From Home Furnishing Business
The Tug for Consumers
The furniture industry is bouncing back from the Great Recession, however, furniture still faces stiff competition from other consumer expenditures.
The battle for the almighty consumer dollar is on, and the competition comes from a variety of places where people are choosing to spend their hard-earned money.
While the furniture industry has made great strides to recover from the Great Recession, consumers are spending an increasing amount of money on Consumer services and “lifestyle expenditures”— leaving fewer dollars for furniture and other durable and non-durable goods.
The largest services expenditure, housing, has steadily increased over the last 15 years and shows no signs of slowing. Housing is followed by healthcare, food services and accommodations, and recreation. Although consumers have these growing demands on their money, furniture is fighting back from the recession to regain share being taken by other durable home furnishings products like major appliances and televisions that have outperformed the furniture industry in past years.
Consumer Services vs. Goods
Consumer demand for services, primarily housing expenses and utilities along with healthcare, have increased their share of personal consumption expenditures over the last 15 years. During that time furniture, within the durable goods category, has decreased. Table A shows the shifting of goods and services from 2000 to the first quarter of 2015.
Services added 3.7 percent to its share of personal consumption, while durable goods, including home furnishings, motor vehicles, appliances and televisions, fell 2.5 percentage points. Non-durable goods, like food and clothing, as a group also lost 1.7 percentage points.
As shown in Table B, money spent on housing, including rent, utilities and other vendor, has risen at a rapid pace since 2000—up 85.6 percent in the first quarter of 2015 while consumption of furniture rose 33.3 percent.
Unlike furniture, which felt the impact of the recession with an 11 percent drop in 2009, housing services expenditures only slowed its upward momentum. On a positive note, furniture has climbed 20 percent since the peak of the recession, while housing increased 18 percent.
In addition to housing, personal consumption of healthcare did not decrease due to a poor economy. Consumers were faced with increasing costs of housing and healthcare on smaller budgets. As the economy recovers and budgets increase, sales of home furnishing products are rising along with consumer services expenditures.
Table C shows the rise of consumer services expenditures from 2000 through the first quarter of 2015. Like housing, healthcare expenditures have grown exponentially—increasing 126 percent in 15 years. Although dropping slightly in 2009, money spent on food services and accommodations and recreation increased by 93 percent and 77 percent. Consumers decreased spending on transportation during the recession by 7 percent, but have grown 21 percent since 2009.
Consumer Home Furnishing Products
In addition to the rise of consumer dollars going to services, the furniture industry has also faced major competition from other home furnishings products.
Table D details the furniture industry’s growth in share of the three major home furnishings product categories—furniture, major household appliances, and televisions. Furniture has lost share over the last 15 years, only slightly to major appliances, but sharply to the rapid innovation in televisions.
Furniture and bedding continues to claim the largest share of the three home furnishings product categories at 56.2 percent but has lost six market share points, primarily to televisions. Since 2000, total personal consumption of furniture products has grown 33 percent at an annual rate through the first quarter of 2015 to $99.5 billion, just above the growth rate of appliances.
Appliances have also lost market share slightly to televisions, falling from 24.8 percent to 22.3 percent between 2000 and the first quarter of 2015. In terms of growth, the $39.4 billion major appliance industry has the lowest rate of the three home furnishings categories at 32 percent.
The innovation in Ttelevisions has been the major home furnishings consumer expenditure story early on, growing from 13.1 percent of the home furnishings category to 21.5 percent over the 15-year period.
The television segment has more than doubled since 2000, growing 141 percent. However, as Table E shows, most of that growth occurred before and during the recession. Since the recession, the furntiure industry has outperformed both televisions and appliances, growing 20 percent since 2009 compared to 9 percent for appliances and 4 percent for televisions.
If the housing market continues to improve and the economy does not falter, furniture should regain some of its momentum against other competing consumer products.
Personal Consumption Expenditures (PCE) is the primary measure of consumer spending on goods and services in the U.S. economy. The data is compiled by the Bureau of Economic Analysis, a division of the U.S. Department of Commerce.
PCE is classified by type of product as follows. Goods are tangible commodities that can be stored or inventoried. Durable goods are goods that have an average useful life of at least 3 years. Nondurable goods are goods that have an average useful life of less than 3 years. Services are commodities that cannot be stored or inventoried and that are usually consumed at the place and time of purchase.
Furniture sales in the PCE include sales tax and sales to non-profit institutions.