weekly feature | Mar 20, 2024 |
Are furniture stores dying, or just changing?

If you’re a regular reader of the furniture industry trade press, you get used to a certain kind of heartbreak. The headline typically goes something like: “Beloved 90-year-old Philadelphia institution calls it quits,” or “After three generations, a Detroit stalwart shutters.” These are independent furniture stores. They’re often family-owned businesses, named the way companies always used to be—after their founders: Scherer’s, Rominger’s, Gamburg’s. They seem to be disappearing at an alarming rate.

The decline of the independent American furniture store is not a new story. Ever since the 1990s—peak home retail era—their numbers have never quite recovered. The biggest drop followed the 2008 recession, a period that pushed one in five furniture retailers out of business. Since then, the story has mostly been one of grinding consolidation, with larger players slowly gobbling up market share.

Last year, though, the pace of closures seems to have picked up. A fourth-generation Philadelphia store shuttered. A Rochester, New York, retailer founded in 1936 filed for bankruptcy. A 123-year-old store in Winston-Salem, North Carolina, closed its doors. Churn is natural, and plenty of independents are thriving, but it’s hard to argue that a certain genre of legacy furniture store—big footprint, lots of North Carolina brands on the floor—isn’t fading away.

When I reached out to Tom Liddell of Planned Furniture Promotions, a company that helps retailers wind down operations and sell their inventory, he was so occupied with clients that it took a few weeks of phone tag to finally connect; when we did, he wryly remarked that his cell phone usage had been through the roof recently: “We are very busy right now.”

Why is this happening, and what does it mean for the broader home industry?

The Romance Is Gone
The laundry list of struggles faced by independent furniture stores will not come as a surprise. First, in the 1990s and early 2000s, the rise of big-box chains and lifestyle brands like West Elm, Pottery Barn and RH introduced a new kind of competitor to the ecosystem. Well-funded companies could flood a region with marketing and, on the back of a newly globalized manufacturing network, undercut the prices of local stores.

The past decade added the internet to the mix. DTC brands and pure-play e-commerce sellers like Wayfair started catching on with customers, while national retail brands got good at selling online. Independent stores came under pressure to master social media, develop a transactional website, and compete with drop shippers on pricing—all on an already slim margin.

“The big national brands are often operating at a gross margin of just above 60 percent, [while] an independent retail store is typically in the 40s,” says a furniture executive who asked not to be named in order to discuss the industry candidly. “That margin allows [bigger brands] to hire more experienced salespeople and have better collateral or a better digital experience—where independents have to make tough decisions about what to spend on.”

Certainly, there have been ups as well as downs. The pandemic home boom was undeniably a lucrative time for home retailers large and small, but the sugar high wore off in 2022, and since then, spiking inflation, a frozen housing market and a moody economy have done nothing to help the industry. “There’s this sense that it’s just not fun anymore for some of these guys,” says Ray Allegrezza, executive director of the International Home Furnishings Representative Association and former editor in chief of Furniture Today. “You’ve got e-comm growing, you’ve got a tough business economy, you’ve got younger consumers that do not want heirloom furniture—it all makes perfect sense why these independents are shrinking.”

In other words, there are plenty of reasons mom-and-pop store owners are feeling the strain. Interestingly, the reason many of them have been closing up shop in recent years has less to do with imminent bankruptcy and more to do with family. Companies started by members of the Greatest Generation in the 1940s and ’50s, then taken over by baby boomers in the 1970s and ’80s, are hitting a wall: The kids don’t want the keys to the store. “Only a small percentage of these people are actually closing for financial reasons,” says Liddell. “The majority are making a conscious decision to retire because they don’t have a future generation that’s willing to take over.”

That generational drain is not unique to furniture retail (just ask your local upholstery workroom). But furniture stores have an ace in the hole: real estate. Showrooms usually take up a lot of space, and if an owner was fortunate enough to buy their property at 1950s prices, they often stand to make an enormous return simply by selling the building. In that way, many long-running furniture stores have a built-in exit plan that a 90-year-old watch repair shop doesn’t.

Combine a hostile economic environment with succession challenges and a potentially lucrative payout—is it any wonder that doors are closing across the country?

Delaware designer Katie Winnington saw the dynamic play out in her own family. Her grandfather purchased C&E Furniture in the 1970s. At 30,000 square feet, it had room for a maze of vignettes that her mother would style into eye-catching displays. The business thrived.

Then, in the early 2000s, big-box stores began entering the local market and aggressively spending on circulars, advertising lower-priced furniture, which cut into C&E’s business. By 2010 her grandfather had died and her uncle, who had also helped run the store, had moved away—leaving her mother alone to oversee the business. “It was way more than she could handle by herself,” says the designer. “And we were feeling the competition.”

Winnington was more interested in a pivot (more on that later) than taking over the store, so her mother ultimately sold the showroom and retired. “At that footprint, you had to follow a big-box model to be successful—curated vignettes were not competing [with] discount stuff,” she recalls. “The romance had gone away.”

Side Effects
The number of independent furniture retailers has gone down considerably since the 1990s. At the same time, the overall market for home goods has increased. Who’s picking up the business?

The simplest answer is: the big fish. While small, one-to-five-store operations have struggled, the large retailers—from Ashley to RH—have thrived over the past two decades. “There is definitely a lot of movement towards the top 100 retailers,” says Bo Stump, a partner at Stump & Company, a consulting firm specializing in mergers and acquisitions. “That’s where all the oxygen is. It’s a consolidation story, and all of the manufacturers are trying to sell into that.”

Meanwhile, pure-play e-commerce retailers have sprung up, Wayfair has grown into a $12 billion business, and a small constellation of direct-to-consumer brands like Article, Burrow, Albany Park and Maiden Home continue to make gains. More than one DTC founder has said that their market opportunity is not so much to compete with West Elm, but to snag the slice of the pie left behind by struggling independents.

The other big shift in the industry will be closer to home for BOH readers: the ascendency of the design trade. Just as the past 20 years have been unkind to independent retailers, they have seen a renaissance in the interior design business. Through HGTV, Instagram and Pinterest, America has come to fall in love with design, and the industry—once almost exclusively reserved for the uber-wealthy—has expanded and developed something resembling a middle class.

With this growth has come considerable purchasing power. Especially at the upper tiers of home retail, a lot of business that once might have gone through a store is now going through a designer. “The industry has been trying to adapt, and one of the biggest changes is the focus on the designer trade,” says Liddell. “All of the high-end manufacturers have been changing their models to cater to the designer directly.”

To see it play out, you only have to look at the audience who goes to High Point Market. Twenty years ago, showrooms would put up signs warning designers away. Now they’re welcomed with cocktails and cover bands. In recent years, designers have begun to make up more than half of High Point’s attendee base, and a designer is the Market Authority’s board chairperson. For the trade, that’s a win. For mom-and-pop furniture stores, it’s a sign of the times.

A New Model
While the decline of the independent American furniture store is not a new story, neither are overcooked predictions of doom for retailers. In response to a 2021 Forbes column titled “Independent home retail furnishing stores are losing. Only the big and virtual will survive,” the trade publication Home News Now clapped back, pointing out that big chains had taken losses too, and that the savvier indies weren’t going anywhere. “I’ve been hearing about this for 20 years,” one industry consultant told me. “And there’s truth to it. But the mom-and-pops are still there.”

While a certain type of old-school retailer is undeniably struggling in today’s landscape, there is a fundamental strength to the independent model. No matter how seductive the online shopping experience, many people want to sit on a sofa before they buy it. And no matter how powerful the big-box marketing campaign, with a strong perspective, local knowledge and community relationships, smaller stores still beat national brands all the time.

“I want to have a close, personal relationship with the stores we’re in business with, and I want them to have the same relationship with their customer,” says the furniture executive who asked to remain anonymous. “That’s what works today; otherwise you’re competing against RH and Serena & Lily, and it’s all about who can get the most catalogs out and clicks to their website, and the independent dealer is not going to win that game.”

The economics pan out, he says, because the right small retailer can drive more business than the wrong enormous showroom. “There are stores we sell through that are small, maybe 8,000, 10,000 square feet. But because they’ve got a point of view, and they’re so dialed in on their customers, we can do $1 million, maybe $1.5 million, in wholesale business with them annually,” he says. “Then you compare that to a chain that’s a little more what you might call old-school, a little more impersonal—even if they have 10 locations and 15 times the floor, we’ll end up doing half as much business [with them].”

In short: Big, genreless showrooms are hurting. Small, lean, design-oriented outposts are working.

C&E Furniture is a case in point. While Winnington’s mother sold the brand’s showroom in the late 2000s, the business didn’t entirely disappear. Instead, the designer relaunched it in 2012 as an extension of her interiors firm. This time around, C&E wasn’t a 30,000-square-footer—it was a 3,000-square-foot shop tightly curated around high-end brands with a vibey coastal aesthetic that would appeal to customers in her new Fenwick Island location. “I recognized that the old version of C&E just didn’t make sense anymore,” she says. “But I saw that there was a way I could take a more elevated, curated approach and treat it more like a boutique—and like a design experience.”

Are furniture stores dying, or just changing?
A living room vignette at Hive CollectiveCourtesy of Hive

When done right, independent retailers can grow in unique ways too. In 2015, interior designer Sara McCann launched Hive as a retail outpost in West Palm Beach to fill what she saw as a gap in the Florida market. “It started to make interior design jobs easier for us—we didn’t want to have to drive to Miami or Fort Lauderdale to take our clients around to touch and feel and sit in things,” she recalls. “We put all of our favorite pieces in a store to make our process easier. From there, we also noticed, OK, not everyone who walks in the door is going to buy a sofa, but we wanted them to leave with something, so we always had gifts and things that you run out of all the time.”

It took off, and the store’s footprint doubled from 10,000 to 20,000 square feet. But rather than simply copy-pasting the model and turning Hive into a regional chain, McCann leaned into her existing customer base and got into other categories, opening up a clothing boutique, a to-the-trade showroom, a store focused on a more contemporary decor aesthetic, and a cafe. The result—called Hive Collective—is a kind of campus designed to satisfy the various needs of an affluent South Florida clientele. It’s the kind of nimble expansion a corporate brand cannot do on the fly.

Businesses like Hive Collective and C&E—and hundreds more like them—prove that there is a model for independent furniture retail that’s growing, not shrinking. It just looks different: smaller footprints, a more curated and design-driven approach, a focus on the higher end of the market.

“There’s nobody doing enough business—RH or whoever it is—that it will do away with independents,” says the executive. “If you’ve got the right recipe, you’ll find business.”

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