by Topics include the tectonic shifts at retail, the modern and minimalist style juggernaut and the threat from travel
The Agenda-Setting Theory of communication suggests that while news media can’t tell us what to think, they can make strong suggestions about what we should be thinking about. News media help to set the national agenda, in other words, and it is an agenda that without exception maintains only three or four issues or topics at any one time.
Two weeks ago the agenda, in its entirety: Taylor Swift and Travis Kelce, an impending government shutdown and the iPhone 15’s record-breaking price. To get a sense of how quickly this agenda can change, how long has it been since bank failures were rattling the consumer markets?
As we barrel into the year’s fourth quarter and another October market here in the Furniture City, I’d like to recommend an agenda for some of our many showroom visits.
Every market has its “agenda,” and I suggest here that on this market’s menu of topics should be the tectonic shifts at retail; the home furnishings style juggernaut that is at once modern, minimalist and natural; and the threat that travel poses to our industry’s share of household disposable income.
Let’s grab a beer, hijack one of those hors d’oeuvres trays with the little egg rolls and rest our dogs on a plush motion upholstery introduction over by the new occasional tables.
Shuffling the lineup
The shakeout at retail: Nationally we saw the post-Covid reality take out, among others, Tuesday Morning, Bed Bath & Beyond, Toys “R” Us and Mitchell Gold + Bob Williams. For the first six months of the year, U.S. retailers across all product categories announced plans to open just 55 more stores than they announced they would shutter. The 3,365 stores on the chopping block are nearly four times more than the 900 closed during the first half of 2022, according to the National Retail Federation. They include some big names — Macy’s, Best Buy, Footlocker, Walmart, Target.
The scene at manufacturing has been equally sobering, with the rather sudden bankruptcies of Klaussner, Lane and Noble House leading that grim list.
But the news has not been entirely apocalyptic. It’s been fun to see the long-awaited retail presences planned by, say, RH, BR Home, Markor and, most recently, Big Lots Home. Ashley Home Stores is underway with a rebrand and store frontage makeover.
As a sign of the times, Toys “R” Us is back, opening up retail presences this time on cruise ships and in airports, news that just broke in the past two weeks.
RH, Markor and BR Home are taking a private-label approach to whole-house collections that emphasize textures, natural color palettes and minimalist design. These looks are elegant but still comfortable, contemporary but not harsh or austere. And these are some big names, each powered by tightly disciplined branding efforts and ambitious growth strategies.
On deck: Big Lots Home
To this list of expansions, let’s add Big Lots.
With grand openings rolling out just as we all gather in High Point for market, Big Lots has figured out its response to the big United Furniture Industries bankruptcy, which took down one of the industry’s most treasured names, Lane.
Big Lots had relied on Lane to fill out its furniture floor spaces, with much of it under the Broyhill label. Big Lots surprised the industry by acquiring the Broyhill name in 2019.
Rather than retreat from home furnishings, Big Lots is going big with 10 new showrooms mostly in the Midwest, including stores in Kokomo, Indiana; Big Rapids and Sterling Heights, Michigan; Georgetown and Louisville, Kentucky; Ashtabula, Delaware; Brunswick, Ohio; and Aliquippa and Hermitage, Pennsylvania.
The new store concept branded as Big Lots Home is being tested in reformatted Big Lots stores serviced by its Columbus, Ohio, distribution center.
The Top 5 chain needs this one-stop approach to work. Furniture is the company’s biggest department in terms of revenue, accounting for about a fourth of total sales. In 2022, the company’s $1.3 billion in furniture sales represented a little over 23% of overall sales.
The Lane debacle and an economic climate that has consumers pulling back on discretionary spending generally brought down Big Lots’ furniture sales by double digits in its fiscal second quarter ending July 29. Overall, Big Lots reported a net loss of $250 million on net sales of $1.1 billion, a 15.4% decrease compared to the same period a year prior.
“Our results for Q2 illustrate that we remain in a very challenging environment, in which our core lower-income customer remains under significant pressure and has limited capacity for higher-ticket discretionary purchases,” Bruce Thorn, president and CEO, said during the most recent earnings call.
This year’s first quarter saw shares of Big Lots dive to their lowest levels in more than three decades, in part because of the Lane shutdown. Time to party like it’s 1991!
Play from the bench
Thorn said the Big Lots strategy going forward comprises five “key actions”:
- Own bargains
- Communicate unmistakable value
- Increase store relevance
- Win with omnichannel
- Drive productivity
Thorn referred to this strategy as putting Big Lots again on “offense” rather than defense, and this is a posture we can see in all of the whole-house concept store strategies. Looking at the roster of companies leaning into the sluggish retail climate rather than retreating, it is populated with the highest of the very high end right down to the proverbial bargain basement. For its part, Big Lots Home is branding with a promise of selling 60% below its competition, according to its website.
Thorn said Big Lots will rely on “a higher penetration of bargains, more newness in our assortment, freight reductions, ongoing cost reduction and productivity efforts, more effective promotions, and a more normalized level of markdowns.”
I learned of Big Lots’ renewed commitment to furniture on my recent trip to Columbus, Ohio, where the company is based, a trip that included a 4-mile walk through downtown Columbus. While there was plenty of décor to be window-shopped, furniture was notable only by its absence. I saw no active furniture stores, only a half-boarded-up, emptied Roche Bobois showroom. (A Google check later revealed City Park Interiors on Livingston Avenue, but Livingston is a block off the main drag, High Street.)
Big Lots operates 1,420 stores in 48 states, as well as selling online. Total sales in 2022 were $5.5 billion.
Take your base
Just one more agenda item to discuss and we can grab a few of those crab rangoons. I read of consumers retrenching and returning with gusto to pre-Covid buying habits and patterns, but there seems to me to be one glaring anomaly: travel and entertainment.
This past summer and even into the fall, Americans have been filling the airports, mobbing the tourist destinations of Europe’s big capitals, and sharing it all in rich, curated color with their social media followers. They paid top dollar to see the Eiffel, stand in front of the Trevi Fountain and snap a selfie with the Mona Lisa.
One industry estimate had tourism up a bulging 30% this summer compared to pre-pandemic levels.
This rush back to the continent has been labeled Covid revenge travel, but it’s the airlines getting their revenge. Airfares are as high as they have ever been, and my travel agent tells me they’re likely to stay there.
This appetite for expensive escapes underlines another theme of 2023 and a through line in many of my columns this year, which is the premium on “experiences.” This is what RH and BR Home are banking on in launching hospitality divisions, and it’s why tickets to Deion Sanders’ Buffs to take on in-state football rival Colorado State started at $800 a pop!
“Air travel demand is strong, and the consumer is in good financial shape, particularly the premium consumer base,” Delta Airlines CEO Ed Bastian told HospitalityNet last month. He called travel consumers’ “No. 1 big-ticket purchase priority, and they desire premium experiences.”
Delta recorded its 20 largest cash sales days all this year, Bastian said.
As home furnishings retailers compete against each other for those hard-fought discretionary dollars, they compete also against the travel industry. And the more they can offer an “experience,” the more salient they can become to everyday consumers demonstrating a willingness, even a glee, in parting with their money.
