Ukraine, freight costs, inflation will form barriers to growth
HIGH POINT, North Carolina – Thanks to the shutdowns forced on all facets of society by the ongoing COVID-19 pandemic, many of the 80 or Canadian furniture and furnishings resources showing at the Spring 2022 edition of market here believe just being open will encourage retail buyer attention.
“Showing at a market is out of the ordinary itself,” says Angelo ‘J.R.’ Marzilli, president of Décor-Rest Furniture, the Woodbridge, Ontario-based upholstery house.
The market will also give exhibitors the opportunity to showcase new goods and collections at a time when the pace of business – launched into hyperdrive by increased demand brought on by lockdowns and stay-at-home orders – is finally starting to normalize.
“We are expecting that many factors are likely to slow business [in both Canada and the U.S.] during the rest of the year,” says Luke Simpson, president and chief executive officer of the Durham, Ontario-based solid wood case goods specialist Durham Furniture. “The current Ukraine situation, inflation, rising interest rates; all lead to consumer uncertainty and fewer dollars available for discretionary spending.”
Others are optimistic the balance of 2022 will be strong but are more uncertain about what lies ahead next year.
“We haven’t felt a slowdown yet but it’s hard because different customers are in different areas, so you don’t know what’s affecting them locally,” says Jade Merriman, vice-president of the Vancouver-based furniture and accessory distributor LH Imports.
“Retailers and suppliers are fulfilling backorders so it’s hard to gauge if things are slowing, but our incoming orders are still steady. I think 2022 is still going to be a strong year for us because of the backlog. I look more towards 2023 if the backlog gets filled and the supply chain gets fixed and we have more supply,” she continued.
“Next year is what we need to prepare ourselves for because the world is changing around us and different things are happening,” she added. “Inflation is an issue and in Canada, with our housing market heating up and restrictions slowing down, we’ll have to see. Will all disposable income go back to travel? Probably not, people still care about their homes. But there are increases in prices and the costs of freight and materials are rising and people might think longer about their purchases. We need to be ready for any changes next year. We also could see restrictions again.”
Other Canadian furniture and furnishing resources are also reporting a stabilization in demand.
“Orders have slowed from the pent-up demand and levels are returning back to the typical inbound of orders pre-COVID,” Decor-Rest’s Marzilli says, adding the company is expecting business to remain status quo for the rest of the year. “We’re on target to reaching our targets.”
As for what could slow business in both Canada and the U.S. going forward, most executives interviewed by Home Goods Online say increasing freight costs are the real challenge.
“Tariffs and freight costs could put the brakes on growth,” says Gary Christianson, sales and marketing director for Mobital, the modern furniture specialist based in Laval, Quebec.
Others say logistical problems will remain a headache for the foreseeable future.
“Logistics is the biggest problem right now. We’re not at a point where demand is being outstripped by supply and I don’t think that’ll happen this calendar yearm” says Frank Rinella, sales and marketing director for sofa bed specialist Sealy Sofa Convertibles.
“Now with what’s going on in Eastern Europe and inflation skyrocketing, no one has enough figures on what’s going to happen. No one has logistics totally sorted out right now and we’re still not flowing product and moving things in a way everyone is comfortable with,” he added, noting rolling COVID-related lockdowns in the People’s Republic of China will also pose challenges.
“The ports are a bigger problem than the manufacturing. China still supplies plenty of parts and other materials so you could have trouble getting products from Asia to here in a timely fashion or at a reasonable cost,” Rinella continued. “Fuel costs haven’t even wandered into this conversation yet. If you look at the war and fuel, it’s hard to determine what will happen.”
Rinella says companies must be prepared to pivot going forward.
“We’re actively looking at other scenarios at all times and if a manufacturer isn’t doing this, they must have a perfect setup. Even if you’re a manufacturer in Canada or the U.S., no one is fabricating their own metal goods, so you’re struggling with the supply of parts and other materials. In upholstery, looking at what’s happening with fuel and crude, that can get into foam and upholstery costs,” he says.
“The war in Ukraine and sanctions on Russia are a global issue affecting the global economy. The impact on us can’t be quantified at this very second but if this stretches out to the end of this year, it’ll have an effect on the global economy. People weren’t ready for this. It’s a lot and it’s a terrible thing.”
As for the supply chain issues that have plagued the industry, some businesses say they’re seeing stops and starts when it comes to long-standing challenges.
“In early January, it looked like things had stabilized and were heading in the right direction,” says Durham Furniture’s Simpson.
“That has since changed, and the supply of certain items, particularly products from overseas, is becoming scarce and more expensive. China is in a lockdown which could affect everyone, and the war in Ukraine is compromising exports from Eastern Europe.”
Related Story: Supply chain slowing improving, Canadian HPM exhibitors say
Related Story: 56 Canadian firms expected to open for Spring High Point