Layoffs, Closings, Competition Changes Phoenix's Furniture Landscape
An industry report by Furniture Today reveals furniture and bedding retail sales topped $100 billion for the first time in 2015. The report predicts sales will grow nearly 20 percent by 2020, but not everyone’s cashing in.
On a Thursday afternoon in late January, Jose Soto should have been working at his job, but instead he and his wife were sitting in the lobby of the federal bankruptcy court in downtown Phoenix.
"We need to get our money back," he said. "$1,000 or our furniture, one or the other.”
Soto and a dozen other people showed up after getting notices about a meeting between The RoomStore of Phoenix and its creditors. Last December, after more than 20 years in business, the RoomStore of Phoenix filed for Chapter 11 bankruptcy protection. Not long after that, Dean Behboodi, the owner of Oasis Bedrooms, announced he’ll close his remaining four Valley stores.
“For me, personally not worth it to sit and fight it," he said.
After 46 years in the furniture business, Behboodi is ready to retire.
“It was a hard decision as far as employee is concerned," he said. "But I made sure everyone was OK, and then I made the decision.”
Controller Jim Wedeward at Oasis' Phoenix warehouse said “In our heyday, we were pretty busy running 10-12 trucks here a day. Now, it's four, five, six, pretty much cut in half."
Like The RoomStore, Wedeward blames the recession and increased competition from so-called mega stores that have opened in the past few years. He said those stores are 10 times bigger than his.
“It’s a very difficult business to manage from a supply chain perspective," said Arizona State University professor Dale Rogers.
Retailers must know where to buy the furniture, how much to order and when.
“Inventory is costly in the furniture business, and it’s also kind of a business where there are regional tastes," Rogers said.
There’s also the post-recession attitude among some consumers who question whether they really need all the stuff they once thought they did and, of course, more people shopping online.
In 2012, Daehee Park and his friend JT Marino dove into the mattress business. They had no prior retail experience, just a passion to fix what they saw as an industry problem.
“A lot of sales people are paid very low wages and are expected to make up the rest with commission, so of course they’re going to do their best to gouge whoever comes in so they can pay their bills and send their kids to school," Park said. "It’s actually really sad.”
Park’s company, Tuft and Needle, is headquartered in Phoenix's warehouse district. They never advertise sales and charge no delivery fees. Instead, you order online, pay a set price and the mattress arrives in a box.
In their first full year of business, Park said they made $1 million. Last year he said they hit $40 million.
“There’s actually 40 copycats now since we started," he said.
Park said more competition and choices make this a great time for consumers. But at the federal courthouse, that's a tougher sell.
The lobby where Soto and his wife waited for the bankruptcy hearing became so full that it was moved to a bigger room.
The RoomStore’s managing member Alan Levitz told some customers it’s likely their furniture was on the way. It’s a response that frustrates some who say they’ve heard it before, but they may find consolation. Under the federal bankruptcy code, priority claims go to retail goods up to $2775. That means household names, like The Arizona Republic, which claims The RoomStore owes more than $500,000 and the Phoenix Suns with a $300,000 claim, must get in line behind Soto.
"We need the furniture more than the money," he said.
Soto was told to expect a check by this summer.
RoomStore customers can find information on how to file claims here.
Oasis Bedrooms could close two stores as early as March.