There’s this bizarre belief that when the calendar flips to a new year, all kinds of weird and wonderful changes will magically happen. Anyone who has launched headfirst into an ambitious New Year’s resolution will know that it doesn’t always work out that way.
But when it comes to the home furnishings retail world, it may happen this year. There will be a lot of change in 2023—enough so that even if some aspects of the business remain unchanged, you will certainly notice the difference.
On the “Whew, glad things have calmed down” front, we’re likely to see the supply chain continue to stabilize, price pressures ease significantly, and buying patterns shift toward pre-pandemic levels. The whiplash surges of the past three years should be just a memory, albeit not necessarily a good one. As for the long-predicted recession, some are now saying it will be milder than expected; others are even forecasting it will never show up. Nevertheless, all the chatter could end up being a self-fulfilling prophecy.
On the brink of the new year, here’s a breakdown of where the home industry can expect more and less (and more or less) to come.
Perhaps the most exciting news for the 2023 retail landscape will be two new highly anticipated stores, which could be absolute game changers in their marketplaces. On the other side of the Atlantic, the first RH store in Europe is slated to open this spring, or maybe summer. Situated in a historic property about an hour outside of London, RH UK (at least, that’s what I’m calling it) promises to be nothing short of outstanding, with a retail component, several restaurants and enough classic British touches to keep everyone charmed both Upstairs and Downstairs. It’s the initial foray into what is expected to be a major European push for RH, with additional locations in Germany, France and elsewhere planned over the next several years. Once again, RH will assume its role as the most impactful home furnishings retail operation; in 2023, it will be doing so not just domestically, but also on an international scale.
The other new store to watch for in the new year is back on this side of the Atlantic: The first-ever Wayfair store is expected to open this spring in the Chicagoland marketplace. At about 125,000 square feet, it will be the e-commerce giant’s first physical manifestation and will say much about the brand’s efforts to go omnichannel. In 2022, the company opened several more modest outposts for some sub-brands, including AllModern and Joss & Main; this Wayfair store puts the company more steadfastly on its way to moving beyond the digital world—but it will need to be a slam dunk for Wayfair to prove to investors and its customers that it can succeed in the physical world.
Another home industry expansion to anticipate in 2023 involves market share gains by dollar stores, off-pricers and deep-discounters (think Ollie’s), all of which will benefit from that possible recession or at least recession-bordering conditions. This isn’t necessarily good news for those giving up market share—more on that below—but the effects will be spread out, so the shifts will be subtle.
The biggest contraction in home products retailing in 2023 is likely to involve Bed Bath & Beyond—not that it will necessarily go out of business or cease to exist, but it will most likely be forced into bankruptcy sometime next year, and in doing so will come out on the other side of that process smaller and with fewer stores. Making concrete predictions on the fate of this retail wreck is a risky endeavor because there is a (small) chance it might just muddle through things, averting the worst. But for every action there is a reaction, and should Bed Bath & Beyond downsize, that will no doubt open up market share opportunities for competitors like At Home, HomeGoods and Wayfair. It’s not a zero-sum game—some of that volume will just disappear—but some will show up on other retailers’ top lines.
Even a few months ago, if you said online sellers would be among those having lackluster times in 2023, people would have said you were crazy. (People may still say that about me, but that’s another matter for another time.) Yet e-commerce, which all the so-called experts predicted would surge to unfathomable heights coming out of the pandemic, has fallen back to earth (to say the least), and its future growth will be much more measured. Any retail business in the home space will absolutely need an online component, but it will not be the main business anytime in our lifetimes.
One more “less” to expect? Sales to the new home market. Despite an urgent need for more U.S. housing, Federal Reserve interest rate hikes have caused a serious hit to home building. Those whose income depends on new homes need to rethink their business models and find new sources for at least the next year. That’s not to say the home remodeling sector will weaken—homeowners who have jobs and money, but can’t afford to buy new homes, will instead reinvest in their current houses. That’s a less turned into a more.
More or Less
Here’s the thing about 2023: Compared to the past three years, we’re unlikely to see the insane shifts in business conditions over the next 12 months. Market shifts will be more gradual and less noticeable. That’s the way it was before the pandemic, and now (we hope) that pattern will resume.
Other shifts to watch for: Expect Gen Z to become more important in purchasing home products as baby boomers finally give up their insatiable spending habits and settle into real retirements. And factors like tech, sustainability and social responsibility will grow in influence across the spectrum, including home furnishings retailing.
That calendar-turning exercise is about to start, and there are any number of variables out there to keep all of us guessing—more or less.
Homepage image: ©Tovovan/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.