As we press forward in 2022, many of the challenges we were facing at the start of the year have not gone away. We are still seeing supply chain challenges, labor issues and COVID infections, and inflation is still high (+8.6% as of May). Now, we face a Ukraine/Russian conflict that is affecting energy prices dramatically here in the United States.
Despite these challenges, we are seeing improvement in many areas, which is bringing opportunities for the independent retailer to continue to offer great solutions to consumers in need.
Here are five reasons you should be excited:
- The Fed is doing something about inflation, and we can expect to see rate hikes throughout 2022. The Fed raises rates to slow the economy for prices to stabilize. This should also have a positive impact on supply chain over time as excessive demand driven by the pandemic slows. A rate hike, while making the cost to borrow money higher, also increases rates on Household savings accounts. This will improve an already strong household financial position that is discussed later.
- While GDP won’t grow as fast as it did in ‘21, it is still expected to be strong. The start of the year will grow less than 3% annualized in Q1 2022. But the rest of the year’s GDP is expected to be between 3% and 3.5%.
- Households are in the best financial position they have been in a long time, driven by excess savings. U.S. households have $2.3T in savings currently, with strong levels of disposable income also available. This is important to note, as there is fading fiscal support that drove higher purchases in the beginning of ‘21.
- Lead times on the mattress side have greatly improved. Most manufacturers are back to normal lead times, generally less than 2 weeks from time of order to ship, which should help drive a healthy GMROI (Gross Margin Return on Inventory) for the mattress side of your business. On the furniture side, we are still seeing challenges for much of the import side of the business. However, many manufacturers have begun putting in place either increased warehouse space in the United States to help move inventory as it comes in or have moved toward more domestic manufacturing and alternative sources, such as Mexico.
- The real estate market is still hot! 2022 is expected to still have high demand for homes, as millennials are entering the market in their peak earning years. Freddie Mac predicts 6.8M home sales in ‘22 – equal to what happened in ‘21 and 300k more than ‘20. Home prices are expected to increase 7% in ’22, driving higher net worth for many homeowners.
So, while some challenges persist this year, it’s clear to the Nationwide Furniture and Bedding team that there are plenty of positives that continue to drive strong results for the independent retailer.
On top of that, our team has been hard at work looking for new opportunities to help our members’ businesses thrive. In fact, we’ve spent the first part of the year focusing on Markets, new vendor programs and maximizing our own PrimeTime event to bring retailers the right mix of solutions to help sustain market share growth and capture new customers.
That work will continue into the back half of this year, where we see plenty of ways for dealers to continue riding this wave of success.
Mike Derro is the Vice President of Furniture & Bedding for Nationwide Marketing Group