When Contract Furniture Source filed for bankruptcy last month, it was a sobering reminder of the fragile state of the business in a city feeling the brunt of government cutbacks, local furniture vendors say.
© Cole Burston.
Jeff Snyder is the vice-president of sales and marketing at Capital Office Interiors.
By David Sali
“To have one of your top two dealers close their doors is unfathomable,” said Brenda Curry, director of business development at Ottawa Business Interiors, which has about 50 employees. “This industry is in sad shape because our profit margins are too low when you sell to the government. It’s a difficult time to sell to the federal government. You better have a lot of exposure in other markets if you want to survive this downturn.”
Contract Furniture Source, which had about 45 employees, had assets of about $477,000 but owed creditors more than $1.5 million when it closed up shop, records from the Office of the Superintendent of Bankruptcy Canada show. Contract was a major presence in the local furniture scene, and its demise caught many in the business off-guard.
“We were surprised to hear that,” said Jeff Snyder, vice-president of sales and marketing at Capital Office Interiors, which employs 35 people and does 30 to 60 per cent of its business with the federal government, depending on the year.
“It’s hard to ignore a huge player in Ottawa like the federal government. Our thinking is they’re certainly close to half the market. It’s not this vertical market you can ignore in our industry.”
Mr. Snyder said the federal Conservatives’ deficit-slashing program will be good for the country in the long run, but right now many industries that rely on government to be a major customer are feeling the pinch, especially here in Ottawa.
“I get it,” he said of the feds’ austerity measures, “but when you have a large employer like that that all of a sudden isn’t spending a lot of money, it impacts our business and I think it impacts everyone in our industry, for sure.”
Interspec Furniture Solutions president Jayne Webber said it doesn’t help that many Canadian furniture manufacturers no longer have standing offers to sell their products to Public Works for major projects.
“That is appalling, in my opinion,” said Ms. Webber, adding her sales took a significant hit when the feds began cutting back on purchases a couple of years ago. “It’s become a very competitive marketplace where Canadian manufacturers are restricted from doing business. That, in turn, impacts the local dealers and distributors of these products.”
Ms. Webber said Contract’s bankruptcy illustrates just how tough things are in the industry right now.
“With the government, we’ve always felt that we were a little bit recession-proof in Ottawa,” she conceded. “Now, I’m in a position where I’ve had to downsize significantly. I don’t want to end up where Contract is. When (the bankruptcy) announcement was made, it was a reality check. We’re making the changes that we need to make in order to survive and regrow in the other markets. And I do find the other markets have picked up a little bit, especially in the last few months.”
Mr. Snyder, who said his company has been able to weather the downturn by catering to a wide range of industries including health care and high-tech, agreed diversification is the key to survival in the furniture game.
“We don’t have 75 or 80 per cent of our business coming from the federal government,” he said, estimating sales at Capital Office Interiors are down a little more than 10 per cent from last year. “I think maybe some of our competitors do have a few more eggs in that federal basket. Having said that, it’s a big part of local business.”
Government spending goes in cycles, he said. He said the feds will loosen their pursestrings eventually in part thanks to Workplace 2.0, a government-wide strategy championed by Public Works with the goal of redesigning federal workplaces to make them more efficient.
“They realize the spaces they’ve been designing for the last 20 years are antiquated and don’t really fit into the new model of work,” Mr. Snyder said. “I think it’s going to be really tough for the next couple of years, but I think long term – and we still plan to be in business long term – I think there’s going to be some really great opportunities.”
For her part, Ms. Curry is taking a wait-and-see approach to the possible business spinoffs of Workplace 2.0.
“If it’s a refit where Public Works is paying for the furniture itself, that’s one thing, but I’m not seeing actual federal government clients talking about their budgets opening up,” she said. “I don’t think it’s going to be until 2015, really, where we start to see a recovery in our market.”