Electronics sales help power growing RTA furniture market - Brief Article - Statistical Data Included

DSN Retailing Today, May 8, 2000 by Debbie Howell

In a roundabout way, computer sales have been kind to mass retailers. Sales have fueled a boom in furnishings and accessories as the home office has become an integral part of today's lifestyle.

Home office furniture accounted for 53% of the $1.9 billion in RTA furniture sales tracked last year by NPD HomeTrak, a service of marketing research firm The NPD Group. For mass merchants, sales of home office furnishings surged 33% over 1998.

"As the home office trend continues and more workers equip themselves to telecommute from home, the strong RTA office furniture sales should continue. We're seeing mass merchant retailers dedicate more floor space to office furniture to meet consumers' needs," said Clark Johnson, vp of NPD HomeTrak.

NPD's data, for the first time, this year measured sales in office superstores and electronics chains in addition to last year's mass sales statistics. Among the three channels, mass commands a 50% share, followed by office superstores at 37% and electronics chains at 13%.

RTA furniture sales at home centers, hardware stores, furniture and department stores were not tabulated, which Johnson said account for about 40% of the market.

The second largest category in RTA furniture was in home entertainment furnishings, with $444 million in sales among the three retail channels and 23% share of the RTA market. Based on last year's mass sales data, this category grew 8% in sales. Home entertainment centers remained the key driver in this category, racking up $208 million in sales with average prices up 6% over 1998. Across the category, average prices were up on all products except media storage. Dollar sales of auto stands doubled, with prices up 7%.

As consumers purchase larger and more televisions, NPD expects the home entertainment furniture category will continue to grow. Not surprisingly, NPD also found a direct correlation between strong sales of electronics products and related RTA accessories.

Of other RTA categories, sales of bedroom furniture grew 18% at mass from last year. Nightstands, while down in unit sales, jumped 32% in dollar sales at mass due to a 42% average price increase to $54.

Home furnishings, with bookcases leading the category, posted $172 million in 1999 sales. Dollar sales were down 13% at mass, with average prices 8% lower. Sales of kitchen furniture, such as microwave and utility carts, grew 1% to $62 million, while home storage items like cabinets decreased 5% in sales to $61 million.

Other data showed total RTA furniture sales up 11% to $948 million at mass last year. The only category at mass that declined in sales was home furnishings, NPD reported. In average prices, home office furniture declined 2% while home entertainment furnishings increased 4%.

"We found overall prices are pretty stable, at least in the mass channel," Johnson said, adding that quality of RTA furniture has conversely improved.

RTA furniture is a healthy category at each of the Big Three as well as for regional mass merchants, such as Ames, which considers the product line one of its strongest in hard lines. For the office superstores, both opening price point RTA desks and upscale furnishings can be found. Staples, for example, has been quite successful selling high-quality computer desks.

Bush Industries, one of the largest manufacturers of RTA furniture, reported sales up 21.7% last year. Sales in the United States, which accounted for 81% of the company's business, grew 14.5%. In its annual report, Bush noted a large part of the sales increase was due to new product placements at key retail customers.

Another big player in the business, O'Sullivan Industries, noted similar sales gains. For the six months ended Dec. 31, 1999, the company reported sales up 14.8%. Even though O'Sullivan lost one of its largest customers, Service Merchandise, the vendor did not suffer, thanks to higher volume sales at mass, office superstores, home improvement retailers and specialty retailers. Service Merchandise, which is reorganizing in bankruptcy, is exiting the furniture category to focus on more profitable departments.

As consumers buy more computers and larger televisions, the RTA furniture category should continue to thrive. Improvements in product quality and affordable pricing have combined to make the category a lucrative one for most retailers, especially at mass.