Evolving preferences remodel what is viewed as ‘home’
Home retailing may have reached a crossroads. New consumer priorities seem to be shifting business, with one consequence being consumer migration from the specialty to the broadline sector of the market.
Although Bed Bath & Beyond had the largest percentage gain among Top 5 sector retailers in Retailing Today’s Annual Industry Category Census, broadliners other than Sears made significant gains. In percentage terms, Target’s gain was almost as large as that of the specialty leader, and in dollar terms, it was larger. Wal-Mart’s percentage gain was smaller than any retailer in the Top 5, except Sears, but again, in dollar terms, the retailer’s gain outstripped that of the other leaders by hundreds of millions of dollars.
Broken down by categories, and based on The NPD Group figures, personal care appliances had the greatest—and only double-digit—sales gain, followed by kitchen appliances and housewares. Home environment appliances and home textiles suffered falling sales, although the result may reflect price rather than unit volume erosion.
A number of trends seem to have converged on the home business, but, clearly, consumers aren’t spending as lavishly on their homes as they have in the recent past. Recent retail developments indicate that macroeconomic trends are causing an impact. Financial performances, even from home retailers such as Bed Bath & Beyond and Williams-Sonoma who have previously managed economic difficulties, have been affected. So have product initiatives, as exemplified by Macy’s Inc.’s decision to drop a merchandising program for its soon-to-launch Martha Stewart line that involved a partnership with a home builder. The decision is further evidence that fewer home sales have led to softening demand for home goods.
Yet, it isn’t just the real estate market that is having an impact on home furnishings and housewares. The expansion of broadliners and the programs they’ve launched in their home departments have had a significant effect, whether as a specific case, as in the expansion of Global Bazaar at Target, or more generally, as in Wal-Mart’s years long effort to improve styling and construction in domestics. On top of that, warehouse clubs, home centers and supermarkets have engaged in product, department and format initiatives designed to compete for those parts of the home goods business that are compatible with their own operations.
Still, influences extend beyond the real estate market and competition. “You might even add a third factor,” said Wedbush Morgan analyst Joan Storms. “I’m not feeling so good about the consumer overall these days, whether it’s higher gas prices or interest rates or whatever.”
The consumer is part of that shifting macroeconomic environment as well. Christopher Lowell, the interior designer, author and Discovery Channel television host, is convinced that retailers need to rethink their approach to the consumer as part of a response to the changing environment.
Top Volume Leaders (SALES IN MILLIONS)| CHAIN | 2006 | 2005 | %CHG. |
| Wal-Mart | $33,122e | $31,470e | 5.25% |
| Target | $11,303e | 9,998e | 13.05 |
| Sears | $ 7,516e | 7,651e | (1.76) |
| Bed Bath & Beyond | $ 6,617 | 5,810 | 13.89 |
| JCPenney | $ 3,283e | 3,098e | 5.97 |
Lowell, who has developed product lines for Office Depot and Jo-Ann Stores and who is a consultant to boutique hotel chains and other corporate clients, has long insisted that retailers need to pay more attention to men’s tastes in home goods. And the success of more modern styles and solid colors over the past half decade suggest that his analysis of the market—which concludes that men are having a greater impact on a home’s decor even if the buyer is usually a woman—has been on track.
He suggests that cocooning and Sept. 11 both have influenced the marketplace, but that today we’re seeing a new phase of development.
Consumers now view their homes as lifestyle stages, spaces built around socializing and functionality. Consumers are increasingly taking the comforts and amusements they have been enjoying outside the home, whether they involve fine meals, spa visits or boutique hotel visits, and making an investment to bring them into their own living spaces.
In his work with Jo-Ann, Lowell developed outdoor fabrics that coordinate with indoor pieces for people who have created transitional environments that extend living spaces from the home to deck or yard. After all, the consumer who has made an investment in an expensive grill and outdoor furniture set may well want to express the same tastes in the outdoor setting as the indoor.
Working with Jo-Ann Stores grants the opportunity to do things inexpensively. Consumers have become more trend-oriented, and as they become interested in new cultural and social developments—grilling Thai-style seafood, for example, rather than burgers—they increasingly want to outfit a meal in an authentic way. So, they may dress the table with Asian-inspired dishware and linens. But they’ll swap out items for new ones as trends evolve and, reluctant to spend too much on any one style, may purchase those square plates they seek at Target.
Top Specialists (SALES IN MILLIONS)| CHAIN | 2006 | 2005 | %CHG. |
| Bed Bath & Beyond 1 | $6,617 | $5,810 | 13.89% |
| Williams-Sonoma 2 | 3,728 | 2,695 | 4.60 |
| Linens ’N Things | 2,819 | 13,867 | (1.78) |
| IKEA U.S. | 2,750e | 2,096e | 31.20 |
| Pier 1 Imports | 1,623 | 1,777 | (8.67) |
As with food trends, developments in electronics are having an impact on the home. Once, people spent a lot of time and money purchasing living room furniture, then went out to purchase a television that fit the furniture. Now, many people spend a lot of time and money purchasing and installing a flat-panel TV, then run out to purchase furniture that fits the TV.
Lowell,