With Brexit postponed and a general election dominating this month’s headlines, Furniture News’ Paul Farley asks a range of industry leaders about the underlying threats facing the furniture industry, and hear how they’re facing them.
Brexit may have been pushed back (again, perhaps for the last time?), but there’s no time for complacency. The ongoing negotiations for the nation’s future have put a serious drain on consumer confidence, leaving discretionary spend – and much of the furniture industry – in a financial straitjacket.
Yet there are other issues contributing to this situation, many of which have been all too easy to gloss over by simply invoking the ‘B’ word. It may be the straw that broke many a camel’s back in the last three years, but there’s plenty more giving the nation’s retailers and suppliers the hump.
Talking shop
Times – and people – are changing. Shoppers are spending smarter, researching alternatives and asserting their rights to returns. In many cases they’ve tightened their belts, creating intense competition for their disposable income – rivalry from the likes of cars, holidays and nights out has never been more relevant.
It’s not all bad – consumer confidence is nowhere near the troughs of the last recession, points out GfK – but there’s ongoing squeeze from the top to contend with, too.
The British Retail Consortium (BRC) states that while retail accounts for 5% of the economy, it pays some 25% of its business rates. And, because these rates are based on physical space, their impact is felt disproportionately by bricks-and-mortar retailers.
“Many household names on the UK high street have announced closures in the past 12 months,” says Mike Murray, director of Land of Beds, an independent retailer with a strong online presence. “This has been attributed to everything from competition from online retailers to the changing buying habits of consumers, as well as the cost of town centre parking and challenging business rates.”
Reflecting on how to respond to these pressures, Land of Beds recently shared its experiences of operating a multichannel business in a Parliamentary Review of retail. “We feel that continuing to assess and future-proof our infrastructure is the key to longevity,” says Mike, “as well as bringing our online and offline worlds closer together.”
Online enterprises have their own headaches, explains Steve Adams, CEO of MattressOnline: “Our single biggest threat in the short-term is competitors focused on growth over profit,” he states. “We have the well-documented bed-in-a-box disruptors, which have swelled the cost of pay-per-click (PPC) advertising, and this is certainly curtailing our growth opportunities.
“Then, on the opposite end, there are the likes of Wayfair with their scattergun approach to product listings. Their challenging margins risk devaluing the average transaction value (ATV) for all retailers. No doubt, waiting in the wings, we also have the threat of Amazon looking to expand their furniture market share!”
Steve’s response is simple in theory, if not in execution. “We can’t compete with their budgets,” he says, “so we focus on good content, the right product mix, the best customer experience, and exceeding our customers’ expectations.”
Breaking the chain
But it’s not just consumer-facing businesses which are having to come to terms with change. Further up the chain, suppliers are under pressure to deliver higher-quality goods and services at lower margins, as shop prices increasingly fall prey to a discount culture.
Dids Macdonald OBE, CEO of IP champion Anti Copying In Design (ACID), believes that the biggest threat to the industry’s integrity is design theft. Original design costs money, so many seek to cut costs by imitating the products which are already selling, she says: “One of the biggest threats globally is counterfeiting, piracy and knock-offs.
“This accounts for 3.3% of world trade, according to the OECD. At ACID we are trying to influence this by working with Government/policymakers. At a grassroots level, we’re trying to educate the need in the sector (which is the most copied in ACID’s history) to create a proactive IP strategy to prevent and deter copying – but equally, to put in place a strategy which will support growth through IP assets.”
Meanwhile, Jan Turner, director of industry marketing specialist AKA PR, believes manufacturers’ biggest challenge is addressing consumer demand for more sustainable manufacturing practices, “as end-of-life concerns become more front-of-mind with consumers”.
Gavin Boden, business development manager at Rhenus Home Delivery, agrees that the green agenda will eventually be the chief priority, even if adhering to it proves costly at the outset. “Poor quality coming from underdeveloped countries will cause a lot of insecurity in the industry,” he says, “but we will also see a lot of change in the next 20 years because of the increasing green demands of the world. I do believe that, here in the UK, furniture production will flourish once again.”
If British manufacturing is to recover, the national industry’s growing skills gap must first be redressed – and quickly, says Dids Macdonald, who also fulfils the role of master at The Furniture Makers’ Company, the sector’s dedicated charity.
She says: “We have a proactive education and training programme – not only to raise awareness, but supported by a series of educational and training initiatives to work towards a future-ready workforce. We play an active role in supporting the Furniture and Interiors Education, Skills and Training Alliance (FIESTA) to encourage non-levy-paying employers to access a much wider selection of funded skills training through Skills Plus.”
The livery company is just one of the associations lending its voice to the British Furniture Confederation (BFC), which lobbies Government to safeguard jobs, ensure export opportunities are maximised, and maintain consumer safety – while working towards that circular economy and sustainable future already described.
Battle plans
With or without Brexit, the landscape is treacherous, and manifold pressures can drive even the most focused business owner to distraction – and to prioritise short-term rewards over strategic growth.
According to furniture designer Rob Scarlett, many enterprises he encounters suffer from a lack of investment and long-term thinking. “I try to advise,” he says, “but you can only lead a horse to water …”
The outlook for those businesses unable to plan effectively is bleak indeed. Emma Leeke, MD of Leekes Retail, warns that the threat of recession hangs over us all, so businesses “need to be lean and continually review their cost base to make savings wherever possible”.
Jessica Alexander, executive director of the National Bed Federation, whose key drivers are “doing the right thing and having a level playing field to do it on”, has a more sanguine take, suggesting that good businesses will always thrive, whatever’s arrayed against them.
“There are many winds of change in the air which will see the industry change so much in the next decade it will be almost unrecognisable from the one we see today,” she says, “but people will always need furniture – so one company’s threat is another’s opportunity.”
