High housing prices fuel Vancouver’s high-end furniture business
More from Jenny Lee
Published on: August 8, 2016 | Last Updated: August 8, 2016 11:18 PM PDT
It’s an unlikely partnership — a young man with no retail experience, but whose father once shipped 32 containers of earthquake rubble from Mexico to sell in Vancouver, and Rick Bohonis, the retired co-founder of national furniture chain Urban Barn.
Ramon Masana Tapia and Bohonis have joined forces to revive Suquet Interiors, a family business known in Vancouver design circles in the 1990s primarily for stone fireplaces and facades made from Tapia’s dad’s original masonry shipment. The distinctive stone arch entrance to South Granville Street’s Boboli boutique is one visible legacy from that shipment.
Tapia’s father, Ramon Masana, spent almost all of his savings to ship pieces of a hand-carved building facade which he sold to Vancouver designers and architects. Masana even grew a business recreating some of the designs with moulds, but he had imported in such volume, there were still pieces left when Tapia’s mother closed the business in 2010 after Masana died.
Suquet’s reincarnation this summer is superbly timed. While Canadian furniture sales have been strong, Vancouver sales have shot up 43 per cent since January 2014 likely because of the city’s rising home prices, according to Bank of Montreal senior economist Sal Guatieri.
The national CPI for furniture rose just 4.6 per cent since January 2014, but Vancouver’s benchmark prices rose 46 per cent in just over two years.
“I guess when you suddenly find yourself living in a million-dollar home, that faded 10-year-old couch just seems out of place,” Guatieri wrote in BMO’s AM Charts June report.
Urban Barn’s Bohonis met Tapia through friends a year ago and started mentoring the younger man.
“As time went on, I started to pay more attention to what was happening in Vancouver,” said Bohonis, who studied economics while playing U.S. college basketball. “The furniture sales increase is not news to anybody in the business.”
Bohonis is now Suquet’s president and Tapia manages daily operations and logistics.
Bohonis brings multiple years of furniture experience to the partnership. Bohonis and business partner Craig Stewart started Urban Barn in 1990 when they saw a hole in the Canadian market. “Even though in most marketing courses they’ll tell you don’t be in the middle, we focused on that,” Bohonis said. At Urban Barn, “we never ever wanted to be cutting edge, but just below that. We wanted people to feel they were getting something new enough, fresh enough, but they weren’t the first ones to try, you know what I mean.”
In the beginning, they modelled Urban Barn after a Californian chain called Z Gallerie, ultimately building a 40-store national chain before selling to private equity.
“I don’t feel ashamed to say we copied a little bit,” Bohonis said. “Because we were careful on our pricing, we made ourselves a little bit recession proof. We found out early on we needed accessories — less expensive pieces that would continue to be run through the cash register when you’re not selling sofas and beds,” Bohonis said. Customers who would normally buy higher-end product would “trade down” to Urban Barn purchases during tougher times.
They sought to sell the “aspirationally affordable — something you’re kind of reaching for, but can afford,” he said.
The model was built around expansion. Bohonis and Stewart started the business with their credit cards and a small BDC loan. In the early days they found locations three or four blocks from the strongest retail areas, did not negotiate lease rates, but asked for three months’ free rent and $60,000 to $80,000 in tenant improvement funds with the right to keep unused balances. They kept rolling the cash over until they’d built about five stores and “cash flow caught up and we were fine,” Bohonis said.
They were also scrappy. “We had a large chain that was fairly close to one of our stores, and we’d pay attention to them, and when they’d go on sale, 50, 60, 70 per cent off, we’d go and buy stock, take the labels off and put our own on, and we had inventory. We were grave robbers,” Bohonis said of the crazy, rollicking early days.
With little money for marketing, Bohonis and Stewart found locations close to businesses that advertised.
“We followed Pier 1 around a little bit. We knew they were spending quite a bit of money on marketing and we didn’t, but if we were three, four, five stores down, people would take advantage of that (and come in).”
For Suquet, on the other hand, the opportunity is in the higher end. “There are pockets everywhere where people are renovating new buildings,” Bohonis said. “A lot of bigger homes are being built. If you’re going to spend upwards of $6- to $16-million on a home, you want quality furniture.”
Nevertheless, the partners have positioned Suquet toward the safer, centre of the high-end market, Tapia said. As with Urban Barn, Suquet is not located in the most expensive interiors and design hubs on South Granville and in Gastown, but on Homer Street close to The Cross and Designhouse.
Shipping and damage is the biggest challenge in the furniture business.
“Shrinkage is huge in this business. I would guess it has to be five per cent for a lot of retailers,” Bohonis said. “All the way from when it’s loaded into a container until it gets into the home, there can be scratches, a small flaw in the upholstery that people won’t accept.”
Urban Barn’s success came from a “cookie-cutter” approach and Bohonis originally thought Suquet would have to be a one-off store because it stocks original, higher-end pieces, but he’s discovering that even large chains are starting to buy regionally for specific markets, and is beginning to revise his opinion. Pieces bought for Toronto may not be the same as those for Los Angeles, for example.
For now, Bohonis and Tapia are looking online more to learn about their customers. “I want (customers) to tell us with social media what we’re doing right and wrong. Two years down the road, Suquet might look completely different.”
E-commerce is difficult for a small furniture store, Bohonis said. “If you order some clothes online, the package is shipped to your door,” with furniture, that isn’t so easy.
The partners seek to distinguish Suquet’s 4,000 square foot store with a “wild mix” of different styles of furniture from casts of Ramon Masana’s rustic fireplaces to mid-century modern sofas, $2,400 camp chairs, and handcrafted $250-$500 Shwood sunglasses, Bohonis said.
“One of the really cool things about Suquet for me is this idea of having a blank slate,” Bohonis said. “Once you’re established like we were with Urban Barn, we had to be careful to stay within Urban Barn. With Suquet we can be anything we want.”
Bohonis believes “furniture retailers had better be prepared because Canada is an emerging market now.” And he figures increased competition will come to Canada over the next five years.
Rick Bohonis’ business tips:
Be prepared to change. The artisanal trend might be popular now, but should only be a part of your business. “At some point, people are going to get past that,” Bohonis said.
Diversify. Because you have to be able to change. How many companies have we seen come and go that have stuck on a style? My biggest tip to anybody especially in furniture retail is to be prepared to change.
Focus on the next purchase. “That client if they are happy with that purchase, they are going to come back for something else. That’s key for us.”
Employees are an asset and not a liability even though they show up on the expense side of the income statement. Even when he had 500 employees at Urban Barn, “I hated just sending out emails. If we had to announce something, make changes, Craig and I would travel across the country unannounced and take them out for dinner.”