From Home Furnishing Business
Editor's Letter: The Best of Times, The Worst of Times
By Bob George,
What a time to manage much less, do a long term strategy. It is an avalanche of external factors that are overwhelming the industry. All of this makes forecasting a challenge but we made our best effort to provide some guidance. We also included the perspective of several industry mavens that have experienced the many up and down cycles that have occurred over the last 30 years. History does repeat itself, but the factors that create the history are not always the same.
How can we argue about the economy as can be seen from the results below?
The U.S. economy is expected to have grown at its best pace in four years in the second quarter, and a part of the boost may have been from inventory building and exports ahead of the implementation of tariffs. Economists say it’s difficult to determine how much tariff-related activity added to the expected 4.1 percent growth. Some economists say it could be just a few tenths of a point, but NatWest Markets economists say it could total a full point.
However, the news is filled with the closing of stores that have been in business 75 years plus. In 2007 at the furniture industry peak, the U.S. had 27,630 furniture stores (store fronts). By the end of last year, that number had fallen 21 percent to 21,765 stores. Over 50 percent of the 5,865 stores that closed between 2007 and 2017 did so in 2008 and 2009, unable to survive the recession. Preliminary data from first quarter of this year shows the first possible increase since 2007 with the addition of 287 stores compared to the fourth quarter of 2017. The graphic below presents the facts.
The political environment which is driving much of these external factors shows no signs of abatement. Even with a change in the midyear elections, the resulting turmoil for the next two years would intensify this change.
All of this disruption has added to the concern of the impact of ecommerce on the traditional brick and mortar stores. While we believe the increase in growth to the ecommerce channel has peaked, we see Amazon’s latest move to create a better online experience in furniture shopping, along with Wayfair’s expansion into the higher end segment with its private label products, promising showroom /gallery quality furniture at a price the consumer can “comfortably” afford, offering an “unparalleled” way to shop online for their homes.
What is the solution? There is no magic answer. However, a trusted map to guide your decisions—or should I say a reliable GPS—that is updated consistently for changing industry conditions, is helpful.
Today, the industry needs more than a sextant or compass to avoid the shoals.
Stay tuned to the next issues.