T’was the week after Christmas, and executives in the home retail business were checking their spreadsheets twice, trying to figure out what in the world is going to happen next year. Given the unreliability of forecasts and predictions for the past three years, most of them will be wrong. But even if few will actually have the answers going into 2024, it’s worth at least asking the right questions. Here are four big ones for the new year.
1. Will the housing market finally show some signs of life, rekindling sales of home furnishings?
Like many things in the overall economy, the housing market has defied expectations, and the paralysis in sales and new builds caused by high interest rates has meant a lackluster market for furnishings. But it appears mortgage rates have peaked, and it’s likely we will see the Federal Reserve start to very modestly—and very slowly—dial back interest rates. We also may see consumers who are simply done waiting it out become ready to move forward buying and selling, regardless of rates. That in turn will jumpstart sales of furniture and other home merchandise—and, as with many things in the sector, the luxury end will feel the change first. We’re not talking about sales like the boom days of 2020 and 2021, but the worst is likely to be over next year. And don’t forget, all businesses will be comparing their results to weak 2023 numbers, so even small upticks will look good for both retailers and suppliers.
2. Are the bankruptcies and business meltdowns over?
The short answer is no. Regardless of any modest signs of recovery, too many companies have been hanging on by threadbare balance sheets for far too long. Look for trouble with companies that concentrated their business in specialized sectors and don’t have the balanced customer base to buffer their sales. Also, those big, bad, private-equity-backed companies are particularly vulnerable to corporate overlords that want to take their assets and move on elsewhere. We’re not talking widespread panic for 2024, but the wave of casualties we saw this past year is far from over.
3. Will home furnishings e-commerce sales continue to gain market share even as physical stores sustain their recoveries?
The rebound in consumer shopping at malls, downtowns, so-called “lifestyle centers” and other physical stores was a nice surprise this past year, precipitating the yin-yang of a slowdown in the growth of online sales. Now that shopping patterns have largely settled back into pre-pandemic patterns, we can look for e-commerce to return to above-average growth in the coming year. That’s good news for players like Wayfair, Bed Bath & Beyond (formerly Overstock) and big-box players with strong digital businesses; it’s less fortuitous for off-pricers, smaller specialty retailers and others with underdeveloped or nonexistent online operations.
4. Finally, what about all those millennials becoming the next great wave of home furnishings consumers?
All of those hallowed outlooks and highfalutin forecasts about demographic trends and their positive influence on home furnishings didn’t take into account a pandemic, 30-year-high inflation and a couple of wars. Global conflicts are likely to continue into 2024, but the other factors have diminished. Meanwhile, the fact remains that we are on the brink of one of the greatest transfers of wealth in American history, as boomers pass their assets on to their kids and grandkids. Combined with the historical realities of family formation and home ownership rates, this becomes an inevitable fact—and even if it’s been postponed a little while, it will most certainly happen. Will we start to see that emerge in 2024? Sorry, that’s a fifth question, and you’re only allowed four this week.
Happy new year, and onto whatever’s next.
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.