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From Home Furnishing Business

Editor's Letter: That Can’t Be Right!

By Bob George,

There is a television commercial for a phone carrier that depicts a party with consumers serving themselves at a casserole buffet using their fingers as scoops to sample and fill their plates – a disturbing scene with the tag line, “That can’t be right.” This depiction in essence sums it up for me.

Having spent almost fifty years trying to understand trends and how they will impact the Home Furnishing Industry, I have watched many changes that have impacted the industry, both positive and negative. This will not be a nostalgic trip down memory lane with commentary on the good old days however it will be a cautious commentary on the speed of change.

We are in a “disruptor” economy, whatever that means. But that has always been true in business. Entrepreneurs seize upon a concept and push forward to satisfy the perceived needs of the consumer. The industry has experienced “category killers,” blockbuster retailers that through volume reduced prices along with services, captured significant market share. The remnant of these retailers, such as Babies-R-Us, a division of Toys-R-Us, have been liquidated, leaving in its wake thousands of small independent retailers that help expectant parents create that special nursery. But beneath that disruption are the lives of many individuals who built those businesses over a lifetime. Disruption, but at what cost?

I know the reaction of many at this point is, “But that is ‘capitalism’.” Don’t take this wrong, I am not saying change is bad. Do the math. I am a product of the sixties (the ultimate disruptors) and an early business career in the heady days of the LBOs (Leverage Buy Out). In our industry, the cry to put that capital required on the balance sheet to work to create shareholder value resulted in the industry manufacturing sector, losing the capital to automating manufacturing. The consequence was the loss of production to offshore. Yes, this was disruption, but at what cost?

As a young business school graduate, it was hammered into my mind that the capitalist system was efficient and would “punish” new ideas with failure. However, it was always with the caveat that a company has to contend with a competitor’s bad strategy until they went out of business. Today, the environment is slow to correct. Weekly, retailers question how etailers continue to increase market share by continuing to accumulate substantial losses. When will there be a correction? In the interim, independent retailers will fail. The latest projection is that we will lose a third of the stores in the next downturn.

The pace of change is increasing. A test by Ikea to rent furniture has become the buzz that will be a disruptor. At times, I believe change is attempted just because we can. Give the consumer their “Big Mac” at any hour, delivered at any hour by Uber Eats at twice the price. Should we? When the cost of the service exceeds the cost of the product, should we take caution?

Venture capital should be a positive contributor to improving society. But with cash pursuing ideas (good or bad) what is the result? I realize I will get incoming flack on this article saying that I am negative on capitalism, but maybe we need an adjustment to more positive, not disruptive, capitalism. The graph below is real. I have experienced each of these cycles. Even though the consumer is confident, should we be cautious?







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