Sign in

User name:(required)

Password:(required)

Join Us

join us

Your Name:(required)

Your Email:(required)

Your Message :

0/2000

Your Position: Home - Home & Garden - Everything You Need To Know To Find The Best Supply Chain of Furniture Industry

Everything You Need To Know To Find The Best Supply Chain of Furniture Industry

Furniture companies still paying for the supply chain crisis

In , I bought on Amazon a zesty asymmetrical mirror from a brand called &#;BIKARSOUL.&#; I paid $141.53 on Feb. 27 of that year. As I gleefully bought mirrors, nightstands and more for my new apartment in the months to follow, I was helping to contribute to a supply chain issue that&#;s still hanging over the heads of furniture makers. 

EISHO Product Page

Moving a container from East Asia to the U.S. on the spot market typically costs around $1,000 to $2,000. That&#;s economical for the furniture industry, which, over the past few decades, has become increasingly reliant on factories in Asia to make everything from mattresses to dining tables. 

Something strange emerged toward the end of , as FreightWaves readers know well. The cost of a container shot up like a meme stock, with spot rates eventually hitting tenfold their usual cost. According to the Freightos Baltic Daily Index, at its peak in early September , moving a container on the spot market from East Asia to the west coast of North America cost just over $20,000. Two years prior, pre-coronavirus, that same move was priced at under $1,600.

Compared to , furniture manufacturers are enjoying much, much lower transportation costs. But, furniture insiders told FreightWaves the cost of materials has remained high. Labor has become more expensive as well.

Furniture brands have also had to slash sticker prices as demand slumps. Other industries, ranging from food to airlines, enjoyed elevated profits in . Their prices were elevated from years past, but their costs had started to sink. 

Not so for the furniture industry. (By the way, none of the bulleted companies responded to a FreightWaves request for comment.):

  • Home retail behemoth Williams-Sonoma, which owns brands like Pottery Barn and West Elm, reported lower margins in compared to the year before. Its revenue increased 5.2% in , but costs of goods sold jumped by 8.3%.
  • RH, previously Restoration Hardware, saw gross profit decrease by 2.3% and revenue by 4.5% in .
  • Wayfair&#;s revenue sank by 10.9% in . It reported a negative income of $1.3 billion that year. 

The annual report of Purple, a mattress company, stated something that echoed across the home furnishings space: &#;In , our gross profit and results of operations were adversely affected by elevated levels of materials, labor and freight costs and lower demand levels.&#;

Here&#;s what happened, in case you just want the high-level view:


  • Retailers canceled furniture orders in March , expecting the world to shut down.  
  • When the American consumer responded instead by ordering a ton of furniture, brands had to respond by revving up manufacturing plants quickly. 
  • Unfortunately, every other industry did the same thing at the same time, and freight rates (and material and labor costs) began to soar. 
  • Demand sank in , but there were still incoming orders &#; moving into the U.S. with super-high costs.
  • Furniture brands have been forced to pay to store that inventory. 
  • Unlike other industries, they&#;ve also been forced to lower consumer prices &#; so they&#;re getting squeezed on both sides.  

A chaotic &#; and

You, me and the guy who lives under the biggest rock in the entire world know this story, but again I will tell it. 

In March , when the world was shutting down in what was then called the novel coronavirus, furniture manufacturers assumed they would be out of commission for a while. Instead, just a few months later, bored consumers started buying a lot of stuff, especially furniture. It was very chaotic, as longtime furniture analyst Jerry Epperson told FreightWaves.

&#;Many of our stores had canceled orders,&#; said Epperson, who is managing director of investment bank Mann, Armistead & Epperson. &#;They didn&#;t know what was going to happen. Factories were closed and we had to get everybody cranked back up again. The demand so greatly exceeded our ability to meet it.&#;

In some cases, Epperson said, factories in Asia had reopened, but those countries&#; ports hadn&#;t opened.

Reasonably, furniture brands started ordering tons to ensure they had decent inventory for what seemed like a bottomless hunger for more furniture.

Within months, though, the cost of importing that furniture became untenable. The sudden uptick in costs, including freight and materials, caught brands by surprise. Ken Smith, a longtime accountant in the furniture industry, said some producers tried to ask their buyers for a price increase &#; and many refused.  

&#;A lot of people lost a lot of profitability by staying with their original pricing,&#; said Smith, partner at accounting firm Smith Leonard. &#;That&#;s one of the things that hurt so many companies, especially those that were importers. You were taking orders right and left, and freight rates were going up like crazy. You weren&#;t pricing those goods expecting freight rates to do what they did.&#;

How many couches do you think are in these containers? (Photo: Jim Allen/FreightWaves) 

Just about everything we buy that&#;s manufactured overseas comes to the U.S. in a 40-foot ocean container. It&#;s trickier packing one of these containers with sofas than, say, socks. Sofas are a lot heavier and bigger. They don&#;t compress like socks do. You&#;ll likely run out of space or weight pretty quickly in one of these containers.


And with low-cost wares, like my asymmetrical mirror, that means some furniture companies were paying more to ship their containers than what the actual stuff in the containers was worth. 

Price increases came soon after. After that, it was a highly profitable time for the furniture industry, which tends to not be so lucrative. 

brought a nasty hangover for furniture brands

One key reason for the uptick in furniture sales was the fact that people were buying new homes and even building homes. Such sales sharply curtailed in early as the Federal Reserve began raising interest rates to combat inflation.

That plummeting demand ended the party for the furniture industry &#; and with a massive hangover in the form of an inventory glut. Americans seemed to order more and more stuff, and manufacturers and retailers provided. In early , they stopped pretty much all of the sudden. 

Furniture and home furnishing sales dipped by 8.0% in the first quarter of , while retail trade more broadly decreased by 0.6%, adjusted for inflation, according to the U.S. Bureau of Economic Analysis. In total, furniture sales declined by 7.4% in , compared to 0.9% for all retail sales. 

&#;Everybody knew it wasn&#;t going to last, but fell off somewhat unexpectedly &#; maybe a little more than what we thought,&#; Smith said. 

That left furniture brands with an absurd amount of inventory. That inventory could have been stocked in warehouses or left in containers in a Chicago railyard or Los Angeles terminal. Inventory levels popped by 40%-50% year over year in certain months of , Smith said. 

It costs money to keep all that inventory stored, which dragged down the industry&#;s margins in . In an October report, Morgan Stanley highlighted home goods companies like Williams-Sonoma as ones that were particularly at risk for elevated inventory and depleted sales.

&#;It&#;s sleeping money sitting in the warehouse,&#; Mike Padjen, vice president at American Home Furnishings Alliance, a trade group, told FreightWaves. 

The hangover refuses to go away in  

In January , Smith&#;s survey found that inventory levels were 20% higher than at the same time last year but down from the previous month. Consumers are still buying perishable goods at a regular clip, but they&#;ve largely turned away from durable goods, like furniture, in the past year.

The company is the world’s best Supply Chain of Furniture Industry supplier. We are your one-stop shop for all needs. Our staff are highly-specialized and will help you find the product you need.

&#;I thought we&#;d be pretty well through [the inventory] by the end of ,&#; Epperson said. &#;But we are not. It&#;s still a significant problem.&#;

Tragically, a lot of that furniture can&#;t even be sold, Padjen said. It&#;s passe!

&#;People are looking for new items,&#; he said. &#;The demand that&#;s out there isn&#;t for stuff that is 2 and 3 years old. It&#;s for new products, especially on the retail floors.&#;

Some of the inventory is also just &#; kinda wonky. Think chairs without their matching ottomans, or vice versa. 

&#;We were so desperate for product,&#; Epperson said, referring to upholstery in particular. &#;Our retailers would buy anything they could get just to not have an empty wagon.&#;

Some portion of that inventory was moved during the height of the supply chain crisis, when freight was exceedingly high. Unusually high sticker prices for consumers were supposed to combat that. But now, even if that un-trendy furniture sells, it will likely be for far lower prices than intended. 

A container ship entering the Port of Los Angeles, possibly carrying a ton of untrendy furniture. (Jim Allen/FreightWaves)

There are other quirks. Furniture makers have been on edge waiting for a federal rule around no-tip furniture, which could revamp how they test their wares. The strong dollar hasn&#;t been favorable to U.S.-based companies that manufacture overseas.

&#;Since April, we&#;ve seen the dollar weaken, and that&#;s raised prices again,&#; Epperson said. &#;Some people who just lowered prices recently have begun to raise prices. You can&#;t make this up.&#;

As a result, Padjen said the profitability of the early s has been all but washed away.

&#;The furniture industry probably enjoyed higher profitability [until early ],&#; he said. &#;But all this other stuff has pretty much taken all that.&#;

Some say they&#;ve been able to lower prices without a massive hit to their margin, in part thanks to lower freight costs. Two high-end, business-to-business furniture vendors told Business of Home in February that declining freight rates have allowed them to slash prices, too.

And, to return to my dumb Amazon mirror, I was stunned to learn that the piece is now about half the price I bought it for more than two years ago &#; even though the price of glass has skyrocketed since then. Dagnabit! 

Do you have a story to share about the furniture industry? [ protected]. And don&#;t forget to subscribe to MODES for more supply chain gossip.

Supply Chain Issues In Furniture Industry

In the last 12+ months, we have experienced unprecedented supply chain and inventory issues. They have dramatically affected the furniture industry. A combination of closed factories, backed-up ports, container scarcity, and labor shortages took its toll on the industry. Returns, cancellations, and even chargebacks are becoming a real (cashflow) problem.

In this article, we will discuss what&#;s causing this and what furniture retailers can do to ensure that they are delivering not only the furniture requested by their customers but also exceptional customer service during this time.

Supply Chain Issues Impacting the Inventory Situation

1) Congested ports in California

One of the main supply chain problems currently backing up the furniture retail industry is the congestion at the ports in California. In the second half of , almost 1 million shipments were processed through the ports in California, which was 50% more than what occurred during the first half of the year. In addition, the Port of Los Angeles reports taking 94% more imports than the previous year.

With the increase in demand in the furniture industry, it&#;s easy to see how the ports could become overwhelmed. However, that is not an excuse that customers are likely to accept.

2) Limited amount of trucks and drivers

As the demand for furniture increased, the number of available drivers (and thus trucks) declined. This makes the current situation that much more dire. As consumers continue to order desks, sofas, beds, and other furniture, manufacturers from overseas continue to produce and ship those products. However, there just aren&#;t enough trucks and &#; more importantly &#; drivers available to deliver these products from the port.

3) Container Prices & More Shutdowns

Container prices are continuing to rise, and retailers are beginning to push back. According to Home News Now, some retailers are finally taking a pass on certain containers when the quote is too high, while others have more generally moved to limit how much container business they do.

The news just doesn&#;t seem to be getting any better, it&#;s the end of July and now there have been significant halts in production due to the recent COVID-19 shutdown in Vietnam. Vietnam recently bypassed China as the leading sourcer/importer of U.S. furniture.

On behalf of members and the industry, the HFA (Home Furnishings Association) has reached out to President Biden and the White House to seek help with the broken supply chain.

Addressing Supply Chain Issues: How Home Furnishings Retailers Adapt

1) Focus on customer service and create innovative solutions

Some furniture retailers have come up with creative solutions to satisfy their customers through this difficult time. With the supply chain and inventory issues, everyone is experiencing, customer service must become the main focus.

Communication is Key

You may not be able to control the problem at the ports, but you can continue to communicate and provide your customers with updates. If you keep your customers in the loop on their order status and progress, they are less likely to cancel an order. They are also more likely to become a return customer thanks to the positive experience.

Give Them Something Tangible

Some retailers are going the extra mile to ensure customer satisfaction. One furniture store has even begun to provide its customers with rental furniture while they are waiting on their delivery. For example, if a consumer purchases a sofa that is eight to 12 weeks out, the store provides a rental sofa for the consumer to use during the lead time. The consumer still physically receives an item to help hold them into the sale.

Creative Inventory Sourcing

Some store owners are struggling to get their hands on any products or inventory. One persevering retailer decided to take their own vehicles and drive around to physically find products to stock their showroom. Whether they were buying overstock from other independent furniture stores or persuading major bulk retailers and department stores to sell their stock at a discount, this store owner never gave up! If there is one thing we&#;ve learned during the past year it&#;s &#; furniture retailers are willing to do what it takes to care for their business and staff.

Another creative approach is to buy up DTC (direct-to-consumer) return items. As consumers order from e-commerce platforms such as Amazon, Wayfair, or Overstock, items sometimes don&#;t fit. One savvy retailer advertised on social media that his trucks would pick up items that otherwise end up in a landfill. His delivery crew is picking up items directly from people&#;s front door. And in some cases, they turn around and sell it again on the same day.

2) Focus on offering American-made products

The supply chain problem is exacerbated by geographical distance. Focusing on American-made products can help retailers find readily available products. Open yourself up to working with domestic manufacturers, such as Vaughan Bassett Furniture. This will help you get your customers the furniture they are looking for in a (more) timely manner.

U.S. retailers have also been shifting their sourcing to neighboring countries, Mexico and Canada. International Furniture Direct (IFD) is a case goods manufacturer with two factories in Mexico and four domestic warehouses spread across the United States. Items arrive on trucks and there is no need for scarce (and therefore expensive) shipping containers.

3) Try offering a larger variety of similar products from different brands

When you find that popular pieces are on backorder, try finding similar pieces from different manufacturers. This gives your customers more variety to choose from. And this ensures that they experience fewer problems with expected delivery dates.

Diversify your catalog and let inventory be the driver. Increase the number of brands you carry, but reduce the number of SKUs per brand. Focus on specific collections or product lines that have a healthy amount of stock. Focusing on a group of SKUs from each brand helps you build a reliable custom catalog of readily available products.

Some retailers are taking it a step further and reducing their SKU count overall. They do this by focusing on a handful of items for each category. For example, they are buying in-depth for five to seven different collections and focus on selling those.

4) Carry ready-to-assemble (RTA) furniture and direct-to-consumer (DTC) options

These days, consumers are increasingly open to the idea of ready-to-assemble (RTA) furniture. These items may be more readily available than traditional choices. The ready-to-assemble segment has grown over the past two years as companies have taken steps to solidify their presence in the category and expand into domestic manufacturing. Flatpack shipping (parcel via UPS or FedEx) is easier than LTL shipments. Offering direct-to-customer (DTC) options may also help minimize delivery time since the products don&#;t have to be shipped to the store first. Homestyles is a dedicated DTC brand by Flexsteel. A majority of their product line is RTA and they ship in flat packs for damage-free shipping and easy assembly.

RTA is not limited to smaller DTC brands. The world&#;s largest furniture manufacturer Ashley Furniture recently acquired an entire production facility for their RTA line. And their &#;Direct Express&#; direct-to-consumer shipping program consists of thousands of SKUs. Assembly videos shown at the point of purchase (online and offline) help to ease the concern that installation might be too complex.

Supply Chain Issues? Expand Your Inventory With the Endless Aisle Kiosk From Wondersign

Furniture retailers from all over the country have been searching for solutions. They&#;re looking for ways they can provide their customers with quality products and reasonable delivery times. The Wondersign catalog kiosk app is an &#;endless aisle&#; solution. It allows furniture retailers to visualize their custom catalog of products. This expands the selection that is physically displayed in their showroom. Wondersign also gives retailers the power to control their selection based on what is in stock or coming soon. As the platform is consuming both manufacturer inventory and the retailer&#;s own showroom & warehouse inventories in real-time.

Whether you are looking to offer more American-made furniture, near-shore options, RTA items, or a range of DTC products, Wondersign has partnered with 45+ manufacturers and brands that cover it all &#; from furniture to bedding, mattresses, and accessories.

A Wondersign customer located in Denver, CO has been relying on their kiosk for nearly 90% of their sales. They were having trouble getting stock for their sales floor. So they have focused on only ordering what customers purchased through special orders. Their first location placed a kiosk and the monthly sales increased to $200,000! Compared to their other location (without a kiosk), which remains under $50,000 a month, that&#;s four times the revenue.

Learn more about how we can help your furniture business overcome supply chain and inventory issues. Connect with a member of our team today.

For more information, please visit Vietnam Rattan Storage Basket.

40

0

Comments

0/2000

All Comments (0)

Guest Posts

If you are interested in sending in a Guest Blogger Submission,welcome to write for us!

Your Name:(required)

Your Email:(required)

Subject:

Your Message:(required)

0/2000