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ORLANDO, Fla. — One of the most talked-about sessions at the National Home Furnishings Assn. convention here was the panel on "Where are we going?"
Joe Carroll, publisher of Furniture/Today, moderated the session, and four industry veterans talked about immediate and long-term opportunities for the industry.
Jerry Epperson, an industry analyst. investment banker and Furniture/Today columnist, examined the aging of the baby boomers, predicting this decade will be the best ever for the furniture industry.
Ellen Gefen, whose video production company, Gefen Productions, provides promotional services to furniture companies, talked about the increasingly diverse market for home furnishings — and the furniture industry's poor record in reflecting that diversity.
Jeff Young, former president of Lexington Furniture and currently a furniture importer, looked at the expanding role of imports and how they have changed and will continue to change the landscape.
Jim Gabbert, from the Top 100 store that bears his family's name in Texas and Minnesota, talked about how he expects retail to evolve over the next several years.
A boom, a bust, an echo
From a demographic perspective, the next several years will be the best opportunity for the furniture industry to make hay, Epperson said. "Home buying by the baby boomers is going to peak in about 2006," he predicted. "Right now, we boomers are hitting our peak earnings. We're coming into our inheritances."
With 77 million people between 38 and 56 years old, this post-World War II cadre dwarfs the next demographic group, numbering 44 million. "There aren't enough Generation Xers to hold up the boom," said Epperson, managing director of Mann, Armistead & Epperson.
Still, all will not be lost when the boomers age out of furniture buying, he added, but the market will shift, with the echo boom, about 80 million strong currently aged 4 to 23, entering the market. "We'll have another boom market in 2010, but it will be for the first of everything," he said. "The high end will be hit hard."
A diverse opportunity
While Epperson focused on demographics, Gefen contrasted the homogenous nature of the furniture industry with the increasingly diverse ethnic and religious backgrounds of the U.S. population.
She said the issue is larger than simply hiring and promoting more women in the industry. "It's not just about women," she said. "It's about diversity. We're still not seeing it in this industry."
African-Americans, Hispanics, Asians, Jews, Muslims and others represent significant opportunities, but they will not all respond to the same marketing messages, Gefen said.
"What are you doing to market your products to people of different languages?" she asked. "Are you making assumptions about people that you shouldn't be making?" The ability to make appropriate appeals depends greatly on a company's commitment to hiring staff who are diverse in race, religion and gender, Gefen said.
Companies that treat any group as if they are second-class will fall behind, she predicted.
Imports will "follow the wood"
Historically, said Young, owner of Jeff Young Designs, furniture manufacturing always has chased low-cost labor, explaining how China has catapulted from about 1% of U.S. furniture imports little more than a decade ago to nearly 20% in 2000.
Over the past seven years, Chinese manufacturers have learned and earned a great deal, and they will undoubtedly be "a force to be reckoned with" for the foreseeable future, Young said. However, international sourcing "is not going to solve the industry's problems long-term," he said.
In fact, imported furniture is starting to look more like a commodity to Young: "It'll never be a true commodity, I think, because it's a form of art. But a lot of it is starting to look alike." He said a single Chinese factory is turning out case goods for several major U.S. brands. "It's coming out of the same plant, and it's coming off the same finishing line," he said. "Of course, it looks similar."
The move to China and other countries was based on labor savings. "The next migration, which will probably occur in the next five years, will follow the wood," he said.
That would be good news for Canadian factories, assuming the exchange rate stays fairly steady. "Canada has a wonderful supply of wood, and most of the manufacturers are vertically integrated," he said.
Young cautioned retailers and domestic importers to keep an eye on international politics, which are more volatile now than at any time since 1939. "Don't get caught with all your eggs in one basket," he said.
A new retail landscape
Retailing has survived for thousands of years and will continue to survive, even thrive, said Gabbert. But it also will continue to evolve.
Successful retailers will be either price leaders, vendor-based franchises or stores providing a superlative customer experience. "You have to be on one of those roads, or your future could be in doubt," he said.
Gabbert predicted that consumer demand for perfection will increase, new kinds of competition will emerge, and more competition will develop as store square footage continues to increase. Also, the fight for consumer attention, time and money will grow tougher. Consumers will want it now or faster, even custom orders.
He also sees more supply chain integration and improved information technology.
And although Gabbert would like to see them, he thinks a few things won't happen. That includes a focus on GMROI rather than just gross margin, one High Point market a year, all-industry marketing, advertising that promotes benefits and romance rather than price, suggested retail pricing that is consistent ("I think our credibility is shot with the consumer") and product quality that doesn't "require retailers to finish or re-engineer the manufacturing process."
| The "Where are we going?" panel featured Jerry Epperson, left, Mann, Armistead & Epperson; Joe Carroll, Furniture/Today; Ellen Gefen, Gefen Productions; Jim Gabbert, Gabberts, Minneapolis; and Jeff Young, Jeff Young Designs. |
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