Ed loves the High Point Market. Bill, not so much. They share views about how they see the future
of our largest show.
Editor’s Note. A Bit of History: Furniture shows had their roots in the 1870s, when manufacturers held small cooperative displays, mostly in warehouses, bringing buyers to goods instead of bringing goods to buyers. This solution proved less than satisfactory for buyers who had to travel long distances to view goods without the advantages of modern roads or “horseless carriages”.
Furniture Markets 1891
Twenty years later, Charles Spratt a traveling representative for Furniture World Magazine, believed he had a solution. Spratt arranged a series of meetings sponsored by the Central Furniture Manufacturers’ Association. The result was the formation of the American Furniture Manufacturers’ Exposition in NY on March 12, 1891. The new association took over a building on 3rd Avenue and 63rd street, renting space at 10 cents per square foot for the purpose of selling to the furniture trade only. Retailing was strictly forbidden. At first, only Eastern manufacturers were permitted to show at the exposition, but these rules were soon relaxed and mid-western companies were admitted. Spratt believed that in order to establish a national market, there must be no limitations or advantage given to individual exhibitors based on their geographic location. The furniture Market system as we know it today had been launched. By 1895, furniture expositions had expanded to New York, Chicago, Rochester, Cincinnati, Boston, Philadelphia, Indianapolis, Rockford, St. Louis, Grand Rapids, Jamestown, and Shelbyville.
Since then, furniture show venues have come and gone, but in many ways, the basic home furniture marketing model has remained the same.
Furniture Markets 2018
Today, another wave of technological innovation has Furniture World's point/counterpoint duo, Bill Napier and Ed Tashjian, thinking about the future of furniture shows, including that behemoth, the High Point Market.
I don't relish putting myself in the middle of Ed and Bill's discussion, but after visiting over 70 High Point Market exhibitions, and making many thousands of showroom visits, I feel justified in sharing the following observation. Whether you are a retailer or a manufacturer, preparation and attention to detail are the keys to having a successful market experience. Large shows are complex ecosystems where manufacturers and retailers share responsibility with show management for their own success. Woody Allen noted that, "Eighty percent of success is showing up.” That definitely isn’t true for furniture shows, where the how, where, with what, with whom and why you show up count for more than 50 percent of any successful showing.
This is Bill and Ed's sixth installment in the series, having previously debated celebrity licensing, digital advertising overload, the millennial myth, whether or not furniture brands matter, and benefits to early adapters of VR/AR.
POINT: Ed Tashjian
There seems to be some conversation regarding the continued relevance of the High Point Market. Some folks think it’s an institution and will last forever, and others, including my point/counterpoint partner Bill Napier believe its days are numbered. In short, they believe the concentration of dealers and new technologies will make it obsolete.
My point of view is that the High Point Market will not only continue, but it will thrive in the foreseeable future. And the smart money seems to support my position.
Follow The Money
In 2011, when Oaktree and Bain Capital formed a partnership to buy much of the real estate in High Point under the aegis of IMC, they spent over $500,000 in research and used the talents of the smartest MBAs to determine whether it would be a good investment. For a cup of coffee, I could have told them it was a great investment! Fast forward to 2017 when Blackstone doubled down and purchased IMC. Blackstone, by the way, with over $371 billion of assets under management, is unlikely to run out of capital for future re-development and acquisition. Further, on any drive through High Point, you can’t miss the amount of new construction. These are massive corporate showrooms that are depreciating their assets over 30 years. What do they know that others don’t? The first rule of business is to follow the money.
One of the arguments is that High Point isn’t necessary anymore. The Top 100 retailers account for approximately 80 percent of the $110 billion spent on furniture each year. They say it will be cheaper to simply bring the furniture to them. This is an erroneous argument. First, the math only works if you sell containers direct to fewer than 25 retailers. Second, there’s still $22 billion dollars on the table.
Too Many Markets
Another argument is that there are too many markets. Some question why the consumer electronics industry can get by with one market per year and furniture needs four. It’s because we are in the fashion business. Our furniture business is one of the most creative and nuanced industries in America, constantly searching the globe for the latest in materials and designs. And the buyers—those 50,000 interior designers, case and furniture buyers, demand freshness and creativity to serve their customers.
Buyers & Technology
I hear some people say that technology will obviate the need for seeing the furniture face-to-face. I embrace technology. Technology makes furniture better. Technology democratizes data and levels many playing fields. But technology will only grow the pie and will make High Point that much more important. In fact, technology will enhance High Point. Near-term, augmented reality and 3D modeling will be commonplace. That will only increase the desire to see furniture the same way it did for automobiles.
People ask me about e-commerce. Will Wayfair and Amazon co-opt the digital assets of High Point and make furniture buying on a B2B basis easier over the Internet than in person? Here’s the irony. Wayfair and Amazon send more people to market than any other institution. In April, Wayfair sent over 100 people. Like everyone else, they want to be first to see the newest and the most interesting trends in fashion, logistics, and marketing. Does anybody really believe that the designers and buyers in our industry are going to make it easy for them to get the upper hand by staying away from markets?
"Wayfair and Amazon send more people to market than any other institution. Like everyone else, they want to be first to see the newest and the most interesting trends in fashion, logistics, and marketing." - Ed Tashjian
Finally, let’s face it. For furniture junkies like us, the High Point Market is just flat-out fun. This is the most jovial and collegial of all industries. We like each other, are happy to see each other and look forward to shaking hands and breaking bread. It’s our Disneyland. It’s even better when you’re a buyer. It provides a respite from the day-to-day headaches of demanding clients. For a week you are valued and admired, your jokes are funny and it looks like you’ve lost weight. You have more invitations for drinks and dinner than you can possibly attend, and for a brief while, you’re the most important person on the planet.
High Point is the Mecca of the furniture world. It has scale with over 10 million square feet of show space and approximately 2000 exhibitors. There are around 70,000-80,000 attendees from over 100 countries. Yes, there are markets in Shanghai, Paris, and Milan—but High Point is the biggest and is highly regarded. If you’re selling, you want to be where your customers are. If you are buying, you want to see the widest choice of the newest things in the shortest period of time. The High Point Market provides both of these, bringing buyers and sellers together efficiently, effectively and joyously… and that is why it will be around for a long time.
COUNTER POINT: Bill Napier
In spite of Ed's persuasive argument in favor of the High Point Market, I see a dramatic decline coming in five years, seven at most. Here’s why.
I started attending the High Point Market in 2000 and was amazed by all the buildings, all the people crowding the streets. Today, published numbers say 80,000 people from all over the world attend High Point Market. Sure, there is more square footage today than in 2000, but just look around. Remember when you couldn’t get on an elevator without obnoxious waits and having to stop on every floor? And how many retailers attend the show? I bet Ashley alone sends 800 to High Point.
"If consumers don't have to touch it, feel it, sit in it, to buy it, what makes you so certain that the same couldn't be true for professional buyers?" - Bill Napier
Bottom line, I see a number of trends that point to reduced attendance and lower manufacturer market participation.
Follow The Money?
I don't agree with Ed’s analysis of Bain and Blackrock's investing practices. To me, it’s a short-term “flip” scenario. Buy all the markets, raise rates, ROI your investment and flip it. I believe that Vegas would make a great condo conversion.
As for all the building going on in High Point, it makes perfect sense, especially if you take a closer look at who is doing the building. The companies Ed references are large Asian manufacturers, many public, that need this presence. The remaining mid-sized and smaller manufacturers, ones that pay for the other 2000 spaces, will be dwarfed by these companies and a few other majors. What happens to most of the independent stores when a Wal-Mart comes to town? That's what I'm talking about. Interesting how history always repeats itself, especially in our industry.
There has been a contraction of independent retailers since the recession. About 10,000 storefronts have been lost. Retail expansion with outside capital investments in Bob’s, Art Van and others has accelerated. Ask yourself, where will these high volume retailers buy? Will it be at the shows or direct from the factories, except for a few items? I'm betting it will be the direct from factories scenario which won't be good for furniture shows.
Consumer Buying Behaviors
Once again, we are missing or ignoring trends in purchasing behavior. It wasn't long ago most people in the furniture business believed no one would buy furniture online. Fast forward to 2018 and look how much the world has changed. Online sales have doubled in the past five years to a projected $42.7BN. According to the statistical website statista.com, over 224 million people shopped online in 2019. The online furniture sales growth curve isn't going down, it’s going up, and up.
According to a report by e-marketer in March of 2018, furniture was the top category U.S. Internet users preferred to shop digitally vs. in-store. We even beat shoes if you can believe that, along with clothing, beauty, and electronics. Now consider venerable retail names brought low by the internet. Sears, JC Penney, Bon Ton’s and Toy’s R Us. It’s all about the consumer. They rule at our ignorance and expense.
And, the continuing online trend is supported by demographics. The size of the average new home is shrinking, and the Millennial generation is still by-and-large renting. Guess what folks? Apartment-dwelling Millennials don’t buy as many multiple rooms of furniture and, what they do buy, tends to support online purchasing.
Retailer Buying Behaviors
What do the consumer buying trends discussed above have to do with professional buyers who attend High Point? A lot. My point is that if consumers don't have to touch it, feel it, sit in it, to buy it, what makes you so certain that the same couldn't be true for professional buyers?
Ed says retailers like Amazon, Wayfair and Hayneedle send large buying groups to furniture shows. I believe this won't last. It makes sense going forward these online giants will not only sell online, but buy the majority of their products as well using new search and AI technologies. Why wouldn’t they adapt the tools they've created for their customers use, to streamline their own buying process?
To Ed’s point, technology could grow the furniture industry, and it does level the playing field by democratizing data, but only if our industry uses it.
I've lost faith that companies in our industry will do that any time soon. How many retailers still use fax machines? Too many! And just look at their websites, templated, loaded with "buy now on-sale" pitches, are hard to navigate and lack content.
"High Point Market is even better if you are a buyer. For a week you are valued and admired, your jokes are funny and it looks like you’ve lost weight..." - Ed Tashjian
The same is true for those technlolgy-laggards, furniture manufacturers. It's my view for manufacturers that don't adapt, don't innovate, will simply not be able to justify the funds necessary to show at multiple furniture shows. This will start a feedback loop, fewer manufacturers and less retail traffic. In fact, it's happening already.
We already see buying groups siphoning off independent buyers with their own dedicated shows. What if the largest manufacturers left High Point and Vegas and built permanent showrooms in or alongside their distribution centers? That would not bode well for major shows. Most companies have DCs on the coasts and in middle America. These showrooms could be open seven days a week. It would be easier for buyers and better for manufacturers. And, it could all cost less than their present showroom leases, the cost of moving products in and out, of taking reps off the road, entertaining and more.
Ed thinks High Point is fun. I disagree. It’s really hard to get to, there aren't many good places to eat or entertain, it’s archaic to navigate, and did I mention it’s expensive and stressful to attend? Before I conclude, let me rant a bit about the Las Vegas Market. I love going to the Vegas Market because it’s so easy. Easy to get to, great hotels, shuttle service, and restaurants. There's only one thing not to love about Vegas. The summer market!
Just because you build it, doesn’t mean they’ll come. Like I said at the start of this counterpoint, give it five to seven years.
About Ed Tashjian: Tashjian Marketing provides senior marketing leadership to the Home Furnishings Industry. It specializes in business analytics and in helping its clients to segment the market, define and communicate a sustainable differentiated value proposition. Get more information at www.Tashjianmarketing.com or call (828) 855-0100.