Statistically Speaking: Three Months of the Pandemic: The Impact on the Furniture and Home Furnishings Industry

July 15, 2020  by HFBusiness Staff in Business Strategy, Industry   

As job losses mounted, many consumers cancelled, restricted, or redirected their spending. While the unemployment rate did improve 1.4% in May as stores and companies began the process of reopening, unemployment was 9.7% higher compared to May 2019. In addition, Consumer Confidence was still down 47.5% and the stock market remained wildly unstable. In this article we dive into the impact of three months of the pandemic on consumer spending and retail sales for March, April, and May, comparing the level of impact on different consumer categories. The article also strives to quantify the advantage given to online retailers and brick and mortar stores deemed “essential”, and the devastating impact that advantage has had on brick and mortar businesses forced to close.

The decline in consumer spending for furniture and home furnishings was considerably less than the plummet of retail sales for brick and mortar furniture and home furnishings stores. The difference centers around consumers taking to the internet like never before as well as warehouse price clubs (Sams/Costco) and big box stores (Walmart/ Target) being allowed to stay open while retail furniture stores and other brick and mortar stores deemed non-essential were forced to close. As shown in Table A, with the exception of total retail sales, the steep decline began in March when a majority of the country shut down by mid-month. Propped up by online sites and “essential” brick and mortar retailers, total consumer spending decreased only 6.6% in March, followed by an additional 12.6% drop in April, but rebounded 8.2% in May as businesses began to reopen.

While consumer spending on furniture and home furnishings suffered greatly from March to April (-17.2%), retail sales from furniture and home furnishings stores forced to close dropped a record 50.6% over the same time period. After many closures were lifted in May, sales in furniture and home furnishings stores responded – jumping 98.4% from April to $7.7 billion. And while this jump almost doubled sales over the previous month, May was still 23.4% below May of last year. Consumer spending on furniture and furnishings in all retail channels increased 29.4% in May compared to April. Consumer Spending (All Channels) by Product Type

In March, consumer spending on durable goods stalled almost immediately as most consumers curtailed spending out of either necessity or caution (Table B). Dropping 12.4% the first month of the pandemic, spending on durable goods decreased another 12.4% in April, before jumping 28.6% in May. Due to a massive rise in grocery sales during March as consumers stocked up, consumer spending on nondurable goods increased 3.9% before dropping 14.0% in April. Spending on nondurable goods increased only 7.7% in May. Not surprisingly, as the shelter-inplace orders began, consumer spending on services decreased down 8.9% in March and another 12.2% in April. May increased 5.4%.

Consumer spending on furniture declined 9.5% in March and another 18.3% in April to an annual rate of $99.5 billion. In May, furniture consumption increased 32.8% (Table C) as consumers fled to newly opened stores. Smaller home décor purchases often made over the Internet like clocks, lamps, lighting fixtures, and other household decorative items, still declined 9.5% in March and another 15.9% in April. Numbers in May were up 15.5%. Carpets and other floor coverings fell 17.6% in April and spending jumped 50.4% in May.

Appliances, televisions, and other household consumer purchases also took a major hit during the first months of the pandemic as shown in Table D. Consumer spending on major household appliances fell less than other home products as major home and garden retailers, like Home Depot and Lowes, were able to stay open. Major appliance spending declined 9.3% and 6.2% in March and April before increasing 16% in May. Initially decreasing just 6.2% in March, spending on televisions dropped 11.1% in April before increasing 16.1% in May.

Only falling 3.0% in April, the tools and equipment for the house and garden category fared much better during the quarantine, as many consumers spent time working in their yards, again as building materials and garden stores were deemed “essential” and allowed to remain open. Spending in May was up 12.6%

Consumer spending on personal computers/tablets and peripheral equipment grew 4.6% in March due in part to online learning for students and much of the workforce having to work from home. While spending on telephone and related communication equipment, including cellphones, tanked in April compared to March (-29.7%), consumer spending growth on cellular services remained flat (Table E).

Initially, consumer spending on groceries jumped 23.0% in March before dropping 12.2% in April. Growth eased up in May increasing 3.2% over April. Spending on restaurant and fast food meals declined sharply beginning in March down 25.4% from February and continuing through April (-30.8%). As restaurants opened in May, growth jumped 24.6%. Clothing and footwear, despite the Internet, also took a huge hit as consumers curtailed much of their spending in March and April – down 28.8% and 28.6% respectively. Interestingly consumer spending on newspapers and periodicals did show an increase throughout the pandemic as many people turned to reading as a way to fill their extra time – up 5.5% in March, 10.2% in April, and 10.8% in May.

Retail Sales by Type of Store Overall retail sales were up 3.9% from February to March before falling 12.4% in April. Total sales rebounded in May by 21.9% as stores reopened but were still 3.4% less than May 2019 (Table G). Furniture and home furnishings retailers felt the brunt of store closures in April – dropping over 50% to $3.8 billion in sales. While retail sales were up 98.4% for those stores in May, sales during May 2019 were still 23.2% higher. Non-store retailers (e-commerce and mail order), had positive growth throughout the pandemic as most consumers turned to online shopping. Warehouse clubs and supercenters comprise about 70% of the general merchandise stores category. Not surprising, this category which for the most part was considered “essential” and allowed to keep doors open, increased by 17% in March before decreasing by 14% in April and then evened out in May – up 14%.

With many consumers quarantined and home during March, April, and into May, sales from the “essential” building material/garden equipment retail stores grew exponentially, increasing an average of 16.2% a month, as many turned to yard work and home projects as a way to stay busy (Table H).

During March and April, retail sales for electronics and appliance stores declined sharply – dropping 13.1% and 48.3% respectively as stores remained closed. In May stores were up 61.5% over April, a number still 31% less than May of 2019. Clothing and clothing accessory brick and mortar stores were among the hardest hit by closures with sales decreasing 42.4% in March, followed by a 74.9% decline in April. Sales rebounded 209.2% in May but still 63.3% less than May of the previous year.

As shown in Table I, gas station sales decreased 7.4% in March and another 21.7% in April as a result of people not driving or commuting to work. Sales increased by 20.4% in May but with gas prices low and many people still working from home, gas sales were 31.5% below May 2019. Grocery store sales jumped 32.5% in March as people swarmed the stores to stock up in the early weeks of the quarantine. Sales fell 12.8% in April before increasing 6.2% in May. As restaurants across the country slowly opened, retail sales among food services and drinking places increased by 38.1% in May after dropping 23.8% in March and 36.6% in April.

Looking at the cumulative impact this year through May compared to the first months of 2019, the brick and mortar distribution channels forced to close during the quarantine still have a long way to go to catch up to 2019 (Figure 1). Through May, furniture and home furnishings stores were still 18.1% below 2019. Electronics and appliance stores and department stores fared slightly worse, down 19.3% and 21% respectively. It will be a few months before data is available to quantify how much of E-commerce’s 16.6% May YTD growth furniture and home furnishings were able to capture.

Residential Construction and Sales Not surprisingly, the housing industry also halted during most of March and April, as shown in Table J. Housing permits declined 5.7% in March and 21.4% in April, but did increase 14.4% in May once many state’s shelter-in-place orders were lifted. Housing Starts also dropped dramatically during March and April, falling 19% and 26.4% before increasing by 4.3% in May. New housing completions have yet to show positive growth – still down 7.3% from April to May. New residential sales were down 14.5% in March compared to February, and another 5.2% in April before rebounding in May up 16.6%. Existing home sales continued negative growth over the previous month throughout the three months – March (-8.5%), April (-17.8%) and May (-9.7%).

As we look to the future, the remainder of the year will be hard for furniture stores as factories just restarted in May. The pandemic is still not fully understood and high unemployment will continue as companies work to adjust to the uncertainty. At press time many states were in the midst of a second resurgence of COVID-19 infections. While many consumers still desire and missed the physical act of shopping and going to retail stores, the preceding few months have shown the necessity and power of e-commerce and online ordering. For many consumer products, the online exposure during the first three months of the pandemic will perhaps permanently change shopping habits. But on a positive note, especially for the furniture industry, the consumer appears to have sorely missed the shopping experience.