Furniture and floorcoverings retailers have enjoyed a sales lift this year but should prepare for tougher conditions in 2008, according to Verdict Research.
Verdict estimates that the sector will have grown in 2007, at its fastest pace for three years. However, stripping out the boost to sales from higher inflation, year-on-year volume growth will be lower.
“The high proportion of homeowners on fixed-rate mortgages is a key reason why furniture retailers have not yet experienced a softening in demand,” said Verdict lead analyst Nick Gladding. “However, as the discount period on mortgages arranged two to three years ago expires and the housing market weakens, trading conditions will become much tougher. The non-essential replacement and big-ticket nature of furniture and floorcoverings products means that consumers are more likely to defer a purchase than in most other sectors of retail.”
The report suggests the pressures of cost inflation have prompted some retailers to begin to move away from heavy discounting and price promotions. Retailers are beginning to explore new ways of promoting their products and marketing on innovative features, style, design and lifestyle.
Home Retail Group’s Argos and Homebase chains hold first and second position respectively in terms of furniture market share. They are followed by Ikea, DFS, MFI and Homestyle.
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