The Good, the Bad, and the Future

The joys of unprecedented demand will outlast the challenges of shortages and higher costs

“2020 was a train wreck, and 2021 is a rocket ship,” said Jerry Epperson, partner with Mann, Armistead & Epperson, Ltd, Investment Bankers and Advisors. “Yes, there are variables that are causing headaches throughout the supply chain. It’s frustrating that lead times are so long. But, if you analyze consumer demographics and confidence levels, our industry has plenty to celebrate.”

Consumer Sentiment

Epperson has shared his authoritative “State of the Industry” outlook with Market visitors for more than four decades. Unable to attend this June due to a spine fracture “which is healing nicely,” he enjoyed sharing the statistics that fuel his optimism for the next several years. “Last year was an unprecedented disaster with a global pandemic, contentious election, extreme unemployment, recession, shut-downs, and logistics disruptions,” he said. “Today, thankfully, we’re looking at everything opening up with vaccination availability, employment gains, stock market records, stable interest rates, booming housing, and retail strength.”

Ken Smith, author of the Furniture Insights® newsletter, concurred with Epperson’s upbeat view in his May issue. “According to our latest survey of residential furniture manufacturers and distributors, new orders in March 2021 were up 96% over March 2020. Since the pandemic really began to be felt in March 2020, part of the increase was due to many businesses being shut down for a while in March. So, we compared March 2021 to March 2019 and saw that orders were up 40% in that comparison. Our perception that business has really been good showed up in those results.”

Both Epperson and Smith cited foam and worker shortages and higher steel, lumber, and shipping prices as concerns for their clients. “Everyone is coping with disruptions. We weren’t sure that with 80% of the top retailers going to Pre-Market, many would come back in June,” said Smith. “But many did. It was much better attended than anticipated. There weren’t any tire kickers. Buyers were looking for product. Even with longer lead times, they still need to place orders at Market so they would be in line to get orders within the new 12 to 25 week delivery times. We didn’t have our usual 50+ scheduled appointments, but we talked informally with many CEOs in their showrooms. Their stories were identical, and I think they took small comfort in knowing their competitors were in the same boat.”

“The logistics and supply chain will catch up with less transportation disruption and fewer price hikes.”

Some of the increased production and shipping costs will be passed on to the consumer. Epperson suggests the industry take the opportunity to adjust margins for survival. “Retailers are always reluctant to raise prices. I’d like to see an ad campaign that compares furniture prices from 50 years ago to those on the showroom floor today. There’s no other sector where you will see so little change. When you consider that the average consumer buys a new sofa every six to seven years, a bed every ten, and a dining room set every 18-20, they expect to spend more on their next purchases.”

Epperson is bullish about 2022, with encouraging indicators to back up his beliefs. “The delivery delays and strong housing activity will continue to feed the demand for home furnishings. Consumer credit is in line; capacity is available. Interest rates, incomes, and employment will continue to increase. The demographics are in our favor. The fastest growth is in the key 35-54 ages for the next 12 years, generating higher birth rates and more home ownership. This 2021 rocket ship should launch us into a new year where the stars are perfectly aligned for growth and profit,” he said.

Jerry Epperson will return with the “The State of the Industry” at October 2021 Market, presented in the Seminar Room at HFA’s Retail Resource Center on Sunday, October 17 at 9am. See their full seminar line-up in their profile.