Ben, Abe, and Sam made all the right moves until it came time to decide which of their kids would take over the business.
SAM ITKIN'S ROUND FACE STILL glows whenever he talks about building the family business. He is a New Yorker through and through, and -- although many years have passed since the family first made a name selling office furniture -- he hasn't forgotten the early thrill. Not that success came easily or quickly: it took hard work and dedication, he says. But right smack in the middle of Manhattan, three brothers built something bigger than any of them ever dreamed themselves capable. Sam calls it "the Tiffany of the office-furniture business."
Tiffany or not, The Itkins was indeed a New York City legend. For more than 40 years, Sam, Ben, and Abe worked side by side, cultivating strong ties with furniture manufacturers, giving customers all the service they could want, treating employees like family. Sam is as proud of that legacy as ever. "The other day," he says, "I ran into one of the old truck rrivers walking down the street, and do you know what he did? He came right up and hugged me!"
But the truck driver no longer works for the company, nor does anyone else, for that matter. "I guess you've heard that the business is closed," Sam tells his visitor. "I walked by the building other day, when I was in New York, and there it was, totally dark. The doors were shut. I still can't believe it."
Sam never dreamed the business would end this way. When he retired seven years ago, the company was in the hands of his two nephews and seemed to be coasting right along. But something went wrong -- exactly what, Sam often ponders. It wasn't the economy, and it wasn't the market. In the final analysis, it wasn't even the strategy. No, he concedes, the demise of The Itkins is a more complicated story -- a story about succession in a family business, about judging young men's characters, and about betting on the wrong heirs.
When the Itkin brothers got started back in 1934, there was no particular reason to believe that their business would be any more successful than the dozens of other office-furniture dealerships in New York City. The sons of a Russian-born cabinetmaker, they rented a modest showroom on East 46th Street, just off Madison Avenue. With only a few hundred dollars to their name, mostly borrowed, they couldn't even afford a truck. What they lacked in resources, however, they overcame with initiative and drive. Their maxim was: "He who makes calls gets results. And he who gets results gets commissions." In the early days, Sam recalls, that meant "walking our shoe leather off," making sales calls within a 12-block radius of the store. Whenever they sold something, they delivered it -- on a dolly.
The business grew, and they were soon able to move to a larger space a few blocks away. Abe, the middle brother, began looking after the financial side of the business, while Ben and Sam, the oldest and youngest, were full-time salesmen. But the brothers remained close, and close to the business. "You worried about accounts receivable, about payables," says Sam. "You grew it like a baby."
Their dream, even then, was to create the biggest and best-known furniture dealer in town. In order to do that, they had to establish the company's reputation. "We must have knocked on every door in New York," says Sam, "from the top floor to the bottom." When they weren't knocking on doors, they were contacting real estate brokers or combing through the newspapers. "If we found out that a business was moving, we'd go see them. Even if the move wasn't for a year, we'd make the contact."
They were equally zealous about service. When asked if they handled, say, refinishing or repairs, the answer was always yes. "One time," says Sam, "I even agreed to wax some floors" -- and own a steady customer as a result. On another occasion, a bank manager commissioned the company to refinish some desks over a weekend. When he dropped by on Saturday afternoon to see how the job was progressing, he was surprised to find the brothers themselves in the bank, hard at work scraping and shellacking. He asked where their refinishers were. "We told him the other guys were tied up on a job, and we didn't want to disappoint him," says Sam, laughing because there were no "other guys." The banker was impressed, and the Itkin brothers added another long-term customer to their list.
With shoe leather and elbow grease, they began to make a name for themselves and to carve out a distinct place in the market. While other companies tended to specialize, Itkins became known as a full-service furniture dealer. The brothers carried all the major lines and styles, from budget-priced steel to the finest walnuts, oaks, and mahoganies. They also built a staff that, by the 1950s, included refinishers, reupholsterers, cabinetmakers, and truck drivers. "We'd tell people, 'Why go to 10 different places? We can do everything under one roof." Customers bought the logic, and sales climbed to $3 million a year.
In the early 1960s, the brothers shifted into high gear, putting together (with the help of an advertising agency) a highly effective campaign aimed at raising the company's profile. Small ads began appearing two or three times a week in The New York Times, mentioning only the family name, never a price or a product. Then, once or twice a year, they would launch a blitz of full-page ads announcing hundreds of sale items and discontinued lines that just had to go. The blitz would last for one or two weeks, culminating in a final ad labeled the "Sorry Sale," with a bold line running through each item that had been sold.
The campaign did wonders for The Itkins's image and helped boost sales to $5 million in 1964. To accommodate its growing clientele, the company moved into, and later bought, a building on Madison Avenue, with two and a half floors of showrooms. There was also a huge warehouse on West 23rd Street, emblazoned with The Itkins logo, as well as a fleet of delivery trucks and more than 60 employees. The company was strong, and the future looked bright. But the brothers, no in their fifties, were beginning to think about succession.
As it happened, all three of them had sons to whom they could pass along the business. Ben's son Lewis was the first to join the company, coming straight out of college in 1962. A couple of years later, Abe's son, Leonard, did the same, but he lost interest after a few years and left. Sam's sons, on the other hand, decided to get their feet wet elsewhere -- Larry as a stockholder and David as a production assistant at a film studio. By 1970, however, both were working in the family company.
As the second generation of Itkins was entering the office-furniture business, there were many signs that the business itself was changing. Little by little, distinct market segments were beginning to emerge. At the high end of the market, "design" was the word of the hour. Sam, for one, found himself spending an increasing amount of his time selling furniture on a contract basis to interior designers. Soon small customers, too, began requesting design service, and so the company expanded its own in-house decorating staff.
But while some customers demanded more service, others wanted less. In the furniture business, as elsewhere, discounting was an emerging trend. The Itkin brothers responded by opening their own off-price furniture outlet for discontinued lines and secondhand merchandise. Located in a low-rent building next door to the warehouse, it was called "Abie's Baby," after brother Abe.
In one sense, these moves were an extension of the company's strategy of the previous four decades, geared toward making The Itkins an all-purpose furniture dealer for kinds of customers. "We were like a department store," says Sam. The approach seemed to work, moreover, as sales continued to climb in the early 1970s, reaching $8 million in 1974.
But not all the Itkins agreed with the strategy. Sam's two sons, Larry and David, had also been watching the trends in the industry, and they had come to the conclusion that, over the long term, the company could not succeed by relying on a large number of suppliers. Furniture makers were becoming increasingly aggressive in their marketing strategies. In the future, the boys predicted, top manufacturers would either open their own showrooms or begin weeding out dealers who were not committed to their lines.
With that thought in mind, Larry and David argued that the company should reposition itself as a high-end furniture dealer, carrying only 10 or 12 of the better-quality lines. They also urged their father and uncles to upgrade the sales effort by hiring a full-time sales manager, and to get rid of the in-house designers. "If you were convinced, as we were, that designers were going to be increasingly large buyers of furniture," Larry explains, "why would you have your own designers? You'd be competing with your clients."
The elder Itkins did not buy the argument. They thought the boys were exaggerating. The industry simply wasn't changing that much or that fast. Moreover, they felt a commitment to all their customers. "You couldn't disregard the people who wanted a $10 desk," says Sam. As for the in-house designers, "we had them for the benefit of our smaller clients, so we wanted to keep them." Anyway, they weren't about to change the way they approached the business. "After 40 years, we were happy doing what we were doing."
Eventually, however, Sam and his brothers did relent on one issue and reluctantly allowed the boys to hire a sales manager from a large furniture manufacturer. A few months later, Larry and David also got permission to spruce up the Madison Avenue showroom by adding carpeting and constructing some platforms near the front windows, where they could display chairs and office accessories. The platforms would give the showroom "a quality ambience," says David, who built them with his brother over two winter weekends.
The boys were pleased with their handiwork, but the elder Itkins didn't like the change. They complained that the image was wrong and, worse, that the platforms took up valuable floor space. One day, Larry and David returned from a business trip to find the platforms dismantled and the furniture rearranged. "There was lots of shouting," David recalls. "They told us, 'this is our business."
A few weeks later, the new sales manager was fired. "We just weren't happy with the guy's approach," says Sam. "He didn't go out on calls. He sat around writing memos." That, argued the boys, is what a professional sales manager is supposed to do -- but to no avail.
In the midst of all this turmoil, who should appear after nearly a decade but the prodigal cousin, Leonard, son of Abe. During his absence, he had sold waterbeds, worked as a locksmith, and studied astronomy in Hawaii. Now he had decided that the time had come to settle down and earn some money. Besides, his father was about to retire, and so this was his last chance to assume his place in the family business.
If Larry David had had any thoughts that Leonard might become an ally, they were quickly dispelled. He rejected his cousins' suggestion that slow-moving merchandise be dropped as a way to improve the company's profit margins. "We had some lines that just sat there taking up space," says Larry. Nor did Leonard agree that the company ought to get rid of the staff designers. And when Larry and David suggested expanding Abie's Baby into more units, he nixed that idea too. "Whenever we proposed something, Leonard would reject it," says Larry. "But he never proposed an alternative."
It is unclear whether or not Leonard had his own strategy for the business. (He would not respond to our numerous attempts to reach him by telephone.) He apparently did have thoughts on the company's succession plan, however. When Abe and Ben retired, Sam bought their interest and decided that, upon his own retirement, each of the four cousins would receive 25% of the equity. That was significant because Ben and Abe had originally owned 37 1/2% each, while Sam's share had been just 25%. According to Larry, Leonard made no secret of his dissatisfaction with the plan to make the cousins equal partners. "One of the first things Leonard said to me when he returned to the business was that he felt he should own more because his father had owned more. He said it was his birthright."
In any case, Larry and David soon came to the conclusion that they could not work with Leonard, no matter what the terms of the partnership. "He was a brick wall," says Larry. "It was impossible to agree on anything." So, one evening in August 1978, they went to their father's house and told him that they were leaving the family business -- that, the following Monday, they would both be going to join a young New Yorker named John Varacchi as equal partners in a small furniture dealership on East 61st Street. Sam couldn't believe his ears. "I was heartbroken," he says. "So was my wife." The shock lingered on for many months, during which time he did not speak with his sons.
About a year and a half later, Sam followed his brothers into retirement, leaving the company in the hands of his nephews Leonard and Lewis. His last months were a bit awkward, he says. "You can tell your sons what to do, but it's a little harder to tell your nephews." Nevertheless, he had full confidence in the nephews, who, he believed, had the best interests of the business at heart.
Be that as it may, the business began to change soon after Sam's departure. Leonard and Lewis simply did not run it the way their fathers and uncle had. Manufacturers' reps began to complain, for example, that they could no longer drop in on The Itkins unannounced, as they used to; Leonard insisted on appointments. The cousins also cut back on services such as refinishing and reupholstering, which had long been staples of the business, and eventually eliminated them altogether. Lewis, who took over the oldest and largest accounts from his father Ben, proceeded to lose many of them, says Iris Schmidt, who worked for The Itkins until 1982. "The longer I was there, the more accounts we'd lose." Leonard, she says, made most of the decisions. He also spent a lot of time at the computer, focusing on financial matters. "They acted like theirs was the only furniture dealership in the city."
As departments were closed, longtime employees were let go. Those that remained felt underappreciated. "Leonard did not like to give raises," says Schmidt. Many of them began leaving of their own accord, and some, like Schmidt, went to work for the competition. They were seldom replaced.
"Leonard didn't trust people," says Nancy Goldstein, who worked as a saleswoman at The Itkins before following Larry and David to the new company. "You never heard him talk about whether clients were getting what they wanted. He seemed more concerned about who was going to pay for the messenger. He didn't seem to recognize that you had to spend money to make money."
Little by little, a siege mentality developed. One former employee recalls running into Lewis in an elevator shortly after she went to work for a competitor. In the past, she says, he had always been cordial. "But, in the elevator, he looked straight ahead and didn't say a word to me."
In time, the showroom itself started to look a little stark. As service declined, the company did an increasing volume of cash-and-carry business with smaller customers, who were less likely to come back for more. To lure them in, the company began carrying less expensive, and lower-quality, merchandise. Eventually, Leonard and Lewis formally recognized the change, dropped The Itkins logo, and rechristened the Madison Avenue store as "Abie's Office Furniture."
To competitors, the transformation was utterly baffling. One of the baffled was Neil Schwartzberg, co-owner of Dallek Inc., an established furniture dealership that moved diagonally across Madison Avenue from The Itkins in 1975. He still can't understand why Leonard and Lewis abandoned their fathers' tried-and-true formula, or why they decided to set up a discount operation in that particular location, or why they dropped a recognized name. "I couldn't explain it, even in my wildest dreams," says Schwartzberg. "We got a lot of their customers. It left a big hole for us."
Following the name change, rumors began flying that Leonard and Lewis were planning to close the business down, but nothing happened for many months. According to salespeople, business actually picked up in 1984 and 1985. Then, in early February 1986, Leonard assembled the employees and told them that he and Lewis were liquidating the company. On April 4, 1986, the family business closed its doors for the last time.
It's been more than eight months now since the For Sale sign first appeared. The building at 290 Madison Avenue remains on the market for an estimated $9 million. Driving down Manhattan's West Side Highway, you can see the family name in tall letters on the side of the warehouse on West 23rd Street. But make no mistake about it: The Itkins is out of business.
Meanwhile, the Itkins themselves have gone their separate ways. Ben, who is 76, divides his time between Palm Beach, Fla., and upstate New York. He prefers not to talk about what happened. "I've been out of the business for almost 10 years," he says. "I don't see anything to be gained by reminiscing." His son Lewis, 45, has moved to New Hampshire. He, too, declines to be interviewed. "It's part of my past that I'd like to have behind me." Abe died in the summer of 1985. His son Leonard, also in his mid-forties, is said to be living in Briarcliff Manor, N.Y., and has an unlisted telephone number.
Sam's sons Larry and David, 42 and 39, respectively, have done well since walking out the door. They were able to pursue their strategy at Furniture Consultants Inc., the young dealership they joined in 1978, and the company had prospered. In both 1982 and '83, it appeared on the INC. 500 listing of the fastest-growing private companies in America. Last year, with sales approaching $30 million, the business pulled off a major coup, providing much of the furniture for the new 51-story American Express Tower in lower Manhattan.
As for Sam, he's made up with his sons and sees them both frequently. He spends his winters in Pompano Beach, Fla., and his summers in Westchester, N.Y. Still vigorous at 72, he is enjoying his retirement. He plays golf four times a week, devours mystery novels, spends time with friends, and remains happily married to his wife of 45 years. Last September, they took a four-week trip to China and Japan.
But something is missing -- the family business that he spent his life building and that he had hoped to pass along to his heirs. Lately, he's been mulling over what happened. Proud as he is of his sons' accomplishments, he still does not believe that the problem was one of strategy. He points out that, since the late 1970s, furniture dealers have succeeded with a variety of strategies, some almost identical to the one he and his brother pursued.
No, the real issue was commitment to the business. Larry and David had it; Leonard and Lewis didn't. "They must have intended to shut the business down," he said one day last summer, over a corned-beef sandwich. "They had no excitement. There was no love for the business. In any business, you've got to have a feeling -- not just for what you're selling, but for the people who work for you. But they had none. It was just what they could get out it. They saw it as an easy dollar, and they let it go to pot."
That insight does not ease his pain, however. "You build up a business for the second generation," says Sam, driving his visitor to the airport. "So it hurts to see a name like ours go the way a poor business would go." Then he brightens slightly. "Of course, the name is still a good one," he says. "I was playing golf the other day, and I got a caddy at the club. I had never met the man in my life, and he said, 'Itkin? Weren't you in the furniture business?"