Statistically Speaking: Furniture Industry Sees Demographic Shifts In Prime Consumers

November 30, 2022  by HFBusiness Staff in Business Strategy, Industry   

The net impact was that a lot of money was pumped into households. In addition, the stay-at-home nesting frenzy contributed to the furniture industry surge initially, but it was the inflationary price increases that followed that drove growth, especially over the last year. Regardless of the reasons for the industry growth, one thing is certain, the demographics of consumer spending on furniture products changed. People went back to work in the midst of surging increases in wages along with competition for workers whose work habits had also changed. The roller coaster ride of the pandemic in 2020, gave way to post-pandemic 2021 when inflation began to take hold late in the year, followed by the economic chaos of as the furniture industry has been unsure exactly what to do to right the ship going forward. Will the furniture industry eventually retreat to the prepandemic days or build on lessons learned? Consumer spending on furniture slowed at the beginning of the pandemic in 2020 Q1, then picked up steam through the second wave in August/September. The industry received an additional bump when with the vaccine rollout in the first quarter of 2021, then slowed briefly September to December 2021 as the Delta variant surged.

Table A

But when inflation took hold and prices rose, growth has been steady through the third quarter of this year. Table A shows the progression.

It has been more difficult to quantify whether after the initial store re-openings in the second quarter of 2020 what portion of the spiraling industry growth can be attributed to more consumers purchasing furniture versus the increase in prices. However, data available on traditional furniture stores, one of the prime furniture distribution channels, shows that, especially this year, growth came in most cases from increased prices as opposed to selling more product to more customers. (See the sidebar article, “Traditional Furniture Store Average Ticket Sales Rise as Traffic and Number of Purchasers Falls”. Data from FurnitureCore, LLC. a subsidiary of Impact Consulting Services, Inc., parent company of HFB.)

Building on this background of COVID stimulus packages, heightened consumer interest in home furnishings and spiraling inflation, the remainder of this installment of Statistically Speaking examines consumer spending on furniture at the demographic consumer unit/household level looking at age (tied to generations), income and living arrangement (marital status). Data from the Bureau of Labor Statistics’ Consumer Expenditure Survey (CE) helps to bring into focus how the final impact of the pandemic in 2020 and 2021 compared to the “way it was” in 2019 before COVID changed the course of consumer spending, whether temporarily and permanently. The Methodology is presented in Figure 1.

The terms consumer unit, family and household are often used interchangeably for convenience; however, the proper technical term for purposes of the CE data is consumer unit. References to households in this article are synonymous with consumer unit. Also, the reader should keep in mind that even though average expenditures and sales went up dramatically in many segments, much of it was due to inflation.

Generational Furniture Expenditures Millennials (ages 26 to 41) are now the largest cohort of the generations as Baby Boomers continue to age. And they showed up in numbers both during and post-pandemic buying a lot of furniture in the process. Millennials increased average consumer unit furniture expenditures 44.1% between 2019 and 2021 from $583 to $840 (Table B, expenditures; Table C, growth). This large generation that the furniture industry has waited patiently to set up households, proved during the pandemic and recovery that they are ready to finally take over control of the furniture industry as the older Millennials beginning to age into the higher income categories. Meanwhile, GenXers (ages 42 to 57), though much smaller number, are still the most affluent workers and spend the most on furniture, surpassing the Millennials. In 2019, GenXers averaged $640 in annual furniture expenditures and grew that number to $909 in 2021, an increase of 42%. Of concern to the furniture industry is that the high-income GenXers (ages 42 to 57) are beginning to age out of this key prime 45 to 54 age group and as they age into the 55 to 64 age group will spend less on furniture. The industry is hopeful that the onslaught of Millennials will reach their same economic affluence as they age. Baby Boomers (58 to 76), who have been the heart of the furniture industry for decades, were more conservative spenders during the pandemic increasing average furniture spending from $514 in 2019 to $601 in 2021, a growth of only 16.9%. Baby Boomers should continue to slow expenditures as they age and their numbers dwindle (Table B, expenditures; Table C, growth).

Millennials (ages 26 to 41) continued to form households during the pandemic and recovery, increasing 6.1% and now represent 26.2% of total households increasing their share by 1.2 percentage points. As the youngest members of this Millennial generation continue to form households, they should soon surpass the GenXers (ages 42 to 57), who represent 26.5% of households, but have slowed their household growth (Table D). New to the scene is Generation Z (ages 10 to 25), only 4.5% of adult households in 2021, who are now beginning their assent into adulthood. The furniture industry will see their impact for decades to come as they continue to age in to the furniture buying population (Table D, growth in consumer units; Table E, percent of households). GenXers (ages 42 to 57) still have the largest share of industry sales at 33.7% with growth of 41.7% in 2021 compared to 2019. But the high growth in spending by the trailing Millennials during the pandemic of 52.8% 2019 to 2021, moved them closer to first place at 30.8% in share of industry sales (Table F, growth in total industry sales; Table G, percent of industry sales). Millennials (ages 26 to 41), being a larger cohort than GenZers will most likely take over their rightful place as the primary consumers of furniture in the near future. Baby Boomers, prior to the pandemic, controlled 32.2%, the second highest total dollar purchasers of furniture in 2019 behind the GenXers but ahead of the Millennials. Their purchases increased 18.2 during the two years of the pandemic and recovery. But as they continue to age, the Baby Boomer influence will continue to wane.

Furniture Industry Growth by Income Range Between 2019 and 2021, the average expenditure on furniture per household grew 37.3% from $521 to $716, and total furniture expenditures grew 38.7% (Table H). (Note: The BLS CE Survey’s consumer spending on furniture growth number here is higher than the 33.2% growth published by the Bureau of Economic Analysis, Personal Consumption Expenditures data. See “Figure 1: Methodology” for an explanation of the differences.) Three income ranges had higher growth than the U.S. household average, two being the lowest income ranges and the other being the highest income range. The two lowest income ranges, (1) less than $15,000 and (2) $15,000 to $29,999, increased their average furniture expenditures by 135.6% and 38.4% over the duration of the pandemic 2019 to 2021. These large increases suggest the major pandemic stimulus programs had a significant impact on lower-income household spending on furniture, as well as other durable and non-durable goods. On the other end of the spectrum, households over $200,000 annual income increased average furniture spending by 44.6% to $2,054 annually (Table H, average furniture expenditures; Table I, growth).

When the COVID-19 pandemic had calmed by the end of 2021, there were 1% more households than 2019 just before the pandemic began, but the economic structure of those consumer units had changed dramatically. The number of high-income households $150,000 to $199,999 had increased 16.2% 2019 to 2021, and households with income over $200,000 had grown an astounding 23.8%. Meanwhile middle- and low-income households with incomes under $70,000 declined in 4.7% in total between 2019 and 2021, with the only exception being households $15,000 to $29,999 which grew 1.4% (Table J).

The decline in the number of lower- and middle-income households again reflects the impact of the pandemic stimulus and unemployment programs. In 2021, 44.8% of U.S. households made $70,000 or more (Table K).

The additional expenditures in 2021 versus 2019 by the lower income groups provided an additional $5 billion in furniture sales based on the BLS Consumer Expenditure total of $98 billion in 2021 (see Figure 1. Methodology). However, these two brackets under $30,000 total only 6% of industry sales, up from 4% in 2019. It should be noted that this income group declined in number of households, but gained industry share with increased spending. Meanwhile, with the increase in household counts and spending, high-income households over $200,000 or more annual income gained 3.9 percent points in share of industry sales, growing from 20.7% of industry sales in 2019 to 24.6% in 2021, adding an additional $9.2 billion in CE calculated furniture expenditures (Table L).

The Future? As the leading edge of high-income GenXers (ages 42 to 57) begin to age into their 60s, they will still make a significant and positive impact on the furniture industry for the next 15 to 20 years. They will provide industry stability as they age, as did their parents, the Baby Boomers, just not to the same degree.

And if the economy does not throw the Millennials another catastrophic economic downturn next year as it did during the Great Recession when they were mostly in high school, college and their mid-20s and starting out, they will continue to form households, have children and buy furniture. Much of the future is in their hands.

And it will be interesting to see how the up-and-coming Generation Z (ages 10 to 25) will begin to make their mark. Early data suggests they may behave very different as consumers.

COVID-19 Pandemic Stimulus and Unemployment Benefits

Economic Impact Payments (EIPs). Research has shown that some of the furniture industry growth can be attributed to the three government stimulus packages as well as lengthy regular and special pandemic unemployment packages initiated by the government The distribution of pandemic stimulus payments began in late March 2020, with the last two payments occurring in the first quarter of 2021

Unemployment Benefits

The severity of the COVID-19 crisis was evident on March 21, 2020, when a then-record 2.9 million people filed initial claims for unemployment. The government acted quickly creating the Pandemic Unemployment Assistance (PUA) program which expanded eligibility to workers not covered by regular UI, including self-employed workers, gig workers, independent workers and others. According to the Department of Labor roughly $400 billion was spent on unemployment expansions.

Traditional Furniture Store Average Ticket Sales Rise as Traffic and Number of Purchasers Falls Traditional furniture stores spent years watching other durable and non-durable goods increase prices, only to see furniture prices fall further behind the curve. After the mandatory shutdowns issued by the Federal government at the start of COVID, other furniture distribution channels stayed open and gained ground, including online retailers, home improvement centers, mass merchants, and warehouse price clubs. The COVID-19 pandemic and subsequent recovery brought with it spiraling inflation, and for the traditional furniture stores, higher profits.

FurnitureCore’s industry database of traditional furniture store sales, tracked the pattern of growth, shown in the graphic below, including average store traffic/ups, average ticket sales and number of purchasers. This growth is also compared to the Census Bureau’s data on total furniture stores sales among all traditional furniture stores. Data is presented in indexed format with 2019 Q4 = 100 as the base quarter, just before COVID began. Indexing growth against a base year is an effective way to compare graphically dissimilar data with dissimilar formats.

After the initial shutdown at the beginning of COVID in 2020, average ticket sales rose gradually as shown in the graphic below until the fourth quarter of 2021, when inflation really took off. Meanwhile, since 2021 Q3, traffic has slowly declined and the number of purchasers with it.