Imports undermine once-durable trade

BY JAMES WEIR

OPINION: A friend of mine is still sitting on a couch his father bought when my friend was about five. I have a presentable table and chairs bought in the early 1950s.

That's why economists call furniture "durable" goods.

But some small Kiwi companies that sell furniture are falling into the "disposable" category in recent times.

It is simplistic to blame the recession for the failure of 115-year-old Upper Hutt Hazelwoods furniture store this week. The business has also been undercut by cheap imports and big chains grabbing market share by offering extended credit.

Hazelwoods laid off 10 people on Wednesday with no redundancy pay. There will be a liquidation sale at the end of next week. Hazelwoods was down to one store and a discount outlet after earlier running five stores.

Hazelwoods is owned by Michael Gibbs, a member of one of the wealthiest families in New Zealand. His father Colin Gibbs, who has been in business in Upper Hutt for about 55 years, ran Hazelwoods in the past and helped set up Wellington's Radio Windy. Colin is the brother of Alan Gibbs, who is the developer of an amphibious car and reputedly worth about $300m.

Furniture, carpet and floor covering sales have been knocked this year – it is one of the hardest hit sectors, in part reflecting the slump in new home building.

April was the worst, with sales down a nasty 26 per cent on the same month last year.

Global financial meltdown and fears of a repeat of the Great Depression hit late last year but March was probably the trough of the panic and it showed in the retail figures. Since then, rising consumer confidence has seen national monthly furniture sales lift again, to be just 10 per cent down on the same month last year.

There are signs that things are picking up, with growing confidence that jobs are more secure and people will be making more money next year, a bank survey out this week stated. Christmas won't be a boom time, but it probably won't be dire for most retailers.

For some, it is too late.

In July, another small manufacturer and retailer Bloom Furniture collapsed and went into liquidation. Bloom had stores in Wellington and Plimmerton.

It expanded into Auckland after several other retail outlets which previously stocked Bloom furniture closed down. All the Bloom stores have now shut.

Bloom still makes its high-quality, hand-made and durable furniture in Otaki. It is seen as a good outfit and the liquidators are negotiating a sale of the manufacturing side of the business.

However, the liquidator's report showed sales fell significantly in all three retail stores after March with greater competition and a general fall in retail spending.

Bloom has an estimated shortfall of $2.1 million owed to creditors, with the majority to ANZ and South Canterbury Finance. It does not look good for dozens of unsecured trade creditors.

Upmarket Wellington furniture store Wade House also failed about 18 months ago. Wade House's receivers' report shows trade creditors were owed more than $400,000 but not even the secured creditors got all their money.

In 2006, the Wellington-based appliance and furniture chain store Radford's closed after more than a century in business. But as Radford's pointed out three years ago, smaller traders faced pressure from big chains, such as Australian-based Harvey Norman.

Despite a recession, Harvey Norman increased annual sales in New Zealand this year almost 2 per cent to about $760m. It took a bit of hit on profit margins, though it still made more than $50m.

It is a big chain in Australia and has more than 30 stores in New Zealand, so it can do big deals, and it offers extended credit deals to get punters in the door. The ease of getting credit at such chains is part of the reason smaller stores struggle to compete.

The other issue is that some direct importer/retailers sell at low prices.

Much of the cheaper furniture is made in China and sold by direct importers.

It costs about $400 to land a Chinese-made leather sofa in New Zealand, its wholesale price is about $1500 and it sells on the shop floor for close to $3000.

But it is still poorly made rubbish that is unlikely to last long, some in the trade say.

Hazelwoods fell over because New Zealand "has been flooded with cheap and nasty crap" from China for about the last seven years, a former Hazelwoods staffer said.

"Kiwis think they are getting a bargain," Laurie Marks said, who has been laid off from Hazelwoods with other staff. About 70 per cent of Hazelwoods stock was still made in New Zealand.

The cheap Chinese furniture pushed some high-quality furniture stores to start discounting this year, when they had never done that, even after the 1987 sharemarket crash.

- © Fairfax NZ News