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Economic Trends For 1998

Furniture World Magazine


AKTRIN economist Stefan Wille and Canadian retailers voice their concerns, plans and optimism for the coming months.

From almost every newspaper, magazine and electronic business review these days, we're hearing mixed signals about the North American economy. Some gurus predict blue skies and rainbows far past the Millennium. Others offer cautions based on peak and trough principles, record markets in both New York and Toronto or, more typically now, David Foot style "Boom, Bust and Echo".

Most retailers are now experiencing, if not a true sales upsurge, at least a more encouraging jingle in their tills.

Stefan Wille, President of AKTRIN Furniture Research, has made economics his life and on the basis of present indicators predicts a continuing "really good market". In the late '60s to early '70s he was immersed in both Swiss and Canadian academe, emerging in '71 with his doctorate in International Economics from the University of Zurich. When asked about his stint at the University of Toronto, Stefan revealed that he had only intended to be in Canada for "a few months" to develop his Masters' thesis. He met his wife, Claire, also a student, and "stayed 30 years"!

Stefan headed an investment banking subsidiary of the Union Bank of Switzerland in Toronto, managed International Economic Research for the Canadian Imperial Bank of Commerce in Toronto and was the bank's representative in Switzerland and Eastern Europe. He also served as Managing Director of the principal Bata Shoe Organization's holding company, and was VP of Finance in charge of Pelikan International's global finances. In l985, Stefan founded AKTRIN Research. He is in the business of writing and publishing marketing and management reports, more than 50 by present check, and maintains offices in Canada, High Point and Switzerland. Important to his international vocation, Stefan is fluent in both English and German and has a good working knowledge of French and Italian.

Said Stefan, "Improvements in the economy and consumer spending in the fourth quarter of 1996 bode well for Canada's furniture industry this year. Sales advanced 4.6 percent to C$4.8 billion. Market attention has shifted from first time buyers of relatively inexpensive starter homes to the more affluent 'move-up' buyers of new homes, an upscale position."

Regionality must be closely watched in Canada. "The aging population is growing more in the central and eastern part of the country. With Asian immigration, relatively young immigrants on the whole, things have changed in the West. British Columbia, for example, is the best market for condos and apartments. Upscale houses are doing well in Ontario and Alberta."

He offers advice to the home furnishings retailer. "You must make your floors enticing. And you have to know precisely your market category. If it corresponds with the upscale housing market, you must be prepared to act fast. With good economic times, people have more money and they are ready to buy more upscale items, housing, the furnishings for their homes, cars, jewelry. Some of the top trends now are garden furniture, home office and home theatre. It's interesting that all upscale products are much more volatile than run of the mill goods. If the economy turns sour, luxury items come to a dead stop.

"Remain loyal to your store's image, develop clientele in that market and stick to it. Here in Ontario, Stoney Creek Furniture, Innisclaire and Smitty's Fine Furniture have flexed their assortments to match the market trends. They know their customers and cleverly managed the transition.

"That's key, to be able to flex rapidly, reorganize, but remain loyal to your basic client. Hold your ear close to the ground, act with necessary speed, but do not dismiss what you are known and respected for."

We asked several retailers at Toronto's August Home Furnishings Market how they were coping with changing times. Produced by the Ontario Furniture Manufacturers' Association, the Market attracted dealers from the Atlantic Provinces, the Canadian West, Quebec, Ontario and some from the United States. Orders were being written both at the permanent showrooms at The International Centre and in factory showrooms around Toronto.

In Concord, at Coja Leatherline of Canada, we met Vina Thompson, Thompson Brothers, Paisley, Ontario. Paisley is a town of 1,100, 15 miles inland from Lake Huron and not too far away from Port Elgin, Southampton, Kincardine and Owen Sound. Vina, son Don and grandson Ryan have a thriving business, and Vina acknowledged that flexibility is becoming more and more important. "We've been in business for 12 years, and I'm happy to say we're growing every year. Last year was somewhat difficult but things are picking up now. Many people in our region are seniors, and they are moving from large homes to smaller houses or apartments. They have the time and the money to go out and shop and buy what they really like now the children are gone. There have been other definite changes, for example we were not selling leather at all but now we are. We are placing emphasis on customer service, and we've renovated our building, replaced the roof, and all the windows. An extra service we've developed for our customers when they make a new purchase from us is taking in their used furniture to sell for them on consignment." The Thompsons advertise in both of the Port Elgin newspapers and "sometimes" in the larger Owen Sound paper, as well as using a "little bit" of radio time.

As Vina left Coja's showroom, Lawrence Kidd of Halifax, Nova Scotia, arrived. He is in full agreement with Stefan's assessment of the economy and the marketplace. "We've always maintained a middle to upper market niche, we've stuck with it over the 47 years we've been in business. The economic upsurge is not as great in the Maritimes but it's definitely present. We have to take each year as it comes along.

"We have been forced to flex to change with the Halifax/Dartmouth metropolitan area now an amalgamated super city. It has become a very, very competitive marketplace. Manorhouse is a 20,000 square foot store. We're competing against Gallery One's 65,000 square feet, with Leon's large store, plus the department stores and decorators. By recognizing changing times we've held on to our little piece of the business. We're servicing the hell out of it to maintain the customer base we've had for years and years.

"We're doing a fair amount of promotion for our 10,000 square foot La-Z-Boy Gallery using newspaper, radio, television and preferred customer direct mail. You really can't predict a good market. We had a big May, the biggest month of the year so far, quite unusual. Everything used to be more predictable. Since 1990 the home furnishings business worldwide has changed. The fabulous '80s, then the recession in the early '90s, and now we're back in a growth phase. We have always made a profit at Manorhouse, but when we hit 1990 business dropped dramatically with the imposition of the GST (federal goods and service tax) and the addition of over 100,000 square feet of new retail furniture space in Halifax. The pie can only be sliced in so many pieces!

"Frankly, I see us continuing in that slight upward spiral for the next couple of years. One of the big questions that could affect us all is what will happen in Quebec if there is another referendum and it goes to a 'yes' (for separation) vote. It could create havoc with the Canadian economy. Otherwise, I am very upbeat about what will happen in the future."

Hot on Larry's heels, Carol Goudie of Goudie's Furniture, Strathroy, Ontario, entered the showroom."Certainly the population is aging, and they have more money to spend," Carol agreed. "There is definitely a demand for better quality furniture. Our average sale has gone up about $400. When people are moving towards retirement now, they sell their family home, get rid of everything they had and are buying new in updated colors. Function is important too; everything must be sized to smaller spaces."

Goudie's is a 2l,000 square foot store "done in room settings with lots of accessories to show the furniture as it would look in the customer's home plus, of course, we sell the accessories," she smiled. "I anticipate growth during this next year with more people out looking for furniture. Five years from now I think we will still be seeing gradual growth. The Canadian economy has taken hard medicine for the last few years."