“The only thing we have to fear is fear itself.”
“…and zombies. It is good to be scared of zombies.”
Uncharacteristically, I’ve spent several months deciding whether to write this column, but I’ve spent a lot of time thinking about this and, heck, it is my column, so here goes….
Have the economic woes that affected other businesses affected the furniture industry? You betcha.
Americans spent $77.1 billion on furniture and bedding in 2008. To give this a sense of scale, we spent $41.2 billion on our pets in 2007. During the first half of 2008, furniture sales were down 9.3% over the previous year and, and in the just the fourth quarter, down 28%. As we buy more of our furniture at Wal-Mart or other non-furniture stores, sales in furniture stores dropped 11% for the year.
And these numbers play out in the details. Ethan Allen is closing their Pennsylvania upholstery plant. Shermag, in Canada, has stopped domestically making furniture (they made great maple pieces). More locally, Stanton International in Tualatin, OR, has closed their doors. Wickes furniture, a retailer in more than a dozen locations in California and Oregon, quit business. South Coast Home Furnishings Centre lost $63M in value and is in receivership. Underhill, a Seattle based business, is closing 4 stores.
Tempur-Pedic sales fell 35% in the fourth quarter (although they still had profits of more than $1M). Williams-Sonoma is cutting staff by 18% (that’s 1,400 jobs). Sealy reported a $42M loss last quarter (that’s 26.2%). Gottschalks, out of Fresno, filed for Chapter 11 bankruptcy. Mainstreet Delivery has filed for Chapter 7 bankruptcy. Macy’s is closing 11 stores. Yarn supplier R.L. Stowe Mills is closing after 108 years in business.
Not surprisingly, this is, in part, a side effect of housing sales. After bottoming out at 4.67M in 2008, single-family home resales are expected to rise to 4.84 in 2009 and up to 5.39M in 2010.
Not all the news is bad, of course. There’ll never be a government bailout of the industry, there’re too many players. Big fish eat little fish and the biggest businesses will use this opportunity to acquire smaller shops. Wolf Furniture opened a 24,000 square foot store in Pennsylvania. Knoxville Wholesale Furniture opened a 93,000 square foot store in Tennessee.
So, what’s the outlook? Analysts expect a 2% future drop in furniture sales in 2009 (to $75B) and a rebound in 2010 to $78.2B. Is it going to save you money? Probably not. There’s an expected .7% drop in the wholesale price which translates into a 1% drop at the retail level.
What’s my advice?
If you can afford it, buy it anyway. The dollars you hold in your hand are intrinsically worth less (because of inflation) as time goes on and, as interest rates drop, the interest on a savings account approaches nil. You might as well get something tangible for your money.
Shop smart. The internet offers oodles of opportunity to compare prices and to do your research to be sure you have the best options available to you. Compare not just price, but quality. If you plan on keeping your furniture for a while, be sure you’re considering the life cycle cost not just the sales price. Like my daddy said about buying tools, “life is too short to buy cheap tools”. Give consideration to buying used items; they really don’t make ‘em like they used to.
Buy local. It is your dollars spent locally that maintain the schools, roads and other infrastructure that makes Olympia a good place to live. Yes, you may spend a bit more for buying locally but the dollars stay in our community and make it better. When you shop with a local small business person, you’re dealing with a neighbor, and they’re likelier to give you good advice.
And, above all, don’t be scared. I haven’t seen any zombies.