There are currently over 15,000 home furnishings manufacturers and over 67,000 home furnishings retailers in the US alone. Consolidation and distribution changes are two widespread trends that are shaping the current nature of the home furnishings industry (S&P, 1999). This results in increasing competition and price sensitivity at both the manufacturing and retail level. Consolidation and competition have served to erode profitability for the companies that do not differentiate on price or product by selling in the high or low end. Access to distribution channels has become a competitive advantage for manufacturers as retailers consolidate. Some major companies are vertically integrating so that they are retailing both through company owned stores and through partnerships with independently owned dealers and chains (US Industry & Trade Outlook, 1999). Ethan Allen is one such example; it is a manufacturer and a retailer who sells it's wares in free-standing stores, 20% of which are company owned and the remainder are franchised. 80% of a manufacturers sales volume is through approximately 10 retailers.

Current home furnishings buying and selling structure:
 

Consolidation has boosted the market share of the top 25 manufacturers; these 25 accounted for 46% of total industry shipments in 1998 compared to 40% in 1990 (S&P, 1999). In order for manufacturers to serve the diverse distributions channels that include furniture centers, independent dealers, national and local chain stores, department stores, specialty stores, and decorator showrooms, companies need to have a robust product line that can meet the needs of all of these segments (US Industry & Trade Outlook, 1999). Manufacturers achieve economies of scale by marketing to the trade via one corporate brand and marketing to the consumer by meeting the needs of many segments (US Industry & Trade Outlook, 1999). Another trend in the industry is partnerships. An example of this is the 1998 partnership announcement between the #1 manufacturer, Furniture Brands Int'l, and Haverty's, a major retailer. Over half of Haverty's floor space will be dedicated to the 3 Furniture Brands Int'l brands.

Retailing is much more fragmented than manufacturing but has also been undergoing consolidation. Just 15 years ago the retailing side of the industry was dominated by small retailers and price was less of an issue with both buyer and seller enjoying acceptable margins (S&P, 1999). In order to capture market share, however, retailers have recently been gouging price points and this has undercut already weakening profit margins. As retailers consolidate they require increasing levels of service from manufacturers; since small manufacturers are unable to keep up with large retailer's needs, they are associating with much larger manufacturers that have the logistics and distribution support needed. This trend has served to push the smaller buyers and sellers out of the market. The top 10 retailers in 1998 accounted for 21% of total sales (S&P, 1999).

Manufacturers are geographically concentrated in High Point, North Carolina, where over 60% of all yearly transactions occur. Currently the industry relies on home furnishings markets to conduct trade; these are the equivalent of an industry trade show. The most popular market is the High Point Market in High Point, North Carolina. Over 70,000 industry players from 106 countries converge in over 50 buildings, 8 million square feet of showroom space, that contain manufacturers showrooms. Many manufacturers rent space year round at the HP Marketplace where they have a fully decorated showroom replete with the lastest styles in home furnishings. The cost per show for a manufacturer is $80,000 and for a retailer $3,000 and most attend between 4 and 10 shows per year. Due to the severe fragmentation in the industry, the market serves as the traditional intermediary in that it is the only way to reveal the vast number of firms and products in the industry.

Most major home furnishings manufacturers and retailers have regional distribution facilities strategically located near a cluster of stores. This allows the manufacturer the following benefits:

• Prompt delivery of in-stock items
• Reduced inventory requirements
• More efficient production runs
• Broader array of products

Manufacturers and retailers receive their information about the industry from the main trade publication, Furniture Today, and from a variety of Industry associations such as the American Furniture Manufacturers Association, California Furniture Manufacturers Association, and the National Home Furnishings Association. The industry suffers from a lack of statistics and data and competitive business intelligence on consumer buying habits due to the paper based systems of purchasing and ordering. The industry has primarily relied on word of mouth and estimated demand forecasts.

The threat of disintermediation looms large in retailers minds. Manufacturers have ceded to retailers threats to pull lines if the manufacturer bypasses the retailer to sell online or directly to consumer. Many consumer focused e-tailers such as Furniture.com are stymied because manufacturers of the most popular brands have adopted policies banning or restricting sales over the Internet. These producers say they need to follow this practice to protect their brick and mortar retail accounts from what they see as unfair competition (Howard, 2000). The home furnishings largest manufacturer, Furniture Brands International, has made it clear that it will not move it's products online but may change it's policy should industry conditions warrant it.  Furniture Brands International has over 10% market share. Andrew Brooks, CEO of consumer site Furniture.com, argues that offline furniture stores are too distracted by showroom operations issues to succeed online, and analyst Bellomy notes that furniture retailing is as fragmented as manufacturing. Most furniture chains are regional, not national. Chains like Sears are exiting the furniture business,  so they're not online competitors (Clark, 1999). Ethan Allen, as a vertically integrated firm, is in a unique position to benefit from e-commerce and was the first manufacturer to announce online operations. The company will assuage dealers concerns about canibalization of offline stores by sharing a % of Internet sales proceeds with the local store owners (S&P, 1999).