'A recipe for disaster': Retail council warns of furniture shortages amid factory outbreaks, tariffs

The Retail Council of Canada (RCC) is warning that disruptions to furniture factories in Vietnam due to COVID-19, coupled with steep import tariffs, may cause furniture shortages in Canada.

Diane Brisebois, CEO of the RCC, told CTVNews.ca that global supply chains continue to be disrupted by the pandemic, draining domestic surplus and hindering what products can be acquired from overseas.

A recent surge in COVID-19 cases has prompted a two-week lockdown in the southern region of Vietnam, forcing furniture manufacturers in the area to shutter their factories and further delay already-late shipments to Canadian retailers.

"This is obviously going to create an enormous amount of pressure and a shortage of goods if in fact the factories remain closed for an extended period of time," Brisebois said in a telephone interview on Thursday.

Brisebois added that most retailers are unable to solely rely on domestic supply as tariffs imposed in May have already started depleting what products they were able to source.

"It's a recipe for disaster and a nightmare," Brisebois said. "It is one thing to be able to say that you can rely on domestic supply, but the reality is that you can't even though."

Brisebois said domestic manufacturers are working to combat this, but in "many cases" certain furniture products that are in high demand are not the ones produced in Canada.

"So it's a perfect storm -- you've got a shortage of inventory, the inventory you have been able to bring in... is now under a huge provisional tariff, and the cost of the furniture has gone up because of input products," she said.

On May 5, the Canada Border Services Agency (CBSA) implemented tariffs on some leather-seated furniture products from China and Vietnam as part of an anti-dumping measure meant to make the market more competitive for Canadian furniture manufacturers.

The CBSA said Canadian companies are unable to match retail prices of Chinese or Vietnamese imports because of the low labour costs in those countries.

The new tariffs are as high as 295 per cent for products from China, and 101 per cent for products from Vietnam.

The move came after a CBSA investigation was prompted by five Canadian manufacturers who applied for tariff protection.

The new tariffs will be reviewed in August, and in the meantime, Brisebois says there should be exemptions for some importers.

"Our concern is that, especially the small and mid-sized furniture retailers, they can't absorb those increases, and through that they may be faced with reduced sales," Brisebois said.

Richard Vennettelli, owner of Guaranteed A Fine Furniture in Windsor, Ont., says he has a large selection of North American products that aren’t directly impacted by the tariffs, but the duties could drive up demand.

“If the price of the import starts going up, then you’re going to see the price of the North American products going up as well,” Vennettelli told CTV News Windsor in June.

At Moe’s Home Collection in Vancouver, co-owner Sara Samieian said the company pivoted before the new tariffs came into effect, building relationships with manufacturers in Mexico, Malaysia and South America in an effort to secure affordable leather and fabric products.

Samieian previously told CTV News Vancouver that Moe's still has old product from China and Vietnam on the floor, but once it is all sold, she said they won’t restock.

Samieian said one of their last products to arrive before the tariffs were introduced -- a leather sectional sofa -- is currently priced at $14,000. Had it arrived after the taxes were implemented, Samieian said the couch would "probably be over $30,000."

To help combat this, Brisebois said the federal government needs to consider extending or revamping current COVID-19 support programs for businesses as the pandemic continues to hamper international supply chains.

Without some sort of aid, Brisebois said it will be challenging for furniture retailers to survive past the end of this year.

"The issues and challenges for our retailers still exist and now with the resurgence of cases and different markets around the world it's even making it worse," Brisebois said.

With furniture factories only producing a limited amount of inventory due to COVID-19 outbreaks and restrictions, Brisebois said manufacturers in Vietnam will likely sell their products to other countries that don't have as high of import duties as Canada.

Brisebois said this will make it more difficult for Canadian retailers to ensure that consumers have a wide selection of products at a variety of price points, and will cause more Canadians to look to the U.S. for furniture.

"At the end of the day, none of this is good for the consumer, and it's certainly not good for the retailer," she said.