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Furniture Stores - Are They Always Going Out of Business?
by Nick Beleiciks
Published Jan-15-2013

 
A classic furniture store marketing approach is to hold "going out of business" sales to attract furniture shoppers hoping to find bargains amidst the ruin of a failing business. More than one observant shopper has noticed perpetual going out of business sales at certain locations, leading them to wonder if the owners of the store ever intended to close their doors for good. But is the "always going out of business" cliché true?

The cliché is certainly no longer true in Oregon. Since 2008, it has been illegal to conduct an endless going out of business sale in Oregon. In what seems like ironic timing, a lot of furniture stores actually did go out of business soon after that law took effect. That's not because of the law, but because of the sharp downturn in the housing market.

Furniture Leader of the West
 
Oregon, relative to the size of its economy, is the leader in dedicated furniture stores employment in the west. Oregon's concentration of employment at furniture stores is 9 percent above the national average. Washington and California, despite employing more people in their larger furniture stores industries, have concentrations 18 percent and 8 percent below the national average. Idaho's employment concentration is slightly below the national average, while Nevada's concentration is equal to the national average.

Relative employment concentration in a certain industry, measured using location quotients, are often used to indicate industries that are exporting from the region. An industry with a higher than average concentration of employment relative to the nation is thought to have more workers than needed to serve the population of the state, and is therefore likely providing goods and services to people outside the state. In that sense, Oregon can be thought of as an "exporter" of retail furniture sales.

After Huge Losses, Furniture Stores Stabilizing
 
Furniture stores, like any industry related to the housing market, were hit especially hard by the recession. The number of furniture stores in Oregon peaked at 435 in early 2008. Two years later there were 365 furniture stores left and the number of stores remained close to that level through 2011, before dropping another dozen stores in early 2012. By the spring of 2012, there were 349 furniture stores left in Oregon, 86 fewer than there were at the beginning of the recession.

The number of people working in Oregon's furniture stores reached a high of 4,353 in December 2007 before store closures and cutbacks whittled the number down to just 2,802 in early 2012 (Graph 1). By the first half of 2012 furniture stores employed the fewest number of workers since 2001 (the earliest year for comparable records).

Furniture stores are now less busy or managing to get by with fewer workers. The average number of employees per store fell from 10 in 2007 to eight in 2011.

The average furniture store worker earns slightly more than the average retail worker. The average pay at furniture stores was $29,123 in 2011, compared with $26,296 for all retail workers - although the averages do not account for differences in the number of hours worked. Payroll at Oregon's furniture stores totaled $84.2 million in 2011.

Graph 1
Employment in furniture stores stablizing
Faster Employee Turnover
 
Not surprising given the recent job losses in the industry, employee turnover (both voluntary and forced) at furniture stores has historically been a little more tumultuous than the retail sector as a whole. Quarterly turnover rates at Oregon furniture stores averaged 9.8 percent in 2011, compared with 8.6 percent for the entire retail sector. Turnover rates average 9.2 percent across Oregon's private sector.

Not "Going Out Of Business" Since 2008
 
Just how prevalent perpetual going out of businesses sales were at Oregon's furniture stores is unknown, but the marketing tactic is now history. Since 2008, it has been illegal to conduct an endless going out of business sale, also known as a "sham sale" in Oregon. That includes any sale description suggesting price reduction due to the imminent closure of the business. Any business that holds or advertises a going out of business sale must file a notice of the sale with the Secretary of State, unless the sale is conducted as part of a court-ordered bankruptcy or receivership.

The rule applies to all businesses. Since it took effect, 35 furniture stores have filed notices of intent to conduct going out of business sales in Oregon (Graph 2).

Graph 2
Going out of business sales
Furniture Stores Sales Improving
 
Retail sales at furniture stores have improved nationally in 2012. Cumulative sales through September were up 7.8 percent compared with 2011. That is well above the 3.3 percent sales increase among the broader group of general merchandise, apparel and accessories, furniture, and other retail sales group.

Similar sales data are not available for Oregon, but sales are likely to increase as the housing market recovers because people are going to need furniture to fill their new homes. Hopefully this means fewer going out of business sales in the future.