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We have quite a story to tell about our prices
As everyone prepares for the Las Vegas Market with expectations of exciting and new opportunities for 2013, everyone will inevitably and eventually get to the issue of price.
Price? This is the most complicated issue of all because we are not selling commodities. Even if the products are similar, there are delivery costs, timing issues, exclusivity considerations and, of course, service. How consistent is the quality? How are damages handled? There are many considerations you must evaluate.
But this is not what we want to discuss. The home furnishings industry remains one of the most entrepreneurial in the U.S. In most cases, there is a low cost of entry and our product and price diversity is so great, there are a multitude of niche markets. We have hundreds of sources for the many home furnishings products and thousands of retailers serving millions of consumers.
The result is extreme price competition. Doubt it? From 2000 to 2011, prices for all consumer expenditures rose an average 22%, but home furnishings prices fell 14.2%. Funny, but all consumer prices would have risen more than 22% had not home furnishings prices helped keep prices down.
Are our labor, advertising, occupancy, raw material, health care and transportation costs declining while everyone else's are rising? Of course not. Have imports impacted our prices? Yes, but other industries have imports too.
Do we get credit for holding prices down? Truthfully no, because we do not educate our consumers and they purchase our merchandise so infrequently that price changes are often not recognized.
But what about the lost sales? In 2000, our home furnishings, including floor coverings, were 1.7% of all consumer spending in the U.S., but in 2011 were only 1.2%. If we were to remove all price changes - up and down - and count everything in constant 2005 dollars, our share of consumer spending rose from 1.4% in 2000 to 1.6% in 2011.
Yes, if we had raised our prices at the average level of all consumer expenditures over the last decade, our sales would be 40% above current levels. Can you imagine what that would mean to our profits and the value of our businesses?
No, I am not suggesting across the board price increases, but I am encouraging our sources and retailers communicate this value story. Perhaps instead of some imaginary "suggested retail price" we could show a leather sofa selling for $1,299 today would have been above $2,000 a decade ago.
Have fun in Las Vegas! (How can you not have fun there?)