Published on : Monday, November 11, 2013
While an upturn in house construction is expected to increase demand for industry products, volatility in consumer sentiment, rising interest rates and growing external competition should constrain industry growth. For these reasons, industry research firm IBISWorld has updated its report on the Furniture Retailing industry in Australia.
Furniture retailers have faced a challenging market over the five years through 2013-14, with industry revenue expected to post annualised growth of 1.1%. Over this period, industry trading conditions have been affected by the collapse of global financial markets, which led to uncertainty in consumer sentiment and a subdued retail market across the domestic economy. IBISWorld industry analyst Claudia Burgio-Ficca states “despite growth in disposable incomes over the past five years, demand for furniture has remained weak as consumers remained concerned about their ability to repay future debt given the tough economic climate.” The Furniture Retailing industry’s revenue is forecast to post modest growth over 2013-14, rising by 1.6% to $8.0 billion.
Over the past five years, consumer demand for furniture products has been affected by volatility in the house construction market caused by unfavourable housing affordability and high household debt. As a result, the Furniture Retailing industry faced annual fluctuations in demand for furniture from new home owners. According to Burgio-Ficca, “despite some volatility, retail spending on furniture products is likely to have benefited from an overall decline in interest rates as this increased consumer discretionary spending.”
Industry profitability is expected to post varied results over the past five years. While profit margins were hindered by the softer retail economy, profitability improved in the second half of the five-year period as revenue rebounded. Furniture retailers are forecast to benefit from improved trading conditions over the next five years. IBISWorld expects demand to be driven by continued growth in disposable incomes, which will positively influence expenditure on furniture goods. However, retail spending will be affected by projected volatility in consumer sentiment, rising interest rates and continued competition from external players. An upturn in the house construction market over the first half of the five years through 2018-19 is expected to aid growth in industry revenue.
The industry is characterised by a low level of market share concentration. Barriers to entry and capital requirements for new players are low and do not hinder potential operators from entering the industry. However, the industry’s major players – Harvey Norman, Steinhoff Holdings and Super A-Mart – are large, well-known businesses that operate in a competitive environment. Furthermore, the industry’s mature life cycle stage may hinder the entry of new players. IBISWorld expects that market share concentration levels have remained static over the past five years.
Tags: Claudia Burgio-Ficca, Furniture Retailing industry in Australia, IBISWorld, Steinhoff Holdings
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