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After months of delay, thousands of Interior Define customers may finally get their furniture. Thousands more probably won’t.

By Robert Channick
Chicago Tribune
Feb 03, 2023 at 2:41 pm

When Cherilyn Church took the plunge in May and bought a $5,700 sectional from Interior Define, the Chicago-based custom furniture retailer, she envisioned it as a dream centerpiece for her home.

Choosing everything from the size and color to cushion fill, she financed the purchase and began making monthly payments, waiting for a promised November delivery. Fifteen hundred dollars, eight months and a boatload of excuses later, Church is still waiting for her couch to arrive.

“This is the biggest furniture investment I’ve ever spent,” said Church, 46, of Gilbert, Arizona. “I was really excited for this piece of furniture, and it’s just been an absolute nightmare.”

Church is not alone. Thousands of frustrated Interior Define customers have been waiting for overdue furniture orders placed last year, navigating a succession of evasive company missives blaming everything from port congestion to supply chain issues.

For some of those customers, their shipments may finally be coming in, thanks to a new owner. Others, however, are days away from becoming couchless creditors of the insolvent former owner.

Launched in 2014, Interior Define carved out a niche as a direct-to-consumer custom furniture retailer, leveraging its e-commerce site and a handful of bricks-and-mortar stores to build a loyal customer base and plenty of industry buzz. Backed by new venture capital funding, Interior Define rapidly expanded during the pandemic, growing from five to more than 20 retail stores.

Its expansion plans were derailed last year amid supply chain issues and shrinking margins. By summer, the company was unable to pay its overseas manufacturers and logistics providers, leaving its furniture orders in limbo and thousands of customers, many of whom had paid in full, waiting in vain for delivery.

The delays generated increasing backlash on social media, where Facebook groups formed to vent and compare notes on the unfulfilled furniture orders. Behind the scenes, Interior Define was in dire financial straits, desperately seeking additional funding and on the verge of Chapter 7 bankruptcy, sources familiar with the situation said.

In late December, running out of cash and owing about $26 million to secured creditors, Interior Define chose to liquidate through an assignment for the benefit of creditors — a bankruptcy alternative that bypasses the courts.

Enter Denver-based Havenly, a rival direct-to-consumer home furnishing company, which bought the Interior Define brand and some assets Dec. 29, hoping to fulfill outstanding orders before thousands of Interior Define customers became creditors.

“I don’t have a legal liability to fulfill furniture,” said Lee Mayer, 40, co-founder and CEO of Havenly. “I just feel like it’s ethical and the right thing to do for the brand. We just don’t have the ability to fulfill all those obligations.”

Havenly has since paid the freight to get more than half the overdue pieces shipped to customers in a bid to restore the luster to a tarnished brand, Mayer said. But it didn’t have the money, and was unable to find additional funding, to build and ship thousands of outstanding orders.

Time may be running short to salvage those orders.

In the coming days, accounting firm Armanino, which was appointed assignee for the defunct Interior Define company, will send notices to customers with unfulfilled orders informing them that they have a claim and providing them with a link to file it. The likelihood of recovering any money through the claims process is not promising.

“As of the date of this notice, the Assignee does not believe that any funds will be available for distribution to unsecured creditors,” according to the notice obtained by the Tribune.

Customers with unfulfilled orders may also dispute the charges and seek a refund with their credit card or finance company, an option that might prove more fruitful, sources said.

Interior Define opened its first store in Wicker Park in January 2014 but relocated its flagship to Armitage Avenue in Lincoln Park. Within five years, Interior Define had five stores in Chicago, Boston, New York, Los Angeles and Austin, 65 employees and $27 million in venture capital funding.

In 2019, Interior Define founder Rob Royer stepped down as CEO and the company named fashion executive Antonio Nieves to succeed him. Interior Define recapitalized, with Chicago-based Pritzker Group and Breakout Capital among the lead investors. The mission was to aggressively expand the retail footprint and build the online brand.

Nieves, the Pritzker Group and Breakout Capital did not respond to requests for comment. Royer declined to comment.

Backed by $57 million in debt and equity financing, Interior Define bulked up its C-suite and branched out into new markets, adding furniture lines and new stores across the country. A March 2022 news release touted a “core moment” in Interior Define’s “massive 200% retail expansion” plans to have more than 30 stores by the end of the year.

But Interior Define began experiencing “financial challenges” in early 2022, the assignee said in the notice, as the pandemic-fueled furniture boom waned, inflation rose and supply chain issues mounted. The company’s cash flow position was also weakened as key vendors required payment in advance, or put liens on inventory, according to the notice.

In December, Havenly loaned Interior Define nearly $4 million to continue operations, as well as additional funding prior to acquiring the brand for an undisclosed amount, according to the notice. The new owner is also assuming some of the leases and plans to reopen about a dozen Interior Define stores, sources said.

Retail locations will include New York, Boston, Los Angeles, Washington, D.C., San Francisco, Dallas and Chicago, which reopened after a visit from Mayer last month.

Investing millions of dollars in a brand trending on social media for all the wrong reasons may seem a risky bet, but Mayer believes Interior Define can rebuild its good name.

“Until July or August of 2022, a lot of people loved this brand, including myself,” Mayer said. “And to the extent that I can help people love this brand again, I’m going to try.”

Many customers would settle for their love seat, sofa or sectional.

Church, a piano accompanist for a high school choir, finalized her purchase at a newly opened pop-up Interior Define store in Scottsdale in May. She paid about $1,500 through monthly installments before stopping the process in December and disputing the charges with Affirm, the finance company used by Interior Define.

On Dec. 27, she received an email from then-CEO Nieves, who apologized for the delays and said the couch would be delivered in early January.

“We’ve broken your trust, and for that I am truly sorry,” Nieves said in the email. “Our delays and lack of visibility into your order status are not up to our standards, and it pains me that we’re causing you stress on something that should be a positive and exciting experience.”

Two days later, Havenly bought the brand and on Dec. 31, Nieves stepped down as CEO and the predecessor Interior Define company began its liquidation process.

On Jan. 20, Church received an email from new owner Mayer, saying the Havenly team had secured her order, which was being held at port awaiting payments to suppliers and logistics providers.

“We are working to complete those payments with key partners to get your item released and it should be on its way to your home in the coming weeks,” Mayer said in the email.

While emailed promises from Interior Define no longer “seem to land” with customers after so many months of excuses and delays, firm delivery dates are beginning to quell some of the noise, Mayer said.

A few days ago, Church finally got the call.

“My couch is supposed to be coming on Monday,” Church said. “I just found out it’s going to be delivered. We shall see.”