WHAT’S IN STORE FOR 2022?
Predictions and insights to help get you through to 2023
There will be
winners and losers in the furniture retail community this year. Industry
observer Tom Liddell provides insights into what may be in store.
Furniture World recently met with Tom Liddell, vice president of Planned
Furniture Promotions to get his thoughts about the likely challenges and
opportunities facing furniture retailers in 2022. Liddell grew up in
furniture retail, became a sales rep and then a manufacturing executive.
An astute observer of the furniture industry in his own right, he prepared
his comments after surveying retailers in trading areas across the
Staffing & Paying Salespeople
The challenges furniture retailers are likely to face in 2022 will vary
depending on the type of store and its price point. One issue that seems
to be certain is that just about everyone will have trouble retaining
salespeople, warehouse personnel or both.
The problem is that it’s not necessarily profitable for them or for
their vendors. There’s a big wakeup call coming for many retailers. ”
Because of shipping delays, instead of paying salespeople on delivered
goods, some retailers have switched over to paying on written business.
Since lots of those orders may never be completed, it’s a pretty big
gamble. Let’s say a retailer pays five to eight percent commission, a
salary plus three percent commission or a tiered commission based on how
much business a salesperson writes. If a salesperson quits or leaves in
the six months it takes to get products delivered, should 25 percent of
these orders cancel because customers are tired of waiting or they find
similar products in stock elsewhere, it’s a problem. The retailer may have
paid out eight percent of sales without seeing any benefit. But, for many
retailers that pay commissions, it’s the only way to have a chance to hire
A related issue has to do with commissions paid to salespeople on
delivered goods. What happens if a salesperson gets fired or quits and the
products they sold don’t get delivered until six months later? That
depends on the company’s policy and state law. Only some states require
that the salesperson be paid. From the salesperson’s point of view, this
seems harsh. The argument retailers have made to justify not paying, or
paying a reduced amount, is that these salespeople are expected to follow
up with customers until delivery to avoid cancellations and ensure
customer satisfaction. They say that when salespeople leave the company
before the goods are delivered, they haven’t necessarily earned their
In 2022 the sky will fall for some retailers.
Those who were smart stashed customers’ deposit money in escrow accounts
or set it aside.”
Sugar High at Retail
Lots of retailers are still cash-rich but many ignore the fact that it’s
cash borrowed from their customers. Let’s say a furniture retailer
collects 50 percent down on a $2,000 sofa that costs them $1,000. By the
time it arrives from the factory, there have been three price increases so
the $1,000 sofa becomes $1,300 dollars. The freight that was originally
projected to be $150 is now $350. If the order was written before the
retailer switched over to paying on written, they owe the commission. They
also owe sales tax and delivery-related expenses.
We are having a kind of “sugar high” in our business right now. Furniture
is in high demand and retailers are enjoying some of the best business
they’ve ever seen. The problem is that it’s not necessarily profitable for
them or their vendors. There’s a big wake-up call coming for many
What About Cash Flow?
About a year ago, I warned retailers to watch their cash. Since then, the
situation has worsened due to price and freight increases plus surcharges.
In 2022 the sky will fall for some retailers. Those who were smart,
stashed customers’ deposit money away in escrow accounts or set it aside
so that it didn’t appear in their checkbook balance.
Some states mandate that retailers hold customer deposits in escrow. More
than half of the states require they have as much cash in their checking
account as they have taken in deposits. Retailers don’t always follow
these laws that are rarely enforced.
Will Freight Problems Persist?
I know of several manufacturing/importing companies that canceled all
their sold orders. Then, they asked retailers to recalculate them so
that they could find out how much was real.”
Many smaller stores that are dependent on warehouse programs and can’t buy
containers are having problems. For example, when a manufacturer finally
does ship via LTL, not only is the freight cost astronomical but at this
point backlogs and delivery are made worse by a lack of transparency.
Often manufacturers and retailers can’t track their products. In some
cases, they can’t even get carriers to call them back.
Here’s what I’m hearing from even big retailers. Manufacturers contract
with carriers and bill for freight on their invoices to make it easy for
retailers to pay one consolidated invoice. Manufacturers may take a slight
markup on the freight, but here’s the problem. Since most dealers aren’t
paying invoices until they receive their goods, and the transportation
cost is included on the invoice, the factors are putting retailers on
credit hold. Their invoices are going past due before they receive the
furniture. Manufacturers and carriers are pointing the finger at each
other. Ultimately though, it’s dealers who are going to get hurt.
Who Will Get Hurt the Most?
Promotional dealers are feeling the most pain right now. Just a few years
ago retailers still sold $299 sofas. When the pandemic hit, the price went
to $399. Now that there is very little product to be found they can run at
$499. Some companies had entire stores full of $399 and $499 sofas. The
new starting price point is $599. Jerry Epperson has been talking for
years about the fact that when Jesus was a baby, they were selling sofas
for $499. That has finally changed. In the bedding sector, reasons given
for price increases were the cost of foam, steel, and wood. Get ready for
additional increases, this time due to labor costs. Mattress manufacturing
is very labor-intensive. Building a mattress is hard work and they’re
having to pay significantly higher rates to find willing employees.
Did PPP Help?
Most retailers had a free ride with PPP programs. As retailers review
their bottom-line profits for 2021, it’s easy to forget how much the
government paid in wages and overhead in our labor-intensive business. Now
is the time to take a closer look at and consider what their true profit
picture is. Yes, they did a ton of business, but did they make any money?
Then they need to figure out how they are going to make money in 2022.
Is it a Good Time to Expand?
That depends. Big retailers have warehouses full of inventory. Large
national chains, like Bob’s and Raymour & Flanigan, might not be getting
exactly the ideal selection of inventory they wished for, but they’re
getting plenty of products to sell. Their vendors are taking good care of
them. Medium size and smaller retailers aren’t being treated as well. They
can’t get inventory and it’s having significant impact. Everyone knows
that many manufacturers just aren’t supporting smaller dealers. Large
regional and national chains generally get whatever they want even if they
weren’t customers at the start of the pandemic. So, to answer the question
as it relates to growth, large stores are growing because they can.
What About the Container Situation?
The container shipping industry had a record year last year. They made
billions in profits and are paying cash for new ships. My view is that
it’s one thing to make massive profits, and another to sabotage the
system. It’s out of control and something needs to be done. Perhaps there
will be a rash of class-action lawsuits representing everyone up and down
the supply chain down to consumers. There’s a lot of greed right now
outside and sometimes inside our industry and consumers will ultimately
pay the price.
What If a Slowdown Comes?
Big retailers don’t need any advice from me. They know what to do.
Average medium-sized and small retailers are a different kind of
One of the things that manufacturers are struggling with is that they
don’t know what percentage of the gigantic orders retailers have placed
over the past year are real. How much of this was placed by retailers who
were hedging their bets? If business slows, it could be like a 600-wagon
train. If the first horse on the lead wagon stops, the backup could get
I know of several manufacturing/importing companies that canceled all of
their sold orders then asked retailers to re-submit them so that they
could find out how much was real. They assigned priority based on when the
original orders were placed and built-in retroactive price increases. This
is unprecedented in the furniture business. Of course, retailers couldn’t
say anything. They were stuck. But many have told me that they are making
notes, taking names and when all this is over are planning to be loyal to
the people who treated them well. Pretty much everybody I talked to in
preparation for this article respects the way HomeStretch Furniture
handled product allocations. They set up a system where every retailer
could buy in proportion to what they bought pre-pandemic.
Situation With Reps?
Reps are getting paid on delivered, but the problem is, they’re not
getting paid on surcharges. So, if a rep sold a $100 item and $70 of
surcharges are added, they only get paid on the original $100. It does
help to keep prices for retailers lower than if the reps had to be paid on
the higher amount, but I’ve spoken to reps who feel like manufacturers
have found a way to further reduce their commissions while enjoying record
What Is on the Horizon for Retailers?
If current trends hold, the supply chain will probably adjust in a
positive direction throughout 2022.
Container prices have stabilized somewhat. Based on my research they are
running between $10,000 and $17,000, depending on whether they’re on
spot rates or under contract. Still, at these prices, the cost of a
container can be almost as much as the value of the freight that’s in
that container, which is insane.
As a reaction to that, we are seeing a big, ongoing shift to production
in Mexico. Companies that were already making product there have been
pleased with the success they’ve had.
Chinese rolling power outages are not a problem like they were, but raw
materials shortages in China, Malaysia and Vietnam are. Production is
running 60 to 90 days longer than projected.
Based on reports from everyone I’ve spoken to, California’s ports are
picking up a little bit. Warehouse space has become a big problem.
Although retail showroom locations are still plentiful for retailers who
want to convert or open new furniture stores, there will be a continued
shortage of warehouse space in 2022. Even warehouses that have been
empty for years are all full of product because all types of companies
are stocking up as a hedge against further supply chain disruptions.
Consumers are even more demanding and there are lots of “Karens” out
there. I hope this won’t continue but fear it will. It’s just one more
factor in a long list that will make retailing less enjoyable in 2022.
Big retailers don’t need advice from me. They know what to do. Average
medium-sized and small retailers are a different kind of animal. In those
stores, the owner is the buyer, the merchandiser, the person who sets up
the sales floor, dusts and pushes furniture around. Owners don’t have HR
departments to make sure that the people they hire aren’t engaged in
bullying or sexual harassment. They manage social media and try to keep
Google ratings high. They are the head of everything in their stores,
mediating arguments between salespeople and making decisions related to
what to do with the employee that’s come down with COVID. It goes on and
on. There aren’t enough hours in a day for them to run their businesses
successfully. So, while it’s easy for me to say that they need to get
control of the financial side of their business, I don’t know how they
have time to think about it. Many retailers I speak to are working
themselves to death, especially with as much business as they have right
The fact is that in 2022 many independent retailers need to manage their
finances better to survive. A retailer’s P&L is just a snapshot in time.
Like anything else, junk in, junk out. Many retailers supply their
accountants with sales and incoming inventory numbers but don’t have
control of their inventory. We recently completed a forensic inventory for
a store that had $1,650,000 on their books and found it was half of the
amount. Inventory discrepancies are not uncommon.
Cash management is often limited to retailers looking at their checkbook
balance every day, and many don’t listen to their accountant’s advice.
These are symptoms that can, and do, result in poor decision-making, which
can’t continue if they want to ensure their success in 2022.
Consumers are even more demanding
and there are lots of ‘Karens’ out there. It’s just one more factor in a
long list that will make retailing less enjoyable in 2022.”
Furniture World is the oldest, continuously published trade publication in the United States. It is published for the benefit of furniture retail executives. Print circulation of 20,000 is directed primarily to furniture retailers in the US and Canada. In 1970, the magazine established and endowed the Bernice Bienenstock Furniture Library (www.furniturelibrary.com) in High Point, NC, now a public foundation containing more than 5,000 books on furniture and design dating from 1620. For more information contact firstname.lastname@example.org.