by HIGH POINT — E-commerce will be the biggest area of opportunity for retailers in the new year, while ongoing supply chain disruptions will be their biggest challenge.
These were among the major findings of Storis’ recently released 2022 Home Furnishings Retail Trend Guide, which surveyed more than 50 furniture retailers around the country.
Some 43% of the retailers surveyed said that e-commerce presented their biggest opportunity this year. Those same retailers said that major changes they expect moving forward include expanded category interest (26%); buying via e-commerce (22%); virtual and store appointments (16%) and less time consumers are spending in stores (14%).
“Combined, these results show that while customers are less reliant on brick-and-mortar stores, they are shopping for furnishings,” Storis noted. “Therefore, in 2022, it will be important to review how your online experience is meting demand for expanded product categories and offering a convenient user experience…As ecommerce is still a rapidly growing segment, the time to optimize is now.”
The report also said that 50% of the retailers surveyed identified ongoing supply chain issues as their greatest challenge in 2022, with another 21% citing inflation and price increases as another major challenge.
“The global supply chain has been incredibly inconsistent over the last several years,” Storis said. “While tariffs on China were a catalyst to diversifying sourcing, the pandemic pushed alternative nations over the edge.”
The authors went on to note that while 28% of the retailers surveyed still mainly source from China, 40% have shifted to Vietnam.
The pandemic, the report said, has expanded the need for diversified sourcing.
“As we have seen the virus ebb and flow in different geographic areas, having diversified sources can be valuable to offset location-specific challenges.”
That said, the report noted that the U.S. was a top source for 21% of the retailers surveyed. And Mexico, while not currently a primary source “may be on the horizon.”
“For shorter lead times and sustainability, the increased cost of producing closer to North America may be justified to secure inventory faster and reduce carbon emissions,” Storis said, noting that a 40-foot container coming from China costs $20,000 and nine months to arrive, while a 53-foot truck from Mexico to L.A. costs $800 to $1,100 and arrives in as little as four to five hours.
On the subject of price increases, the authors noted that inflation is a direct result of rising labor costs, increased freight and fuel expenses and an “imbalance of supply and demand.” The good news, the report said, is that inflation is widespread, impacting all sectors.
“Therefore as a furniture retailer, you will not be alone, and the customer likely won’t be surprised when you raise your prices in 2022,” the report said, noting that 85% of those surveyed said they will raise prices this year. It went on to note that some retailers believe that price increases may reach the “ceiling of what customers are willing to pay in 2022, especially if they are balancing price increases throughout their daily purchases.”
The survey identified the third most important issue as attracting, hiring and retaining talent in what it described as an employee-led labor market. This issue has been exacerbated by competition from resources such as Amazon offering steeper starting wages and more people wanting to work from home.
“While wages are important, flexibility and benefits are driving employment decisions,” the report said. “Providing greater shift flexibility and opportunities to conduct some responsibilities remotely may be key. However, because that becomes a significant challenge in physical showrooms, the attractiveness of these roles may have to lean more on salary.”
Yet due to inflationary pressures, Storis noted that there is “little margin to offset wage increases. Corporate culture is critical to retention. Providing career paths for retail and warehouse positions can support the retention of talent within your brand.”
Storis noted that another place to look is process efficiencies or activities where labor expenses can be streamlined or automated to provide more opportunities for competitive benefits and wages.
The survey expressed a sense of optimism among retailers, with only 5% viewing competition for discretionary income as a top challenge for 2022.
“For many, home as their central domain is simply convenient,” the report suggested, noting that consumers will continue to have meals, entertain and work at home, having already made investments in their kitchens and dining rooms, home offices and outdoor entertaining areas. “In the rapid suburb migration, many customers purchased larger homes they are still furnishing. For the sizeable millennial population, these rooms may soon become nurseries. These factors all present continued market opportunities.”
Other key findings cited in of the report are as follows:
+ Many consumers are interested in environmentally friendly products, making sustainability a key differentiator on the retail floor. In addition, the sale of second-hand products also appears to be on the rise.
+ 26% of those surveyed see customers returning to stores as a major area of opportunity.
+ 44% of those surveyed plan to open at least one new store in 2022.
+ 76% of those surveyed say customers spend an hour or more in their store.
“The treasure hunting experience of shopping has rebounded after years of transaction-driven time in store,” Storis noted. “Merchandise curation and storytelling through product vignettes are roles of the showroom that reaffirm the social aspect of shopping.”
+34% of those surveyed also found e-commerce integration as a top tech initiative.
+ 22% view customers buying online as their greatest opportunity for 2022.
“While customers are comfortable shopping online, ironically, direct-to-consumer brands are rapidly opening stores,” Storis said “The competitive landscape requires a truly holistic, unified commerce experience. This is why e-commerce integration is a top tech initiative. Continuing to blur the lines between channels, offering consistent inventory and providing customers with a single hub for brand interactions enhance the value of your website. Further, this customer data empowers features such as online self-service options and personalized recommendations.”
For further insights, and a list of Storis’ Top 10 technology trends in home furnishings retail, click here.
