Semigration, new housing developments, home refurbishments and increasing competition from independent retailers are driving growth in the retail furniture industry.
But with increases in the cost of living, some retailers may come under pressure as consumers seek cheaper or pre-owned furniture while others put off replacing household items.
According to Euromonitor research analyst Unathi Matwasa, increasing price sensitivity is leading to the increased penetration and entry of cheaper retailers, including in furniture retailers.
Competition from warehouse or factory stores that offer relatively cheap furniture products is increasing. These outlets can offer consumers cheaper prices because they source their products directly from Asian countries.
“Therefore, retailers are expected to continue focusing on offering a wide range of products at varying price points to appeal to a variety of customer needs,” Matwasa said.
Yet, increasing semigration, mostly of young people, is driving demand for fashionable furniture.
The increasing consumer appetite for credit will also be a major trend in the year ahead
— Lewis Group CEO Johan Enslin
“Many of these young consumers are always looking for modern and urban-inspired furniture. As a result, demand for contemporary and urban furniture will likely continue to drive growth in 2023,” Matwasa said.
The retail furniture industry is estimated to be worth just more than R35bn and is projected to grow at between 6% and 8% in the next four years, according to Euromonitor.
It has also been one of the best performing retail categories recently. According to StatsSA retail sales for November 2022, retailers in household furniture, appliances and equipment registered annual growth of 6% year-on-year, followed by textile, clothing and footwear and leather goods retailers at 5.9%.
The increase in furniture and homeware retail companies has been accompanied by a rise in traditional clothing companies opening standalone stores that sell items such as couches, bedding and bedside tables, some at more affordable prices than traditional furniture stores.
These companies include Mr Price Group and TFG, the latter having recently bought Tapestry home brands, whose brands include Coricraft and Dial-a-Bed, giving the JSE-listed retailer access to new customers and furniture manufacturing facilities that will help it produce 50% of its items locally.
The retail furniture sector has been dominated by companies such as Lewis, Russells and Beares for decades, and these brands continue lead the market. Matwasa said this is largely due to the wide range of household furniture they offer to low to mid-income consumers, who have been struggling financially, while also offering appliances on credit.
Chris Gilmour, an investment analyst at Salmour Research, said most consumers are still buying from retailers such as Lewis and JD Group, the subsidiary of clothing retailer Pepkor. JD Group houses Russells, Bradlows, bed company Sleepmasters and HiFi Corporation.
“I have noticed that Lewis, for example, has seen a big uptick in credit sales at its traditional stores. This is good for them as they make much more profit on credit sales. Sales of second-hand furniture will obviously increase as the economy tightens but it is difficult to get meaningful stats in this regard,” Gilmour said.
He warned “it is going to remain extremely tough in the discretionary spending space this year and next”.
Lewis Group CEO Johan Enslin said the group’s key differentiators are its “exclusive merchandise offering across all brands, decentralised store-based business model, extensive retail footprint, large credit customer base, same-day delivery service and experienced management team, all factors which position it favourably to gain market share in the current market environment”.
He said the increasing financial pressure on consumers has resulted in greater demand for credit and a shift away from cash sales.
“In the current environment consumers are also delaying buying big-ticket items and extending the lifespan of their large kitchen appliances and lounge suites, for example,” Enslin said.
Customers are seeking value and “we expect sales to be increasingly promotionally driven in the months ahead. The increasing consumer appetite for credit will also be a major trend in the year ahead.”
I have noticed that Lewis, for example, has seen a big uptick in credit sales at its traditional stores. This is good for them as they make much more profit on credit sales
— Chris Gilmour, an investment analyst at Salmour Research
Enslin said the largest-selling categories are base sets and lounge suites. Euromonitor research shows that living room, kitchen, bedroom, indoor and outdoor furniture remain buoyant and continued to experience growth in 2022.
Home improvement aids these categories as most consumers are spending time in their homes post-lockdown, and increased time spent at home has elevated the need to upgrade living spaces.
“Given high levels of inflation, accompanied by a rise in unit prices for furniture, most consumers have been taking into consideration which home furniture upgrades would be most crucial and financially reasonable. As a result, the majority of consumers are opting for quality but affordable home furniture items as a result of pricing pressures,” said Matwasa.
With most furniture retailers focusing on local sourcing as part of the industry’s plan to revive and grow the sector, Matwasa said local manufactures most likely to succeed are those that can cater to rising consumer demand for multifunctional and trendy furniture items made from sustainable materials.
Enslin said Lewis Group sources products from a wide range of local and international suppliers. Imports accounted for 33% of stock purchases in the 2022 financial year. The main categories of imported merchandise are lounge, dining room and bedroom suites and wall units.
According to Matwasa, most furniture retailers experienced supply challenges in 2022 as most of the stock was imported through rail transport.
“This was worsened by global shortages of shipping containers. On the other hand, supply chain issues are far from over, especially in Eastern Europe. Given this, there remains uncertainty on supply issues in the South African context as much furniture is still imported,” she said.
There are 1,800 manufacturing companies registered with different regional bargain councils across the country, employing about 25,000 people. . Of the companies, 90% are small to medium sized and employ up to 15 people, saidm South African Furniture Initiative (SAFI) managing director Bernadette Isaacs.
SAFI is finalising the industry’s plan to address issues such as transformation, export opportunities and skills.
Isaacs said it has done extensive work to consolidate the once fragmented industry. He said they will continue to conduct research and analysis of the value chain of the industry and on the skills it requires.
“We want to understand the categories and our strengths so that we can decide what we want to continue doing and become the biggest exporters in that area. We also want to engage with retailers and anyone that imports furniture to understand why they are importing. If they are importing items we can produce we should then focus on meeting the demand,” she said.
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