Furniture: A highly regionalized market

Market: 
December 6, 2016

Faced with growing competition, the furniture industry has rebuilt itself, but remains marked by specific regional problems. While Western Europe and US manufacturers are betting on differentiation and additional services, most Eastern European and Asian players are still operating with a mass-production mindset. This is about to change. Here, we zoom into four areas of the globe where furniture manufacturers are dealing with very different situations.

Mature countries: productivity and agility

Essentially composed of medium-sized companies, the furniture industry in the US and Europe is experiencing a multi-faceted upheaval. Whether they produce for high-end brands or specialized retailers such as IKEA, manufacturers are looking for new business models. They are required to combine competitiveness, corporate identity and attractiveness. Agility, creativity and flexibility are also mandatory to be able to respond to higher customer expectations: shorter series, personalization, original styles and a choice of materials.

US: modernization and creativity needed

The US furniture market is recovering but the economic environment remains uncertain and manufacturers face competition from China – the source of 71% of US furniture imports. Manufacturers are thinking about ways to sustain their growth through investments, while maintaining the process improvements they launched during the crisis. The US industrial base was automated early, but is now aging and requires modernizing to preserve margins without compromising on quality, and to be able to alternate between mass production, small orders and made-to-measure. Creativity and flexibility, which have become prevalent in Europe, are gaining ground in the US, where the furniture offer is just beginning to move towards differentiation with distinctive, individual designs.

Western Europe: transform or perish

With raw material costs and wages rising, mass production has been transferred from Western Europe to lower-cost countries. Domestic production capacities have had to radically improve productivity simply to survive. Today, a recovering market requires that manufacturers – many of whom are operating with excess capacity – transform in order to remain viable and maintain their market share.

Eastern and Central Europe: fierce competition

In Europe, the bulk of production has moved from the West to the East, where wages are cheaper. Today however, new market conditions compel manufacturers to review how they operate, owing to rising raw material prices, increasing labor costs, a shortage of skilled labor and higher customer expectations. Competition is fierce among the biggest furniture manufacturers in the region, including customers such as IMS Sofa, Polipol, Fomaris and Eurolines. Companies contending to supply IKEA and other brands must be highly competitive and offer the lowest prices. In the case of Polipol, remaining competitive involves being able to deliver different model variations within a very short time.

China: from mass production to mass consumption

A tidal business transformation is underway in China. The country accounts for 40% of global upholstered furniture production. Historically export-oriented, Chinese manufacturers now also cater to the newly consumer-driven domestic market. Their key challenge is how to manage their current double-digit growth and make it sustainable. Although automation is arguably the only way to take advantage of market growth, modernizing industrial processes has hardly begun. In spite of the current trend toward smaller orders, most manufacturers still focus on producing higher volumes. They will need to learn how to handle increasing diversity alongside their legacy mass-production model. Another challenge is managing the shift from producing for export to serving the local market. This means that manufacturers will have to acquire abilities in product development and creative know-how.

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