Big Lots’ recent Chapter 11 filing, coming as it did on the heels of an even more dire outcome for Conn’s and Badcock, highlights the ongoing softness at the promotional end of the furniture business.
Lower income consumers have been among the hardest hit by the latest wave of economic challenges, which have seen prices for housing, food and basic household commodities rise substantially over the past three years. While there’s been much discussion about consumers reallocating discretionary spending away from home and toward experiences, such as restaurants and travel, for lower income consumers that reallocation has been toward necessities.
As a result, the promotional and lower-mid segments of the furniture business have been challenged by continuing softness. At the same time, the plight of economically challenged consumers is not improving. According to a recent report from the Federal Reserve’s Center for Microeconomic Data, the percentage of credit card debt sinking into serious delinquency (90 days or more) rose to 7.18% in the second quarter of this year, up from 5.08% for the same period of 2023.
At the same time the number of aggressively priced offerings from factories selling through Amazon marketplace has exploded, severely undercutting furniture stores’ ability to profitably match prices and exerting additional pressure on the traditional promotional store business.
A recent Amazon search for “sofa” for example turned up these results:
- Shintenchi 79-inch convertible sectional sofa: $259.99.
- Yeshomy Convertible sectional sofa U-shaped couch: $459.99
- Ucloveria sectional sofa couch 87-inch sleeper sofa bed with reversible storage chaise pull out couch with side pocket charging station: $399.99
This is just a quick and brief search, but it reflects a growing trend on digital marketplaces, where aggressive factories are hitting price points that make it difficult for more traditional models to compete.
When there was similar activity in the bedding business not that long ago, it began pushing many more established players toward mid-tier price points where higher feature and material levels could support the pricing.
The combination of cash-strapped consumers and the proliferation of aggressively priced competition is making the promotional segment a far more difficult place for mainstream players to compete. As a result, there has been a significant increase in the number of companies talking about stepping up to address the so-called “middle” market with some even talking about extending into mid-to-high price segments.
While consumers who traditionally shop this segment are likewise challenged by higher inflationary costs, there appears, at least anecdotally, to be a move by traditional upper-mid and high-end consumers to trade themselves down in a search for savings.
The result, at least from early conversations heading into next month’s High Point Market, is a growing number of introductions focused on step-up segments and less activity at promotional price points. Heading into 2025, it portends an increasingly crowded and competitive marketplace, with even more focus on capturing market share than we’ve seen over the past 12 to 18 months.
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