Survival in 2009

November 30, 2008  by in UnCategorized   

By Home Furnishings Business in Furniture Retailing on December 2008 The second edition of Home Furnishings Business’s annual economic survey can be summed up easily: If you think things were tough last year, it was nothing compared to this year.

HFB surveyed more than 200 members of the home furnishings industry, asking a variety of questions about how the economy affected business and what, if anything, could be done about it.

Compared with last year, respondents were decidedly more pessimistic about current conditions and when they would improve, but most also cited plans already in place to bring in business. Last year, when questioned about the economy, survey respondents said, on a scale of 1 to 5 (5 is a lot, 1 not very much), the economy rated an overall median “4.” This year, respondents bumped that up to a “5,” indicating that the overall economy had a major impact on their business.

Just 1 percent of survey respondents said the overall economy had little or no effect on their business, with 58 percent, up from 28 percent last year, saying the economy had a major effect on their business.

For the second time, participants ranked consumer confidence as the most important economic factor, with home sales and housing starts not far behind. When asked to name the single most important economic factor, survey participants overwhelmingly chose consumer confidence, with many adding comments about how dominant this factor is.

Third-place honors this year went to gasoline prices, compared with last year’s No. 3, interest rates. This year, interest rates fell to ninth place in respondents’ ranking of the most important economic factors.

Mortgage rates shared ninth place this year with interest rates, quite a drop-off from last year’s fourth place.

For the first time, HFB questioned survey participants about the role of the stock market in the economic climate and they gave the market indices fourth place in importance, possibly due to the timing of this year’s survey, which hit just as the markets took a huge tumble.

Looking Ahead When it came to figuring out what was going to happen next, survey participants sent mixed messages. Looking at the number of bankruptcies, about one-third thought that number would stay stable, with more than half believing bankruptcy rates would increase in coming months. The balance opted for a decrease in bankruptcies.

Last year’s survey showed more than half of respondents thought bankruptcies would stabilize, with 3 percent believing the number would decrease.

The most important factor affecting businesses, according to the survey, is consumer confidence. Looking forward, 37 percent of participants said confidence would stay the same, with 27 percent saying it would worsen and 36 percent seeing an improvement. Last year, more than half thought confidence would stay the same, something not borne out this year.

More than 80 percent of survey participants predicted gasoline prices would either improve or stay the same, compared with 93 percent last year.

Respondents stayed pessimistic about healthcare/insurance costs, with 58 percent expecting costs to rise, measured against 55 percent last year. For the most part, participants were more optimistic about home foreclosures, with 20 percent expecting the foreclosure rate to improve, versus 3 percent last year. Last year, 62 percent said foreclosures would worsen, compared with 48 percent this year.

Housing activity is expected to pick up by 28 percent of respondents, double that of last year. One-third said housing activity would decline, compared with 45 percent last year, leaving about the same number in both years predicting home sales and starts would remain the same.

Inflation is a predicted problem this year, with 49 percent of those surveyed indicating it would get worse, compared with 34 percent last year. Half of last year’s participants thought inflation would remain the same versus 39 percent this year.

Interest rates were judged to likely remain the same by respondents of both surveys.

This year, participants were slightly more optimistic about mortgage rates staying the same, 53 percent this year compared with 42 percent last year. Respondents expected home prices to continue to improve, by 28 percent this year versus 17 percent last year, with 36 percent saying prices would worsen this year compared with 45 percent last year.

About half expected taxes to stay the same this year, compared with 69 percent last year. This year, 10 percent expected taxes would improve, with 38 percent anticipating higher taxes. Last year, 31 percent said taxes would increase, with no one expecting a bettered tax rate.

Perhaps the biggest change, year over year, is the expected unemployment rate. This year, 50 percent of survey participants expected unemployment to worsen, compared with 24 percent last year. A year ago, 62 percent of respondents anticipated unemployment to remain the same, far more than this year’s 39 percent. The balance in both years opted for an improved unemployment situation.

Sales Outlook Things are not looking nearly as rosy this year as last. In last year’s survey, 53 percent said sales were up compared with the prior year. That number slipped to 11 percent this year. Sixty-two percent of the participants in this year’s survey said sales were down, compared with 21 percent a year ago. Surprisingly, about the same number—27 percent this year versus 26 percent last year—said sales had remained the same.

For those experiencing a downturn in sales, 13 percent this year thought sales would improve in three months, compared with 34 percent last year. It would take six months, said 19 percent this year and 28 percent last year.

A year ago, 7 percent thought sales would turn around in nine months, versus 27 percent in this year’s survey. It would take a year or longer, according to 31 percent last year and 41 percent this year.

ACTION PLANS Despite a troubled economy, industry insiders are not lying down and taking it on the chin. A change in advertising was planned by nearly six out of 10 survey participants, with 62 percent planning on “implementing a more effective marketing plan.” Last year, 43 percent expected to change their advertising and 57 percent were going to work on their marketing plans.

Additionally, survey participants are looking at changing the price points they sell at (38 percent this year, 25 percent last year), either adding or laying off employees (34 percent this year, 32 percent last year) and changing employee hours or benefits (36 percent this year, 25 percent last year).

On respondent, remarking on the dominance of the consumer in determining the health of the economy, said, “Consumers’ perception and experience of these factors is critical. Most consumers are too busy to understand the specific condition of our economy but, whether their information comes from the evening news or other sources, they tend to ‘feel good’ or ‘feel bad—nervous, uncertain’ about the information as they see it ... and react accordingly. They base their desire to buy on these feelings. If they or their friends are in trouble, they stop buying.”

Others also keyed in on the importance of the news media in driving consumer behavior. One respondent said a major factor in consumer behavior was the “... overall state of the economy as reported in the news media. The over hyping of all economic and political info instead of fair and accurate reporting without sensationalism is the single factor that keeps people weary of spending.”

Despite concern about the economy, most industry people are not planning GOB sales. Many offered specific plans to improve their business, including:

• Becoming more customer focused and less product -focused

• Tightening inventory and cost controls

• Finding ways to trim costs even more

• Sharpening skills and doing more “fun” marketing

• Seeking product with higher perceived value

• Monitoring income and expenses opportunities

• Expanding services and being creative

• Buying very carefully and advertising

• Training to retain every customer

Others offered very realistic assessments but are determined to stay strong:

• Cut costs and hang on!

• Hold on tight! We’ve done everything else.

The bottom line is that you make your own opportunities in this kind of economy. Watch costs, actively seek out opportunities and listen to your co-workers and customers.