Slow but steady growth anticipated for home products - home furnishings industry

Discount Store News, May 23, 1988

Slow But Steady Growth Anticipated for Home Products

Despite a positive trend toward people spending more time at home, 1988 is not the easiest year in which to introduce new products or product features in housewares, consumer electronics and domestics.

While results from the Yankelovich Monitor, an annual survey of 2,500 Americans by Westport, Conn.-based consumer research firm Yankelovich Clancy Shulman, prove that "couch potatoes" abound, it also indicates that consumers will only purchase a product if they see a true benefit to its use.

A possible recession within the next six to 18 months and the problems these industries are already experiencing may also hold back future consumer spending.

Jay Spaulding, president of Chicago-based National Housewares Manufacturers Association, said "I don't believe a recession will occur within the next 12 to 18 months. If I'm wrong, whatever happens in the economy, it will not have an adverse impact on the housewares industry."

In the consumer electronics industry, Tom Lauterback, vice president of communications of the Washington D.C.-based Electronic Industries Association/Consumer Electronics Group, said he sees slow growth, but feels it will be steady and consistent.

"There is uncertainty though, because of the talk of a recession and the yen/dollar situation mitigating against us," Lauterback said. "It looks like the yen/dollar situation won't be getting any better any time soon."

And in domestics, industry participants are pointing to the recent J.P. Stevens & Co. and West Point-Pepperell merger as the possible source of new adversity.

Spaulding's optimism for increased sales in housewares is fueled by a national movement toward more single households. Sales and Marketing Management's "1987 Survey of Buying Power," which reflects 1986 figures, shows one-person households grew 3 percent to 22.97 million in 1986 from 22.35 million in 1985, while the national population only grew 1 percent to 243.2 million from 240.8 million in 1985.

Industry sales accounted for $31.3 billion in 1987, a 20 percent jump from $26 billion in 1986. However, Spaulding is not certain that the 20 percent increase can be attributed solely to housewares sales since a new study was developed to track 1987 sales. Nevertheless, Spaulding predicts a 10 percent increase in industry sales this year.

At the Winter Consumer Electronics Show held in January, Frank Myers, president of Arvin Electronics and industry vice president for EIA/CEG, said his confidence level on 1988 industry growth estimates was "less firm than in the past." The association is predicting the industry will grow 6 percent to $32 billion in factory sales from $30.3 billion produced in 1987.

In domestics, the industry is already experiencing a 10 percent to 15 percent loss in retail sales, said suppliers.

In general, home textiles account for about 5 percent to 10 percent of total sales at most discounters. Discounters, which account for about 80 percent of the home textiles business, would use sheets and towels as an "image of value" by setting competitive pricing to draw customers into their stores.

"I look for a difficult time in household textiles apart from anything that happens in the economy," said Seymour Seidman, publisher of a weekly industry newsletter, Seidman News Bulletin.

"The West Point/Stevens consolidation would eliminate an important resource for retailers, resulting in buying far more in advance, a shortage of goods, more expensive products, and less access to buying personnel," he said.

Adjustment Period

The adjustment period may take a long time and it may result in smaller retailers with less power than discount giants leaving the field of battle to do less in linens and domestics, industry sources said. They may obtain more goods from importers and smaller vendors and concentrate on other lines such as window treatments, curtains, rugs, bath shops and other accessories.

In housewares, discounters account for 26.5 percent of industry sales. Spaulding feels that since most housewares products are functional, needed items, the housewares industry will remain "recession proof."

Even consumer electronics is becoming more of a necessity than a luxury, especially to those who already own such equipment. Currently, first-time buyers of VCRs seem to be postponing the purchase, while those who own VCRs are replacing them and adding second and third units, Lauterback said.

And those who are purchasing the low-end units seem to be buying the Korean-made units, he added.

In general, manufacturers have a hard time making any money from the low-end VCRs, he said. Three years ago, according to EIA data, a low-end VCR cost $431; it now sells for $293.

PC Hasn't Found Niche

The Yankelovich survey points out that while microwave ovens and VCRs have turned out to produce real benefits for a broad variety of consumers, the personal computer has yet to find its niche.

This is indicative of the confusion in the home office market. Manufacturers are gearing production costs toward these products because they know this category could produce good industry growth. Yet, while a plethora of product abounds, retail sales to consumers has remained minimal.