No baloney: National Furniture to go out of business
As company winds down, other stores face challengesSeptember 27th, 2018
National Furniture Store Inc., the Spokane furniture retailer known for its “No Baloney” tagline, plans to close its doors this November, following a three-month liquidation sale.
While the store’s owner, Mark Barnes, says the closure is mostly an issue of timing, he says the retail furniture industry is a challenging market these days as smaller brick-and-mortar stores struggle to compete with online retailers.
Economic observers and furniture sellers here appear to agree, saying online selling is stressing merchants in the already competitive local furniture market, and uncertainties about the effects of potential tariffs are also looming.
Barnes says his father started National Furniture in 1960, and he took over ownership 30 years ago in 1988. He says the company currently has five employees, three of whom currently are working with Planned Furniture Promotions, a Connecticut-based company that has been hired to manage National’s liquidation sale.
“The main reason we’re closing is that I’ve decided to retire,” he says. “Our employees are all quality workers who I’m certain will find new employment.”
Though he’d considered selling the business, Barnes says he spoke with brokers here who weren’t optimistic about the sale of a retail furniture store that wasn’t making a profit.
“My kids also weren’t interested in taking over, so it came back to timing,” he says. “Retail is a challenge at the best of times, but I was ready to get out and focus on other things.”
Though not directly comparable as a furniture retailer, longtime Spokane-area mattress maker and retailer Northwest Bedding Co. closed earlier this summer, when company controller Lee Kvalheim told the Journal that majority owner Robert Evanson also had found no interested buyers. Other factors in the closure included Evanson’s health issues, and lack of a succession plan, Kvalheim said at the time.
National Furniture is located at 213 E. Ermina, a 9,500-square-foot warehouse location it moved to in 2016, following the demolition of its longtime location at 1230 N. Division, where it was replaced with a Carl’s Jr. restaurant.
Barnes says he still owns the property at 1230 N. Division but is leasing it to the Carl’s Junior franchisee through Clark Pacific Real Estate Co., of Spokane.
He says once National Furniture has officially closed, he plans to lease its current Ermina location through Carsten’s Management Co., another commercial real estate brokerage.
“There’s currently a two percent vacancy on warehouse space in Spokane,” he says. “So in my mind the timing is also better for leasing the property, as it’s a warehouse space that’s suitable for partial retail and close to transportation.”
Barnes says National Furniture’s sales went down following the 2008 recession and, with the exception of a few good years, never fully recovered.
“Furniture is always the first industry to go in a recession and the last to recover because it’s a deferable purchase,” he says. “It’s always been more of a need economy than a want. From the consumer standpoint, if they need to replace it, they’ll buy it.”
Barnes says the business’s move to its Ermina space in 2016 did help to reduce overhead, but it still wasn’t enough to compete with online retailers.
“The challenge for furniture dealers is that we have to order a certain amount of stock in order for our suppliers to ship it,” he says. “I think people do want to shop locally but it takes time to ship, and in the meantime, they could order online and have it much quicker, probably even delivered directly to their door. It’s frustrating.”
Barnes says a recent study in the trade industry magazine Furniture Today estimated 20 percent of furniture is now bought online.
“That top 20 percent is where the profits are, so that’s a good chunk of my business that’s lost to internet retailers,” he says. “Our decision to close was mostly down to good timing, but it has gotten harder to be the little guy.”
Data published by New York-based market research firm eMarketer last month indicates online furniture sales are indeed growing.
The firm reported U.S. digital sales of furniture and home furnishings are expected to total over $50 billion this year, making up 9.5 percent of total retail ecommerce sales.
EMarketer further estimates the category will climb to 18.5 percent this year, and annual growth will remain in the midteens through 2022, when digital furniture sales are expected to hit $90.4 billion.
Patrick Jones, executive director of the Institute for Public Policy and Economy with EWU, says trends in the furniture industry are closely linked to two big demographic economic trends: household formation and home sales or new construction.
“Household formation, or the number of people choosing to live together in one household, has slowed here in recent years,” he says. “The other factor is ... that up until this year, we haven’t seen much growth in new home construction. If the rates of household formation and home construction aren’t up, the things that go into those homes, like furniture, probably won’t be selling as quickly.”
Jones says he’s not too surprised by the continued popularity of online shopping that furniture retailers have been struggling to compete with, as it relates directly back to those same two big factors.
“Online shopping is a very real threat to brick-and-mortar stores no matter the industry, but this new generation of shoppers is very oriented toward buying online, especially millennials,” he says. “And as they move into their 30s, they’re the group that’s most involved in both household formation and home building.”
Jones says the percentage increase in median household income last year for Spokane County was also pretty modest, at only .6 percent, meaning area families have less disposable income for items like furniture.
“Income drives retail, so no increase in income makes it a bit tough,” he says. “Family-owned stores with single or low-unit outlets are probably difficult to maintain these days.”
Jeremy Klontz is the general manager for Spokane Furniture Co., another locally owned furniture retailer that’s well aware of the industry trend toward online shopping.
“The biggest thing we fight against in the industry is online stores like Wayfair and Amazon,” says Klontz. “If you can’t be competitive on pricing and give customers a reason to shop local, they’ll shift their buying patterns.”
“People start their search online first, and take into account things like positive reviews,” he adds. “So not having a strong online presence is almost a death sentence these days.”
Klontz says Spokane Furniture Co., which is owned by Zach Ziegler, started in 2002 as Ziegler Oak Furniture. The business’s main store is its original location at 1901 N. Division, although it has expanded over the years to include a warehouse and outlet store at 2801 N. Monroe, and a Spokane Valley store at 16413 E. Sprague.
“We started with the Division store but changed the name soon after we learned the history of the building, which was built for the original Spokane Furniture back in 1906,” says Klontz. “At the time we also decided to broaden our selection and focus, as oak furniture had lost some of its popularity.”
Klontz says Spokane Furniture Co. continues to do well with sales but has noticed an increase in customers who stop in to view furniture and test its comfortability in person without buying.
“Businesswise, we’re continuing to grow, but we do see more people who stop in to look, then search for the same item online at a lower price,” he says. “That’s why we make sure to have a good online presence and keep our pricing competitive with online retailers.”
Besides the increase in online furniture sales, some retailers are also preparing for the potential impact of upcoming tariffs on Chinese imports.
While nothing has been finalized yet, Jones says in the last few months there has been talk of the U.S. imposing tariffs of up to 25 percent on a wide mix of products, including furniture.
“The biggest impact of any tariff is an increase in prices, but to what degree is the question,” he says. “Does a 10 percent tariff mean the consumer will see a 10 percent increase in price at the checkout? In most cases the answer is no, because some of that cost gets absorbed along the supply chain by producers, wholesalers, and even retailers.”
While a 10 percent tariff might not have a noticeable effect, Jones says if tariffs reach as high as 25 percent, consumers might start to feel the impact.
When asked about potential impacts of the new tariffs, Klontz says he’s not too concerned, for some of the same reasons cited by Jones.
“A lot of furniture is brought in from China, so tariffs might make our costs go up, but whether that will mean higher retail prices is hard to say,” he says.