The Import Caravan

October 31, 2008  by in UnCategorized   

By Home Furnishings Business in on November 2008 We’ve all heard it over and over. Whether it revolved around applying to colleges, job interviews or overall business strategy, sage advice came down to the age-old saying—don’t put all of your eggs in one basket.

The dour economic news and the dramatic swings on Wall Street have made the simple words ever so sound and wise. Surely no one who has watched the value of his or her 401K drop by a drastic 35 percent or more in the last couple of months—despite the wisest of diversification strategies—would argue with spreading investments across different instruments. It just makes good sense.

When you look at the furniture industry and its dependence on China for imported case goods and upholstery, the pendulum definitely swings in China’s favor. But changes are on the horizon.

As in most sound investment strategies, retailers and marketers of furniture are looking beyond the mainland of China for cost-effective goods and looking to diversify the supply chain with product from other locales. Sharing the wealth, so to speak, or spreading the eggs to several

different baskets.

Playing in a global economy is never easy. Factor in the changes the global economy is currently undergoing, and it gets more complicated. While currency fluctuations aren’t the only concern regarding whether to import from a particular country, they do play a role.

The strength—or lack thereof—of the U.S. dollar is down significantly against most foreign currencies, meaning it buys less of what you need. When compared with the Chinese yuan, the value of a

dollar dropped 9.9 percent from June 2007 to June 2008. In Taiwan, the same comparison shows a 7.5 percent decline against the Taiwan dollar. In Brazil, the dollar’s value against the real has dropped 17.4 percent; against the euro, we’ve seen exchange rates drop 14.1 percent.

Retailers and suppliers who shared their experiences with us in this issue are looking at other source countries for products. Many have already shifted some buying

to Indonesia, Malaysia and Vietnam.

Other worries:

• Customers looking beyond China are concerned that factories are looking to be more efficient in a down economy and what was once known as quicker service has slowed with adjusted production schedules. Getting that container of bedroom groups may take longer than you’re typically used to, and sometimes a warehousing program just won’t cut it.

• New regulations are coming down the pipeline in January that will impact the levels of formaldehyde in furniture. Those regulations, which require testing in off-shore factories, will also dictate documentation of custody chains for furniture.

• And, factor in the skyrocketing costs of travel today when considering a trip to the Far East in search of new vendors. Air travel alone can exceed $5,000 for a business-class fare.

The import road remains bumpy for the industry and will for years to come. Just when we think we’ve figured out the best way to balance importing for a sound business strategy, macroeconomics, cultural and social issues will continue to throw up roadblocks.

The key is to be prepared for the changes that lie ahead with solutions that work. Read on for some insight into what the industry faces in the next year concerning imported goods.