Habitat up for sale?

It’s the ultimate middle-class urbanite’s store. With it’s minimalist feel and clever design, it’s a shame to see the brand suffer. Founded in 1964 by Sir Terence Conran and bought from him by the Swedish Kamprad family during the last recession in 1992, Habitat’s problems have kept stacking up.

Yes, the recession has hit the company hard as shoppers shy away from splashing out on furniture, but retail experts say many of the business’ woes - such as poor customer service, a wrong product mix and overpricing - have been self-inflicted. Its latest accounts (of March 2008) show losses of more than £13.4m, and now investment bank Lazard has been called in to assess a number of options for the chain, ranging from sale to break-up.

But the owners aren’t giving up on the interior design chain quite yet. The Kamprad family has turned to 77-year-old Sir Terence for advice on restoring the company to its former glory. ‘Obviously, I still remain very attached to Habitat’, he told The Sunday Times yesterday. ‘I’m proud to have created it. Sadly, I’m not proud when I see the sort of mess it’s in at the moment.’

When he was asked for his advice a couple of months back, Sir Terence suggested injecting a bit of charm and humour into the brand, and improving customer service but Habitat’s CEO Mark Saunders told him: ‘Price is singly the most important thing to me and you known I don’t want to consider anything that puts the price up.’

But there’s the problem. Habitat furniture is more expensive than Ikea and many of the high street department stores – it’s madness to that that it can successfully compete with them on price alone. By tapping into the aspirations of stylish middle class folk, it has to convince them that parting with a bit of extra cash will make them feel special – not only for owning a piece of design but for all the extras that come with it, like excellent customer service.

Conran argues that the last time Habitat made money was when Vittorio Radice ran it in the early 1990s: ‘He sprinkles stardust. That’s what it needs: a bit of stardust.’ And stardust, unfortunately, doesn’t come cheap. Despite the best efforts of tourists taking advantage of the weak pound for a bit of retail therapy (news out today shows that wealthy foreign shoppers in London contributed to a bounce in retail sales last month), a serious strategic shakeup at Habitat is desperately needed.

‘[Habitat is] a good brand that’s not suffered from underfunding but suffered from management that hasn’t had a clear idea of what to focus on,’ says Conran. Respected designer Tom Dixon left Habitat as creative director last year, and with him, some of the brand’s sparkle. It can’t continue to charge designer prices without providing the wit and glamour that goes with genuinely good design, and the service that is expected to go with it. It looks like it’s back to the drawing board, then.

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