The discount-designer furniture store that's killing it

October 14, 2013: 11:23 AM ET

It's called "The Dump." No, really, that's the name.

By Catherine Dunn, reporter

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FORTUNE -- Twice a year E.J. Strelitz's company buys up designer showrooms from High Point Market in North Carolina, the furniture industry's monster trade show, and brings them -- along with other furnishings from across the country -- to a place called The Dump.

It's a curious name for a national chain that trades in major life purchases -- that Italian leather sectional, that hand-knotted rug by Calvin Klein. But in a furniture industry clobbered in recent years both by the rise of imports and the Great Recession, The Dump's done well by its strategy: selling discounted-designer furniture in sprawling stores that are open just three days a week.

"Ironically, we really shine in higher-end goods," says CEO Strelitz, who regularly touts half-off prices big-ticket items.

Strelitz's sales have climbed from $20 million in 2002 to a projected $250 million this year. The company's eleventh location in Lombard, Ill., just outside Chicago, celebrated its grand opening this weekend in a 134,000-square foot store housed in a former Sears Great Indoors.

The Dump is a division of Virginia-based Haynes Furniture, a retail outfit that Strelitz's family has owned since 1930 (he's a third-generation executive). In the mid-1980s Haynes was searching for a "growth concept," Strelitz says.

They found one by tapping into an existing vein: the furniture that retailers, like themselves, and manufacturers simply need to get rid of -- whether because a store has to make room for fresh merchandise, or because a furniture maker produced too many pieces, or is closing out a product line, or because a furniture company files for bankruptcy.

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"Historically we've not had a very efficient way to buy this and sell it to consumers," explains industry analyst Jerry Epperson, a managing director at Mann, Armistead & Epperson in Richmond, Va. He says Strelitz was one of the first merchants to recognize and capitalize on that reality, buying close-outs and overstock "opportunistically" and getting customers excited about the prospects of deals.

In branding this concept, the name "The Dump" spoke to Strelitz -- as in, a site where retailers and manufacturers could dump their old goods. "We thought it was kind of cool," he says.

So in 1986 the Dump debuted in Norfolk, Va., essentially a clearance center for Haynes. Located in a former grocery warehouse -- it even contained a set of train tracks -- Strelitz concedes that their first store "wasn't much to look at."

Additional stores have since followed in Virginia, New Jersey, Pennsylvania, Texas, Georgia, Arizona, and now Illinois. Always, Strelitz opts to launch one "super-regional" location, rather than multiple smaller shops, open Friday through Sunday: prime decision-making time for "lifestyle" purchases.

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The schedule allows plenty of time for replenishing the floor in between high-volume sales days. Sales associates, in turn, are drawn to the compact schedule, and the potential to earn up to $75,000 a year, based on commissions.

Over the years, The Dump's taste in real estate has evolved. "We're no longer interested in shabby real estate in B or C locations," Strelitz says. In 2010, for example, The Dump took up residence in The Home Depot's (HD) legacy locale in Atlanta's affluent Buckhead neighborhood. That same year, The Dump opened in what was once a Costco Home (COST) outpost in Tempe, Ariz.

"We're much more picky than we used to be," Strelitz adds.

Indeed, it took several years for Strelitz to settle on his ideal spot in the Chicago area, one of the top three U.S. markets for furniture sales, alongside New York and Los Angeles. He started scouting properties there in 2009 but decided the economic climate wasn't right yet.

Yet in 2012, Sears Holdings (SHLD) announced the closure of its Great Indoors chain, and the Lombard location piqued Strelitz's interest. Poised just west of the Windy City, at the crossroads of several interstates, the store sits "right in the center, from our perspective, of the Chicagoland suburban market."

Now he has to rally customers anew to come scavenge for high-end bargains. The Dump's Labor Day "sneak preview" opening drew more than 10,000 customers, according to Strelitz.

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But his company's continued growth doesn't stop him from worrying about "the dilemma with the name." Will it alienate the higher-income buyers The Dump seeks? To this day, company management, which includes Strelitz's wife Randi, an executive vice president, argues about the right approach to advertising.

This month, for instance, The Dump is rolling out a series of tongue-in-cheek commercials featuring a pair of hippies in one, and nudists in another, contemplating a furniture run.

A third TV spot, which has aired in a handful of markets, stars an elderly woman, coiffed in pearls. As she snips blooms from a rose bush she sniffs, pointedly, "Paying retail is for suckers." It seems Strelitz has already proven his case.

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