Our industry rebounds after every downswing
Jerry Epperson -- Furniture Today, August 17, 2008
Take a moment and examine your competitive position. In every major city, we have lost furniture stores in the last three years, and not just the often-discussed Levitz, Bombay, Wickes, Leath, Domain, Storehouse and others. Thirty of 1998's largest furniture retailers, according to Furniture/Today, are now gone.
If anything, we have lost a higher number of smaller retailers, but not necessarily due to the economy or bad business practices. Some took advantage of real estate values and sold their stores while others retired. One large retailer who has no family in his business told me that unfortunately, he never paid any of his management enough so that they could afford to buy his operation.
If you are still around today, you have probably gained market share. When business improves you will not only see your prior customers return, but those who used to do business elsewhere — if you plan for it.
Those of you where the housing and credit problems are the worst — Florida, California, Arizona, Nevada, Michigan, Ohio, Maryland, Georgia, Massachusetts and Indiana — may see a somewhat slower recovery, but the rebound will be more noticeable and the opportunities larger. Remember, where home prices have fallen the most will likely attract the most new homeowners.
If you read the pessimistic articles about housing, they mention how many homeowners are “underwater,” with their homes no longer worth the existing mortgage. The truth is that it makes no difference unless you have to sell your home. If you stay another five or 10 years, you will be glad you stayed.
In some markets, home sales are off 50% from 2005 levels, but that also means 50% are still being sold. In every city, there are some neighborhoods or sections that are doing okay. There is no national housing market — housing is always local.
The large glut of homes for sale will likely keep prices down, keep values improving, and discourage homebuilders from constructing speculative homes, so new home sales may not recover until 2010 or 2011. But existing home sales can recover very quickly, and are doing so in some cities already. Remember, we sell three times as many existing homes as new homes every year.
Studies have shown that housing turnover is responsible for only 20% of furniture sales, even in the best years. Eighty percent of our sales have nothing to do with housing!
We recognize the bunker mentality is prevalent today throughout the furniture business, but after every economic downswing our industry has experienced since World War II, we have rebounded to new highs. Sometimes the first year after weakness is up substantially as seen in 1972 (+13.4%), 1977 (+15.9%), 1983 (+13.3%), 1993 (+7.7%) and 2004 (+7.8%).
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