External competition is on the rise as discount department stores attract price-sensitive customers
New York, NY (PRWEB) April 21, 2015
In the five years to 2015, the Home Furnishings Stores industry's revenue growth nearly stagnated as deteriorating economic conditions stymied consumer demand. During the recession and in the years after, elevated unemployment, volatile consumer confidence and restrained consumer spending led to lacklustre revenue growth. Additionally, a fragile housing market diminished demand as homeowners postponed purchases for their homes. Therefore, in the five years to 2015, industry revenue is expected to increase.
In addition to slowed consumer spending, industry operators have had to endure substantial external competition. According to IBISWorld Industry Analyst Maksim Soshkin, “large discount department stores and supercentres were able to offer customers both lower prices and a diverse product selection, beyond home furnishings.” Consequently, increasingly price-sensitive consumers shopped at these retailers to save money and time. Consumers also started to purchase home furnishings from online retailers, as a lack of brick-and-mortar costs enabled internet vendors to offer low-priced merchandise. In response, industry companies were forced to cut prices, reducing industry profit in recent years. Increasing competition and squeezed profit margins greatly impacted small companies, and many exited the industry. However, because of their size and large product selection, big-box home furnishing stores were better able to withstand market conditions, and some even expanded. “Nonetheless, competition has caused industry profit margins to fall over the past five years,” says Soshkin.
In the five years to 2020, industry revenue growth is forecast to increase. Accelerated economic growth will reduce unemployment and boost wages; as a result, consumer confidence and spending will likely increase, leading to higher demand for home furnishings. Moreover, the housing market will strengthen, encouraging homeowners to invest in furnishings once again. However, companies will continue to face strong competition from large discount department stores, supercentres and online retailers, which will mitigate potential revenue growth. In addition, if a housing market bubble does burst, demand for home furnishing might further drop.