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New furniture orders increased in January, although not for everyone

New furniture orders for January were 8 percent higher than in January 2018, accounting and business consulting firm Smith Leonard PLLC in High Point, N.C., reported March 29. 

Key Monthly Indicators

“The good news for January was that shipments were up 14 percent over January 2018 and some 75 percent of the participants reported increased shipments for the month,” the firm said in a summary of its monthly survey results. “New orders are critical but shipments and subsequent collections pay the bills.” 

“The not so good news is that everyone was not participating in these good results. In January, only one-half of the participants reported increased orders for the month. This was up from approximately 45 percent reporting increases last month. There were a good number of participants reporting only slight declines, but clearly these results do not reflect the rising tides that we would hope for.” 

Percent Increase/Decrease Compared to Prior Year

In a commentary, partner Ken Smith offered this: “Spring time is coming and so is an early High Point Market. We hope all retailersand designers will come. While business may be not all that great, it is hard to imagine being in the furniture business and not coming to see the latest in the best fashions available anywhere. We hope to see you.” 

Tax swap in Texas riles HFA members

Some Home Furnishings Association members in Texas aren’t happy about a proposed tax swap that one retailer compared to “playing games.”

Gov. Greg Abbott, joined by Lt. Gov. Dan Patrick and House Speaker Dennis Bonnen (pictured above), unveiled a plan April 10 to raise the statewide sales tax from 6.25 percent to 7.25 percent and use the additional revenue “to buy down property tax rates for all Texas homeowners and businesses.”

The three top leaders see the tax swap as a means of slowing what they called “skyrocketing property taxes.”

“In 2017, Texans paid $59.4 billion in property taxes, up from $40.3 billion in 2010 and $22.5 billion in 2000, state records show,” the Fort Worth Star-Telegram reported April 10.

Some furniture retailers, however, are wary of the proposed tax swap, predicting that higher sales-tax rates will widen the price advantage enjoyed by out-of-state online sellers.

“Property taxes are high, but so is our sales tax, and it gives people one more reason to go shop online especially since we have such a high threshold for the online sales tax law, which means more lost revenue,” said Brad Schweig, vice president of operations for HFA member Sunnyland Furniture in Dallas.

Later this year, Texas will begin requiring out-of-state online sellers to collect sales taxes on purchases by Texas residents – but the law will exempt their first $500,000 in sales.

“This will affect brick-and-mortar stores in Texas negatively if the internet tax threshold is not reduced to zero,” Chris Pfeiffer, owner of Homestead House Furniture in Conroe, said. “Pushing the sales tax to 9.25 percent only increases the pressure to buy products online to avoid paying sales tax,” he added, referring to a 7.25 percent statewide rate plus as much as 2 percent more in local taxes in some areas.

Last year in South Dakota v. Wayfair, the U.S. Supreme Court ruled that states could require online sellers to collect and remit sales taxes even if they did not have a physical presence in the taxing states. Most states, including Texas, have moved to take advantage of the opportunity to increase revenues.

The decision delivered a victory to brick-and-mortar retailers, which lose business to online competitors that don’t collect sales taxes from their customers. The disparity gives online sellers an automatic price advantage. So, the Wayfair ruling helps level the playing field. But it tilts again when a seller is given an exemption on initial sales – a highest-in-the-country threshold of $500,000 for Texas.

Brick-and-mortar retailers also pay property taxes, so easing those levies would help, but some don’t see the tax swap as even.

It doesn’t make sense to Schweig.

“If a tax increase is really needed — for example, the gas tax — then let’s do the right thing instead of playing games like this,” he said.

If the Texas House and Senate pass tax swap legislation, the proposal then would go to voters for their approval in a statewide referendum. 

Exclusive Furniture

Better late than never: Exclusive Furniture opens long-awaited Webster store

It took a little longer than expected – about nine months longer – but Home Furnishings Association member Exclusive Furniture opened its seventh Houston-area store this spring. 

The opening in Webster, Texas, a bedroom town 28 miles southeast of Houston, continues Exclusive owner Sam Zavary’s push for saturating the Houston market with 11 Exclsuive showrooms while also unifying the brand’s at-times fractures brand image between stores. 

“We’re getting there,” said Zavary of his growth goal. “It’s taken a little longer than we first thought, but everything’s coming together, and we’re thrilled with the new store.” 

Weather and contractor problems delayed the Webster store’s opening and has put the company behind plans in its next two store openings in the area. Still Zavary is looking forward to the community’s reaction to the new store.  

He’s projecting $13 million in annual sales from the Webster store and even more after an American Furniture Warehouse store – the first AFW store in the Houston market – opens across the street. That AFW store will be more than 350,000 square feet of warehouse and showroom space.  

“Talking to folks, there’s a lot of excitement in the store and in the community,” said Zavary. “I’m really happy with the year and our growing. We’re going to be doing some really cool things this year.” 

CPSC prodded to take stronger action on furniture safety

A divided Consumer Products Safety Commission was given a hard push this week to take stronger action against furniture tip-overs.

“I’ve been really disappointed at the speed at which we’ve seen these dangerous products taken off the market,” U.S. Rep. Jan Schakowsky (D-Ill.) said Tuesday during a CPSC oversight hearing held by a consumer protection subcommittee of the House Energy and Commerce Committee. “Every 14 days a child dies from a tip-over.”

All five commissioners appeared before the panel, which Schakowsky chairs. She quickly noted that they were split last month when Commissioners Elliot Kaye and Robert Adler proposed accelerated rulemaking to set mandatory safety standards for children’s dressers but were opposed by the other three.

The faster timeline could have seen new regulations established within months rather than years, Adler told the subcommittee.

Kaye concurred. “In my mind, this is one of those issues where we should be pursuing every authority we have,” he said. “Whatever tools are available to us, we should be doing that.” That “would send a signal to the industry that we are not leaving any tool unused.”

CPSC relies on voluntary standards written by ASTM International, formerly known as the American Society for Testing and Materials. Schakowsky asked Ann Marie Buerkle, CPSC’s acting chairwoman, whether the agency monitors compliance and “how soon can we have a more robust mandatory standard to make sure kids are safe?”

Buerkle explained steps SPSC has taken recently. On Feb. 27, the agency’s deputy executive director, DeWane Ray, sent a letter to furniture manufacturers, retailers and other industry groups advising them to comply with the voluntary standards.

“Children face an unreasonable risk of serious injury or death from clothing storage units that fall within the scope of the ASTM F2057-17 standard but do not meet its requirements,” Ray wrote. “Should we encounter such products, we shall initiate an investigation and will seek the corrective action we believe is appropriate.”

The same day, Buerkle wrote to ASTM expressing support for proposed revisions to the ASTM standard. One would lower the minimum height of units covered from 30 inches to 27 inches. The second would raise the stability test weight from 50 pounds to 60 pounds.

To meet the ASTM furniture safety standard, units must pass two stability tests. The first is to remain upright when all drawers and doors of an empty unit are fully opened. In the second test, the top drawer or door of the unit is opened and weight is gradually applied to it. The test must be conducted without the use of anchoring devices, which are recommended for units at risk of falling over.

The Home Furnishings Association recently joined ASTM’s consumer products committee and furniture safety subcommittee and will vote on the proposed revisions. Ballots are due by April 22. HFA’s Government Relations Action Team will decide how the association will vote.

Any HFA member can apply for ASTM membership. Application for membership, at an annual cost of $400, is here. Select F15 Consumer Products Committee, F15.42 Furniture Safety Subcommittee and User as primary activity.

HFA also strongly supports CPSC’s Anchor It! campaign, which seeks to increase consumer awareness of the dangers of furniture tip-over and encourage parents to secure furniture to a wall.

Schakowsky has said she will again introduce what she calls The STURDY Act, for Stop Tip-overs of Unstable, Risky Dressers on Youth Act. A similar bill in 2016 failed to advance, but its chances this year are better in the House because Democrats are now in the majority. The measure would require CPSC to adopt new rules unless it determines the ASTM voluntary furniture safety standard is effective in preventing accidents and is met by manufacturers. During Tuesday’s hearing, she urged commissioners to support the bill.

A video of the hearing is here.

Doug Clark is content manager and government relations liaison for the Home Furnishings Association. Contact him at 916-757-1167 or dclark@myhfa.org

Jerry Epperson

Epperson tells HFA members to seize their advantages

Twenty percent of all home furnishings transactions next year will take place on the internet — even more where accessories are concerned. Hoping to claim its share, Amazon, Walmart and others continue to grow their proprietary online furniture lines.

It’s easy for Home Furnishings Association members who own a brick-and-mortar store to look at the trends in e-commerce and shake their collective heads.

Resist the temptation, said industry expert Jerry Epperson. At his biannual “State of the Industry” seminar Sunday at the HFA’s Resource Center in High Point. Epperson urged brick-and-mortar retailers to defend their stake by touting all the amenities their stores provide over online competitors.

“Look, you’re never going to beat (e-commerce) on price, but that’s OK because you’re not really selling the same thing.”

Online retailers sell furniture designed for delivery, said Epperson. That means items packaged for single delivery with 800 operators standing by to help confused customers with assembly or to replace missing or broken parts.

He admitted to buying a “rolling desk” online only to find when it arrived that its wheels didn’t turn.

“I had to give the thing away,” he complained. “The ad called it a desk with wheels. People have these problems every day. They don’t return it, but they don’t buy from there again.”

Traditional retailers need to educate or remind customers in their communities of the differences between the furniture in their showrooms and the often-disposable furniture offered online.

“If the furniture comes to (your house) in a box with a piece of paper and instructions in Spanish on one side, French on one side and I don’t know what language on another side, that’s a piece of furniture that’s not going to last you a lifetime,” he said.

“Do you differentiate yourself?” he asked retailers in the room. “They (online retailers) got a picture, you’ve got the real thing. Your customers can see it, touch it. Your message should be, ‘Let us show you the features because you’re going to learn so much more about it than a picture on your phone.”

Epperson reminded retailers that more than 1,000 pure-play online furniture retailers have disappeared over the last 15 years. “They make a great deal of noise when they announce their presence, but they tend to go quietly into the night when they close shop.”

The key to leveraging your store’s worth, said Epperson, starts with educating consumers on your website and following up when they show up in your store. “You and your staff are the front line to education,” Epperson said. “It’s up to you to show them what you can offer them over what they’re going to get — or not get — online.”

In his usual colloquial manner, Epperson touched on a variety of other industry topics including the ongoing trade war between the United States and China.

“I don’t think anyone has real sense of how this is going to end or even when,” he said. “It’s such a complex issue with no easy solution that benefits both sides.”

Just last week President Trump touted prospects for an “epic” trade deal with China but acknowledged that a settlement of a year-long commercial conflict remained at least a month away.

Epperson said he could easily see Trump or Chinese President Xi Jinping walking away from a deal before talks even begin. “Our leader has a real-estate background,” said Epperson. “One of the most popular negotation tactics is to walk away until you get a better deal. We’ve already seen that in these negotations and where North Korea is concerned.

“I’m telling retailers not to worry about it because it affects everyone in the industry — not just them.”

Even if a deal is reached, Epperson said he’s not optimistic the 10 percent tariffs on $200 billion in Chines goods will be lifted. “I can’t remember the government putting a tax in and then taking it away. Remember, we’re talking about $7 billion a month. You don’t think the government could find a good waste for $7 billion?”

Epperson’s overriding message to HFA members was encouraging, however.

“We sell furniture that is meant to be used for years if not for a lifetime,” he said, noting that home-furnishings products are better than ever: better built, with better finishes and better fabrics, safer and cheaper in that furniture prices have risen very little compared to automobiles and other durable goods. Retailers must do a better job of telling that story, Epperson said.