by I’m writing this column while most of you are in market mode, either buying or selling home furnishings.
So, while you are hard at it, I am working just as diligently trying to get a glimpse of what the conditions of the home furnishings playing field may look like once the madness of market is over.
For me, the best way to do that is to make a list of the key challenges and opportunities our segment is facing.
This time, I am taking a look at what I see as the major obstacles to growth. Next time, I will take a look at our opportunities.
With furniture and related home furnishings a decidedly discretionary spend, I’m putting the ongoing challenge of inflation at the top of my list of challenges.
While mitigating somewhat, the annual inflation rate for the United States was 5.0% for the 12 months ended March, following a rise of 6.0% in the previous period, according to U.S. Labor Department data published April 12.
Worth noting is how ongoing inflationary prices of non-discretionary items like groceries, fuel and utilities negatively impact discretionary purchases including furniture and consumer electronics.
Since consumers typically buy groceries and gasoline weekly, the ongoing spike in prices for both tend to cause shoppers to pull in their horns when it comes to buying higher-ticket, discretionary goods like furniture.
Looking ahead, analysts from BlackRock, a leading provider of investment, advisory and risk management solutions, said, “ We think we are going to be living with inflation. We do see inflation cooling as spending patterns normalize and energy prices relent — but we see it persisting above policy targets in coming years.”
Another challenge, but far less worrisome for the long term, is inventory management. As the industry continues to recover from what I am calling a pandemic hangover, too many suppliers and retailers are still bloated with inventory, an issue.
The secondary risk of this, at least in my book, is the tendency for suppliers and retailers to panic and join the race to the bottom, an event where only the consumer wins and everyone else involved does not.
The issue was noted by Bloomberg last year in a report that pointed out that furniture sales dropped 2.9% while stockpiles rose. The report went on to observe that unsold furniture remains dormant more than two months.
Additionally, excess inventory adds cost for those who have to store it and these goods also run the risk of wearing yesterday’s looks, depending how long they sit in a warehouse.
The pandemic, which fueled major economic shifts as well as altering consumer shopping behavior, also created challenges for the housing market.
With first-quarter home sales to guide us, many real estate professionals say softening home sales, spiking mortgage rates and ongoing inventory issues have them watchful.
Historically, second-quarter home sales, particularly May and June, have been seen as the best months of the year, but this year could be the exception.
With the future of the economy still up in the air, and with ongoing concerns about inflation, unemployment and the recent failures of Signature Bank in New York and Silicon Valley Bank in California, it’s easy to see how this all impacts consumer spending and housing affordability.
Last, but not least is the issue of how brick-and-mortar retailers address what for them is often the elephant in the room — also known as e-commerce.
Fortunately, we benefited from the pandemic thanks to consumers initially having to shelter in place (which resulted in many of them realizing they were tired of their current furniture), and we also won when the government dished out three stimulus checks (which consumers often spent on furniture).
But the pandemic also helped drive online sales through the roof. And while online sales have dipped somewhat, e-tailing is here to stay and traditional retailers who don’t give consumers a chance to purchase online and in-store are in store for a very loud wake-up call.
A recent CivicScience survey of more than 3,300 U.S. adults finds that over 60% plan to buy furniture this year. You can read the survey here: but all you really need to know is that retailers need to offer omnichannel options or consumers are likely to not only change the channel, they will turn you off.
Next week — the opportunities and how to maximize them.
Have a great market!
