The home furniture sector made in excess of $101 billion in 2013, despite a decline in purchasing activity due to the recession. A down economy is only one of the many factors that determine the success of the industry’s future. Find out what shaped the sector within the past five years.
1. Free Shipping
Offering competitive shipping rates has become a challenge for retailers. With shipping expectations growing due to online shopping availability at sites like Amazon, Walmart, and Target, consumers have come to expect items to be shipped at no additional cost, yet with a quick turnaround time.
In fact, the 2015 Costumer Loyalty Engagement Index released by Forbes indicated free shipping made up 15 percent of brand engagement. A hefty percentage, the trend will continue to benefit customers, despite its costly impact on retailers and distributors.
A solution that can alleviate expenditures as well as expedite shipping is maintaining localized inventories. Rather than designating one warehouse to fulfill all orders, retailers can create more centers in close proximity to stores to complete transactions.
2. California Port Strike
At the beginning of 2015, a California port strike occurred due to labor disputes between unions and employers. Nearly 30 ports along the west coast ceased operations, which disrupted imports from Asia. The ports were responsible for receiving 70 percent of US imports. Numerous industries, including the furniture sector, were negatively impacted by the strike.
Furniture retailers who expected orders during the strike noticed considerably slower delivery times. Some had to redirect furniture deliveries to other ports, such as those in Washington state, to reduce further delays that would keep store floors empty and product selections limited.
3. Foreign Costs
For a period of time, freight and labor costs in China were on the rise. As a result, many speculated that companies would transition to onshoring most of their operations, thus bringing manufacturing back to America.
However, China has reduced labor costs in the past year, according to the southeast regional manager of commercial services for the financial holding company CIT. Fuel prices and cost of shipping containers across the oceans have also dropped. The news requires furniture distributors and manufacturers to reevaluate the value of onshoring.
4. Purchasing Power Shift
Until 2014, Baby Boomers accounted for a majority of furniture purchased. Millennials, those between the ages of 18 and 34 as of 2015, have since taken the lead. The younger generation, which is comprised of 74 million people, has overtaken the Baby Boomer population slightly with regards to purchasing power.
Those on the older end of the Millennial spectrum, particularly, are purchasing and decorating homes as well as creating a space to grow their families. These life events have had a direct correlation with the fact that Millennials made up more than a third of the population purchasing home furnishings and bedding in 2014. In particular, the demographic is drawn to neutral grays and pops of blue. Reports have indicated more purchases in casual dining, youth bedroom, and office furniture.
5. Mobile Technology
According to Smart Insights, 80 percent of smartphone owners use their phones to search the internet. Nearly half begin their research on a search engine, including 41 percent of those looking for home and gardening products and services. Further, the website http://www.furnituredealer.net reported that 47 percent of shoppers relied on their mobile device to look for furniture in October of 2014. Data from Google supported these findings.
Mobile remains an impactful platform for selling consumer products. Sales transacted through mobile devices increased by nearly 50 percent during the second quarter of 2014, which equated to $6.8 billion. A portion of e-commerce sales were a result of mobile usage as well.
6. Lifestyle versus Traditional Stores
From Generation Y to Baby Boomers, lifestyle stores, such as Pottery Barn and Crate & Barrel, are top of list when it comes to shopping. Generations X and Y frequent these stores often for their home-buying needs. Baby Boomers, while they shop at these stores less than other generations, still turn to lifestyle stores 70 percent of the time. The reasons given for shopping these stores is that they offer functional and affordable products.
However, interest in traditional retailers, like Ashley Furniture, have not subsided. Consumers visit manufacturer-branded stores to source solid wood pieces they feel are made to standards of high quality. Traditional stores also provide a larger selection of products from which to choose. Typically, local-owned, the retailers often provide top-notch customer service, which pleases consumers.
7. Going “Green”
Deforestation, among other environmental concerns, have played a significant role in how consumers decide which furnishings to purchase. Buyers now look for furniture that causes the least harm to the environment. As a result, despite its costly price tag, “green” furniture remains in high demand.
This has made larger retailers, like Ashley Furniture, look for new ways to create products that benefit both its buyers and the environment. For instance, Ashley Furniture no longer uses toxic flame retardant chemicals in its upholstered furniture. The announcement was made public in 2015.