Anderson Bauman Tourtellot Vos & Co.
An ABTV Industry Watch Report
The American Furniture Industry: What Will It Take to Survive?
The first decade of the 21st century has not been kind to the American furniture industry. Having experienced the “Asian Invasion,” which rapidly eliminated nearly all domestic wood production and disrupted upholstery production, the industry is now facing a severe economic slowdown, with incoming orders 20 to 40 percent below normal levels. The combined impact of the competitive off-shore onslaught and the domestic economic meltdown has put unbearable pressure on all furniture players, without exception.
Industry leaders Ethan Allen, La-Z-Boy, and Furniture Brands have watched helplessly as already slim profits turned into robust losses, and stock prices plummeted. Industry niche players, even the best of the lot, have scrambled to cut costs, shut down plants, and abandon marketing programs. Bankruptcies and orderly liquidations have been numerous, especially in the retail sector, and many more are yet to come. Typically, it takes time to bury a furniture company, for no matter how mortally wounded it may be, the liquidation of assets keeps it afloat longer than expected.
There is no rising tide to save the fleet. The aggregate demand for furniture is shrinking and the traditional channel of distribution is following in its path. Assuming the economy turns and that order levels improve, the survivors will face far less competition than before and may well have some interesting opportunities. During the near-catastrophic period from 2002 to the present, virtually all aspects of the industry have changed, so it will take new strategies and tactics to cope with the emerging structure. There can be no going back to the old ways. The likelihood of the ‘same old same old’ returning is about as good as the Dodgers returning to Brooklyn.
The industry is obviously going through a transformation, but the emerging form is not so easy to envisage. Upholstery manufacturing has changed; conventional wood manufacturing has disappeared; some retail channels are gone, while others have emerged; and heretofore neglected areas like information technology, systems, logistics, and global sourcing have become essential, not peripheral.
The purpose of this white paper is to get a good fix on the current state of the industry and to project from that some semblance of what we might expect in the future. Unfortunately, the severity of the economic downturn makes it difficult to distinguish what works from that which does not.
FURNITURE INDUSTRY WATCH REPORT SEPTEMBER 2009