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With the sophistication of the internet has come the booming growth of e-commerce. The combined furniture and home furnishings industry has been one of the big recipients of this growth second only to the clothing/footwear industry. It is estimated that 2015 internet sales of furniture alone now totals an estimated $14 billion or 15 percent of furniture industry sales. (Source: Impact Consulting Services, Inc. proprietary industry model and U.S. Census Bureau’s E-Commerce Report issued June 2016 covering years 2004 to 2014.)
Furniture Industry Sales
Since the bottom of the recession in 2009, total furniture industry sales have grown 24.1 percent, and much of that growth can be attributed to the rise in e-commerce. Actual brick and mortar store sales of furniture are up 13.8 percent since 2009 while e-commerce has grown by 168 percent. (Table A)
In 2004, e-commerce sales were inconsequential in relation to brick and mortar store sales which accounted for 93.4 percent of the total furniture industry. Over eleven years, the share of e-commerce has grown from 3.2 percent to 15.3 percent in 2015, while brick and mortar sales fell to 82.9 percent of total furniture dollars (Table B).
Along with furniture e-commerce sales, other home furnishings products – floor covering, window treatments and home accessories – have grown at an even faster pace than furniture. The table below shows that while furniture e-commerce sales have grown 440 percent since 2004, home furnishings have growth 697 percent to $13.9 billion (Table C).
Brick and Mortar Stores e-commerce
Retail sales of furniture and home furnishings products are sold through three avenues – brick and mortar stores, internet shopping (e-commerce) and finally mail order and other miscellaneous non-store retailing. In the first instance - brick and mortar stores -consumers can physically visit the store or they can often visit the store’s website and make an online purchase. Many of these retailers offer expanded product offerings on their websites not available in stores. While some large brick and mortar merchants have been successful in online retailing of furniture and home furnishings products, furniture and home furnishings stores as a whole have been much less successful with online attempts. These websites serve as much to draw the consumer into the store as to generate online sales. And while e-commerce sales among furniture and home furnishings stores almost doubled from $330 million to $651 million 2004 to 2014, this only increased internet sales to less than one percent of furniture stores volume in 2014.
Comparing furniture and home furnishings stores to other retail brick and mortar companies, furniture and home furnishings stores lag behind in percent of e-commerce sales to total sales, though none are exceeding three percent of sales via e-commerce (Table D).
The phenomenon of e-commerce has been the rise of what was once called “Non-Store Retailers”, now referred to as “E-Commerce Retailers” – companies without physical stores competing with brick and mortar establishments. The new Census Bureau study reports sales of furniture and home furnishings through e-commerce retailers increasing from $4 billion to $24.3 billion in ten years (2004 to 2014) – a growth of 503 percent (Tables E).
Along with furniture and home furnishings, other consumer merchandise lines dramatically increased sales through e-commerce retailers. At $46.9 billion in sales, clothing/footwear leads e-commerce retailer sales in 2014 up from $7.1 billion in 2004. By far, the fastest growing products sold by e-commerce retailers, clothing/footwear increased 561 percent over the ten year period. Furniture and home furnishings experienced the highest growth among e-commerce retailers coming out of the recession 2009 to 2014 – jumping an average of 20 percent per year. Sporting goods sold through e-commerce retailers also experienced high growth in the last few years, but electronics and computer hardware have tapered off with sales increasing a yearly average of five percent since 2011 (Table F).
Of the five selected merchandise lines in Table G, clothing/footwear holds the highest share of e-commerce retailer dollars and grew from 13.3 percent share in 2004 to 18.4 percent share in 2014. Furniture and home furnishings also saw a gain in share – finishing 2014 at 9.3 percent. As more merchandise lines like clothing and furniture have increased their internet presence, two broad product areas have lost share among e-commerce retailers -- electronics and appliances and computer hardware. Once the king of e-commerce, computer hardware fell from 15.1 percent share to 6.3 percent in ten years. Electronics and appliances slipped down from 10.8 percent share of e-commerce retailer sales to 9.2 percent.
Retail Trade Total
While internet purchases have made major inroads into many consumer product areas, e-commerce is still a small part of overall retail sales. According to the new government e-commerce report covering years 2004 to 2014, sales from e-commerce for all U.S. retailers, both brick and mortar retailers and e-commerce, for all consumer products excluding gasoline totaled $298.6 billion in 2014. This reflects an increase of 14.3 percent from the year before and a 311 percent change over ten years (Table H). Meanwhile total retail sales, excluding gasoline, grew 30.3%.
According to the Census Bureau, the internet claimed 7.3 percent of all retail sales, excluding gasoline, in 2014, up from 2.3 percent ten years before (Table I).
While the growth of internet sales of some products appears to be slowing, other product areas, like food, are still in their e-commerce infancies. The rapid growth of furniture industry sales by successful e-commerce retailers are challenging the brick and mortar stores and presenting a distribution dilemma for manufacturers. In the next issue Statistically Speaking will continue to address e-commerce and the future customer.
Millennials, Americans born roughly between 1982 and 2000, account for more than one quarter of the nation’s population. As of 2015, these 17 to 34 year olds numbered 83.1 million and have surpassed the 75.4 million Baby Boomers. The Millennial generation continues to grow as young immigrants move into the U.S., while deaths among Baby Boomers exceed the number of older immigrants. These children of the Boomers will emerge into full adulthood in 2017 as the largest consumer generation in history.
This is the first of two articles profiling this generation. The initial article explores demographically how the Millennials have altered the population, income, education and household characteristics of both the Under 25 and 25 to 34 age groups over a ten-year period. The article next month will explore how researchers think this generation will spend its estimated $200 billion dollars annually starting next year.
As a whole, the number of 15 to 34 year olds has grown 9.5 percent from 2004 to 2014 (most recent population data). As shown in Table A, the glut of Millennials is in the 20 to 24 age group – totaling 22.9 million in 2014 after jumping 12.6 percent in ten years. Ages 25 to 29 have also grown dramatically, increasing 15.7 percent from 19 million to 22 million. While dipping down to 19 million in 2008, age group 30 to 34 has climbed up to 21.5 million. The Millennial stragglers are in the top end of the 15 to 19 age group. Once the highest young adult population in 2006 and 2007, most have since aged into their twenties leaving this age group relatively flat at a 3.7 percent growth over the ten-year period.
Income and Employment
The economy has had a major impact on Millennials. Many of them still live with their parents, have crushing student loan debt and are underemployed at best and unemployed at worst. Over the past ten years individual incomes have yet to reach pre-recession levels. Latest median income figures from the Census Bureau report Millennials ages 25 to 34 earn $31,219 annually, down over 10 percent from a peak of $34,459 in 2007. Many of the Under 25 age group Millennials are currently part-time employed college students, underemployed graduates or workers in unskilled low paying jobs.
The percentage of Millennials that are college educated is higher than any generation preceding it, a fact that should bode well for future economic growth. Over seventy percent of Millennials have some higher education (Table C) a much higher percentage than their Boomer parents.
Despite the level of education, a staggering number of Millennials are still looking for work. At the end of last year, 9.4 percent of adults ages 20 to 24 seeking jobs were still unemployed (Table D).
Of all of the characteristics of Millennials, perhaps none is more significant to the home furnishings industry than the tendency to delay marriage (Table E). In less than ten years, the marriage rate shifted from 38 percent of adults marrying by age 34 to only 26.8 percent. Marriage spurs home ownership and family planning which in turn feeds the home furnishings industry.
Although Millennials make up the largest and most educated generation in American history, the combination of economic factors, delayed marriage and family formations and shifting consumer attitudes also make them the slowest to embrace home ownership. This is most evident in the 25 to 34 age group where home ownership has fallen 10 percentage points in 10 years. In 2004, 49 percent of Millennials owned their own homes compared to 39 percent in 2014. (Table F).
The glut of the Millennials, the Under 25 age group, is one of the few groups to increase expenditures on furniture in the last 10 years, although expenditures still comprise only about 5 percent of industry sales. Many of these Millennials, however, still rely heavily on family financial support. Millennials ages 25 to 34 as well as the older GenX 35 to 44 group, traditionally the core of the furniture industry, have both failed to reach pre-recession furniture expenditures – down 8.2 percent and 12.3 percent.
For the home furnishings industry, the Millennials always seem to be just over the horizon but yet to make their big entrance. In terms of furniture industry sales, sales to the Baby Boomers are still growing, but they will begin to lessen their impact and make way for the Millennials.
Many things add up to help explain the slow arrival of the Millennials on the home furnishings consumer scene. The long recovery from the recession brought stagnant wages and higher unemployment. Add to that the delaying of marriage and slow home purchases. But the industry is ready. In the next issue, Statistically Speaking will examine the attitudes and lifestyle characteristics of Millennials and whether home furnishings purchases will become as important to them as they have been to their Boomer parents.
Is an election year partly responsible for a healthy economy? Are furniture sales higher and unemployment rates lower? Looking back over the past 20 years and the elections those years encompassed yields interesting results. With the exception of the Great Recession in 2008, a possible heightened sense of confidence and hope for the future during election years may partly be responsible for higher furniture sales growth, consumer confidence, gross domestic product and lower unemployment rates.
In presidential elections over the last 20 years since 1997, the last year of each term with one exception, has produced the highest furniture industry sales growth of all four years of that presidency. The one exception was the second term of George W. Bush which ended during the Great Recession. The last year of each term is also the Election Year for next term, as the nation is experiencing now in 2016. If the pattern continues, 2016 should grow in excess of the 5.3% furniture sales growth of last year.
Table A shows the furniture industry growth by year over 20 years encompassing five presidential terms, including the current 2016 election. Note that the industry’s highest growth was in the last years of Bill Clinton’s second term and George Bush’s first term.
Consumer Confidence was highest during the Clinton years – topping out at 139 during his last year in office (an election year). Taking a big dip post 9/11, Consumer Confidence dropped to 80 in 2003 before climbing back up to 96 during George W. Bush’s last year of his final term. During the Great Recession, Consumer Confidence hit its lowest at 45 during Barack Obama’s first term but grew 22 percentage points to 67 in the Election Year of 2012. Consumer Confidence has continued to grow over Barack Obama’s second term, but at 95 in March 2016, it is still below the 1985 base of 100.
Gross Domestic Product
The Gross Domestic Product or GDP is defined as the monetary value of all the finished goods and services produced within a country’s borders in a specific time period. As Table C shows, the GDP has made its largest gains during election years with the exception of the Great Recession. In both Bill Clinton’s 2nd term and George W. Bush’s 1st term, the value of U.S. goods and services increased by more than 6.5 percent from the previous year. It remains to be seen whether 2016 will follow the same trajectory.
Like the highs in Consumer Confidence, the Unemployment Rate was at its lowest during the Bill Clinton years (Table D). The Great Recession caused the unemployment rate to skyrocket near 10 percent, but by the election year of 2012, the rate has decreased to 8.1 percent and continues to fall almost a percentage point each year. Currently at 4.9, the Unemployment Rate looks to be continuing the trend of other election years with the lowest unemployment of the presidential term.
Election Year vs. the First Year in Office
While the majority of election years in recent times have ended on a positive economic note for the furniture industry, did the momentum carry over to the first year of a president’s new term? The continued upswing did occur in the 1980’s and 1990’s, but since the turn of the century, furniture industry growth during a president’s first year in office did not surpass the election year preceding it.
Table E shows that in the 80s and 90s, with the exception of Ronald Reagan’s second term, the first year of a president’s four-year term experienced higher furniture industry growth than the previous election year.
Unlike the 80’s and 90’s, in recent elections (Table F), the economic momentum of the election year did not carry over to the first year of a presidency. No president’s first year of the term exceeded the previous election year’s growth. If this trend continues into 2017, the Furniture Industry will not experience quite the growth of 2016.
With America facing what pundits are calling a polarizing election year, the hope is that the U.S. economy will follow tradition and industry growth will continue and consumer confidence grow.n
China’s devaluation of the yuan earlier this year was done in hopes of stabilizing the country’s shaky economy. The impact such a move could have on the U.S. furniture industry remains unclear and opinions vary from expert to expert.
Although economists differ on the depth of the impact, China hopes to prevent its economy from slowing further by making its exports less expensive. China currently dominates 60.8 percent of household furniture imports to the U.S. and cheaper imports could strengthen that hold.
The world totals of both U.S. imports and exports in the household furniture industry have been on the rise since the recession (Table A). In 2014 imports totaled $23.8 billion at wholesale or about 74 percent of U.S. furniture and bedding consumption. This compares to 62 percent in 2007, as reported in the April issue of Home Furnishings Business.
Imports to the U.S. experienced high growth of 53.6 percent from 2002 to 2007 before plummeting 24.3 percent by 2009. Since 2009, furniture imports increased to 53.1 percent in 2014—growing an additional 10.9 percent from the second quarter of 2014 to the second quarter of this year to date. While U.S. exports total just a fraction of imports, exports of furniture have been steadily increasing since the peak of the recession in 2009. Up 50.1 percent since dropping 5.9 percent in 2009, the furniture export industry has increased from $1.5 billion in 2002 to $3.5 billion in 2014—a jump of 141 percent.
Imports by Country
China’s exports to the U.S. have grown to more than 60 percent of total U.S. imports—up 20.6 points from 2002 to the second quarter of this year (Table B). Since the peak of the recession in 2009, the value of imports from China has grown 52.4 percent to $14 billion.
Canada’s decline alongside Vietnam’s rise is quite noticeable. Vietnam jumped from a half percent to more than 10 percent of U.S. imports in the past 13 years while Canada has dropped from 18.3 percent in 2002 down to 5.5 percent in the second quarter of thie year—a decline of 12.8 points. As the fourth largest importer, Mexico accounted for 4.8 percent of total imports in the second quarter of this year— 0.8 points shy of 2002.
Major Furniture Imports
Wood household furniture is the largest imported furniture product, but in 2014 the category had not yet reached pre-recession import levels. Conversely both upholstery and metal have been increasing at a high rate, and combined, now account for more than 50 percent of total furniture imports (Table C).
Purchases of upholstery and metal household furniture from around the world have increased more than 29 percent since 2007. The smallest imported product category is bedding. At $464 million in 2014, the category is a small fraction the total. However, bedding has increased by 140 percent from 2009 to 2014 and more than 20 percent in the first six months of 2015 compared to the same period last year.
Current 2015 second quarter year-to-date performance for all broad categories shows that Metal is the only category not experiencing double-digit growth this year (Table D).
Wood household furniture imports totaled $9.8 billion in 2014 and are up 10 percent in the second quarter of this year compared to 2014 (Table E). China still owns the wood category at $3.7 billion wholesale in 2014, but has lost significant share over the last 10 years to Vietnam.
Vietnam’s 2014 imports have increased to $2.2 billion, up from $60 million in 2002. Through the second quarter of this year, China’s wood imports have grown 7 percent compared to Vietnam’s 23.9 percent, closing the gap even further. Malaysia and Indonesia continue their steady wood niches but control less than 6 percent of wood imports each.
Unlike the wood category, China has virtually no competitors in upholstered goods in the U.S. marketplace (Table F).
In the early 2000s, China began to make its move with upholstery imports of only $543 million in 2002 and grew to $3.9 billion by 2014. Essentially, China has taken market share from U.S. producers as the secondary countries—Mexico and Canada—have struggled to maintain shipment levels. Through the second quarter of this year, China upholstery imports are up another 15.2 percent over the same period last year. Vietnam has slowly tried to enter the U.S. upholstery market, but only grew to $293 million in 2014.
Even more so than upholstery, China has a stronghold on metal furniture—accounting for 78 percent of all metal furniture imported into the U.S. in 2015 at mid-year (Table G).
China increased from $1.7 billion in 2002 to $4.7 billion in 2014—a jump of 172 percent in 12 years. While imports from Canada, Taiwan and Mexico have grown since the bottom of the recession in 2009, they continue to lose U.S. market share to China.
Exports by Country
Although the U.S. exports a fraction of furniture compared to imported goods, exports have continued to rise since 2009 and surpass the peak highs of 2007 (Table H). More than half of the $3.4 billion in U.S. exports are to Canada.
Although exports have been growing, they are not approaching the growth in imports being fueled by China. While the furniture industry in China has been threatened over the last few years due to rising labor costs and labor shortages, U.S imports continue to increase from China alongside a growing Vietnam Wwood manufacturing presence. The recent devaluing of the yuan could go a long way to strengthen China’s hold on U.S.
Methodology: Household furniture imports and exports are compiled by the U.S. Census Bureau, Foreign Trade Division from more than 200 countries by product type and material.
Although the housing industry has picked up some steam over the last two years in terms of existing home sales and housing starts, the lagging growth over the last five plus years can be partly blamed on the slow recovery from the recession and partly on the demographics of available homebuyers.
However, all of this is beginning to change on two polar fronts.
At the youngest end, the housing industry is starting to feel the bump from the millennials, the children of the Baby Boomers, as they age into the housing market. On the older front, the Baby Boomers’ changing housing needs are already creating a different kind of housing bump. Both should spur housing growth and subsequently the furniture industry for the next 10 to 20 years.
Millennials vs. Baby Boomers
This year, millennials are expected to surpass baby boomers in numbers and become the largest living generation. The millennials are generally defined as children of the baby boomers born between the early 1980s and the early 2000s. The oldest millennials are entering their 30s and the youngest are still pre-teens. Over the next 10 to 20 years, millennials will pour into the housing and apartment markets and many of the baby boomers (currently ages 51 to 69) will downsize to smaller homes, single-family retirement communities or group housing.
Table A shows how the population will grow and change over the next 10 years with the surge of millennials and the skyrocketing of baby boomers in the over 65 age group. Boomer growth over 65 will total 37.8 percent—increasing at a rate of 3.3 percent a year from 2015 to 2025.
Table B shows the current population of millennials and five age groups from 10 years to 34 years of age. In 2015 the highest population of millennials falls into age group 20 to 24 with 22.7 million people, while age group 24 to 29 is only slightly smaller at 22.5 million. Millennials are just starting to age into their home buying years with 21.7 million in age group 30 to 34.
Projecting out 10 years, Table C shows the age groups millennials will comprise in 2025. Over the next decade, the youngest of the millennials will be leaving college and entering the rental or housing markets and the oldest will be in their early 40s and often upgrading housing. Age group 30 to 34, primarily first time home buyers, is projected to increase 12.9 percent—from 21.6 million to 24.5 million, while the population of 25-to-29-year-olds, prime renting age, shows a slight growth of 2.8 percent. Ages 35 to 39 and 40 to 44 are expected to increase 15.9 percent and 10.5 percent as the older millennials age into a traditional period of housing upgrades.
In terms of net population growth, Table D shows the impact in the next five years of the changing demographics of both the millennials and baby boomers with the middle lower birth-rate population generation X stuck in between. By 2020 people in their late 30s are expected to grow 1.7 million, while age group 30 to 34 has a forecasted increase of 1.5 million—both adding to potential growth in the housing industry.
As the leading edge of the Baby Boomers begin to age into their 70s over the next five years, a need for senior and lifestyle housing will dramatically increase. Already 55-and-over, single-family communities are in rapid growth. An additional 3.4 million people are expected to flow into age group 70 to 74 by 2020 while almost 2 million are added to age group 75 to 79.
Table E further illustrates the dramatic increase in the population of seniors from 2000 to projected 2025. Over the span of 25 years, the number of people between the ages of 65 to 79 is projected to have increased 95 percent. Population projections show 10 years from now that age group 75 to 79 will grow 62 percent, while age group 70 to 74 climbs 47 percent and people in their mid to late 60s will increase by 26 percent.
Housing Costs Climb
As millennials age into the home buying years, the question will become, “Will they be able to afford a home?” Housing prices and apartment rental rates have been on spiraling upward in many parts of the country. If rates continue to grow faster than wages, buyers and renters will be facing housing’s ever-growing demand on their incomes which in turn impacts their ability to not only buy furniture, but all consumer goods and services.
Table F shows the rising cost of home prices from 2002 to 2014. At the peak of the housing bubble in 2007, the median price of a home was $244,950. With the subsequent housing market crash, the price fell 12 percent to $215,650 at the bottom of the recession in 2009. Since 2009, housing prices have climbed dramatically higher than pre-Great Recession days—up 32 percent in 2014 at $284,825. Median home prices have increased an average of 8.2 percent since 2011.
Millennials are flooding the apartment market. The rapid jump in home prices over the past few years is adding to a rising rental market as many potential home buyers are turning to apartments and other rental housing. As shown in Table G, rent rates have increased from $1,042 per month in 2010 to $1,239 per month in 2015 year to date— a jump of 19 percent. Over the last five years, rates on rentals have increased an average of 3.5 percent a year.
The next 10 years is demographically poised to be a high growth time for the housing and apartment markets. The challenge will be providing affordable housing for the first-time millennial homebuyers as well as senior and lifestyle living for baby boomers.
Methodology: Figures reflect data from the U.S. Census Bureau on Population Projections. Note the Census varies the level of net immigration (the difference between those coming and those leaving) to discern its impact on the U.S. population. The findings show that immigration makes for a much larger overall population, while having only a small effect on slowing the aging of American society. If immigration continues as the Census Bureau expects, the nation’s population will increase from 309 million in 2010 to 436 million in 2050 representing a 41 percent increase. The Census Bureau assumes net immigration (legal and illegal) by 2050 will total 68 million. These future immigrants plus their descendants will add 96 million residents to the U.S. population, accounting for three-fourths of future population growth.
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