While the American furniture industry once primarily comprised large, family-owned companies, the sector’s landscape is now far more complex. Economic turbulence, technological innovations, and shifting consumer trends have shaken up the market, leaving players to contend with a greater number of competitors and strategic challenges than ever before. Read on to learn how to navigate this increasingly crowded market.
Renewed Economic Growth
Prior to 2007, the relative size and product scope of America’s major furniture companies had created a largely equal playing field that left many competitors neck-and-neck. Any competitive advantages or disadvantages tended to be short term, and smaller, independent retailers primarily competed within their own local markets.
The economic turbulence of the Great Recession led to the emergence of a more varied and dynamic furniture industry. From 2007 to 2015, widespread economic decline caused some 12,000 furniture stores to close their doors. Fortunately, the sector has shown strong signs of recovery. The furniture and home furnishings market has surged at a compound growth rate of 4.1 percent over the past five years, reaching a value of $96.57 billion in 2016.
As the addition of new furniture retail outlets in major markets across the nation heralds the industry’s return to prosperity, much of this growth is coming from familiar faces. As smaller retailers folded to the pressure of the recession, several larger independent and regional companies have seized the opportunity to branch into newly accessible markets such as Dallas, Phoenix, and Chicago. But while these major players continue to expand, the ever-growing presence of technology is allowing new competitors to stake their claim within the digital sphere.
The Evolving Retail Experience
Consumers’ shopping habits have changed, and furniture companies face new challenges in attracting people to stores. In addition to opening new retail locations in order to fill the void left by smaller entities exiting the market, larger companies have also sought to expand their reach to meet shifting consumer demands.
Today’s furniture shoppers are beginning to favor geographic convenience over the concept of an elaborate furniture retail destination. While it was not uncommon for shoppers to visit four or five different furniture retailers before making a purchase 10 years ago, people are now shopping at just one or two different locations. In order to make this coveted shortlist, retailers are opening more stores in a more varied selection of markets.
This influx of new retail locations has greatly diversified the options available to consumers. While independent furniture retailers have relinquished some of their market share, lifestyle stores, specialty bedding companies, and vertically integrated brands such as Ashley HomeStore have attracted a larger portion of sales. In addition, the Internet stands out as the fastest-growing channel among non-traditional furniture retail platforms—by 2015, e-commerce accounted for 19 percent of all furniture sales.
Although e-commerce should be a major strategic consideration for every furniture retailer going forward, growth in online sales has slowed, indicating that many consumers still want to see and touch a major furniture purchase before taking it home. Brands now face the task of making brick-and-mortar stores worthwhile destinations for consumers in the digital age. Even Amazon, the global giant in online retail, has expressed the possibility of establishing brick-and-mortar furniture stores.
Greater competition and an otherwise dynamic business landscape have created new financial needs for furniture retailers. As companies add more stores with more elaborate designs, many of them in emerging high-income markets, they face higher occupancy costs. Some traditional strategies assume that an increase in brand presence will reduce the need for advertising, allowing a smaller marketing budget to offset increased occupancy expenses.
However, the explosion of e-commerce has created new advertising costs as well. The need to create customer-friendly, efficient online shopping platforms; effective email and text outreach efforts; and an engaging social media presence have all impacted the advertising budgets of most furniture retailers.
Following the Trends
Faced with the challenge of rising occupancy costs, changing advertising strategies, and greater competition for customers’ attention, furniture retailers must heed emerging consumer trends in order to stand out in the crowd. While digital disruption has made e-commerce and social media important for companies seeking to reach new audiences, a retailer’s technical capabilities are not the most prominent selling point for most consumers.
In fact, a recent consumer survey conducted by The Fuld Institute of Competitive Strategy found that, among furniture shoppers who had made a purchase over the last two years, price beat out other factors such as quality, convenience, and brand name to serve as the most influential decision-making factor. This suggests that furniture companies may be able to gain a competitive edge by appealing to more modest budgets, or by expanding into innovative territories such as multiuse furniture.
Furniture retailers can also connect with consumers by respecting their preference for personalized service. As big data and technology facilitate curated subscription boxes, music platforms, and other consumer services that cater to individual needs and tastes, shoppers have come to expect more options throughout the buying process. By taking full advantage of customer research and technology to deliver services such as product recommendations, custom order processes, and home design tools, companies can better cater to the needs of the modern consumer.