Monthly Issue
From Home Furnishing Business
July 15,
2015 by in Business Strategy, Industry 
The furniture industry is bouncing back from the Great Recession, however, furniture still faces stiff competition from other consumer expenditures.
The battle for the almighty consumer dollar is on, and the competition comes from a variety of places where people are choosing to spend their hard-earned money.
While the furniture industry has made great strides to recover from the Great Recession, consumers are spending an increasing amount of money on Consumer services and “lifestyle expenditures”— leaving fewer dollars for furniture and other durable and non-durable goods.
The largest services expenditure, housing, has steadily increased over the last 15 years and shows no signs of slowing. Housing is followed by healthcare, food services and accommodations, and recreation. Although consumers have these growing demands on their money, furniture is fighting back from the recession to regain share being taken by other durable home furnishings products like major appliances and televisions that have outperformed the furniture industry in past years.
Consumer Services vs. Goods
Consumer demand for services, primarily housing expenses and utilities along with healthcare, have increased their share of personal consumption expenditures over the last 15 years. During that time furniture, within the durable goods category, has decreased. Table A shows the shifting of goods and services from 2000 to the first quarter of 2015.
Services added 3.7 percent to its share of personal consumption, while durable goods, including home furnishings, motor vehicles, appliances and televisions, fell 2.5 percentage points. Non-durable goods, like food and clothing, as a group also lost 1.7 percentage points.
Rising Costs
As shown in Table B, money spent on housing, including rent, utilities and other vendor, has risen at a rapid pace since 2000—up 85.6 percent in the first quarter of 2015 while consumption of furniture rose 33.3 percent.
Unlike furniture, which felt the impact of the recession with an 11 percent drop in 2009, housing services expenditures only slowed its upward momentum. On a positive note, furniture has climbed 20 percent since the peak of the recession, while housing increased 18 percent.
In addition to housing, personal consumption of healthcare did not decrease due to a poor economy. Consumers were faced with increasing costs of housing and healthcare on smaller budgets. As the economy recovers and budgets increase, sales of home furnishing products are rising along with consumer services expenditures.
Table C shows the rise of consumer services expenditures from 2000 through the first quarter of 2015. Like housing, healthcare expenditures have grown exponentially—increasing 126 percent in 15 years. Although dropping slightly in 2009, money spent on food services and accommodations and recreation increased by 93 percent and 77 percent. Consumers decreased spending on transportation during the recession by 7 percent, but have grown 21 percent since 2009.
Consumer Home Furnishing Products
In addition to the rise of consumer dollars going to services, the furniture industry has also faced major competition from other home furnishings products.
Table D details the furniture industry’s growth in share of the three major home furnishings product categories—furniture, major household appliances, and televisions. Furniture has lost share over the last 15 years, only slightly to major appliances, but sharply to the rapid innovation in televisions.
Furniture and bedding continues to claim the largest share of the three home furnishings product categories at 56.2 percent but has lost six market share points, primarily to televisions. Since 2000, total personal consumption of furniture products has grown 33 percent at an annual rate through the first quarter of 2015 to $99.5 billion, just above the growth rate of appliances.
Appliances have also lost market share slightly to televisions, falling from 24.8 percent to 22.3 percent between 2000 and the first quarter of 2015. In terms of growth, the $39.4 billion major appliance industry has the lowest rate of the three home furnishings categories at 32 percent.
The innovation in Ttelevisions has been the major home furnishings consumer expenditure story early on, growing from 13.1 percent of the home furnishings category to 21.5 percent over the 15-year period.
The television segment has more than doubled since 2000, growing 141 percent. However, as Table E shows, most of that growth occurred before and during the recession. Since the recession, the furntiure industry has outperformed both televisions and appliances, growing 20 percent since 2009 compared to 9 percent for appliances and 4 percent for televisions.
If the housing market continues to improve and the economy does not falter, furniture should regain some of its momentum against other competing consumer products.
Methodology
Personal Consumption Expenditures (PCE) is the primary measure of consumer spending on goods and services in the U.S. economy. The data is compiled by the Bureau of Economic Analysis, a division of the U.S. Department of Commerce.
PCE is classified by type of product as follows. Goods are tangible commodities that can be stored or inventoried. Durable goods are goods that have an average useful life of at least 3 years. Nondurable goods are goods that have an average useful life of less than 3 years. Services are commodities that cannot be stored or inventoried and that are usually consumed at the place and time of purchase.
Furniture sales in the PCE include sales tax and sales to non-profit institutions.
July 15,
2015 by in Business Strategy, Industry
We recognize the young talent throughout the furniture industry with Forty Under 40.
By Sheila Long O'mara
Ahhhh, The Joys of youth. To have all of the energy and excitement.
The furniture industry is filled with a great collection of energetic folks who are all bright-eyed and eager to tackle the world.
Youngers are filled with exuberance, and that energy offers them the ability to tackle nearly any challenge. Often, people hear exuberance and youth in the same sentence and think carefree and wild. However, the word exuberance comes from exuberant, which means to be very energetic with enthusiasm.
The furniture industry has an abundance of exuberant youth who have taken hold in the business and done great things. That said, we’re honored to celebrate our 2015 slate of Forty Under 40 in this issue.
The list’s foundation was created through industry nominations accepted over the last few months, and the nominations rolled in from across the industry. This year’s list, unlike the one we did in 2013, features retailers AND industry vendors. Both segments offer the furniture business a wealth of talent in a variety of positions including marketing, operations, retail management, presidents and a number of vice presidents.
Members on the list include folks from family businesses as well as those who have jumped into the business having no family ties at all.
The furniture industry is much better and boasts a bright future because each of them is an integral part of the fiber of this great big family.
Our slate is filled with creative, intuitive and downright business savvy individuals who are shaping the furniture industry. They continue to push themselves, encourage their co-workers and push the envelope to move the furniture business forward.
This year’s under-40 set has taken the industry by storm in each of their positions, and I’m certain there will be many innovations to come from the 2015 class of Forty Under 40.
The industry needs to continue listening and learning from these innovators who push the boundaries in search of new ways to conduct business. We need to continue to nurture and mentor them so that they OWN this business when all of us more-seasoned executives have moved to the beach to retire.
Enjoy the list!
July 15,
2015 by in Business Strategy, Industry
The magic tool for hanging onto shopper’s loyalty is available.
By Bob George
It would be wonderful if we could read the consumer’s mind. However, since this ability remains in the world of the supernatural, we are forced to take another approach.
Whether it is industry meetings or one of our performance groups, a key discussion is how to stem the erosion of furniture retailing to alternative distribution channels.
In previous issues we have documented the erosion by distribution channel (May 2015) and by product by distribution channel (June 2015). Now the quandary becomes figuring out what traditional furniture retailers can do about it.
Discussions of what to do often turn to the latest finance offer. No interest and no payment for an ever-increasing time frame. All of this only impacts an ever-decreasing bottom line by 3 percent to 4 percent. Next come the Rubik’s Cube of pricing—50 percent off with an additional 10 percent off if it’s Tuesday, etc., etc., etc. All of these are decreasing the gross margin at the top of the income statement while at the same time causing mistrust with the consumer.
It would be wonderful if we could read the consumer’s mind. However, since this ability remains in the world of the supernatural, we are forced to take another approach, a much easier approach—the consumer survey. We asked a national sample of consumers who had recently purchased furniture to specify the things that were most important to them when buying furniture. Our findings are shown in the accompanying graphic.
We might have expected low prices to be the predominant purchase driver. However, this was not true. It falls in second position with 14.7 percent of consumers choosing low price as the most important factor to them. However, the expectation mentioned most often at 15.9 percent is that the furniture store would provide a good product selection. If we combine this percentage with the 11.3 percent of consumers indicating a desire to see a wide selection of styles and prices, we appreciate the high degree of importance the consumer places on the product selection offered.
The third most important offering a furniture retailer can provide consumers is free delivery, which is cited by 14.5 percent. This is a factor we frequently want to ignore. However, the consumer has spoken on that issue, and he or she expects the furniture to be delivered.
As you consider this data, take a look at the other distribution channels and see how they are responding to consumers. It could be eye-opening. If you would like the next 10 things the consumer wants from retailers, drop me an e-mail, and I’ll send you those.
July 14,
2015 by in Business Strategy, Industry
Home Furnishings Business unveils the stars of the Forty Under 40 in the furniture industry.
There are youngsters among us in the market crowds, but often they’re hard to find.
Welcome to Home Furnishings Business’ second Forty Under 40 list of industry movers and shakers who are making noise and leaving some large footprints in some great operations throughout the business sector
The slate of nominees, chosen by their peers in furniture land, share a similar skill set built of leadership, determination, creativity, tenacity and great work ethic. Their youth fills them with great ideas of how to tackle industry-old problems, and those strategies are being implemented every day in retail operations across the landscape.
We applaud their tenacity in convincing an older generation to look at the industry in new ways and adapting to new tools for a brighter tomorrow.
The toolbox looks quite a bit different than the ones available 40 years ago.
A few interesting tidbits as we were putting the final touches on the list.
Our Forty Under 40 varies from generational businesses to brand new companies. Manufacturers, suppliers and retailers round out our list this year, and all of those named carry with them a passion for the business and what the future holds for each of them and their respective companies.
Men still outnumber women on the list. We’re not pointing fingers; only making an observation.
Enjoy the list, enjoy the profiles and by all means, nominate someone next year. We all stay young when surrounded by smart, hard-working youth, and we can surely use more bright ideas.
July 14,
2015 by in Business Strategy, Industry
By Sheila Long O’Mara
Whether many parents want to admit it or not, those pint-sized beings are quite vocal with their opinions on their room décor.
In Home Furnishings Business’ latest consumer survey, more than half—52.2 percent—of children were either moderately or extremely influential in the furniture purchases for their bedrooms. They wield a bit of power over their own domain; however, that power was zapped a bit from last year’s survey when 58.8 percent of parents said kids were moderately or extremely influential in the decision-making process.
The window of opportunity to capture families in the youth market is wide open between birth and 13 years old. After that, the window closes because the kids have outgrown a train or pink and purple flower room, and parents have likely moved over into adult bedroom for those rooms. More than 80 percent of the youth furniture purchases were made by the time a child is 13, according to our latest consumer survey.
According to data from Home Furnishings Business' owner FurnitureCore, the sales growth in youth bedroom has been outpacing adult bedroom for the last several years. Sales in youth bedroom grew 2.4 percent from 2013 to 20124, the latest full-year figures available. Adult bedroom grew 1.9 percent during the same period. In fact, when we examine total industry sales across all categories for 2014, which total $74.78 billion, excluding bedding, and grew 2.5 percent, the youth category is keeping pace with the industry’s growth.
Looking back farther to the change between 2012 and 2013, youth sales grew 1.8 percent compared to 1.2 percent for adult bedroom.
Total youth bedroom sales for 2014 were $2.75 billion. For the first quarter of this year, the category's sales were $710 million. Comparing the first quarter of 2014 to the first quarter of 2015, sales of youth furniture grew 7.3 percent.
Youth bedroom accounts for 3.7 percent of the furniture industry’s overall sales, excluding mattresses.
The increased sales figures are being bolstered primarily by the purchase of traditional goods. Slightly more than 57 percent (57.1 percent) of the surveyed consumers bought traditional furniture for their children’s rooms this year. That’s a significant drop from last year when 70.6 percent bought traditional furniture.
The traditional styles are losing ground to contemporary styles. This year, 28.6 percent of those surveyed classified their youth furniture purchase as contemporary. Last year, that figure was at 11.8 percent.
Pricing of youth furniture can be a stickler for consumers.
Nearly 67 percent said they expect a room of youth furniture to cost $700 or less. Only 19 percent said it should cost between $1,001 and $1,500, and another 9.5 percent bumped the cost up to between $1,501 and $2,000.
Those pricing expectations seem to be at odds with the consumers’ purchases and their perception of how long the product will last and its use.
Almost 43 percent (42.9 percent) said they bought the furniture for their child’s room with the idea that it could be used for the child’s first apartment or home. Another 33 percent said they hoped the furniture could be used in a spare bedroom in the future.
Most of the surveyed consumers—76.2 percent—also said they furnished their child’s room with stylish, good quality furniture.
What Suppliers Say
Bolton Furniture’s Cambridge Collection
Classic Louis Philippe design gives the group its winning appeal. Available in white and chestnut finishes, two bed styles are available in twin and full and a third style is also available in a bunk option. All beds work with the company’s under bed storage or accessory units. Suggested retail for a four-piece set starts at $1,599.
Legacy Classic Kids’ Avalon bed from Inspirations by Wendy Bellissimo
The Inspirations collection offers sophisticated styling that allows the furniture to fit many settings as needs change. Grey tones in home fashion continue to perform well. The Morning Mist grey finish of the collection brings the color into the youth market. Suggested retail of $599 for a twin bed.
Magnussen Home’s Crayola Colors Collection
Design details in the collection include signature tapered bent drawer fronts with the option to change front panels with the six Crayola colors accenting the white. The furniture grows with the child by removing the color panels leaving a chic white transitional group. Unique pieces include an art table, lighted island bed and lounge bed. Suggested retail for a twin bed is $599; dresser, $599; and a night stand, $299.
Samuel Lawrence Furniture’s Expedition Bunk
The bed is beautiful, durable and adaptable with its timeless style and finish. The design allows for multiple configuration of bed sizes and is available with and without storage options to fit every child’s needs. The bunk also separates into free-standing. Suggested retail is $999.
Universal Furniture’s Smartstuff Paula Deen Guys Bunk Beds
The beds feature classic styling and is available in twin over twin, full over full and twin over full and converts into two beds. Offering several Smartstuff features including the “nightstand-in-the-sky” and a 17 percent wider ladder with grooves for greater traction, the bunk bed is available with under bed storage options. Suggested retail is $1,099.
Walker Edison’s Bunk Beds
Walker Edison bunks are designed to adjust as families grow by providing versatility of two traditional beds that can be separated, space underneath for a futon and more options. Ready-to-assemble construction allows for home delivery via express carrier.
Ashley Furniture’s Zayley Storage Bed
Lateral storage accommodates the diversity in size and shape kids’ rooms. The extra storage and daybed feature allow youth to lounge with a book, computer and friends while offering additional storage space. Color options behind the circle motif are interchangeable. Suggested retail is $799.
What Retailers Say
Bolton Furniture’s Windsor bed
“The classic styling works for boys or girls, and the bed is made of all-wood construction with a full slat roll. The bed and coordinating pieces come in five finishes. Great bed for the money.” Retail is $398.
Bill Abrams
Allen Wayside Furniture
Portsmouth, N.H.