Monthly Issue
From Home Furnishing Business
December 11,
2018 by HFBusiness Staff in Business Strategy, Industry 
The big question I often get is: why do some organizations tend to always be at or near the pinnacle of their area of endeavor and others always lag behind? Well, to use a dreaded sports analogy, there are several teams that readily come to mind as consistently being on top of their game year after year. Everyone in each league plays by the same rules, their fields and equipment are pretty much the same, they have the same list of plays or strategies to draw upon and they all want to win their games. In our business, we all work under pretty much the same rules, have the same advertising opportunities available, carry relatively similar merchandise (at least to our customers) and want to sell as much as we can. So why do some continue to prosper while others don’t? Obviously, the best ones manage their business or team better, but how?
The answer boils down to the fact that they are great at studying how they did and figuring out ways to do it better in every aspect of their game or business. The best teams analyze each area of their game, grade every player’s performance and set targets for improvement in the next game and at the end of the year, for the next season. What training needs to take place, which players or coaches need to be replaced and how they can improve their preparation for each game, are all examined. As a result, they create plans for performance improvement. The best companies do the same thing.
Here are some thoughts that may help you move the needle next year by starting off with a solid plan for what you want to accomplish.
Proper Planning Positively Propels People’s Productivity
One of the biggest mistakes I see many organizations make when they begin the planning process is not establishing goals or performance targets for every department within their organization. Basically, a plan is a map for your business and the two things you must know in order to use a map are—where you are and where you want to go. It is the same with a plan, with the goal being where you want to go or your destination. Once you know that, you can decide what steps you need to take to get you to it, how to take them and when. That completes your plan.
As stated, this month is a great time to create your plan for next year. So here are some ideas about the areas in your business for which you might want to create a Performance Improvement Plan and a few metrics you could target in each:
Sales – This is the first one that comes to mind for all retailers because it drives the business and without it nothing happens. It is also the one we most often see goals developed for by our clients. However, quite often they only deal with total sales volume, which is the product of a lot of things happening together. Increasing/maximizing sales is obviously the main result you are interested in driving, but we find that targeting the things that go into the sale like Closing Rate, Average Sale and Revenue Per Up are better to focus on, because improving them will deliver the result you want. We also have seen goals for Items per Sale, In-Home sales % and Sketch % help get the right things happening on the sales floor. We recommend you look at where you are in all your sales metrics and determine two or three that you think can be improved. Target them on a quarterly basis, changing to new ones as you improve the originals. Just don’t give them too many goals or it will weaken their motivational power. Be sure to reward and celebrate success!
Office – Does your office run so smoothly that you never have issues with orders, paperwork or other processes? If that is the case you are in the minority, yet this is an area where we seldom see goals utilized as a planning or motivational tool. We suggest you find those parts of the office process that seem to constantly be causing issues within your organization and develop solutions for the problems, then set goals for improved performance. Each operation varies as to what parts of the sales support, order fulfilment and customer service processes are handled, so it is tough to come up with any universal recommendations. However, your management team should be able to develop good ideas in this area.
Warehouse, Delivery and Repair – There are many performance metrics that can be goaled in the back end of your business. In fact, next to sales, this is the most common area we see clients setting goals, paying bonuses and driving improvement. Perfect Deliveries %, Items Repaired, Open Repair Orders, Deliveries Made, are some of the targeted numbers we have seen. Depending on what systems you are using, you can find several great ways to focus this business area on improved performance and customer service.
Advertising – Most retailers do a good job planning their advertising expenditures as part of their budgeting process. The best ones do great work in planning their creative to consistently deliver the message they want to targeted customers in their market. What we don’t see as often is a goal setting process that reflects the actual performance of the advertising other than just raw gross sales. While those are of course the major result, it is also good to track and set goals for each promotion that focus on traffic level, revenue per Up generated, average sale, cost per customer, advertising to sales % and other meaningful numbers. This is especially true if you have an outside agency managing this process for you. What better way to hold them accountable for spending your money productively?
Merchandising – Merchandising, along with advertising and sales, are the three areas of your business that most drive sales. Yet, we seldom see meaningful goals set for it in most small to medium sized retailers. There are many very critical numbers you can track with your business system that can be goaled to help you plan for improvement here too. Obviously Gross Margin, GMROI and Turn are very important to our business, so they are good places to start. There are other areas a buying effort should manage such as freight costs, open to buy and vendor selection that can also be targeted.
Yourself! – So, you thought we might forget about you? Remember that unless you develop and strive to make growth goals yourself, it will be tough for you to lead a goal oriented, growth focused team – walk the walk and talk the talk!
Once you have your plan in place, it is critical that you follow it and make sure you are hitting the goals you set each month. There is no doubt that executing a plan is much harder than creating one, so this is where the rubber meets the road. The biggest thing to avoid is giving in, throwing out your plan and going back to just doing what you think is right at the time. It takes discipline and courage to make the hard decisions and stick to your guns. Of course, if you determine that your plan is too optimistic, you may want to adjust, but don’t just discard it.
In retail, the most important areas to plan for and keep an eye on—because they directly impact your sales results—are what I call the Final Four: Product, Promotion, Presentation and People. These are the ones your management team needs to focus on every day, to make sure your plan succeeds. Are we assorting the right products, displaying them the best we can, advertising to bring in the targeted customer and lastly, are our people providing the best customer experience possible? As a coach though, I must say that it always seems to be the last one that gives us the biggest problem. Products, advertising and display are easy to manage compared to people. But, even if we do a stellar job of managing all of the other areas, if our people fail to deliver, then our business/team fails.
As is often the case, I am not telling you anything you didn’t already know or at least suspect. The most successful businesses and teams excel at creating a plan and executing it. Having a solid plan, getting everyone onboard with it and consistently executing it is the key difference I see between highly successful organizations and the “also-rans”. So, get busy this month and work on planning for your growth and success in 2019. If you don’t plan for it, it won’t happen. Next month I will provide you with a list of some things you may want to include in your plan to help drive performance improvement in your company!
December 11,
2018 by HFBusiness Staff in Business Strategy, Industry
On trend open floor plans for homes means that home offices are no longer restricted to a single, dedicated area of the home. Instead, manufacturers are facilitating the trend to allow for more flexibility in their product offerings and where these products will be placed in the home. According to Lisa Cody, Vice President of Marketing at Twin Star Home, “consumers want more flexible spaces in their homes that can serve multiple activities” with products that “can work well in a home office, casual living room, mudroom or kitchen. On top of flexibility, we are in a time where consumers are influenced by technology in everything they do.”
And she’s right. Consumer research by FurnitureCore (the research arm of Home Furnishings Business) shows that among recent purchasers of home office furniture, 47.06% report using a laptop for their work, guaranteeing the fluidity of moving from space to space. The same report found that less is more in these home offices with 94.12% of consumers reporting that both a personal computer and printer are the main items in their work spaces. With the flexibility of smart phones, many other needs have fallen to the wayside (think fax machines and land lines).
Consumers still need an area to set up these items, no matter how technology shapes work life. 47.06% of consumers report that the primary use for their home office is an area to work when they are not in their regular office. Another 29.41% use the area to perform home and family business, while 23.53% report using the space for home-based business , up 11.93% points over 2017.
The furnishing selection is vital to the work that will be accomplished by the consumer in the environment of their choosing. 29.41% of consumers report that the home office is in a shared room and 70.59% of consumers report that their office furniture is not a part of a coordinated set. This trend has triggered a move away from office furniture collections and into a more eclectic look that can easily blend in with shared spaces. If these consumers rely on flexibility to create their work environment, manufacturers must meet that need by creating beautiful pieces that can be integrated into any room. According to BDI’s Matthew Weatherly, associate design director and designer, "the beauty of [BDI’s Office Collections] is the number of components offered, which means consumers can create the ideal set up that works for their space and their office needs. From a smaller, modular set up, to a full executive office suite, BDI brings sophisticated styling and generous features that make any workspace functional and beautiful.”
Desks have long been the heart of the home office. When asked, most consumers reported that their preferred style of desk is an executive desk at 35.29%, quickly followed by a writing desk at 29.41%, and L-shaped desks in third with 23.53%. Trailing behind were corner desks and desks with a hutch, both at 5.88%. Desks with an adjustable height were not included in the survey choices but are up in popularity as they allow the user to stand while working and are marketed as a healthy alternative to hours in a seated position. Though these desks provide differences in functionality, it is clear that the contemporary style is favored by nearly 50% of those polled, followed by traditional style at 29.41%.
Other office furniture staples follow with desk chairs and file cabinets both reported in consumers’ home offices at 58.82% and some 41.18% report that book cases are in their home office space. Work tables have surged in popularity as 29.41% of respondents reported that they are present in their current office set up (up from 10.1% reported in 2017.)
No matter the setup of the home office, more and more people are working from home with their entertainment sources just steps away, if not already in the same room.
Just as open floor plans are trending for the home, entertainment centers have opened up to reflect the technology advancements in the form of a wireless experience. Gone are the days of unsightly cable bunches needed to power home entertainment systems as we welcome Bluetooth and smart devices that consolidate function, like smart televisions with built in DVD players and Wi-Fi connectivity.
Televisions are crucial in the home entertainment case goods category and require consideration for cord management and screen size when it comes to selecting storage devices. Without fail, ‘the bigger the better’ mindset has persisted when it comes to screen size and picture quality, 50% of those polled reported that their primary TV screen in their home is 55” or larger.
While technology advancements move at a pace that will make your head spin, one thing is clear: consumers no longer need to hide their televisions and instead, proudly mount them on the wall as 31.25% of those polled have reported. Consumers’ favored method to display flat screen televisions is to place it on a media console as 43.78% have reported and only 18.75% of consumers prefer to hide their televisions. These televisions are central to the home as 50% of consumers state that the television is placed in the living room and 37.50% report that it is placed in the family room.
With the larger screen sizes and other advancements in technology, manufacturers have to find a balance by updating their product offerings to accommodate for the fast paced electronics industry. Luckily for retailers, they have done just that by offering wall mountable consoles, products with door features that allow remote access yet hide multiple media devices, or produce consoles that double as statement pieces for the room suited to large screens.
November 7,
2018 by HFBusiness Staff in Business Strategy, Industry
The current generation of senior management at least are solidly “Baby Boomers” and have forgotten the transition that they endured with the pre-Baby Boomers – those now in their 70’s-80’s. Several years ago in a senior level meeting, a new member of the executive team admitted his new fiancée was intimidated by the size of their stores and breadth of selection and they shopped at Pottery Barn. No, he wasn’t fired – he was family - but it impressed upon me the difficulty of incorporating the perspective of younger consumers.
The key challenge for traditional retailers will be to allow their retail operations to transition from the Baby Boomers that have served them well for the past 30 years and move forward to serve the next Generation (Gen X 35-45) and the generation beyond (Millennials <35).
The graphic below presents how the new and existing age groups consider furniture attributes during the shopping process.
Major takeaway: the younger generation values comfort more than price, but they still want quality and design (aesthetics).
It is not hard to understand what they want, just ask.
November 7,
2018 by HFBusiness Staff in Business Strategy, Industry
This growth in the short term will be fueled by Generation X (35-44), which is the fastest growing age group under 65, projected to grow 1.8% in 2019. What follows is the Millennials, which will dwarf Generation X, but for now, their furniture purchases are limited.
Why are we excited about the sign of life in the furniture consumer? Research just conducted indicates they have a “dream style” that they look forward to in the future. The results were surprising.
When we forced the consumer to choose visually and did not allow the ubiquitous choice of “transitional”, we found some interesting dream styles.
While many of the consumers were stuck with the eclectic combination of traditional, surprisingly only 31% choose that as their style of their dreams.
The challenge of the industry is to make the consumer move on to satisfy their dream of a new style. The fact is that over 50% of the households are thinking about or are in the process of shopping for furniture. Unfortunately, when these same consumers are surveyed a year later, less than half have moved on that desire.
What influences style? The industry has struggled with style designation. In the eighties, consumers moved away from the historical designation of the 18th Century or French provincial. As individuals became more inclined to express their individual styles in apparel, home furnishings were not far behind. Style performance is influenced by the lifestyle of the individual and how they want to spend their time. DesignCliq, a family of applications that captures and engages customers, has explored the relationship between consumer performance, as it relates to a style of furniture, using a series of fun questions about their preferences.
DesignCliq Questions:
- How do you like to entertain?
- How do you spend your ‘me’ time?
- How would your friends describe you?
- When in a city, it would be fun to…?
- When looking for home décor inspiration you like the rooms to be?
- Where do you find style inspirations?
- Which magazine says you?
- Which would be your dream home?
- Who is your favorite male actor?
- You just won the lottery, now what?
The response to these questions are statistically weighed and associated with a retailer or manufacturer’s product. The result is that 87% of the consumers agree with this match.
A national survey recently conducted identified a breakdown of consumer style preference.
The designation of style can be expanded depending upon the merchandising assortment of the retailer or manufacturer. Several manufacturers and retailers are using this research to focus their merchandise selection.
The relationship between a consumer’s lifestyle and their style preference for their furniture is illustrated by the relationship between how they entertain and their preferred furniture style.
The major concern of brick and mortar retailers is traffic or the lack of traffic. FurnitureCore (the research arm of Home Furnishings Business) estimates that traffic this year is off 7%, but this is misleading with some retailers off substantially more. The key questions to retailers are simple: Who did they consider? Who did they shop? Who did they purchase from?
Obviously, a retailer must be “considered.” This is typically referred to as brand awareness. Established retailers have achieved this over many years of advertising and providing an outstanding customer experience. For established retailers, this level could be 70%+, but retailers entering a market with a substantial advertising plan may require 2-3 years to reach a 30% level, if consumers are not focused on furniture or advertising impressions have a low penetration level. For this reason, location, visibility, and signage for a retailer entering the market is critical and worth the additional occupancy cost.
The most important objective for retailers is to make the consumers visit the Internet to research their pending purchase. According to FurnitureCore research, 77% do so before purchasing. Interestingly, from that same research just under 50% visit the store first before beginning that Internet research. In other words, for these consumers, the retailers have an opportunity to impress. The take away for retailers: Don’t let your retail sales associates ignore those “tire kickers”.
“From our experience in assisting retailers with improving their sales management, these consumers are often not included in the traffic number.”
-Bob George, president, Impact Consulting
The buying process that ultimately occurs indicates that a consumer visiting a brick and mortar store can provide some insight to the changes in traffic coming into the store. The first recognition is that the target consumer is changing. The Baby Boomer, long the favored target for the traditional retailer, is receding into retirement. For the next decade, before the Millennials appear, the new target consumer is Generation X. Fortunately this consumer has not abandoned the independent retailer and regional chains unlike the coming Millennials.
The major challenge, as mentioned earlier, is to get the consumer to find time to purchase furniture. Unlike the older Baby Boomers, furniture is a shared desire. Interestingly, the males lead the way in initiating the furniture purchasing process. However, it is the task of the female partner to make the initial visit.
While interested in furnishing the home, the male delegates to execute a significant change from the preceding generation.
However, the shopping process is abbreviated with the task being complete within two weeks (37.7% for 35-44 and 30.8% for 45.54) or extended out beyond three months.
The reasons for the Generation X’s (35-44) furniture purchases are significantly different from the preceding generation, the young Baby Boomers (45-54). Obviously life changing events impact the purchase of furniture.
To summarize, when the consumer reaches 35-44 it is a time for change while the preceding generation of young Baby Boomers have settled down. Only 18% of both listed desire for new furniture as their reasons for purchase.
What are retailers doing to address the changing consumer?
While other distribution channels, such as the lifestyle stores Restoration Hardware (RH) and Arhaus have adopted a more focused marketing approach to selected lifestyle segments, traditional furniture stores have continued with large selections of products and styles.
The result is a time starved, often impatient consumer being confronted with a 100,000 square foot monument only to be abandoned for the more curated approach of the lifestyle stores that focus on the style that their targeted consumer wants. The frustrated traditional retailer bemoans the fact that they have the “Pottery Barn” look at a better price – why wouldn’t they shop?
Several traditional retailers have begun to recognize the problem and are executing solutions. Morris Furniture, with their new Columbus store, has adopted a lifestyle approach. Working with 
, a store design firm, consumer research was used to develop the new concept. Bill Chidley of ChangeUp explained the process.
“Like many furniture retailers today, Morris is under pressure from changing consumer behaviors and an abundance of new shopping choices when it comes to furnishing a room or just replacing a sofa. We knew that merely redecorating the store, or moving categories around was not going to be enough, so we started with the notion that the Morris brand —what it stood for and why— had to be the core. We needed to relaunch the retailer, and since they had virtually no awareness in the new market we were helping them enter, there was both an opportunity and a need to do this.”
Chidley says they began by gaining an understanding of what consumers want from a retailer through quantitative research they conducted in Cincinnati and Dayton—Morris’s two markets.
“ We learned that consumers find little difference between furniture stores when it comes to rational attributes like selection and having deals, and that they find them a chore to shop,” he said. “We also learned that Morris was under-appreciated for the quality and style of the products they offered. So, we crafted a brand idea around the proposition that Morris could provide the styles and inspiration the consumer is looking for from specialty competitors like Arhaus, but at a better price-point. The result was making their shopper feel smart and savvy for shopping at Morris.”
To activate the brand idea, the decision was made to revise the name and identity to Morris Home, and create a more sophisticated logo. “We developed a tone-of-voice for the brand that insured it ‘spoke’ (through advertising and marketing communications) with a voice that reinforced a stylish, inspiring, and savvy personality,” Chidley said. Finally, the concept was brought to life with a dramatic exterior expression, and a new layout that merchandised distinct style statements through whole-room vignettes down a main “boulevard” aisle. “This merchandising approach simplified shopping by aligning with the new shoppers path-to-purchase, where they begin online for inspiration then show up in the store with a more focused vision of what they want.” Chivley continued, “Instead of a ‘sea of sofas’, Morris shoppers now hone in on a style proposition that feels like Morris knows them and isn’t burdening them with an exhausting hunting expedition.”
The new facility is just the beginning to execute change. Starting with advertising and continuing through engagement by the retail sales associate on the floor, everything needed to change.
In January 2015, Morris Furniture Company began a two-year process trying to create a better shopping experience for their customers. The old Morris Home Furnishings had struggled with showroom display; balancing manufacturer galleries, lifestyle displays and product category areas. Owner Larry Klaben explains. “As an independent furniture and mattress retailer we needed to better understand our customer and how she shopped. We selected ChangeUp, a full-service design agency, to help us and to create an amazing customer experience.”
ChangeUp studied the store’s current showrooms as well as competitors’ showrooms, and surveyed furniture customers and Morris associates to fully understand what creates a better showroom experience. Their findings showed that furniture shopping is not so easy and is not fun for customers especially when they are making a long-lasting large ticket purchase. They advised Morris to simplify the process and to help focus the offerings in the large showrooms.
“That data resulted in our new name,” Klaben said. “We are now Morris Home, lifestyle inspired stores with category areas for non-lifestyle products. On one side of our showroom we feature certain lifestyles; Natural Living, Urban Loft and Modern Studio. We believe that no customer is limited to one lifestyle and these three lifestyle displays appeal to a group of consumers. On the other side of the showroom we offer; Uptown Glam, Farmhouse Chic and Heirloom Classic. Again, many customers are attracted to products within those three lifestyles to create their own eclectic look. In each lifestyle there is a selection of living rooms, dining, and bedroom along with accents to fully create the lifestyle environment. Once inside the lifestyle area there is an intimate feeling, which is mood specific to that lifestyle display. Inside each multi room area, a customer can experience the look and feel as if it were their own home.” Klaben added, “Outside the lifestyle area is additional upholstery that compliments that specific lifestyle.”
The lifestyle areas were designed to flex in size to meet expanding or contracting customer interest in a particular lifestyle. In addition, each of the three metropolitan markets the company serves have different consumer demands. Columbus is a more modern, contemporary, and urban customer than Cincinnati and Northern Kentucky, which has more Farmhouse and Classic customers.
“There are three specialty areas showcased in our Morris Home showrooms,” Klaben said. “There is a Design Center featuring customizable upholstery with extensive fabric options. Morris Home features Bernhardt adjacent to the Design Center as our best design provider. On the other side of the showroom, adjacent to the reclining category display, is the La-Z-Boy area. Our survey data showed that shoppers are often looking for these specific product categories so we located those products on the perimeter of our showrooms. These areas feature; dining, bedrooms, kids and teen, our Better Sleep Shop, entertainment and reclining.”
Klaben continued, “To help our customers understand their lifestyle preferences, we partnered with DesignCliq, both on our website and in our showrooms. The customer can take a short quiz to determine her dominant lifestyle. This helps both her and our sales specialists determine a starting point to begin shopping.”
Klaben says retailing is all about product and lifestyle displays and requires keen focus on carefully curated product and displays. “Our displays must rival and surpass the individual ‘lifestyle’ stores. That is our biggest challenge; to offer leading fashion merchandise and to offer value to our customers. Each product is merchandised to have a specific home within the six lifestyles, in the extended area or in the product category areas.”
Morris Home is not the only retailer aggressively pursuing a lifestyle approach to merchandising. Art Van has executed new lifestyle displays for its Fall offerings using six distinct lifestyle themes: Mid-century modern, casual, urban, farmhouse, and traditional. All Art Van stores have begun reset.
In addition to the traditional furniture category, Art Van has added a new large home décor department featuring rugs, lighting, wall art, and other accents. The new home décor product will also be integrated with the lifestyle collection. From research done separately by Impact Consulting, parent company of Home Furnishings Business, the need to increase traffic to the store can be accomplished with the integration of all home furnishings products into the store. From FurnitureCore data, furniture and bedding represent only 40% of the consumers’ home furnishings needs.
While the consumer expends on average $848 per household for furniture, other non-durables in the home furnishing category exceeds that amount. While other home furnishing stores are invading our space, such as Target and Big Lot, presenting total furniture collections should traditional furniture stores not return in kind.
The sales of home furnishing stores surged in 2016 and 2017. Fortunately, furniture stores regained their growth so far this year. Much of this is based upon the recent difficulty of certain chains, such as Bed Bath & Beyond, due not to consumer preference but other external factors. However, the seasonality of this distribution channel (31.7 in 4th quarter) will even the performance.
Without a doubt, the emerging consumer is ready to furnish their homes. It is the challenge of the traditional retailers to satisfy their demand for furniture that meets their perception of style offered in an environment that matches their retail experience.
We must be able to change.
November 7,
2018 by HFBusiness Staff in Business Strategy, Industry
The U.S. became over-stored in many channels during the 1990’s and early 2000’s as developers kept building shopping centers and companies continued opening retail outlets. The Great Recession was the initial economic event to impact the retail landscape, especially for furniture and home furnishings stores as the housing and mortgage crisis escalated. Then with the influx of internet companies like Amazon and Wayfair, consumers altered spending habits and priorities. Over the last 10 plus years, dramatic shifts in distribution channels have taken place both in sales and in store counts.
Number of Establishments
Some retail channels have fared well during the last ten plus years, but many have not. Many channels peaked in total establishments (store fronts) just before the recession and some continued to grow. Except for electronic shopping, mail-order stores and general merchandise (variety) stores, virtually all other retailers of furniture and home furnishings continue to close stores. Furniture, electronics and appliance stores, and home centers peaked in 2007 and continue to decline. Home furnishings stores have been on a similar path, but did increase in number slightly in 2017. Department stores, warehouse clubs and superstores grew during and after the recession, but have been victimized from the pressure of internet companies and have decreased in number in the last couple of years. (Table A)
The number of furniture stores peaked in 2007 at 27,630 according to the U.S. Bureau of Labor Statistics. Since that time brick and mortar furniture stores fell to 22,052 store fronts this year. This 20.2 percent total decline or annual CAGR of 2 percent loss represents the largest decrease of all the key channels 2007 to 2018 Q1. The announced closing of 700 Mattress Firm stores will result in another 3 percent decline. Home furnishings stores did not fare much better falling 19.4 percent in number over the 10 plus years, but showed a slight uptick in the first quarter of this year of 0.3 percent.
During the same time period 2007 to 2018 Q1 pure electronic shopping and mail order houses surged by 100.9 percent or 6.5 percent annual growth.
Warehouse stores and supercenters (i.e. Costco, Wal-Mart, and Target) peaked in number two years ago in 2016 at 6,073 locations and have gradually closed 1.1 percent of the stores over the last 15 months. Department stores (i.e. Macy’s, Bloomingdale’s, Kohl’s, TJ Maxx) as a group also showed strong signs of post-recession recovery, increasing the number of stores by 22.5 percent (2007 to 2015) before a catastrophic closing of 14.5 percent of stores in just over two years. Electronics and appliances stores, the largest distribution channel in number, along with home centers (i.e. Home Depot, Lowes’s) continued to remove stores throughout the recession and after, maintaining an average annual decline of 1 percent and 2 percent, respectively. At one time the electronics and appliances stores totaled 53,343 but now number 45,351 in 2018 Q1. (Table B)
Table C tracks the percent of stores closed from two historical perspectives – (1) 2007 to 2012 during the recession and subsequent slow recovery years, and (2) 2012 to 2018 during economic recovery and high growth. During the recession and the immediate recovery years, furniture stores and home furnishings stores shuttered more locations as a percent of total than any other in the key retail furniture groups, closing stores at an annual rate of 3.8 percent over those five years. Meanwhile home furnishings stores closed 3.5 percent of locations each year 2007 to 2012. But these two primary channels took their hits early due to the housing and mortgage crises as did home centers. During the last five years furniture and home furnishings stores lost less than 1 percent of its outlets annually. Meanwhile home centers closed 2.2 percent of stores annually in the five-year recessionary/recovery period and continued to lose 1.2 percent annually 2012 to 2018Q1.
Other retail channels continued to grow during the early recession and post period or had minimal store closings, but have closed stores in recent years. These include department stores and electronics and appliances retailers. The only retailers to continue opening stores were warehouse clubs and superstores, general merchandise stores, and electronic shopping and mail-order houses (non store retailers).
Retail Sales
During the recovery period from 2012 forward, all furniture and home furnishings distribution channels grew in sales, despite store closings, with the exception of electronics and appliance stores and department stores (Table C).
Retail sales from electronic shopping and mail-order houses catapulted 131.3 percent from the peak of the recession in 2009 to 2017, but furniture stores and home furnishings stores experienced a healthy growth in retail sales, increasing by 23 percent and 21 percent from 2012 to 2017.
Both furniture stores and home furnishings stores’ sales have grown a yearly average of 4 percent in the past five years. Warehouse clubs and superstores have slowed momentum of sales in the last five years, but are still growing an average of 2.6 percent each year (Table E).
The net effect, especially for furniture, is that even though industry sales slowed and stores shuttered, the ones left standing had higher sales and continued to increase their sales per store, as shown in Table F. The average annual sales per store for furniture stores climbed steadily from $1.9 million in 2009 to $2.9 million in 2018 YTD – jumping 52.6 percent. Home centers have also benefitted from the net effect, increasing their sales per store by 73.7 percent during the same time period, mostly likely as smaller stores have closed.
Many have labeled the next few years a “Retail Apocalypse” as total retail chains in varied product areas are projected to exit the market and existing retailers pare down their stores in number and in size. Some predict entire malls will continue to close. However, furniture still remains one of the products where many consumers still like to “kick the tires” before purchase. And despite the store closings, retailers are finding ways to survive and perhaps re-gain some market share.