From Home Furnishing Business
Cover Story: STATE OF THE INDUSTRY: “What Industry Are You Referring To?”
The term “pace of change” is frequently used without a full understanding of its meaning. The pandemic has accelerated trends that were happening already, but the pace increased. For decades, the industry was defined by a few distribution channels; department stores, national chains, and the mom & pops derogatorily referred to as “dirty window stores.” These channels were supplied by established, typically family owned, manufacturers located first in the North (Jamestown, NY) and the Midwest (Grand Rapids, MI), and then gradually to the MidAtlantic states (North Carolina and Virginia) to be close to plentiful raw material sources. Before you stop reading and dismiss this as an article reminiscing on the old times, there is a point.
Change has always been a fact of business. The key to survival for both manufacturers and retailers is to recognize it is happening and plan for it as you deal with the everyday challenges of running the business. The history of the industry is replete with examples of manufacturers that did not react to the movement of production to the south or the subsequent move offshore (Table A).
Or, small mom & pop retailers that did not foresee the expansion of their once competitors to become regional chains, filling the void left by the failure of the national chains such as Montgomery Ward, Sears and JCPenney.
All these strategic shifts occurred in the backdrop of the impact of economic conditions as illustrated in Table B.
As a result of the pandemic, many of the small independents are closing their doors. The reason? It’s not because of financial distress, but rather the lack of successors to pass down to, or the inability to find a buyer. But for many, the real reason is the owners are tired of dealing with the pressure of executing a long term strategy. Simply put, they are tired of trying to anticipate “where the puck is going.”
Our forecast, as always, will be for the TOTAL FURNITURE AND BEDDING INDUSTRY. However, our focus has been the traditional furniture retailers and the suppliers that serve them. As can be seen from Table C, this marketshare after the pandemic, has settled in at about 35% - 40%. What are we saying? Simply put, traditional retailer’s competition may not be who they think. The competitor may not be the family-owned store down the street or the regional chain that just moved in last year, but the other retailers that “dabble” in furniture.
How can traditional retailers compete with these alternative channels while satisfying the consumers and their retail preferences? For decades, the baby boomer and to some extent, the silent generation, has been the focus of the traditional retailer (Figure 1).
While this generation segment(s) is still purchasing a significant amount of furniture as they downsize and move to the next stage of life, the coming force is their children (Generation X) and their grandchildren (Millennials). Where do they purchase? Findings from a recent national survey of furniture purchasers, are shown in Figure 2.
While the Baby Boomer has remained loyal to the independent retailer, the attraction of the more focused MANUFACTURER OWNED store and the value priced experience of the WAREHOUSE CLUBS has made inroads. The younger Generation X consumer has definitely been attracted to the alternative channels. Attracted by style to the more LIFESTYLE RETAILER (Crate & Barrel, Pottery Barn, Restoration Hardware) as well as convenience (INTERIOR DESIGNER, INTERNET) and also price and finance. The younger Generation X and the Millennials are shopping all distribution channels.
From the same survey, the analysis by income presents another perspective (Figure 3). The focus for the traditional retailer has become the consumer household earning above $50,000. For groups below this income level, they recognize there is a strain on discretionary spending after securing the basics, which makes furniture a deferrable purchase.
To summarize, to furniture consumers in total and the emerging furniture consumer, the distribution choice is a very eclectic choice as shown in Figure 4. But what do they want in a retail experience? FurnitureCore has identified what is important. It is everything as can be shown in Figure 5.
To conclude, the forecast that follows is for the total Furniture/Bedding industry. You will see that while challenging, it is a positive growth for the upcoming year, but for traditional retailers, the challenge will be to stop the erosion to the other distribution channels.