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Dot-com downturn hits furniture business

Some of the same slowdown symptoms that have hit dot-coms are affecting the companies they do business with--particularly the office furniture businesses.

    Layoffs. Bloated inventory. Canceled orders. Revenue shortfalls. Changing business strategy.

    Sound familiar?

    Some of the same slowdown symptoms that have hit dot-coms and the technology sector are affecting the companies they do business with--particularly the office furniture businesses. For every dot-com worker or tech engineer, there was a cubicle. Now, for every laid off worker, there's a workstation that no one wants.

    It's gotten so bad that Craig Codding, who refurbishes and resells used cubicles, recently refused an offer for some free office furniture.

    "There's no market for it," said Codding, who owns the Hayward, Calif.-based Electrocoat. "Everybody's warehouse is so full that you're not going to invest the time, even if it is free, to go pick up something you already have plenty of."

    Codding said he started seeing a glut of used furniture on the market in January as a result of companies downsizing or closing shop. At the same time, Electrocoat saw a drop-off in new orders.

    "We react pretty quickly to the market," said Paul Friant, owner of Oakland, Calif.-based Friant and Associates, which manufactures workstations and other office furniture. "If you're not growing, you're not buying furniture."

    Friant said a slowdown in sales led him to lay off 29 of the company's 120 workers in February--most of whom had been hired in recent years to keep up with the incredible demand for office furniture then.

    Last year, forty percent of Friant's business was with dot-coms. That's dropped off by about 25 percent this year, he said.

    The glut has dealt him a double blow, Friant said. Some businesses moving into new office space these days often find that it already comes with furniture left by a departed dot-com.

    "They have the choice of taking the existing furniture" or buying new, Friant said. "The first budget to always get cut is the furniture," and many of them stick with the existing furniture.

    Robin Moorad, the director of major accounts at interior design company Interform, said she is increasingly seeing major clients cancel expansion plans--including plans to buy new furniture to go along with it.

    About 50 percent of Interform's business was with dot-com or technology companies last year, Moorad said. That percentage should remain the same this year, but business will likely fall by about 20 percent this year, she said. Last year, Interform wrote off several thousand dollars in debt from dot-com clients, marking the first time it had ever had to deal with bad debt, she said.

    Consequently, Interform has shifted its focus away from selling new furniture to helping manage interior design projects, Moorad said. The downturn has actually helped expand that business as companies try to reconfigure their office space for their newly shrunken staffs.

    "When companies let people go, they let people go now," Moorad said. "Typically, they want to occupy a smaller amount of space, and they want to do it now."

    The project management business is not as profitable as furniture sales, Moorad said. But there are positive sides to the downturn in the office furniture market.

    "We were all so busy the last two years that it was hard to take a breath," she said. "In some ways, it's a welcome respite, but let's see how it looks six months from now."