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Nervous Twitch
October 31,
2010 by in UnCategorized 
By Home Furnishings Business in on November 1, 2010
An economy moving in fits and starts, and a mid-term election season as front-of-mind for consumers as many presidential campaigns has kept traffic spotty at many retailers across the country moving into the end of 2010.
While on paper, overall sales are ahead of last year, business is nowhere near making up ground lost in 2009. Part of the reason is that consumers worry about the slow pace of economic recovery, and joblessness remains a big concern as employers are slow to re-staff to pre-recession levels out of nervousness over their long-term outlook.
The Conference Boards Consumer Confidence Index more or less reflects the good week/bad week, good month/bad month activity in many furniture stores. After dipping to 46.4 in February, the index climbed three straight months to 62.7 in May, dipped twice to 51 in July, hit 53.2 in August, dipped to 48.6 in September, and rebounded slightly to 50.2 in October.
Still, the index remains high above its level in the 20s during early 2009.
Appetite for Furniture
A furniture-specific consumer measurement, the Furniture Buying Index from Americas Research Group, which gauges consumers intent to make a specific purchase, climbed steadily through June to 72 before dipping to 67 in August, rising back to 70 the next month and staying flat in October.
Consumers are thinking about buying furniture this fall, but with the economic conditions many consumers are putting furniture buying on hold, said Charleston, S.C.-based ARGs chairman, Britt Beemer, in comment on the October number.
Consumers basically are staying in place right now.
There are larger worries beyond a flat index, Beemer noted in a telephone interview.
In good times, consumers spend $500 or more six to eight times a yearin past recessions, thats gone down to four, he said. Whats scary about this last year is that its down to two or three times.
Say a consumer has to replace four tires on their car, and then their refrigerator breaks down. That might be all their big purchases gone for the year, or maybe theyll have one left. Thats one reason these television promotions have worked so well. A televisions something the entire family can enjoy, and in a lot of cases the shoppers are buying the furniture just to get the TV.
Furniture retailers in general are not nearly promotional enough in the current economic environment, he added.
Consumers are buying more and more on holiday weekends, and thats why Black Friday could be a big day for furniture, but for that to happen, you have to get down in the dirt and play the game with everyone else, Beemer said. Open the store at 6 a.m., have early bird specials. Theres no reason Black Friday shouldnt work for furniture, and if you do those things you can have a big day.
How about a look at a major market, New York state? Douglas Lonnstrom is professor of statistics and finance at Siena College in Loudonville, N.Y. Hes also founding director of the Siena Research Institute, which produces a monthly index of consumer confidence in New York.
The Siena survey asks consumers about their plans to make purchases in five categories: automobiles, computers, furniture, homes and home improvements.
Furniture has stayed quite flat since February 2009, Lonnstrom said. Its ranging from 15 to 21 percent for those saying theyll buy furniture in the next six months.
In September, the last month for which survey figures were available by HFBs press time, 17.6 percent of New Yorkers said they plan to buy furniture, up 2.3 points from August.
Its a fairly consistent figure, as low as 15 and as high as 21, Lonnstrom said.
Roughly one in five families in New York are planning to buy furniture in the coming six months.
We often see home purchasing and home improvement spending going in opposite directions, and furnitures been tending to move in a line with home improvement.
Politics Loom Large
Last months mid-term electionssome of the hardest-fought and most attention-getting campaigns outside a presidential election year in recent memoryhad consumers minds on things other than furniture. But Beemer pointed out a practical impact on retailers trying to stay front-of-mind among their potential shoppers.
Nationally, 54 percent of retail ads were getting bumped in October by political ads, Beemer noted. If youre a big television advertiser, fewer (furniture) ads were being seen from Labor Day moving forward. Political advertising is running this year at a rate you usually see during many presidential elections. There are fewer offers you can give the consumer.
There was a hope that once the elections are over, consumers will free up some mind space for things such as furniture shopping. Thats the take from Chris McCall, furniture buyer and a partner in Carthage, Tenn.-based retailer D.T. McCall & Sons, which has four central-Tennessee stores selling furniture, electronics, appliances, home and garden, and other home-related categories.
More so than anything, the November election will have a big impact on consumer attitudes, he said. Government spending has scared the American people into holding on to their dollars. If theres a big change in the house and senate, youll see a huge November and December selling season, and the stock market will go up.
While Democrats retained the U.S. Senate, Republicans did end up regaining the House of Representatives. On election day, the Dow Jones industrial average did rise 60 points, but as this issue went to press only a couple of days later.
Big Picture
The housing crash and ensuing recession have created a less mobile society thats tied to their current homes, and that has impacts furniture retailers in a several ways.
The foreclosure mess has precluded a lot of the normal migration youd see as people relocate to get new jobs, said Jerry Epperson, industry analyst and managing director of Mann, Armistead & Epperson in Richmond, Va.
Theres a double whammy at work: Its hard to sell a home to move, and there arent as many new jobs to inspire those moves.
Typically, our industry benefits from those moves, Epperson said. Not only that, homes are getting smaller, not as many MacMansions are going up. If we arent building these great big homes, we arent using as much furniture to fill them up.
Consumer demographic trends could pose problems the next few years, as well, particularly if the economic recovery continues on a slow curve.
First, Epperson noted a decline in births4.4 million in 2006 and falling for three years in a row. And there are issues with the generations ahead of those new arrivals.
The Baby Boomers are now 46- to 64-years-old, and weve aged out of that 30- to 45-year-old market, which is the biggest furniture-buying demographic group, Epperson said. And now, there arent as many in that rangeGen X has 47 million people.
There are 72 million of ourthe Baby Boomerschildren in Gen Y, but they dont have high enough income yet (at ages 11 through 29). Also, that Generation X is a plague on the real estate base. Our commercial real estate markets entire business model is geared for 77 million consumers. Gen X has 47 million, and thats not enough people to support it. HFB