The Mystery of Escalating Furniture Prices: An Insight into the $399 Sofas and Trade Duties
The cost of living has been a hot topic recently, with a focus on the escalating prices of common household items. One item that has seen a significant price surge is furniture. How have these price hikes affected your everyday life? Let's delve into the matter.
Furniture: A Victim of Price Inflation
Since the start of the pandemic, the cost of furniture has been on an upward trajectory. Bedroom furniture has experienced an 11% price hike, whereas the cost of living room, kitchen, and dining room furniture has surged by a staggering 25%.
The Reasons Behind the Rising Furniture Costs
Furniture manufacturers and sellers, like all other businesses, are grappling with inflated expenses such as utilities, insurance, and wages. The pandemic brought along a sudden spike in demand for certain furniture items like home-office desks and patio sets, causing shipping costs to skyrocket.
However, insiders from the furniture industry would argue that the rise in furniture prices has been slower than the overall inflation, which has surged by nearly 26% since the early days of the pandemic. They also claim that prices have dropped from their peak in 2022. As a popular adage in the industry goes, "You could buy a $399 sofa in 1984, and you could still buy a $399 sofa today". This shows that while some furniture items have seen a price rise, others have remained relatively stable.
International Competition: A Factor in Keeping Prices Low
Excluding high-end craftsmanship and heirloom woodwork, mass-market furniture sellers are under intense pressure to keep prices low. The furniture business is fragmented and the barriers to entry are quite low. Sellers not only compete with second-hand goods but also with high-cost plans such as trips and home repairs.
This drive to keep prices low has led to a significant portion of the furniture industry moving overseas. "Manufacturing follows low-cost labor. That has been true for 60 years," says an industry insider. Labor forms a large component of the cost of a product, hence American wages are typically higher than those overseas, on top of the larger costs of U.S. environmental standards. Consequently, many components of furniture — fabrics, handles, and electronics — are shipped from abroad, predominantly from China.
The Role of Tariffs
In his first term, the President implemented tariffs that increased the cost to ship furniture from China, prompting a shift in manufacturing, not to America, but to Vietnam. This year, he escalated tariffs on imports from almost all countries, introducing new double-digit tariffs specifically for kitchen cabinets, vanities, and upholstered furniture. Consequently, major furniture companies increased the prices of most of their products due to tariffs. Industry trade groups have warned of cumulative cost increases for both retailers and customers.
Consumer Response to Rising Furniture Prices
As imported furniture becomes more expensive, American-made furniture may start looking more attractive in comparison. However, sellers worry about consumer reactions. Despite expressing a preference for American-made goods, consumers often choose less expensive imported items due to significant price differences.
Many customers, like Erin Cummins in Connecticut, find themselves dealing with increased spending on other essential costs like health insurance, car insurance, or groceries. "Every time we're having company over, I look at that furniture and I'm going, 'I really need to replace that,'" says Erin, whose well-loved couches have been worn down by three dogs and three children. "I have priced it out a bit, but every time I do, I get sticker shock and walk away."