Viewpoints -- What are the major challenges facing the home accents industry in the next five years?
Home Accents Today Staff -- Home Accents Today, October 10, 2005
A few months ago we asked all kinds of people--from sales reps to presidents, from store owners to designers--to give us their thoughts about the major challenges this industry faces in the next five years. We got lots and lots of thoughtful answers. No one was flip and it is obvious there is a lot of thought being given to the issues. With nearly 100 responses, it is only slightly surprising that so many people identified the same challenges: China, the decline of the independent retailer, the overall economy and knockoffs. Following are the responses we received.
Q. What are the major challenges facing the home accents industry in the next five years?
The No. 1 challenge over the next few years will be whether or not the industry will pull together and take steps to ensure the survivability of the independent retailer.
On the supply side, there are aggressive steps being taken by both vendors overseas and large retailers in America that will eventually eliminate wholesalers from the supply chain. Vendors are actively pursuing sales representatives in America to represent them directly to large retailers. This is happening at an alarming rate, and will facilitate large retailers being able to work even more “direct with the factory.” As a recent Wall Street Journal article noted, one of the largest vendors of product in China has opened a large “showroom” in Manhattan. The article reported it looked more like an American shopping mall, i.e., with product covering virtually every category of consumer goods. On the day the reporter visited, he listed seven or eight major American retailers who had buyers in the building that day actively holding discussions.
Bottom line: Wholesalers in this industry became too greedy over the last 10 years, actively pursuing large accounts for big sales and telling them how easy it would be to work through them and get special product and special packaging. While this strategy was successful, it is now coming home to roost, as most large retailers are now saying "Why do I need this guy?” Wholesalers have created this monster and we are beginning to see the most natural next step in the evolution of streamlining and cutting cost out of the supply chain.
As this continues to develop, wholesalers will begin to move back to the independent channel, realizing it was a mistake to help large retailers make contacts and learn business models that could be used against them over time. Wholesalers will begin to realize that while independents are not their largest sales opportunity, they are their largest profit opportunity. Indeed some of the most aggressive wholesalers of the past (World Bazaar Imports, Blue Ridge Designs, etc.) have gone bankrupt pursuing large retailers and one only has to look at the state of the public companies in this sector today to draw a direct line between the deterioration of those companies and the effort on their parts to move toward the low-profit, large-retailer model (Enesco, Russ Berrie, etc.).
The real challenge lies in how soon the industry will recognize that long term the independent retailer offers the most profitable business model to pursue, and make every effort to help them survive until the day comes when every large retailer in America no longer needs any American-based wholesaler. We better hurry, it won't be very long.
Joseph Santoro, retailer
Santoro & Company
The challenges for me are like they are for many independents -- budgeting for shows, bringing people into the store and keeping your name out there. Finding a niche is a challenge, especially in the rural area we’re in. We go out of our way to get our name out there by sending out press releases and letting industry and shelter magazines know what’s going on, awards we’ve won, etc. We also team up with local organizations and fellow retailers for open houses that bring customers in the door.
Ron DeSantis, designer
Let’s start with the economy, not so good for the middle to lower income areas. Will it improve, yes but at a slower rate than expected.
We are moving into transition times. Companies are reinventing themselves to stay completive. Quality, craftsmanship and the long history of manufacturing in this country and Europe seem to be coming to an end.
As more major manufacturers look toward the Far East for production facilities, and with the shift of presentation from the East coast to the West emerging, we are faced with asking ourselves, do we join the ranks in this migration or stay fast with our heritage? As a designer of home products, I have chosen to work with people who have the skills, passion and talent which are represented in their culture and tradition. I like the word 'Real" and not "Imitation." DeSantis Designs proposes particular materials and elements with a contemporary sensitivity, conceived and designed for people wanting something special for their homes suiting their lifestyles as well. Our designs have kept pace with the evolution by way of conceiving and using materials, almost as a semantic revolution while maintaining our heritage. Are we competitive? No, I have removed myself from that race. Perceived value is derived from values, and we remain with ours.
Jeffrey L. Portman
President and COO
The prospects for innovation and creativity that await those businesses impacted by Katrina recall the optimism and imagination that gave birth to Home Accents Today 20 years ago.
We look forward to a bright and dynamic future.
China ! The onslaught of manufacturing and even more of a challenge, marketing and sales. With their income they will be able to secure space in Las Vegas, buy well-placed U.S. companies, and eventually buy retail outlets and create a vertical system. Imagine China manufacturing 90% of the goods, showing in shows to buyers and then selling to the end user in retail outlets. Their costs of showing and retail selling will be similar to ours, so they still must do a better job. Up to now they have not been able to do that. Will they learn or will the foreign culture, to them, be too hard to sell to? That is where we can still maintain superiority.
I, as a manufacturer, am under constant attack from lower prices but have managed to make a more relevant product due to cultural knowledge and style. But will the day come when I am offered too much to turn down or will the Chinese propensity for greed keep them from offering a fair price? Time will tell.
I like to look at the next few years as all opportunity. What do I mean? CBK's business model is focused on the independent retailer, and our job is to continue to provide what the retailers' customers want and need. For example, we continue to conduct market research on trends and colors so product will be available for the independent channel in a timely manner.
Yes, there will be challenges such as raw material cost and transportation issues and timing that we all will have to deal with, but it is no different than the past. It is up to all suppliers to aggressively stay ahead of these challenges and have contingency plans to provide retailers what their consumers' needs will be and when they want it, which in the end benefits the retailers. This all sounds too easy and obviously it is not -- the challenging part is to perform for the retailers.
Our political leaders have begun to recognize that China's desire to trade with the United States allows political pressure from the U.S. to influence reform in areas like human rights issues and democratic influences in the future. By the U.S. eliminating quotas on incoming textiles and other goods from China, we have seen an overwhelming amount of goods land in our ports with prices that will allow the retailer to keep margins healthy for them, but at the same time, U.S.-made goods and even goods from other Asian countries cannot compete.
Suburban Silk sources from Thailand, a higher priced country to source from. We believe our product is unique enough with quality and design that our retailers will not substitute us with a Chinese-made product and we will certainly try to keep innovations coming. However for U.S.-made companies, the China issue is looming large and fast.
We know of one example in Mexico where many street vendors are selling Crucifixion souvenirs now being made in China because they are cheaper for the seller to buy than Mexican-made goods.
Steve Stratford, retailer
I don’t think the furniture industry has seen such challenges for both the vendor and the dealer. The following are areas that I feel will impact the industry the most:
*3rd World Manufacturing
*The Internet and ecommerce
*Vendors opening Retail stores
The biggest and most dramatic changes will come from fFurniture sales on the Internet. Already you can see large companies positioning themselves to dominate the industry through Internet sales. The key is free or low-cost shipping. These companies have developed their own trucking companies to give to-the-door, white-glove service. We will see the full effects of this within 10 years as the X and Millennium Generations mature.
Markets – the buying and selling process. The decorative accessory industry has bloomed and we have 16 possible markets a year we can attend, in addition to countless small regionals that buyers can explore for new and undiscovered treasures. With the cost of doing business for these shows, the challenge will be to choose which ones will be the most important, most profitable, most inspirational and most convenient.
Deirdre Staab, retailer
The Scarlet Tassel
1. Internet Security -- Continued development of the Internet has been and will be exciting. It is an opportunity for growth in many businesses. However, with growth come concerns with Internet security. Knowledge of these threats and business policy development will be required to protect our data. Just staying ahead of the curve
will be a challenge.
2. Internet Legal Issues -- Whether it be sales tax or copyright concerns, how our Internet businesses expand and fit in with society as a whole will be a challenge. New concerns are sure to emerge as various government entities continue to see the Internet as an opportunity for added revenue.
3. Consumer Challenges -- Including the prospect of rising interest rates, increasing energy prices and modest gains in income, how the consumer reacts with her spending dollar to these influences has been and will continue to be our greatest challenge.
Shelly Dozier-McKee, retailer
The Scarlet Tassel
1. Competition from mass merchants and discounters -- Mass merchants like Target, WalMart, Linens-n-Things, Sears, and Bed, Bath & Beyond, are offering more "fashionable" and stylish home decor products in their stores. With their sharp price points, they are attracting customers that may have never looked to them for this type of product before. Consumers are taking advantage of the ability to do a majority of their shopping at one location versus having to make several trips.
2. Personnel -- Attracting and retaining qualified sales associates and managers is and will continue to be a challenge. Younger employees do not have the work ethic that people, now in their 40s, did at the same age. When hiring older employees, we are faced with a lack of computer knowledge and their inability to do some of the manual tasks needed to service our customer fully. Turnover in retail has always been high, but with a smaller specialty stores the impact of turnover can be great.
3. Product Exclusivity -- As a specialty retailer, our ability to work with manufacturers on limited exposure or exclusive items has diminished. Now, many reps are not protecting their customers when it comes to product distribution and you may end up with an item that is carried in a store down the street from you.
5. Customer loyalty -- Maintaining a loyal and repeat customer base will get harder over the next few years. As a specialty retailer, we recognize to keep customers coming back we have to offer elements that they may not get from mass merchant, chain or discount stores:
· Outstanding customer service -- We will go above and beyond to service our customer
· Unique product offering -- We look beyond the top sellers at market, to find items that won't be seen in every store. We offer products that allow our customers to personalize their home environments
· A unique shopping environment -- We have created a relaxed and welcoming shopping environment that provides design inspiration through lifestyle displays and vignettes. We provide customers with real-life decorating solutions and design ideas they can envision in their own homes.
· Value -- We ensure that all of our products are priced to offer value to the customer.
· Services -- We offer services that enhance the shopping experience of the customer: special orders, free gift wrapping, shipping, design services, educational workshops and corporate gift assistance
6. The economy -- Although economic predictions point to the economy and consumer spending improving over the next few years, I think consumers will still spend cautiously. I see consumers thinking twice before making a big purchase, even those with lots of disposable income.
Sandra Kroll, C.I.D.
Pen Argyl, Pa.
1. The ability to get product to consumers "when they want it." Furniture ordering cycle is too lengthy for impatient customers who "want it when they want it."
2. The oversight agencies for the design industry (ASID, especially) become more of a roadblock for designers as they continue to add and escalate costs, and to add more elaborate requirements and restrictions for the design professional. The agency moves to a "big business" mentality, losing sight of its original purpose.
3. The continued focus on the "eclectic" look in design/decorating will not ameliorate the ability to make a living for those designers/decorators focused on serving the low to middle-end customers. It appears that consumers will continue to annoint themselves "designer/decorator," thus discounting the need to pay for design/decorator services they feel they no longer require. Home style magazines and some design professionals themselves continue to inflict the “eclectic,” “everything you like goes with every other thing” on a public eager to do their own thing without regard for salient design principals.
Robert M. Weiss Presents
THE REDUCTION OF MANUFACTURING CENTERS IN THE U.S.
While the growth of furniture and accessory industries in China has created lower prices for the American consumer, it has also caused the decline of manufacturing centers in the United States. It is only a matter of time until China, like Japan in its export infancy, will raise prices due to the increased standard of living created by this ever-growing export income. Ultimately, the lower prices most Americans have welcomed will be replaced by prices comparable to what Americans had been paying for ‘made in USA’ products.
We have seen similar examples in the early ’70s with our love affair with cheap Japanese electronics and cars. Today, Japanese electronics and cars are no longer cheap but as expensive or more so, than their American counterparts. As in the Japanese experience, the tooling and manufacturing centers in the U.S., unable to compete, will have closed their doors. Those wanting to compete anew will need to reenter the industry with the overhead of new tooling, untrained personnel and acquisition of manufacturing plants.
The continued growth of large Discount chains, a result of consumer demand for low-cost goods, will place more demand on low-cost imports from China and Asia. To illustrate the strength and growth of large Discount chains, if Wal-Mart were a country, it would be the eighth largest trade partner of China.
As national fiscal policy, the high cost of fuel and energy and declining stock markets take their toll on the working middle class, that segment of population will continue to shrink. The buying patterns of the public will be divided between working lower and middle class seeking low priced needs within furniture and accessories and upper class seeking high end wants. The mid-priced product, heretofore enjoyed by the middle class, will face shrinking demand.
We should all be concerned about the destruction of forests within China and Asia for the wood products used in this industry. Japan and the United States have become reliant on these countries for wood resources because of their willingness to capitalize on their forests for export capitol. The problem is they have not, like the U.S., Japan, Canada and other timber-rich countries, developed a reforestation program. Thinking globally, the implications for these countries and our environment are not promising: global warming, destruction of animal habitats, worsened air pollution and increased diseases as the “lungs of the earth” are gradually eliminated and the erosion of rich planting soils leaving these countries to compete for more sustainable resources, such as clean water and food.
Robert Boragno, retailer
Monarch Beach, Calif.
As a gift and home accessories retailer, I think the most important challenge facing us in the next few years is the plethora of off-shore goods which are over-saturating our markets. As look-alike low-cost goods flood the marketplace, these products become somewhat disposable. When your $16.95 lamp looks like everybody else's lamp you throw it away and buy another. Unfortunately, these goods can be purchased everywhere, which adds to their intrinsic value of zero.
This makes it harder for the consumer to justify paying a higher price for a handcrafted high-quality item which "heaven forbid" they may have to use for more than a few years and actually hand down to their family someday. Beware of the “looks good -- can you believe how cheap it is?” pitfall the next time you go to market.
Kurt Adler Inc.
The big box stores are the greatest challenge to the independent home furnishing store(s). While the mass retailers can appeal to mass-market tastes and provide mass-produced goods, it is up to the smaller retailer to develop customer loyalty by appealing to niche tastes of the customer, creating an atmosphere bursting with excitement and providing great service. This can only be done if you know your customer, love your product and have enthusiasm for the goods you sell. Excitement sells.
Today with the vast majority of our products being manufactured overseas, are we losing our creative identity? A once-thriving industry of American craftsmanship and creativity has given way to the concept of more, bigger, cheaper, buy-it and throw it away. I believe one of our biggest challenges is to educate the consumer to appreciate craftsmanship and quality and at the same time encourage our neglected and exploited artisans by giving them shelf space. While there is certainly a place and need for goods manufactured outside of the United States, must we completely surrender our capabilities in order to satiate our needs?
Barry W. Nicholson
The biggest challenge our industry will face is probably something we haven't seen before. However, of the challenges that we know about now, I believe that the biggest challenge will be fighting the flood of knock-offs coming into the market. Lack of design integrity has always been, and presumably always will be an ugly issue in the home furnishings industry. Although our industry is not completely unique in this regard, as a recent issue of a national news magazine had a cover story about the increase in "knock-offs" in everything from fashion to motorcycles mostly from Asian imports.
Unfortunately several largely unchecked factors are pushing for the growth of un-licensed copies of home furnishing product designs. They include the U.S. consumer demand and expectation for lower prices, the retailers' "eyes-wide-shut" attitude about buying knock-offs to satisfy that demand, and the relative ease that an importer can find a hungry factory willing to make anything.
With this convergence, we believe that those retailers and manufacturers/importers that respect intellectual property will find it more difficult to deliver high quality, well-designed new products to the market. Sadly, we expect that to result in fewer manufacturers/importers developing these unique products, and even fewer retailers willing to risk limited open-to-buy dollars introducing them. In the end, the consumer will be the
big loser, and the rest of us in the value chain will find our value minimized as we all make and sell the same commoditized products.
Undoubtedly, there are some actions that could be taken, and in a few cases, are being taken to stem the flow. However, the idea that it is the consumer's fault for demanding it, or the factories fault for making it is a sad misconception. Ultimately it is the responsibility of both the retailer and the importer to respect the value of design integrity, and, in fact, to abide by the laws in place to protect it. Let's hope more of us will own up to our responsibilities in this regard as the pressure increases on us to abandon them.
The Phillips Collection
The contraction of wholesale will be the biggest challenge. As it becomes easier and more attractive for larger retailers to do their own importing, wholesalers will need to find new ways to stay relevant, or risk losing multi-store customers. There will always be smaller, independent stores, but they are more expensive to obtain, service and maintain, and their orders will generally be smaller. Wholesalers can make themselves important to larger stores by offering unique proprietary products, by inventorying in the United States, and by creating a consumer brand, but all these options are expensive and require significant investment. Returns may not be immediately quantifiable.
We have discussed this many times, both in house and with
our customers. There isn't a problem in this industry -- the problem is the economy, the war in Iraq and the insecurity and uncertain future we hear about every single day. We simply must get out of the negative mode -- move on and it will prosper again. The golden times of the nineties will be hard to repeat!
I feel my greatest challenge is the do-it-yourself marketers who reach the masses via television and the Web, who are willing to promote bad taste at a low price, as "design."
Why aren't we promoting excellence, creativity and value as gifts to our clients who are trusting us with their most valued possession, their home?
Nicole Bent, retailer
Shelmerdine Garden Center Ltd.
Our challenge is understanding our customer in our quickly changing world. It seems like our average customer is more complex than ever before. They are educated shoppers. They know if they are paying too much for an item, their design knowledge is strong (educated by HGTV and magazines) and their expectations in terms of store displays and uniqueness of product are high. About 80% of our customers are female, age 30-60. These are smart women! As well, they want product that speaks to them on some type of emotional level/reaction. I appreciate the challenge they present!
A second challenge is buying product. For example, import product this past season arrived quite late due to the quantity of containers at ports of entry. I feel it necessary to buy import product because of price points and competitiveness. However, I find import suppliers are becoming less reliable. We carry many gardening accessories -- and quality of import product is definitely a factor. For instance, we will be told by suppliers that products are designed to withstand outdoor elements, but we cannot trust in this. Many products are returned by our customer because it simply crumbled apart in the rain.
As a result, I am becoming less excited by import. Our customer is asking more and more, “Is that made locally?” The more I am asked this, the more I would like to respond, “Yes, it is!” Customers are looking for a good story behind the items they buy, not just a good price.
Myra Hughes, sales rep
Southern Accessories Today
I think the biggest challenge we will face is competing with Internet sales. Absolutely anything and everything is available and at competitive prices.
Murray Feiss Import LLC
Our challenge for 2006 is to anticipate consumer needs based on design, scale, price and color and then to deliver the properly designed product that will fill all those needs.
The biggest challenge for us as a company is to keep wholesale pricing stable. With the rising cost of oil, every part of our business expenses has increased between 5% and 12%. It's staggering. Meanwhile, the average consumer has been programmed to "get a good deal" by the TJ Maxx-type discount retailers.
In my estimation, the biggest challenges are:
The proliferation of industry trade shows and markets worldwide that create added expense to manufacturers without the ability to increase margins to accommodate those higher costs. This trend also creates unrecoverable expenses and confusion for the trade attendees of all of these markets. The proliferation eliminates attendance at multiple markets by many small to medium dealers.
Second is a concern that the U.S. GNP Index will not grow enough to keep pace with the consumer’s ability to spend and sustain or grow our industry’s percentage of the consumer’s disposable income.
Vice President, Sales
We have two big challenges to face in the next several years:
The first is financial. Historically low interest rates have been the growth engine of the home furnishings business. We are in large part indexed to rates. In its simplest explanation: Rates come down, people can buy bigger homes and do. The same people have a need for more home furnishings. With inflation signs on the horizon, rates are slowly ticking up. The increase in fuel prices will continue to raise inflation pressure, making more rate increases likely. If this continues we will see a chill on the housing market. This will no doubt soften the home furnishings market. When this happens we will have to be ready by managing our costs, while providing the best possible value to our customers.
I think the long-term outlook in this sector is positive. Rates will most likely relax again with growth. For the next several years we will see bigger homes, and probably smaller cars.
The other looming challenge is in addressing the next generation of our consumers. Generations X and Y create challenges by their habits. The baby boomers, in large part, openly rejected the culture of their parents and society. Ironically a few years later they were immersed in the culture of beautiful homes and other possessions. Their style is often derivative of their parents. This created a large accessible market that has fueled 20-plus years of growth.
The next generations of consumers are being raised on a diet of clean industrial design. Their most precious possessions are electronic. Apple and Nokia are teaching them what good aesthetics are. We have to be ready to address this customer. Their cleaner. more urban aesthetic is still a very small part of our market. We have to broaden this look to remain relevant. The landscape of home furnishings will look very different when this customer controls a large share of the spending dollar. We will be there for them.
Home Furnishings International Association
The biggest challenge I see before our industry is being relevant and capable of making a positive, needed difference in people's lives. I think the challenge starts with us inside the industry. I don't think we believe in the power we have for good and therefore only half-heartedly ask consumers to use our products to improve their lives. I think we all need a huge does of positive self-talk and maybe even a little "fake it 'til you make it" mentality about how indispensable we are to the well-being of society. Once we've convinced ourselves, we need to address our audience. People need our products to make their homes their havens for recharging themselves; for shaping their lives and their families' lives to be better and more satisfying; for recovering from all the uncertainty and worries that life brings. Our homes can reflect us in all the stages of our lives and a little bit of each stage can be carried through to the next stage so that a walk through our homes can show where we've been and what we've learned.
This thought is brought home to me every time I think of our family friend, Ruth. She is 95 years old, living alone in her home of more than 50 years. My husband worries that she must be awfully lonely and I'm sure she is. She is, however, surrounded by more than 50 years of memories of family and friend now gone. She can see memories of her son who was killed in the Korean conflict.
She can see memories of her mother who gifted her with the genes for a long life that is now both a blessing and curse. She says she's the last leaf left on the tree! She can celebrate old friends and new ones, all in the rooms of her little gray bungalow.
That's the kind of haven we can help our customers create, but we have to believe in our ability to do so. Once we believe, we must deliver this powerful message. If we can quit talking about price and talk about value, we will begin to meet this challenge.
The home furnishings industry as a whole is challenged from the consumers, retailers and offshore vendors.
The consumers are demanding more for their money -- price, quality, and fashionable product. Additionally, their own employment confidence is driving them to make the decision to purchase.
The retailer is fighting with the rising cost of doing business, more competition, an overabundance of world product choices, and a decision to have a vision and/or plan on where they want or need to go in their business. Many retailers are struggling as to which market is appropriate for them to attend.
The industry wholesaler is facing similar pressures of the retailer -- more competition, the rising cost of fuel/shipping cost, imports and the ever-changing world economy.
Price -- the high, medium or low end -- is a huge part of the equation. Upper-end product is becoming a luxury market, and the middle or better products are fighting for shelf and floor space. The low end or promotional area has gotten more stylish, better quality, affordable prices and competitive, offering more choices.
Think about what is happening in the mass market. You can go to Target, JC Penney or Kmart and get designer product that is well merchandised, priced competitively and fashion forward. Total room selling is happening even at the mass market. For instance, if you want a “lifestyle” of product, you can find it at Target. They have made shopping fun again for the consumer in all areas of their store: Advertising, presentation and product assortment.
In some areas of retail, you will find similar or better product than the wholesale buyer sees at market showrooms. How can you be competitive at retail when the consumer is purchasing product at wholesale prices? The majors with their buying power are getting better at style, quality and merchandising.
The upper end of the retail market is pushing the envelope with more selective, special, private label product. The stores additionally offer special services, perks and inner circle rewards to gain loyalty. Their sales associates are more knowledgeable and seasoned. Sales training on the upper level is one way those retailers are able to gain more sales with their product and customer loyalty. Consumers want to feel special --especially if they are buying luxury products.
Vice President, Sales & Marketing
As our industry has made great strides in embracing technology, I believe we will be challenged in working to strike a balance in the distribution of business between Web-based and bricks and mortar retailers.
The Uttermost Company
Our biggest challenge is falling prices. Ideally our industry would compete based on better design, quality and features, and not so much on price. Fallling prices hurt everyone from the vendors to the retailer to the supporting industries, as we must sell more units to make the same dollars.
Senior Account Executive
I do think the biggest challenge (and one that we really did not see so much five years ago) is keeping up with the "warp speed" changes in the global marketplace. Our industry has been used to a much different pace -- retail and wholesale revolved around April and October, and collections stayed around for years. Now with technology, everything can change in an instant. To be successful you had better be forward thinking and not just rely on what had always worked. It is said that most of us have a fear of change, and now change is just about the only constant (scary, huh?).
Julia Knight America
I think one of the biggest challenges is the ease of global trade, due to e-technology. The almost seamless stream makes everyone a potential importer and makes everyone think they are a designer. E-mail, scanners, digital cameras and Photoshop give everyone the ability to tweak and modify a designers' original work so you can call it your own. Result – everything looks the same or almost the same. We have a choice to take the easy way out and stifle creativity or to use all this technology to push the design envelope to go further and better! Let's stop copying and start creating.
High Point, N.C.
Get the consumer emotionally excited about making a furniture purchase, creating a connection that motivates them to make an immediate purchase as opposed to spending money on electronics and trips or taking months to come to a buying decision.
One solution is to strategically use brands (often licensed) to create an immediate point of emotional connection, provide recognition or inspire aspiration as a purchasing motivator for the consumer.
I believe the biggest challenge will be SERVICE to the consumer. This task is one we as an industry need to address. We also need to look to quality, not just price. The consumer is extremely savvy and they know what is a good value. We also need to address the question of space. Let’s not build furniture by the pound.
I say affordable style will be the key ingredient for the future.
Area Sales Manager
I believe the biggest challenge for our industry will be the “death” of all the individual retailers with nice, unique stores and a different assortment. Everything will look alike in the future when all the chains take over and every mall and every shopping area will look boringly the same.
The Wilcox Collection
My feelings are that the biggest challenges for our industry in the next few years will be closely linked to how much more we use China as the maufacturing base for all our products for the home -- the notion that things are "made in China" opposed to "made in the U.S." will have a big impact.
China's willingness to produce almost anything is what has brought the market to such a strong realm in the past five years, but I also feel the bubble could burst somewhat if we continue to see mass-produced poor quality products come in to the U.S.
The fact that China produces so much in our industry means there is a danger we are selling ourselves short on quality -- the pressure from the big players in the United States to get the price so low forces all to go to China. But on the other side is the consumer becoming more willing to pay a higher price for something that is made in the U.S. or just has better quality?
To conclude, can you imagine an Antiques Road Show in 50 years time where someone finds a hidden treasure in their house and it doesn’t say "made in China" on the back!
George F. (Jeff) Little II
George Little Management
White Plains, N.Y.
The biggest challenge for all of us is to successfully navigate our businesses through this unprecedented period of accelerating change. Demographic changes, the sourcing inversion, consolidation, and the revolution in information technology, are among the factors that have us all asking the same questions about viability and relevance.
Horizons International Accents
Logistics is the big challenge.
As everything is being made farther away from home, there is clearly an imperative reverberating throughout the manufacturing world to minimize the transportation component of the final cost. This has been accentuated of late by world events that have contributed to the dramatic rise in oil and transportation costs in general. Merchandise must be handled in a streamlined cost conscious manner.
The most important challenge we face is how to get more products shipped in a faster and more efficient manner to the larger retailers who are starting to dominate retail sales. Or to devise means to get more affordable product to our smaller customers so they can hope to compete.
So container direct has now taken on a multifaceted persona. Shipping programs have become just that; many layered programs.
1. Finding the right people to sell our beautiful products. There are wonderful career opportunities for the right people and making the "right" connections is a challenge.
2. Freight handling by freight companies
3. Materials procurement in some cases.
4. Getting enough square footage on retailer floors for our products
5. All industries/economies will be affected by off-shore production in China. Long term, this will be a big problem.
Read the book: Running on Empty by Peter Petersen
Jamie Young Co.
I think the overburdening of our West Coast ports is going to be an increasing problem for any Asian importers. That also includes the U.S. railway and trucking systems People are going to have to order father in advance to be sure of having product to ship. This is going to be more expensive for the importers in having to hold more inventories for a longer time. All-time highs with no relief in sight.
At the end of last year it was an amazing sight to see all the container ships stacked up waiting to unload, far out at sea. At present, I believe, traffic is up by more than 35% on last year, but may even be higher. Considering Washington’s knee jerk responses to Chinese imports in the form of threatened tariffs and penalties, it could make China sourcing uncertain and compel companies to look at other countries.
In fact this is already happening at a significant pace, why have all your eggs in one basket? This obviously affects companies that have invested in infrastructures and offices more than the ones that have stayed more nimble and adaptable.
That is the key thing here, stay nimble and alert and be ready for change, because like life, it’s coming whether you like it or not.
James van Maanen
Jackson Heights, N.Y.
I've been in this industry for almost 30 years (and breathing for around 65) and I have never seen anything like what’s happening today. Our greatest challenge? It's a crisis of confidence. This lack of industry confidence should come as no surprise, given that the surveys all point to a decline in consumer confidence, as well. And whatever we do for a living, we are all consumers.
The dictionary defines confidence as "trust" or "reliance," and there appears to be increasingly less of this in our industry -- and in our economy and our government. Might there be a connection here, as one small retailer after another disappears into retirement or bankruptcy no longer possessing the confidence (or the funds) to continue operation? On the other hand, corporate mergers and acquisitions continue to swallow up individual firms and one chain becomes part of another, leaving in their wake fewer choices for consumers and fewer jobs for our continuing -- and growing -- unemployed.
As confidence in our government falls, so does confidence in our media and in that all-important mandate that separates our churches from our state. This last is what has long set us apart from countries or individuals (like those who felled New York's World Trade Center) that place the idea of god's will above government (or worse: god's will as government). Since people can’t begin to agree on what or who god is, it always amazes me that they seem so sure about his/her/its will.
That same dictionary (Webster's New International), at the tail end of its other definitions of "confidence," offers this one: "Having to do with the appropriation by a swindler of funds entrusted to him by a dupe who is promised large and easy profits from a type of investment not generally considered ethical." While this brand of "confidence" (or scam) is growing, topping out with the likes of Enron and WorldCom, the more important kind--the confidence that will get us, our industry and our government back on track -- eludes us.
From what does confidence derive? In terms of industry, it used to be that reliance and trust came from seeing the fruits of one's labors commensurately rewarded. But this appears not to be the driving force behind much of what passes for industry today. Hence the vote of no confidence. The only possible good news that I can see is this: When things reach a point where they can’t go on, chances are they won’t go on. Change is going to come. What kind? Wish I knew. But if there is any greater challenge facing us than how to regain our confidence (the true kind, rather than the fake), I can’t imagine what it might be.
Thompson Lange, retailer
As the world gets smaller with the Internet and competition tighter with the big boxes, it is imperative that specialty retailers definitively carve a niche for themselves. Their product must at least appear unique, whether it's from local vendors or international gift shows, and they themselves should become spokes-people for their stores through marketing and branding. Why would anyone want my stuff if they thought that it could be had cheaper at Pier One, Cost Plus or on the Internet? The fact that I've marketed myself as the buyer for an eclectic store makes me appear as an authority on this product, a person they can trust.
That being said, retailers need to be able to trust their suppliers and reps. If a rep says the quality of an item they're pitching is good and then it comes in shoddy, it does no one any good If supplies are promised and we in turn order complimentary inventory or pre-sell to our regular customers, only to have a company consistently back-order, then my product mix and customers suffer.
And a surprisingly large number of suppliers need to pay attention to what is on the order sheet. When I put a P.O. and a ship date on an order, I'm doing it for a reason. I have a product mix and tone I'm setting for each season and when items arrive three months early, not only does it put expense out for product that will be off the floor but it puts an unnecessary burden on my shipping and receiving department. And it makes me madder than hell.
In this day and age with the Internet and Wal-Mart, specialty retailers, vendors and reps need to be more respectful of the job each of us must do to keep going. Vendors take a risk on developing product, retailers take a risk on purchasing product and reps take a risk every time they walk through my door. You never know what kind of mood you'll catch me in.
Helen Loflin, retailer
Ivy and Old Lace
My concern is the great influx of imports in this country. I am concerned that Americans are losing jobs to our Asian friends and that we in America are losing our ability to not only compete, but also to be creative.
I worry that America's dollars are rapidly leaving this country and being spent overseas. I worry that the American middle class may disappear because of this, taking their buying power with them.
Christopher G. Kennedy
Merchandise Mart Properties, Inc. (MMPI)
Globalization of manufacturing, American interest rates, Chinese exchange rates, the current balance, U.S. tax policy and retail consolidation are all challenges which loom large on the horizon. The people who today own and manage the important companies in the furniture industry have risen to overcome greater challenges than these, and I am confident that they will rise to the occasion once again. Each of these issues was identified early by the writers and editors of Home Accents Today, and that is why for 20 years we have known that reading it each month is a competitive advantage.
Relationship & Sales Manager
Gold Leaf Design Group
Creating and maintaining a good working relationship with our clients, having clients embrace using the Internet and e-mail as communication tools to make the ordering process more efficient.
Gary and Josephine Amerigian
House in the Country
We feel the biggest challenge is to continue to follow the dream despite decreased pricing and increased competition. The great thing about the capitalistic system is that if you have the courage to pursue your ideas and turn them into reality, you will always be rewarded both spiritually and monetarily. The American buying public recognizes unique, creative talent and rewards it. You can't be all things to all people but you can be the best at what you choose to do.
I see the biggest challenge facing us as an importer/distributor is that Chinese manufacturers will press into the U.S. market directly with very low prices, build their own distribution centers and warehouse in the U.S.
Lake Park, Fla.
Our furniture world continues to rapidly change, bringing new and different sets of challenges than most of us have experienced. Many of these challenges lie in the changing face of retail. Never before have so many furniture manufacturers opened their own retail stores, while at the same time reinvented themselves as marketing and distribution companies. We are an industry that, speaking in very general terms, doesn’t “get it” when it comes to utilizing new technologies (and some not-so-new) in the advertising, marketing, sales, and the communications arena. Whether it’s retailers that do not use the Internet to glean valuable information from their vendors, they also don’t promote their respective businesses with an on-line store and presence. Aren’t they missing out on an incredibly level playing field?
Continuing to speak in general terms, there is the (old-school) sales representative who insists on trying to get that big buyer on the phone to no avail week after week, month after month. Those buyers don’t have time to talk to or to see the representative. I think the bigger stores today and the smaller ones tomorrow will opt for a more efficient means of viewing and purchasing merchandise. And for sales representatives who want to remain an important part of the distribution process, they must embrace the technology.
It seems that taking fewer risks is the order of the day and we all know the consequences of living in a comfortably uncomfortable world. Taking risks and living outside our respective “comfort zones” is the clearest path to meeting the new challenges the home furnishings industry faces in the early part of the 21st century.
Emma Gardner Design, LLC
Globalization and the positive and negative impact it will have on every aspect of our business will pose the greatest operational, competitive and creative challenges.
Competitively, foreign product competing for local dollars, shelf space and consumer awareness will demand a focused and sustained effort to maintain existing sales and distribution channels, client relationships and a resonant marketing message.
On the positive side, it works both ways and we can pursue
production/manufacturing opportunities as well as sales targets overseas. Operationally, the competitive environment will demand the adaptation of new technologies and strategies to increase productivity and margins that are eroded through global competition.
Of course, efficient and forward-looking operations are the foundation for long-term success, even if the conditions are forced upon you.
Creatively, the exposure to varied work from around the world will stimulate superior design and engineering while better serving consumers.
Excecutive Vice President
The Zrike Company.
Being able to respond to an ever-changing business environment and stay profitable is the biggest challenge that we will face in the next few years. With continued store consolidation and inconsistent economic times,it is more important then ever to keep your approach fresh and innovative.
I believe some of the biggest challenges we will face as an industry over the next few years to be totally out of our control. External factors such as rising raw material costs, revaluation of Chinese currency, home mortgage interest rates, and a potential housing market bust are just a few of these outside/uncontrollable factors. Unfortunately for our industry, and also for the end consumer, many of these factors will result in high prices for our goods and services. All of this can cause such an air of anxiety and uncertainty.
I also believe our industry will survive these and other factors into the future. I believe that good old American creativity and ingenuity will win out, and we will survive. I actually believe the most creative and ingenious companies and individuals will not only survive, but will thrive in this environment.
Chief Operating Officer
Dallas Market Center
The two paths to retail profit are quantity or quality, and the divide between the two will continue to expand in the U.S. In an increasingly competitive retail marketplace our specialty store customers tell us they must be vigilant about finding the most unique items of high quality that also offer a healthy margin. The continuing challenge to the local retailer, to the market center and to the manufacturer is to offer our customers a better selection of a higher level of merchandise that consumers demand.
Senior Merchant Home Decor
For smaller and mid-size retailers, the biggest challenge is to get ahead and stay ahead of the big box giants. Small chains have got to be more flexible, first to the market with new ideas, and provide a level of service that differentiates their total offering.
For all retailers, a huge challenge is smarter customers. Customers have so many options in which to research features and benefits, options, pricing, etc. that when they are ready to buy, they have already done their homework. Retailers have to be right on the money the first time to get the sale.
Global raw materials pricing and consumption is a challenge for both manufacturers, suppliers and retailers. Costs are going up, but pricing flexibility in retail is very difficult, with low inflation.
International Home Furnishings Center
High Point, N.C.
The challenges are basically the same as they have been for many years, distribution and product. However, the complexities of these two issues are constantly changing.
We know that historically 80% of the buyers who purchase furniture for their stores also buy accessories. Considering the ongoing consolidation of furniture retailers, it places more emphasis on the need for accessories suppliers to become more sophisticated in their business practices and product development. We have seen this trend impact the number of exhibitors at the High Point market. For example, there are 500 fewer smaller exhibitors who show in High Point than six years ago. The "better" are becoming more important. Retailers want to do business with reliable resources and the bigger they are, the more important this issue becomes. It also puts more pressure on product development. Add to that the world sourcing scene and you get a picture of the complexities mentioned earlier.
A very positive development for accessories manufacturers is the realization by many retailers of home furnishings that smaller pieces, those that fall into the broad category of accessories, can be very profitable. This development also has been instrumental in the development of stores that are decidedly oriented in this direction.
Overall, I would say the accessories portion of the home furnishings is alive, well and poised to do even better. At IHFC we take pride in presenting to the buyers who visit our facility the very best of resources available in the industry. We owe it to the buyers and to our exhibitors who only wish to be in the company of businesses with the same high standards. We feel good about where we are at this point in time.
David Hinson and Jeff Chauvin
Jeff and I both feel one of the biggest challenges our industry will face over the next five years will be the opening of more retail stores such as Home Goods, TJ Maxx, etc., which will hurt those vendors currently importing. More and more stores will go direct to manufactures in countries such as China, India, Vietnam, etc. and cut out the middle man, those vendors currently showing at trade shows.
In addition these retail stores (TJ Maxx, etc.) will be able to offer the same products as smaller retail stores but at a better price because of volume purchased. So in the long run, it will affect both the vendor and retail store.
BJ’s Home Accents
We feel a large problem that looms on the home accessories/design business horizon is the diminishing number of quality individually owned businesses. As prices increase on everything from inventory to fixed expenses, it will be harder and harder to find individuals (that have the talent) who have or are willing to pledge the money to maintain quality businesses. At the same time the big box stores keep forging forward with their generic merchandise. People that have the money to invest in a business are being fed a steady diet of other investment opportunities. These opportunities do not require the total commitment of energy and time and produce a better return on capital. Compounding the problem is the competition from the big box discounters that force the independent to discount in order to compete.
We are doing a great business and are told constantly by our reps. that we are the exception and not the rule. We feel really blessed, but we give our business our total time and effort, not everyone is willing to do this. I feel sure that we could take all the money we have tied up in land, building, inventory and other expenses and invest it in much less time-consuming vehicles and double our profits, at least. The only problem is we would not have the fun we are now or make all the friends, like our HAT friends, we have in the industry.
The biggest challenge facing our industry today is the same as it has been for many years and that is to create a desire in consumers for home furnishings. For our industry to grow and prosper, we need to create in consumers a drive to continue to beautify their home and create a warm, fresh and ever-evolving home environment.
From the perspective of a manufacturer of high-end goods, one of my biggest challenges is to maintain the strict high quality standards that we adhere to, as well as developing fresh, original designs while responding to the ever-increasing price point pressures. Those pressures are exacerbated by other challenges including increasing health care costs for our employees who are like family to us.
Bella Rose by Chateau
This question was a great company wide discussion item. We had several responses from a design/manufacturing standpoint.
From design: Our biggest challenge is that the Chinese will become more Westernized in their creativity and will compete directly with U.S. designers.
Our other concerns:
The economy in general, taking away U.S. jobs.
Demand for product.
The length of time to get product to the U.S.
Balancing the playing field with China.
President and CEO
Barclay Butera Inc.
Our biggest challenge is being faced with non-U.S. made product and the quality involved in that product. Emphasizing the economics of offshore production over handmade American quality has long-term consequences. I only manufacture in the U.S. and the perception of that carries great weight with clients.
Other CEOs in different fields have also concentrated on recognizing the craftspeople of America, instead of always going for the margin, and their clients know that, feel they are getting a top-notch product, and are dedicated to them.
Courtney Davis, Inc.
Well, this is the ultimate question is it not? The biggest challenge is how to keep the specialty retailers in business. With the big box stores offering similar product for less and the mass getting a better mix at higher standards, how can they survive?
The challenge is also how can a quality product stand up to Chinese imports driving prices and quality down. Vendors are already having trouble competing with factories that are going direct to American designers. We are being approached by factories looking for American designers so they can offer retailers direct prices without vendors. This is dangerous business.
Licensing will take on a different face as all of this unfolds. Target for instance is already using known brands to develop proprietary goods, and going direct to make these goods, thus eliminating or reducing the U.S. vendors’ presence. One Target vendor I know lost $12 million of business in one year when Target went direct. That is clearly the challenging issue today.
Vice President of Sales
I believe the biggest challenges facing the rug industry in the next few years are two-fold. First, the potential labor shortages in China will increase pricing pressures on handmade rugs from that country. Currently, they are the leader in production, but with labor becoming more scarce the wages are constantly rising. There is so much competition for Chinese labor in electronics, construction and the service areas in China, along with increased incentives from the government for farmers to stay on their farms rather than take open factory jobs. All these forces are combining to take labor away from weaving rugs, which means the wages will continue to increase, eventually resulting in higher prices or even product shortages.
The second biggest challenge facing our industry (and others) is the lack of ethics in business, especially among some of the larger companies. Our company too often runs into unauthorized chargebacks and deductions, late payments, short payments, etc., many of which may be done intentionally or at least without much effort to make the situation better. Some retailers seem to take the approach that it is OK to make deductions, hoping that the wholesaler won't bother to fight them, that the few dollars involved are less than the effort to collect them. This certainly isn't the way to create partnerships. Fortunately, there are still plenty of companies around with honest, ethical employees where a handshake is a deal. I hope that they continue to succeed and do well, so that the others eventually get the message.
P H Y R E Design Resource & Studio
As an independent design firm of one, I can see clearly my own greatest challenge in offering a somewhat unique design service to the home product industry: keeping a step ahead, or two steps ahead, of the expanding product services available direct from the manufacturers. In China, India, Malaysia, and elsewhere, factory owners are increasingly sophisticated and savvy when it comes to understanding the American market, the American aesthetic. Not long ago my clients would return from visiting these factories with a few samples of their own original designs. The attempt to please would be evident, and the piece-part price sharp. But a deep, unilateral absence of design sense shone bright. Not so anymore. As factory-originated designs and collections have moved closer to hitting the aesthetic bull’s-eye, my clients' openness to carrying "off-shelf" product has grown. It's becoming increasingly difficult to spot open stock SKUs mixed into a retailer's lineup.
To face this challenge, I offer engineering and manufacturing expertise along with my designs; costing assistance, prototyping capabilities, research and resourcing, as well as serving as a link to a network of other independent professionals offering related services. I also keep a few completed collections at the ready for those little gaps that can show up late -- just before a market or buyer presentation, for example.
Donna Marie Territo
For high-end manufacturers and designers such as Abbiamo Tutto, a major challenge facing us in the next few years are two basic thoughts: Continuing to develop and work with European manufacturers instead of Asian which is extremely costly due to the U.S. dollar value compared to the Euro; and contining to position our products in the ever-shrinking high-end marketplace.
Uttermost and Surya at the Dallas Market Center