The Fall and Rise of Retail

March 7, 2016  by in Business Strategy, Industry   

In the five-year period between 2007 and 2012, the home furnishings retail landscape took a pounding and lost a major chunk of its storefronts.

To get an in-depth picture of how the furniture industry is rebounding post-recession it important to understand how home furnishings stores were hit across the country. Newly released, detailed geography data from the Economic Census conducted by the U.S. Department of Commerce throughout 2012 shows that all types of home furnishing establishments closed a multitude of stores between 2007 and 2012.

No area of the country was unscathed.

As a whole the furniture and home furnishings business lost 18 percent of its stores, and data from the Commerce Department’s Bureau of Labor Statistics shows the number of employees falling 23.6 percent and average hourly earnings decreasing 0.9 percent
(Table A).

 

Since 2012, the total industry has seen another 3.6 percent loss in store count.  However, both employment and hourly wages have improved, 6.1 percent and 9.3 percent respectively, signaling an ever-so-slow rebound.

 

Table B shows the rapid reduction of stores during the recession with the total furniture and home furnishings industry dropping from almost 61,000 stores to 48,000 between 2007 and 2015.

 

Despite the continued loss of stores, Table C shows that hiring is picking up. Although not back to pre-recession levels, the number of employees has increased since 2012 climbing 6.1 percent in 2015. In 2015 the industry employed 465,000 workers, down from 574,000 in 2007.

 

While average hourly earnings dropped 0.9 percent from 2007 to 2012 (Table D), wages increased 9.3 percent since 2012 to $19.37in 2015 and now exceeds pre-recession (2007) average earnings.

 

Furniture was one of the hardest hit industries during the recession due to the collapse of the housing market and the high unemployment rate. It has also been one of the slowest to dig out.

While current data is maintained by the Bureau of Labor Statistics for the broad home furnishings category, data from the recent geography release from the 2012 Economic Census shows the impact of the recession on the store types—furniture stores, home furnishings stores, and floor covering stores (Table E).  

 

The data shows that for furniture and floor covering stores, not only were the store closures significant, but remaining locations also cut back on employees. Furniture stores lost 18 percent of their locations, home furnishings stores 23.8 percent and floor covering stores 21.7 percent.

The net result of the five-year period was as a loss of more than 13,000 stores, 133,000 employees, and $3.4 billion dollars removed from the economy (Table F).

Regions

Although store closing were systemic across the country, the Northeastern and the Western states were the hardest hit (Table G). Compared to a loss of 13.4 percent of furniture stores in the South, the West almost doubled that percentage closing 26.2 percent of stores. Meanwhile, floor covering stores closed the most doors in the Midwest, 26.7 percent.

 

Cuts by Market Size

Metropolitan Statistical Areas (MSA), Micropolitan Statistical Areas (Micro SA), and rural areas all experienced widespread store closures, employee reductions, and decreases in annual payroll from 2007 to 2012.

Looking at the impact of store closings on markets by industry size, mid-sized markets (under $100 million) tended to fare only slightly better than large markets with more than $100 million in industry sales or small Micropolitan Statistical Areas (Table H).

Furniture store closings were the least impacted with mid-sized markets faring the best, but still closing 16.1 percent of stores during the 2007 to 2012 period. Meanwhile, more than 27 percent of floor covering stores closed in Micropolitan Statistical Areas.

 

Furniture stores were forced to cut almost 30 percent of their employees across all markets from 2007 to 2012 (Table I). Floor covering stores had the highest percentage of employee cutbacks—the largest occurring in Micropolitan Statistical Areas with a 38.1 percent drop. Home furnishing stores suffered the least amount of employee loss—most likely due to a wider variety of non-furniture merchandise as well as typically smaller store sizes.

 

The furniture and home furnishings industry has slowed, but not completely stopped, the bleeding. Although an additional 3.6 percent of storefronts have closed since 2012, those left standing are contributing to steadily rising industry sales. Hiring is up 6.1percent over the last three years, and wages are increasing.

The slow sales rebound will be the subject of next month’s Statistically Speaking.