There is no question the furniture business is booming, at least in terms of consumer demand. The first wave appeared within weeks of initial shut-down orders this past spring, although the benefit accrued largely to e-commerce players as many stores were closed.
The wave became a tsunami when stores reopened late-second quarter, consuming inventories and swamping supply chains that simply could not respond fast enough. By August it was apparent that demand was outstripping supply, that not all orders would be filled and replenishment would be delayed by months not weeks.
With the first cool autumn wind of September, you read in this space that price increases were coming and that full-blown shortages were imminent. And now the price increase letters have started going out putting that prognostication — admittedly based not on a crystal ball but on many on-background conversations — in black and white.
This is just the beginning.
All indications are that prices on raw materials, components, freight and other key components of the pricing equation are unlikely to reverse themselves this year and in many instances will continue rising. If you just received a single-digit increase from one or more of your suppliers, rest assured it’s because they ate enough of it to get a Pepto Bismol-sized case of indigestion.
So the real question now is: What next?
The most likely answer is we’re going to discover the price elasticity in the current wave of consumer demand. For an industry that still manages to hit the same opening price point for a sofa that it did in 1990 and offer better quality doing it, this is certain to be an unsettling prospect.
There is always a reasonable concern that one dealer’s price increase is another’s sale. Or as Jeff Bezos once said, “Your margin is my opportunity.” In this case, however, few if any will escape completely unscathed from this round of hikes. And those who think they can trade profit for market share may find the benefits fleeting.
One of the lingering concerns surrounding consumers’ recent love affair with re-furnishing their homes is that it would prove to be just a fling. And once they can return to their favorite restaurants and vacation spots, furniture stores would be just one more jilted lover.
It’s a question that keeps manufacturers up nights as they wrestle with shortages and try to determine whether it’s better to ride them out or invest in additional capacity, although labor issues in many instances make even that option difficult.
There are no easy answers. There is no crystal ball.
But careful study of consumer response as price increases work their way into the marketplace could provide helpful clues to what the post-pandemic selling environment might look like. Technology today offers the ability to study consumer behavior at unprecedented levels of granularity. We can track the variables that shape the purchase journey on an almost minute-by-minute basis.
There has never been an ability to so closely study consumer purchase behavior, and there has rarely been such a great need to do so.
The great question today is: Does the current boom have legs? The answer is that we’re about to find out.
The post Blog: Does the home furnishings boom have legs? We’re about to find out appeared first on Furniture Today.