Retail Woes as Big Ticket Sales Plummet Amid High Interest Rates

retail woes as big ticket sales plummet amid high interest rates.jpg Business

Earnings season has brought to light a serious challenge facing retailers – consumers appear to be holding back on big-ticket purchases. Retailers have been reporting a significant shift in consumer habits, with shoppers gravitating towards services rather than products. This shift has been attributed to a combination of high interest rates, a stagnant housing market, and the growing pressure of inflation on lower-income consumers. Even the home improvement market, which has seen unprecedented demand in the last three years, is feeling the pinch, with companies like Home Depot reporting a 5.5% year-over-year decrease in big-ticket transactions.

The effects of this spending shift are being felt unevenly across the industry, with furniture and appliance manufacturers bearing the brunt. Data from the Institute for Supply Management shows manufacturing activity signaling contraction for a tenth consecutive month, with furniture, appliances, and related products among the 13 industries that saw a decline in activity. The cost structure of these industries, particularly for furniture manufacturers who often produce in the U.S. for logistical reasons, makes them more susceptible to this shift in spending. This has led to company closures and job losses, adding to the economic strain.

Consumer Spending Shift Challenges Retailers

Challenging Times for Big-Ticket Retail

The latest earnings season has revealed a significant challenge for retailers: consumers are becoming increasingly hesitant to make large purchases. This trend is impacting sectors such as home improvement, appliances, and furniture, with companies like Home Depot and Big Lots reporting softer engagement in high-ticket discretionary categories. Home Depot’s EVP of Merchandising, Billy Bastek, highlighted a 5.5% YoY decrease in big-ticket transactions over $1000 during the company’s Q2 earnings call. Inflation is identified as a key factor holding back lower-income consumers from making pricier purchases.

Impact Across Industries and Products

The reluctance to spend on larger items is not only impacting retailers but also manufacturers. Data from the Institute for Supply Management revealed a contract in manufacturing activity for the 10th consecutive month, with furniture, appliances, and related products among the industries experiencing a decline. The Bureau of Labor Statistics’ latest Consumer Price Index report further illustrated this trend, indicating a slide in the cost of furnishings and major appliances as demand decreases.

Uneven Impacts on Furniture and Appliance Makers

As consumer spending habits shift, the impacts on appliance and furniture makers are not evenly distributed. Shanton Wilcox, the US manufacturing lead at PA Consulting, explained that the costs associated with manufacturing appliances, which often occur overseas where costs are lower, allow vendors to reduce prices more easily than furniture manufacturers who typically produce domestically for logistical reasons. The furniture industry, therefore, is more exposed to these spending changes. This had led to closures of companies like Mitchell Gold + Bob Williams and Klaussner Furniture Industries.

Consumer Spending Outlook

The manufacturing sector, so far, has not seen a major impact on jobs from the slowdown in durable good demands. However, economists are monitoring the pressure on consumers as households draw on their pandemic-accumulated savings in a high-interest-rate environment. Chief Economist at The Conference Board, Dana Peterson, suggests consumers may be on the brink of anticipating a recession.


The shift in consumer spending habits towards big-ticket items presents both a challenge and an opportunity for retailers and manufacturers. Companies need to adapt their strategies to meet changing consumer preferences and behavior, whether that involves adjusting pricing, exploring new markets, or investing in innovation. Despite the current challenges, this shakeup could ultimately drive growth and transformation within the retail industry.

Crive - News that matters