From Home Furnishing Business
But what consumers did not stow away, they spent a lot on their homes – furniture, appliances, new carpet, window treatments, and yard equipment. Tables A, B, and C detail 2020 monthly consumer spending for key home furnishings products compared to the same months in 2019. Note that furniture spending, due in part to forced retail closures, fell to $100 billion dollars (annualized) in April, the lowest level since April 2015. Product growth will be discussed in more depth later in this article.
In addition to stimulus checks and unemployment benefits, for many consumers extra cash was freed up from numerous sources impacted by the government virus shutdown. A few of the cash sources included eating at home as opposed to restaurants (but higher grocery bills), saving on gasoline from not driving to work or school, curbing vacation and travel, giving up gym memberships, closed entertainment facilities or venues, and reduced or postponed physician and dental visits.
This quarter’s Statistically Speaking takes a detailed look into all the sources of disposable income and where consumers have put it through the pandemic, with a focus on growth in furniture and home furnishings. Disposable Income Beginning in late March, disposable income rose significantly during the first seven months of the pandemic, up 9.0% compared to March to September 2019 (Table D). Moderate monthly increases of 2% to 4% in the first quarter skyrocketed to 17% disposable income growth in April during the start of the of the stay-at-home orders as full Federal pandemic stimulus arrived. As parts of the economy began to open in May through July, disposable income increased another 11.3%, 9.4%, and 10%, respectively. As Federal stimulus ended by August, disposable income slowed but continued to improve over 2019, up 6.2% in August and 7.1% in September.
What did the consumer do with the influx of pandemic money and the rise in disposable income? As shown in Table E, most consumers saved a lot of it, feeling uncertain of the future. Compared to saving an average of 7.5% of disposable income in 2019, consumers saved 33.6% in April 2020 during the initial stimulus, 18.1% in July and 14.3% in September. Meanwhile, consumer spending fell significantly in April to 63.7% of disposable income but has continued to gain back share, up to 82.9% in September. This compares to 89% in all of 2019.
The excessive growth in disposable income is a reflection of the changes in the sources of personal income, shown in Table F. In 2019 year-end, wages and salaries accounted for the majority (50.2%) of personal income. In April 2020, that percentage dropped to 41% as many people lost their jobs or were furloughed. Meanwhile, the percent of personal income from government social benefits skyrocketed from 16.6% in 2019 YE to 31.1% in April 2020. By September, when much of the stimulus had dried up, wages and salaries as a contribution to personal income was still below half at 47.4% and government benefits finished the month at 20.8% of personal income.
Personal income (seasonally adjusted at annual rates) grew from $18.5 trillion 2019 YE to $21.1 trillion in April as stimulus checks were distributed. At press time, personal income had fallen to $19.8 trillion in September, still 7.1% above 2019 year-end levels. Figure 1 compares the primary sources of income: (1) wages and salaries, (2) government social benefits to persons (impacted by the stimulus), and (3) personal income receipts on assets (interest and dividend income). As Figure 1 shows, combined unemployment insurance benefits and COVID stimulus dollars grew over 1700% in April compared to April 2019. Meanwhile wages and salaries were down 8.2% in April, impacted negatively by job losses but positively by government stimulus to businesses.
Personal Consumption Expenditures
Despite dramatic growth in disposable income during the early months of the pandemic, the high rate of consumers choosing to funnel income into personal savings contributed to the decline of consumer spending since March (Table G). Personal Consumption Expenditures dropped 16.1% in April and declined another 9.2% in May compared to the same months in 2019. Once the pandemic reached June, the consumer became more comfortable and spending began to increase. By September of this year, consumer spending gained momentum but was still down 0.5% compared to last year.
Consumer spending is divided into three broad categories – Durable goods, like furniture and automobiles; Nondurable goods, like food and clothing, and Services, like transportation, hotels, physician visits, restaurants and drycleaners. As shown in Figure 2, durable goods were hardest hit during the initial retail lockdown of the pandemic in April but grew rapidly once retail establishments opened up in May. Meanwhile, spending on services, which is the largest share of the three broad categories, posted the most long-term negative impact.
Table H details the monthly growth in the three spending categories for select pandemic months. Spending on durable goods, the smallest of the spending categories fell by 9.8% in March followed by 21.1% in April. On the positive side, durable goods were also the fastest to recover (Figure 1) – bouncing back to 12.1% of total expenditures by August and 12.3% in September with the furniture industry benefiting from the uptick.
For nondurable goods, food for consumption at home (grocery stores, not restaurant sales), is a large part of this category and takes into account what little growth nondurable goods have experienced since spending fell 9.6% in April (Table H) as the consumer sheltered in place. However by September nondurables were up 4% over September 2019.
Meanwhile, spending on services includes many industries with long-lasting negative impacts from the pandemic that were the last to open or are still unable to open due to state mandates. Compared to 2019, spending on services started to decline in March before falling 17.1% in April versus April 2019. Spending has continued to drop below 2019 levels, but at a slower rate (Table H).
Consumer Spending on Furniture
As expected, with furniture stores and many factories closed and consumers holding on to their income, spending on furniture tanked from March to April – falling 23% over April 2019. Growth began slightly in May (1.2%) before jumping 15.9% in June compared to 2019. Momentum was maintained through July, August, and September as furniture expenditures increased by 15.1%, 13.2%, and 14.3% respectively (Table I). Year-to-date September, the industry is up 5.5% compared to the same period last year.
As shown in Table J, alongside furniture expenditures increasing beginning in May, other home furnishings categories saw positive growth once consumers felt more comfortable spending their disposable income. After dropping 21.7% in April, clocks, lamps, lighting fixtures, and other household decorative items increased 8.7% in September 2020. During the same time period, spending on carpets and other floor coverings fell 15.7% in April, but by September showed growth of 15.5%. Spending on window coverings fell 11.4% in April but rebounded by September, up 9.7% (Table J).
In addition to furniture and home furnishings, consumers also turned to outdoor equipment, appliances and electronics during the pandemic. Expenditures for both house and garden tools/equipment and personal computers/tablets never decreased year-over-year in April as consumers nested in their homes. Spending on both items then skyrocketed through the coming months (Table K). While major household appliances and televisions did dip down by over 12% during the month of April, both were up 8.6% and 3.7% by September compared to the same months in 2019.
Pandemic’s Temporary or Permanent Impacts
Many changes in the daily routine and lifestyle of Americans since the pandemic began have had at least a temporary negative or positive impact on many industries, including the furniture and home furnishings industry.
Pandemic Lifestyle Trends
- Remote connectivity from home (includes work, education, tele-medicine, and others)
- Renewed interest in the home; spending more time there and creating an inviting and comfortable environment
- Adapting to fewer entertainment choices outside the home -- movie theaters, concerts, sporting events, restaurants, etc.
Some of these routines/lifestyles, were they to continue, could possibly have permanent impact and long-term implications for many industries. Figure 3 lists just a few of the industries impacted by COVID-19 that stand to lose a lot or gain a lot and the growth they have lost or gained since the pandemic began in March. It also highlights the possible negative or positive outlooks going forward.
What follows is a list of the top twenty articles from 2015–2019, based on input from readers and clients. You can find them in the Home Furnishing Business archive of past issues at http://hfbusiness.com/Magazine/ Past-Issues. I hope you’ll read each of them in full as they contain valuable information.
1. February 2015 —“Missed Opportunities” — How well do you understand and manage the number of opportunities each of your staff members takes? Most salespeople will take all the Ups you can throw at them, but where is each one’s “point of diminishing returns”? How many potential clients are not getting properly served during your busy times? Fix this and you will find lost sales!
2. March 2015 —“Team Coach or Waterboy?” — Is your sales manager really leading your sales effort or is he/she mostly a support person for them, handling service issues and pricing questions? Is your manager coaching in the game or merely reviewing the results with the staff? Make sure your sales manager understands their role of driving sales improvement and is performing it consistently.
3. June 2015 — “Sketch to Build Sales” — There is no better tool for building sales and satisfying customers than the simple sketch. Most “big” writers sketch and none of the weaker ones waste their time doing it – perhaps there is a connection?
4. January 2016 — “Blueprint for Success” — Product knowledge and display are absolutely critical elements in the selling process for your staff. Do they have all the information they need to maximize their sales? When, by whom, and how are new products being introduced to them? Improve communication among your team as to why something is on the floor and who would buy it. This is a great way to increase sales without spending a dime.
5. April 2016 — “WOW ‘Em” — The in-store consumer experience is an area where retailers can differentiate themselves and become a true competitor in their market. You have already done something right by enticing the customer into the store. They believe you have what they want, or they would not waste their time coming in. This article highlights a few critical considerations that could help you stand out from your competitors.
6. June 2016 — “What is not measured cannot be changed” — We all tend to focus our goals and coaching efforts on total sales volume. However, the major problem with focusing on total revenue is that it is the end result of our efforts in so many areas within our business. Unfortunately, it is virtually impossible to improve a result if that is all you focus on. You just cannot “coach” a result! You need to break it down into the individual factors that deliver what you want. This article presents some ideas about that process.
7. February 2017 — “Average Ticket Delivers Sales and Profit Growth, How to Drive It in 2017” — As managers you can do a fantastic job of bringing in the right customers and having the right product for them, but in the end, it is the sales person that CONTROLS your average sale! They and they alone are ultimately responsible for this result because it is their skill and desire to maximize the sale that delivers higher tickets. Therefore, you must do all you can to hire, train, and coach your staff on how to increase their tickets with each and every customer.
8. May 2017 — “Is Your Sales Management Effort Leading Performance Growth or Merely Providing Adult Day Care?” — The title of this article is based on what is meant to be a humorous commentary about what a sales manager ends up doing much of the time in most retail stores. Unfortunately, it is often a more accurate depiction of the situation than any business owner would want it to be. The reason is that many mangers get so wrapped up in solving the daily issues of their staff that they lose sight of their real role, which is to provide performance leadership that consistently improves the team’s results and actually makes all of their lives better.
9. July/August 2017 — “Our Mission Represents a Higher Calling Than We Think” — We all know that a successful salesperson on the floor can make a very good income. In most cases better than they can in other industries after spending more time and money on additional education. However, even when we show today’s younger applicants what they can earn, many of the ones we really want, turn up their noses and go elsewhere. Why is that? Perhaps it is centered on the fact that they are more interested in “making a great living” rather than just a good income.
10. November 2017 — “Why Many Customers Leave Our Stores Without Buying” — Recent research indicates that as many as 50% of those consumers who shopped a store and left without buying, stated that it was because the store “did not have what I was looking for.” Wow! That is an awfully big number. Isn’t it our sales peoples’ job to help our customers find what they are looking for? Let’s take a look at what could be causing this to happen.
11. December 2017 — “So Why Else Do Customers Leave Without Buying?” — Once we get the consumer talking to us about why they came in, we need to properly analyze their needs and wants, then develop a solution that fulfills their dream for the room within whatever physical or financial limitations they may have or they will walk out. This column presents the essence of the needs analysis and development process we train our clients to provide for their customers.
12. March 2018 — “Words Matter, So Be Careful Which Ones You Choose to Use!” — The highly successful retailer Art Van Furniture is investing a lot of money to convert all of their clearance areas into outlets, all because of the Millennials’ negative perception of that one word. This made me think about how important the words we choose to use are in everything we do, both personally and professionally. That reminded me of the famous standup comedy routine the late George Carlin performed in 1972. As a result, I put together my “Seven Word Choices You Should Say in a Home Furnishing Store,” when talking with targeted consumers and staff members.
13. April 2018 — “Are You Winning or Losing Your Market War?” — Are you winning or losing your competitive battle for share of the business conducted in your market? Every business needs to determine and understand this critical number because it is indeed the only true indicator of how you are performing in your market war. However, market share is heavily influenced by “share of traffic”. This article presents some ways to better understand and improve something even more important, our “share of customers”.
14. June 2018 — “Building the Perfect Beast. How to Develop Future Leaders” — Without training, including exposure to new ideas, processes and cutting-edge thinking, how can we hope to develop well rounded, professionals to take over our businesses and guide our industry? My best boss sent his direct reports to a great event featuring presentations from General Norman Schwarzkopf and other famous leaders. This article presents some notes I jotted down from what one of our great military figures said about being a leader.
15. November 2018 — “Where Have All the Shoppers Gone? Long Time Passing?” — Our very existence is based on the process of attracting shoppers and turning them into buyers. We like to talk about how to get more of them to visit, however, since in recent memory most furniture stores (particularly smaller ones) are getting fewer shoppers than the year before, an important question might be, where have all the shoppers gone? This made me recall the folk song Where Have All the Flowers Gone? written by Pete Seeger. Follow my rewrite of this great song to find out my opinion about where the shoppers have gone.
16. February 2019 — “Do Your Customers Know More Than Your Salespeople?” — Have you ever heard of a customer saying, “It felt like I knew more about what the store offered than the salesperson did?” That is a very scary thought, but unfortunately, if you are not consistently communicating with your staff about your products, promotions and website, it is probably happening in your store every day. Here are some thoughts about making sure your customers are not saying this about you.
17. March 2019 — “Are You Harvesting All the Low Hanging Fruit You Can?” — Low Hanging Fruit is used to describe those things that are perceived as being easier to acquire than others. It also can refer to those items that give a greater return than others for the same or less effort. Here is a short list of some of the places a home furnishings retailer could look to find some low hanging fruit they might be missing or at least not maximizing.
18. June 2019 — “What Do Top Sales Professionals Think About? The Numbers” — Do your salespeople ignore, fear or totally reject the performance metrics you use to coach their selling efforts? If so, perhaps you need to revisit the importance of these numbers with them to gain their buy in and help them be more successful running their “personal business” within your store.
19. September 2019 — “Selling WITH the Internet Instead of AGAINST It” — Has our fear of competition from the Internet caused us to miss an opportunity to use it as a tool to help our customers find what they are looking for? If most consumers start their search online, how can we incorporate it into our process to help them find what they want and get it? Here are some thoughts about where the Web is going and how it might be a good sales process asset for us.
20. October 2019 — “Turning Staff Downtime into Sales Uptime!” — What are your staff members doing when they are not working with customers on the selling floor? Making personal calls? Shopping on the Internet? Surfing the Web? Napping? Chatting? Arguing with each other? The fact is that some or all of these staff activities go on daily in most stores. It is the old cliché about idle hands. Here are some thoughts and a recommended activities list to help you turn unproductive staff downtime into productive sales uptime!
Hopefully some of these ideas and recommendations will help you improve your business in the months to come. This year has been a tough for all of us in ways that no one could have ever imagined last year. Let’s hope 2021 will be a vast improvement over 2020 and get us all back to a better “normal” than the one we have just been through!
I understand “essential” when it comes to groceries and maybe a washer/dryer in a household of multiple kids, but a new sofa? Furniture retailers have been begging consumers to redecorate their homes for years, luring them with major discounts and long term fi nancing, and now they decide to fi nally buy in the midst of a pandemic? Don’t misunderstand – I am glad the consumer’s att ention is now directed to the home. And, many retailers believe this will be a long term trend. Consumer research has yet to bear that out. As you can see from the forecast, 2020 will end up growing only 3.7%, signifi cantly down from the previous year. What was disturbing was who the consumers went to when the local furniture store was closed. The e-commerce channel was the benefi ciary along with the home improvement stores and general retailers, such as Big Lots. As has been reported, Wayfair’s sales increased 86% from the same period last year, adding 46,000 new customers. The graphic below presents some statistics.
I realize it has been a while since consumers qualifi ed their purchase with a testimonial like, “My parents and grandparents bought their furniture here.” I know today we look to social media for our feedback. But, how real is a 4.5 ranking when the consumer easily goes to another distribution channel for a postponable purchase? In every market, furniture retailers have their local charitable events that have been repeated for years; Jordan’s, Bernie & Phyl’s, Morris Home, Walker Furniture & Matt ress LV, and so on, for pages. As an industry, each year we provide City of Hope millions in support. I know charity should be without expectation of return, but it should be recognized.
As an industry, we must redefi ne loyalty and recognize our most loyal customers in a proactive way with tangible rewards. For those that still have access to the older generation, ask what they did to instill loyalty. And then we could look at newcomers, such as RH, formerly Restoration Hardware. We are all envious of their growth and profi tability. They charge an annual membership fee to be a prime customer – just a thought.
As can be seen from Graphic 1, with all the turmoil, the result was a dismal 1.8% down in the second quarter. However, with the conversion of the substantial backlog at the end of June, for some more than 30%, the industry soared in the third quarter to what we believe will be a growth of 10.1%. Unfortunately, this irrational exuberance will not continue and the industry will decline, we believe, to a 2.0% growth for the fourth quarter for the end of the year. After all the angst, a meager 3.7% growth year over year for 2021 and a slight rebound to 4.0% in 2020. What caused this irrational exuberance? Simply put, the consumers were encouraged to stay at home and not spend. And the nation sent significant stimulus in the form of checks and enhanced unemployment.
This created a major increase in DISPOSABLE INCOME never before experienced. Graphic 2 illustrates. But the party may be over. At this point, no more stimulus is forthcoming from the federal government. The job losses thought to be temporary now appear to be permanent with small business support (PPP Loans) seemingly exhausted. As with other downturns, now the best predictors will be CONSUMER CONFIDENCE and UNEMPLOYMENT.
Consumer confidence fell 40% from its near-term peak in 2018 with the corresponding decrease in furniture consumer spending. At this point, consumer confidence has not reached the level of the Great Recession; however, the consumer has not fully absorbed the impact of the job loss. Graphic 3 presents the trends.
What is real is the unemployment. In one short period of time, 30 million jobs were gone. While many believed it would be short term, it has seen a third of the loss return to work. However, each month another million jobs lost is added to the rolls. Graphic 4 illustrates. This time, furniture spending held back— there are many theories as to why, such as people being forced to “shelter in place” or work at home becoming a permanent condition. The future trends are not clear. The following sections present the analytics behind our forecasts. This forecast will be modified and adjusted as we move through the year. This is followed by the insight of three of the recognized experts in the industry.
With all of our perspective, we may find our way through the fog of the new normal.
Based on a FurnitureCore, Inc. Industry Model developed by Impact Consulting Services, parent company to Home Furnishings Business, the broad upholstery category has maintained its 34% of total furniture and bedding sales compared to the same quarter last year (Q2/2019). Manufacturers have certainly noted the sustained demand bolstered by the current reality of increased time at home and have weighed in on what consumers are searching for.
“Our collections are rooted in uncomplicated luxury, designed for spaces that are real, relaxed, and refined,” said Jay Peters, vice president of merchandising at Standard Furniture. “And, now more than ever, we find consumers are asking for easy, comfortable pieces that provide a sense of home, creating a space that the whole family can enjoy.” Suzanne Henson, vice president of merchandising and marketing at Craftmaster Furniture, expands on how home life has been impacted and how product demand has been reshaped, saying, “The COVID situation is definitely bringing a greater focus to life at home.
Along with a huge increase in overall demand, we’re seeing a few distinct trends emerging. First, the demand for fast delivery is so important. Because of the rising tide in business, retailers are having issues keeping stock on their floor, and manufacturers are scrambling to keep their delivery times from going out too far. So any product we can deliver quickly to a retailer is a hot commodity and means the retailer can keep their floors refreshed. Second, we see even more demand for customizable sectional groups. Consumers have fewer distractions right now and are able to spend some time creating custom pieces that work specifically for their room.” Again, a keystone to the success of this category— the sectional— is magnified.
“Nothing seems to be more compelling at retail right now than sectionals,” says Anthony A. Teague, senior vice president of sales and merchandising at Jackson Catnapper. “In stationary seating, sectionals represent four of our top six selling items and we wanted to translate that success to the motion category. We believe by using fabric combinations that are more commonly associated with stationary, we are bringing a new customer to the motion category and the proof has been evident in the numbers.”
Whether the consumer is looking for a stationary or motion solution for their new reality, a survey conducted by FurnitureCore helps define additional factors related to consumer purchases in the category. Shoppers were polled on their preferred style of upholstered furniture and found that a vast majority (56.25%) preferred traditional stylings. Second was contemporary at 28.13%, followed by rustic at 6.25%. Mission/shaker, cottage, and transitional tied with each at 3.13%. Additionally, the survey analyzed which look the consumer finds preferable in upholstered furniture. 59.38% favors plump, overstuffed deep seating while the remaining 40.63% prefer a sleek, tight body cover following the lines of furniture.
Most importantly as we face delays in today’s COVID-world, the survey polled consumers on how long they would be willing to wait for a custom order sofa. This survey pre-dates the pandemic, but may lend some insight into wait times for more standard SKUs as the industry gains momentum following mandatory shutdowns across the country and abroad. The survey found that most consumers (40.63%) are willing to wait two weeks to a month for a custom sofa, 15.63% are willing to wait 1-3 months, 6.25% are willing to wait 3-6 months, and 3.13% are able to wait more than 6 months. The remaining 34.38% are only willing to wait less than 2 weeks. The demand is there. The following products are sure to help uplift the consumer’s spirits and satisfy their need for a comfy family area.