When did you last hear of a Canadian selling furniture into China? Dan Nussbaum is aiming to do just that – through a niche manufacturing strategy that focuses on a narrow world market where he can be a design leader. For his small Mississauga company, Arconas Corp., that market is public seating, particularly seats for airports, but also other transport terminals – such as a new Hong Kong cruise-ship facility, where Arconas has landed a contract worth in excess of $2-million to supply 5,500 seats. Since buying the company eight years ago from his father-in-law, he has taken on a partner, Pablo Reich, and narrowed Arconas' product focus while expanding its geographical ambition.
So what is the story here?
It is about a small Canadian success overseas. Mostly, you hear of furniture coming from Asia to Canada; not that often do you see it in reverse. This is a bit of a model for Canada. We have been fighting the high dollar for a long time. We work with suppliers, local and international. We don't manufacture of lot of the parts ourself; it is the design we worry about.
Arconas is a 40-year-old company. How did it get to this place?
Going back in history, we inherited a company with a very good name, but it was more of an commercial furniture company and we needed to specialize to survive. We wanted to be a leader in a category, and we really focused for the first five to seven years on the airport market.
Then, we wanted to identify new markets for the same products, and started to look outside airports and transportation – to government, courthouses and health care.
But airport seats are your forte?
Airports are the main business. Our seating was in five airports a decade ago; now we are in 200 around the world. The biggest proportion is North America, and the U.S. has been our biggest market, but we are now doing a fair number of projects outside this continent. The Hong Kong project is a big breakthrough in the Far East.
So do you do all your manufacturing in low-cost countries?
We actually have our factory here in Mississauga. Certainly, there are components coming from different parts of the world, but we work with a great local supply base, as well. We have all of our upholsterers here in-house. All the labour that relates to cutting, sewing … is Canadian. The foam is from Canada, the steel will be from Canada, and some of the aluminum components will be from Asia.
How do you keep processing work in Canada?
The design allows us to do it – it is very production-friendly and it is a design we can sell. You can buy a product for a quarter of the price directly from China, but you won't have the same design functions built into it. The Toronto area offers a fantastic work force and supply base – we have advanced laser cutting, advanced water-jet cutting and other great technologies locally.
We rely on highly industrialized processes for furniture-making, and we do not rely so much on manual labour. We can afford to pay Canadian labour rates and still remain competitive. The big part for us is the engineering that goes into the final product. And we employ 40 people, a similar number as 10 years ago.
But at $15-million in sales a year, you have about five times the revenue of a decade ago?
Yes, and the dollar hasn't been our friend during all that period. We had to push pretty hard.
Is China a hot airport market?
China is on a pace to add another 200 airports by 2025. There is also a big and growing market in India and the Middle East. We won our first Indian project in the Hyderabad airport a year ago and we have a very good distributor there bidding on other projects.
What is the key in China?
That is the million-dollar question. It is reputation, knowledge of the industry and ultimately the ability to execute and deliver. The Hong Kong terminal [designed by the firm of renowned British architect Sir Norman Foster] is an iconic building for Asia, and they wanted the new standard for cruise ship terminals.
Where do you get your own designs?
We work with independent designers. One of the key ones is Douglas Ball out of Montreal; he's done excellent design work for a number of companies and he designed our most popular product called Flyaway. Another is Davide Tonizzo who is based in Toronto. Wherever possible, we use Canadian designers and Canada has a lot to offer.
Do you have growth objectives?
We continue to grow in the 20- to 25-per-cent range a year. We hope to maintain that growth, but it will not all come from selling airport furniture in North America. In that market we are already a leader and … our growth now will come internationally. China is the biggest potential opportunity; it is also the toughest market to get into.
Twenty years ago, when you were enrolled at a U.S. liberal arts college, did you have any idea you would end up here?
In my whole life, I have been looking for a good entrepreneurial opportunity. It was the right place at the right time. It is such an interesting business. It is not huge, but we work on projects that have a lot of profile.
Your father-in-law, Art DeFehr, built Palliser Furniture, and added Arconas to his group of companies. How did you get involved?
After college [where he met Mr. DeFehr's daughter, Shanti], I joined the business, and worked for him a few years before grad school. I left for a bit and came back. I ran the Palliser buying office in Thailand, and I moved here about eight years ago. Arconas was a standalone business and the opportunity came to buy it. Pablo [now executive vice-president] came over more recently; we were colleagues at Palliser many years ago.
As a small player, aren't you intimidated by the huge competitors in your market?
We have great competitors, like [U.S. furniture giant] Herman Miller Inc., but at the same time they are busy selling furniture to offices. We have this niche of airport furniture and it is too small for them to worry about, but it is one in which we can be relevant.
As an example, we have installed power plug units for seats at Pearson Airport. Because we were working with airports and understood their needs, we developed a power solution before anyone else. They came to us and said, 'Listen, we need to solve the issue of our passengers going through with phones and laptops and everything else.' Part of it was that market focus.
DAN NUSSBAUM, CV
President, Arconas Corp.,
Born in Kidron, Ohio;
41 years old
BA, Goshen College, Goshen, Ind.; MBA, London Business School
Spent much of his early career with Palliser Furniture, Winnipeg.
After completing his MBA, worked briefly in London for online image distributor.
Spent three years as Palliser's general manager in Bangkok.
Since 2005, has been Arconas' president and majority shareholder.