From trendy design to the end of the line

While the end came quickly, the writing had been on the wall for Habitat's Irish stores for some time. Habitat UK, which controlled the franchises for the Dublin and Galway stores that closed suddenly eight days ago, had been trying to offload the franchise to a new operator for some time, according to sources in the furniture trade, writes Paul Cullen.

Internal difficulties in Conai Designs, the Irish franchise-holder, convinced both that company and Habitat that it was time for a change.

In the end, though, the stores perished in a perfect storm caused by these difficulties, a dramatic fall-off in business and a dip in business confidence that decimated the line of potential suitors for the franchise.

For an outlet once considered the essence of trendy design, the end was ignominious. Up went a terse sign on the window telling customers the shops had closed; out, with the shortest of notice periods, went the workers; and down went the phone lines and other avenues of communication.

Even Habitat UK ran shy of the media for days before deciding to rescue what was left of its good name in Ireland by promising to honour outstanding contracts and gift vouchers. That only came after scores of customers rang Liveline about their missing €5,000 sofas and the National Consumer Agency reminded the company that Irish customers knew nothing about a franchise and had assumed they were buying from Habitat.

Six years ago, when another furniture company, House of Denmark, collapsed, it continued taking orders from customers up to the minute it closed. One of the directors was arrested after a creditors' meeting and taken to the High Court, where he was told 2,000 customers were owed more than €500,000.

We'll have to wait for the work of the liquidator to find out how bad a state Habitat was in when it closed, but, with hindsight, its problems should have been obvious. Anyone who visited its cavernous, dark, split-level new Dublin store between Suffolk Street and College Green recently would have been struck by the lack of customers. Gone was the buzz and sense of light associated with the old store on St Stephen's Green and gone, too, was the notion that the quality and design of the products might justify their high price-tags.

For Terence Conran, the designer who founded Habitat in 1964, the business was as much about selling a distinctive lifestyle as mere furnishing. But since the Swedish furniture giant Ikea took over the business in 1992, that identity has leached out of the business, to the extent that customers started to see Habitat goods as being the same as those from its parent company - minus the low prices.

As John Douglas of the shop workers' union Mandate points out, Habitat had long since lost its position at the top of the market.

"Once, Habitat furniture was iconic; now, you could get virtually the same goods in Dunnes Stores. The space in which they operated has become crowded with many other players."

The irony is that Habitat's parent company contributed to its demise. The opening of Ikea's store in the North last December has led to an exodus of shoppers crossing the Border in search of value. Many predict the death knell for overpriced furniture retailers will finally be sounded when the Swedish behemoth gets around to opening its first store in the Republic, probably in early 2010.

The slump in the housing market has hit the furniture sector particularly hard. Gone are the streams of first-time buyers looking for cheap and cheerful furnishing for their new homes; also gone are the developers with vast blocks of apartments to furnish in a hurry. Douglas acknowledges there is something of a chill wind blowing through the entire retail market at present. To himself, he counts the number of stores currently running sales, but quickly runs out of fingers.

The Dublin City Business Association says low- and high-end retailers are doing okay, but those in the middle of the market are being squeezed somewhat.

It isn't all doom and gloom, of course. Only this week, the Economic and Social Research Institute delivered an optimistic picture of sustained medium-term growth. On the retail landscape, developers are still forging ahead with ambitious plans to redevelop city centre shopping areas, such as Joe O'Reilly's proposal to transform the site of the old Carlton cinema in Dublin.

It isn't even all doom and gloom in furniture retailing. Only this week, another retailer, Instore, announced it is to open a large new shop in Stillorgan, south Dublin.

Instore is an Irish-owned company and it paid almost €5 million to buy the premises, rather than opting to rent. The chain started in Limerick 20 years ago and grew slowly in Munster as the housing market took off. Now it is dipping its toes in the Dublin market for the first time, just as the economic signs are turning negative.

"The market has definitely contracted, and you have to trim your sails accordingly," says its chief executive, Oliver Moloney. "But it's not all bad. People are spending more time at home than ever - the smoking ban was a big positive - so the pressure is greater on them to change their furnishings."

With fewer people moving house, more families are extending and redecorating, he says. Then there's the holiday-home boom, with many property-owners apparently preferring to kit out their bolt-holes in the Algarve or the Auvergne with furniture ordered in Ireland. (Often, he admits, this involves importing the furniture from, say, France and then sending out to France again.)

Moloney says he isn't scared of Ikea: "There's a perception that Ikea is fantastically cheap, but the reality is somewhat different when you take everything into account. They don't deliver and they don't assemble, so the customer ends up doing half the work."

The real message behind Habitat's demise may be that there is no longer room for space-hogging furniture warehouses in city centres, where rents verge on astronomical.

For Moloney, it's a wake-up call for landlords, who, in recent years, have become accustomed to regular rent hikes. "The days of bulky city-centre furniture outlets with no ambience are gone. The future may lie in small stores backed up by big catalogues or the internet."

Once, furniture was for life, and was passed from generation to generation. Then retailers like Habitat came along and gave us disposable furnishings. But tastes come and go, and now consumers have shown that furniture shops are just as disposable as the products they sell.