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An inconsistent year at retail has case goods suppliers hoping that 2003 will see the release of the considerable pent-up demand that everyone agrees is out beyond the horizon.
According to the American Furniture Mfrs. Assn., wood shipments were up 4% to $11.3 billion in 2002. AFMA predicts a 4.4% increase in 2003 to $11.8 billion, which still would leave the industry in catch-up mode, since wood shipments totaled $11.9 billion in 1999.
That fairly conservative growth estimate is a good idea, considering that demand, while pent-up, isn't exactly straining to bust out of the calaboose. The same big- picture issues that affected consumers in 2002 — the war on terrorism, economic uncertainty and confidence-shaking corporate scandals — remain at the forefront in 2003.
Even the high end, usually more resilient against a soft economy, suffered this year from the effects of a plunging stock market that left wealthy consumers in an ill mood regarding expenditures such as furniture.
Big questions
Albert Prillaman, chairman of Stanley Furniture, said that with issues like the possible war with Iraq looming, forecasts are irrelevant these days when it comes to planning business.
On top of that, he has questions about disposable income, housing activity and consumer confidence, all indicators for consumer activity in furniture.
"We don't have any particularly good indicators for any of those," Prillaman said, noting that pent-up demand won't release until there's a clearer picture in the economy.
"My guess is you won't have a single trigger that releases demand in 2003," Prillaman said. "Maybe we'll look back after a few months and realize business is better."
John Wampler, president and chief executive officer of Pulaski, called the AFMA forecast "reasonable." Like Prillaman, he anticipates that any improvement in case goods sales during 2003 will be subtle.
"It looks like it might be one of those years with incremental gains," Wampler said. "It won't be sudden, but I think later in the year we'll sit back and examine it, and we'll realize that business has gotten better."
In the wake of the West Coast ports lockout earlier this year, import logistics remain an important issue for case goods in 2003. Wampler said the shutdown didn't affect Pulaski, which brings in most of its product to the East Coast, as much as some importers, but service is of special importance with so many suppliers getting involved in sourcing.
"You have to pick the right (freight) partner, use shippers who have the most critical mass, and be an important part of their business," Wampler said. "Lots of times you can get the bottom nickel, but then you might not get a container."
More importers are increasing their commitment to stateside warehousing, to supplement direct-container business.
"We haven't found it necessary to increase our warehousing yet since we already stock the best-sellers," Wampler said.
Imports also will continue downward pressure on pricing.
"The single biggest issue is deflation," Prillaman said. "It is more of an issue at retail than it is at manufacturing."
Tom Tilley, president of Pennsylvania House, also mentioned deflation "due to imports. Retailers will have to sell a lot more units to make up for the lower pricing they're dealing with and inconsistencies in service and quality that go to the bottom line."
Fresh designs critical
On the supplier side, imports shorten the shelf life of proprietary designs for furniture.
"It puts the onus on established manufacturers to bring out fresh ideas targeted to specific consumers," Tilley said.
The flip side of that downward price pressure is more value for consumers — if service and quality back up the price story.
"You're going to see a greater product/value relationship on an ongoing basis for the retail consumer," said Ray Allori, vice president of wood merchandising at Lane, which now imports all of its case goods. "A lot of the midlevel and even smaller independent retailers are starting to take advantage of that on a direct basis or through (distributing) companies such as ourselves."
Sourcing also fits strategies both for all-import suppliers and for manufacturers blending offshore product with domestic production.
"We're in the midst of restructuring to a middle price point range and a more casual lifestyle approach in our major collections," Allori said. "Country Living is the first example of that at Lane."
At Stanley, a mix of imports is helping gain market share in some unexpected areas like dining room.
"We see an indication that as we're styling up without trading up in price, a lot of people are coming to our looks, and imports help there," Prillaman said. "The youth business is still good, and because of demographics we see less fluctuation in our Young America program than other product lines. The real wild card for us is master bedroom and dining room."
While it may sound simple, the bottom line for success in the face of a slow economy, price pressure and rumors of war remains a focus on product.
"The consumer today is looking for new ideas and designs, and manufacturers are going to have to work harder at taking traditional designs and updating them for that customer," Tilley said. "Like it or not, we're a market-driven industry. Those companies who've successfully introduced product this year will be well positioned for 2003, but if you didn't have a strong market in October, you'll be hurting in April."
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