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Housewares Market Remains Challenging, Retail Inventory Levels Key
Consumers Spending More Time at Home Can Translate to Sales
Rosemont, ILL (December 2009) – Even while consumers remain cautious with their spending, and retailers have reacted by lowering inventories, members of the International Housewares Association Board of Directors see a silver lining in the fact that housewares purchases still increased slightly during the height of a prolonged recession.
This resilience has seen the housewares industry through previous economic downturns as well, with sales remaining relatively steady during each recession. The average U.S. household spent $609 on housewares in 2008, according to a just released IHA State of the Industry (SOI) Report. That represents a 0.7 percent increase from the previous year, when the recession was said to take hold.
“Well run housewares operations will endure during economic downturns no matter their severity,” said Robert Trudeau, IHA chairman and chairman of Trudeau Corp. “Consumers are spending more time at home. Consequently, housewares products will get more attention and purchasing these are within the reach of most people.”
Adds IHA President Philip J. Brandl: “The housewares industry historically has been able to sustain itself well during tough times and then rebound quickly as the economy renews. In part, this is because consumers look to housewares when they are spending more time at home and are being more cautious with their discretionary income overall.”
Bruce Kaminstein, chief executive officer of Casabella Holdings, Inc. and IHA Chairman-Elect, sees an improvement in retail point of sales compared to this time a year ago and since the summer of 2009, which has translated to more optimism from buyers across the retail landscape. “The last few weeks (Casabella) has been up significantly on higher price points, which has been very encouraging,” he said.
Overall retail sales, excluding autos and gasoline, are expected to grow by 2.7 percent on average in 2010, “building from about 2 percent growth in the first quarter toward 4 percent growth in the fourth quarter,” according to a report by Retail Forward, a global consulting firm that specializes in retail intelligence. In 2011 and beyond, the report said, retail growth is expected to “approach” 4.5 percent, which marks the lower end of the growth range for retail sales in “good times.”
Such projections bode well for housewares suppliers, which will depend on retailer inventory levels rebounding as retailers “become more confident,” said Jeffrey Siegel, president & CEO of Lifetime Brands, Inc. “The only fundamental change (in the industry) in this recession is that upper end consumers have either shifted their purchasing to lower priced products, or are waiting for upper priced products to be drastically reduced…Consumers who have jobs are spending as much on housewares as they did before this recession.”
In the housewares industry for more than 40 years, Siegel said past recessions only “marginally” affected the buoyant home goods market. The difference this time, he adds, is that retailers are more sophisticated today. As a result, they have drastically reduced inventories “in order to stay in business.” That reaction by retailers, he said, is actually “very good for the future. Those that have survived are much stronger than they were two years ago.”
Barry Harper, president & CEO of Harper Brush Works, Inc., believes U.S. consumers are still postponing major buying decisions because of a lack of confidence in job security and the government’s ability to generate an employment recovery. Those postponed decisions include vacations, new cars and major remodeling, for instance.
“I do think they will jump back,” he said, “And there will be pent-up demand once confidence returns. There may be no vacation this year, but consumers are saying to themselves, ‘I’m not going two years without one.’”
“The silver lining (in this recession),” he says, “is that the surviving manufacturers and retailers will be stronger and more nimble.”
In the meantime, people entertain regardless of the economy and the kitchen has become “the heart of the home,” according to Evan Dash, CEO of Prepara. “Therefore, there is a natural consumer receptivity to new and unique housewares products.”
Still, to keep consumers interested, innovation in the housewares industry must keep pace with fundamental changes brought about by the worst recession since the Great Depression. Dash said housewares manufacturers have indeed become sophisticated when it comes to the innovation pipeline because “it’s become a necessity just to ensure survival. Because companies have more recently put so much effort and resources into design and innovation, consumers in turn are still reacting very favorably to new products and technologies that make their lives easier or bring them enjoyment.”
“I firmly believe that the price/value relationship is much more meaningful than price points alone,” he said. “The consumer will tire of buying disposable products that are supposed to be durable, and those companies offering real value (through innovation) will achieve the best results.”
The bedrock change, another IHA board member agreed, has not affected “consumers wants and needs,” but has placed increased importance on value in the consumer purchase decision. “This will continue for some time,” he says, “as consumers will be more cautious with their spending.”
Trudeau believes that permanent change in the playing field is undoubtedly occurring. “The business environment of previous years is history,” he said. “The word ‘recovery,’ as such, will have quite a different meaning (than in the past) because the fundamentals of the business environment have changed, creating a cash crunch situation resulting from the greater difficulties in securing credit.”
The form the new economy will take remains to be seen, said one IHA board member. “I don’t have a crystal ball,” he said, “and frankly, the current times are without precedent. We will need to carefully monitor trends so we can respond quickly…My personal hope is that we modify our financial systems as a result (of this recession) to reduce the suddenness and severity of this type of economic collapse.”
