retail watch | Jan 13, 2022 |
6 home retailers to watch in 2022

If the past two years have taught us anything, it’s that unpredictability rules the day. Still, as we leave one year behind and enter a new one, it’s worth taking a look at the ups and downs of home furnishings retail in 2021 and exploring how those market forces will shape the year to come. In this four-part series, Retail Watch columnist Warren Shoulberg is taking stock of the current state of play, the characteristics that will define success in 2022, retail winners (and losers) amid the current climate, and which companies are on track to make waves. Here, he rounds out the four-part series by identifying the brands to watch this year.

Legend has it that the origin of the word “news” is an acronym spelling out the four directional points of the compass: north, east, west, south. As myths go, it’s a good one—and for our purposes here, it’s quite apropos. Indeed, in looking at the six most newsworthy retailers of home furnishings products this year, one must look in all directions. These retailers represent many different formats and business models, yet each brings to 2022 a sense that what they do over the next 12 months will mean a great deal for both their individual businesses and the overall home furnishings retailing sector. No doubt, there are others who will be newsworthy, but these are the ones I’m keeping my eye on.

1. Ikea
If your image of Ikea is held from the days of funny-named furniture that was basic beyond basic, incredibly cheap and often not very sturdy, this is not your baby boomer’s Ikea anymore. The retailer has traded up its quality and design, and while it still maintains those giant stores on the edges of cities, it now also offers more modest urban locations, smaller design studios and all kinds of specialized resource centers. Even more, it is now renting furniture, recycling its products and setting them up for resale. The Swedish giant is taking sustainability and eco-friendliness to new levels, not just far beyond its prior practices but ahead of what just about anybody else in the furniture business is doing.

In short, if you don’t have Ikea on your radar, you need to reset your dial. It is not just one of the largest furniture sellers in the country—it is a company that is constantly innovating, and has the means to test out loads of retail strategies. You need to know, understand and respect Ikea accordingly.

2. Bed Bath & Beyond
The biggest wild card in the broader home furnishings sector is Bed Bath & Beyond. While the company isn’t a monster player in mainstream furniture, it is the largest specialty seller of kitchen, bedroom, bath and similar home merchandise. It is also in the middle of a massive turnaround that has seen the entire management team booted out, a new group led by a former Target executive come in, and the rollout of a complete merchandising redo—a merchandising strategy that includes a heavy emphasis on in-house (“owned”) brands, more direct importing, a significant reduction of in-store SKU counts and entirely new presentations on the selling floor. The brand is trimming back the number of stores it operates, and has sold off peripheral banners and put major investments its their e-commerce and omnichannel capabilities. It also has a juvenile products retail unit, BuyBuyBaby, that is the de facto largest specialty player in that sector, and one it is counting on to grow faster than the parent.

To say there are so many moving parts in play is a huge understatement. And frankly, so far, things have not gone entirely smoothly—partially as a result of supply chain issues, partially because of self-inflicted errors and partially because, well, all those moving parts. But Bed Bath & Beyond does a lot of business, and its customers still love it (and those coupons). The company’s successes (or failures) will have an outsize impact throughout the food chain.

3. Wayfair
The company is the largest online seller of home furnishings products, give or take a few Amazon orders, and it has endeared itself to its shoppers. Besides its namesake brand, it operates a number of sub-brands for the modern, country and luxe sectors. There’s an enormous amount of financing behind Wayfair, which only just started to make money for the first time in its business life as a public company.

Wayfair is a major player in home, but also a major enigma. It has the best technology in the home space but major issues with logistics and distribution. And perhaps strangest of all, it doesn’t have any physical retail presence, though the company plans to open stores later this year in what will no doubt be a long, expensive and troubling process. Yet whatever moves the company makes affect every other retailer of home furnishings. The brand raises the bar on AI technology and lowers it on delivery charges. You cannot do business in this space without understanding Wayfair and anticipating their next move.

4. HomeSense
The kid sibling to HomeGoods, this TJX division is still a rounding error to its giant off-price powerhouse parent company, with just 34 stores. But with its stronger emphasis on furniture than HomeGoods, it has the potential to have much more of a presence in the furniture sector—and might get there more quickly than you think.

HomeGoods is on its way to 1,000 locations, and so TJX will need to look at HomeSense as its next growth vehicle. Use the Marshalls/T.J. Maxx matrix as your model: The parent company operates both brands in tandem, allowing them to place additional stores often in the same shopping strip/center. It will do the same with its two home brands. The weakness here is online. HomeGoods has just launched e-commerce, and has a long, long way to go, while HomeSense is nowhere digitally. That hole will not last, but in the meantime, the growth spurt in physical locations will be enormous once the division gets truly ramped up. Watch for it.

5. RH
For much of its recent existence, RH has been the retailer that everyone kept waiting to fail: It can’t keep opening those massive galleries, mailing those massive catalogs and selling those massive sofas, right?

Guess what: Everyone was wrong. RH has gone from an outlier to the leading retailer of better luxury furniture and furnishings in the country. (And soon beyond this country, with the opening of its first European store later this year.) RH has redefined the luxury shopping experience, balancing in-store and online, offering design services, and as if that wasn’t enough, incorporating restaurants, baristas and bars into its merchandising mix. And it is not done—next up are hotels, luxury yachts, private jets and whatever else CEO Gary Friedman dreams up. He dreams a lot, which means whatever RH does will trickle down throughout the entire home furnishing sector.

6. D2C players
Here, I’m making an exception to specifying individual brands and am rolling up direct-to-consumer companies into one spot on the watch list. These are companies like Residence, Burrow, Joybird, and many others that were created probably while you were reading this sentence. They are very small now, and have a very small share of the market, too. But so did mattress startups like Casper, Purple, Nectar, and Tuft & Needle. While those companies are still not in the Simmons-Sealy-Serta-Tempur range yet, they are growing, and forcing everyone else in that space to adjust as they do it.

The same thing is happening in the D2C furniture companies. They are redefining the customer shopping experience in terms of prices, deliveries, return policies and branding. And of course, they are learning they need to have physical stores to truly be players in the furniture business. Many of these upstarts will disappear as quickly as they appeared, but not all of them, and that’s why the direct-to-consumer brands need to be included in any competitive landscape you consider. Perhaps more than any other retailers to come along in the past 20 or 30 years, these companies are changing the rules of retailing.

We wrap up our look at the New Abnormal this week with the understanding that what’s been presented is now in your hands. Taken together, this series serves as proof that what was normal just a year or two ago no longer is—and that soon enough, perhaps before you even realize it, the New Abnormal will become just normal.

Homepage image: ©Pixarno/Adobe Stock


Warren Shoulberg is the former editor in chief for several leading B2B publications. He has been a guest lecturer at the Columbia University Graduate School of Business; received honors from the International Furnishings and Design Association and the Fashion Institute of Technology; and been cited by The Wall Street Journal, The New York Times, The Washington Post, CNN and other media as a leading industry expert. His Retail Watch columns offer deep industry insights on major markets and product categories.

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