Furniture retailing is a mature yet ferociously competitive sector that is mainly driven by price promotions, sales and special events. However, consumers have become wise to these tactics and retailers now face the challenge of enticing consumers through the doors for reasons other than cut-price deals.
A report from Mintel shows that furniture specialists need to find ways of repositioning their brands to prevent margins being eroded further. Retailers seem to be recognising that style and image are an important part of their products and marketing and so these elements are being given greater prominence in advertising campaigns.
The shift in marketing focus should help furniture retailers cultivate desire for their products – by selling inspiration rather than just furniture items. DFS, for instance, has launched a low-cost range by designer Linda Barker, thereby building on the public’s interest in style and design, generated by makeover programmes such as Changing Rooms.
According to Mintel data, the furniture and furnishings market is worth about &£10.9bn – up 25 per cent over the past five years. The value of the carpets and floor coverings market has risen by a similar degree, and is worth &£3.5bn. MFI, Ikea, DFS, Courts, Carpetright and Homestyle Group, which owns Harveys and Bensons for Beds, dominate the overall furniture and carpet market. All players have had mixed degrees of success over the past two years.
Ikea and MFI dominated the league table of retail sales in 2003. The small multiples and independents lost market share last year, and overall furniture specialists have lost out to lifestyle retailers, while the larger companies continued to grow. Overall sales have declined and it is thought this is because of improved furniture ranges at catalogue stores such as Argos and Index; mixed retailers such as Next and Laura Ashley; and DIY stores.
The main reason for buying furniture is still need, such as setting up home, replacing first furniture or when having children. But with style and design becoming more important to consumers, updating furniture because of changes in fashion is on the rise. This means that the lifespan of furniture is decreasing as consumers replace items with more fashionable ones, but the downside of this is that consumers are less prepared to pay high prices.
Consumers also expect to have new furniture rather than second-hand, which was the norm 40 years ago. It is much more common for young people to completely fill their homes with new items. They are able to do this by shopping around a wide range of low-priced furniture alternatives, such as Ikea. They are also prepared to repeat the process when they move to their second home, either because their tastes have changed or because styles have.
The Mintel report shows that the housing market is an important influence on buying furniture. There are fewer large households and more one- or two-person households in smaller dwellings. This naturally means that there is less space for furniture. As a result, it must be functional rather than merely decorative, and storage is also a major consideration. Practical items that offer good storage solutions perform best for all rooms in the home.
Many of the trends that have shaped the furniture market in the past five years will become even more influential in future. For instance, consumers will become more aware of style and design, and so will opt for stylish items but replace them more regularly. Retailers must continually refresh the look of their stores and update their ranges to cater for this trend.
In addition, the demand for smaller housing combined with the trend for more possessions will continue to boost the need for storage and functional furniture. Furniture that enables consumers to construct their own storage solutions from modular ranges will sell well.
The sector is ripe for consolidation with more market share spread between fewer but larger players. There is also scope for lifestyle retailers, particularly Next, Marks & Spencer and Argos, to significantly increase their market share, and the grocery stores are set to continue developing their non-food areas such as furniture, both through their stores and through home shopping. So, the battle for category dominance is set to continue and is likely to become even more hotly contested.
Mintel predicts that furniture will be a highly competitive sector over the next two years. Interest rate hikes and the looming slowdown or even deflation of house prices will mean that consumer confidence will be dented. This could put pressure on the large specialist chains. Nevertheless, Mintel’s data suggests that retailers should avoid price wars and become more innovative and imaginative, placing greater emphasis on style, to win over consumers.