Just as with the year before it, 2023 was a challenging year for the furniture industry. New problems reared their head this year, while other issues continued into the year from 2022.
Here are five of the biggest issues the industry faced over the year:
Tip-over standard
On April 19, the U.S. Consumer Product Safety Commission voted that the previously voluntary ASTM furniture tip-over standard met the requirements of the STURDY Act, which was passed late 2022. STURDY had directed the CPSC to adopt a mandatory safety regulation standard for clothing storage furniture.
While largely in favor of the ASTM standard becoming mandatory, the industry was confused at the time, as a separate tip-over standard had been published in the Federal Register late November 2022. This rule was more complex and was met with resistance from industry groups such as the American Home Furnishings Alliance.
The rule was set to go into effect May 24 but ended up being superseded by the ASTM standard under the STURDY Act. The industry breathed a sigh of relief, as manufacturers had been scrambling to meet the quick May deadline. Manufacturers had a better understanding of how to meet ASTM’s requirements and had until Sept. 1 to do so.
Now, as 2023 draws to a close, preparing for the changes required by the standard is largely in the rearview mirror.
Too much, too little inventory
Through most of 2021, retailers were buying anything they could to keep up with demand, as well as to make sure they had product on-hand amidst the severe supply chain delays and disruptions happening at the time.
Then as 2022 hit, with improved supply and less demand, retailers found themselves with too much product. To make matters worse, much of this product was purchased at a much higher price, as ocean container rates were soaring at the time.
While improved from 2022, the issue has not resolved fully in 2023.
“There is little that is more worthless than obsolete case goods inventory,” said Andy Bray, president of the high-end domestic furniture manufacturer Vanguard. “Many of the companies that are going under have choked to death on overvalued inventory and debt.
“In some cases, the freight was more expensive than the furniture,” he added. “No retailer is willing to pay for a manufacturer’s inventory mistakes, nor should they. By the same token, retailers need to shed their excess inventory, regardless of what it does to the balance sheet. It will never be worth more than what you can sell it for today. Likewise, no retailer should pay inflated prices to cover a manufacturer’s debt.”
Housing sales, shortages
Issues in the housing sector – notably low home sales and housing starts – are becoming increasingly apparent as 2023 comes to a close. The issue is more potent for case goods manufacturers, as case goods typically last longer than upholstered items and the sale of items such as bedroom furniture often depend on having a new bedroom to put it in.
“There are headwinds, and we know what they are: high mortgage rates,” said Doug Bassett, president of domestic case goods manufacturer Vaughan-Bassett in November. “Home startups are important for the bedroom category in particular because bedrooms don’t wear out. We need the creation of new bedrooms and housing starts. Our whole industry would be greatly helped by lower inflation and interest rates.”
Last month, Ashley Furniture CEO Todd Wanek also cited issues in housing as a problem for the industry, but he offered some optimism.
“We do have a 13-year low of housing starts,” he said in a webinar with the Home Furnishings Assn. “In 2021, 7 million homes changed hands. In 2023, that’s down to 4.9 million. That does impact home furnishings. As an industry, we’re about six months behind those housing starts. Maybe there’s a bit of headwind there, but there’s also this tailwind of Millennials coming in. They’re moving out, getting married and having kids.”
Data from a few of the nation’s largest homebuilding and realty organizations lend weight to the severity of the issue. Mortgage rates averaged 7.62% in October, according to the National Assn. of Home Builders, the highest number seen since 2000. Elevated rates depressed buyer demand for the month, the group said, as well as pushing down new home sales.
The same issue is being seen for existing homes. In October, sales fell year-on-year in all four major U.S. regions. Month over month, sales fell in the Northeast, South and West, while seeing no change in the Midwest.
A year with layoffs and shutdowns
This was a rough year for the industry when it came to layoffs and company shutdowns. As of May, the industry had already seen at least four major bankruptcy filings, six shutdowns and more than 21,000 laid off workers.
Some of those included Serta Simmons, which filed for Chapter 11 in January; retailer Tuesday Morning, which entered its second bankruptcy filing in February; online retail giant Wayfair laying off 10% of its total workforce at the beginning of the year; and MillerKnoll, which announced the shuttering of a Wisconsin factory and the laying off of 162 workers.
Then later in the year came two shutdowns that shook the industry. In early August, Klaussner Furniture abruptly went out of business, laying off nearly 900 employees. That same month, North Carolina upholstery giant Mitchell Gold + Bob Williams closed its doors. Both cited a sudden removal of funding from their banking lender as reasons for the closures.
Consumer demand remains sluggish
This is the core issue for the industry and, apart from the tip-over standard, is connected to each of these other issues.
The industry saw record demand in 2021 and into the beginning of 2022 before coming to what seemed like a screeching halt. Inflation came, and the economy worsened. Since then, demand for furniture has generally been in decline.
For the 13th month in a row in November, the U.S. manufacturing sector has shrunk. According to accounting firm and furniture industry analyst Smith Leonard, furniture orders so far this year are on par more-or-less with 2022, which in-turn were 16% down from 2021.
“Incoming business seems slower, and some would call it spotty, giving you the feeling from time to time that business is starting to level out to more normal levels, and then it slows down again,” Ken Smith, Smith Leonard’s founding partner said in early December. “All the national economic news, for the most part, continues to say that we are still going to have at least a mild recession, if there is such a thing. Some of you have said your company is already in one.”
Ashley’s Wanek said in the November webinar that consumers of all income levels are trading down.
“66% of consumers in the marketplace are under stress,” Wanek said. “That’s a lower income customer typically living in a rental house. Rent has skyrocketed over the past three years. With inflation, food prices, etc., they’re more price conscious than ever before. They might end up in a Rent-A-Center or something like that before walking into a furniture store. I’m not saying they’ve disappeared; they’re just smaller than they were before.”
“The middle market and high-end are trading down as well,” he continued. “They’re trading down a price point and are much more price sensitive. Even some retailers that I talk to tell me they’re seeing Restoration Hardware customers walk into their stores. They’ve never seen it before. That tells you customers are looking for value and are very price conscious and more than ever before. They want to make sure they’re getting a good deal for their money. There’s a trade down happening in every price segment of the marketplace.”
These certainly weren’t the only issues the furniture industry battled through the year. Email me at rdalheim@furnituretoday.com if I missed anything important.