Remember a year ago — or less — when most retailers were still clamoring for anything that was in stock?
It may seem like a distant memory today, but back then, many were still trying to satisfy some of the highest level of consumer demand the industry had seen in years, or even during most of our lifetimes.
“I have been in our business for 47-plus years, and probably for 45 and a half of those years, growing sales has been the prime, if not the number one issue,” City Furniture Chairman Keith Koenig told Home News Now. “For a year and a half, during peak Covid demand, our industry, for the first time I can remember, was not focused on growing sales — we were focused on meeting customer demand.”
It was also a time when inflation — both from materials prices and high container costs — drove up the cost of goods to levels not seen in many years. Thus, lower-priced goods quickly moved into middle and even upper-middle prices with no real noticeable improvement in quality or construction.
“We have gotten 25 years’ worth of inflation that all kicked in over a period of a year,” Koenig said, adding that due to ongoing inflationary pressures, he doesn’t see the cost of furniture coming down anytime soon.
“Costs are higher, so whatever was $499 before, that turned into $599 and now it’s maybe $699,” he said. “It’s pretty tough to take that back to $499.”
Fast forward to today when retailers are having to make those tough pricing decisions to move excess inventory on goods that have continued to arrive from orders placed eight months ago or more.
Another reality? Many are also canceling and postponing orders they simply have no room — or demand for — due to what many are describing as a significant drop in business. In recent days and weeks, the message is the same: consumers are curbing their spending due not only to higher gas and food prices, but also as they look to spend money in other areas such as vacations and other forms of entertainment.
Add to that the psychological impacts of the war in Ukraine combined with news of mass shootings in schools and supermarkets and you have a perform confluence of negative events potentially affecting consumer mindsets and behavior.
It’s a message we haven’t heard for some time, but the reality is that many consumers are starting to put off furniture purchases much like they did in years past.
It’s a cruel irony given that the April High Point Market seemed like a return to pre-Covid times when dealers had a renewed interest in what was new at market as much — if not more — than what’s in stock. This gave many suppliers we’ve spoken with a sense of optimism that things were returning to normal.
But within a few short weeks, observers have noted, the demand at retail has plummeted, causing uncertainty about when or if suppliers can even expect orders for those goods.
As one retailer put it, suppliers and manufacturers that were up until recently in the “catbird’s seat” with high backlogs will soon be “begging for orders.” That could include some manufactures in Vietnam and other parts of Asia which have increased capacity to boost production for customers in the U.S.
Another source told Home News Now that one furniture factory in Malaysia has seen an 80% drop off in orders from the U.S. in recent weeks.
It’s a dire situation, no doubt. But isn’t it one that we all saw coming? After all, consumer demand had to falter at some point, just like the stock market and overall consumer confidence.
But there are some silver linings. For example, some of this downward shift in demand could help stabilize the unrelenting cost increases in other areas that have besieged the industry for way too long. We’ve already heard reports of container prices leveling out. Perhaps some material prices may do the same.
There is also the hope that consumers who invested in their homes and home decor won’t lose that interest anytime soon, particularly as they’ve come to discover new trends and product categories in both indoor and outdoor furnishings. As the home improvement saying goes, “Never stop improving.”
A similar slogan might benefit the furniture industry right around now, leading to heightened consumer interest and sales over time.
Could our best days be ahead?