Around the Bob's Discount Furniture office, corporate has a saying: “Value is always in vogue,” according to Ramesh Murthy, the retailer’s COO.
That philosophy has enabled Bob’s to expand at a time when the overall home retail category is stagnating. Furniture and home furnishings store sales have fallen since their peak of $12.7 billion in January 2023 to $11.8 billion this May.
Meanwhile, Bob’s announced plans to open 20 new stores this year. Fellow furniture retailer Ikea is opening eight new locations across the U.S. this spring and summer.
While these two retailers differ greatly, they share commonalities that cater to today’s consumer and have been instrumental in their expansion despite category softness: a focus on low prices and a penchant for convenience that seamlessly blends online and in-store shopping into a true omnichannel experience.
“Customers today want things to be easier, faster, and more accessible,” said Rob Olson, COO at Ikea U.S. “We want to meet people … however they choose to shop.”
If the price is right
Pandemic lockdowns prompted a slew of home renovations and furniture purchases. But in the years that followed, home and furniture retail “ran out of steam,” said Matthew Katz, managing partner at consulting firm SSA & Company.
Home and furniture retailers such as Bed Bath & Beyond, Conn’s, Mitchell Gold Co., Pirch, True Value, The Container Store, Tuesday Morning and Z Gallerie filed for Chapter 11 bankruptcy. Consumer confidence has waned, new home builds are down and mortgage rates are hovering above 6.5%. Material costs have risen and tariffs could hike prices, especially on home furnishings imported from China.
As a result, many consumers are trading down, and value players are poised to take market share from higher price points. “Some of the price-conscious players, like Ikea and others, will have an opportunity to steal share,” Katz said.
Over the last five years, Ikea has grown its market share in the U.S. by 13.6%, per the retailer. In addition to quality, sustainability and other factors, low price is a key element of its product designs.
“That’s a big part of why people trust us — we’re committed to making great design accessible to everyone, not just a few,” Olson said.
Ikea’s sales did fall 5% last fiscal year after it lowered prices in hopes of attracting more consumers. But Jia Li, associate professor at Wake Forest University’s School of Business, expects value retailers to continue to “be in good shape, as long as they find a way to keep their prices down.”
“What will be in trouble is those middle retailers."
Jia Li
Associate Professor, Wake Forest University’s School of Business
On the opposite end of the spectrum, high-end home retailers have reported mixed results. RH’s revenue grew 12% year over year in Q1, with executives crediting the retailer's “most desired products presented in the most inspiring spaces in the world, with bespoke interior design services.” In Ethan Allen’s most recent quarter, however, sales dropped 2.5%, with CEO Farooq Kathwari noting “uncertainty in the economy, elevated interest rates and a challenging housing market, that together, have impacted consumer confidence and interest in the home.”
According to Li, price insensitive consumers will continue to shop at high-end stores regardless of economic conditions. “What will be in trouble is those middle retailers,” he said. Consumers shopping in that tier, which includes department stores, are likely to trade down as inflation continues.
Katz expects “more mixing and matching,” in which consumers purchase high-end furniture but are willing to trade down for accessories, such as a throw pillow.
“Price will be a big driver for much of this market in the near term,” Katz said.
The shopping experience — on and offline
Value is just one piece of the puzzle. Convenience and omnichannel experiences help retailers stand out, especially for digital-native generations.
“Their purchase behavior is totally different from the previous generations,” Li said. “If you want to perform well, you must become an omnichannel retailer.”
As Ikea and Bob’s expand their brick-and-mortar footprints, they’re ensuring physical stores and their online presence tie together.
Bob’s offers what it calls an Omni Cart. Consumers can start shopping online, add items to a virtual cart, then visit a showroom to try out the physical product before completing the purchase in store. The process works in reverse too, Murthy said.
“For furniture, this is unique, and others in the industry are still looking to catch up,” Murthy said.
Ikea’s remote planning service lets consumers virtually speak to Ikea teams. The retailer also offers in-home kitchen planning, where employees visit the consumer’s home to plan a kitchen together. That service will expand to all stores by the end of this summer, Olson said.
Physical stores remain important in furniture retail, because “people still like to go to the store, take a look, touch it, feel it,” Li said. Just 14% of Bob’s sales are online, compared to the retail industry’s e-commerce penetration of more than 16%.
At Ikea and Bob’s, stores offer something unique as well: food options. Some Ikea locations have full restaurants with hot food offerings, while others have a Swedish Bistro concept with hot and cold options “for a quick meal on the go,” Olson said. Each Bob’s store has a Bob’s Café with free snacks and coffee, and the retailer 100% matches any donations that customers give in the store.
Bob’s expansion includes markets such as North Carolina, with high population growth, and a store in Vermont, which “allows us to get closer to a population that has grown up with Bob's and loved it,” Murthy said.
Ikea has added small-format stores and plan-and-order points, where shoppers can pick up online purchases. The store formats, often located in urban areas, offer convenience to large populations and “allow us to reach people where a traditional large-format Ikea simply couldn’t,” Olson said.
Ikea’s footprint in the U.S. has grown to 51 stores (up from 40 in 2015), 10 plan-and-order points and 74 pick-up locations.
“It’s been an incredible journey, and we’re just getting started,” Olson said.
