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.
April 16,
2015 by in Business Strategy, Industry
Stanley Furniture is jumping back into the youth and nursery furniture category at this month’s High Point Market with the introduction of Stone & Leigh. The company shuttered its iconic domestically produced Young America brand last April because the model was no longer profitable. Now, Stone & Leigh will follow the Stanley’s current business model as a design, sourcing and marketing house. Glenn Prillaman, president and CEO of Stanley Furniture, took time to discuss the company’s new strategy for youth.
Home Furnishings Business: What is the name of the new youth division, and how did you come up with moniker?
Glenn Prillaman: Stanley is a design, sourcing and marketing company with plans for growth through a diversified product line. The flexibility of our operations model allows Stanley to bring exciting new products to market each year. Our new nursery and youth product line, Stone & Leigh, is our newest introduction. The new brand’s name speaks literally to its connection to the Stanley brand’s authentic identity. The brand narrative offers a storybook tale of a young boy and girl who live in an imaginative house in a small pastoral town and experience the wonder of nature and exploration. The children’s names each share a piece of our company's American heritage and authenticity as a proud manufacturer of quality furniture
Our founder, Thomas B. Stanley, was a farmer turned industrialist who later became the Governor of the Commonwealth of Virginia. In 1957, as part of Her Royal Visit to America to celebrate the 350th anniversary of the landing at Jamestown, he hosted England’s Queen Elizabeth at his home in a storybook occasion all unto itself. Stoneleigh is the name of the Stanley family home located in the town named for the family. Stanleytown, Va., is also where Stanley Furniture was founded in 1924. The Stone & Leigh brand is both authentic to the heritage of our company, and a whimsically imaginative journey we look forward to taking with boys and girls around the world.
HFB: Share with us the strategy in shuttering Young America a year ago and then relaunching the youth category this year.
Prillaman: For several years after the housing crash of the late 2000s, Stanley did everything possible to profitably operate a domestic manufacturing platform supporting an upscale case goods product line that was distributed through smaller independent brick-and-mortar retailers. Ultimately, production of the Young America brand had to be discontinued as profitability could not be reached within a reasonable amount of time. The Young America product line had been designed to capitalize on the competitive advantages of domestic manufacturing. A multiplicity of finishes, unparalleled product safety assurances and the cache of a product Made in the U.S.A. insulated the brand’s marketing narrative from copycat import brands. The product could not simply be transferred as is to a source in a foreign country without retail interruption. So rather than an abrupt halt to service, we executed a carefully orchestrated shutdown of the product line and the supporting domestic factory.
This helped Stanley’s retail customers with an orderly closure to the relationship the brand had created between them and so many consumers after decades of operation and more than $1 billion of sales in the nursery and youth business. This effort required a tremendous focus from our management team.
When all was said and done with Young America we continued to have customers tell us no competitor had filled the void we left in the marketplace, we felt confident in our ability to source a new product line designed around the competitive advantages of our company’s overseas operational model and marketing expertise.
HFB: How will this youth product differ from Young America?
Prillaman: I answer to some extent above when I say that Young America was designed around the competitive advantages of domestic manufacturing, while Stone & Leigh is designed around Stanley’s business model as a flexible design, sourcing and marketing company. From product design, to branding and marketing, to logistics, the business model moving forward is quite different. What will not change is our company’s commitment to design leadership, superior product safety and quality and dependable service. We expect our customers to always expect these efforts to be well executed at Stanley.
HFB: How broad is the premier introduction and what do the price points look like?
Prillaman: The Stone & Leigh brand introduces both nursery and youth product. There are five original designs for each of the two product categories and multiple finishes featured with each design. The feedback we have received from the retail partners who have already committed to the product tell us that we have developed a product of exceptional value.
HFB: What sort of projections do you have for Stanley in this category?
Prillaman: It would be irresponsible of me to attempt to project sales for any new product introduction. What I can share is that Young America was generating $40 million in annual revenues when we discontinued the product line. Stone & Leigh has been specifically developed and designed for today’s nursery and youth market. The values are evident when you see the product and you come in contact with the new brand. We believe the birth of our newest brand represents a significant opportunity for growth not just for Stanley, but also for our retail partners who intend to attract a younger, affluent, female consumer into their stores.
April 16,
2015 by in Furniture Retailing, Industry
By: Sheila Long O'Mara
Area rugs can give bare floors a quick and easy makeover, and they can also be a great anchor for a well-designed living space.
In today’s home furnishings world, a great selection of rugs give retail sales associates a better opportunity for add-on sales. According to the most recent Home Furnishings Business survey of consumers, that’s just how people shop for area rug—first, they buy new furniture; then, they buy the rug.
Nearly 75 percent of the 157 consumers participating in the survey said they chose their furniture first. Each of the consumers had bought a rug within the last 18 months. Another 17 percent said they reversed the purchases and bought the rug first. The other 8 percent bought furniture and the rug at the same time.
Perhaps the most concerning part of the survey for furniture stores is that consumers are bypassing the traditional furniture retailers when buying rugs and turning their attention and money to mass merchants like Walmart and Target.
Thirty-four percent of those surveyed made their most recent rug purchase at a mass merchant. Another 23.3 percent opted to buy from the nearby home improvement center—Lowe’s or Home Depot, for example. Even the Internet wooed a higher percentage of rug buyers at 13.8 percent compared to traditional furniture stores where only 11.3 percent of surveyed consumers recently bought their new rug.
When asked where they shopped for their rugs prior to purchasing, 16 percent said they’d looked for rugs at a traditional furniture store. The mass merchants garnered 29.7 percent of consumers shopping for their purchase, and the home improvement stores were cited by 20.5 percent of rug consumers.
Price sensitivity could have driven many consumers into non-traditional furniture channels for their purchase.
More than 42 percent said they spent between $100 and $399 for their most recent rug purchase. Another 35.2 percent reported they spent less than $100 for their rug. Another 12 percent spent between $400 and $799.
In Style
Consumers in our survey seemed clustered around a few trends. Neutral colors—beige, white, black, for example—were bought nearly six times as more frequently than other colors with 66 percent opting for neutral hues. On-trend blues, one of the more popular colors in home furnishings, came in a distant second at 11.3 percent, and greens followed at 10.7 percent.
A myriad of designs and patterns exist in rugs, but the largest segment of our consumer group, 29.6 percent, opted for solid rugs. Geometric designs followed at a distant second with 18.9 percent buying those patterns. Floral designs at 15.1 percent and traditional prints at 12.6 percent followed in third and fourth places.
Want More?
A more in-depth report on the rug category is available for purchase by calling Natalia Hurd at (404) 390-1535 or via e-mail at NataliaHurd@ImpactConsultingServices.com
Callouts
5.7%
Percentage of 2014 industry sales attributed to rugs
$4.99 Billion
2014 rug sales
3.6%
2014 sales growth for rugs
What Retailers Say
“This rug is a winner because it’s gradient color design is stylish while still being very versatile. The color way includes grays, blues and creams, which are very on trend. Because it does not include bold pattern, it can be paired with many different types of furniture and prints. And above all, because of its shag construction it’s very soft and comfortable underfoot.” Retail is $299.99 for an 8’x10’.
Heather Hele
Jerome’s Furniture
San Diego
What Suppliers Say
Kasbah Star by Capel Rugs
Kasbah is hand-knotted in India and is crafted with Lincoln wool. “It has a great hand with texture being oh so important in decorating these days,” said Cameron Capel, vice president with Capel. “It also features the Moroccan look and an aged, antiqued look, which many people enjoy.” Suggested retail is $2,559 for an 8’x11’.
Calvin Klein’s Prairie Arctic from Nourison
The Prairie Arctic rug features special cowhides with contrasting hues and alternating hair direction to add to the design and sophistication of the unique collection, said Kimberly Weling, social media specialist with Nourison. Shifting bands offer speckled silvers on a pale ground. Suggested retail is $6,998 for an 8’x10’.
Anastasia from Loloi
Anastasia has become a fan favorite, giving the appearance of being a fine rug made by hand, but offering ornate character that is also easy to care for. The intricate detail, luster of colors and unbeatable price point have establish the popularity of this collection among rug owners. Suggested retail is $629 for a 5’x8’.
Melody by Surya
Hand-tufted in 100 percent wool, Surya’s Melody offers a medium pile and a subtle hint of color. The geometric pattern gives the rug a welcoming vibe. Suggested retail is $379 for a 5’x7’6”.
Sheffield Stripe from Company C
The combination of texture and on-trend blue give Sheffield stripe an easy design that can coordinate with multiple shades and neutrals. The molting in the yarns, a high-low texture and the tie-dyed yarns give the rug visual and textural interest.
Revival by Oriental Weavers
The Revival collection interprets the over-dyed look that is currently on trend in the marketplace, said Nicki Rayburn, director of marketing for Oriental Weavers. “The collection has a vintage Persian styling but in brighter, more modern colors and anchored in the popular neutral gray,” she said. Suggested retail is $199 for a 5’x8’.
March 24,
2015 by in Furniture Retailing, Industry
By: Lee Brown
One of the major challenges facing retailers and suppliers in the retail sector is the number of storefronts that are necessary to effectively serve a trading area.
Historically furniture retailers chose a compelling location and built a substantial building that could be converted to other uses. Once the building was complete and merchandised just so, the retailers would host a grand opening event.
In other words, build it and they will come. Many retailers took this concept and attracted consumers from one to two hours away.
Today, however, the dynamic has changed.
Time-starved consumers are not willing to spend the day on a shopping excursion for furniture. For most, 20 miles in a mid-sized market is pushing the travel limit. Recent research for a $400 million total market is shown in the accompanying pie chart.
Compounding this trend is the consumer expectation that the store be located within a major shopping area. Doing so means shopping for new furniture or bedding can be included on the Saturday shopping excursion for flea collars at PetSmart and groceries at the market on the return trip from the soccer field.
The importance of the traditional real estate strategy is disappearing and is being replaced by leases. We can have a good debate about the pros and cons of the strategy. The situation, however, is that the 100,000-square-foot furniture store is shrinking to 50,000 square feet because where one store was at one time acceptable, now four stores are required 10 to 15 miles apart depending on traffic patterns and congestion drivers face.
The density of bedding stores is even greater. These stores require 5 to 10 miles apart since 70 percent of purchases are conducted within that distance. Remember, the consumer does not have time.
“Two exits back I saw a sign on the freeway about a store. Let’s go back to see what they have.” With the Starbucks effect of a shop on every corner, what are the changes to the business model and, more important, what are the skill-set changes needed to manage the merchandising selection?
Now, what about the manufacturers who, in many cases, have become suppliers without strong consumer brand awareness? Without a doubt, the product line breadth will support multiple retailers within the market.
For most suppliers, the consumer who does not have brand preference will visit 2.2 stores before buying and this is after having done extensive research on the Internet. The supplier wants to be certain their product is presented to the consumer. Unlike the consumer searching for a cup of coffee, more storefront choices may not be better.
Based upon our research, an optimum number of doors per market exists. Our measurement of market penetration compared the number of doors or every 1,000 households. We found a point that maximized the manufacturer’s market share. In fact, we discovered that, after a certain point, there was a decline in sales. The following graphic illustrates for bedding stores in a middle-size market.
Why the decline? We believe oversaturation leads to a consumer perception that, “Everybody will have it.” It is important to understand consumers still want to be unique within a comfortable range of style.
There is also a practical reason for the sales decline. Retail sales associates hesitate to push a product if a competing retailer has the brand even if they don’t offer the same product.
The solution would be for retailers and manufacturers to work as partners in order to find the sweet spot of distribution and maximize the market’s potential.
March 24,
2015 by in Furniture Retailing, Industry
By: Janice Summers
Look back through time in the home furnishings industry, and you’ll see that in the 1980s the manufacturers sales representative was a force to be reckoned with.
Manufacturers knew it the secret sauce in hiring the best of the best when it came to sales representatives, and chose their reps like football franchises choose key players. They were superstars.
That began to change a few years ago. Sales territories got bigger, and sales teams shrank. Some companies, like Thomasville in 2007, even eliminated their sales forces altogether.
“Whether they will stay or go has been controversial for years,” said Randy Spak, vice president of sales for American Furniture Manufacturing. “At one point it looked like they’d be going away. We choose to have reps on all our accounts. The relationships they have are very valuable in our eyes. In many cases they are a tiebreaker when companies are competing. I even heard of one case where sales volume dropped by half when a certain rep stopped handling the account. That’s a big risk for a company.”
The role of a sales representative has never been easy, and in today’s climate of vertical retailing, offshore manufacturing and retail consolidation, the job has gotten more challenging. Being the liaison between vendor and retailer can put even the best of salespersons in a precarious position.
Today’s retailing environment requires sales representatives to wear a number of hats—marketing consultant, trainer, inventory control manager, customer service agent and more.
Matt Keepers has been an independent sales representative for 13 years and has seen the role evolve during that time.
“We are constantly finding ways to reinvent ourselves,” he said. “In the beginning, a rep’s sole purpose was to sell merchandise. It was still like that when I started.”
Today, most manufacturers have computerized systems requiring sales representatives to update them with accurate information. The systems offer real-time projections on what products are selling.
“It’s time-consuming,” said Keepers, who is the current president of the International Home Furnishings Representatives Association (IHFRA). “We have to analyze our business by product. Many manufacturers have 2,500 or more products. Having up-to-the minute information is crucial, because domestic manufacturers might have inventory that’s 30 to 60 days out, but importers can have a 4-to-6-month lead time. Sales reps will have a purpose as long as we have value, and providing information to the retailer is a huge part of that value.”
Number crunching aside, Keepers recognizes the most important place to be is in front of the customer.
“I work with my customers face to face during the day and do my computer work in the evening,” he said.
Keepers feels that independent representatives still build crucial relationships between manufacturers and retailers¾offering product training, advising about things that are not working, and answering specific questions that aren’t apparent either in the catalog or by looking at the product.
“The distribution network hasn’t changed all that much,” said Keepers. “Some major customers tried to go direct to overseas suppliers but found it’s difficult. There’s no sales force, no cataloging, no parts. It’s a big challenge to source straight from China. Most international companies don’t have warehouse space here, so they sell by the full container. The largest retailers might be able to handle it, but it’s hard for most retailers to take 100 of anything. That, and other manufacturing constraints overseas restrict retailers from going direct.”
Historically, most representatives are independent and may represent several companies. Companies may have as few as three reps or as many as a hundred for the larger companies. Sometimes they are salaried and sometimes commissioned.
There might be fewer of them, working longer hours and bigger territories in a role that has shifted, but IHFRA has more than 2,000 members in the U.S. and Canada.
“We must look out for our manufacturers and customers, not ourselves,” Keepers said. “If we take care of them, we’ll be fine.”