Home stores ache from home market's pain

Recently, Home Depot hd CEO Frank Blake declared 2007 one of the worst years ever for his company and predicted that store sales will be off about 5% again this year.

Deborah Murphy of Earlysville, Va., is still shopping at Home Depot and Lowe's low— but it's for a two-car addition that she and her husband built themselves because they couldn't afford to hire others. As for jazzing up the inside of her house, Murphy says that will have to wait.

"Nothing is broken," she says, "so why replace it just because I think (new furniture) might be nice to have?"

A possible silver lining

Some in the home-oriented retail business are holding out hope that the bleak economy, in a perverse way, will eventually deliver them a helpful shot in the arm. Their reasoning: With gas prices at record highs and little money left in many budgets for family trips, more people will be staying home in coming months. The more hours they're forced to look at that tattered couch, the more they'll feel compelled to pay for a new one. That, at least, is what retailers hope.

"There's a cocooning effect when travel and even going out to restaurants is impacted," says Farooq Kathwari, CEO of Ethan Allen eth. "Home is an important refuge. People still want to have a beautiful home."

That helps explain the thinking behind Debbie Cortopassi's home-furnishing shopping trips. Her home was just completely remodeled, so she's not venturing out as often, because now, "I love being at home," says Cortopassi of St. Louis. Yet, she still buys things that "add to the comfort of our home."

Some say, however, that such behavior has become the exception rather than the rule.

"People will be staying home more, but they will not be spending more for home goods," says Christina DeMesquita, a former housewares manager and buyer for department stores. "They will be trying to pay for gas and their mortgages."

Ethan Allen is betting that DeMesquita is wrong. Though the chain closed 18 locations by the end of March, it will have opened at least 20 new interior-design centers by the end of August. The company is turning its furniture stores into full-scale interior-design centers — showrooms that help customers conceive different looks with their furniture and accessories. Its goal is for fewer stores to serve more people with better locations spread through larger geographic areas.

Ethan Allen is also hoping that one particular service it offers — free design consultations in customers' homes — will help it compete better in a tight-fisted economy, even with fewer locations.

"If you're just selling furniture as a commodity," Kathwari says, "you have a tougher time."

Ethan Allen is also hiring more interior designers, many of whom are young and bring a more cutting-edge style to the once-staid retailer. Allegrezza says these "young, hip designers" are one reason Ethan Allen hasn't been as hard hit as many other furniture retailers. Epperson agrees that Ethan Allen's "in-store personnel is second to none." That said, he notes that its higher-end customers aren't likely suffering as much in the current housing mess.

What's essential in selling furniture in this economy is convincing people that it's "important for their overall being," says Ann Raider, an executive vice president at Affinity Solutions, which helps retailers, including Home Depot and Pier 1 pir, build customer loyalty.

Furniture retailers are "highlighting the comfort of the home," Raider says.

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