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Q: Retail Furniture Industry Threats... ( Answered,   1 Comment )
Subject: Retail Furniture Industry Threats...
Category: Reference, Education and News > Teaching and Research
Asked by: estropelic-ga
List Price: $25.00
Posted: 13 Feb 2004 23:55 PST
Expires: 14 Mar 2004 23:55 PST
Question ID: 306695
We need a list of 5 things that pose a threat, are affecting in a
negative way, or make the future gloomy for retailers in the
durables/furniture industry.

Basicly, any information that if a retailer read, would be worried.
For example, ask yourself this question... if you owned a furniture
store, and read this it would scare you somewhat...

Examples: Internet shopping is booming... how does this affect the
furniture retail industry?
Poor quality affects long term relationship with customer? How so?

Poor Salesmenship, will lower the conversion ratio of the sales people
and increase costs overall... etc...

If you have any questions, please ask...

Clarification of Question by estropelic-ga on 15 Feb 2004 07:44 PST
In the answer, you must provide resources...
Subject: Re: Retail Furniture Industry Threats...
Answered By: omnivorous-ga on 15 Feb 2004 15:12 PST
Estropelic --

In doing a typical SWOT (strength/weakness/opportunity/threat)
analysis, some things can be both a threat and an opportunity,
depending on the company.  For,  Internet retailing is an
opportunity -- yet it's probably a threat to traditional stores unless
they've found a way to make e-commerce work for them.

But here goes:

1.  Internet retailing of furniture is making available a huge number
of choices.  The DMOZ Open Directory lists more than 1,800 retailers
of furniture.  If nothing else, this forces a retailer to narrow their
marketing focus -- and avoid low-margin items unless they have the
volume to get efficient inventory turns of the low margin products:
"Shopping: Home and Garden: Furniture"

2.  Every major mass merchant has a number of furniture products,
often sourced off-shore at low cost.  The first four of the companies
below each have return privileges at hundreds of stores nationwide;
in-store credit card; gift card and sophisticated promotion programs. 
In short, they have huge market power to exploit fashions and trends
in the industry.

Pier 1 Imports
"Furniture Guide"

Pottery Barn

Note that Pottery Barn even segments its business further with a PB
Teens offering.  This alone could be considered a major threat, as the
industry considers the 25-34 age groups to be key buyers, as those are
the years at which Americans set up household and make major
acquisitions of furniture:
Detroit News
"Pottery Barn Debuts Teen Furnishings" (Colborn, April 12, 2003)

Cost Plus World Market

IKEA Home Page

This synopsis of a Mintel report on the U.K. market shows that Ikea
has already had dramatic effect in some geographies, taking a leading
market share in furniture within the U.K.:
"Furniture Retailing" (Mintel, Dec. 1, 2002)
"Furniture & Décor"

For more details on the importance of the furniture portion of their
business, you may find it interesting to go to the Investor Relations
pages of any of the companies above, as all are public companies. 
Another option is to do a Google search for any of the companies
above, adding the word furniture.  It often turns up with the impact
of furniture sales on earnings, such as the following search:
"Cost Plus" + furniture

3. Manufacturers' stores.  Because the leading manufacturers
(including Ethan Allen and La-Z-Boy) own the brand they are able to
take the product directly to the consumer by opening their own stores.
 Though retail stores are not generally favored by Wall Street
analysts (Gateway has lost millions in its Gateway Country stores),
companies like S.G. Cowen believe that it makes sense for furniture

An excellent report on the state of the furniture industry and retail
is this case study done at the University of North Carolina's
Kenan-Flagler Business School.  See p. 8 for a discussion of this
retail trend:
"The Furniture Industry (Case Goods)" (Bryson, Lanzillotti et al, March 7, 2003)

4. Consolidation of retail.  As the UNC report above notes, the top 10
retailers combine for only 16% of the market, making it prime for
consolidation into larger chains.  Berkshire-Hathaway, the company led
by famed investor Warren Buffettt, is already number 3 in retail
market  share for furniture.  And it's clear that he's seeking to
expand his company's role even further:
Furniture Today
"Buffett Far From Finished with Furniture" (Nov. 12, 2001)

5.	Triple threat: new homes, interest rates, decline in 25-34 age
group.  The UNC study (Appendix A, p. 19) notes what it considers the
key indicators for furniture sales.  They are:
?	single-family home resales
?	sales of new single-family homes
?	privately-owned housing starts

Trends have been up for the past few years due to low mortgage
interest rates; a peaking of the number of baby boomers buying homes;
and trend to larger houses.  With a projected federal deficit of $500
billion following all-time low interest rates, a rise in interest
rates is the logical response by the Federal Reserve if the economy
improves and corporate borrowing rises.

The threat is a slowomg new home sales, as well as reducing the size
of homes being built.  Combined with a lower population of 25-34 year
olds (already seen in the Mintel U.K. study referenced above),
furniture sales could be expected to decline.

Google search strategy:
"furniture retailing" + threats
"furniture retailing" + "Warren Buffett"

An additional source of good data on the furniture industry is Aktrin
Resources, a furniture industry consulting firm which has quite a bit
of data published.  Unfortunately, little of the analysis is reflected
on the worldwide web.  However, they publish (and re-publish) such a
wide amount of data that you may find one or more of their books
available at a good local or business school library:
Aktrin Furniture Information Center
Search Facility

Other excellent resources include Furniture Today, whose columnists
see a range of other issues:
Furniture Today Home Page

And, though not available on the Internet, HFD (once called Home
Furnishings Daily) is the Fairchild Publications weekly that covers
the industry:
University of Florida
"Other Retail Publications"

Best regards,

Subject: Re: Retail Furniture Industry Threats...
From: probonopublico-ga on 14 Feb 2004 02:33 PST
1: Supermarkets ... They're getting into everything.

2: Economic Downturns ... Aren't we overdue for a prolonged slump?

3: Cheaper alternatives ... These days EVERYTHING is being made in
China ... Is your stuff?

4: Durability .... So who cares about what's fashionable anyway?

5: YES ... The Internet is sharpening competition everywhere.

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