Mattress players say supply side ‘upside down’

Price increases inevitable as producers can no longer absorb costs

Sheila Long O’Mara • February 15, 2021

HIGH POINT — Like other categories in the home furnishings space, the cost of making a mattress continues to soar. Pricing on nearly every component that goes into making mattresses and foundations has increased, and when combined with climbing labor and freight costs, retailers are facing additional increases from manufacturers.

Price hikes on components like foam, steel, nonwovens, wood and cotton started in May 2020 with a continual drip through the end of the year, continuing into 2021. Additional increases are on the horizon, and mattress manufacturers that have not yet passed along increases to retailers say they can no longer absorb the cost. Others that have already shared increases are considering additional bumps.

Historically, price increases have always been a touchy subject, and despite today’s climate where few if any manufacturers are holding the line, companies are remain leery of sharing details. However, those executives who opted not to speak on the record, all mentioned impending increases for their partners.

Those increases mean retailers will likely need to pass those increases onto consumers.

Inflationary problem

Some key executives in the bedding segment say that this inflationary period ranks up there with the 1970s when the U.S. was hit with the oil embargo by OPEC countries.

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Mattress players say supply side ‘upside down’

March 10, 2021

Even the Washington Post is Covering Furniture Delays

Booming furniture sales mean ‘unprecedented’ delays for sofas and desks

Demand for home furnishings has been an unexpected bright spot for retailers. But supply chain hiccups — and a shortage of shipping containers — persist.

By Abha BhattaraiMarch 8, 2021 at 1:23 p.m. EST

Alexis Serrano’s new couch was supposed to arrive two weeks ago. But shipping delays have pushed back delivery to her downtown Miami condo to April 1 — at the earliest.

Serrano, who ordered the couch in January and promptly sold her old one, says she’s wondering whether other recent purchases for her new home — a living room table, two beds, nightstands and bar stools — will have similar fates.

“I have no idea when anything is going to arrive; they said it could be eight months from now,” the 26-year-old property manager said. “If I had known, I would’ve just waited to buy furniture.”

Across the country, furniture retailers are reporting months-long delays in every step of the supply chain — from overwhelmed factories to clogged ports — amid surging demand for desks, chairs and sofas during a pandemic that has kept millions of families largely stuck at home for nearly a year. Companies say shortages of shipping containers as well as materials such as steel and acrylic have made it nearly impossible to keep stores and warehouses properly stocked.

Meanwhile, the furniture business is booming, driven by big jumps in work-from-home arrangements and home sales, making it an unexpected bright spot in the otherwise flagging retail sector. Americans last month spent an estimated $11.3 billion at furniture and home furnishing stores, up 12 percent from a year earlier, according to Commerce Department data. Monthly sales in the sector have soared 181 percent since April, while overall retail sales have grown 34 percent.

“You have two problems: high demand and a broken supply chain,” said Greg Portell, a partner in the consumer and retail practice at consulting firm A.T. Kearney. “All of the places where this stuff gets manufactured, whether internationally or domestically, have been disrupted by covid and are under enormous strain.”

La-Z-Boy customers are now waiting an “unprecedented” five to nine months on their orders, chief executive Kurt Darrow said in an earnings call last month, adding that manufacturing disruptions and shipping delays amounted to $30 million in lost business in the latest quarter. Factories also have been short-staffed, he said, because so many manufacturing workers were infected with covid-19 or needed to quarantine following the holidays.

“Individually, any one of [those hurdles] is not that significant and could be overcome,” Darrow said. “But when you get them coming at you from six or seven different directions, the magnitude of it adds up.”

La-Z-Boy has added weekend and overnight shifts at its U.S. plants, and expanded production facilities in Mexico. Even so, executives say, consumer demandisso high that the company can’t make enough sectionals and other big-ticket items to keep up.

“The amount of demand we’re getting … is keeping the backlog out a lot farther than we’d like,” he said. “But that is the state of the industry. It’s not just a La-Z-Boy problem; it is for everybody.”

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Dan Flickinger, the chief executive of Kasala, which has four stores in the Seattle area, said furniture that normally would take about three months to arrive from China can now take upward of nine. Orders placed this month won’t arrive until December, he said. Even then, there’s no guarantee they won’t spend several more weeks languishing at the port.

“A lot of our furniture is handmade and requires a tremendous amount of components, so one missing piece can really mess up a whole lot of production,” he said. “Our warehouse is so close to the port that we can pretty much see the containers, but we can’t get to them.”

Analysts said the furniture industry, which imports the bulk of its products, has been particularly hard hit by manufacturing and shipping challenges. In the past year, ocean freight shipping fees from Asia to the United States have quadrupled in some cases, from about $1,500 per container to $6,000, according to Mark Yeager, chief executive of Redwood Logistics. In addition, he and others said, capacity has droppedbecause it uses storage space in international flights, which are down sharply due to pandemic-related restrictions. And within the United States, weather-related railroad disruptions and a shortage of truck drivers have only added to the scramble.

Initially, manufacturing overseas was the bottleneck, said Jonathan Johnson, chief executive of Overstock.com; “now, it’s the shipping that’s the slowdown.” The online retailer’s sales surged 75 percent last year, to $2.5 billion, boosted by demand for patio furniture, trampolines, sofas, rugs and other home furnishings. “If you look at the Pacific Ocean outside of the Los Angeles and Long Beach ports, it’s like the [Interstate] 405 in rush hour. Shipping lanes are jam-packed.”

Retailers are also having to adapt to an era of increased online shopping for bulky, big-ticket purchases like sofas, beds and dining tables. Many chainsare rapidly building up mobile apps and websites, and adding curbside pickup options to accommodate the crush of e-commerce purchases. At Ikea, for example, online sales now make up 25 percent of all orders, up from 15 percent before the pandemic. The company recently created a new mobile app and has expanded staffing at its call centers.

Stores are increasingly rethinking layouts, too, to make it easier for shoppers to quickly test out sofas or mattresses before committing.

“The customer is coming into stores at a different point in their journey,” said Debbie Propst, president of Herman Miller Retail, which owns the high-end modernist furniture chain Design Within Reach. “They used to come at the beginning, when they were just starting to look. Now they’ve done all of their research and are coming in to sit on a particular chair, to see if it’s right for them.”

The company quickly redesigned its website at the beginning of the pandemic, and its newest store, opening in Southampton, N.Y., this week, is an attempt to get closer to the wealthy New Yorkers who have relocated to their summer houses during the pandemic. It has also added a number of Herman Miller seating stores in cities such as Austin, Los Angles and New York, to keep pace with a 300 percent increase in sales of ergonomic desk chairs.

Retail orders climbed 41 percent in the most recent quarter, driven by demand for upholstered seating, outdoor furniture and home-office staples such as desks and filing cabinets. Consumers are also increasingly looking for furniture with multiple uses, Propst said. Sectionals and ottomans with built-in storage have been popular, as has the Stamford, Conn.-based brand’s recently-launched Edel Table, which starts at $1,800 and doubles as a dining table and office desk.

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Many furniture shops say pandemic sales have followed an unpredictable but clear pattern: Revenue dropped precipitously in March and April when much of the country went into shutdowns. But by May, when Americans realized they’d be stuck at home long-term, they started snapping up desks and patio furniture, then upholstered chairs, couches, dining tables and just about everything else — and demand has remained at elevated levels since.

“It’s been such an extreme roller coaster,” said Bruce Champeau, president and chief operating officer of Minneapolis-based furniture chain Room& Board. “We went from being closed to having record sales months, one after another.”

Annual sales are up 30 percent from a year ago, to nearly $500 million, he said, adding that it expects to break $600 million this year. Demand, he said, has “kept evolving, as people look around and say, ‘You know what, maybe we’ll update our sofa. Maybe we’ll replace this and that.’”

After moving from California to Athens, Tenn., in December, Stephanie Campisi stopped by a local mattress store to buy a bed. Everything was sold out, and she was told it would take upward of two months for the next delivery.

She ended up driving to Walmart and buying a $150 foam mattress-topper for her family — which includes a toddler and dog — to sleep on while they waited for movers to deliver their belongings.

“We were really surprised,” said the 35-year-old children’s book author. “We thought you would just go into a shop and buy a mattress that was in stock. But the pandemic has changed even the simplest things.”

Bed sales have skyrocketed during the pandemic, according to retailers, as well as mattress makers such as Tempur Sealy International, Casper Sleep and Purple Innovation, which reported annual sales growth between about 20 percent and 50 percent last year.

“Once people realized they were going to be in their homes a long time, they started looking at the stuff that was frustrating them,” said Stephen Oblak, chief merchandising officer for Wayfair. “That’s led to a lot of furniture and textile sales.”

Tasha Belikove, who has been working from her Los Angeles apartment for nearly a year, says she’s constantly looking for ways to upgrade the two-bedroom she shares with a roommate. So far she’s purchased a desk, bed frame, living room rug and Peloton exercise bike, and is considering buying a dining table and upholstered chairs.

Furniture, she says, has been one of the few areas where she’s splurging, since she’s saving on Uber rides, dining out and traveling.

“I’ve definitely been looking around my apartment and just realizing I hate everything,” the 27-year-old social media coordinator said. “Being in a pandemic and seeing literally nothing else other than the inside of my apartment has me wanting to spend all my money on new furniture.”

https://www.washingtonpost.com/business/2021/03/08/furniture-sales-pandemic/