Contract Is NOT an Extension of a Furniture Brand's Business. It Is a Different Industry.

Contract is the commercial dream of nearly every Italian furniture brand. A project worth 2, 5, 8 million. A prestigious jobsite. A name to add to the portfolio. The feeling, at last, of playing in a different league.

When the closing numbers come in, the dream almost always turns into the same story: “the margin is lower than expected,” “the project ran long,” “we had problems on site.” Put less diplomatically: the project burned cash, froze resources for months, and left a hole in the overall profitability of the fiscal year.

This happens systematically. It is not bad luck, it is not the “particular” project, it is structural and it has five precise causes, which I have observed for years with embarrassing regularity in very serious, very well-run companies within their core business.

The first — confusing a “big order” with a “Contract project”

The first trap is semantic, and therefore mental. The brand receives a request from an American developer to furnish 480 residential units. Internally, someone classifies it as “a big order.” From that moment on, the entire corporate machine handles the project with normal B2B processes: quotation, order confirmation, production, shipping.

A Contract project is not a big order. It is a temporary industrial project with specifications that change over time, multiple approval phases, mock-ups, value engineering, managing a client who is not the end customer, quality control against contractual standards, split logistics, installation coordinated with other trades on site, and continuous change orders. Treating it as “a large order” means going to war with a hunting rifle.

The second — pricing at the brand markup, ignoring the real cost of delivery

The brand's price list is built around the retail and distribution channel. Markups, discounts, known margins. When the Contract project comes in, the estimate is made starting from that price list with an “aggressive but sustainable” discount. The problem is that the resulting net price does not cover everything a Contract project requires beyond the product: dedicated project management, specific product engineering, prototyping, mock-ups, labeling, kitting per unit, special packaging, customs documentation management, site supervision, extended warranties, and reserves for disputes.

These are not incidental costs: in a well-structured Full Contract or Turnkey project they account for between 15% and 30% of the total product cost.

If they are not inside the price, they are outside the margin.

The third — the lack of a separate P&L for the Contract Division

Almost always, Contract is run “inside” the existing structure. Same accounting, same cost centers, same overhead allocation. The result: at the end of the project no one really knows how much was earned, because the costs are diluted across multiple centers and the real margin is invisible. The project “seems” to have gone well because it generated revenue, but if you do the exercise of honestly costing manager time, technical hours, warehouse occupancy, and the financial cost of frozen working capital, the real margin is often half of what was declared. Sometimes it is negative.

Without a separate P&L, the company cannot see where it is bleeding. And so it does not correct course.

The fourth — treating after-sales activities as a cost, instead of as a second margin

Logistics, installation, change order management, post-delivery, warranty, non-conformity returns: in the brand's mindset these are “nuisances to be minimized.” In the reality of Contract they are the second engine of profitability, often more lucrative than the first. A well-managed change order has double the margin of the base project. A well-built logistics plan frees up capacity and eliminates penalties. A coordinated installation accelerates the collection of the next progress payment.

The brand that treats these phases as annoyances not only leaves margin on the table: it actively burns it in the rush to “close out and move on to the next one.”

The fifth — committing before doing a real feasibility study

The feasibility study is the moment when a Contractor decides whether they will make or lose money. It is not a formal exercise: it is the discipline of taking the project apart piece by piece before signing it, identifying the risks, pricing the uncertainties, building the reserves. Almost no Italian brand does this with the necessary rigor, because internally no one has the authority to say “this project should be walked away from” in front of a Sales Director who sees only the revenue.

You sign out of enthusiasm. You pay for years.

What all this means

Contract is not an extension of a furniture brand's business. It is a different industry, with different economics, different organization, different culture. Treating it as an extension is the fastest way to discover that the commercial dream was, in fact, a strategic distraction.

The point is not that Contract is not worth it. It is worth it, and very much so. But it is worth it only for those willing to build it as what it is: a company within the company, therefore an autonomous Division, or better still a separate Interior Contractor company, with its own governance, its own metrics, its own structure, its own head.

Everything else, statistically, loses money.

— Davide Semprini · LA Venice