HIGH POINT — The Federal Reserve’s decision to slash interest rates by a half percentage point on Wednesday has created hopes that consumers will be soon more willing to open their wallets. But will they be throwing their cash at big ticket items such as furniture just yet?
For GigaCloud Technology, an end-to-end B2B solutions provider for large parcel merchandise that employs a supplier-fulfilled retail model, the possibility of increased spending on the part of consumers is just one of several factors it is considering in its medium and long-term planning.
“It’s a good thing for consumer spending. And I think that the interest rate will probably stay low for quite some time,” CEO Larry Wu told Furniture Today.
Alongside potentially improving macroeconomic factors, Wu pointed to several realities in the industry that should also be taken into account. “Everybody in our industry that is really sensitive to consumer spending needs to understand that we’re pretty much on our own if anything goes wrong. I think there’s something way more fundamental than just the interest rates that companies really need to look at.”
Wu believes that the furniture industry’s “highly fragmented” nature creates unique challenges for each company based on their position in and share of the market, meaning that the rising tide of consumer spending might not lift all boats equally.
“But by focusing on the fundamentals (such as efficiency in the supply chain) and being realistic, companies can be in a better position to grow,” he said. “We’re encouraging people to look deeper because we see that a lot of people are not aware of inefficiencies and potential risks.”
GigaCloud’s interim CFO Erica Wei stressed that supply chain risk is something that the company has already factored into its planning.
“For ocean freight, we do have a number of fixed rate long-term contracts that we’re starting to utilize, starting in Q3. We didn’t really see many of the benefits in Q2, but those are contracts that will carry us for a year at a time,” she explained.
Wei believes that GigaCloud will be in a good position to meet potential challenges and capitalize on opportunities created by greased consumer spending due to the flexibility of its model.
“The idea is to always stay agile. It’s choices that give you leverage; leverage gives you an advantage. So how flexible are we when changes occur? That applies to a number of things,” she said. “The hardest one to move is the location of the supply chain. That’s not something you can change overnight. When it comes to things like labor or other expenses, luckily, we’re a lot more flexible with structure we’ve built for ourselves.”
Whatever the impact of the Fed’s move on consumer activity may be, Wu urged using a realistic standard of comparison to gauge success in growing sales.
“Those glory days during COVID seem to be some kind of norm that everybody is trying to bring back. They will never come back,” he said.
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