Disrupting Buying Cycles

For the past few years, it seemed like furniture and bedding stores in this area were focused on stumbling over each other with incredible finance offers, "No payments or interest for 2 years!", then "No payments or interest for 10 years!", or "Pay nothing until you're dead, just leave us in your will!"

The problem with delayed payments, is that you are disrupting the usual buying cycle. Car dealers had this problem for a few years until the rise in fuel prices created a real demand for a different vehicle.

But when you buy a bed before you really need one and because of the incredible offer, you run the risk of selling next years customers today, and then if the economy tanks, your selling strategy is in trouble.

That's why, I believe the mattress industry is tossing and turning these days (and nights):

Mattress Manufacturers Expecting a Slow Year

The International Sleep Products Association's latest bedding forecast takes a bearish turn on business prospects this year. It calls for a 3 percent decline in unit shipments of mattresses in 2008, with a modest 1 percent gain in the dollar value of mattress shipments.

But, ISPA predicts, much stronger days lie ahead in 2009. The trade association's forecast for 2009 envisions a 4 percent gain in mattress unit shipments, with a hefty 7.5 percent increase in the dollar value of mattress shipments.

If that growth materializes next year, it will end what ISPA expects to be a three-year slide in unit shipments, finally putting the industry back into a unit growth mode.

Meanwhile, ISPA's latest look at business prospects in 2008, issued last month, is more pessimistic than Furniture/Today's consensus bedding forecast for 2008, issued last December. F/T called for a 0.6 percent decline in bedding units in 2008, with dollars increasing by 2.8 percent.

Mattress shipments slumped in December, and some leading bedding producers are predicting sales declines in the first quarter of 2008. That poor business climate has soured forecasters' views about business this year.

The wave of bad bedding news was enough to convince the ISPA Forecast Panel, composed of leading bedding producers, to sharply revise their forecasts for 2008 downward. Last October, when that panel looked at 2008 prospects, it called for 2 percent growth in mattress units for 2008, with dollar growth of 5.1 percent.

The latest ISPA forecast represents a swing of five percentage points in unit volume, and a swing of 4.1 percentage points in dollar volume, compared to ISPA's October forecast.

ISPA offered this commentary on its current mattress outlook: "Mattress shipments tumbled in December, capping off a fair-to-middling year. With the largest 12-month fall-off in recent memory, the dollar value of shipments posted barely positive growth of 1.4 percent for the year, while unit shipments declined by 2.1 percent. This weakness in December will carry forward and be compounded by the continuing housing crisis, tightening credit markets, and consumer caution, especially during the first half of the year."

ISPA's latest mattress industry forecast also addresses an issue that is being debated in the business press: Are we in a recession? ISPA's answer: "Not yet and probably not at all, based on the University of Michigan's forecast. Fourth-quarter real gross domestic product growth was 0.6 percent, small but still positive, and even though the first-quarter growth figure is expected to be negative, the economy should turn the corner this spring."

(Source: Furniture/Today, 04/04/08)

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