This article follows up on the previous one, evaluating how the home furnishings retail sector has fared since the housing crisis began.

1. Making the Connection Between HGTV and Downtown Revitalization
By Michael Stumpf, November 2006
G
ive HGTV some credit. They did not invent had the fifth-highest change in store counts from
the home improvement show, but they 1997 to 2002, adding about 300 new stores per
have built it into an enormously popular year.
entertainment venue, reaching 89 million house-
So what does all of this have to do with downtown
holds and capturing more than 800,000 nightly
revitalization? Downtowns have certainly reaped
prime time viewers. It has been called one of the
some of the benefits of these trends. In places as
most widely copied formats on the television
diverse as Appleton, Wisconsin and Idaho
landscape, giving rise to such shows as Trading
Springs, Colorado, home furnishings and related
Spaces and Extreme Makeover on other channels.
businesses line the downtown main street, where
HGTV’s goal is “to provide ideas, information, and shoppers may find home décor, tableware, ornate
inspiration” for decorating and home improve- staircases, art, custom kitchens, interior design
ment. And its viewers have been inspired. Be- services, and more.
tween 1995 and 2005, sales of furniture have
In the retail industry, new shopping centers adopt-
grown by 75%, outstripping the 67% rate of over-
ing this leasing strategy – placing shops with a
all retail sales. Sales of home furnishings – items
specific targeted customer next to each other – are
from carpets and linens to lamps and kitchenware
known as lifestyle centers. By understanding the
– have grown by 97%. People are spending more
strengths of these centers and the motivations of
time at home and spending more to decorate their
lifestyle shoppers, cities may help to create a
homes.
competitive advantage for their business districts.
Home furnishings is one of only a few retail cate-
The typical HGTV viewer is between 35 and 64
gories not dominated by a relatively small number
years old. Seventy percent of them are women.
of firms, and also exhibiting growth in overall
These demographics parallel those of the typical
store counts. The fifty largest home furnishings
lifestyle consumer. On average, these consumers
retailers capture 29.3% of all sales in the category.
shop more often, visit more stores than average
While this may seem like a lot, in 14 of 24 catego-
during their shopping trips, and spend more than
ries, just eight retail firms capture more than 30%
the typical shopper. Best of all for downtowns, a
of sales. At the same time, home furnishings stores
significant number of these consumers do not like
Place Dynamics
Michael Stumpf is a consultant in community planning, economic development, and
1 market analysis, based in New Berlin, Wisconsin.

2. visiting malls. They value the experience they get
in shopping unique venues. For this same reason,
online sales have not had much impact on in-store
home furnishings sales.
Downtowns can cater to these preferences by cre-
ating an attractive environment and providing
both convenience and safety. It is definitely an
upscale market and appearances should reflect
that. Quality dining options can help to extend the
shopping trip. Entertainment should be geared to
adults. Informational and “hands-on” interior de-
sign, art, cooking, and related workshops can be
an ideal compliment to the sidewalk sales, craft
fairs, and other community events often held in
downtowns.
stores are most sensitive to lease costs. Rent con-
sumes an average of 28.6% of potential profits, the
seventh-highest percentage of any industry.
The lower rents usually found in central business
districts are a strong incentive for home furnish-
ings businesses to choose a downtown location.
Knowing this sensitivity, cities can establish mar-
keting campaigns and target incentive programs to
attract home furnishings retailers by addressing
this key cost sector. Retail incubators, rent reduc-
tion programs, and renovation loan programs are
some possible tools for cities to consider.
Trends change. Will the slowdown in residential
real estate impact the industry? Recent home buy-
ers spend more than anyone – over $3,000 – on
Most people will recognize names such as Pottery home related purchases within the first year in a
Barn, Crate & Barrel, and Restoration Hardware. new home. Or will higher interest rates cause
Chains like these make up the bulk of all home people to spend more to remodel and expand their
furnishings stores. While they will locate in larger existing homes?
and distinctive downtowns and neighborhood
Bob Vila has been on television for over two dec-
business districts, their usual choice is a mall or
ades, Martha Stewart recently signed a deal to put
lifestyle center. The more likely candidate for a
her merchandise in Macy’s, and Ty Pennington
downtown location is an independent retailer or
will be marketing products for Sears. For now, it
small regional chain. appears that home furnishings will continue to be
About a quarter of all home furnishings stores are one of the hottest prospects for downtowns. O
either sole proprietorships or partnerships. Aver-
aging about $350,000 in annual sales, sole proprie-
torships most likely resemble a store that would © 2006 Place Dynamics
be found in the downtown of a small- or medium-
sized city. Two-thirds of these stores earn a profit,
averaging 13.1% of sales. While the cost of goods The following article revisits this sector to explore
sold is the largest expense they may have, these the impacts of the current recession.
Place Dynamics
2

3. The HGTV Effect Revisited
By Michael Stumpf, November 2008
Two years ago when I wrote this article, the first concept. From a peak of 61,086 furniture and
signs of a slowing housing market were beginning home furnishings stores in the first quarter of
to show. Since then conditions have worsened 2007, we have seen a precipitous drop-off to
more than anyone could have foreseen. The con- 59,192 establishments at the end of the second
cerns I raised at the end of the article have proven quarter of 2008. This does not include stores that
to be true – for some businesses. that are part of recently announced closings.
Times have been hard on the chain retailers. Unfortunately, data do not break out the number
Overall sales in 2007 were less than in 2006. In of chain stores closing versus independent retail-
2006 most of the 25 largest home furnishing ers such as those that would be found on Main
chains saw solid growth. In 2007 nearly 40 per- Street. Anecdotal evidence suggests that the
cent of these companies experienced declining greater number of closed stores are chain stores.
sales, and only Bed, Bath & Beyond, Williams- So far, perhaps, the independents have proven to
Sonoma, and Crate & Barrel posted the double- be more adept at weathering the storm. If this is
digit gains that were so common in preceding true, it may be due to their unique merchandise,
years. Data for 2008 won’t be available for some associated service offerings, characteristics of the
time, but monthly reports indi-
cate a continued slump, with
sales falling to about the same Number of Furniture & Home Furnishings Retailers
levels we saw in 2004.
61500
Slowing sales have taken their 61000
toll. Companies like The Bom- 60500
bay Company and Wickes Fur- 60000
niture have closed their doors 59500
for good. The segment’s number 59000
two retailer, Linens ‘N Things, 58500
has filed for bankruptcy, an- 58000
nounced store closings, and 57500
may yet throw in the towel. 57000
2001 2002 2003 2004 2005 2006 2007 2008
Other major chains like Pier 1
may follow suit, as well as 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
stores like Home Depot’s Expo
Monthly Sales: Furniture & Home Furnishings Stores
12000
10000
8000
Millions
6000
4000
2000
0
Place Dynamics
3

4. business (independent businesses do not employ agement, internet sales, and other core retail busi-
salespeople may be better able to absorb a de- ness needs. O
crease in sales), or qualities of the site. Downtown
and specialty districts have an entertainment
value that continues to draw shoppers, and these © 2008 Place Dynamics
locations may offer more attractive rents than the
mall sites preferred by chain retailers.
Is furniture and home furnishings a retail category
that is still a good fit for downtown? While the
short term prospects for growth in this sector look
dim, and undoubtedly many more retailers in the
segment will not survive the economic downturn,
it still appears that this sector is still in the long
term a strong bet for downtown and specialty dis-
tricts.
Even in the short term there are hopes that sales
may pick up. The recession is causing people to
spend more time at home. Furthermore, the hous-
ing slump is encouraging people to remain in their
homes instead of trading up or moving to retire-
ment housing. These two factors could lead to a
resurgence in home remodeling and purchases of
furniture and home furnishings.
The basic dynamics of the industry that made it a
source of retail entrepreneurship in prior years
still hold true. This is already a retail sector in
which sales are not heavily concentrated among a
small number of firms. Several among the largest
chains are struggling and unlikely to outlast the
recession, and that will mean there will be market
share up for grabs. Some will certainly go to other
channels like discount stores, but there will be
plenty of opportunity for existing and new home
furnishings retailers.
For business districts, the initiative recommended
in the original article still hold true. There is
much that can be done to support these busi-
nesses and help them to survive the current reces-
sion. Home and food related events and other
promotions that draw customers to the district are
critical. They may even prove to be more success-
ful than in the past, as people seek low-cost enter-
tainment. Incentives should continue to focus on
the core expenses of this sector – rent and inven-
tory. Additionally, this may be a very good time to
bring in experts to assist businesses with window
displays, merchandising, marketing, cost man-
Place Dynamics
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