Four factors feeding record furniture sales
Originally published in Home News Now.
Stump & Co.’s Stuart Stump Mullens considers the drivers of the summer rebound and how well-positioned the industry is to continue on the upward path.
In their latest earnings reports, many home furnishing retailers are reporting record-breaking quarters. This is a historical anomaly for the industry — to be leading the charge out of a recession (though a welcome one).
We see four primary influences driving these results, some that should continue as tailwinds to the industry and others that are helpful in the moment but will likely abate with time:
E-commerce Those players that have been able to ramp up and take advantage of online selling opportunities are winning market share. The portion of furniture and home furnishings now flowing through e-commerce has increased dramatically. Essentially, the trends we were already observing have accelerated thanks to COVID. E-commerce is no longer a nice to have, it is a must have.
New consumer purchasing behavior has been established. This is not a trend that can be taken back. Companies must continue to invest and get better playing in this space to effectively compete.
A population pent up at home has led to pent up demand for home refreshes. Also, as Americans have been pushed to work from home (and in some cases even given stipends to outfit home offices) it has also created a greater demand for work from home products.
To some extent the pent-up demand from quarantine will abate, however, the work-from-home trend is anticipated to continue now that employers have seen months-long proof of acceptable productivity from their homebound workers. We believe this will continue to fuel growth.
Creative utilization of the omnichannel Companies able to pivot into new ways of reaching customers quickly and deftly to facilitate purchases are succeeding. We are seeing creative new delivery services, curbside pickups, etc.
It will continue to be true that those innovating and responding to ever-evolving customer needs will be the ones who win market share, though it should be noted that many of the COVID services may no longer be needed or desired once the pandemic has abated.
De-Densification is playing to the advantage of many suburban retailers who are now strategically placed as populations seek to migrate out of compact city living and into suburbia where there is more space and greater ability to distance from crowds. We are watching this trend carefully as it will have far-reaching implications on retail locations, furniture fashion trends (compact and streamlined for urban lifestyles or large and plush to fill suburban spaces), and national purchasing patterns. This could be a long-term boon for suburban retail stores.
However, we must also note that there were several one-time factors fueling the demand (e.g., stimulus checks, federal add-ons to unemployment benefits, PPP loans). These are abating, which could put pressure on some consumer demand.
We remain cautiously optimistic, but if the past six months have taught us anything it is to expect the unexpected.
Stuart Stump Mullens is a partner in Charlotte, N.C.-based Stump & Co., a mergers and acquisition specialist for the home furnishings industry.