After years of struggle during the economic downturn, there’s a sense that a big comeback is on the cards for big-ticket furniture retailers.

SCS

If the first six weeks of the year are anything to go by, that optimism may not be misplaced. Despite 2015 still being very much in its infancy, January and February have already seen ScS float on the stock market and furniture giant DFS unveil its plans for an IPO, while private equity firm CBPE acquired Sofa.com for around £50m.

That bright start was further highlighted today when Martin Harris, the son of Carpetright founder Lord Harris, revealed his plans to open a 200-store flooring retailer in the summer.

He says: “There’s a gap in the market and there’s enough room in the market for more than one national retailer.”

Such news won’t have come as a surprise to analysts. Many of the economic factors that contribute to the success of the sector have been in good health in recent weeks.

Interest rates remain at 0.5%, the housing market continues its gradual improvement and consumer confidence is increasing.

Figures from the British Retail Consortium-KPMG January Retail Sales Monitor revealed that furniture had reaped the rewards of the buoyant market conditions, recording a solid performance in its key month despite a tough comparable from the previous year. Bedroom furniture proved particularly popular as the public’s desire for big-ticket purchases hit its highest level since the recession.

And although footfall dipped in shopping centres and the high street in January, big-ticket retailers benefited from a 1.5% jump in traffic to out-of-town retail destinations.

Rise of multichannel

Verdict retail analyst Matt Walton believes the sector will continue to perform well throughout the year, estimating that the furniture and upholstery markets will grow 2.7% and 2.8% respectively.  

Walton says: “We think 2014 was a good year for the sector and the major purchase index improved significantly. We expect that to continue in 2015.

“During the downturn it was easy to defer purchases like sofas, carpets and other home furnishings. Now that conditions have improved, confidence is returning and demand is back.

“DFS and ScS are both doing well and that’s been emphasised by their floatations, but John Lewis has also rolled out its fabric offer, Sofaworks has expanded into the South and Oak Furniture Land has introduced sofas into its stores.

“There’s a lot of competition, a lot of development and a lot of growth.”

“More and more shoppers are viewing the product in-store, but will go home and make the purchase online”

Matt Walton, Verdict

Walton said a key change for big-ticket retailers in 2014 was their adaptation to online, creating a “multichannel offer” that better appeals to the modern customer.

In the furniture and floor covering sector, 5.8% of purchases were made online in 2010, but that had almost doubled to 11.4% by the start of 2015.

“We are seeing a shift in behaviour,” Walton said. “More and more shoppers are viewing the product in-store, but will go home and make the purchase online.

“Retailers have certainly put their focus on that and some have taken it further than others. Sofaworks launched its augmented reality app, which allows people to visualise how their new furniture would look in their home.

“It really is becoming a multichannel offer. Customers still want to see and feel the product before they make their decision, but there is an increasing willingness to make that final purchase online – you only have to look at the success of Made.com and Sofa.com to see that.”

Cautious optimism

Walton believes the rise of multichannel will stand big-ticket retailers in good stead, but he is cautiously optimistic about the future of the sector – and says he doesn’t expect many more entrepreneurs to follow Harris into the market.

“The sector is in the process of turning the corner,” he adds.

“The prospects are certainly a lot more buoyant than they have been in the past few years. Retailers have sharpened their offer, but the fact remains that they are so reliant on the housing market, interest rates and consumer confidence. It only takes one event to ruin those and all of a sudden big-ticket retailers will find themselves struggling again.

“Retailers are cautiously optimistic about 2015. Consumer confidence is always quite fragile, particularly when it comes to big-ticket items, which are always going to be the easiest ones to cut back on.”