New West - From The Source
Futon Life Feature Story
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by David Garretson Part 1


The Sun Sets On New West

Ring. Ring. Ring. Ring. Ring. Ring. Ring. Ring. Ring. Ring. Ring. Ring. Ring. Ring. Ring. Ring. Ring.

New West, leader of the futon industry, wasn't answering the phone. Dozens of futon retailers were persistently calling, trying to get word on their orders. Thanksgiving was coming and customers were getting restless. Ring. Ring. Ring. Ring.
Only two years earlier, New West had been the leader of the pack, the top company in futons, the fastest-growing segment of the home furnishings futon industry. One of the best showrooms in High Point. A top exhibitor at the Futon Expo. Big advertiser in Futon Life. Fancy catalog, big product line, big payroll, big warehouse. New West was the only futon company in the furniture mainstream, the only one owned by a publicly traded corporation.

Admittedly, it had been a tough year. Throughout 1997, New West had sent several mailings to its futon customers. "Our new products will excite you," they wrote. "The company is turning around," they promised. "Our best days are ahead." "Rumors of our demise are false." One mailing after another.

Now, in November, silence. No announcement, no press release, no recorded message. Ring. Ring. Ring. Ring. Ring. The telephone. It ended as it started, with a single telephone.

From The Source

In 1986, the original phone sat on the desk of Bob Fireman in New York City. His futon store, Furniture Gallery, was the city's leading futon store in New York City, and he was branching out into buying futon frames direct from the source. "At that time, almost nobody was in the futon business," Fireman remembered. "I had about two thousand dollars in the bank, and I was putting together my first deal to import futon frames from South America."

"My customers wanted oak futons, so I found a factory in Tennessee. They weren't very good. Actually, they were working on my second order when they went bankrupt. I went to the auction hoping to buy some of my inventory, and Gary Shaffield was there. I convinced him to buy the futon frame parts and assemble them for me. He and his brother Bill had a woodworking shop in Sparta, Tennessee called Shaffield Industries Inc. Back at the shop, I think they laughed at Gary when he came in with this junk from the auction. But it put their business on the map."

Fireman was buying platform beds and futon frames for his own store only. "I was the only customer. I'd order six of this, seven of that. Almost everything they made, broke," he said. "I was talking to Gary five times a day on the phone. Eventually we worked out the bugs. One time somebody sent me a prototype futon frame, but I didn't like it. A fellow named Ed Boling redesigned it for me and I named it after him. I called it the Bo-Ling, and it became our best seller."

The word spread and Fireman began wholesaling futon frames to other retailers through Furniture Gallery. The wholesale business grew. "Finally I got together with Bill and Gary Shaffield and said 'Let's set up an office in Tennessee. Instead of me marking up everything in New York, let's put everything in one pot, the imports, the futon covers, everything. You run the business, do the banking, and I'll get the business and find new sources.' We called it 'From The Source' because futon retailers could now go direct to the factory, the source."

"The first year we did $200,000, and before long it became millions," said Fireman. "I handled the sales, the Futon Show, got us the High Point showroom, and lined up the factories overseas. They ran the factory, handled the customer service and the billing. Bill started attending shows with me and meeting the buyers."
As the business grew, the money grew, and the tensions grew. "We were always on edge, always arguing, always needling," said Fireman. "Money was an issue. The work load was an issue. One day in 1992, I decided that I was tired. 'Let's split up,' I said."
"One time I asked Bill, 'What do you see as your role in the company?' I'll never forget his answer. He said, 'I spend most of my time holding you back, Bob.' I'm chaotic, wild. They were the anchor. I was creative, and they had the business sense. Looking back, we were a good team. Neither of us did as well after we split."

New West, the Marketing Partner in California

From The Source relied heavily on regional distributors to fuel its growth. The most important was New West, the distributor of futons on the west coast. In addition to warehousing From The Source products, New West manufactured its own line of pine futon frames.

The two companies became interdependent, each distributing the others' products. They shared exhibit space at trade events such as the Futon Expo, San Francisco, and High Point. They shared advertising space in Futon Life. They co-sponsored events at the Futon Expo. To many retailers, the line separating the two companies was unclear. Was it one company or two? Who cared?

The $8 Million Valentine

Adam Levondosky had an idea. He was President of Southern Wood, the RTA shelving company based in Sparta and owned by Loewenstein Furniture. He was impressed with the rapid growth he saw at From The Source. Bill and Gary Shaffield's woodworking shop had grown to over one hundred employees and sales of $13 million.
Levondosky took the idea to Loewenstein management. The futon business was growing fast, going straight up! Mass merchants such as Wal-Mart and K-Mart were getting interested, and Southern Wood already had entry to those channels. This was a good match with tremendous growth potential, and it could all be run from a new division, the RTA Division, to be headed by Levondosky in Sparta.
The deal came quickly. Loewenstein Furniture bought From The Source from the Shaffields for about $5 million in the fall of 1993. Bill and Gary Shaffield stayed on to help run the company, but they bristled at having to get Levondosky's okay for everything.

"We never thought we'd run it, but we expected Adam to work with us," said Bill Shaffield. "We thought he'd let us do what we'd always done. That was our understanding. But as soon as the deal was done, ninety percent was taken out of our hands immediately."
"Adam Levondosky had a funny attitude," remembered Gary Peterson, then head of quality control at From The Source. "As far as he and his people were concerned, everything we did was all wrong. They eliminated all 'indirect labor,' which meant that we dropped the quality control program. No more inspections."
Until then, quality control had been a top priority at From The Source. Quality control inspectors examined every batch of imported futon frames, monitored quality in the Sparta oak futon frame plant, and also monitored the soft goods produced at the Sparta futon and cover plant. "Under the Shaffields, nothing got shipped without a QC sign-off," said Peterson. "And then, under Loewenstein, it (eventually) stopped."

Levondosky may have been too busy to consider the consequences of dropping the QC program. In addition to running Southern Wood and From The Source, he was negotiating to buy New West. By acquiring the other "half" of the marketing partnership, he'd have the two leading futon companies. Plus, Mike Haworth, then 30 years old, a more polished and aggressive executive, could run the business. Haworth received about $8 million in Loewenstein stock for New West. The deal closed on Valentine's Day, February 14, 1994.

continued on next page

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