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Business

Furniture companies collapse under crunch 'identical' to construction sector, leaving customers thousands of dollars out of pocket

Bob Goodwin ordered a $5,000 couch in October. (ABC News: Jemima Burt)

It has been an uncomfortable six-month wait for Bob Goodwin, who ordered a $5,000 couch in October.

But even more painful – the prospect of never getting his sofa or a refund.

The North Lakes retiree had ordered a double recliner through the Custom Sofa Centre – a New South Wales company with three branches in Queensland.

After months of delay, he went to check on his order, to find the shop completely vacated and the company uncontactable.

Online, dozens of customers report similar situations.

It comes just months after Melbourne brand Brosa entered voluntary administration.

The peak body for the furnishing industry said it is facing similar pressures to the ailing construction sector, with supply delays, rising costs and staff shortages.

And in the face of a cost-of-living crisis with families tightening the belt on discretionary spending, economists say it is a tough time to be in retail.

Customers ghosted by retailer

Mr Goodwin said he doubted whether the lounge ever made it to Australia in the first place. (ABC News: Jemima Burt)

Mr Goodwin, a retiree and self-published author, has approached his own consumer story like a bona-fide investigator.

He has spoken to former staff and other customers left in debt, and tried to contact the company.

"Each time I sent an email, in the first part, I got the generic response of automated response saying how you're a valued customer, and we'll get back to you and we're pretty busy at the moment sort of thing," he said.

"But they never did get back to me. The only correspondence I got was an email from the store about the lounge being delayed at customs for inspection."

Mr Goodwin said he doubted whether the lounge ever made it to Australia in the first place.

He is not holding out hope that he will ever see his money.

"I think they need to do the right thing by their customers, people that go in there and we can good faith and put a deposit on furniture," Mr Goodwin said.

"I think there could be a lot of people, maybe even hundreds of people that have waiting lounges that are never going to be delivered.

"If they can't deliver it, they should refund the money."

The Custom Sofa Centre has not responded to the ABC's requests for comment.

Furniture industry blues

The Custom Sofa Centre is a NSW company that has three brances in Queensland. (ABC News: Jemima Burt)

Like many sectors, the furniture industry is suffering the hangover of a post-COVID era with shipping delays, skyrocketing material costs and staff shortages, according to Australian Furniture Association CEO Patrizia Torelli.

"You can't buy a car without waiting 12 months for it. We have similar delays with furniture when you're purchasing from retailers that are not sourcing the products from local manufacturers," she said.

Late last year Melbourne company Brosa fell into voluntary administration, and like Custom Sofa Centre, sold imported furniture.

Ms Torelli said that business model was particularly vulnerable.

"Many of our online retailers are over-promising and under-delivering because when they run out of stock, there's no continuity or consistency or security of their supply chain, and that's where they tend to fall over," she said.

"At the end of the day, if you can't deliver, then you will collapse."

She described the situation as identical to similar issues faced by the construction industry and called for greater support for Australian furniture manufacturers.

"The delay is significant but the more significant issue that we have is the cost," Ms Torelli said.

"In some instances, the cost has gone up 300 per cent in the last couple of years.

"That is a huge, huge impacting factor on our importers for products that they need to manufacture locally, and therefore the cost is going through the roof."

'Revenge spending' drying up, economist says

Economist Shane Oliver said retail spending has slowed in Australia. (ABC News: John Gunn)

Economist Shane Oliver said the furniture industry will likely continue to suffer as interest rates rise and the cost-of-living crisis deepens for Australian families.

"As interest rates go up, they [businesses] also have to pay more on their debt," he said.

"The second issue is that as people start cutting back their spending, it results in a loss of revenue for businesses."

Mr Oliver said the impacts were starting to spread.

"We're already starting to see, through the most recent profit reporting season in Australia, a bunch of retail companies starting to talk about slower demand slower conditions in their shops," he said.

"That's gradually starting to percolate through.

"Through last year, the economy was protected to some degree because we had revenge spending and revenge travel — people so happy to be out of the lockdowns being able to get out there again, freely, that they wanted to spend.

"But that impact is now over."

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