What will the future hold for the home furnishing retail business? The steady barrage of ready-to-assemble (RTA) furniture sales; the ever-flourishing of internet retailing; the mass furnishing import from the mainland China; the changing demand and taste of consumers...... These are just some pieces of the complex puzzle that retailers must solve. Surely, there are a lot to be done. Among others, some retailers choose to shift their strategies to sell lifestyles. “More furniture retailers are taking this approach,” said Mr. Ray Allegreza, editor-in-chief of Furniture/Today, a weekly publication in the furniture industry. Will that be the future direction of the general retailers in the home furnishing market?

Fast growing of RTA furniture

Ready-to-assemble (RTA) furniture is recorded as one of the fastest growing segments in the international furniture market. Once viewed as an inferior alternative to solid wood furniture, much of the RTA furniture in the market today is of high quality while still being offered at lower price points.

In addition to the recent advances in production machinery, RTA furniture expands to such spectrums as home office, entertainment, bedroom, and kitchen items. Ready-to-assemble furniture is turning into a specialised product line.

In the US, RTA furniture has been growing at the rate of over 5 percent annually since 1977. A growth of more than 10 percent is forecasted in the coming two or three years.

The primary distribution channels for RTA furniture are the mass merchandisers, such as K-Mart, Wal-Mart, Sears; discount stores, such as Target, as well as other contemporary specialty chains. Meanwhile, the category is also changing to home improvement stores like Home Depot. The growth of RTA furniture, which leads to stretching distribution channels, is inviting more players to enter the market, giving rise to intensified competition with the traditional furniture retailers.

Internet: the future of retailing?

Internet shopping is part of our life, not a fad. Today’s consumers are busy. The Web provides people with the utmost convenience of shopping, without leaving their homes or workplace. As Internet-based businesses boom, and online shopping patterns surge upwards, it is indisputable that the Internet profoundly affects traditional retail business. Indicated in the latest Consumer Behaviour Report released by PriceGrabber.com, consumers are found migrating online to shop for furniture, appliances and home furnishings.

23 per cent of the respondents stated that they expected to buy more products online for their homes within next year. This survey result is in line with a recent market forecast made by JupiterResearch, which predicts a steady growth of 17.4 per cent for the online furniture purchase from 2005 to 2010.

Right at this moment, millions of consumers are clicking their mouses and browsing through different websites for all kinds of purchases, letting alone the furniture and various home furnishing items. This new trend is what all home furnishing retailers have to adapt to — or they risk repeating the footsteps of music stores and bookstores.

High-speed development of Chinese furniture

China exports and its increasing role in shaping the furniture industry are great market concern. According to the figures from International Trade Statistics, the country has already topped the furniture export market of over US$12 billion since 2004, which had literally rocketed more than double when compared with three years before.

The international furniture industry has been restructuring its production and accelerating its shift to China. The low labour cost and other favourable incentives for investment remain highly attractive to foreign investors. The global furniture traders flock to China for competitively-priced supplies. There is a procurement group from the United States to start stationing in Dongguan, Guangdong province of China making regular purchases of 500 containers of furniture each month. Meanwhile, thousands of retailers in Europe are considering importing furniture from a host of Asian countries, including China.

It seems that cheap merchandising should be a piece of good news to retailers. It brings considerable profit margins and creates more room for flexible pricing. However, when it comes to a situation that all markets are flooded with furnishings that made in China and other Asian countries, we could imagine the problem of “homogeneous” product offerings in shops.

According to 20 recent studies conducted by the National Home Furnishings Association, consumers view most stores alike. They do not really see much difference for the products on display as well as the “best prices”.

Shopping for style

“Shopping habits are changing, tastes are changing. We are watching all these HGTV shows that are empowering people.” That is how Allegrezza, editor-in-chief of Furniture/Today comments on today’s furnishing consumer market.

As reflected by Mr. Tom Lias, president and chief operating officer of Gorman’s Home Furnishing and Interior Design, “Fifty percent of customers say they are just looking. But they are really shopping lifestyle. They picture themselves in a lifestyle.”

The new marketing landscape is best illustrated by the successful story of IKEA. In the 14 November 2005 issue, Business Week explored the winning formula of the furniture retailing leader. IKEA is doing a great business globally, including Asia, Australia, Europe, and the US. “That’s because it is far more than a furniture merchant. It sells a lifestyle,” the report concludes.

The display in IKEA plays the tricks. The display of furniture in the outlet is arranged and accessorised in exotic styles. Down to the picture frames on the nightstand, this is to inspire and encourage customers to spend more. Along the way, differently styled showrooms entice the shoppers.

The sale of IKEA keeps growing year by year. For the fiscal year ended 31 Aug 2006, Ikea’s revenue rose by 15% to US$17.7 billion.

Stores sparkle with lifestyle

Responding to the changing shopping pattern of the furniture market, Gorman’s Home Furnishing and Interior Design has moved on to revamp its three traditional stores. “In the past, customers have come to our designers looking for a particular brand or price point, and therefore we organised our showrooms accordingly,” Lias said. “Today’s customers shop differently. They want the Gorman’s design team to create the room that works best for them, even if that means mixing different brands or combining investment pieces with more affordable ones.”

So it came with Gorman’s new layouts combining furniture pieces into life-like settings based on style, instead of brands or prices. These are the eight lifestyle groups: uptown modern, European classics, traditional elegance, casual retreats, coastal cottages, traditional living, vintage and contemporary living.

The result has been encouraging. Despite a rough economy and the soft underbelly of retail seen in the furnishing market, Gorman enjoys expanding sales. Indeed, its sales have been up by about 30% in the past three years, revealed Lias.