Reasons for caution when marketing to millennials
Thomas Russell -- Furniture Today, August 5, 2013
For years, furniture resources have tailored their product mix to address smaller scale living spaces ranging from town homes to condominiums. These have included Aspenhome, Durham Furniture, Magnussen and Stanley, which have developed smaller scale bedroom and/or dining collections targeted towards urban settings or second homes with smaller bedrooms and dining areas.
Others, such as Magnussen and Legacy Classic, have tailored their youth mix with fashion forward bedrooms that can work as easily in a youngster's bedroom as they can in a second or guest bedroom.
The trend continued at the Las Vegas Market as Aspenhome, Standard Furniture, SEI, Somerton Dwelling and Aico each presented smaller scale collections geared to today's smaller living spaces. Obviously these companies are responding to demographics indicating there is huge growth potential among younger Americans who need this type of furniture.
Despite these growth opportunities, there is reason for caution when approaching this market. Millennial consumers certainly represent one of the fastest growing segments of the market population wise. Yet they also are among those hardest hit by the recession. Not only are they faced with record amounts of student debt, they are among those who have had a hard time finding good jobs that are essential to buying a house.
A recent report in the Wall Street Journal noted that couples in their late 20s and early 30s have only represented 30% of home sales in the past year. That compares to an average of 40% of sales over the past 30 years and 50% of sales in 2009, when they could take advantage of first-time home buyer tax credits, the paper reported. One reason for the lag is that they don't have enough cash to bring to the table and are thus being pushed out of the market by investors. This is particularly true in markets such as California, Arizona, Nevada and Florida, where a rebound in homes sales is driven largely by investor purchases.
More and more young people also have weaker credit scores, or are unemployed or underemployed. Many, too, are living at home with their parents as they try to save money for their first home.
This isn't to say millennials are not important to the furniture industry. It just means that their purchases could be delayed by a few years. Those who are buying now could likely be more price sensitive than ever, a factor that could drive them to big box stores such as IKEA, Wal-Mart or even Target along with online resources that offer competitive pricing.
Fortunately, the housing market seems to be rebounding. But right now, younger people may not be a big a part of the market as the industry suspects. That shift could bring challenges in the months ahead.