I hope that everyone reading this had a wonderful holiday season with friends and family. I also hope that your businesses enjoyed a brisk year end as consumers looked to close out the year with a new piece of furniture or a brand-new mattress for their homes.
As the furniture & bedding industry enters the New Year, we as a category and the economy in general are still facing many challenges that began in the last half of 2022.
Inflation continues to be at the forefront, on the mind of not only all consumers but the Federal Reserve. The Fed continues to raise rates at a historically fast pace in order to try and combat it. And it looks like they will continue to do so until inflation gets closer to the accepted annual 2% growth rate. This means that your consumer will continue to use more of their disposable cash to pay for basic needs like groceries, fuel and utilities. This has driven credit card borrowing to extremely high rates over the last few months and could continue well into the new year.
One of the major contributing factors for an increase in furniture and mattress purchases is real estate transactions. When more homes are being built or sold, more furniture and mattresses are needed to fill those rooms. The once red-hot real estate market has slowed considerably over the past year. While most homes in the first half of 2022 sold in less than two weeks, and for over asking price, the current trend is that homes are on the market for 50 days, and over 25 percent of them are having to reduce their asking price to close the sale. Inventory remains low as consumers have been dissuaded from moving thanks to interest rates on 30-year mortgages approach 7 percent. The high mortgage rates have also put a strain on many first-time home buyers qualifying for a loan.
It’s not all headwinds, however. There are some positives in the marketplace as we enter the new year.
The household net worth in the US has improved at all income levels — but it’s improved the most in the bottom 50 percent according to Wells Fargo. This excess savings could provide a buffer and drive future spending in consumer goods.
The supply chain that was severely strained for almost 18 months has begun to normalize. Specifically shipping container costs, at one point approaching $20,000 to ship a container from overseas, are approaching their pre-pandemic levels and should remain there as demand slows.
The average ticket in the Furniture and Home Furnishings continue to rise as well. According to a recent Doorcounts report, the average ticket for furniture was $2,663, 12 percent higher than last year. While traffic may be lower, consumers that are out shopping are continuing to buy better goods.
Given the current market conditions, retailers can take a few actions to set themselves up for success in the new year.
Inventory Management. Many retailers may be in a position where you have too much of the wrong inventory on hand. This could have been driven by supply chain challenges and long delays in receiving product. If you have inventory that is not moving, look at clearing the excess to allow you to put the right product in your stores and warehouses.
The Las Vegas Furniture market is right around the corner and is a great way to see new product introductions from major manufacturers. Every major furniture and mattress category is represented at this show. Don’t forget to stop by the Nationwide Marketing Group space at the market in building B-826. We will have a collection of our Private Label products from furniture and mattress partners as well as representatives from all our business units.
Run Promotions. According to PR Newswire 88 percent of consumers are planning to look for more discounts and offers. When you are promoting your products and services, ensure that you are highlighting a powerful savings story coupled with strong financing offers.
Offer Financing to Increase Conversions. Consumers looking for higher value goods in many cases will look to finance these purchases. If you can offer both primary and secondary finance options, you will have the ability to capture more sales. Buy now, pay later has been one of the fastest growing segments of the finance space and should be added to your portfolio.
Attend PrimeTime! One last reminder from your Furniture & Bedding team. PrimeTime is rapidly approaching in Dallas! The dates are March 25-28th. There is great excitement surrounding this show already, and you can expect to see many of your top manufacturer partners attend. There will be strong promotions and discounts as well as opportunities to network and learn during dozens of Nationwide Learning Academy sessions. We look forward to seeing you there!
Mike Derro is the Vice President of Furniture & Bedding for Nationwide Marketing Group