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Home Furnishings Prices Continue Four Year Decline

The Consumer Price Index is defined by the Bureau of Labor Statistics as the measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. The CPI-U (Consumer Price Index – Urban Consumers) represents all urban consumers, about 89 percent of total U.S. population. This article focuses on the Consumer Price Index from 2010 to 2016.  To interpret the CPI note that the base year indexes is always shown as 100.  The index for subsequent years indicates the percentage growth over that base year.  For example, an index in the year 2013 of 119.3 indicates the price of that consumer item has grown 19.3 percent since the base year of 2010. On the other hand, an index of 86.2 indicates the price of that item has fallen 13.8 percent.  Each year represents the growth over the base year.

The prices of consumer items grew steadily coming out of the recession for virtually all broad product categories until 2012 to 2014, when Durable Goods, including furniture, appliances, and electronics, along with Non Durables, and Commodities began to decline.  The Services sector, led by skyrocketing medical costs, is the only broad group continuing to see large price increases.

According to the Bureau of Labor Statistics, the Consumer Price Index (CPI) for all consumer items increased 9.9 percentage points over the last six years – an average of 1.6 percent a year. Meanwhile, the purchasing power of the dollar decreased with time – declining 9 percentage points since 2010 (Table A) Durable Goods has been the worst performing sector in price growth compared to Non Durables, Services, and Commodities (Table B).

Durable Goods prices grew slightly coming out of the recession, but began declining in 2012, and this year are 3.3 percentage points below 2010. With a constant upward trajectory, the price of all consumer Services has increased 14.4 percentage points from 2010 to 2016 –due in part to escalating medical costs. 



Except for home furnishings and operations, housing and home energy costs have grown over the past six years. Both Rent and Home prices have crept up an average of 3 percent (Rent) and 2 percent (Homes) a year – resulting in overall growth of 18.6 and 15.7 percentage points. And while Household Energy prices peaked at an index of 106.8 in 2014, prices quickly fell back down this year to just 1 percent growth since 2010. With Rent and Home prices growing, consumers may have fewer disposable dollars available for Household Furnishings and Operations which are both below 2010’s index by 2.9 percent (Table C).

Furniture and Home Furnishings

Focusing on Household Home Furnishings prices, the accessories category (Clocks, Lamps, and Decorator Items) has the most negative price growth – dropping 29.1 percentage points since 2010 (Table D). Major Appliances is second with a 13.9 percent decline. Furniture and Bedding, Window Coverings, and Floor Coverings all experienced slightly less negative growth – falling between 3.9 percent and 8.8 percent from 2010 to 2016.

Furniture Products

The CPI breaks Furniture into three broad categories – (1) Living Room including Upholstery, Kitchen, and Dining Room, (2) Bedroom including Bedding, and (3) Other Furniture. All three categories are down in price from 2010 (Table E). Bedroom Furniture experienced small price increases leading up to 2012, most likely via Mattresses, but has declined steadily in price since then. Currently Bedroom and Bedding is down 4.9 percent from 2010 prices. Living Room, Kitchen, and Dining Room Furniture peaked at 102.1 index in 2012 before falling to 96.1 this year, a level 3.9 percent below 2010.

Television and Cable

In many electronics categories, the price of the durable good has fallen while the cost of operating that product has increased. For example, Television prices have dropped dramatically, but the cost of programming services has skyrocketed. The price of televisions has fallen 65 percentage points since 2010 or about 16 percent a year.  During the same time period, Cable and Satellite Television and Radio Services have jumped a total of 17 percentage points – a roughly 4 percent yearly increase (Table F).

Computer and Electronic Services

Similar to Televisions, Personal Computer prices continue to fall – down 41.6 percentage points in six years (Table G). Surprising to some, Wireless Telephone Service prices are also down, while Internet Services have stayed steady with a slight increase of 0.5 points from 2010 to 2016.

New Vehicles and Gas

New cars and trucks is one Durable Goods area that has seen steady price increases, up 6.8 percent since 2010 (Table H).  On the flip side, however, is that while cars have become more expensive, gasoline prices have become cheaper. Gas prices peaked in 2012 at levels 30.8 percent above 2010, but began their decline three years ago.  In 2016 the price of gasoline is down 23.4 percent down from 2010.

Food and Beverages

Food, both groceries and restaurant prices, have experienced overall growth from 2010 to 2016 (Table I). Food away from home showed the most growth – increasing 16 percentage points.

Medical and Drug Prices

By far the largest increases in prices come from the Medical Industry (Table J). Aside from Health Insurance which has fluctuated since 2010 with the introduction of Obamacare, all medical services and drug prices have maintained an upward trajectory. Hospital Care alone is up to 30.5 percent in 2010 to 2016. All other physician services, dental services, and prescription drug costs have grown between 16.5 percent and 22.8 percent. Even medical care for your pet is skyrocketing growing over 20 percent since 2010.

Education and Childcare

As shown in Table K, education for all ages along with childcare costs are close behind medical care in services that have sharply increased over the past six years. Up to an index of 126.1 in 2016, College Tuition and Fees have jumped an average of 4 percentage points per year. Consistently on an incline, childcare has increased 14.6 percent points from 2010 to 2016.

The Consumer Price Index clearly shows how consumers are faced with growing prices in the Services area but over the last two years have seen overall declines in durable and non-durable goods.  The problem for the home furnishings industry is that prices have been consistently falling since 2012 which may be good for consumers, but not so good for the retailer.

Generation X Might Not Be a Bust After All

Historically named the “Baby Bust Generation,” Generation X babies are now roughly 35 to 50 years old and born between 1966 and 1981. Sandwiched between the Baby Boomers and Millennials, Generation X is often overlooked by media and marketers as a worthy target – instead focusing on upcoming Millennials and their future economic influence. Once considered too small in size to make an impact, Generation X is now almost 70 million strong and is the largest generation of consumers alive, ages 21 to 65. Moreover, they are increasing their earning power rapidly with more going toward their home furnishings purchases.

They have been much maligned as a generation of latchkey kids growing up in an era where divorce rates more than doubled. They have been purported to distrust the big corporations they feel mistreated their loyal parents and yet are now taking over the high paying jobs of baby boomers as they retire in record numbers. Gen Xers are revolutionizing the business world with their demands for a work-life balance and place a high priority on their families and homes.

These 35 to 50 year olds also have over 50 percent of the children under 18 – further extending their buying power. With homeownership rates up and furniture expenditures at their highest in years for ages 35 to 44, Generation X is poised to make a significant mark over the next five years and beyond.


At 69.8 million, Gen Xers trail behind both Millennials and Baby Boomers in size (Table A), but as Table B shows the current adult population of Generation X is higher than the Millennial’s 66 million as many are still under the age of 18. While Gen Xers are still smaller than the living Baby Boomers (74.9 million), they now have more buying power.

As shown in Table C, the population of the “Baby Bust Generation” is now much larger than originally projected due to immigration. With 58.5 million births between 1966 to 1981, Generation X has grown by almost 20 percent (19.3) in numbers.

Although smaller in total population, Gen Xers are the largest adult consumer population at 37.5 percent of adults ages 21 to 65 (Table D).


Gen Xers are in their prime earning years. As Baby Boomers retire more high paying jobs will open up to experienced and ready Gen Xers. In 2015, median income (Table E) was the highest for Generation X 45 to 49 year olds at $76,095, followed by 40 to 44 year olds at $72,143. In addition, the youngest of the Gen Xers, the 35 to 39 year olds, had the fastest growing incomes last year with median income increasing 9.2 percent over the previous year (Table F).


Gen Xers ages 35 to 50 are in their prime family purchasing years for both themselves and their families. Over half (52.9 percent) of children (65.7 million children) under 18 reside in Gen Xer homes (Table G). Over 80 percent of those Generation X households are married couples.


Gen Xers are only slightly less educated than the younger Millennials with 35.7 percent attaining bachelor’s degrees or higher.  For 35 to 50 year old Gen Xers, 38 million have some college or higher degree.


Gen Xers have followed the Baby Boomers in their love of homeownership but were temporarily stymied by the recession. Homeownership among all three Gen X ages is now well above 50 percent with 61.6 percent of 40 to 44 year olds owning a home and 68 percent of 45 to 49 year olds (Table I). With homeownership rates bouncing back, Generation X has dramatically increased furniture spending.

Furniture Expenditures

Last year saw a dramatic increase in furniture expenditures by Gen Xers according to the government’s Consumer Expenditure Survey. The heart of Gen Xers (ages 35 to 44) is spending the most on furniture of any consumer group averaging $672 annually. This survey reflects about 55 percent to 60 percent of furniture expenditures.

With the Baby Boomers aging out of prime buying years and the Millennials still pouring into adulthood, Generation X is the here now for the furniture industry. Industry leaders should keep their focus on this bread and butter generation that may just be the consumers that transition our industry toward real prosperity.


By Bob George

It is somewhat comforting to rely on the fact that Second Quarter is typically the slowest quarter of the year. However, when June is complete we may find that this is going to be the worst performing quarter in three years. For most, the President’s Day sale period was the bright spot in Quarter One. April was all right, but the wheels came off in May and, as I am writing, June hasn’t been much to write about either.

Furniture retailing is not the only lackluster area in retailing with major retailers reporting a decline in sales and profit. Overall, the mood of the consumer is one of uncertainty. When that happens, the urge to purchase consumer durables is replaced with the attitude “if it’s not broken, we will wait.”

However, this is the rest of the story in furniture retailing. When looking at the performance for those traditional retailers that are dominant in their markets, sales are up 10%+. Like many areas of the nation, there is a widening gap between the top and the middle. A major factor is that the buying habits of the consumer have changed. This has resulted in fewer stores being shopped. Once retailers find themselves in a third or fourth position in a market it is difficult to make a move. This is much like passing on a mountain road when you are three cars back.

What is the answer? The importance of maintaining a loyal customer base is at the top of the priority list. Traditional retailers focus on attracting new customers rather than maintaining the repeat business for a lifetime customer. This revenue potential could be $75,000 for middle income households.

This points the way to a more relationship-oriented approach to attracting the consumer. What do we mean by relational selling? There will has always need to be a sales transaction. However, if the path to the sale is based upon assisting, providing information, and truly being helpful in creating that great environment, then a long-term relationship will be possible.

The smaller retailer has the advantage over the larger retailer and both have distinct advantages over the national chains where furniture is hidden among all of the other housewares. For the Internet, relational selling implies a one-to-one contact. Need I say more?

It is becoming increasingly difficult to attract the consumer to the store. We are updating our annual Advertising Report for the upcoming issue in order to understand better the consumer’s perspective of the industry’s efforts. However, one thing is clear. The focus is on making the consumer “drink the water”, i.e. best price, free delivery, etc. and not very much on making the consumer thirst for the product, “I can’t live without it.” Let’s put vacations behind and move forward to the Fall.

See you in Las Vegas.


Last year the furniture industry finally exceeded the volume experienced in the pre-Recession years of 2006 and 2007 growing 5.2 percent to $92.1 million in furniture and bedding sales (Figure A).

Lacking new marketing strategies, the furniture industry has had to rely in part on sheer pent up demand to clear the hurdles in the past two years. Overall financial performance has improved among furniture retailers with much of it attributed to improved Cost of Goods Sold as a percent of Revenue.

This is the third HFB report Retail Metrics for Furniture Retailing providing a comprehensive look at financial performance in the home furnishings industry via comprehensive data collected throughout the year by HFB’s parent company, Impact Consulting Services. This data is collected through Impact’s FurnitureCore application, Best Practices, which provides an ongoing monthly measure of a retailer’s performance. This subscription-based online application allows retailers to compare themselves to other home furnishings retailers and devise a plan to better manage store operations. No individual retailer’s numbers are shared, only composite percentage results. (See Methodology for additional criteria used in the Retail Metrics report.)

The focus of this article’s financial comparisons is five-fold. Results are provided for All Participants and reflect the performance of the entire sample compared to last year. Two additional retailer segments are featured for performance comparisons based on revenues – Under $5 million and $5 million to $25 million.  For the two larger retailer segments -- $25 million to $100 million and over $100 million –only trend comments are provided due to the proprietary nature of their data.  It should be noted that retailers participating in FurnitureCore’s Best Practices application are retailers focused on improving their company’s performance and does not reflect the industry in total.

The sales ranges not only reflect size of retailer, but in turn the differing operational characteristics the company size brings to profitability. The Under $5 million retailers are the surviving Mom and Pops who have developed niches and strategies for staying in business. Retailers with sales $5 million to $25 million have often emerged from Mom and Pop stores and are usually very owner-focused in operations. The larger $25 to $100 retailers may also reflect similar ownership, but have also developed more tiered management operations adding professional managers, for example in warehousing/delivery functions. The largest sales group, the Over $100 million retailers have accounting practices are often driven by tax strategies.

For the two revenue segments featured for comparison, high performing groups selected by net income as a percent of revenue are featured. The Top Quartile includes the top 25 percent in performance, and the Best Performers represent the elite top 10 percent.

The overall financial performance of All Participants is shown in Table 1.

Overview of Key Performance Indicators

With the furniture industry showing ever-increasing signs of recovery, profitability among retailers is also up. The retailers as a group improved performance over last year in all key areas, except Store Sales Expense. These improvements resulted in Net Operating Income almost doubling over the previous year to 5.8 percent of revenue. Table 2 gives an overview of key indicators – Gross Profit, Sales Expense, General & Administrative Expense, Net Operating Income, and Credit Expense.

Selling Expense is consistent across the board with little variation. This category is comprised mostly of sales force compensation, advertising, and warehouse/delivery expense. What does vary are General and Administrative expenses. The biggest chunks of G&A are Occupancy costs (rent/lease) and Administrative costs, primarily administrative and managerial salaries.

Each segment of financial performance is presented in more detail in the below.

Above the Line Income

Total Revenue encompasses merchandise sales as well as returns, sales of fabric/leather protection, and delivery income (Figure B).

Returns: Merchandise Returns (Figure B) continue to represent about 3 percent to 4 percent of revenue. Smaller retailers tend to handle many of their returns outside of the tracking system with voided tickets and even exchanges. Meanwhile larger firms are more likely to document these transactions negatively reflecting on their performance.

Merchandise Protection: Merchandise Protection (Figure B) is an often an important profitability component to traditional retailers, with the exception of upper to premium dealers, who often consider it a negative. This income usually represents around 3 percent of total revenue and is down slightly from the previous year among All Participants.

Delivery Income: Free delivery (Figure B) has become the expectation of consumers in all retail outlets, and this is especially true for smaller retailers. The best performing companies have still been able to offset this expense as Delivery Income as a percent of revenue continues to decline. Larger retailers are able to offset this expense at nearly double the rate of smaller companies.

Cost of Goods Sold

The big improvement in the bottom line appears to be in the cost of goods relative to revenue. Either the retail is “buying better” or simply not having to discount its merchandise so heavily. For the total group, COGS was down 2.3 percentage point over the previous year to 52.1 percent of revenues with larger retailers outperforming their smaller counterparts. (Figure C)

Gross Profit

Alongside improved COGS, comes higher Gross Profit. For All Participants, Gross Profit increased 2.3 percentage points over last year to 47.9 percent of revenue. Best Performers among all sales ranges reached Gross Profits over 50 percent.

The furniture industry’s Gross Margin (Figure D) is the envy of many retail sectors. Some vertical furniture retailers enjoy higher margins due to their direct sourcing models while electronics and appliance margins can run in the teens. With such healthy margins, why does the furniture industry make so little profit? Tracking how much it the industry spends on selling the product and running the business brings these low profits into focus.


Selling Expense

A significant 23 percent to 24 percent of revenue is spent on Selling Expenses (Figure E), and this figure has remained constant last year over the previous. This is the cost of attracting the consumer to the store (Advertising), converting that consumer to a purchaser by trained personnel (Sales) and successfully delivering that product to the consumer’s home (Warehouse/Delivery).

Advertising Expense. The cost of promoting product is a significant percentage of revenue. Last year the industry as a whole spent 6 percent of revenue on Advertising, similar to the year before (Figure E). Best Performing retailers over $100 million spent the most on advertising as a percent of revenue, but not significantly more than other groups. While advertising channels may differ by size of retailer, the total percent of revenue varies only one or two percentage points. Larger retailers will use more broadcast/air channels while smaller retailers rely heavily on print mediums, but the cost results are similar. It is imperative that advertising’s effectiveness be measured on a weekly basis and the only measure is number of visits – or ups – to the store or the website.

Sales Expense: The largest component of selling expenses is the cost of the sales associates, along with the cost of managing and motivating of them. Included in Sales Expense (Figure E) is the sales associates’ commission, as well as sales management, bonuses/contests and similar activities. Overall, Sales Expenses run about 9.1 percent of sales. However, over the last year it appears the smaller the company, the more the cost of Sales as a percent of revenue.

Warehouse/Delivery/Service: The “after the sale” cost of Warehouse/Delivery/Service is also a significant cost to the retailer. Last year these expenses totaled 7 percent of revenue, which was down over one percentage point from last year (Figure E). Often a retailer’s upfront performance is negated by the backend if the retailer is unable to manage it correctly. As reported earlier, merchandise returns can total over 3 percent of sales. Warehouse and Delivery must be managed intelligently and if not, outsourcing should be considered.

Store Sales Expense: A small but important selling cost, Store Sales Expense, averages 0.5 percent to 2 percent of sales. The Best Performers in the largest companies do outperform their smaller counterparts, but not significantly (Figure E). Retail technologies exist to eliminate the sales counter which can cost one percent or more, but can negatively impact the consumer’s excitement for the furniture purchase.

General and Administrative Expense

While not directly touching the selling process, the final piece to profitability is the control of General and Administrative Expenses. General and administrative expenses are, for the most part, fixed expenses and must be controlled relative to the potential volume. Primary components include Occupancy costs – the place to conduct business and the costs to keep it open, the cost of the management team that develops and executes a strategy, and finally the technology and information systems that are essential in controlling the process. These expenses can be as much as the Selling Expense in some cases and generally vary significantly by the size of the retailer. (Figure F).

Information Systems: Technology costs are staying around 1 percent, and for the Best Performing retailers, is down to 0.5 percent to 0.6 percent, regardless of size (Figure F). The successful implementation and ongoing maintenance of systems necessary to run a business smoothly can be painful at times but are critical to profitability. The larger retailers investing more in information systems have achieved an advantage in processing the customer order after the sale, often by transferring the process to sales associates.

Occupancy: The Best Performing companies enjoy Occupancy costs around 6 percent, compared to 7 percent to 8 percent for All Participants (Figure F). Often these larger retailers have the upper hand with the ability to secure the best locations. Consumers are increasingly placing a priority on location wanting to shop closer to home or visit retailers along their normal shopping routes.

Administrative Expense: The largest chunk of Administrative Expense is management salaries along with bonuses, professional fees, and insurance. Overall Administrative fees can total 8 percent to 10 percent of revenue on average for all retailers. Larger retailers over $100 million saw significant increases in these expenses last year. The decision to hire managerial positions is a hard one for many companies, but can produce big results with the proper personnel.

Credit Income and Expense

Retailers acting as credit houses are disappearing and what was once a key area of profitability is now a crucial place to control costs. Net Credit Expense totals 2 percent to 4 percent of revenue for the Best Performers regardless of size and 2.8 percent for All Participants (Figure G). From our perspective, credit is a selling expense that has emerged as a perceived necessity to generate consumer traffic. In our experience, less than 30 percent of consumers opt for offered credit promotions.

Net Income Before Interest and Taxes (% of Revenue)

Last year saw a big improvement in Net Income Before Interest and Taxes. While the average participant saw Net Income increase to 3.4 percent of revenue from zero percent, Best Performers experienced double that at 7 to over 8 percent, regardless of size.


The growth in the furniture industry is reflected this year in the improved financial performance by furniture retailers. Keep in mind our numbers are only guidelines to stimulate thought and discussion of how to profitably run a retail operation. We caution any specific retail figures, to be comparable, must be compiled to conform to these classifications.

We believe an ongoing focus on a company’s statistics is the path to high performance. It is not achieved in a month, but is part of a continuing process. Such a process is greatly enhanced with membership in a retail performance group that allows for open and frank discussion with peers of the barriers to achieve certain objectives.

While the overall industry statistics are improving, many retailers are achieving exceptional results. We challenge you to be one of those. Home Furnishings Business is committed to providing input to your process.


From all indications the storm has passed in 2015.  Total furniture and bedding sales exceeded the 2007 peak. Financial performance has improved significantly from last year’s breakeven level to a much better 3-4% range for all traditional retailers. Is it time to breathe?  From my perspective as an observer of the industry for the past 35 years, the answer is unfortunately not. Furniture retailing is like riding a bicycle.  If you stop peddling, you slow down and eventually fall over.  Unlike other business sectors that consider long term strategies, the time frame for a furniture retailer is much, much shorter. Regrettably for many retailers, the consideration begins when the situation is critical.

From a financial perspective, in 2015 it was relatively straight forward. Furniture retailers were able to increase margins over two percentage points.   For the most part, this flowed to the bottom line. What gave retailers the impetus to increase margins? Was it better merchandise, improved consumer attitude, or was it the result of tighter margins at the supplier level? 

The question becomes, “Is this a permanent solution or a short term fix?” As business slowed in this year with the industry up only 2.2% from Quarter 1 last year, will we panic and sell “price” or sell “financing”? The independent furniture retailer is up against significant competition from other distribution channels. The most immediate are the etailers (Internet) that have gross margins in the 24% range, but have yet to make a profit. Understandably, it takes significant investment to pioneer a new distribution channel. However, how long will investors endure the losses?

Interestingly, Amazon, one for the pioneers in this space, recently announced that they plan to open 300-400 bookstores. Now that they have captured significant share in the product category and caused the demise of bookstores, they are returning to opening bookstores.  Maybe we can speed up the process of furniture and sell them the existing stores.

We recently completed some research that, contrary to popular belief, indicates more consumers visit the store before doing online research. Our take-away – we have an opportunity to sell the advantages of purchasing in a “real” store - the opportunity to see the product, to understand the quality and, most important, to be assisted in a major purchase by trained sales associates, associates who will work with the customer in creating the entire room. The final benefit is the delivery and installation by the company from whom the purchase was made.

We have the strategic advantage if we will use it not only with the Internet retailers, but also with the lifestyle stores who have limited selection and sales associates less skilled at selling the product.  Keep pedaling, but it’s time to engage the next gear.

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