Happy New Year!
Jerry Epperson is one of the more insightful analysts of our industry, and his recent newsletter was no exception helping separate the wheat from the chaff. He is optimistic about 2018 for the furniture business. His research and data about consumer confidence, millennials starting to form households, and the ease of ship-ping with the internet made him feel excited about this year’s sales prospects. However, his reflection on where American manufacturing has come from the 1960’s until 2016 evidences a death spiral.
Having had some of my best years in late 60’s and early 70’s with American made products, the truth hit home. My days with Liberty Chair, Bernhardt Manufacturing, Kingsley Upholstery, and eventually Pilliod Cabinet gave me a package that was only limited by the ability to get merchandise fast enough to satisfy the retailer’s needs. At that time most volume was being done by small to medium sized retailers, many of which catered to a more affluent growing middle class. Department stores dominated bedding sales and promotions based on large ROP ads in local newspapers. Fast forward to the last 10 years and see what changes have occurred. The report that 85% of wood furniture is now imported – mostly from Asia, 46% of upholstery in 2016 came from China and other neighbors with an outsize amount of that volume in leather products.
Many of the goods, now being imported at popular prices, are delivered with inherent cost advantages that trump domestic manufacturing:
Longer production runs are more economical
Cheap foreign labor with high work ethic
Foreign government assistance allowing for huge investments in facilities and technology.
No quarter to quarter financial accountability
Low threshold of environmental responsibility
Now look at the retail landscape. The capital required to compete today is enormous. Regional powers – many of whom are expanding into national powers with the use of private equity money – manufacturer’s owned stores ala Lazy Boy, Ethan Allen, Ashley, and Life Style chains from R.H., Create and Barrel, Pottery Barn to Brookstone and Relax a Back provide additional competition for consumer dollars.
The fact is the pressure to get bigger and bigger has caused a deflation in retail prices so the $499 bedroom, the $299 sofa or 5 pc casual dining means the need to sell a lot more units just to stay even. Couple that with Internet Retailers picking off ITEMS that consumers find easier to buy than going into a store and being pressured or confused by the mass of stuff and it’s tough!
The year of 2018 has great potential but traditional retailers have to question each facet of what they project to their customer. Just offering 6 to 8 years no interest or today sale of sales may not stimulate the very savvy new breed of search oriented consumers. They have determined that price is not their most important criteria. Selection, reviews, product information and instant gratification seems to be the playbook of the better internet players. And don’t forget easy returns. (Did you hear about the lady who returned a Christmas tree to Costco on January 4th because it was dying? And they gave her a refund!!!)
Take the next few weeks to really drill down on what you are projecting to your audience. Finding merchandise that is unique in your market, audit social media to see what excites young couples, beef up your website so your store will be a destination after they search Amazon, Wayfair, Crate and Barrel etc. After being a part of this furniture evolution of the last 50 years, I am confident that good merchants will survive and prosper in 2018 and beyond! And of course we are here to help you on the journey. Smooth Sailing!