Internet Makes Furniture Gains

May 19, 2015  by in Business Strategy, Industry   

In 2002, furniture and home furnishings stores were by far the primary channels for furniture distribution—accounting for almost three-fourths of furniture purchases.

In the last 12 years, distribution channels have shifted and while furniture and home furnishings stores continue to lead the pack in furniture sales, electronic shopping—e-commerce—has gained momentum and many consumers are turning toward the Internet to meet their furniture needs.

General merchandise stores and warehouse clubs and supercenters like Sam’s and Costco have also increased their share of furniture distribution while other smaller furniture distributers, department stores, discount department stores, and building material stores, have decreased in furniture sales since 2002.  

 

Note: Figures reflect data from the U.S. Census of Retail Trade issued every five years—2002, 2007 and 2012. Figures for 2014 have been estimated by Impact Consulting Services’ furniture industry model. These Census estimates capture only sales from retail establishments, exclusive of sales taxes, and do not include any additional sales hand-to-hand or furniture resales. Internet sales from online retailers are also included. These channels are summarized based on the NAICS code issued by the Department of Commerce. For example, furniture stores include all retailers “primarily engaged in retailing new furniture, such as household furniture and outdoor furniture …” Examples include traditional furniture stores, mattress stores, specialty stores like Pottery Barn, and other establishments where furniture is the primary source of sales. Business models range from manufacturing and retail verticals, national and regional chains, and mom-and-pop dealers. Sales of furniture within home furnishings stores are included in the broad distribution channel and represent 6 percent of the category.

 

As shown in Table A, furniture and home furnishings stores are at the heart of furniture distribution, accounting for more than two-thirds of the industry. This channel includes traditional furniture stores, specialty furniture retailers, mattress stores, and other retail outlets where furniture is the primary source of sales. Of course, many different business models drive this category, including manufacturing and retail verticals—national and regional—national chains and mom-and-pop dealers.

This broad channel reflects the ups and downs of the economy from 2002 to 2014 with performance varying among the store types. From 2002 to 2007, furniture and home furnishings stores rose 13.6 percent in sales before falling 10.6 percent—followed by an overall increase of 1.5 percent in 2014.

The most noteworthy changes occur in electronic shopping as the online distribution of furniture has made great strides despite the most recent recession. Over the course of 12 years, electronic shopping has jumped 627.2 percent—increasing 201.3 percent the first five years during the peak furniture industry sales years and 141.3 percent the latter seven years. Internet retail furniture sales grew from $1.8 billion in 2002 to $13.0 billion in 2014.

Both general merchandise stores and warehouse club and supercenters grew in importance from 2002 to 2014. General merchandise stores increased by 27.3 percent from 2002 to 2007 and 47.5 percent from 2007 to 2014—with a total growth of 87.8 percent. While warehouse club and supercenters had just a slight increase of 2.9 percent from 2007 to 2014, they posted an overall jump of 24.3 percent over 12 years.

All other distribution channels showed substantial declines through the 12-year span. With the exception of discount department stores showing growth of 8.8 percent from 2007 to 2014 after a drop in the first five years, the remaining channels decreased both time increments.

 

Electronic Shopping Grows Share

Online shopping has increased its share of furniture sales as furniture and home furnishings stores have decreased its share of the furniture sales pie.

Table B explores the changes of the percent of total distribution by each channel during the selected years of 2002, 2007 and 2014. A more detailed look at each channel follows.

 

Furniture and Home Furnishings Stores

As shown in Table C, furniture and home furnishings stores are still the primary source of furniture sales. This traditional distribution channel has decreased share of furniture and bedding sales by 8.1 percent from 2002 to 2014—down to 64.5 percent in 2014 from 72.6 percent in 2002.

Electronic Shopping

While furniture and home furnishing stores have decreased their hold on the furniture industry, electronic shopping—the Internet—(Table D) has steadily gained traction as a major distribution channel. Jumping from 2.8 percent in 2002 to 7.3 percent in 2007, online shopping finished out 2014 with 17.8 percent of the total distribution.

Warehouse Clubs and Supercenters

Table E shows how warehouse clubs and supercenters increased the share of total distribution slightly from 2002 to 2014—up from 3.6 percent to 3.8 percent in 2007 with an additional 0.2 percent gain in 2014.

General Merchandise Stores

 

After slightly increasing by 0.3 percent from 2002 to 2007, general merchandise stores (Table F) grew by 1.1 percent in 2014—accounting for 3.4 percent of total distribution.

Discount Department Stores

Discount Department Stores

 

Dropping the percent of total by 1.5 percent from 2002 to 2007, discount department stores (Table G) rebounded slightly with an increase of 0.2 percent in 2014—decreasing 3.8 percent to 2.5 percent over the 12-year span.

Home Centers and Building Materials

 

As shown in Table H, stores such as The Home Depot and Lowe’s as a group decreased share of total furniture and bedding sales from 3.1 percent in 2002 to 2.3 percent in 2007 with a minimal rise to 2.4 percent in 2014.

Department Stores

 

Decreasing share by 0.7 percent from 2002 to 2007 and dropping another 0.6 percent from 2007 to 2014, department stores, depicted in Table I, was 1.8 percent of distribution in 2014.

All other Furniture Retailers

 

In 2014, the remaining retailers (Table J) dropped to 3.7 percent of distribution, after a decline from 8.9 percent in 2002 to 7.9 percent in 2007.

Editor’s Note: Future articles will address the performance of the sub-channels within the furniture and home furnishings category as well as examine the channels associated with online purchases. Coming soon will also be a look at the major products’ shares of each distribution channel.