Opinion: Outdated furniture retailers are being unseated

Both the internet and the rise of value players such as B&M and The Range have transformed the future of furniture retailing beyond recognition, and with post-Brexit uncertainty and a slowing housing market thrown into the mix, no big-ticket business can afford to sit still.

With the first interest rates hike in a decade, wages stagnating and currency fluctuations pushing up prices, the noose around consumers’ necks is tightening. 

Unfortunately for furniture retailers, this results in discretionary and expensive items for the home being erased from the shopping list.

Since last year’s Brexit vote, conditions have been difficult for retailers across the piece.

It’s clear something is amiss when tightly run, forward-thinking firms, such as Topps Tiles, report plunging full-year profits.

Good-old reliable DFS even issued a profit warning earlier this year.

“Those that have been slow to establish a strong digital proposition, while newcomers such as Made.com continue to encourage shoppers to migrate online, will now struggle”

And as retail sales and consumer confidence weaken further in the run-up to Christmas, costs rise and business rates mount, outmoded furniture retailers are being – as one source says – “squeezed to death”.

One of the first to topple was Multiyork and its stablemate Feather & Black, which collapsed into administration last month after owner Charles Wade failed to secure a buyer for the businesses. 

And there will be more casualties to follow, particularly as we rocket towards the big-ticket peak – the January Sales – and the banks, eager to limit their exposure, are said to be increasingly jittery about the market’s weaker-positioned players. 

End of the traditional model

Tough trading conditions aren’t good for much, but they do separate the wheat from the chaff – shining a light on businesses’ weaknesses and models that are no longer fit for purpose. 

As the internet changes the rules of the game, too many boards are “miles away” from what’s going on, says an industry expert, and those that have not adapted will not survive.

“Furniture retailers don’t need big, expensive locations any more. It can be done from small displays with a strong online presence”

 

“It is the death of expensive space for this product,” the source says, “following a structural shift to online, which has accelerated in furniture over the last year or two.

“Furniture retailers don’t need big, expensive locations any more. It can be done from small displays with a strong online presence.”

The source explains that those that have been slow to establish a strong digital proposition, while newcomers such as Made.com continue to encourage shoppers to migrate online, will now struggle – particularly in this “new world” of transparent pricing in which consumers are shopping around online for the best deals.

“Furniture retailers can no longer make the margins to support expensive store space,” the source concludes, so they are better off having as few stores as they can get away with and spending the money instead on Google search engine optimisation.

Furniture retail’s changing face

Meanwhile, savvy online disruptors are adding salt to the wound with continued innovation and expansion.

Made.com became profitable in the UK last year with group sales fast approaching the £100m mark, and even Amazon has now entered the fray, introducing its own furniture range.

And, as a means of surviving in their own competitive market, grocers have expanded their home and furniture offers.

When Sainsbury’s acquired Argos last year it gained the retailer’s Fast Track delivery advantage, and made shopping for Argos furniture even more convenient with digital stores within larger Sainsbury’s supermarkets.

And as part of the deal, Sainsbury’s also added Habitat to its portfolio and opened small shop-in-shops. Habitat, now more visible and accessible, has also since ramped up its digital prowess with 2,300 click-and-collect locations.

International giant Ikea has also pressed ahead with business transformation in the UK, with small stores that are dubbed order-and-collection points, an improved web platform and new superstores to bolster its convenience credentials.

As well as appealing to cash-strapped consumers with its value price point, Ikea has tapped into the growing do-it-for-me trend with the acquisition of home-services business Task Rabbit.

Is Multiyork a warning?

It is often said that furniture businesses are the first into a recession and the first out, so the demise of Multiyork, and falling profits at its rivals, has given the sector a shake.

But does it suggest that a repeat performance of last decade’s crash is on the cards?

Consensus is that today’s conditions are in no way near as severe, with little evidence of a recession, particularly while employment levels remain high.

“I’m surprised there hasn’t been more bloodshed already. It’s about as difficult as it has been since 2009 – a lack of certainty really unseats people”

 

But, given what happened 10 years ago, retailers are on the alert for signs – unwilling to make the same mistake twice, while running at top speed just to stay still against today’s strong headwinds.

The collapse of Multiyork and Feather & Black did not occur in a vacuum, and there are other vulnerable firms operating outmoded models which could fall into the same trap if they don’t move fast.

“I’m surprised there hasn’t been more bloodshed already,” another retail veteran says. “It’s about as difficult as it has been since 2009 – a lack of certainty really unseats people.”

Furniture specialists Harveys and Bensons for Beds might have previously fallen into this ‘outdated’ camp. However, transformation is now under way with new boss Stuart Machin at the helm. 

Likewise, Furniture Village, which has around 50 stores and was slow to shift online, is now working extremely hard to mitigate today’s blustery conditions.

There are hazards all around that could easily trip up the weakest bed and furniture retailers and, for those with outdated models, it could soon be the end of line.