Despite brittle consumer confidence in 2022 as the cost-of-living crisis took hold, homewares and furniture retailers released positive trading updates to close the year. Several retailers posted strong results in 2022, as DFS reported a 10.6% growth in order intake for the 26 weeks to 25 December and Wickes reported like-for-like sales growth of 3.5% for the full year. Additionally, some momentum within the furniture market is expected to continue at the beginning of 2023; as DFS anticipates order intake to remain strong for the time being, and ScS is encouraged by recent order levels.
Despite this recent positivity, the impact of interest rate hikes and a dampened housing market will hit furniture sales in 2023, and GlobalData forecasts a 2.8% dip in the furniture market—with inflation masking the fall in volumes. Higher mortgage costs, tougher affordability and a decline in housing prices will reduce transactions and impact a key driver of the furniture sector. Retailers now face the issue of a weak housing market with an especially low appetite among first-time buyers, who are more likely to purchase furniture when buying a house. Falling house prices are also discouraging consumers from putting their houses on the market, restricting supply, and translating into worrying figures across furniture.
The expected short recession in 2023 will not have the same severity of impact as the last financial crisis though, when furniture sales slumped by 5.9% in 2008 and 10.4% in 2009. Nevertheless, the sharp rise in inflation and persistent financial headwinds have significantly impacted consumer confidence and caused a shift in consumer behaviour. Inflation is outpacing wage growth, leaving shoppers’ spending power stifled as the higher interest rates suppress demand. As a result, 51.0% of UK consumers expect their finances to get worse over the next six months*, compounding the key issues UK retailers will face this year. Online pureplays are also facing their own set of problems, struggling to remain in growth as the market continues to normalise after lockdowns, sending shoppers back to stores and benefiting multichannel retailers. Therefore, online pureplays must focus on value for money, pricing and quality to avoid following in the footsteps of Made.com.
Retailers must get ready to withstand the storm as those with unattractive propositions risk seeing their sales fall significantly as consumers put off big-ticket purchases outside of essential replacements. Investment in designs should be prioritised to attract customers, with new look remaining one of the primary purchase motivators, driving 53.0% of purchases across total furniture**. Offering a range of price brackets is important to cater to a wide range of shoppers, and retailers must attempt to trade shoppers up to higher priced items, for instance by offering interest-free deals and credit—as Wickes has done by partnering with Klarna, helping consumers navigate the challenging economic conditions.
* GlobalData’s monthly survey of 2,000 UK respondents conducted in February 2023.
** GlobalData’s survey of 5,000 UK Home shoppers conducted in January 2023.