Monthly Issue
From Home Furnishing Business
November 13,
2015 by in Business Strategy, Industry 
Consumer confidence is on the rise and with it the demand for consumer products, especially durable goods.
With an array of spending choices, the furniture industry has its eye on these more confident consumers. Several factors may finally be coming together to push home furnishings products ahead of other key consumer goods. The surge in new automobile sales may be slowing as consumers increase the length of car ownership. Also, consumer spending on home electronics has flattened. Combine these trends with a surge in housing starts, and it may just be the furniture industry’s time to shine.
About 70 percent of the gross national product consists of consumer spending, and one of the prime drivers of spending is consumer confidence. The Consumer Confidence Index increased to 103.0 in September, up from the 2015 low in July of 91. The all-time low in confidence occurred in February 2009 when it fell to a recession low of 25.3, according to The Conference Board.
As shown in Table A, consumer confidence took a nosedive after a high of 103.4 in 2007—dropping to an average of 45.4 in 2009. Since the Great Recession, confidence in the economy has steadily increased a yearly average of nine index points—resulting in a total jump of 53.3 points from 2009 to 2015 year to date based on an annual average.
Consumer confidence, measured monthly by The Conference Board, is an economic barometer of the health of the U.S. economy from the consumer’s perspective. The survey asks consumers how they feel about the current and six-month future business climate, including the health of the local job market, and whether they see incomes rising or falling going forward. When the Consumer Confidence Index is released at the end of the month, stock markets can be impacted, as well as decisions made by the U.S. government concerning whether or not to raise interest rates.
A monthly look at consumer confidence over the last three years (Table B) shows the swings in consumer attitudes.
The dip in confidence in July to 91 was a result of “the less optimistic outlook for the labor market, and perhaps the uncertainty and volatility in financial markets prompted by the (economic) situation in Greece and China,” according to The Conference Board.
Confidence and Employment
In a sense, the Consumer Confidence Index is a lagging indicator in response to several economic catalysts, among them the health of the U.S. jobs market, growth in wages, and the overall global political and financial climate.
Confidence tends to fluctuate more strongly than actual economic data. Table C graphs these economic catalysts.
More than any other indicator, consumer confidence tends to mirror the growth in personal income with the Consumer Confidence Index responding more sharply to economic downturns.
Employment bottomed out in 2010 at an index of 94.4—6 percent below 2007. (2007 = 100) Since then, the number of employed workers has increased by 8 percent and is currently at an index of 102.5. Personal Income stayed flat during the recession but quickly gained momentum after 2009 and has increased to 126.8 index, an increase of 26 percent.
Confidence and Personal Consumption
Consumer confidence is perhaps the prime external driver of consumer spending. Population and household formations form the base for growth in spending; however, consumer confidence drives demand, especially when it comes to durable goods. Table D shows the indexed growth of selected products.
New car sales follow a similar trajectory as consumer confidence with personal consumption dropping dramatically from 2007 to 2009, posting a decline of 29 percent, before climbing an average of 8 percent to a 2015 year-to-date index of 119.
Consumption of furniture and home furnishings followed a similar cycle. Home furnishings dropped 15.8 points in 2009, compared to 29 points for new cars. Home furnishings rebounded by 23 percent from 2009 to year-to-date 2015.
After peaking in 2008, the video and audio equipment industry experienced a slight downturn due to the recession but overall has been flat for the past eight years.
Confidence has a lesser impact on non-durable goods, like food and clothing, which tend to avoid the peaks and valleys of confidence swings more so than durable goods.
As shown in Table E, consumers may slow non-durable purchases but only significantly during periods of extremely low confidence.
Confidence and Housing
The other piece of the consumer spending pie is housing, especially new home sales. Economic conditions drive the homebuilding industry and once building slows, it takes a while for housing starts to catch up once the consumer starts to regain confidence.
New home sales plummeted alongside consumer confidence as the housing industry went bust during the Recession taking almost two years to bottom out after the confidence began to recover.
Table F shows a drop of 61 percent in new home sales from 2007 to 2011. As the confidence in the economy picked up, housing starts ignited and new home sales are now growing at a steady pace—posting gains of 68 percent from 2011 but still only reaching a 66.2 index in year-to-date 2015. Existing home sales also felt the effects of the drop in consumer confidence—declining to 74.1 index in 2010. Existing home sales were quicker to recover due to an already present housing inventory.
A high confidence level of 103 in September gives insight into the attitudes of consumers today.
Despite a volatile stock market and concerns about the stability of the global political and economic climate, consumer confidence continues to grow thanks primarily to an improving U.S. jobs market. The consumer is not easily scared, but once uneasiness sets in, consumer spending quickly becomes the victim.
November 13,
2015 by in Business Strategy, Industry
By Sheila Long O’Mara
Much like the comfort from a broken-in leather jacket or the warmth provided by favorite go-to leather boots, leather upholstery creates a welcoming, comfortable place to land.
There’s something timeless about a leather sofa or chair no matter the style family.
Leather upholstery sales for the first half of the year are at $2.77 billion. That’s 7.2 percent of the furniture industry’s overall sales, excluding mattresses. In 2014, leather sales totaled $5.37 billion. For the first half of 2014, leather upholstery sales were $2.63 billion.
In the latest Home Furnishings Business consumer survey, more than 100 consumers who recently shopped for and bought leather upholstery in the last year shared their insight on leather upholstery pricing and preferences.
By its nature, leather upholstery is one of the more technical categories furniture retailers sell. Varying leather grades, the plethora of bonded leather in the market, and the general wear and aging of leather can leave consumers’ minds spinning with questions.
Most consumers begin their shopping online before stepping into a store, and the Internet offers a ton of information—some good, some not so good. That leaves retail sales associates in the perfect position to help clear up any misconceptions.
To be able to do that, they require training that delves deep into product and then have the ability to answer questions with authority and set straight the myths consumers bring through the door with them.
Let’s start with the bonded leather term.
Consumers have no idea what that means or even what it is. Heck, many in the industry aren’t even sure what it is. Only 6.7 percent of our surveyed consumers said it bonded leather wasn’t real leather. More than half—53.3 percent— thought bonded leather was real leather processed to improve the performance of the leather. Another 40 percent said they had no idea what the term meant.
For the record, bonded leather is a covering made from fiber or paper, pulp from shredded leather scraps and a polyurethane coating. It’s not leather, but unfortunately some retailers still sell it as such. It’s a deceitful strategy that misleads consumers into believing they’re buying something that they aren’t.
The Price Struggle
Inside the industry, retailers and manufacturers tend to understand the craftsmanship and detail required for creating a quality, top-end leather sofa or chair. Consumers haven’t quite embraced that craftsmanship and may not yet be ready to pay for it.
When asked how much more they would be willing to pay for all-leather seating as opposed to a leather-vinyl or leather-fabric combination, only 21.4 percent said they would pay more than $200. Another 28.6 percent said they would pay $200 more, and 14.3 percent said they would be willing to stretch only $150 more. The same number—14.3 percent—said it wouldn’t be worth more than $100 upcharge for them.
Drilling down to those popular brass tacks, the majority of our surveyed consumers—57.1 percent— said they would pay between $1,000 and $1,999 for a good quality leather sofa. Another 17.9 percent breached the $2,000 mark. Twenty-five percent said they would pay between $300 and $999 for a quality leather sofa.
When we asked about leather chairs, all of the surveyed consumers said they would be willing to pay between $600 and $999 for an item. Looking at pricing for leather sectionals, consumers split 50-50 between willingness to pay between $600 and $999 and paying between $1,000 and $1,999.
Want More?
A more in-depth report on the leather upholstery business is available for purchase via e-mail to robin@furniturecore.com or by calling (404) 961-3734.
CALLOUTS
$2.77 Billion
2015 YTD leather sales
7.2%
Leather’s percent of industry sales through 2Q 2015
5.3%
Sales increase through first half of 2015 over same period last year
Suppliers Say
Bernhardt Interiors’ Kingston Chair
The Kingston from Bernhardt Interiors offers an updated take on the classic wing chair for a powerful design statement. The chair can be dressed in a variety of leather or fabric options spanning from very traditional to uber modern. Suggested retail is $2,700.
Craftmaster’s Paramour
A winning design in Craftmaster’s leather upholstery lineup for several years, the Paramour silhouette blurs the lines between transitional and traditional. Wrapped in a hand-wiped leather and crafted in a perfect scale, the sofa is at home in any environment. Retail is $1,499 in eight-way hand-tied seating with down blend coil cushions.
Port Royal by Flexsteel
Clean lines and classic tailoring are part of the DNA of Port Royal from Flexsteel. The versatile frame offers deep seating and is accented with an abundance of down-filled throw pillows. A track arm and base rail are lined with nail heads. The collection includes a sofa, sectional, love seat, chair and ottoman and a cocktail ottoman. Suggested retail for the sectional is $3,999.
Four Hands’ Maxx Swivel Chair
The Maxx Swivel Chair from Four Hands is a modernized interpretation of a classic library chair. Covered in distressed black top-grain leather and mounted on a swivel base of weather oak, Maxx sports comfort and function. Suggested retail is $1,595.
HTL International’s RS-10717
The HTL International’s spirit shines through in the RS-10717 motion sectional. Packed with function, the sectional features power motion with pillow-top arms, a curvy shape, and adjustable head rests. The frames sets atop tapered wood block legs. Suggested retail in leather-vinyl combination is $3,500 (leather/vinyl)
La-Z-Boy’s Rave
From La-Z-Boy’s Urban Attitudes collection, Rave’s consumer appeal is based on the need for comfort teamed with a on-trend, design statement. The sofa’s angled wood base, flared arm and a slight tufting create a retro feel. Suggested retail is $2,199.
Klaussner’s Roseboro
The Roseboro leather collection from Klaussner shows off decorative nail head trim along the accent wings, shaped track arms and banded front border. Three-over-three welted seat and back cushions fit perfectly inside the back wings. Accent fabric throw pillows pull the look together. Suggested retail is $2,399.
Natuzzi’s Dorian
Designed by Manzoni and Tapinassi, the Dorian sectional from Natuzzi is named for author Oscar Wilde’s Dorian Gray. Part of the Natuzzi Italia line, the sectional’s sophisticated design exudes luxury. Thick leathers and subtle memory foam team with down filling for comfort. Suggested retail is between $8,000 and $18,000 depending on leather grade.
NicolettiCalia’s Flamingo
Flamingo from NicolettiCalia offers a sleek design with a wide track arm bolstered by clean tailoring and stitching. The design sits atop angled stainless steel legs for a mid-century modern feel. The seat features memory foam for comfort. Suggested retail is $1,999.
Simon Li’s Camden
The Camden leather collection from Simon Li appeals to consumers seeking a dramatic combination of color, exquisite shape and luxurious comfort. Accent pillows and accent chairs add to the group’s appeal. Suggested retail for the sofa is between $1,199 and $1,599 depending on leather grade.
Vanguard Furniture’s Syms Swivel
Shown in Moorland Bayou leather, the Syms Swivel chair from Vanguard is available with optional box quilting on the outside arms and back. The chair’s classic shape works in a range of settings and offers a fluted wood. Syms is also available as a stationery chair with casters and can also be paired with the matching Syms ottoman. Retail starts at $3,315.
November 13,
2015 by in Business Strategy, Industry
Consumers regard furniture shopping in a variety of manners. The approach to furnishing their homes varies widely.
Like anything in this world, people come in all shapes and sizes, and of course, shopping preferences.
All consumers are not created equally; nor do they approach furniture shopping in the same manner. Impact Consulting Services, parent company of Home Furnishings Business, has created a proprietary model dubbed Lifestyle Clusters. The clusters provide furniture retailers a look at how consumers in different lifestyles tend to shop for their homes.
While psychographic profiles combine demographics of age and income with geo-demographic attributes, the Lifestyle Clusters add another layer. Lifestyle Clusters dig into the buying attitudes of specific consumers, the beliefs or expectations that cause consumers to choose products to buy.
The clusters are developed by giving consumers are list of statements that deal with internal attributes focused on consumers’ overall lifestyle, how consumers feel about the home, including concerns with decorating, how formal or informal a home is, and feelings about shopping for furniture.
The ratings are then tallied and the lifestyle profiles are assigned to the surveyed consumer.
Style Aware
These consumers are motivated by how things look. They read style magazines—fashion and home—and spend a good part of their leisure time shopping and surveying what is in the market place.
The consumers pride themselves on knowing the latest trends and want to be perceived as reflecting them. They have a heightened sense of style and are as comfortable with their decisions as they would be with those of a professional advisor.
If they do not have the income to allow purchasing as much as they would like, they will buy what they can afford and postpone further spending until they have the money to buy what they want. To this group, presentation is extremely important.
Frequently, but not always, consumers in this segment are among the population’s more affluent.
Here’s how to spot them:
· They have a sense of purpose and are at ease in furniture stores.
· They are stylish or trendy in appearance.
· They pay close attention to room vignettes and accessories.
· They may come in the store with fabric swatches, paint chips and pictures of rooms.
· They are well versed in furniture and interior design.
Prestige Seeker
Consumers in this cluster are often seen as status seekers. Image is all-important. Their fashion styling—whether clothing or home related—is a direct reflection on who they are, and they judge themselves by how others perceive them.
Prestige Seekers are not always the most confident about their sense of style and are often insecure about their ability to buy the right thing. It is not uncommon for them to seek advise from friends and professionals.
This group reads magazines, watches television programs and visits Internet sites with decorating and fashion advice. They are not trendsetters, rather trend adopters.
They are more likely than Style Awares to rely on a retail sales person for advice and to buy those items shown in a store display, whether it’s an outfit on a mannequin or a collection in a room vignette.
Here’s how to spot them:
· Stylish personal appearance
· They are less assured in their manner than Style Awares.
· They may carry fabric swatches, paint chips, pictures of rooms and rarely shop alone.
· They are very interested in store display, but more as a guide to purchase. This group studies vignettes for ideas and guidance.
Self Possessed
This consumer group reflects a sense of well-being and self-confidence, and members take great pride in their surroundings and their lives.
They have a high sense of style, but couple it with an adherence to the belief that function is as important as style. Members of the Self Possessed group tend to be are very creative, but it is a creativity that is intuitive. They gain as much personal satisfaction from the creative process as they do from the object produced.
Regarding the home, these consumers want beauty, but not at the expense of function and comfort.
Here’s how to spot them:
· These consumers may travel quickly through stores’ room displays editing in their mind.
· They may be dressed stylishly offbeat or stylishly upbeat or in a casual manner.
· Like Style Awares, these consumers are confident and at ease in furniture stores.
Follower
This consumer is a paradox. On one hand, we see a consumer who is somewhat disorganized in their daily habits. Members of this group tend to be forgetful, don’t adhere to schedules, and often are doubtful of personal choices.
In the area of home furnishings, they don’t enjoy shopping, care nothing for decorating, and think furniture is only functional. On the other hand, they would like to have a nice house, not necessarily a beautiful, wonderfully decorated one, but a tidy house.
Followers will use a decorator or the advice of a friend since they lack confidence in their choices.
Here’s how to spot them:
· They want a well-decorated home, but are often intimidated in furniture stores.
· Followers may enter a store and wander around aimlessly.
· Store displays are important, but this consumer often has the feeling that it’s too big of a job to handle.
· Lack of confidence is evident in the consumer’s body language—hurried, tentative and indecisive. They are a bit anxious in furniture stores.
· Reluctant to make a purchase without advice so they are often accompanied by a spouse, other family member or friend.
Just Me
Armed with a what-you-see-is-what-you-get attitude, the Just Me consumer doesn’t feel it’s necessary to present an image. They are polar opposite of Prestige Seekers.
They don’t spend their free time on things that don’t interest them, and this approach extends to their homes. They have no interest in the style and fashion of furniture. Furniture is purely functional, and they make no apologies for this sentiment.
Shopping for furniture can be an intimidating experience, and they rely heavily on retail sales associates for advice.
Here’s how to spot them:
· They probably will be dressed casually. Remember, they have no need to impress.
· They have little interest in furniture and will likely find shopping for it intimidating.
· Because of the discomfort, this customer will appear in a hurry on the sales floor.
· Keep in mind, furniture shopping can be uncomfortable for this group that is usually very confident about his/her self image and ideas.
Comfort Seeker
Family, friends, social gatherings and home crafts are at the center of these consumers’ lifestyle. Comfort is more important than style or status, and they are content with the lifestyle they have.
Even though they do not derive status from their home, they feel confident about making furniture purchases and find shopping enjoyable. Furniture, however, is primarily functional rather than fashionable.
How to spot them:
· The Comfort Seeker will most likely be dressed comfortably and possibly informally.
· Furniture shopping is not a chore for this consumer. He or she will take time to wander a retail floor.
· This consumer is influenced by store display.
· Expect a relatively laid back approach to the purchase. This is the group that will likely shop the longest for their purchase.
November 13,
2015 by in Business Strategy, Industry
Has the disappearance of furniture brands left consumers confused when shopping for home furnishings?
by Bob George
From the perspective of my age viewing the current environment requires differentiating between nostalgia for the good old days and the current consumer trends. With that said, it is true that the simple decision regarding what to wear is a challenge.
Is it appropriate or will I be overdressed? A suit or a sport coat? Is anything OK as long as it portrays your personal brand? Clothing is only one of the traditional ways people portray their success, whether it be wealth or position in the community. One’s home, home furnishings, and transportation mode also communicate one’s position in society.
Our interest, however, is home furnishings. The first question is “When portraying one’s position in the community, where does home furnishings stand?”
In this month’s cover story, we discuss Style Aware consumers. These are consumers who use home furnishings as an important way of communicating who they are. Interestingly, they represent a significant percentage of our furniture purchasers at 44.75 percent.
Why are consumers confused?
Could it be because of the loss of consumer brands? This is a loss that is seen not only in the premium brands of Kittinger and Pennsylvania House, but also in what was once considered the more middle market of Cochrane and Virginia House. It is true that there are still brands that survived, for instance Harden and Stickley. I admire their commitment to the standards of quality and design even if they existed today. Where are retailers that prominently display and communicate the value that these premium brands represent?
Is it in the designs we produce that we have embraced the concept of the eclectic or transitional to the point that the consumer feels no need to ask what’s new? Home decorating television and shelter magazines are promoting the concept of treasure hunts as the way to shop for furniture even so far as collecting discards on the sidewalk. In this setting what is the future and where are the manufacturers’ brand advertising?
Is it the myopic focus on price? I won’t rant and rave on current prices of furniture when compared to other consumer products. If requested, I will send the Consumer Price Index for furniture compared to other consumer durables. However, why do we need to sell price? Trust me, the majority of consumers, if properly informed, will not let price be the No. 1 purchase factor.
Are there signs that the consumer will believe having the latest phone is not as important as what their guests see when they walk through the front door? Yes, I believe so; right after they get over the boom in the automobile sector.
Most important, however, is the most recent High Point Market with Thomasville producing the first 100-plus piece introduction in many years overcoming what I am sure were serious concerns of the supply chain guys. Another example is the new interpretation of traditional with A.R.T. Furniture’s Continental collection. It is cleaner with some exciting finishes. This, along with flashes of design in other lines, indicated the tendency to take the path of risk instead of the same old same old.
If the consumer is confused, it is our fault. I see advertising from across the country. The sameness of this advertising is frightening. If you can, find on YouTube the video message the CEO of Restoration Hardware sent to shareholders. E-mail me and I will send this to you. We should consider this as we reflect on the fact that traditional furniture channels’ market share is now below 40 percent.
Let’s excite the consumer.
November 13,
2015 by in Business Strategy, Industry
Disasters bring into focus the importance of home, friends and kindness.
by Sheila Long O’mara
Home. Just saying the word conjures up all sorts of connotations for people.
No matter if home is a one bedroom, basement apartment or a $5 million home on the perfect ocean-front lot, home is, well, were the proverbial heart is.
During the time since we published the last issue of Home Furnishings Business, my adopted home of Columbia, S.C., has had some troubles.
We found our way into the national weather spotlight the first weekend of October—the same weekend Hurricane Joaquin trailed off the eastern shoreline of the Carolinas. The tropical weather from the hurricane teamed up with a wicked non-tropical system to serve up a heavy dose of rain on our already saturated ground.
The 18 inches of rain that fell in 24 hours followed on the heels of nearly two weeks of straight rain. Columbia seemed like ground zero. The rains fell, and dams in the area were breached or gave way, sending waves of water into homes and stores and wiping out bridges and roads. Seventeen people died as a result of the flood or weather-related automobile accidents.
The O’Mara home was safe and dry, but as is the case in many weather disasters, those with the least to lose lost the most during the historic flood.
Schools were closed for a week, and then delayed for two additional weeks while bus routes were redrawn and schools used as shelters for those displaced.
The three youngest O’Maras, possibly bored from hanging out at home or perhaps, out of the goodness of their hearts, started asking what now. Loaded with water, work gloves and boots, we headed out. We weren’t sure where we were going only that we needed to go do something.
I learned that in such times of need, it doesn’t take long to find someone, somewhere that could use a helping hand. For us, it was neighborhood that had been underwater. With the water receded, demoliton was underway. My guys are really good at tearing up stuff, so a rainy day ripping out soggy sheetrock was pitch perfect. Stories were swapped about the rain, the flood and the kindness of strangers from all over and what happens next.
The next is well underway here as families continue to rebuild and recover from the damage and loss. Organizations throughout the state continue to provide much needed supplies and assistance to those in need.
Looking to help? The American Red Cross is a great organization in such disasters.
On a completely unrelated but much happier note —Amy Kyle, the former publisher and my co-founder of this magazine, had a celebration of monumental proportions Oct. 3. Her daughter Sidney Sikes, now Sidney Sikes Wolfe, married her high school sweetheart, Gray Wolfe, in the most perfect of ceremonies in Trinity, N.C.
Congratulations and best wishes for a beautiful life together!