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Bedding retail bounces back

 

bedAfter a long period of declining revenue, the mattress and bedroom furniture retailing industry in Australia is finally returning to growth.

The mattress and bedroom furniture retailing industry in Australia has sagged under unfavourable market conditions over the past five years. Revenue slumped over 2008-09 during the worst of the global financial crisis. The resulting declines in consumer sentiment and discretionary spending translated to unfavourable sales for industry operators.

According to IbisWorld industry analyst, Kosta Lev, “post-crisis blues kept the retail market subdued in the years following the crisis, with industry revenue continuing to decline every year up to and including 2011-12”.

The industry made a slight comeback in 2012-13, posting a return to growth. In 2013-14, the industry is expected to start picking up momentum with a revenue gain of 0.8 per cent. Overall, these figures are expected to translate to an annualised revenue decline of 1.2 per cent for the industry over the five years through 2013-14, to reach $2.4 billion.

Negative conditions from the housing construction sector caused by unfavourable housing affordability and high household debt levels led to reduced demand for new bedroom furniture from new home owners. Housing construction picked up again from 2012-13 and increased demand for industry products.

On the whole, demand for industry products has remained weak over the past five years, despite growth in disposable income levels. Consumers remained unsure of their ability to repay debts given the uncertain economic climate.

“Disposable incomes were artificially heightened by the reductions in interest rates over the period, as the government attempted to boost retail spending,” says Lev.

As economic conditions stabilised later in the period and sentiment began improving, the low interest rates and higher incomes began translating into positive demand for industry goods. Weak consumer demand and strong competition has led to a reduction in industry profitability over the five years through 2013-14. The industry has a low level of market concentration, with Forty Winks and Steinhoff Asia Pacific the only major players.

Over the next five years, positive economic conditions are expected to result in a relatively prosperous period for operators in the mattress and bedroom furniture retailing industry. The positive results will be on the back of continuing growth in incomes and better results from housing construction compared with the previous period.

Fluctuations in consumer sentiment will also affect demand for industry products over the next five years, while the projected increases in interest rates could threaten further growth over the period.

For more information, visit IbisWorld’s Mattress and Bedroom Furniture Retailing in Australia report.

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