Furniture businesses have dealt with more change in the last couple of years than in the previous two decades.
The sharp rise in inflation and the persistent issues with global supply chains continued to add pressure on businesses. On top of that, the strong economic and social headwinds had a significant influence on consumer confidence.
To help you navigate the competitive landscape, we took a closer look at the latest economic developments and analyzed the potential impact they could have on the furniture industry. Let’s dive in.
The e-commerce boom catalyzed by the pandemic has brought excitement to the digital world. E-commerce as a share of total retail sales had significant growth, which forced businesses to invest more time and money into boosting their e-commerce channel. Now, as the dust has settled, there’s a sense of slowdown, when in fact, e-commerce has continued its growth to the pre-pandemic pace.
Zooming into the furniture e-commerce realm, in 2023, the United States was the biggest market for furniture e-commerce worldwide, with estimated revenues exceeding 90 billion U.S. dollars. China ranked second, with furniture e-retail revenues reaching approximately 45.8 billion U.S. dollars. According to Statista, a fifth of global shoppers were purchasing home and garden products online on a monthly basis. Data shows that the highest user adoption of furniture e-commerce was in the United States, where 31% of shoppers were buying household furniture online on a monthly basis.
Consumers’ shift to digital has accelerated dramatically — especially in the furniture industry. Unlike in the past, when online browsing was more like window shopping, today, most customers searching for furniture products online are ready to buy. Data from Searchmetrics shows that almost two-thirds (62.3%) of searches in the furniture sector are transactional.
The European homeware sector is a €40 billion industry, dominated by living and dining room furniture purchases, which account for €13 billion of these sales, according to the RetailX European Homeware 2023 report.
The homeware sector witnessed dramatic growth during the pandemic when 40% of European consumers invested in their homes. And while the surge had started to correct itself by 2022, the market is now more than €10bn larger than it was in 2019.
It’s interesting to note that e-commerce constitutes only a quarter of the sector’s revenue, which means there is still a lot of room for growth. Users are now increasingly comfortable buying online, which can be seen from the fact that one-third of the homeware online revenue comes from purchases made using mobile devices.
Economic instability and higher interest rates are the top-of-mind issues for furniture retailers as they transition their businesses into 2024, according to a recent TD Bank survey.
Results showed that 64% of retailers cited economic uncertainty as the biggest concern. One-third of the respondents identified interest rates, while about one-fourth cited price increases from suppliers and inflation as issues their businesses would face in the upcoming year.
During the pandemic, supply chain bottlenecks collided with high demand, and as a result, furniture businesses struggled to meet the increased appetite for household goods. However, after the initial excitement and shopping craze, consumer spending has shifted due to uncertainty on a global level, leaving retailers with excess inventory. After the disproportionate waves of (first) demand for furniture and later supply (due to excess levels of inventory), things are starting to look up.
According to Maison&Objet Barometer, both brands and retailers have normal inventory levels compared to 2022.
And while the supply chain has stabilized, the number of blank sailings has been fluctuating throughout 2023. As reported by XChange, blank sailings peaked at 21% early in 2023 but dropped to 7% in October 2023, indicating industry stabilization.
The reason? Carriers are canceling vessels because they’re not full. So, while there’s no visible threat with freight rates because of supply and demand, containers may show up a couple of weeks late, according to Ashley CEO Todd Wanek.
There’s no doubt that the world is in a complex economic situation. Furniture players have already felt the impact of the changing business landscape. The question is whether there’s a place for optimism.
According to a TD Bank survey, furniture businesses remain optimistic about purchase volumes. Results show that 63% of retailers surveyed believe that home furnishings purchasing will increase or remain steady in 2024.
According to industry experts, one of the biggest panic triggers is the fact that furniture businesses compare their results with 2020 and 2021, which were an exception when the home became a central point in people’s lives because of the lockdowns. To make realistic forecasts, businesses need to look back at 2019 and adjust for a price increase.
Success in furniture — or almost any line of business in a digital-first world — depends upon technology. And furniture brands and retailers are aware of this. According to a recent Forrester study, the appetite for emerging technologies is high. Results from the study show that 52% of furniture businesses are planning to adopt augmented reality (AR) in the next 12 months, 59% of furniture businesses are expanding the use of 3D product visualization, and 78% of furniture leaders see AI for customer support as impactful on sales.
The news about the macroeconomic outlook continues to dominate the headlines. And while some businesses are waiting on the sidelines, others are moving decisively and quickly to develop a response.
Companies are already expanding their horizons to capture future growth opportunities, with the understanding that bold steps now can increase the potential to lead in the future.
Results from a TD Bank survey show that 50% of retailers said they were planning to expand their product offerings, 19% are thinking about store redesigns, 16% will be hiring more staff, and 13% are considering vendor changes.
We took a closer look at the developments in the furniture industry to understand what leading furniture companies are doing now to prepare for 2024 and beyond. Here are the takeaways:
Furniture businesses are bullish because of an upcoming tailwind: Millennials. Despite the housing market challenges, Millennials will be the driving force for years to come. According to the 2023 Profile of Home Buyers and Sellers, published by the National Association of Realtors (NAR), the typical first-time buyer was 35 years old (the second-oldest age in four decades of NAR’s data).
However, after falling to a record-low 26% of buyers in 2022, first-timers made a comeback in 2023, comprising 32% of sales.
Although all generations are feeling the impact of the economy to a similar extent, Millennials and Gen Zs are more likely to take an optimistic view of the economy and its potential impact on their future spending, shows The 2023 Consumer Spending Report by Klaviyo and Qualtrics.
As reported by Furniture Today, younger generations account for a significant portion of furniture purchases, with 7 out of 10 purchases made by Gen Z and Millennials. According to the same research by Snap Finance, the average furniture consumer has an income of $50-75K. When it comes to decision making, 51% of furniture purchases are solo decisions made by women.
What does it mean for furniture businesses?
Tapping into the buying power will require some adjusting. Millennials are tech-savvy, and they digest media differently. As a digital native generation, they are prone to online shopping. Furniture businesses that want to capture Millennials and Gen Z's attention have to:
The rapid digitization of commerce has completely transformed customers’ expectations. To cater to their needs, retailers are improving the e-commerce experience to meet customers where they are.
The British furniture retailer Sofa Club puts style-savvy customers and their needs at the center of the business. The way people shop for furniture has changed. Sofa Club transformed its business to deliver a seamless shopping experience.
“For most people, buying a sofa is going to be one of the biggest investments of their year; this is something they will be living with for years to come. Historically, a large percentage of consumers want to touch and feel a sofa in person before committing to the purchase online; however, we have seen this behavior shift dramatically post-COVID. Our focus is now on delivering an outstanding online experience with our products and providing the customer with enough information, content, and technology that gives them the same level of confidence as seeing it in real life. Social proof has also become more important than ever, and we are working hard to ensure potential customers are aware of feedback from existing customers through reviews and user-generated content.”
- Louis Rose, Founder, Sofa Club
What does it mean for furniture businesses?
Put your online shopping experience on top of your priority list. Make sure customers have a seamless shopping experience as they navigate through your website, from your product feed and product listing pages to the recommendations and checkout page—reassure customers they are making the right decision. Some action points that can help in this process:
Furniture retailers have finally realized there’s no room for legacy website experiences and platforms never designed with our digital age in mind. Retailers will need to move beyond the current 2D focus of e-commerce to prepare for a more social and immersive future of shopping.
The need for fresh content across different platforms has hit an all-time high. Furniture brands, on the other hand, have been struggling to balance between the amount of content they produce and the total costs. With 3D technology, businesses can create 3D lifestyle imagery at scale without breaking the bank.
The UK design-led furniture brand Swoon Editions uses 3D technology to showcase its products in context and at scale with customizable lifestyle imagery. The ability to easily generate and iterate upon photorealistic lifestyle imagery allows Swoon to serve a wide range of photorealistic content in their email marketing campaigns, social media, product feeds, and many other touchpoints.
“Cylindo has been transformational for Swoon in terms of how we distribute our digital content. Prior to the partnership we were expending lots of time and effort producing hundreds of photographic images across multiple digital channels. Now we can design, produce and push content to our website in a matter of weeks, greatly improving efficiency whilst maintaining consistency. The 360 viewer, 4K zoom, and lifestyle imagery features allow us to serve a wide range of interactive content from a single 3D asset which aims to both inspire and manage our customers' expectations seamlessly.”
- Josh Rushby, Head of Marketing, Swoon
What does it mean for furniture businesses?
Furniture businesses that want to get ready for the new chapter of furniture shopping have to embrace 3D product visualization. In 2022, Google introduced 3D visuals of home goods to its search function. The results show that shoppers engage with 3D images almost 50% more than static ones. Moving forward, 3D product visualization will become the norm across industries.
Another thing furniture businesses need to change is their approach toward advertising and marketing. During the two pandemic years (2020–2021), there was no need to promote furniture because online sales were skyrocketing. Things have changed.
“Right now, we need to get back to how we got here: advertising and marketing. Our stores need to get back out there and promote and advertise. Our vendors need to get back into the market and advertise their products and tell people what they have and get some confidence in ourselves,” said Jerry Epperson, managing director, Mann, Armistead & Epperson for Furniture Today.
However, promoting products requires the agility to act quickly and equip both your sales reps and your e-commerce website with assets that boost customers’ confidence to make a purchase. Here’s where 3D product visualization comes in handy.
The luxury Canadian brand Monte understood the importance of promoting new styles and colors quickly, and they introduced a 3D product visualization, which made new product launches much easier.
“We partnered with a 3D product visualization partner right when COVID-19 hit, in times of large uncertainty, which has proved to be the right decision. With the amount of personal customization available with our line, having a 3D product visualization partner in our corner enables us to move quickly with new styles and colors and offer them to market in a much faster timeframe. The features we require at scale are extremely time-consuming using traditional photography.”
- Ralph Montemurro, CEO and Founder, Monte Design
What does it mean for furniture businesses?
Furniture businesses have faced an array of challenges in the past couple of years. The competition is fierce, and it’s hard to stand out without well-thought-out marketing campaigns. Here are some things to consider:
The unprecedented boom in furniture e-commerce sales forced many to believe that this would be the end of physical retail. Instead, we saw some of the leading retailers expanding their physical footprint. The reason? E-commerce has transformed the role of brick-and-mortar stores.
Moving forward, physical stores will still play a critical role in pushing business objectives and commercial targets forward — but this time, with a spin — the store will become the hallmark of experiential retail.
The UK furniture and homeware brand Loaf is known for its Shacks — “slowrooms” (not showrooms) where customers can fully immerse themselves and enjoy the furniture shopping experience. What makes Loaf different from regular furniture showrooms are the added features customers love, such as a mattress testing arena, swatch stations, a selection of small homewares, retro arcade games, sweet stations, a chill-out area, and even a biscuit bar.
What does it mean for furniture businesses?
Furniture retailers and DTC brands that want to keep (and boost) foot traffic in their showrooms have to reinvent their retail experience and offer something unique. Here are some ideas to keep in mind:
The consumer shift toward e-commerce has opened the door for a long-overdue great retail reset and digital transformation to create a seamless omnichannel shopping experience.
Thriving in this new furniture e-commerce landscape will require unique insight and action. It’s vital for furniture businesses to understand what consumers expect when shopping online, their behavior changes, and their future expectations.
Investments in 3D commerce, rich e-commerce merchandising, and the store of the future can help companies address the rapidly shifting customer preferences. This will require furniture brands to transform their thinking and make long-term commitments, but it could also change the way they conduct business forever. Ready to adopt 3D product visualization as part of your business strategy? Let's talk.