• Furniture sellers still have historically long backlogs and face tight freight markets.
  • Furniture manufacturers haven't adjusted to the e-commerce boom.
  • Winners will adjust supply chains on the fly to deliver on time and keep promises to customers. 
  • See more stories on Insider's business page.

Cathy Roberson sinks into her couch when she sits down. The coils are shot, and it's time to replace it. But these days, getting a new couch takes more than choosing a new design and pulling out a credit card. It takes serious patience. 

"Our go-to furniture store is La-Z-Boy. I grew up with La-Z-Boy. It's American-made," she told Insider. "We know there's always been a wait." But when she went to her local La-Z-Boy showroom in the Atlanta suburbs in April, she learned the wait for a new couch, usually around one month, would instead be seven months. 

Roberson is a supply chain analyst, so she knows the struggles importers are facing due to the pandemic. La-Z-Boy may make its furniture in the US, but it gets materials from overseas. Still, the seven-month wait was a shock, and enough to send her to a local Rooms to Go, where she found a Mississippi-made couch with a comparatively brief two-month wait time. 

The experience proved to Roberson that even after a year of the pandemic, with vaccines showing the way out, the furniture business is nowhere near back to normal. A series of problems virtually broke the industry's supply chain for most sellers and crushed its ability to recover. 

Supply chain disruptions — difficulty obtaining essential components from overseas, absenteeism at factories, shipping delays and more — hindered La-Z-Boy so severely that sales dropped in the last quarter of 2020, the time of year they usually ramp up. CEO Kurt Darrow said on an April earnings call, according to a Sentieo transcript, that customers were waiting an unprecedented five to nine months for their orders.

Ironically, the delivery delays pushing 2020 orders into 2021 will create a boom year for furniture sellers in terms of revenue. Restoration Hardware expects $150 million in 2020 demand to hit the books in 2021. 

But even as revenue pours in, the industry is not celebrating. On the whole, lead times — the time between a customer clicking "buy" and taking delivery — haven't improved much. 

The pressure is on to fix a broken system, pushing companies to take fresh looks at their supply chains — some for the first time in a long time. And those who can master the suddenly nasty task of delivering furniture in a timely manner stand to grab serious market share. 

An industry pressed pause — and the play button broke

While many industries hit by COVID-19 have recovered or at least improved, furniture continues to struggle. Industry experts say that decisions made out of caution a year ago are now causing delays and missed revenue. 

"This time last year, everyone was canceling their purchase orders," said Brian Bourke, chief growth officer of Seko Logistics, which works with several major furniture sellers. Overly cautious retailers didn't want to be stuck with furniture they couldn't sell. Factories shut down in a cascade across Asia where most furniture is produced. First China, then Vietnam, then India. 

Then, as people grasped the long term reality of the pandemic, demand for furniture ramped up. The aim of creating a serviceable home office soon became a general spruce up. Then the second-home purchases began.

When orders restarted, manufacturers needed time to get back into gear. Materials suppliers felt a similar pinch — a  phenomenon often referred to as the "bullwhip effect," where changes in demand close to the end consumer get more impactful as they ripple back through the supply chain. 

One example: the foam needed for so many kinds of seating is only getting more difficult to find. US foam manufacturers and those that make the chemical components, mostly located in the Southern states, experienced the same drop and resurgence in demand last year. Catching up was difficult enough before the February snow storms in the South, which led several suppliers to declare force majeure. Now, foam prices are skyrocketing due to the shortage. 

Even without weather issues, raw material shortages in the US are mirrored all over the world. And the manufacturing map for global furniture isn't diverse enough to mitigate risk.

"Everyone's using the same factories in Asia. So lead times have gotten so much longer for everyone," Bourke said. 

Manufacturers have old-school priorities

On top of the bullwhip effect holding up manufacturing and raising prices, the shift in furniture orders from stores to online made matters even worse. 

Furniture manufacturers simply haven't adjusted to the switch, according to Ori Anavim, cofounder and COO of Deliveright, a third-party logistics firm built for and dedicated to furniture e-commerce. 

"For some reason, they love brick-and-mortar before they love e-commerce," Anavim said of the major furniture manufacturers. 

Though much of the consumer demand of 2020 was funneling toward click-and-order, manufacturers still favored brick-and-mortar retailers with faster delivery times and, in many cases, lower prices, said Anavim. And so some sellers were able to restock, but many barely made a dent in their inventory deficits. By the fall of 2020, brick-and-mortar furniture sellers reopened and were flooding manufacturers with orders to refresh their dwindling stocks, too.

This experience has woken some manufacturers to the potential of e-commerce, Anavim said, but there is still a lot of work to do up and down the supply chain to bring the industry into the e-commerce age. 

Freight chokes an industry trying catch its breath

By last summer, it was clear that retailers needed to restock, but they faced another problem. Freight players across ocean, rail, and trucking had also taken bracing postures in March of 2020 as demand dropped. Railroads furloughed workers, ocean lines cancelled ships. 

When it became clear that consumers would still shop online, carriers had trouble booting up as fast as they had shut down. And demand just kept growing. Capacity across freight modes has been tightening ever since, exacerbated by the safety precautions required to work without spreading the coronavirus. Freight rates went up and some furniture sellers hesitated … again. 

Buyers weren't placing many orders between November and January, as they were waiting for high ocean freight rates to drop, Bourke said. "That hasn't happened."

The simple, stupid realities of furniture make things worse. Because the items in question are large, every container that does make it to the US placates relatively few online buyers griping about seemingly endless waits. 

And a US arrival is far from journey's end. The cadence of cancelled orders and troubled restocking is playing out across product industries and ships have flooded West Coast ports. (The recent debacle in the Suez Canal didn't help.) Cargo can take weeks longer than usual to escape port. Once out, it meets a trucking market that is historically tight. 

New thinking for an old business 

All that chaos means that even decades-old players with seasoned CEOs are rethinking fundamentals. RH (formerly Restoration Hardware) CEO Gary Friedman has been with the high-end furniture seller for about a decade, preceded by 13 years at Williams-Sonoma. He's credited with saving RH from its previously unfocused design aesthetic and precarious financial situation. 

To tackle today's challenge, Friedman brought in 10 new top supply chain executives, and raised prices. But he's also asking fundamental questions.

"Should we have furniture made in America for America? Should we have furniture made in Europe for Europe? Should we have furniture made in Asia for Asia? Is that the right model?" he asked on the company's March earnings call, teasing upcoming announcements. 

Localized production has been a common trend coming out of the pandemic. Williams-Sonoma, for one, is expanding domestic manufacturing by 20-30% and adding 2 million square feet of warehouse space in the US to keep more product on-hand. 

"This will support our elevated demand, particularly in furniture," CEO Laura Alber said on a March earnings call. The company will also embrace a marketplace model where vendors ship products themselves and Williams-Sonoma never owns the inventory. These marketplace sales were 4% of sales in 2020. Alber wants to triple that in the next five years. 

Digital-native Wayfair has traditionally used a version of the marketplace model too, but with an internal logistics network it has spent years building, to much analyst skepticism. 

Owning much of the logistics infrastructure needed to transport the goods sold through its platform gives Wayfair more control over transportation decisions and a closer link with suppliers. That, plus giving vendors data they can use to improve their businesses, has helped Wayfair win the favor of suppliers who have a lot of discretion over who gets product first.

"We've been able to show that a lot of the capabilities we built have, in fact, given us the advantage we said it would in terms of being able to keep reliability high, being able to get capacity when it's scarce, being able to bring that selection of goods to customers to bear even when there's a lot of competition for a relatively limited amount of inventory," CEO Niraj Shah said at a Canaccord event in March.

The fastest to adapt will win 

Newer players, too, are rewriting their playbooks. 

Cristian Chavez joined furniture upstart Article in 2019 as its head of supply chain, after 12 years at the world's largest Caterpillar equipment dealer. He's looking at the furniture industry with fresh eyes and sees a lot of maturing to be done. 

That starts with hiring. "Having an end-to-end supply chain executive — you wouldn't question that at Walmart or at retail. Why wouldn't you have that? But I think in some distributors in furniture, there are still different ways of looking at that and the importance of the supply chain," he said, describing the many layers Article has eliminated.

Article saw many of the same problems the larger players in the furniture space saw. The company works with manufacturers in China and Vietnam, Malaysia, Indonesia, and India — the ocean freight crunch has affected everyone. 

Freight has been the biggest challenge for the past year, Chavez said. Myriad delaying forces pushed the company's usual one to two week lead times to reach four to six. The fact that they didn't have to start counting in months, Chavez chalks up to adjusting plans in real-time. 

"We've been very creative in finding solutions, but we're not a big company like, you know, Target or Amazon," he said. Creativity in this case might mean using smaller containers, leasing entire vessels, or exporting from smaller ports. 

"One of the biggest challenges is the physical container — where is it and how to get a hold of it. So having people on the ground locally has been critical for us," Chavez said. 

The company has also diversified its ports. It shipped into Charleston for the first time last year. Chavez said many competitors have done the same, but some are still stuck in their ways. Article is now also sending goods to Jacksonville, Florida, Houston, and New Jersey.  

"You have to be creative and work on the fly, but that's kind of the way we approach things in general," Chavez said. 

There's one part of all this that has less to do with the supply chains that Chavez said Article got right: setting customer expectations. 

"The biggest conversation is when you first purchase. That's the moment of truth and honesty. Because if we promised six months there, and that's okay, then you made a commitment. If that's not okay, we give the option to just stop the purchasing experience. The critical piece is whatever you promised upfront, you deliver on it. And I think we've done a good job on that," he said. 

Who grabs market share this year may be determined by who can deliver, but the fate of furniture sellers in the future could have a lot to do with which players can keep their word so that customers don't get burned. A quick look at internet comments directed at furniture companies shows that many are failing that test.