Chilly summer for costs and confidence
Home furnishing retailers are facing a challenging summer of rising costs and falling consumer confidence as multiple factors impact the economics of the sector, say industry commentators.
A new round of price increases is going out to flooring stores from manufacturers as the pressure from higher raw material costs, energy prices and ongoing logistical issues continues relenlessly. Supplier prices rises from 3% to 19% have been reported across the trade.
Order books in flooring retail are still busy, but with many still coping with a backlog of business. But the future is less predictable. All manufacturers are feeling the pinch of increased energy and labour costs and are passing it on after absorbing as much as they dare.
Particular pressure will be felt as the year goes on for those dependent on imported synthetic fibre and LVT which will be increasingly hit by raw material oil price issues during the Ukraine crisis. Wood floors are also being affected by the war.
Ongoing logistics issues, compounded by the latest P&O dispute at ports, is adding the the anxiety.
"This is a national and international issue," said Sean Holt, managing director of the furnishing indusry trade body BFM. "Our members are reporting a constant flow of increases, which are impossible to predict and difficult to absorb.
"We’ve seen a pattern of material increases over the last two years, but the situation has escalated significantly in recent weeks," says Sean. "Compound price hikes of up to 100 per cent are not unusual, and this is on top of the energy cost increases affecting manufacturing, which need to be managed to operate and maintain production.
"We appreciate that the situation will bring disappointment and inconvenience to retailers and their customers," he said.
One major UK carpet manufacturer told us "that period of pent-up demand is over – and it's suddenly turned into a tough market for sales. We having to work very hard out there to maintain momentum."
The manufacturing and supply-side issues coincide with the "wall of worry" that has hit consumer confidence for major household purchases says retail analysts GfK.
GfK's closely-watched Major Purchase Index decreased by nine points to minus 24 in March; this is 13 points lower than it was this month last year. The overall consumer confidence index was down to minus 31 from minus 26 last month.
Joe Staton, Client Strategy Director GfK, says: “A wall of worry is confronting consumers this month and there is an unmistakable sense of crisis in our numbers.
"Consumers across the UK are experiencing the impact of soaring living costs with 30-year-high levels of inflation, record-high fuel and food prices, a recent interest-rate hike and the prospect of more increases to come, and higher taxation too – all against a background of stagnant pay rises that cannot compensate for the financial duress.
