American Freight Closing All Stores, Rising Online Sales, and the Road to Industry Resilience
Your go-to source for quick, insightful updates on the ever-changing furniture industry—delivered through this blog and our podcast (Furniture Industry News) to keep you and your team in the know.
Major Retail Shake-Up: American Freight Closes Nationwide
In a landmark development, American Freight has announced the closure of all its stores across the United States. This decision follows the Franchise Group's Chapter 11 bankruptcy filing, which has forced the retailer to shut down operations amidst persistent economic challenges.
Key Points:
Closure Timeline: Store closing sales commenced on November 5th, marking the end of American Freight's presence in the furniture retail landscape.
Reasons for Closure: The company cited sustained inflation and broader economic difficulties within the durable goods sector as primary factors.
Franchise Group’s Restructuring: Despite American Freight's exit, Franchise Group has secured a restructuring agreement with holders of approximately 80% of its first lien debt and obtained $250 million in financing to support its other businesses, including Pet Supplies Plus, The Vitamin Shoppe, and Buddy's Home Furnishings.
Industry Impact:
Market Gap: American Freight’s exit leaves a significant void in the value-focused segment of the furniture market.
Employment: The closure affects numerous employees nationwide, highlighting the volatile nature of the retail furniture sector.
Evolving Consumer Shopping Behaviors
Recent research unveils intriguing trends in how consumers are approaching furniture purchases, signaling a shift in retail strategies.
Traditional vs. Online Shopping:
In-Store Preference: Nearly 50% of consumers still favor the traditional in-store shopping experience.
Growth in Online Purchases: There’s notable growth in online furniture sales, particularly in categories such as bedroom sets, office furniture, and lighting products.
Drivers Behind Online Shopping:
Better Prices: 27% of consumers cite competitive pricing as the main reason for online purchases.
Free Delivery: 25% are motivated by the availability of free delivery.
Convenience: A wider product selection and a faster shopping experience also play crucial roles.
Consumer Behavior Insights:
Online Reviews: 31% of furniture shoppers rely heavily on online reviews before making a purchase, more so than in other retail categories.
Social Shopping: Over a third of consumers shop with family or friends, and about 20% report that their shopping companions significantly influence their decisions.
Popular Purchases:
Top Items: Mattresses lead as the most popular purchase, followed by lighting and bedroom sets.
Demographic Trends: Households with children, Generation Z, and urban dwellers are more likely to purchase furniture compared to other groups.
Industry Performance Metrics
The latest data presents a mixed picture for the furniture industry, with both challenges and areas of resilience.
Order Trends:
August Decline: Furniture orders in August dropped by 7% compared to last year, continuing a trend of declining orders (5% in July and 6% in June).
Year-to-Date Orders: Overall orders are now only 1% ahead of 2023 levels.
Shipment and Backlog Data:
Shipments: August shipments fell by 10% year-over-year but improved by 14% from July. Year-to-date shipments are 8% below 2023 levels.
Backlogs: There has been a 10% reduction from last August and a 5% drop from July.
High Point Market Insights:
Designer-Focused Companies: Firms with strong designer customer bases are outperforming those primarily focused on retail.
Optimistic Outlook: Industry experts remain cautiously optimistic, predicting a return to more stable market conditions by mid-2025, contingent on improvements in the housing market.
Retail Sector Foot Traffic Trends
Despite broader challenges, certain retail segments are showing positive momentum in foot traffic.
Leading Performers:
HomeGoods: Achieved an 8.1% increase in store visits from July to September.
Costco: Recorded a 7.2% growth in foot traffic, maintaining positive year-over-year growth every month since January 2024.
Other Notable Gains:
BJ's Wholesale: 5.9% increase in visits.
TJMaxx and Marshalls: Both saw foot traffic grow by over 5%.
Target and Walmart: More modest increases of 1% and 0.9%, respectively.
Interpretation:
Value-Oriented Shoppers: The strong performance of HomeGoods and Costco underscores consumer preference for competitive pricing and diverse product selections, even in a selective spending environment.
E-Commerce Resilience: Wayfair’s Strategic Advancements
In the e-commerce realm, Wayfair continues to demonstrate resilience and strategic prowess despite industry headwinds.
Performance Highlights:
Revenue: A slight 2% decline compared to last year.
Average Order Value: Increased by 4.4% to $310, indicating higher customer spending per purchase.
Customer Loyalty Initiatives: Launched a subscription-based rewards program offering 5% back on purchases and free shipping.
Strategic Focus:
Price Optimization: Enhancing competitive pricing to attract cost-conscious consumers.
Logistics Improvements: Streamlining operations to ensure efficient delivery.
Digital Experience: Investing in website and mobile app enhancements to improve the online shopping experience.
Market Position:
Market Share Growth: Consistently gaining market share every quarter since late 2022.
Cost Management: Effective reduction of operational costs over the past two years positions Wayfair favorably for future growth as the market rebounds.
Looking Ahead
While the furniture industry faces significant challenges, there are signs of potential recovery on the horizon. Key factors such as increased housing inventory and heightened housing activity are expected to drive the industry forward. Companies that continue to adapt by optimizing inventory, enhancing customer experiences, and leveraging both physical and digital retail strengths are well-positioned to thrive in the evolving market landscape.
Stay tuned for more insights, trends, and updates tailored to help you navigate the dynamic world of furniture retail.
Subscribe to Furniture Industry Insights to ensure you never miss our latest updates on industry trends, market analysis, and breaking developments that matter most to your business. Join our community of furniture professionals committed to staying informed and ahead of the curve.
Thank you for reading!
If you enjoyed this newsletter, please consider sharing it with your colleagues and industry peers.