Millennials to Boost Home Furnishings Sales
Friday, February 12, 2016
The good news for U.S. furniture and home furnishings retailers is that Millennials forming their own households will help the sector maintain a compound annual sales growth rate of 2.9 percent through 2019. The challenging news is that online retailers and services will continue to disrupt what had been a consolidating retail category, according to “A Deep Dive into the U.S. Furniture Market,” a newly released Fung Business Intelligence Centre Global Retail & Technology (FBIC) report.
The continuing growth of the U.S. economy has led to a strong housing market, which supports furniture and home furnishings sales, and the outlook over the medium term is optimistic, says executive director-head of Global Retail & Technology Deborah Weinswig in the report. Furniture store sales have outperformed department and apparel stores sales, and should continue to do so for the next three years.
“It will not be all smooth sailing ahead, however,” says Weinswig. Ongoing financial pressures, including high housing prices and lingering student debt have delayed household formation for those between 18 and 34 years old.
Despite these challenges, Millennials are beginning to enter the market, and their share of spending on furniture and bedding more than doubled from 2012 to 2014. Yet Millennials are shopping differently from previous generations, seeking smaller, multifunctional and affordable furnishings. And more are researching and finding these items online.
The number of furniture stores has declined by 20 percent from before the recession, while e-commerce sites such as Overstock.com, Amazon and Wayfair have seen exceptional growth. Online furniture sales, estimated at $23 billion in 2015, are forecast to increase to $32 billion in 2018.
“The attractive growth prospects of the U.S. furniture and home furnishings segment, and improving logistics and delivery options have attracted a host of innovative companies to the industry,” says Weinswig. These include pure e-commerce retailers such as Hem, Campaign (which builds no-tools-needed furniture ready for assembly) and Greycork. Augmented-reality apps such as those created by Cimagine and IKEA can help shoppers virtually fit potential furnishings into their homes.
“The outlook for the U.S. furniture market is positive, as the industry is following the broader economic recovery and the improving housing market. [But] consumer behavior is changing. New startups are emerging with innovative products and solutions. The large incumbents will rise to the challenge these startups present, but we will not be surprised if one or two of these innovators grow into a major retail force over the next few years,” Weinswig says.
Deborah Hazel Communications