As the home furnishings industry continues to ride out one of its strongest business cycles in recent memory, it is being hampered by product shortages exacerbated by a logistical perfect storm. It comes down to this: too much demand, too little supply.
As other sectors of the economy, like airlines, cruise ships, restaurants and movie theaters, suffer due to the pandemic conditions, the home furnishings business has been riding a high. We’ve all heard the explanation: Everyone is spending far more time in their homes and trying to make them nicer. From major investments like new kitchens and baths and four- and five-figure furniture purchases, to more modest upgrades like bread makers, cookware and decorative pillows, we are focused on our homes as perhaps never before.
That demand is one of the major causes of the shortages in available merchandise. The problem goes back more than a year to when factories in China—where much of the home products Americans purchase are made—shut down at the onset of COVID. Some production facilities were closed for weeks or months as that country, followed by the rest of the world, grappled with managing the virus.
Last spring’s knee-jerk reaction from American retailers and importers—also closed or severely restricted in operations—was to cut back, postpone and outright cancel orders for deliveries later in 2020. Even when the factories in China and elsewhere in Asia reopened, they had fewer orders on their books.
Then the unthinkable happened: Demand started to pick up big-time—first at essential retailers like Walmart and Target and online through Amazon, Wayfair and other e-tailers, and then throughout the marketplace. American consumers, armed with government subsidy checks and no way to travel, started spending on their homes.
That’s when the second punch hit the marketplace: Factories and the supply pipeline couldn’t react fast enough. Still hampered by COVID-induced labor shortages and social distancing requirements that spaced out and slowed down the manufacturing process, things backed up. And they backed up bad.
Factory loading docks couldn’t get cleared quickly enough due to shortages of trucks and drivers. Ports on both sides of the globe were slammed as shipping companies that had cut back capacity were either slow or hesitant to get back up to speed. The perfect storm had hit, and it was no fleeting weather.
Which brings us to today—and, more importantly, tomorrow. Here’s what experts say we can expect:
- Given the complexity of the supply chain issues, don’t expect relief for the home furnishings business until people start getting out of their homes again as vaccinations reach critical mass. That’s when demand will start to subside. The most realistic time estimates are the fourth quarter of 2021, give or take a few shipping (and shopping) days.
- In the meantime, the incentive to raise prices because of higher freight and raw material (especially cotton) costs is increasing significantly. Historically, the home business has not been effective at implementing price increases, so activity on this front is likely to be modest and focused on new products rather than existing ones. If prices were to rise 2 to 4 percent, for instance, that would be a lot.
- Even as Americans begin to venture out of their homes, it’s unlikely they’ll abandon the idea of spending on furnishings. Granted, a lot of the current activity will be at the expense of future purchases, and the pent-up demand for travel, entertainment and vacations outside the home will be powerful. But the consumer sentiment to value their homes will not disappear, and is likely to be entrenched in the collective American psyche for the foreseeable future.
In the meantime, the industry is very much stuck in a predicament that is gratifying, but also utterly frustrating.
Homepage photo: © Nadezhda/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.