Everyone in the home market knew this day was coming. After furniture and home furnishings retailers enjoyed a nearly 20% two-year growth spurt from $120.3 billion in 2019 to $140.6 billion in 2021, things were destined to change. Retailers held onto their gains in 2022, even boosted them to $141.3 billion, but now the tide is turning.
Overall, home furnishings retail has only retreated about 3% through May, but the year-over-year decline quickened as the months passed. Retail sales dropped 12% in April and May was off 5% year-over-year. Given that June and July are typically weak months for home purchases as people take to the road, the low single-digit drop so far this year will surely widen as the third and fourth quarters roll around.
Home retailers must adapt to the change, and the direction Crate & Barrel is taking provides a valuable case study on how to manage the shift.
Its strategy is to fill in the gaps after the big purchases have been made with multifunction, practical and flexible home items that serve a utilitarian need, like cookware and other kitchen tools, area rugs, outdoor kitchens and storage solutions.
Services are getting special emphasis too. Through expanded complimentary design services, its clients can ensure their existing and new furnishings play well together.
And to engage early with young couples as they begin furnishing their first home – and hopefully to extend the relationship at each subsequent stage of their life together – the company is leaning into bridal registry services with special in-store events to personalize their bridal registry experience.
Common Challenges
Crate & Barrel, owned by the German conglomerate Otto Group, enjoyed a post-pandemic boom. Year-over-year revenues rose 29% in the 2021/2022 financial year to $2.5 billion, including the flagship brand, CB2, Crate & Kids and Hudson Grace brands.
Financial 2022/2023 was another banner year with revenues advancing 28% or 15% when adjusted for exchange rates; this while the Otto Group’s overall business flatlined at about $18 billion, but declined 2% on an adjusted currency basis.
Looking ahead, the Otto Group projects a “drop in revenue” for Crate & Barrel with much riding on the North American market, where it operates 70 of its over 100 stores and which accounts for the lion’s share of the brand’s sales. And with its share of e-commerce revenue slipping in the most recent year, dropping from 63% share in 2021/2022 to 60%, its stores will have to do more to cushion the potential revenue blow.
Stores To The Forefront
While Crate & Barrel president Alicia Waters describes the company as a digital-first brand, its stores are “designed with purpose” to meet the customers anywhere along their shopping journey.
“Stores have played and continue to play a critical role in providing that face-to-face, human touch service,” she said, adding, “Services is how you win in today’s world.”
Its complimentary home design service puts the customer service side of design ahead of sales, as other home retailers might. It offers design services through scheduled in-home, in-store and virtual engagements.
Waters shared that the company is seeing “huge growth” in its design services with its mindful approach to design, which she described as a “less is more” philosophy that puts quality before quantity.
“We care a lot about design services, and it’s an area of focus and investment for us because each person’s view of purpose is individual. So design is about understanding what authentically resonates with the client, where they spend their time and how to build their home out with high-quality materials to serve people and the planet in a thoughtful, mindful way,” she continued.
In-store events are also filling the store, since everyone wants somewhere to go and things to do post-pandemic. In particular, it’s found traction offering scheduled private registry events, where bridal couples are guided throughout the store after-hours to register gift selections while enjoying light refreshments.
Private registry attendance has been up over 50% between October and January this year. It’s an investment with a long tail for the brand, establishing a trusted relationship with a couple just starting out that hopefully continues to pay off throughout their life journey together.
And as for all retailers, new merchandise gives customers another reason to come into the store or visit the website.
Filling In The Gaps
Just like the pandemic placed new demands on the home, this post-pandemic period is seeing some trends continue to pick up steam and new ones emerge.
“The home has to do more,” Waters maintained. “A lot of it is around multifunction and versatility because many people are still working from home. And kids spaces must be multifunction too serving as bedroom and study space. We are still seeing growth in these areas.”
The kitchen gained new prominence during the pandemic that continues today. While Crate & Barrel has always been strong in kitchen and dining, it introduced its first private label cookware collection last year, promising higher performance stovetop cooking and oven baking. It rounded out the extensive 200-piece collection with houseware utensils and cutting boards. This collection and its other kitchen offerings, including small electric appliances, continue to show strong growth.
And since cooking is no longer limited to the kitchen, Crate & Barrel is leaning into outdoor kitchens with a new collection of outdoor kitchen cabinets and carts to add to the investment people may have already made in outdoor furniture.
It’s also expanded its outdoor range in tabletop pizza oven, barbecue grills and smokers, plus an outdoor refrigerator and beer keg cooler. And to enhance outdoor entertaining, a collection of melamine dishes that mimic the look of porcelain and shatter-proof acrylic wine glasses with a fine crystal look are on offer.
Another gap filler is a new collection of area rugs. These provide its designers a wider assortment to ground their room designs. And since many homeowners upgraded flooring over the last two years, area rugs are the perfect gap-filling necessity.
And it’s added a range of new home organization products by the NEAT Method to help homeowners make better use of their multi-function spaces and store their accumulated stuff. The NEAT Method is in keeping with Crate & Barrel’s refined, modern aesthetic.
Purposeful, Whole Home Approach
Just as the company’s mission is to help people design a home with purpose, it is taking the same purposeful approach to designing its retail fleet. Last year it repurposed its Tysons Corner outlet store to a multi-brand Crate & Barrel and CB2 store and moved it across the way to the Tysons Galleria. It also plans to relocate its NYC Soho store to a location in Flatiron in time for the holidays.
“We are one of the few retailers in the industry that actually serves the whole home,” Waters shared. “We serve outdoor spaces, the living room, the bedroom, kitchen and dining room, kids rooms. That’s our competitive advantage.
“We can make the whole house feel cohesive to bring people peace and tranquility. It’s through mindfulness and thoughtful, intentional purchasing. We don’t target a customer demographic. We serve all demographics. What unites them is a purposeful mindset,” she concluded.
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