This is the second article in a 2-part blog series focused on the obstacles that have countless home and furnishings retailers at a stalemate. While many were convinced that the demand for furniture and home goods would subside once consumers got back into business as usual following the pandemic, recent sales projections prove that this is not going to be the case.
In 2021, furniture sales jumped by 35.6% over the same quarter the year prior. The demand is there. However, the current state of the manufacturing, retail, and shipping industries mean that many home furnishings retailers aren’t prepared to step up to the challenge.
The strangest thing about the pandemic’s impact on the home furnishings industry? The fact that so many analysts focused on locking down a timeline in which things would return to “normal.” The idea that, one day, the aftershocks of the pandemic would disappear, and we’d teleport back to the way the industry looked in 2005 may have been enticing, but it was founded in neither fact nor reason. Instead, we witnessed a dramatic shift in the global retail ethos that will last as long as the lifespan of those that lived through it.
State of the Industry
One trend that doesn’t show any signs of abating is consumers’ drive to create a desirable living space in which to hunker down in turbulent times. Demand for home furnishings skyrocketed during the pandemic, and it will remain strong in the years to come. The home furnishings industry reached $682 Billion in 2021 and is growing at a CAGR of 4.8% throughout 2022-2027. Online furniture sales are grooving at a CAGR more than triple that (16.79%). So don’t be fooled by false (retail) prophets… home furnishing sales are expected to increase, not decrease in the coming years.
Increased demand brings about an increase in profits, but it can also lead to production and communication errors for teams that aren’t optimized to handle the additional business. The past two years came with a valuable lesson for everyone in retail: technology is a more dependable investment than staffing alone. Technology was the answer for frontline retailers that suddenly needed to offer BOPIS to remain operational. But technology can also empower production and purchasing teams to eradicate the unique bottlenecks that plague their verticals. The bottom line? Home furnishings retailers’, suppliers’, and buyers’ operations are forever changed.
Let’s take a look at three of the five root causes of bottlenecks in the home furnishings industry, how to make sure they don’t happen to your team(s), and how to streamline your company for what comes next.
3. Hard-to-Reach Partners
The retail industry has unique communication needs that aren’t shared by other verticals. Miscommunications cost even smaller businesses of just 100 employees an average $420,000 a year. That number is even higher in an industry like home furnishings, where the cost of shipping is at a premium. Communication errors are costly, leading to lost sales, dropped partnerships/clients, and slow trend responsiveness.
To prevent this, buyers and suppliers need to have a seamless method of communication with external partners. But most legacy ERP solutions only allow users to chat with internal employees, and not external contacts. This doesn’t work for retail sectors that need to do business with external entities –– such as buyers, suppliers, manufacturers, and supply chain workers. Legacy ERPs result in siloed product information, which leave buyers and sellers unable to access the product information they need to create quotes, export critical data, or get a PO signed.
The furniture industry is centered around data, requiring an average of 100 to 150 data points for each item sold. Compare that to the 50 (or less) average data points for each piece of fashion apparel, and you’ll see why home furnishings retailers are particularly inclined to experience bottlenecks. And why they need to be proactive about implementing a PLM that allows for centralized communication with external vendors.
4. Poor Inventory Forecasting
Although we don’t talk about markdowns as much in the home furnishings industry, it’s a relevant conversation –– especially in a time when margins are eroding for so many retailers. Home furnishings retailers need to be trend responsive, too. In fact, the home furnishings industry is particularly susceptible to trends. The rise of work-from-home culture has led to a boom in home office supply sales, and retailers need to be prepared to respond to WFH decor trends in a timely manner.
But it’s not just trend responsiveness that’s needed. Buyers and suppliers need a simple way to communicate product data, such as colors, uses, makes and models, setup details, and product iterations. Buyers work tirelessly to track down critical product data to make more informed sourcing decisions. However, with the right product lifecycle management software, all inventory data is housed in one centralized place. So, it’s easy for buyers/suppliers to find the data they need for more informed production and purchasing.
5. Products Get Lost in the Supply Chain
Major companies dominate the home furnishings market. This is largely because they have the infrastructure to support increased consumer demands, shipping delays, and worker callouts. But your home furnishings business doesn’t have to have a flexible staff with hundreds of workers on-call to fill in staffing gaps just to compete with the big guys.
Legacy ERP systems make it hard to track down product data. Buyers rarely have visibility into where a product is in their supply chain, much less the ability to talk to external partners when they need to track down data in a pinch. A centralized PLM platform will give every single team in the production, shipping, and purchasing process total visibility into each product’s lifecycle. No more misplaced products. No more missing data. Just 360-degree visibility and real-time collaboration on a highly visual, easy to learn interface.
The right PLM can enable buying and production to do all of their busywork with just the click of a button. It eliminates wasted time when catering POs (purchase orders) to each retailer’s unique specifications or trying to track down product data from various Excel sheets. So retailers can enjoy a 3x increase in revenue per home furnishings employee and maximum productivity. Less manual data entry means that buyers and sellers can reserve their mental stamina to refocus on the parts of their jobs that they love the most –– learning, creating, and communicating about products.
Product lifecycle management is a quickly evolving industry with a lot of moving parts. We do all of the research, so you don’t have to. Stay ahead of news & trends by subscribing to our Product Lifecycle Management Blog.
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