Monthly Issue
From Home Furnishing Business
April 16,
2015 by in Economic News, Industry 
As the leading edge of the Millennials, the second largest birth generation in U.S. history, starts to make its way into the prime furniture purchasing age groups and the Baby Bust generation ages, the furniture industry will be looking forward to new household formations, first time home purchasers, and new families.
These children of the Baby Boomers— Generation Y and Millennials—are entering their 30s and will slowly feed the furniture industry for the next 20 years. Not surprisingly, Baby Boomers turning 65 in the next 10 years will facilitate a dramatic increase in the 65 and over age group.
Combined consumer age groups 25-to-34 and 35-to-44 are projected by the U.S. Census Bureau to increase by 8.7 million people or 10 percent over the next decade.
Table A below shows the percent growth by age segment.
As shown in the table, Baby Boomers aging over the next decade will cause the 65 and over age segment to skyrocket 37.8 percent—increasing at a rate of 3.3 percent a year from 2015 to 2025.
Combined, the 25-to-44 year olds are projected to increase 10.4 percent over the next decade. Note that consumers aged 35-to-44 spend the most on home furnishings per household of any group.
Meanwhile, the tail end of the Baby Boomers has finally entered its 50s. The 45-to-54 year olds, who have been the highest populated group over the last 10 years, will now house much of Generation X, also referred to as the Baby Bust generation, and are estimated to drop an average of 1 percent a year in population—with a 5.7 percent decline by 2025. These high earning consumers have historically been key purchasers of upper and premium furniture.
While projections for Ages 55-to-64 show a growth of 5.2 percent by 2020, these final Baby Boom numbers are expected to drop 3 percent by 2025.
The youngest segment, ages 15-to-24, is due to remain flat over the next five years and decline 1.2 percent by 2020.
The Next 10 Years
Table B, below, depicts the projected population in five-year increments—growth by 2020 and 2025. Ages 25-to-44 and 65 and over, will have steady increases each five-year period, while the remaining age segments are projected to experience both upturns and downturns during the same time span.
Each of these age segments is discussed in more detail.
Ages 15 to 24
Many of the Millennials will be aging out of the youngest of the future furniture purchasers, the 15-to-24 year old group, over the next five years. The group is expected to decline 1.7 percent by 2020 and remain relatively flat with 0.4 percent growth from 2020 to 2025.
Ages 25 to 35
As the Millennials begin to age into the young adult group ages 25-to-34, a projected rise of 6.3 percent in population by 2020 should cause the furniture industry to take notice. A poor job market has previously forced many back home to parents and delayed marriage for others. But a more robust economy should help with new household formations resulting in increased industry sales for this age group.
Ages 35 to 44
The largest spenders on home furnishings, the 35-to-44 year olds, are expected to have the highest growth among the key home furnishings purchasers—increasing 5.2 percent by 2020 with an additional jump of 7.7 percent by 2025. Combined 25-to-44 year olds are set to increase in number from 84.7 million to 93.4 million over the next decade—a gain of 10.4 percent. These younger adults will become the heart of the furniture industry.
Ages 45 to 54
Prime earners ages 45-to-54 are projected to decrease 5.3 percent in the next five years and will ultimately drop from 43.1 million in 2015 to 40.7 million in 2025. The decline of these peak income consumers will have the most negative impact on the furniture industry as they are often key purchasers of premium furniture.
Ages 55 to 64
While expected to jump 5.3 percent by 2020, Baby Boomers will age out of this group over the next five years—resulting in a slight overall 10-year growth of 1.6 percent.
Ages 65 and Over
Leading-edge Baby Boomers are aging into the 65 and over segment, which is expected to skyrocket 18 percent by 2020 and have a total increase of 37.8 percent for the entire decade. The furniture industry may think it will be sad to see the largest generation in history move into retirement; however, their influence will still be significant over the next 10 years.
Trend Impact on Sales
All of this demographic data is great information for reading how the shifting population will impact sales in the furniture industry.
The growth of the 25-to-44 year olds coupled with the decline of ages 45-to-54 should still result in moderate growth as the Millennials start to spend. This is based solely on demographic trends—projected population growth from the U.S. Department of Commerce and the U.S. Census Bureau, current headship rates, and most recent average consumer expenditures by age group from the Consumer Expenditure Survey.
Table I below shows the estimated industry sales by each age group.
Demographic trends alone should grow the industry by $7.7 billion dollars over the next 10 years to $97 billion. Because of their sheer numbers, in 10 years the over-65 Baby Boomers will still spend $17.8 billion and have the highest volume increase $3.1 billion. The 35-to-44 year olds, although smaller in number, will spend $21.7 billion with the highest average per household and grow by more than $2.5 billion in industry sales.
Table J, above, shows the expected percent increases in industry sales as a result of demographically driven trends.
Couple these demographically driven increases with the U.S. Department of Labor’s projected increases in consumer spending over the next 10 years and the outlook significantly improves. In addition, increased housing demand by the Millennials will also fuel the furniture industry.
February 16,
2015 by in Economic News, Industry
By: Sheila Long O'Mara
The latest breakdown of significant numbers and what they mean to the industry.
68.7%
- The amount of Earth’s freshwater held in ice caps and glaciers
U.S. Geological Survey
25 Billion
- The number of Styrofoam coffee cups Americans toss each year
Environmental Protection Agency
2.5 Million
- The number of plastic bottles Americans throw away each HOUR
Recycle Across America
12 Feet
- Height of wall from Seattle to New York that could be built each year with the amount of office paper thrown in the trash
Recycle Across America
1 Ton of recycled paper
Recycling Revolution
About 1 Billion trees
- Worth of paper are thrown away each year in the U.S.
Recycling Revolution
78 Million Acres
- The amount of rainforests lost annually due to burning
ThinkGlobalGreen
65%
- The recycling rate for paper
Environmental Protection Agency
2 Billion Books
350 Million Magazines
24 Billion Newspapers
Environmental Protection Agency
5,000+
- The number of products that can be made from recycled paper
Technical Association of the Pulp and Paper Industry
February 16,
2015 by in Economic News, Industry
By: Bob George
The term Tipping Point entered the business lexicon several years ago to describe an occurrence in the consumer sector. Made nearly famous by author Malcom Gladwell, the concept applies to the business sector as well. Simply put, tipping point is the instance of a previously rare happening becoming rapidly and dramatically more common.
For several years, Impact Consulting Services has conducted research on the topic of sustainability and specifically sustainability in the home furnishings industry. We have reached the magic number that indicates 50 percent of all consumers would be interested in buying green home furnishings.
The question now becomes what will it take to make green or sustainable or eco-friendly an established fact in the industry? According to Gladwell, author of the Tipping Point “The success of any kind of social epidemic is heavily dependent on the involvement of people with a particular and rare set of social gifts.” He notes these gifts specifically as connectors, mavens, and salesmen.
In his book, Gladwell defines each of those people as follows:
Connectors: “… people who know large numbers of people and are in the habit of making introductions.”
Mavens: “… ‘information specialists’, or people we rely upon to connect us with new information.”
Salesmen: “… are ‘persuaders’, charismatic people with powerful negotiation skills.”
What category do you fall into?
As an aside, I, as principal of Impact Consulting, was involved in a campaign several years back to set a minimum sofa cushion density of 1.8. It worked, and the industry is better for it.
We at Home Furnishings Business have provided the information. Let’s get started.
February 16,
2015 by in Economic News, Industry
Major shifts are occurring in the populations and purchasing habits of the four prime purchasing age groups for the furniture industry.
The two older groups—ages 45 to 54 and ages 55 to 64—are quickly surpassing the younger generations in size. Households ages 35 to 44 (Gen X), traditionally the core of the furniture industry, are in sharp decline. While the youngest age group tracked, ages 25 to 34 (Gen Y), has shown little growth since 2000, it does show great potential for the industry. As the second-highest birth rate generation, the numbers will be impressive as the group ages into the furniture buying segment.
Traditionally, furniture industry households have been divided into four age groups: 25 to 34 years, 35 to 44, 45 to 54, and 55 to 64. Consisting of more than 50 percent of the furniture buying population, the Baby Boomers (currently ages 49 to 68) have begun to exit out of the prime furniture purchasing years. Challenges face the industry as the group ages; especially in the next 5 to 10 years, as household formations slow.
The Rise of the Boomers
Since 2000, the rise in households has rapidly grown 68 percent due the successes of the Baby Boomers. In 2013, people aged 55 to 64, accounted for 26 percent of the furniture buying population. That’s up from 18 percent in 2000. People aged 45 to 54, currently including the younger portion of Baby Boomers, have increased in numbers by 15 percent since 2000.
While holding the greatest share of the furniture buying population in 2000, the Gen Xers, people between 35 and 44, dropped 11 percent to 24 percent in 2013. When compared with the Baby Boomers, Generation Y, those aged 25 to 34, have shown minimal growth since 2000. Gen Y grew 7.5 percent and made up 23 percent of total furniture buying households.
In 2007, the recession was hitting its stride and the older age groups surpassed the younger generations in numbers. Currently totaling 22.8 million households, ages 55 to 64 became the second largest group in 2011—a meager 5 percent lower than ages 45 to 54. As a combined group, predominately made up of Baby Boomers, it represents more than half of the furniture buying population.
Gen X households, which dominated the industry’s record growth in the late 1990s and early 2000s, are in sharp decline. In 2004, this prime family age group fell to second place in the race for the largest age segment, and in 2011 it dropped to third. The youngest group, Gen Y, holds the least number of households in the furniture buying population and has had consistently slow growth since 2000.
Spending vs. Age
Although Gen X is declining in numbers, it continues to lead the industry with an average annual expenditure of $527 in 2013, the most recent data available. On the flip side, the Boomers have grown in numbers, but their purchasing is 15.6 percent below Gen X furniture buyers with an average of $456 in annual furniture spending in 2013.
Table C illustrates annual expenditures by age group.
10-Year Historic Spending
Since the recession bottomed out in 2009, expenditures in most age groups have been steadily increasing to meet or surpass the average annual furniture purchase of 2002. Only one age group—45 to 54—in 2013, however, has come close to its spending levels from 2005.
The following four charts break down the historical furniture spending daty by age group.
While ages 55 to 64, the older Boomers, have made promising growth in spending since 2009 with an increase of 38 percent, the group spent 16 percent less per household on furniture than Gen Xers. The average spending is still down 14 percent to $456 per household for the Boomers from 2005 when they spend $527 on furniture.
Furniture spending trends by the largest age group — 45 to 54 — are shown in Table E. This group, split between the younger Boomers and the older Gen Xers, spent the lowest amount on furniture per household most recently. This group spent $422 on furniture in 2013.
That amounts represents a 6.8 percent drop from 2002 when the group was spending $453 on furniture and a slight 0.2 percent shy of its 2005 spending level of $423.
While sleeping in numbers, the 35-to-44 group, Gen X, has traditional spent the most per household on furniture. That trend continues, and Gen Xers have shown a 35 percent spending increase above their 2009 spending levels.
In the second quarter of 2013, the average Gen X household spend $527 on home furnishings, as shown in Table F.
The youngest group in among our furniture buyers, Gen Y encompassing those aged 25 to 34, is also the smallest in number. The group still spent on average $420 on furniture per household in 2013.
Gen Y appeared to be the least sensitive than older households in its spending habits during the recession. See Table G.
Future of Furniture Buying
Looking ahead into the next seven years, households in the age segment of 55 to 64 will continue to increase at a staggering rate. With an estimated 77 percent from 2000 to 2020, this segment will make up the majority of the furniture buyers.
Ages 25 to 34 are projected to increase 15 percent over the 20-year span, and those between ages 35 to 44—the prime furniture buyers—are expected to fall by 7.5 percent during the same period. The age group of 45 to 54 will have flat growth in 2020.
In 2020, age group 55 to 64 is projected to make up 19 percent of the furniture buying population, while the three younger generations will each account for about 16 percent.
January 12,
2015 by in Economic News, Industry
This is a dangerous piece for me to write without letting my age show. I have memories of the days of the dominant brands—the brands that drove retailers to be the first in the showroom at Market to claim their places in the first cuttings.
It was a period when manufacturers were forced to create Premarket in order to have a chance to sort out distribution. However, it is a different time now.
Again, referencing my age, bear with me as I repeat myself knowing that often repetition is a sign of experience, not old age.
In my April column of last year, “The Commodity Abyss”, I discussed the challenges of avoiding commodity status for the furniture product. Sadly, these same challenges exist today. Nothing has changed in a year. In a study we recently completed, we compared how home furnishings products have fared against other durable goods products.
The accompanying graphic shows our findings. This should not be taken as a pessimistic view of our industry. Rather it should be a call to action.
It is my hope that if we continue to talk about this problem, we will be able to conquer it. The first step is to recognize the challenge. Then, we can begin to address it.
In 2015 perhaps we should explore the cost and potential return on building a brand. Yes, it begins with the manufacturer. However, the retailer must support that effort by recognizing that there is a cost to building consumer demand. Maybe we need a furniture industry initiative because, at the end of the day, these issues involve us all.