The financial market crisis has exerted a major impact on the home furnishings market, which declined by 5% on average in the last two years. Consequently, its value stood at PLN 12.6bn as at the end of 2011. The market saw an upturn in the first six months of 2012, though the economic slump of the year’s second half will have an adverse effect on the sector. According to projections presented in PMR’s latest report “Home furnishings, equipment and DIY retail in Poland 2012. Market analysis and development forecasts for 2012-2014”, the value of the market is poised to shrink by approx. 1%. As the correction is to continue throughout the next year, the sector will revert to positive growth in 2014.
In 2009, the furnishings market still did not feel much of the impact of the financial crisis, primarily driven by sustained levels of buoyant consumer confidence and, above all, an increased number of renovation projects and activities involving the finishing of homes purchased before the outbreak of the crisis. However, the sector saw declines in the subsequent two years.
The downturn in consumer sentiment, which partly stems from vague signs of improvement in the global economic situation, results in buyers making efforts to keep spending low. In addition, the trend is aggravated by significantly more stringent lending policies adopted by banks, increased unemployment rate, companies largely slowing growth and focusing on cost-cutting measures and a fall in real incomes of households.
Buyers carefully plan out their purchasing decisions, review what stores have on offer and, consequently, they postpone transactions. Impulse buys are less and less common, while the average number of transactions falls as buyers look for less costly options. Although last year selected segments reported increased sales in quantitative terms, the increases were not followed by a higher value of sales. Combined, these factors drove down the market value to PLN 12.6bn as at the end of 2011, by more than 10% compared to the level of 2009.
Although the home furnishings industry made a good start to 2012, the second half of the year will see a slowdown of economic activity related to the weakening economic growth. In a way, the market can be said to be levelling off, which means that the situation will remain constant at the level recorded last year.
Lack of major increases will be conditional on various factors, with prices being the key determinant for retail activity. On the one hand, stores go out of their way to attract customers with low prices, on the other, buyers, accustomed to this form of marketing, expect more bang for the buck.
Retail on the Polish furniture market is doing much worse than wholesale of products intended for exports. Chains of stores offering home furnishings currently review their establishments and, therefore, nearly 130 outlets of specialist chains operating on the home furnishings market which are covered by PMR disappeared from the market, despite new openings initiated by numerous chains.
Developments on the housing market, which has not picked up since the onset of the crisis, have a direct bearing on the home furnishings segment.
Economic forecasts show that 2013 will see a slowdown of the economic growth, with occasional bouts of recession. The underlying cause of why the outlook is so grim is the worsening situation on the European markets. The economic slowdown projected for 2013 will undermine the outlook for private consumption, including the market of home furnishings. However, improvement will come in 2014 when the sector is expected to record an upturn for the first time in four years.
This press release is based on information contained in the latest PMR report entitled ”Home furnishings, equipment and DIY retail in Poland 2012. Market analysis and development forecasts for 2012-2014”.
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Jarosław Frontczak, Retail Analyst
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equipment retail, exports, financial market crisis, home furnishings market, housing market, unemployment rate