From Home Furnishing Business
Editor's Letter: What Goes Up, Must Come Down
Since we began to calculate industry performance (1974), the growth has not approached the 22% level experienced year over year (2021). Yes, in the late 70’s and early 80’s and then in the early 2000’s, a growth of 10-15% occurred, but then returned to normal levels of 5-6% in line with household formulation.
Since 1974, the compounded annual growth rate (CPGR) has been 6.1%, gradually falling from the 8% level as we experienced economic ups and downs. The graphic below presents the historic growth annotated with the significant happenings:
While our CPGR growth is below what is defined as good (10-15%) there are challenges that are unique to our industry. The pandemic gave rise to an increase in revenue at retail driven by an increase in prices due primarily to transportation and increase in gross margin objectives enabled by supply and demand. Now that prices are declining and written orders at retail are weakening, it is tempting to lower the gross margin objectives. The industry should hold strong and resist the urge to discount. Note I said the industry. When one competitor does so, others follow.
Our products are a bargain when compared to other consumer products and have been so for years – refer to our feature article on page 8 for consumer price index compared to all consumer products. Let’s stop the race to the bottom. Just realize you can’t make money buying/displaying/selling/delivering a $399 sofa.