January 19,
2023 by HFBusiness Staff in Business Strategy, Industry 
Now, before we go too far, there is a need for people to live in a stylish home at an affordable price point. That is the major challenge. In today’s world of $1000 phones where does the beautiful room fit.
In a recent national consumer survey FURNITURE is faring well in position number two only behind cars compared to 2019 prior to the pandemic. The table below present the rankings. Maintaining that position of intent to purchase is the challenge in MERCHANDISING.
MERCHANDISING is the sum total required to create a product from design to manufacturing to transportation to marketing to the retail floor or website. Then the retailer moves forward creating the presentation along with the message that will be used in the marketing and down to the retail sales associate that communicates to the consumers. In summary, a product that excites the consumer at the price point. What is important to the consumer? In a recent national survey conducted by FurnitureCore, a sister company of Home Furnishings Business, consisting of consumers that had purchased furniture and when asked to rank the importance of certain features, QUALITY by far was number one in their minds. The table below shows the consumers’ ranking. When you made your most recent furniture purchase, the following are some features that may have brought that product to your attention. Rank these features in order from 1 to 7 of the importance of each with 1 being the most important feature, 2 being the second most important, etc. If you do not think a feature is important to you, please do not rank it.
When you made your most recent furniture purchase, the following are some features that may have brought that product to your attention. Rank these features in order from 1 to 7 of the importance of each with 1 being the most important feature, 2 being the second most important, etc. If you do not think a feature is important to you, please do not rank it.
Merchandising is a process not a flash of brilliance, nor is it a cold calculation of another point of gross margin. It is a creative process. In today’s diverse consumer base and competing needs for disposable income, there is a requirement for a more data driven approach. However, the numbers will never replace the creative input provided by the merchant. The following presents the elements in the process:
THE CONSUMER
Reflecting back, when you questioned the MERCHANT, how he – yes typically a male and for the most part the owner of the store – made the decision on the product he purchased. The answer was the people that were his customers, specifically, “Well, Mrs. Jones, they are well off and Mrs. Smith is as well, but sort of frugal, and Mrs. Brown has great taste, but they struggle” … and so forth. He really knew his customers not the specific purchase but the lifestyles of people.
Manufacturers that were considered to be PROJECT MAVENS, typically the owners, cultivated relationships with these merchants and got specific input on what would sell. This input continued as recently as 20 years ago, but more organized with dealer counsels at Broyhill, Booker and others.
Today the industry has moved away for the most part from this collaboration as retailers have gotten larger and more diverse and manufacturers have expanded their product offerings. The challenge to avoid the impact of “fast furniture” is to restore the “human hands” in the process. We can not return to the small factory in the foothills and the predominant local mom and pop community store. However, we can use a more analytical approach to determining the product promised and the product offered to the consumer. It may not be as good as “Mom’s apple pie, but, “not bad.”
Let’s start with a 35,000-foot perspective. There are 131.21 million households in the United States from single homes to condos/cluster home to apartments. Living in these shelters are approximately 100M furniture purchasers annually segmented by age/income as shown below:
These households are the targets for furniture manufacturers and retailers. Each year approximately 75% of these household make a significant furniture purchase. As of October of this year, based upon a national survey of furniture purchasers conducted for Home Furnishing Business by FurnitureCore, 17.8% were engaged in the shopping process significantly up from 13.4% in 2019.
This consumer target at a national level is interesting but not actionable to either the retailer or manufacturers. First, if we drill down to a market (MSA) level, we find the demographics vary 200% in age and 400% in income. In other words we have young markets (Manhattan, KS) and old markets (The Villages - Florida) as well as affluent markets (East Stroudsburg, PA) and less affluent (San Rafael, CA). The tables below present some examples.
The merchant must go beyond sheer demographics to identify those “Mrs. Smith’s that have the income but are frugal” and the “Mrs. Brown’s that have the taste level but lack the means.”
This introduces lifestyle into the equation or physiographic clusters. When a typical furniture retailers customer base is analyzed, we find that they sell to everybody, but specific clusters emerge. The graphic to the right presents:
The “chic society” and “doing well” are the descriptions that replace the mental image of “Mrs. Smith” and “Mrs. Brown.” The starting point for understanding the retailers customer base is who you are selling. Now, availability of data allows the determination of the age/income of the “Head of Household” simply by use of the home address. The processing of your sales each quarter allows the definition of your customer base, and when compared to the households in your market footprint a concentration factor can be produced. The concentration factor is simply the probability that a person in this age/ income segment would be a customer. The graphic below illustrates the concentration of a traditional furniture retailer:
Obviously, this must be drilled down to the product level and for some the store level which introduces the possibility for tailoring the merchandising line-up for those customers within a defined perimeter. Today, the concept of a “destination” store has disappeared because consumers will not drive the distances to shop.
As can be seen from the graphic, the retailer sells to everyone, but 73% are their primary consumer (shaded brown). A retailer or manufacturer obviously wants to sell everyone but too broad of a selection results in a confused customer. The goal is for the consumer to comment, “this is my store, it knows what I want.”
THE STYLE
As the United States has become more diverse and the Internet has exposed the consumer to a global lifestyle, along with the increase in the more visual social media platforms of Pinterest and Tik-Tok has stimulated the home furnishing consumer. As the styles evolved from traditional, manufacturers and retailers coined the term “transitional” contributing to a lack of clarity. Home Furnishing Business has found one of the better ways to communicate style is the use of a room scene along with a descriptor. The scenes to the right are the current descriptions:
In the recent consumer survey, TRADITIONAL, while still the largest descriptor (38.4%) continues to decline. When the consumer was asked their current decorating style, Cottage casual continued to increase. The graphic to the left presents the findings: But even more interesting is the increasing decline of the traditional style when the consumer was asked about their “dream” style. The statistics are shown below:
PRICE POINTS
The pandemic and the disruption of the supply chain has played havoc with the industry’s price structure. Unit prices have increased resulting in record sales in the furniture sector and specifically furniture stores as can be seen in the graphic: While revenue has increased as the average ticket increased, unit sales did not. The net results are the shifting of price increments.
While revenue has increased as the average ticket increased, unit sales did not. The net results are the shifting of price increments.
The graphics below present the unit sales by price point for a STATIONARY/FABRIC/SOFA comparing 2019 Q1 – Q3 to 2022 Q1 – Q3.
As can be seen from the graphic, the promotional price points < $399 declined 11.3 % with the opening price points of upper $999 – 1099 increasing by 9.0%. Will the price points shift back to the promotional price points? Will the value merchants (Big Lots/American Freight) and Mass Merchants (Home Depot/Costco) capture that price point? Should we care? The cost to buy/sell/deliver a $399 sofa is the same as a $599 sofa. What does your consumer want? What can your retail sales associate sell?
CREATING THE TOTAL ROOM
One of the most important elements that differentiate furniture stores from mass merchants and value merchants is the retail sales associate. The opportunity to inspire the consumer to not just purchase a sofa, but to create a beautiful room is the traditional furniture retailers unique difference.
But first it requires some cooperation between the upholstery buyer and the occasional buyer. The questions of “what goes with what” is often forgotten. There is technology that analyzes words in product descriptions to suggest purchase combinations. However, the talent of the visual merchandisers working with the buyers to create looks to include upholstery/occasional/ accessories has improved the consumer’s experience and increased the average ticket at the same time.
The pandemic mentality of “can we deliver what we sell” has cut short the effort to add to the ticket. The graphic on the next page presents the industry statistics for attachment rates.
PROFITABILITY
With the pandemic and the supply chain disruption came a significant increase in gross margin (48.71 – 51.93%). The table below presents the comparison.
GROSS MARGIN MAJOR PRODUCT
As is evident from the table, all product categories experienced increases especially outdoor driven by supply and demand as consumers moved outdoors for entertainment due to COVID.
The downside to this increase in gross profit was the increase in inventory. The measure of GMROI (Gross Margin Return On Investment) as shown below:
While overall, the measure fell slightly ($2.94 - $2.70) from pre-pandemic, the top retailers decreased substantially ($5.30 - $3.27). As can be seen from the graphic to the right for ALL RETAILERS the gross margin per square foot of selling space continues to increase driven by the larger retailers (red line):
MEASURING THE RESULTS
The final step in a more analytical approach to merchandising is to understand how effective the product line-up is in attracting those consumer segments that are part of the overall strategy. Again, a furniture retailer does not necessarily need to sell everyone. The very focused retail verticals such as Arhaus, La-Z-Boy, and Love Sac know their customers, a very focused target. Understand your targets as presented to the right. The approach to measuring the effectiveness is simply a more comprehensive “WAR ROOM” that is digital instead of the difficult to maintain wall of pictures with post-it notes. The same information is needed. Sales in dollars and units; Gross profit and average unit sales all in rank order. The table presents an actual example with some redaction illustrating top 10 performers. That could be expanded: the comparison of top sellers overall to top sellers by demographic segment, there is significant deviation in top sellers. A critical merchandising analysis of price point and style will give guidance to how to expand sales to this demographic segment.
While the knowledge of what is selling to who on the retailer’s floor is important input to the consumer preference, but this is after the fact. In the ideal world, sharing of this information with the manufacturer would be invaluable. Another approach would be for the manufacturer to solicit input from the consumer. While in person focus groups are ideal, the costs and logistics can present a challenge. However, the use of Internet focus groups can provide a broad sample of consumers on a timely basis. The use of digital model early in the project development process can avoid costly mistakes. The graphic on the next page illustrates the output. Merchandising has evolved from the intuitive perspective of the merchant. The challenge is to integrate a more analytical approach to deciding WHAT WILL SELL.
January 19,
2023 by HFBusiness Staff in Business Strategy, Industry
The rapid increase in mortgage rates in the Fall of 2022 put what many feel was much-need pressure on the housing market to slow its pace of record price increases. However, prices have not decreased as much as expected as tight inventories have protected the industry from sharp declines. In addition, falling mortgages four weeks in a row to December 8 has not spurred demand. At press time, mortgage rates were 2X the rate in January of 2022, but home prices still 6% higher.
A correction may be ongoing, but fewer economists now suggest there will be a 2023 housing crash. Some even predict that slightly declining mortgage rates beginning in November may suggest the housing industry has weathered the worst of it. How long the correction will last is in large part in the hands of the Fed and whether additional rate increases are forthcoming. Current, existing home owners are sitting tight. Also, there is another wrench in the new housing crisis and subsequent recovery. New household formations are now accelerating while housing supply remains near historic lows, with not enough new construction in the pipeline.
All of these housing factors and their impact on the furniture industry are examined in more detail in this insallment of Statistically Speaking. Each housing factor discussed is divided into two sections – (1) the current situation, and (2) the future drivers going forward.
Mortgage Rates
Current Situation. In the first week in January of 2022, a 30-year fixed rate was at 3.22% and a 5/1 ARM 2.41%. Eleven months later, the fixed rate had more than doubled to 7.08% and the 5/1 ARM had jumped more to 6.06% (Table A). Since that height last November, mortgage rates have continued to drop four straight weeks (at press time) almost three-quarters of a point, the largest decline since 2008. Last December 8, a 30-year fixed rate dropped to 6.33%. Since November 11, the rate for 5/1 ARM exceeded the 30-year fixed and has no longer become attractive.
Future Drivers. While the decline in rates has been large, according to Freddie Mac, “homebuyer sentiment remains low with no major positive reaction in purchase demand to these lower rates.” Interest rates have priced many homebuyers out of the market. Couple that with inflation and economic fears, and homebuyers have chosen to sit this one out for a while.
New and Existing Home Sales Current Situation. The surge in home sales that began during the pandemic and continued through 2021 peaked in January 2022 at a combined 7.3 million new and existing units (annualized). Both new home sales and existing homes sales have been in free fall since then. During the first nine months of last year through October, the most current data at press time, new home sales fell 23.9% and existing home sales were down 31.7% (Table B). Low inventories and declining pending homes sales data suggest November and December continued the trend.
Future Drivers. Besides the stability of mortgage rates, the key drivers for housing demand going forward include, among others, new household formations, consumer confidence, the affordability of housing, and new construction on the horizon, which is examined in more detail later in this article.
Home Prices
Current Situation. Housing prices, both new and existing homes sold, have been skyrocketing, especially since 2019. The annual median price of a new home increased 41.1% between 2019 and October 2022 YTD while existing home prices grew 42.2% during the same period. (Table C). Despite falling home sales throughout the summer, prices continued to grow, but softened for existing home sales with rising interest rates. New home prices slowed briefly with the impact of higher rates, but the median price of a new home in October was still $493,000, a new record. This price was 8.2% above the prior month of September following a two-month slump after recession fears surfaced in the media and larger interest rate increases became evident. October new home sales prices were also up 15.4% over October 2021. Meanwhile, the median price of existing homes sold fell in October for the fourth straight month from its peak in June of last year. October's median existing home price of $379,100 was 8.4% below June's record of $413,000.
Future Drivers. Low inventories should keep prices from falling significantly, especially if interest rates stabilize. More importantly will be whether the economy responds to anti-recessionary efforts by the Fed.
Housing Inventories Current Situation. Low housing inventories have been a hot topic over the last three years as one of the prime drivers of increasing home and rent prices. During the buying frenzy beginning in 2020 through October of last year, inventories for housing units for sale dropped 56.7% and available rental units declined 16.3% (Table D). But as housing demand has slowed in recent months, months’ supply of inventory has increased as this factors into available inventory and current demand, which has been low.
Future Drivers. New construction of homes and apartments and slower demand are the two key drivers of inventory levels and also key to easing the housing price wars. Unfortunately, in 2023, especially in housing units for sale, current housing starts don’t appear to be high enough to appreciably impact inventory without a sharp decline in demand.
Housing Construction Permits and Starts
Current Situation. It takes a while to permit, start, and complete a new home or condo (seven or eight months per the Census Bureau). And an apartment building takes well over 1-1/2 years (17.5 months per the National Association of Home Builders). The length of the process provides a unique window into the future inventory of new homes and apartments.
For single-family homes and condos, building permits were issued in a frenzy and new units started beginning in the summer of 2020 and peaked at the end of 2022. About 50% of building units permitted are started within the same month and 90% are underway within two months. Therefore, housing and apartment starts track closely alongside permits. Single family starts peaked in the winter at the end of 2020 at 1.3 million annualized units but were down to 855,000 starts by October of last year. Total starts for the first nine months of 2022 were down 6.6% over 2021. Meanwhile, multi-family apartment starts stayed strong at 612,000 last April (Table E). Year-over-year October 2022 YTD total average multifamily unit starts are up 17.5%. Future Drivers. Home and apartment builders, much more so than existing home sellers, have to look into their crystal balls as the housing demand landscape may have changed by the time a project is started to completion. Understanding changing demographics is essential to the planning that goes into building, especially since the pandemic. For example, is there a trend toward moving out of the city and into the suburbs? Or, what is the affordability picture for younger households? No matter the current consumer demand, mortgage rate or inflation rate today, new home and apartment inventories were set in stone months ago for new homes and much earlier for apartments.
Housing Completions
Current Situation. With the flurry of building in 2020 and early 2021, new homes and condo completions remained strong in most of 2022 through September and then began to decline, as economic uncertainty set in (Table F). New homes were completed in the first nine months of 2022 at an average annualized rate of 1 million, which was 5.3% higher than the first nine months of 2021. Meanwhile multi-family completions, which had begun construction over 1-1/2 years prior, slowed slightly in 2022 to an average annualized rate of 343,000 for the first nine months, down 6.5% compared to the first nine months of 2021.
Future Drivers. Table F also shows estimated new home completions through the first six months of 2023 based on what is already in the pipeline, and the picture is not pretty. Based on starts seven to eight months prior, new home completions in the first six months of this year are estimated to decline a total of 26% in annualized units.
Multi-family units will pick up some of the slack in housing as there will be more apartment units built this year since the mid1980s (Table F). Buildings begun over 1-1/2 years ago, should come online growing an estimated 33% in total annualized units over the first six months of this year compared to 2022. The second half of this year could bring another 24% growth in units over the first half of 2023. With the high number of apartment completions coming this year, the furniture industry has an opportunity not seen in years, to market apartment-suited home furnishings, especially to the 25 to 39 year age group, which is growing rapidly.
Regional Outlook
The one-year growth in housing starts by region gives us a glimpse of what we might see in the months ahead for new houses and the longer future of multi-family apartment buildings. Compared to the first nine months of 2021, total new home starts were down 6.6% and multi-family starts were up 17.5%. One-year growth for new home starts declined in all regions, with the Northeast dropping the most by 15.6%. The Midwest was down 6.3% in one-year new home starts with the South declining 5.1% and the West 8.0%. All regions posted very good growth in multi-family apartment building starts during the same period, except for the West which was up only 2.7% for the first nine months of 2022 compared to 2021 (Table G).
Household Formations
Current Situation. The population has been growing for many years in the 25 to 39 age group as Millennials flooded into adulthood. However, numbers have been declining for the 40 to 54 group, the households in their prime earning years. Last year there were 7.5 million more people in the younger Millennial age group than the older adults (Table H). The Census Bureau is also reporting unexpected growth in new households coming out of the pandemic for younger adults.
Future Drivers. According to the Census Bureau, the demographics will change dramatically over the next 10 years impacting the housing and furniture needs of households under 55 in ways not seen since the Baby Boomers came on the scene. In 10 years, it is estimated the total population ages 25 to 54 will grow by 8.9 million, and almost half will be in their prime furniture buying years by then. This explosion of households will be the subject of an upcoming issue of Statistically Speaking.
November 30,
2022 by HFBusiness Staff in Business Strategy, Industry
While consumer spending on furniture grew 33% between 2019 and the end of 2021, sales began to slow by mid-2022 as the housing market cooled, furniture demand leveled and inventories swelled. Yet this fall’s mood is buoyed by supply chain improvements, dramatic reductions in transportation costs and the assurance that – for the first time in a couple of years – new products ordered are expected to arrive within a few months.
As retailers express an appetite for fresh new products and producers introduce expansive collections, the burning questions that remain revolve around the furniture consumer. Will the consumer’s new-found love for their homes be enduring? Have they changed their preferences about where they are buying furniture and why? How will the volatile housing market impact furniture purchases? Will the consumer continue to be willing to pay more for furniture? And will furniture continue to enjoy a larger share of consumers’ discretionary spending?
Survey of 1,000 Furniture-Purchasing Households Compares 2019 and 2022 These questions and more were the focus of a comprehensive Home Furnishings Business survey of 1,000 households who have purchased furniture in the last 18 months. As we compare today’s furniture consumer with the pre-pandemic benchmark of the 2019 consumer, some compelling and distinct changes are apparent. Many of the most interesting are highlighted here.
1. TODAY’S FURNITURE CONSUMER IS MORE ASPIRATIONAL. When asked, “What best describes your attitude towards decorating/ home furnishing?” the response, ‘My home furnishings must communicate who I am and reflect a sense of current style’ jumped over 11 points from 34.8% of responses in October 2019 to 46% in September 2022. (Table A)
While style and personal expression soared as a motivator, more practical attitudes toward furniture decreased. For example, those who said home furnishings should be “functional” and that furniture is mainly for “now” decreased from 13% to 11.8%, and those motivated mainly by comfort decreased from 21% in 2019 to 18% in 2022.
INTERNET PROVIDES STYLE INSPIRATION
Today’s more aspirational furniture consumer is getting her inspiration from the Internet. When asked where they find style inspiration, “Internet” is the top source, named by 38%. That’s nearly 20 points higher than the next source of inspiration, HGTV. As a source of inspiration, retail stores are next at 18%, followed by Magazines at 13% and Antiquing at 11%. (Table B)
“The stay-at-home dynamic in the early stages of the pandemic opened peoples’ eyes to what was possible for their homes as they used the web to do research,” observed Peter Keith, a senior research analyst for the furniture and mattress retail sector for investment firm Piper Sandler. “Consumers were able to see a much broader array of styles and items, rather than being limited by in-store assortments. While the initial market share shift toward online buying has now shifted back to the in-store experience, what has remained is that online research is a more integral part of the shopping process,” he said. “Consumers are coming into stores more informed with a vision of what they want for their home, which is helping to drive a higherticket sales and higher conversion rates.” What does a more expressive, aspirational and informed consumer mean to retailers and producers? No doubt, these shoppers have higher expectations for fashion, design and an elevated in-store presentation.
And, since the consumers are operating from a higher level on the hierarchy of needs, furniture merchants should be able to maintain pricing and margins, especially in the upper medium to high-end price points. 2. TODAY’S MALE FURNITURE SHOPPER IS DRAMATICALLY MORE ENGAGED THAN 3 YEARS AGO.
For years, the female consumer has been by far the dominant player when it comes to furniture shopping and home decorating. That dynamic has flipped on its head in the last 3 years. In October of 2019, 58% of respondents reported that the female in their household was the one who most frequently made the decision to purchase furnishings, while 26% said the male did and 16% reported a joint decision. (Table C)
This year, the percentage of households reporting the male as the one making the decision to purchase furniture rose over 20 points to 47%.
That’s a full 10 points higher than those reporting that the female makes the furniture-purchasing decision. Again, 16% report a joint decision. In a related question, respondents were asked who in their household was the first to mention a need to buy furniture. Females dominated in 2019, with 59%, while males were the first to mention buying furniture in 29% of households. This year, males and females pulled even at approximately 43% each. (Table D)
3. FURNITURE IS STANDING TALL AMONG CONSUMER DURABLES AND NON-DURABLES.
In both 2019 and 2020, households were given a list of five possible areas in which they might make a major purchase. These included leisure travel, home computer/laptop, communications/smart phone, furniture and a car. (Table E)
This year, furniture ranked overall as the highest priority for a major purchase. Furniture’s ranking improved from 2019, when cars were at the top of the list. As the number one spending priority, leisure dropped as a first choice for household spending by more than 10 points from 31% to 21% in . Furniture as the first choice for spending went up from 16% in 2019 to over 22% this year. Meanwhile, communications spending as the top priority almost doubled as 16% of respondents cited it as their number one choice for spending.
Leading industry analyst Jerry Epperson, managing director at Mann, Armistead & Epperson Ltd., believes furniture will maintain and even strengthen its clout as a contender for the consumer’s discretionary dollar.
“Over the last two-plus years, consumers have increasingly realized the value of their homes, become more willing to invest in them, and they have learned a lot about all the functionality and styles available in furnishings,” Epperson said. “As we head into the new year, many of the retail inventory imbalances will improve, and retailers are going to be bringing in a lot of fresh new product that will draw consumers back into stores.” While perishable and nondurables will continue to experience some inflation and product availability problems in 2023, furniture pricing in comparison will be stable, and our product availability will be the best in a few years. This dynamic, enhanced by exciting new products and promotions from retailers will put furniture in an advantaged position relative to other goods,” he believes.
4. CATALOG MERCHANTS, HOME IMPROVEMENT STORES AND MASS MERCHANTS GAINED AS DESTINATIONS FOR FURNITURE BUYING COMPARED TO 2019, WHILE REGIONAL FURNITURE CHAINS AND MANUFACTURER-OWNED STORES DECLINED AS DESTINATIONS. When asked, “What type of retailer did you make your most recent purchase,” the biggest gainers were:
• Catalogs of a retailer or manufacturer, up 4 points to nearly 9% of total responses.
• Home improvement stores (Lowes, Home Depot), up 5 points to around 5% of the total responses.
• Mass merchants, up 3 points to over 6% of the total responses. (Table F)
Remaining largely flat compared to 2019 were:
• Independent furniture stores at about 21% of the total.
• National chains also remained flat at 6% of the total.
• Internet/online outlets as a source for furniture stayed about the same over the period at 13%.
• Both interior designers and warehouse clubs stayed even at around 1% of the total. • Department stores made a slight gain to 9%.
Retailers who had the most decline compared to 2019 included:
• Regional furniture chains were down 6 points to 16% of the total.
• Manufacturer-owned stores like Ethan Allen and Ashley Furniture Home Store were down 3 points to 11%.
• “Manufactured by the retailer” stores like Pottery Barn or Crate & Barrell went down a point to 1.5%.
5. CONSUMERS BECAME FAR MORE COMFORTABLE PURCHASING FURNITURE ONLINE, ESPECIALLY AT OMNICHANNEL RETAILERS WITH BOTH BRICK AND MORTAR AND INTERNET SALES VENUES.
When asked “Have you ever purchased furniture online?” affirmative answers grew significantly from 59% in 2019 to 72% in , a 13-point jump. (Table G)
The growth area for online purchases of furniture is clearly omnichannel retailers, or brick & mortar retailers who have both a store and an online selling site – the best of both worlds.
Forty-six percent of consumers reported in that they purchased furniture online from an omnichannel retailer, growing nearly 6 points from 40.5% in 2019. Those buying from manufacturer websites also grew from 22.6% in 2019 to 27% in 2022. (Table H)
The decline in Internet furniture purchases during the period came for online-only retailers. While 37% reported buying from pure ecommerce players in 2019, that number dropped 10 points to 27% reporting that they purchased from a pureplay ecomm dealer in 2022. 6. SECOND HOMES GREW AS A PRIMARY REASON FOR BUYING FURNITURE.
When asked what the main reason for buying furniture was, “second homes” stood out by rising 4 points to 5% of the total. As the trend to remote work “from anywhere” took off during the pandemic, many consumers moved to their vacation/ second home and ended up staying there some or most of the time. While companies have returned to the office full-time, many others have adopted a hybrid model of having their employees work both in the office and at home. (Table I)
The number one reason for purchase in both 2019 and is furniture replacement, although it was down slightly to 26% in . “Desire new furniture” and “Redecorating” were tied at 18% each. Remodeling and recent move were next at 14% and 13%, respectively. Marriage was up 3 points to 5% of the total.
7. COASTAL COTTAGE AND GLOBAL ECLECTIC ARE GROWING AS “DREAM DÉCOR” STYLES.
The rise of second homes as a motivator for purchase could partially explain why “Cottage/Coastal” rose 3 points from 2019 to as the look consumers describe as their “dream style,” to 16.5% citing it as their ideal décor. The other look that grew in popularity as a dream look is “Global/Eclectic,” which was up 4 points to 15.4% of the total calling it dreamy.
Meanwhile, both contemporary/modern and traditional/classic decreased as a dream look. Contemporary fell in the dream category from 24% of the total to 21%, while traditional/ classic fell from 33% to 28%.
8. FURNITURE SHOPPERS’ RATINGS OF AND ENGAGEMENT WITH RETAIL SALESPEOPLE IMPROVED FROM 2019 TO TODAY.
Consumers were given a list of attributes on which to rate the professionalism, knowledge and helpfulness of retail salespeople. In every category, the overall ratings of salespeople improved from 2019 to, including:
• Appreciation for the helpfulness of the salespeople
• Salesperson’s greeting
• Remembering the names of salespeople
• Professionalism of the salespeople
• Their knowledge of furniture design and production
• Their decorating advice
• The salesperson made them feel special and more inclined to return to the store for future purchases.
9. AMONG FURNITURE CATEGORIES, BEDROOM AND DINING HAD THE MOST GROWTH IN PURCHASES FOR RESPONDENTS, WHILE UPHOLSTERED SOFAS AND CHAIRS BOTH DECLINED.
When asked about their most recent furniture purchase, bedroom furniture made the most gains from 2019 to , with about 31% citing bedroom this year compared to 26% in 2019. Youth bedroom and infant bedroom also grew. Youth bedroom grew 3 points to 9.3% of responses, and infant bedroom great about 1.5 points to 3.1%.
Another growth area was home office, increasing 1.5 points to 3% of respondents citing it as their most recent purchase. Compared to 2019, those citing their most recent purchase as an upholstered sofa fell 7 points to 17%, and those citing an entertainment center/armoire fell about 2 points to 1%. (Table J)
10. PURCHASERS REPORTED MAKING FASTER DECISIONS TO BUY FURNITURE COMPARED TO 2019. IN BOTH YEARS, VISITING 3 RETAILERS BEFORE MAKING THEIR DECISION WAS THE MOST POPULAR PRACTICE.
Compared to 2019, furniture shoppers are making faster decisions to buy. The biggest increase over the period was for those saying they made their decision in 1 to 2 weeks, which gained 5 points at over 32% of respondents.
At the same time, those reporting that it took them two weeks to a month to decide went down 2 points to 28%. (Table K) As for how many retailers purchasers shopped before making their most recent home furnishings purchase, that remained largely unchanged over the period. In both 2019 and , the greatest number – about 38% -- reported shopping in 3 stores before buying. (Table L)
Furniture Consumers Keep Looking Homeward Red-hot Housing Market Cools; Poised to Grow Again in 2023
Beginning with the safer-at-home practices early in the 2020 pandemic, consumers have rediscovered their homes and home furnishings, causing the housing industry and residential furniture to be among the stars of the U.S. economy.
In August of 2020, over one million new homes were sold at an annualized rate, the largest number in 18 years. Housing activity continued strong through around spring of 2022, when the ongoing shortage of homes, double-digit housing inflation and rising interest rates sent existing home sales down an estimated 13% in the second half. New single-family homes were down even more at 17% in the same period.
As most forecasters expect a recovery in housing in 2023 (Housing starts are forecast to grow nearly 8% for single-family units and 3.5% for multi-family units), we asked 1,000 furniture-purchasing households if they had recently purchased a home, what kind of home they purchased, how large it was and what furniture they bought to furnish it. If they had been sidelined from buying a home, we asked them why.
Here’s a look at the housing landscape among furniture purchasers: Nearly 60% of Furniture Purchasers Have Recently Bought or are Buying a Home When asked, “During the last 6 months to one year, have you purchased or are you in the process of purchasing a home,” 38% of respondents reported buying a home, and 18% reported they were in the process of buying a home, for a combined total of 56.6%.
On the other side of the coin, 43% said they have not purchased and are not in the process of purchasing a home. What type of homes are being purchased? Sixty-eight percent report buying a house. A combined 24% report buying multi-family housing such as an apartment, townhome or condo. According to the {U.S. Department of Commerce}, multi-family housing starts have been on fire, up significantly in Q1 and Q2 of this year, at 20% and 18% respectively.
During the last 6 months to a year, have you purchased or were you in the process of purchasing a home?
Housing square footage has stayed stable from 2019 to 2022 in most categories. The area of largest growth is in larger houses from 2,500 to 2,999 square feet.
In both 2019 and 2022, 27% of respondents reported their homes are 1,000 to 1,499 square feet, and approximately 20% reported their homes are 2,000 to 2,499 square feet both years. Those reporting their homes are 2,500 to 2,999 square feet went up 5 points during the period, from 6% then to 11% today.
The other area of change during the three years was a negative one. Homes of 3,000-plus square feet went down from 8% of respondents in 2019 to 5% in 2022 . Rising Prices + Interest Rates, Housing Shortage Sideline Home Buyers Especially in the second half of 2022, a number of consumers have left the active market for a home due to a myriad of reasons including the ongoing housing shortage and rising mortgage rates. We asked furniture purchasers, “In recent months, if you have delayed the purchase of a home or made offers on a home but have not had offers accepted, what was the reason you were unable to buy a home as desired?” The top four reasons in order are: 36% The rising prices of homes make them cost prohibitive for my budget 33% Lack of available homes in my area/price range 16% Rising interest/mortgage rates… 12% Unable to compete or have offer accepted during bidding wars over properties…
To those who had been sidelined, when do they anticipate re-entering the market for a home or being about to buy a home?
The greatest number of respondents – 42% -- anticipate re-entering the market for a home in 2023. Another 26% anticipate continuing their home search later in , while 19% expect to re-enter the market in 2024. About 4% say they don’t see the possibility of buying a home in the foreseeable future. Living Room Upholstery, Tables, Motion on Top of Buying Lists for New Movers For those who recently moved into a new home, we asked what kind of furniture they had purchased just before or just after moving.
Here, in order, are the top choices: 30% Sofa, sectional chair
15.5% Living room tables, consoles, shelves
11% Reclining chair/furniture
8.3% Entertainment center
5% Dining/kitchen table/chairs
3.3% Office furniture
As natural disasters, severe temperatures and shrinking waterways become alarmingly more frequent, climate change and environmental issues have become a top concern for corporations, state and federal lawmakers and voters.
But what about furniture shoppers? Do furniture shoppers have environmental and sustainability concerns top of mind, and are they willing to pay somewhat more for products sold by brands and retailers who tell a sustainability story? In the Home Furnishings Business survey of 1,000 households who have purchased furniture in the last 18 months, we asked purchasers what they are concerned about in the environment and their attitudes toward “buying green.”
Areas of concern that rated lower but still of some concern to purchasers include overloading of landfills, hazardous indoor air quality and unfair labor and trade practices.
Are shoppers willing to invest in their concerns? Nearly 86% of all shoppers said they would be willing to pay “moderately more” for a furnishings product made with sustainable, ecologically friendly materials, or materials contributing to healthy indoor air quality.
The willingness to pay moderately more for sustainable furniture items broke down significantly by age. Those 44 and younger were almost unanimous in saying they would be willing to pay more for an ecologically friendly furnishings product: 95% of those aged 25 to 34 were affirmative in paying more, and 94% of those aged 35-44 report they are willing to pay more. Among those aged 45 to 54, 78% said they are willing to pay more, and among those aged 55 to 64, 72% report a willingness to pay more.
In all income ranges, at least 70% report a willingness to pay more. Beginning in the 50K to 75K annual income range, 84% report a willingness to pay more, and beginning at income ranges of at least 100K annual income, 94% to 96% report a willingness to pay more.
The survey asked recent purchasers to rate their concerns about the environment on a scale of 1 to 10, with 1 being the most concerned. These are the top areas of concern, in order:
1. Global warming
2. Deforestation/loss of rainforests
3. Using up natural resources
4. Extinction of species
5. Increases in natural disasters
Overwhelmingly, consumers prefer to buy sustainable furnishings, all things being equal.
All other things being equal, with comparable style, quality and price, a dramatic 88% of shoppers said they would prefer to buy a furniture brand that uses sustainable materials and environmentally friendly business practices. How can brands and merchants best communicate a message of environmental stewardship in their products and business practices?
One key is to use the right terminology. The Home Furnishings Business survey asked furniture shoppers what their preference is for terms used to describe products that are good for the environment.
Their preference for terms in order is:
1. Eco-Friendly
2. Sustainable
3. Environmentally Safe
4. Green
When shopping for furniture, how interested are shoppers if a brand or product has an environmentally friendly story or materials? When we asked purchasers about their level of interest, the answers were all over the board. While the 20% who indicated a high level of interest represented the largest portion, other levels of interest were just under that percentage. Notably, those rating the importance of an environmental story when shopping for furniture as a 1, 2 or 3 in importance represented a combined 43%.
“Apparel and footwear are ahead in offering a lot of messaging around sustainability,” said Peter Keith, a senior research analyst for the furniture and mattress retail sector for investment firm Piper Sandler. “They talk about products made with recycled materials, and products having more durability, so they last longer and create less waste,” he said. “In fact, in recent years the idea of ‘fast fashion’ has really gone away. People don’t want to buy shirts that last only three to six months and create waste. By the same token, consumers are paying up for premium quality, not disposable furniture that wears out in a few years.”
Keith believes furniture is “starting to catch up” in the area of environmental practices, products and messaging. “There’s a ripe environment toward environmental and sustainability storytelling in the furniture and mattress industry,” he said.
Much Ado About Millennials Generation is Massive, but Home Ownership Rate & Wealth Lag Previous Generations
I t’s no wonder that furniture marketers spend lots of time and energy trying to figure out how to reach the Millennial Generation.
Today aged 26 to 41, they are the largest generation in America at over 72 million strong. As trend setters in everything from fashion to culture and from shopping to entertainment, many consider Millennials the most influential generation. That’s not only because of their size. They also have enormous impact on the next-largest generation: their 70-million-plus Baby Boomer parents.
All that said, as furniture retailers consider how to connect with generations in their sales, marketing, merchandising and customer service, two major principles should be considered.
1. Millennials command a lower portion of those who are purchasing from traditional furniture retailers today, compared to the other two major generations.
According to FurnitureCore, LLC., sister company of Home Furnishings Business, Millennials are currently overshadowed in buying furniture from traditional furniture stores by two other generations. As shown on the pie chart, while Millennials accounted for about 30% of all purchases from furniture stores in 2021, Generation X and the Boomers combined for over 70% of purchases. (Gen Z, meanwhile, or those aged 25 and under, did not quite account for 1% of purchases) Generation X, currently aged 42 to 57, are truly the “prime” generation. They’re in their prime earnings years and the life stage for buying furniture and homes. They accounted for over 30% of all furniture store purchases last year. The Baby Boomers, aged 58 to 76, represent a 40% share of furniture-store buying all by themselves, as they command the most wealth and buying power – both for homes and furniture. 2. Millennials’ path to wealth and homeownership has been fraught with pitfalls and false starts.
First it was the Great Recession of 2007- 2010. That’s when a large percentage of Millennials were graduating high school or college, entering a dismal job market that languished for years. When many were finally getting on their feet, the COVID Pandemic struck, throwing the economy – and then the housing market – into chaos and turbulence. Members of the Millennial generation – the oldest of whom are 41 – have less wealth than previous generations, have delayed life milestones like getting married and starting a family and have lived with their parents longer on average. While their dream of home ownership is intense, their outlook is still clouded because of a massive housing shortage, rising home costs over the last couple of years and now rising mortgage rates. In the related article Furniture Consumers Keep Looking Homeward, {see page 20}, we reported findings of a survey of 1,000 households who have purchased furniture in the last 18 months. Many of them reported leaving the active market for a home in recent months.
Thirty-six percent said the rising prices of home made them cost prohibitive, 33% said there are a lack of available homes in their price range or area, 16% cited rising interest/mortgage rates, and 12% said they were unable to compete or have an offer accepted during bidding wars over properties.
The good news is that around 60% anticipate re-entering the market for a home late this year or in 2023. Yes, Millennials are the largest and arguably most influential generation, and should continue to be a focus of furniture marketers. But right now, two other generations are equally important and are more in the “sweet spot” of furniture purchasing.
But we’re not betting against Millennials – the most educated and diverse generation in history. They will land on their feet professionally, economically and as homeowners.