The home furnishings industry finds itself in the ultimate Venn Diagram (a graphic representation of circles that shows the sweet spot where different datasets overlap): the confluence of Americans spending much more time at home, much less time traveling and going out to restaurants, theaters and events — and all of us having a general feeling that where you live should be the nicest, most comforting place on the planet. It is Home Sweet Home to the max.
While certain sectors of the American economy like airlines and restaurants are in financial freefall, the companies that make and sell home furnishings products are riding high. Be it furniture, cookware and kitchenware — or home décor categories like bedding, rugs and decorative accessories, home products are in such great demand that there are now shortages in the marketplace and some suppliers are sold out through early spring.
[callout]In uncertain times, there’s some comfort people can find in the physicality or realness of items they buy, because everything can feel uncertain and undetermined. [/callout]
It\’s quite a turnaround from the first days of the pandemic when much of the industry was shut down, consumers were hanging on to every dollar they had, and most people were expecting a surplus of merchandise to be flooding the marketplace by this point on the calendar.
Three Things That Changed the Home Business
Overall consumer purchases are stronger in an age when experiences are not possible, but the psychological benefits are part of the equation, clinical professor of psychiatry at Stanford University\’s medical school Elias Aboujaoude told the Washington Post. \”In uncertain times, there\’s some comfort people can find in the physicality or realness of items they buy, because everything can feel uncertain and undetermined. A physical thing can become a tool to help anchor us.\”
What changed? Back to the Venn Diagram:
- We are all spending a vastly larger amount of our time at home. It isn\’t only working from home, it\’s the fact that we are not traveling the way we used to. With all that time at home, we are looking around and finding all the things we\’d like to improve.
- With that significant reduction in travel, as well as eating out at restaurants, going to entertainment venues like movies, theaters and concerts and taking exotic vacations, our disposable income pies are shifting radically. Forget about exotic experiences, we want to buy bread makers, decorative pillows and new kitchens.
- Finally, there is the intangible of the warm and fuzzy feeling we have for the place we live. Our houses are not just our homes, they are our safe places, our refuges, our sanctuaries. As the world is in turmoil and beyond our control, where and how we live is something we can influence and change.\”With so much external stress and chaos, a lot of consumers will want a cozy and comfortable holiday season at home,\” Neil Saunders, managing director at GlobalData Retail told Modern Retail recently.
Beyond Just Furnishings
Whatever the psychological forces driving the home run, they extend to far more than just furnishings products. The market for housing itself is booming, albeit with changing geographics based on urban flight and the sudden attractiveness of suburban and even rural locations. Supply is still lagging behind demand, a fallout from the Great Recession more than a decade ago and tightened lending practices. But where houses are selling, they are selling quickly and for lots of money.
It also extends to the home remodeling and renovation sector of the economy. The big two retailers in the space, Home Depot and Lowe\’s, have put up impressive comp store sales increases in their most recent quarters with the suggestion that that\’s more to come.
But it\’s the home furnishings category itself that is reaping the most benefits of the homeward bound movement. \”Everybody being at home, they\’re making lots of changes with their home,\” Macy\’s CEO Jeff Gennette said during the company\’s most recent quarterly earnings call. \”Be it new textiles or new home décor or new furniture or mattresses…as a department store that gives us an opportunity to grow those businesses disproportionately.\”
The only cloud on the horizon could be shortages in goods for the next three to six months. At the recent High Point Market, the largest wholesale market for furniture and home décor, many suppliers said the reduced attendance was not an issue because they were essentially sold out. A combination of order cancellations in the early stages of the pandemic and the increase in demand this summer and into the fall has created serious backlogs in the pipeline. \”It\’s all right a lot of people didn\’t come,\” said one senior executive with a big furniture supplier that makes its products in Asia, \”we don\’t have anything to sell them.\”
It\’s at Every Retail Level
Consider these recent news items from other points in the home furnishings retail space:
- Wayfair, the leading online home furnishings site which has never posted a profit in its nine-year history as a public company, did so in last two quarters, with sales up more than 80 percent and record levels of new customers buying from the site.
- Target, which has always had a well-developed business in home, said sales in this category were up more than 30 percent versus a year ago for its second quarter, outpacing the store overall.
- Bed Bath & Beyond, which has had negative comp store sales for nearly four years, reported its first positive year-over-year results this past quarter and its first profit in more than a year, attributing it to significant gains in its online efforts which had been behind the curve for years. \”During this unprecedented time when our homes have become the center of our lives,\” said the company\’s CEO Mark Tritton, \”we are well-placed as customers spend more on their home and lifestyle.\”
- RH, the upscale home furnishings retailer, has seen its stock more than triple since the start of the pandemic in March, reaching all-time highs. \”People are holed up at home,\” CEO Gary Friedman recently said.
- Talbots and other apparel retailers are scoping out the home business, a sign that they believe that is where the prospects will be better. Talbots, the classic preppy women\’s chain, is now introducing its first home collection, Haven Well Within. Said CEO Lizanne Kindler, \”There has never been a better time for us to launch this brand.\”
- Miskelly Furniture, a seven-store home furnishings retailer based in Jackson, MS, has gone so far to send out 400 small gift boxes to customers who are waiting for deliveries that are delayed by shortages in the supply chain. The items come with a note from president Oscar Miskelly, explaining, \”Due to supply chain issues and worker shortages, along with the unprecedented demand for home furnishings, our furniture suppliers have been unable to meet the normal shipping time frames.\”
Whether it\’s the wide-spread sales jumps experienced by national retailers or the local make goods from independents, the home furnishings boom is on and, of course, the big question is how long it will last. As with most things this year, making any kind of forecasts is a risky business but the general consensus from those in the business is that things will remain above average well into 2021.
RH CEO, Gary Friedman, never shy about commenting about business conditions, was willing to offer a prediction. \”I think there\’s going to be some systematic shifts in spending,\” he told CNBC\’s Jim Cramer, \”that will last, I think, for the next year or two. Could be longer.\”
For the home furnishings business, those words could not be any sweeter.