By all accounts, the pandemic year was a great one for home furnishings brands and retailers. Cooped up at home, Americans invested in improving their living spaces.
Home improvement retailers that served the DIY-inclined rose 14% year-over-year. These retailers were aided by being classified as essential retailers during the shutdown, but nonetheless, it was the “Year of the Home” for Americans last year.
According to HomeAdvisor, Americans spent nearly 10% more on home improvement projects last year compared to 2019, rising from $7,560 on average to $8,305 in 2020.
Once the walls are painted and the hammers and saws put away, people begin decorating, which is when the hunt is on for new furniture and furnishings to match the updated rooms. And as expected, Americans spent 7% more on these items last year, to the tune of $238.8 billion.
So one would assume it was also a boom time for furniture and home furnishings retailers. But that would be a mistake.
Retail sales in these stores actually declined more than 5%, down from $117.8 billion in 2019 to $111.5 billion in 2020. Admittedly, these stores suffered months of shutdowns, which might explain it, but a look at trends over the past five years suggests otherwise.
Since 2015, furniture and home furnishings stores have experienced a steady decline in their share of consumers’ furniture and home furnishings spending.
Five years ago, home furnishings retailers captured some 60% of spending in the category. It declined to 53% by 2019 and then tanked to 47% in 2020. Their loss has been the gain for e-commerce retailers, general merchandisers and home improvement stores which are leaning into the category.
Maybe, just maybe, home retailers will recover some of the business in 2021, but don’t count on it. Shoppers are creatures of habit and a year of shopping somewhere else besides the typical furniture and home furnishings stores for these items have fixed a new habit.
“In less than five years, 35% to 50% of small and medium-sized home retailers will be out of business,” says Bill Napier, a keen observer and advisor on home retail for 20 years and a contributing columnist for Furniture World.
The retailers that will fail suffer from what Napier calls the “Arrogance of Ignorance,” ignoring what is painfully obvious to the market leaders while they continue on the path to oblivion as the commoditization of home furnishings retail grows.
Home retailers face “a perfect storm of changing consumer buying habits with technology taking over every aspect of our lives,” Napier says.
“The ‘arrogance of ignorance’ will eventually destroy a great industry that has been focused on brick-and-mortar retail and an over-reliance on discounts and promotions – 50% off everything and ‘no payments until you are dead,’” he quips and adds, “It has to become a virtual experience and most retailers websites stink.”
The big will only get bigger
Napier predicts the demise of mom-and-pop retailers and the rise of the major players and big regionals, which will also take a fair share of manufacturers out that supply the market. The largest retailers can go to Asia and buy direct.
And they have built retail brands that mean something to consumers. They don’t rely upon the manufacturers to do the marketing for them, which in Napier’s view “provide virtually no support for retailers: no romance copy, little content and support materials.”
Furniture Today confirms the industry’s tilt toward the big home retailers. Nearly 50% of furniture and home furnishing retail sales ($48 billion) were made by its top 100 retailers in 2019.
And more than half of that ($26.6 billion) was credited to its top 10, in order by their furniture and home furnishings sales:
- Ashley HomeStore
- Mattress Firms
- Rooms to Go
- Berkshire Hathaway Furniture Division
- Sleep Number
- Big Lots
BIG(a general merchandise discounter peeling away sales from home specialty retailers)
- Bob’s Discount Furniture
We can expect the top 100’s share to be even higher when Furniture Today’s 2020 list comes out, continuing a trend since 2015 when only about 40% of retail furniture and home furnishings sales were made by its top 100.
What’s separated the big home retailers from the rest, besides having a strong retail brand identity, is a sophisticated online presence and e-commerce capability.
Lead with strong digital presence
Without question, some home-related purchases are made on impulse, but as a rule, consumers tend to approach this category with a more considered and comparative approach, given the highly personal nature of style choices, color matching and the need for items to fit. And in the case of larger-ticket purchases, like furniture and mattresses, they are also purchased infrequently.
All this translates into considerable pre-purchase research, considerably more than in other categories, so a home retailers’ website must be top-notch, well-organized and with excellent search features. Further, websites must be loaded with detailed descriptive product content, measurements, multiple pictures including closeups to reveal texture.
Beyond the basics, the retailer website has to do more than just showcase product. The website must give clear and compelling reasons why this is the place where consumers need to come to decorate and furnish their homes.
Napier believes way too many independent home retailers fail here. “Many retailers’ websites are built on templated platforms that limit imagery, content and customization,” he says, “And forget about virtual tours, 3D imaging and other advanced features.“
E-commerce capability is less important – Statista estimates that only about 12% of furniture and home goods sales are conducted online – but getting more important by the minute.
“Back in 2005-2007, I worked with a manufacturer that sold high-end leather sofas on Costco’s online platform,” Napier shares. “I was shocked that people would spend $2,500-$6,000 for a sofa unseen. The mindset at the time was people wouldn’t buy online because they needed to touch and sit on it. It was then I witnessed the upcoming revolution.”
Providing guidance on what a top-notch furniture retailer’s website needs is a study by Cylindo analyzing the Furniture Today’s top 100 retailers’ websites conducted in June 2020. Its findings confirm Napier’s experience.
“Many furniture businesses that were delaying digital transformation efforts have been caught flat-footed, without the ability to deliver a positive digital experience,” the report states, as many retailers focused primarily on in-store sales.
Even the top 100 have been slow in adopting many of the 17 website features considered most important in the category, such as product customization (only 35% have this feature), HD Zoom (33%), 360-degree product views (13%) and augmented reality (14%).
Retailers that got the highest marks in the Cylindo analysis were Interior Define, awarded 94.5 points on an index scale of 100; Crate & Barrel (93); and Ikea (89).
But not all of the Furniture Today top 10 did so well. FT number one AshleyHomeStores scored only a 58; Big Lots (60); and Berkshire Hathaway/Nebraska Furniture Mart (45.5).
The frogs have boiled
Retailers that sell into the home furnishings space have suffered the boiling-frogs syndrome, contentedly sitting in the water as it slowly heated to a boil. Napier estimates that twenty-years ago when he started in the home business there were over 40,000 storefronts selling furniture and today around 22,000. And with the pandemic, those weak retailers still sitting in the water feel the heat rising even faster.
“I’ve been warning retailers for years they must change, invest in their websites and in marketing, but too many remain fixed in an old mindset,” Napier concludes. “The basics are simple: ‘Show, Tell, Sell.’ Too many have missed the two most important points: ‘Show and Tell.’ All they want to do is ‘Sell.’ Consumers don’t want that, they want the details about quality, manufacturing and all the rest so they can compare products and make the right decision for themselves.”