Couches, Chairs, Tables, Lamps: Consumers Are Buying Once More
With pickup in economy and new homes, furniture sales take off
CONSUMERS are buying more home furnishings. The American Furniture Manufacturers Association in High Point, N.C., projects $43.5 billion in furniture sales for 1993, up almost 9 percent from 1992. The outlook for 1994 and '95 also is good.
``I think '94 will be a record year for the industry, and '95 will top that,'' says Jerry Epperson, managing director of Mann, Armistead & Epperson Ltd., a furniture analysis group in Richmond, Va., and an affiliate of Interstate/Johnson Lane of Charlotte, N.C.
Home furnishings sales have taken off for several reasons, analysts say. The primary one is pent-up demand: Customers who deferred purchases because of the recession or because they refinanced their homes, are now beginning to buy.
``Furniture is the most easily postponable purchase,'' says Britt Beemer, chairman of America's Research Group in Charleston, S.C.
Today's shoppers should have been buying in 1991 or '92, says Mr. Beemer, whose organization conducts research for home furnishings manufacturers and retailers. ``As many as five out of six purchases right now ... are directly impacted by pent-up demand,'' he says.
The furniture business is always one of the first industries to be hit in a recession and one of the last to recover, Beemer says. Over the last five years, 20 to 30 percent of furniture stores closed in the United States, leaving certain areas with a dearth of stores, Mr. Epperson adds.
Sales in California and New England, which account for a disproportionate amount of the furniture business in the US, slowed down significantly, he says.
The rebounding housing market is another reason for the home-furnishings surge, analysts say. Existing home sales in 1993 exceeded 4 million, Epperson says, giving the industry an ``immediate pop.''
The increase in new housing starts in 1992 and '93 will fuel furniture sales for the next two years, he says, as most people buying newly built homes delay furniture purchases a year.
Beemer, unlike most analysts, does not give as much credit to the influence of the housing industry. The housing surge is not the ``great white hope'' that it was in the 1980s, he says. The furniture industry once could expect about $16,000-worth of home furnishings purchases for every new home that was built. Today, consumers spend less than one-half of that - about $7,000.
The latest boom in ready-to-assemble (RTA) furniture sales is helping to recharge the market. RTA furniture - about a $2 billion business within the furniture industry - is growing from a 10 percent category into a 20 percent category, Beemer says. RTA furniture is appealing to the ``value-obsessed consumer'' who wants high-quality, low-cost products, Beemer says.
The question now is how Americans will respond during tax season. If people are not hit hard with taxes this year, Beemer predicts a 3 to 5 percent growth rate. ``When the average tax refund is under $400 for Americans, the electronics industry has a boom time,'' he says. ``When the tax refunds average $550 to $600, the furniture industry has a great boom time.''
Epperson, who maintains that this year's new tax bite will not be a factor, expects the industry to ``bounce back'' even stronger than most analysts predict. He projects an 8 percent growth rate this year and 7 percent in 1995.
Why so optimistic? A combination of low real-estate and interest rates and rebounding consumer confidence are creating tremendous opportunities for retailers to open new stores and increase inventory, Epperson says.
Detroit-based Art Van Furniture, which has 22 stores throughout Michigan, is the 10th-largest furniture operation in the country. The store, which had double-digit increases in retail sales last year, opened six new stores and expanded its warehouse to handle its growing volume, says Ray Plummer, the company's president.
And Rhodes Furniture in Atlanta, which operates 78 chains throughout the region, is increasing inventory as well as advertising in anticipation of a booming market, says President Irwin Lowenstein.
Overall, the home furnishings industry is not seeing a big change in consumer shopping patterns. Discount stores such as K mart and Walmart, which sell RTA furniture, are benefiting slightly more than anyone else, Beemer says, while sales at stores such as Ikea and Crate & Barrel remain stable. Furniture stores are holding their own, but they will continue to shrink in number, and department stores are beginning to place greater emphasis on their furniture business, Epperson says.