Halloween came early this year for the furniture industry which wrapped up its twice-yearly market in North Carolina earlier in October. The tricks were plentiful but the treats somewhat limited and just about everybody would tell you it looks pretty scary out there going forward.
The furniture industry is normally pretty steady with demand for household furnishings remaining somewhat static from year to year, largely tied in with the housing market and family formation statistics. However, it’s been anything but steady for much of the past two and one-half years as the stay-at-home period of the pandemic drove a surge in business that hadn’t been seen since the post-war Baby Boom of the 1950s. Sales of furniture – as well as virtually anything and everything in the entire home furnishings sector – exploded and tied in with the supply chain meltdown it created a seller’s market of unprecedented scale.
As a result of supply chain nightmares, there’s no inventory in custom-made goods at either the manufacturer or retailer level to speak of. Combine that with the fact that these products are generally targeted at the more affluent customer who is always buying home products regardless of the economy, you have a neat perfect storm of no excess inventory.
All of that came crashing down in early spring leaving sellers with too much supply and not enough demand. So, the High Point Furniture Market in October was the first true time the industry gathered since 2020 to try to sort out its state of affairs. Amidst the cocktail parties, tote bags, celebrity designers and parking problems of the 11-million-square-foot-plus market complex it was no easy task. Here are the issues that marketgoers were dealing with (and reflect the same challenges in the retail market).
…and More Inventory
What a difference a year – even a few months – makes. A problem of not enough goods to sell the industry moved all-too-quickly to the polar opposite. Merchandise was stacked up throughout the supply pipeline, not the least of which was at the retailer (this industry for some reason calls them dealers) level. That meant even though retailers…er, dealers were in town at levels we hadn’t seen since before the pandemic they weren’t necessarily there to buy – or at least buy a lot. But curiously the fact that they were buying anything was kind of remarkable given those swollen backrooms.
It’s why there was more than a modicum of optimism throughout High Point, just like trick or treaters who hit the motherload of full-size bars of Snickers.
The Coming Deluge
Nobody ever accused the furniture industry of being bashful when it comes to promotions and events – what other sector could have Arbor Day Sales? But it’s quite likely that things will kick into overdrive over the next few months. All of that excess inventory has to go somewhere, and retailers don’t really care where as long as it’s not sitting in their warehouses. Many in the business thought we were in for some serious selling for the holidays and into the first part of 2023 as a result. But there’s a subset of the furniture industry that seems to be saying, “thanks, but no thanks.” While much of the merchandise sold in the business is off the shelf, a portion is not. That’s the furniture that is custom-made, very often upholstered products (what the industry calls sofas but most everyone else calls couches). Because of the infinite number of fabrics, sizes and assorted trim pieces offered at moderate and upper end resources, most upholstery is made to order. And guess what: As a result of supply chain nightmares, there’s no inventory at either the manufacturer or retailer level to speak of. Combine that with the fact that these products are generally targeted at the more affluent customer who is always buying home products regardless of the economy, you have a neat perfect storm of no excess inventory. For this part of the industry, market was much more upbeat with smiling ghouls and friendly ghosts not Angels of Death.
The Ian Factor
Nobody likes destructive acts of nature and certainly the recent impact of Hurricane Ian on large parts of Florida, particularly the West Coast, was about as devastating as the country has seen in a very long time. Yet, like it or not, the sun that came up the next morning also marked the start of the rebuilding and for the furniture business that was indeed a silver lining. While the home improvement trade, particularly Home Depot, Lowes and anybody that sells lumber, roofing and windows, will be the immediate beneficiaries of this storm, come the back half of 2023 Floridians will start to buy new furniture for their repaired homes.
It’s a cycle that seems to play out every four or five years and while nobody likes to talk about it in public, it’s the dirty little secret of the Florida home furnishings business. Come hell or high water – usually both – there will be a spike in business in at least part of the state and sales will boom. The aftershocks of Ian will be no different. If you were a kid who was able to save some of your Halloween candy and savor it later in the year you know what that’s like.
So, Will It Be ’23 Skidoo?
Yes, it’s a very old saying that probably not everyone knows about: it referred to the Flatiron Building on 23rd Street in Manhattan, which because of its shape tended to create downward windstorms at street level causing women’s dresses of the era to blow up above their knees. Police officers assigned to the corner would tell some of the so-called gentlemen who watched to scram…or skidoo in the vernacular of the day. Aren’t you sorry you asked?
But I digress. The question is really what the furniture business is going to be like next year. Again, given the high failure rate in many forecasts over the past three years, that’s a little risky to predict but most people in High Point were saying a flat 23 would be OK with them, considering the downside possibilities. Of course, whether we truly enter a recession will have a lot to do with it, but buying furniture is more about consumer confidence than global economics.
In fact, the furniture industry tends to be a trailing indicator of the overall economy. People start traveling and buying cars before they buy furniture when things start to improve. And because of the time lag, they are often still paying for furniture long after times have turned sour. Some people have always said watch the home improvement stores like Home Depot and Lowes to get a good read on consumer spending and then about nine months later the furniture and furnishings sector will follow. It’s not a foolproof system but it works out that way more times than you would think.
High Point Indeed
The High Point Furniture Market remains one of the most unlikely events in the American buying-and-selling business. It’s as if the fashion industry had its biggest trade show in the old sweat shop towns because that’s where the garments were made, or food industry shows were held in the cornfields of Iowa.
The furniture industry has been holding its market here for going on a century, originally because this is where the trees that were made into dining room tables grew. Now, it’s more about force of habit and cheap showroom rents – a furniture showroom can be the size of a Walmart rather than a 10×10 booth at some convention center. And even as other markets have tried to take this business away (most recently Las Vegas but before that Dallas, Atlanta, New York and even China), it has always come back to High Point. That’s the cycle the industry finds itself in now as the industry continues to coalesce around this town, consolidating showroom locations and even building and expanding new ones.
Many have written – prematurely – the epitaph of High Point but this past market once again showed its resiliency and as a treat with a particularly long shelf life.
It’s a pretty good trick.