Furniture offers different advantages such as sleeping, seating, dining and storage function. Furniture products are vital parts of office and home layout. Furniture products are manufactured in different designs depending upon the end uses with different machine-based processes and handcrafting.
This article gives an outline of the current state of U.S. furniture, the changing nature of the U.S. consumer and the trouble making players of the furniture industry. The U.S. furniture industry has maintained a healthy growth rate and a continued improvement in the labor quality after the recession. People born between the year of 1974 to 1995 cover the larger age group in the society and approach to the furnishing differently than the older generations.
The global market for furniture is growing at a considerable CAGR. The growth of the furniture market is mainly due to the growing demand for luxury and premium furniture. Additionally, rising government investment in infrastructure development coupled with growing urbanization is anticipated to enhance the growth of the global market for furniture. Increasing penetration of technology in the furniture manufacturing process is attracting the new entrants to invest in the global furniture market.
"The global furniture market was valued at around USD 331.21 billion in 2017 and is expected to reach approximately USD 472.30 billion by 2024, growing at a CAGR of around 5.2% between 2018 and 2024."
With the growth in GDP and a healthy employment market, the U.S. furniture market has continued to gain progress to improve its financial crisis. The improved economic environment has been particularly favorable for consumers, who got increment in their salaries and wages with the economic recovery. With the growth in the GDP of the U.S. housing market, home sales and new home construction have been on the rise. However, the growth has not been as significant as compared to the GDP growth in 2015.
New home sales showed instability in terms of growth and declined unpredictably in September 2015 only to bounce back in recent times. The indicator rose by 9.9% year over year in December, to 544,000 units, which is still low by historical standards.
The existing home sales ratio improved in December, to 5.46 million units, representing a solid growth of 7.7% annual increase. The pace of sales increases hovered around 10% during the second and third quarters of 2015.
Millennials, who have taken over baby boomers in terms of the age group in the U.S, have not been capable of being successful homeowners as the previous generations did. The number of people between the age group of 18-34 has increased to almost 3 million since 2007, but the number of millennials living independently has decreased constantly over the years. According to the researches, in the first third of 2015, about 42.2 million millennials, or approximately 67% of the age group, lived independently of their families. In 2007, the number was about 42.7 million, or 71%. And the number of millennials heading their own households was 25.0 million in 2015 versus 25.2 million in 2007. A study done by Home Depot shows that among millennials, 57 percent view ownership as an important goal as compare to the 38 percent of Gen Xers and 34 percent of the baby boomers.
The recovery in the U.S. housing market has lead to an increased sale of furnitures over the past few years. The sector sales jumped to an increase of 13.8% in value since December 2015. The furniture and home furnishings stores have grown better than other clothing and departmental stores. In the last two years, the sales of the furniture products have outmatched the departmental and clothing products by 16.6 percent and 10.7 percent, and it is predicted that the furniture market will continue to outpace the other retail trade businesses for the next three years.
There is no questioning the fact that millennials are continuously failing to start a household but they show a great determination in terms of spending on Furniture goods. The Consumer Buying Trends Survey conducted by the Furniture Today found that millennials have become the largest consumer group in the US furniture and bedding market. In 2014 millennials represented 37 percent of the Furniture market as compared to 14 percent in 2012. However, millennials having lower average disposable incomes fail to spend as much as the baby boomers in the Furniture marketing arena. Millennials represent 28 percent of the total spend compared to the 36 percent spent by the baby boomers.
A closer look at the actual dollars spent provides a clearer picture, why millennials are becoming important to furniture retailers. Between 2012 to 2014, the group's spend increased from $11.1 billion to $27.0 billion. Gen X consumers similarly spent more on furniture over that period, increasing their expenses by 43 percent. Baby boomer remained at the top of the lists with 34.7 billion, but their transaction declined by 17 percent as compared to the last two years.
The US furniture market was likely to reach $96.4 billion in 2014. Furniture Today shows that the Furniture market will grow at a CAGR of 2.9% between 2015 and 2019, reaching $111 billion in 2019. The industry has become less incoherent over time as the major 100 retailers have taken market share away from the remaining marketers. The top 100 represent 79% of the industry’s revenues, according to Furniture Today, while eight years ago, before the recession, they accounted for 59% and furniture stores now number around 23,000, down nearly 20% from before the recession, largely due to growth in furniture e-commerce and the optimization of distribution networks.
In terms of product segmentation, living room furniture accounted for the bulk of the furniture spend in 2014, comprising 40% of sales, followed by bedroom furniture at 33%. Traditional stores were the main distribution channel for furniture in 2012 and 2013, even though they lost 2% market share to the direct-to-consumer segment during that period.
As the biggest furniture retailer in the US, Ashley Furniture maintained its top position as a manufacturer in 2014, followed by La-Z-Boy and Klaussner Furniture Industries. Sauder Woodworking and Dorel Industries, which are big players in the ready-to-assemble segment, were fourth and fifth, showing very strong, high-single-digit growth in shipments. Two other companies showing notable improvement in 2014 were Standard Furniture and American Furniture Manufacturing, both of which increased shipments by over 20% year over year.
The growth prediction of the U.S. furniture industry and home furnishings has drawn a host of innovative companies to the industry such as Hem (which was started by the founder of Fab.com, Jason Goldberg) to more niche retailers such as Campaign (which builds no-tools-needed furniture that is ready for assembly), startups are entering the space with innovative solutions and strong financial backing. E-commerce sales are growing at double-digit rates as a result, and they represent a big opportunity for some retailers—but a threat for the furniture marketers.
The expectations from the U.S. furniture market is positive in the upcoming years as the industry is having a continuous and constant growth in the past years. Larger furniture marketers saw their revenues growing at a much faster rate as compared to the overall industry's growth rate in 2014. The trend is likely to continue in the upcoming years, which means the rebalancing of revenues toward the top portion of retailers will continue. Consumer behavior is changing, due to the rapid growth of the millennial generation as the largest consumer group in the market. With the adoption of new technologies, the shoppers across the board are more attracted and more willing to purchase digital devices. E-commerce sales are growing at a more rapid pace as, and represent a big opportunity for some retailers and an equal threat to others. The landscape is becoming more dynamic and new startups are emerging with innovative products and solutions. Our view is that larger marketers will rise to challenge those startups present, but there are chances for some new innovators to grow over the next few years.