An Insider's View


The I’s have it: Imports, inflation having their impact

November 6, 2017

Do you ever feel like you are running in place? That can be explained if you are selling furniture. Truthfully, we are selling more units for fewer dollars, and sadly those more units have other costs like warehousing, inventory costs, transportation, home delivery and more, so fewer dollars can be really painful.

But inflation has been running at minimum levels in the past 15 years, hasn’t it? Yes, generally speaking, that is true and one major reason interest rates have stayed low as well.

Our problem is larger. We went back into our studies and looked at the 1980s. Back then, imports accounted for less than 20% of all furniture sold in the U.S. as compared with 85% of wood furniture and 45% of upholstered furniture today. We had more SKUs and larger collections because of domestic sourcing and less global logistics. Inventories could be controlled with a phone call to a vendor, and big stores bought truckloads.

But throughout the 1990s and 2000s, imported wood took a larger share of the U.S. market. Wood products were restricted for a while by raw material, rubberwood and other minor Asian species, but when America got so hooked on Asian-sourced everything, the gloves came off.

Empty containers going West offered a cheap way to source North American lumber so the Asian factories could now compete with their strengths — low labor costs, less governmental restrictions and other factors — using American hardwoods. It gave them access to the upper-middle and higher priced markets.

Today, the imported middle and upper-middle priced wood furniture — with hand carvings, complex veneer inlays, hand-rubbed multi-coat finishes — is essentially our new “high end.” This change in the product mix gave us more units being sold at lower prices, and the cycle continues.

Upholstery is quite different, and we can document why. The shift has been more subtle and high-end remains the beneficiary of the upholstery category’s ability to customize almost every feature. Yes, the Asian factories have made large inroads into mass-produced upholstery, but the market segments remain largely as they were some decades ago.

No, it wasn’t inflation, but get ready. Inflation is rising in many subtle ways. The most obvious is the more than 6 million unfilled jobs (the most ever), jobs for which salaries will have to be increased to fill those positions.

The other way is Subway’s “$5 foot-long” is now $7, a 40% increase. The company are masking it as a great deal on a “$3.50 six-inch” sub, but we furniture folks are too smart for them.

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