Imports and Exports— Coming or Going?

October 31, 2007  by in UnCategorized   

By Home Furnishings Business in on November 2007 Three decades ago, people in the United States were just coming to grips with off-shore production of low-cost, high-quality automobiles that were rapidly becoming a force in the marketplace. Probably very few took that lesson to heart and realized that American-made furniture could become an endangered species by the dawn of the 21st century.

While American furniture is far from down for the count, more and more furniture production and jobs have been outsourced in the ensuing years. And that paralleled—or even caused—consumer interest in furniture prices. It’s hardly a secret that American consumers have been wooed and won by falling furniture prices.

The advent of “no, no, no” sales banished, probably for all time, the notion that furniture wasn’t a commodity. The idea of “no deposit, no interest and no payments” for a specified period of time, sometimes for years, was easy to believe and more than easy to get customers to sign on the dotted line.

Customers were seduced by the belief that you could buy furniture at low prices. They assumed, rightly or wrongly, that the furniture they purchased would last as long as that of their grandparents. It didn’t bother them (if they even knew) that the furniture they were bringing into their homes came from a different continent, with profits going to a foreign vendor.

American vendors came on board. Many of them, determined to even the playing field, opened their own off-shore production facilities or established partnerships with existing manufacturers. Off-shore producers, often with the help of their governments, built new, state-of-the-art manufacturing plants that used low-cost labor, presenting a tough competitive challenge.

The result, as expected, gave both retailers and vendors the opportunity—and problem—of developing new ways to provide consumers with low-priced, high quality furniture. Import and export strategies changed and evolved to meet a new global marketplace.



Upholstery—The Next Battlefield?

Due to the challenges of custom production, upholstery can present quite a challenge for off-shore furniture producers. But that American advantage can be successfully erased by limiting the number of SKUs retailers purchase. By displaying artistic room groups using carefully chosen coordinates, domestic retailers can reduce the number of choices consumers can make and still offer attractive furniture at very attractive prices.

In 2000, the number one furniture import source country was the People’s Republic of China. Five years earlier, Canada was the U.S.’s chief import partner. Chinese upholstery imports exceeded $2 billion in 2006, nearly five times its 2002 upholstery imports. For the first six months of 2007, Chinese upholstery imports exceeded $1.06 billion, a 10 percent increase over the same period in 2006.

The next four import source countries, in order, were Mexico, Italy, Canada and Brazil. Mexican imports represented just under one-sixth of China’s upholstery imports in 2006, despite substantial growth in the five years between 2002 and 2006.

Total upholstery imports in 2006 were just under $3.2 billion, about double 2002’s $1.6 billion. Overall exports of American upholstered furniture were off 2.8 percent, but are showing a slight improvement for the first half of 2007, up 10.1 percent over the same period in 2006.

The No. 1 destination country for U.S. upholstery exports is Canada, which received $309.6 million in 2006, up more than 130 percent from 2002. For the first six months of 2007, American exports to Canada are up 10.6 percent over comparable 2006 results.



Case Goods Imports Still Strong

In the five years from 2002 to 2006, case goods imports reached $10.9 billion, up 43 percent from $7.6 billion. Once again, China was at the top of the leader board, with imports from that Asian supplier topping $5 billion in 2006, up 78.2 percent.

However, for the first six months of 2006, Chinese case goods imports have slipped 6.7 percent from their comparable 2007 number, dipping to $2.3 billion from $2.5 billion. The number three import source country, Vietnam, has gained a lot of ground, up more than 1,000 percent from 2002 to 2006 to finish at $779.4 billion, with 2007 six-month imports up 36.7 percent.

Taking second place honors was Canada, which finished the five-year period with imports of $1.3 billion, up 1.5 percent. For the first half of 2007, Canadian imports fell to $557.8 million, off 11.1 percent from the same period in 2006.

On the export side of the equation, shipments to Canada exceeded $460 million in 2006, up 49.5 percent over 2002 figures. Mexico was in second place, with 2006 shipments of $92.6 million. Total exports in the five years since 2002 were up 33.4 percent to $908.8 million.



Metal and Other Furniture
Showing Solid Growth

The number one import source country for both metal furniture and other furniture (as classified by the U.S. Department of Commerce) is, as expected, China. Chinese imports of metal furniture doubled from 2002 to 2006, reaching $2.7 billion. Metal furniture imports for this leading Asian country grew to $1.7 billion for the first half of 2007, up 10.3 percent from $1.6 billion for the comparable 2006 period.

Chinese imports of other furniture grew to $563.6 million in 2006, up more than 54 percent in five years, and gained 10.8 percent for the first semester of 2007, reaching $337.8 million, up from $305 million for the same period in 2006.

Canada is the second-place source country for both metal and other furniture. For the five-year period ended 2006, Canadian imports stood at $285 million, up 31.2 percent over 2002 results. For the first six months of 2007, metal furniture from Canada increased to $142.3 million, up 4.7 percent over 2006 results of $135.9 million.

Total imports of metal furniture were $3.9 billion in 2006, up 74.9 percent over 2002, while imports of other furniture increased 50 percent to finish at $1.1 billion. Six-month increases, 2007 measured against 2006, were 8 percent and 7.2 percent for metal and other furniture, respectively.

Total metal furniture exports for 2006 were $422.5 million, up 42.3 percent over 2002 results, as exports of other furniture climbed 37.2 percent to $230.7 million.



Bedding—the New Opportunity?

Total bedding imports more than quadrupled from 2002 to 2006, reaching $243.3 million. Measured against the first six months of 2006, 2007 first-half bedding imports slipped 10.7 percent to $107.5 million.

Once again, the leading source country was China, which posted bedding imports of $106.6 million in 2006, up from $7.8 million in 2002. For the first half of 2007, Chinese bedding imports were $51.6 million, up 3.7 percent from comparable 2006 results.

For the five years ended in 2006, Mexico also saw U.S. bedding imports jump, from $2.7 million in 2002 to 2006’s $50.7 million. Comparable first semester numbers for 2007 and 2006 were flat at $22.7 million.

Total bedding exports grew nearly 75 percent from 2002 to 2006, reaching $105.7 million in 2006, with Canada once again the number one export source country. Exports to Canada were more than $49 million in 2006, nearly four times the 2002 level. Canadian exports increased 2.1 percent for the first half of 2007, as total bedding exports were off 6.2 percent for the same period.



Is the Competition Over?

Despite the rapid influx of furniture imports into the U.S. over the past few years, American vendors are fighting hard to retain ownership of the market. Through creative partnerships with overseas producers, American companies have evolved into aggressive marketers with multi-channel sourcing strategies.

In 2006, imports to the U.S. market of upholstery, case goods, metal, other furniture and bedding exceeded $19 billion, excluding the sizable market for furniture parts. Estimates for 2007 already indicate that imports of these categories will exceed $20 billion and possibly reach $21 billion.

More and more retailers are moving to importing directly themselves, in an attempt to keep prices as low as possible. However, this adds other costs to the bottom line as retailers and others have to develop a series of checks and balances guaranteeing the furniture ordered arrives in the expected condition on time.

Offsetting the import trend is the fact that not all of the furniture that has reached American shores has been of high quality. This, in turn, has prompted increased interest by consumers in where their prospective furniture was made and how it got to this country.

Yet another factor to be considered is the time it takes for furniture produced off-shore to reach the U.S. American consumers are increasingly demanding that their furniture arrive at their home within a minimal amount of time, not the six to eight weeks that has been customary in the industry.

No-delay delivery also can be costly, as retailers must have immediate access to the product they’re selling. The question then becomes who warehouses the furniture that has been imported, perhaps weeks or months before the customer purchase?

What’s a retailer to do? First of all, establish long-term relationships with vendors. Know who you’re dealing with and what you can expect from them. Know who is responsible for damaged product and the cost of warehousing.

In other words, expect from your vendors what your customers expect from you. If you cannot get the furniture you order within your specified time, don’t advertise quick deliveries to your customers. Inspect the furniture before it’s delivered to your customers so there’s no surprises that will come back to haunt you and your customers.

In this new global reality, American consumers are far less likely to be loyal to one store or furniture manufacturer if they can find—or think they can find—a better deal somewhere else. They want their furniture well-made, stylish and readily available. Savvy retailers understand this and demand only the best from their vendors. Make sure you’re one of those retailers and you’ll have all the repeat business you can handle.HFB