In August of 2022, experts reported that the residential furnishing industry had lost 41% of incoming orders since the previous month. Since then, the decline has persisted and deepened. Orders dropped another 30% in October of 2022, declining once again for what was then the 10th month in a row. According to Leonard Smith of Furniture Insights, 88% of participants in a related survey reported that orders had been down consistently over the last 10 to 12 months.
Managing partner at Furniture Insights, Ken Smith, commented that while business was unusually good in 2021 over 2020, it was clear that it would not last. He said, "No one thought it would last long. [...] No matter who we talked to, it was clear that it was just a matter of time until the slowdown would begin."
By the start of January of 2023, the numbers and value of orders had dropped precipitously, leaving residential furnishing retailers in a lurch.
According to WoodworkingNetwork.com, "YOY new orders are down 29% from last year; for comparison, 2021 YOY was up 16% over 2020. Approximately 91% of the survey respondents said new orders are down for the year to date."
Clearly, 2022 was a turbulent year for most industries, and the reasons are not mysterious. They are supply chain related. We've all heard that term. But what constitutes a supply chain? As it relates to the residential furnishing industry, we have some rather definitive metrics by which to measure this industry-specific recession. They are:
Ocean Container Prices
Ocean container transport rates hit a peak in 2021 at $10,377 per 40-ft unit. That's almost 10 times the average price in 2019 of $1,420. By December 2022, the rates had dropped down to $2,119. So there has been relief, but prices are still higher than the previous baseline.
Despite the bubble of record demand in 2021, demand for residential furnishings, (and furniture in general) is now at a record low. For the residential furnishings industry, low demand shows that the industry's customers are hurting as well. As customers struggle to cut corners, residential furniture is one of the first corners to be cut.
The labor shortage has hit many industries hard and residential furniture is no exception. Even as restrictions on workers back off moving into 2023, the loss of skilled woodworkers has taken a severe bite out of the ability of manufacturers to produce quality products. Those that kept production high by cutting corners lost big on customer satisfaction in 2022.
Just as ocean freight costs have increased, so have inland freight prices. Gasoline prices have stabilized, according to U.S. News, but even that marginal relief is not expected to last. In December, Diesel dropped to $4.59 a gallon, still 97 cents higher than last year.
Finally, the furnishing industry across the board is suffering from inventory shortages. This means even companies that aren't reporting reductions in demand might be hurting more than they claim.