Furniture retailers are grappling with the enduring perception of oversupply, despite a surge in consumer spending. In 2009, the United States witnessed a peak of 56.5 square feet of retail space per capita, yet this figure has since steadily declined to 54.3 square feet per capita, marking a 3.9% reduction. This shift has transpired alongside an increase in both population and retail spending.
The pandemic prompted a significant spending spree, with consumers elevating their spending on goods by 35% and services by 21% since February 2020, according to the U.S. Bureau of Economic Analysis.
However, this upswing in spending has failed to dispel the lingering oversupply perception within the retail sector. Retail construction remains subdued, and aging malls have undergone redevelopment, resulting in the demolition of more than 130 million square feet of retail space over the past five years.
In the furniture retail sector, retailers have managed to adapt to this challenge by maintaining inventory growth, albeit at a slower pace than population and spending increases. This highlights their adeptness at efficiently managing supply chains to balance inventory and demand.
While the shift in supply per capita impacts one market differently than another, in numerous top markets there has been a decrease in total retail space over the past 15 years, particularly in areas with robust population growth. In response, furniture retailers in these markets are focusing on optimizing their existing spaces.
Many furniture retailers are navigating the changing landscape by taking a consumer-centric approach.
Recognizing evolving consumer preferences, furniture retailers have invested in improving the in-store experience and embracing digital transformation. Technologies such as augmented reality (AR) and virtual reality (VR) have gained prominence, allowing customers to visualize furniture in their homes before making a purchase. This shift was accelerated during the pandemic as online furniture shopping gained traction.
They are also enhancing their supply chain resilience by improving forecasting, implementing efficient procurement practices and just-in-time inventory management, ensuring that they can manage inventory efficiently and minimize oversupply.
Lastly, furniture retailers are expanding their offerings beyond traditional furniture. They have ventured into home decor, smart home technology and services such as interior design consultations. This diversification not only meets changing consumer needs, but also presents opportunities to optimize retail space effectively.
While the furniture retailer sector is a part of the broader retail industry, it faces unique challenges regarding the perception of oversupply. Adapting to evolving consumer preferences, enhancing the shopping experience both in-store and online, and building resilient supply chains will be pivotal for furniture retailers to successfully navigate this evolving retail landscape.
Ben Haverty has more than 30 years of experience as an executive and entrepreneur in the furniture industry, operating retail stores, home delivery warehouses and regional distribution facilities. As the lead of Colliers Furniture Industry Service Team, he works with Colliers integrated real estate services to provide comprehensive solutions for every stage of the furniture industry supply chain.