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Aftermath - What went wrong?
Futon Life Feature Story
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by David Garretson Part 4

 

Rising, Briefly, From the Ashes in Phoenix

By early 1997, New West's survival depended more than ever on reviving the core business, the small futon stores and furniture stores. If the core business didn't come around, and fast, there wouldn't be enough time for the new high-end program to develop at big furniture merchants.

The small New West staff went all-out to present their new introductions at the Futon Expo in Phoenix. This was the last stand, and it had to count. The New West display was fresh and exciting. The sales reps were psyched. The new introductions were prominently displayed. And the reaction, according to Reed, was terrific.
"We came home from the Phoenix expo absolutely pumped," said Reed. "It was a great show for us. We'd had a great reception. But almost immediately we knew that it wouldn't come back fast enough, there wouldn't be enough volume there. The core business was not coming back. We could open or re-open 300 accounts, but those customers were not giving us the volume or the floor space they did before. They were gun shy.

"In July, WinsLoew decided to cut out imports entirely and immediately. There went seventy percent of our total business. Gone! They led us to believe that we would continue as a domestic futon company," Reed said.
"In early 1997," said McLeod, "it became a reality that we were not achieving market growths in our product lines and specific market segments. We started executing a strategic plan to evaluate and possibly exit segments of the futon industry."
"Despite our determined efforts and our commitment to our futon business, sales never returned to their former levels," said Richard Hurwitz, Vice President, Corporate Communications at WinsLoew, in a letter sent to us in response to some questions we had asked them. "As a result, a new strategy was required. We decided in the third quarter of 1997, with a great deal of regret, to close our doors," the letter said.

Death Watch

The first week of July (1997), Gary Peterson received a phone call. "I was on vacation and got a call from somebody telling me that the day had come. In one day they laid off all the computer people, all the support people, the VP of Manufacturing, the plant manager, all the supervisors. When I came back from vacation, they laid me off, too.

A letter went to customers on August 1st. "Our company tends to be a lightning rod for rumors," it read. The letter went on to detail New West's decision to stop selling imported futon frames, but continue producing domestic futon frames and futon mattresses. A long list of discounted futon products was enclosed. "New West will remain in business...New West is not going away," excerpts from the last paragraph. The letter was signed by Carlos Reed.
"We spent the summer selling everything as fast and as cheap as we could," said Reed. "Later, in August, Richard told me that the entire operation was closing. Our official line was that the company was for sale. Frankly, by that time, it was a relief for it to be over." Reed, hoping to remain with WinsLoew, stayed on.

The dwindling staff was besieged with phone calls. First, with customers eagerly snapping up the bargains. Later, with demands for replacement parts. Some of the discounted futon frames were defective. And through it all, the persistent question from customers was, "Is New West closing?" The routine answer, given repeatedly, was "no."
In October, just prior to the October High Point market, Carlos Reed was terminated. The New West showroom in High Point opened as usual for the October market, but its usual look was missing. Half of the space was occupied with Southern Wood's promotional shelving products.

Traffic was lean. The customers who did stop were surprised at the spare display. McLeod spent much of his time discussing complaints and concerns from unhappy customers. The New West division is being sold, he told them. On Saturday afternoon, the third day, McLeod went home, leaving the showroom unmanned. For the remainder of the eight day event, a neighboring exhibitor opened the showroom each morning.
Two weeks later, New West stopped answering the phone. The company had ceased operating. There was no announcement of any kind.
"We didn't feel it was necessary at that point," explained McLeod. "We were on the phone every day with our customers, they knew what was going on. Also, there's a time period in which you must notify your employees if you are intending to close, and we were trying to collect our receivables."

Aftermath

What went wrong?
"When we started to sell to mass merchants, the company lost its focus," said Mario Morales. "You've got to sell to one or the other."

"My greatest regret is what happened to our employees after we sold," said Bill Shaffield. "My second greatest regret is what it did to the futon industry and our customers. Gary (Shaffield) and I have never forgotten our futon customers. I make a formal apology for what happened."
"I've never seen a team of people try any harder," said Richard McLeod. "We just could not pull New West out of where it was in the marketplace. The WinsLoew people were supportive. You couldn't ask for better support. Some of the damage had begun before we got there."

"WinsLoew lost in excess of $10 million in its futon business," said Hurwitz' letter. "While we deeply regret the disruption to our futon buyers and employees, it is our view that industry conditions are not sufficiently promising for the level of monetary commitment that would be required for our long-term involvement."
We asked WinsLoew what they intended to do with New West's warranties. They did not respond to us verbally or in writing by the time this article went to press.
In January 1998, WinsLoew liquidated the New West assets. The equipment, inventory, product designs, and rights to the New West name were sold to Jordan Furniture, a futon manufacturer of outdoor furniture based in Monticello, Indiana. Jordan is a supplier to the Winston division of WinsLoew.

"We plan on being a real factor in the marketplace," said company president Dave Jordan. He said that they are now producing futon frames and futon mattresses for "selected key accounts."
Jordan emphasized that his company is not liable for New West product claims, and he was unsure if they would continue to use the New West name. "New West doesn't have a real good name out there," he remarked. The company will not exhibit at the Futon Expo in New Orleans.

"Right now we have about six million dollars in futon furniture inventory to move," said Jordan. "We shipped about fifty truckloads to Indiana. I know that we've got about twelve or thirteen thousand futon covers."

FL

 
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