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Brought to you by Home Furnishings Business
October 31,
2007 by in UnCategorized 
By Home Furnishings Business in Case Goods on November 2007
For nearly a decade, the dependable answer for most questions that furniture retailers have faced has been China.
Where do I find the best case goods values? China. How can I offer $299 sofas? China. Who has the best deal on mattresses? China.
Suddenly, with China facing higher labor costs and rising prices for raw materials, many retailers now say that the world’s largest furniture producer is still the most obvious answer for many furniture products, but it’s no longer the sole answer. Retailers who operate dozens of stores—as well as those who just have one—say answers are increasingly coming from countries like Vietnam, and, at the same time, upholstery and case goods from U.S. factories are also answering more of their needs.
“There’s no doubt that domestic product becomes more attractive as import product costs rise, and domestic upholstery is a good example,” said Keith Koenig, president of City Furniture, Tamarac, Fla., which operates its own Kevin Charles Fine Upholstery factory in Mississippi. “We want to buy in the U.S. what makes sense to make here cost-effectively, and, believe it or not, those are the more generic, broad-appeal styles,” he said. “What China can do (more effectively) is higher-end, traditional frames with wood-carving details.”
A ‘Better Breeze’ Helping Domestic Factories
Koenig, who operates 15 City Furniture stores and seven Ashley HomeStores, said he’s added more case goods from American factories, but said most shoppers seem to continue to prefer the styles and values in imported products. “There’s no doubt that there will be a better breeze at the back of the domestic producers as costs rise globally and as the U.S. economy and production costs stay competitive,” he said. “I’ve always said almost all retailers would prefer to buy from U.S. suppliers just because they can get it quicker.”
That “better breeze” for domestic factories takes on the form of a decline of the U.S. dollar (which has less purchasing power in Asia) and what manufacturers in China see as a shift in policies that are increasing production costs at the same time gasoline and raw materials costs are rising worldwide.
According to the International Trade Administration, imports of wood furniture—from all countries—declined 7.2 percent in the second quarter and upholstery imports declined 1.4 percent. China saw its wood imports into the U.S. decrease 11.6 percent in the second quarter, and upholstery imports from China rose 4.6 percent.
The decline for China’s wood output came during a time when most retailers were trimming orders due to the housing slump. On an annual basis, wood imports from China increased 8.3 percent in 2006 and upholstery imports increased 29 percent, according to ITA figures reported by Mann, Armistead & Epperson, Richmond, Va., in October.
In the second quarter, the 11.6 percent decline in wood imports from China came as Vietnam saw imports to the U.S. increase 26.9 percent and Indonesia posted a 7.8 percent as all other countries declined.
One example of the shift in China’s policies is that rebates of the country’s value-added tax (VAT) have been reduced substantially and some U.S.-based importers fear it could be phased out altogether, adding 12 percent to a producer’s costs. A recent report in
Forbes magazine said the reduced VAT rebates caused profits to decrease at Samson Holding. The company launched an unsuccessful bid for to acquire Furniture Brands International in July. In October, it was disclosed Samson paid $73 million for a 14.9 percent stake in St. Louis-based FBI.
Faster Fashion
Rooms To Go CEO Jeff Seaman believes furniture retailers are becoming more focused on domestic upholstery, in particular. Price, he said, is not as big a factor as speedy delivery and style. “In upholstery, you get it so much faster domestically than from China. There (are) still going to be a lot of upholstery imports, but there’s still room for growth domestically because upholstery is much more fashion driven, and you have to get in and out of it quicker ... and make changes faster.”
Still, no one is predicting that China will relinquish its dominant role as the top source for furniture. Instead, retailers say that rising costs in the country may lead to growth from other sources in Asia and, perhaps, in the United States. “China is still an extraordinary value in the global home furnishings market,” Koenig said. “We’ve been careful to align ourselves with the very best factories in China, and that’s been to our advantage. However, Vietnam is growing in importance and has the advantage of no import duties on bedroom (furniture).”
David Beckmann, president of Emerald Home Furnishings, an importer based in Tacoma, Wash., said China is still king, but added, “You’re seeing government policies moving away from low-cost manufacturing jobs. You have a tight labor market. Oil prices affect raw materials and fabrics.”
Emerald also has production in Vietnam and Malaysia, and Beckmann is planning a trip to India in the year ahead to scout opportunities there.
With that backdrop, Lee Goodman, president and chief executive officer of Jerome’s in San Diego, said, “Our philosophy is to try to stay as agile as possible because we feel there’s a lot of exposure with imports due to everything from the dollar to geopolitical issues to (the risk) of having all of your eggs in one basket.”
He said Jerome’s, like many large retailers, has shifted sources of some case goods products from China to Vietnam. “We’re constantly trying out to find out where the next factory is so we can move and reduce our exposure in the imports. There are so many different things that can happen out there. We’re constantly talking about watching out for what’s ahead.”
Smaller Retailers See More Flexibility among Importers
At the single-store Follett’s Furniture in Lewiston, Idaho, General Manager Greg Follett is finding that importers are giving more opportunities to smaller retailers these days. In many cases, Follett said there are less savings in buying a container of goods shipped directly from Asia versus buying from an importer’s U.S. warehouse. “Warehouse prices that used to be quite a bit higher are coming down a little bit. I think that might be a function of why they have a little bit more flexibility right now.”
Still, container buys still can produce savings of 20 percent—sometimes more, said Follett, who is also president of the Pacific Furniture Dealers, a buying group of more than 60 retailers. “If anything, as a group, we’re buying more (container goods) and we’re looking for any good buys that come about,” Follett said. “We’re fortunate to have different (PFD) programs that allow us to have multiple dealers buy on one container. Otherwise, a lot of us wouldn’t be able to buy that way.”
He said the PFD program has a billing program for container sharing, as well as a shipping agent who breaks out orders that are trucked directly to each retailer.
Woody Whichard, the owner of Midtown Furniture Superstore in Madison, N.C., said he’s seeing similar deals in which a retailer can buy as little as a quarter-container of goods and still save 10 percent or more off wholesale prices from a U.S. warehouse. “It seems like they’re trying to help the smaller retailer compete with the big boxes a little bit more, which is encouraging,” he said.
Whichard said he’s sold imported case goods exclusively for the past year, but began seeking out domestic suppliers again at the October High Point Market. “We bought a couple of suits from Vaughan Furniture,” he said. “We like to buy domestic when it’s feasible, but the prices haven’t been there for us. Since some of the imports from China have increased (in price), I think we’ve seen the quality go down on some of those who didn’t raise prices. For us, the decision (to buy from a U.S. factory) was a little bit of price and a little bit the speed of delivery. We don’t have to have as much tied up in inventory, so it makes us more liquid.”
Potential for ‘Catastrophic Mistakes’
Slug Hefner, who operates two Hefners Furniture stores in Missouri, said he’s also seeing importers offering more flexibility when it comes to allowing a retailer to mix different types of furniture in a single container. “The smaller (importers) seem to be offering more flexibility. If they allow you to mix containers, it’s a lot easier for us. Not matter how smart you are, if there are 18 of the same bedrooms in a container, you’re going to be missing a bed here or a nightstand there when you get to the end of it. If you can mix three different ones, you can sell through them much more quickly and there’s less risk.”
Like other retailers, Hefner said he buys from domestic sources when that’s possible, adding that mistakes can become “catastrophic” when it involves a shipment of 20 bedrooms. “We’ve had some mistakes, and you just have to bite the bullet and do what you need to do to get rid of it.”
He said the situation in China is already having an impact on Hefner’s approach to buying. “I think you have to look at every transaction now on its own individual basis and merit because there are so many factors that go into it.”
Pushback on Pricing
In San Diego, Goodman said rising costs in China are unlikely to be absorbed by U.S. retailers because a long bout of deflation has brought the prices of many furniture products to historic lows. “There have been a couple of (recent) cases where we passed (increases) on to the customer, and there wasn’t even a blink. We’re going to look at everything that if a product still retails (at a higher price), then that’s a product that makes sense. If additional costs make the product slow down, then we know it’s a cost we can’t pass on, and we’ll pull it. In most cases, we haven’t seen a decrease in the sales rate ... but we won’t be absorbing more price increases.”
October 31,
2007 by in UnCategorized
By Home Furnishings Business in Markets on November 2007
H
ome Furnishings Business spent the second day of the Shanghai furniture market with members of the buying team from American Furniture Warehouse, Thornton, Colo., to get a retailer’s-eye view of shopping the show. This year was AFW’s ninth at the Shanghai event.
In Shanghai, AFWs team split into three areas of focus: CEO Jake Jabs and Buyer Nicole Gunther handled upholstery; Fran Coleman shopped case goods, occasional and outdoor furniture; and Tony Mitchell searched for ready-to-assemble and home office goods.
The first half of the day was spent with Jabs and Gunther at the Furniture China show at the New International Expo Center in Shanghai’s Pudong district. Later on, Coleman rejoined Jabs and Gunther for a look at the Shanghai International Furniture Fair, held at the new JSWB Global Furnishings Center on the city’s outskirts.
Keep in mind that the opinions below are those of one retailer shopping for goods specific to its market and price niche.
October 31,
2007 by in UnCategorized
By Home Furnishings Business in Furniture Retailing on November 2007
The Maynard family didn’t know how lucky it was when Al Maynard, home from World War II, decided to open up a second-hand furniture shop in little ol’ Belton, S.C.
Lt. Maynard, an Atlanta native who had a business degree from the University of North Carolina, was discharged from the Navy and landed in a furniture shop in Rome, Ga. He had but one year of furniture-selling experience under his belt before he went into business for himself. Maynard picked Belton for what seemed a good reason: his wife was from Belton.
Maynard’s store, founded in 1947 with some personal savings and relatives’ investments, was the homiest of businesses—5,000 square feet on the Belton town square. Al Maynard had a way with people, and starred in his own radio and TV advertising. He introduced every ad with his signature “Hello, nice people,” and that was how most people greeted him around town. He started selling new furniture when the post-war economy shifted from the production of war materials to domestic goods.
Today, a third generation of Maynards is selling home furnishings in two Maynard’s stores—on 25,000 square feet in Belton and 20,000 square feet in nearby Piedmont. Though Belton is still a tiny town, with 4,700 people, and Piedmont is about as small, Maynard’s has managed to thrive. Sales in 2006 hit $4.3 million and growth, even in this soft economy, has remained steady in the single digits in recent years.
Maynard’s, it turns out, was founded in the right place, in that Upstate South Carolina has been one of the rapid growth zones of the New South.
Belton sits off the well-traveled Highway 76, a short hop from I-85, one of the South’s major thoroughfares. From the Belton location it’s a 16-mile drive north to the Piedmont store, which is a quick commute to Greenville and Spartanburg, the booming twin cities of the Upstate. In the 1990s, BMW gave the regional economy an enormous shot in the arm with its choice of Spartanburg for its only American plant. Suppliers to BMW followed suit. And the Upstate also became the headquarters of Michelin, USA. Furthermore, the region’s mild climate has attracted retirees who have further expanded Maynard’s customer base. Now the stores draw from three states, with most people driving no more than 60 miles to pay Maynard’s a visit.
Occasionally, this widening, more diverse net of shoppers prompted Maynard’s to tinker with its product mix, a mid- to high-end blend of traditional furniture. They would display contemporary pieces, or skew their price points down to reflect the more general trend toward cheaper imports.
Those were mistakes they learned from, said Rex Maynard, Al’s son and the current president of Maynard’s Home Furnishings.
“We would always get into trouble when we would try to buy a cheaper product,” he said. “Even though my dad started out selling second-hand furniture, he always tried to offer the customer the best quality he could get.”
The same goes for style.
Contemporary just wasn’t striking a note with Maynard’s loyal customer base. “You can’t put one or two transitional or contemporary sofas on your floor,” said Maynard. If that’s what customers want, he reasons, they’ll also want more choices. So for Maynard’s, traditional is the past, present and future.
“We’re in a traditional area,” he said. “You have people moving in from other parts of the country who have some different tastes, but you can’t be all things to all people.”
But you can distinguish yourself. Aside from offering higher quality than many of the regional chains, Maynard’s offers a large selection of outdoor furniture—about 7 percent of its inventory—a somewhat high proportion for a furniture store. “We kind of lucked into it,” says Maynard. A rep called his father one day and wanted to know if he would buy a boxcar full of outdoor furniture. Al Maynard bought it, and did well by it.
In 1952, Maynard’s moved off the town square to its current Belton location, along the highway to Anderson, S.C. Al Maynard was ahead of the curve in displaying furniture in vignettes, which he began doing in the early 1960s. And he smartly invested in his homey radio and television advertising. His talent was connecting with people, and the airwaves connected him with an increasingly wider audience.
Al Maynard’s son Rex was not one who had to be coaxed into the family business. He graduated with an economics degree from Wofford College in 1969 and went straight to Maynard’s, where he had spent summers working in the front office and delivering furniture. His first title was warehouse manager and delivery supervisor, a position Al Maynard knew his son deserved given his many years of on-the-job experience. Soon after, Maynard’s opened a second store in nearby Piedmont, and Al made Rex manager of the original Belton store. Rex Maynard was all of 24, and his father proved a patient boss.
“My dad was calling the shots. He was the president. I would have hated to be in that position without him,” says Maynard. “But he did allow me to make my own decisions and mistakes—and hopefully learn from them.”
The business had its ups and downs. Maynard’s Colonial Shop in Highlands, N.C., where the family had a second home, opened in 1960 and closed in 1969. It specialized in furniture, antiques and gifts. Maynard’s Porch, Pool & Leather Furniture opened in Greenville in 1982 and closed three years later. Maynard’s Country Manor, 10 miles south of Greenville, opened in 1971 and was sold to a partner in 1977, the year that Rex Maynard became president of the company. He bought it back in 2000, and it is now their Piedmont store.
Al Maynard died in 1993—a pillar in the industry and the community.
Rex Maynard describes his own salesmanship as a diluted version of his father’s.
“He could sell anything to anyone, though he wouldn’t. He wasn’t a hot shot,” Rex Maynard said. “My strength is more organizational.” Still, Al Maynard had prepared his son to become not only the president of Maynard’s, but its public face. Before he died, Al Maynard had Rex star in Maynard’s commercials. Today, Rex Maynard periodically asks his advertising agency whether his father’s “Hello, nice people,” is still the way to begin every Maynard’s spot. “Isn’t it too cornpone?” he wants to know. The answer is always a definitive “no.” Build on your tradition, the agency folks advise.
But some things have changed over the years at Maynard’s. In recent years, the store has not been able to ignore the great influx of less expensive imports. Maynard’s kept the quality high, but did make adjustments, increasing its share of imported pieces.
“One of our biggest vendors is Hooker and they’ve closed all their American factories,” said Rex Maynard. “We’re selling all that from China but from people like Hooker, which has a better quality product and an American presence. I wouldn’t consider buying from a manufacturer with no American presence.”
“We enjoy doing business when we can with family-owned companies like Jamison and Hooker,” Maynard continues. “It’s nice to know that if I needed to, I could pick up the phone and talk to (Harden CEO) Greg Harden.”
Maynard’s sells a lot of Harden, but Hooker is its biggest supplier. Rex Maynard also extols Canadian Durham—“a solid wood, wonderful quality line,” as he puts it. He also likes offering American-made Saloom for casual dining groups and the ability to chose a finish. Cochran dining sets allow Maynard customers the customization the family believes sets its store apart.
In the leather department, Bradington-Young is its biggest line, though Maynard’s also sells plenty of Woodmark. And though Maynard isn’t crazy about La-Z-Boy’s other offerings, he’s keen on the brand’s trademark recliners. “For the most part, their stationary is a little under where we want to be as far as price, look and design. We tried (once or twice), but we’ve been much more successful with recliners,” he said.
When it comes to bedding, at Maynard’s its Jamison and only Jamison—for the past 20 years. The family-owned Tennessee company is just the sort with which the Maynards like to do business. “Family-owned” means a lot to the Maynards, who have already turned the company into a three-generation legacy.
Rex Maynard has two sons and two daughters, three of whom followed in his footsteps to his alma mater, Wofford College. He suspected that at least one of them—his younger son Blake—would follow him into the furniture business. But he didn’t expect that Alderman Maynard, who had chosen to work elsewhere during his summers home from college, would want to pursue the family business. But when Alderman graduated from Wofford, he asked his father to go fishing. That meant, the father knew, that Alderman had something important to say.
“I want to go into the family business,” the son revealed.
“It was music to my ears,” says Rex Maynard.
October 31,
2007 by in UnCategorized
By Home Furnishings Business in Case Goods on November 2007
Anyone looking for an object lesson in how a company can use the globalization of furniture manufacturing to transform would do well to take a look at Magnussen Home. Starting with occasional and accent furniture, and in an effort led by now-President and CEO Richard Magnussen to explore materials, styles and pricing available in the Far East, family-owned Magnussen Home began honing its sourcing chops almost three decades ago.
In 2001, the company put that hard-won knowledge to work with an entry into case goods—a step-by-step process that avoided rushing into a huge number of collections at first in an effort to maintain a reputation for fast service on imports it was determined not to sacrifice. The company now is a key case goods supplier for retailers of all sizes, with a distribution infrastructure comprising hi-tech warehousing stateside, and now in Vietnam, where it’s promoting its ability to mix containers across a broad selection of case goods merchandise.
Richard Magnussen’s father, Ingwer Magnussen, unable to find work during the Great Depression, founded the business in 1931 in Kitchener, Ontario, starting with carved show wood for sofa frames for upholstery manufacturers.
Richard Magnussen joined the company in 1970 at the age of 20, leading Magnussen Furniture to become Canada’s largest supplier of occasional tables. In 1986, Richard founded the Presidential Furniture division to serve the U.S. market. Magnussen-Presidential Furniture began importing from the Orient a decade before fashion trends and design styles in the furniture business made it in vogue to do so.
After introducing case goods in 2001, in 2002 Magnussen-Presidential Furniture became Magnussen Home to reflect its new ability to offer furnishings for an entire household, and in the same year opened a U.S. headquarters in High Point.
Richard Magnussen sat down with
Home Furnishings Business during the October High Point Market to discuss sourcing trends in Asia, and the importance to retailers of supply chain management in their import programs, especially regarding mixed containers.
You have decades of experience sourcing goods in Asia, first in occasional, and in recent years a growing case goods business. What do you see on the furniture frontier in terms of potential new source countries, and also underdeveloped regions of existing source countries?
I would start with underdeveloped regions in existing countries by saying that business in China is moving toward the middle and north of China. Some of our Taiwanese friends are considering that.
Certainly all of Southeast Asia is a target for development. The one that’s not producing furniture for export right now that comes to mind is Cambodia. I think they’ll start as China did, as a support source to manufacturers elsewhere, starting with raw materials. Usually the government steps in and says, “We want secondary manufacturing as well.”
That leads to supplying dimension stock and components.
Cambodia’s proximity to Vietnam is key. From our (Vietnam) distribution center, it’s about 40 miles to the border.
Looking back on 27 years of doing this (sourcing), it just makes sense. As fast as Vietnam is getting richer, the neighboring countries see what’s going on, and they want a bit of the action, too.
There are other countries like Egypt and India where furniture is still a cottage industry. They need management to move in like the Taiwanese did in China and Vietnam to take it to a production level.
A new Magnussen warehouse facility in Vietnam for mixing containers is now fully operational. We hear a lot about mixed containers these days. In general terms, what should retailers look for when they hear “mixed containers”? Are there any factors that should raise a red flag for retailers looking for such service from their vendors?
If I’m a retailer looking at this, I think a flexible marketing mix is important. Sometimes a vendor will run two case goods groups in a factory and say you can mix these products. If you’re talking a true mixed-container program, that’s like saying you’re half-pregnant.
A true mixed-container program must allow a broad mix of merchandise delivered quickly.
The goal of mixing containers (for retailers), in my opinion, should be to increase turns. If you have mixed merchandise, but can’t deliver it on time, the retailer can’t get the turns. Retailers should be able to get eight to 15 turns on their mixed program.
One of the problems you sometimes see is that service parts aren’t always available. How a (vendor) handles its service parts is important, and to me, that should be a 24-hour program.
This is specific to Southeast Asia—but that’s where a lot of case goods manufacturing is going—a humidity-controlled environment for storing furniture is very important.
At our (225,000-square-foot, high-cube) facility in Vietnam, we take 340 gallons of water out of the air each hour.
If you’re used to manufacturing in China, this is a new dimension—you have the same thing in Indonesia. Our case goods come into our facility averaging 12 to 14 percent (water content) and leave at 9 percent.
When you’re talking about mixed containers, you’re blending products together from different production runs that take place at different times, and your shelf life on furniture is around 60 days without humidity controls before you start having problems with the product.
The root of a strong mixed-container program is supply chain management, and I’m passionate about that. Sometimes Wal-Mart and those big boxes are a bad word among retailers, but I’m convinced that smaller retailers can incorporate their practices in their business.
Retailers can move toward strong supply chain management, reduce their costs and be more profitable.
The measurement that a mixed container program is working for a retailer is inventory turns. I’d like to see a lot of small and mid-size retailers stay in business, but they need to partner with the right people to get their supply chain in order.
We’re all hearing that China is experiencing increased labor rates and zoning restrictions as the government places greater emphasis on hi-tech industrial development. How is that affecting Magnussen’s sourcing, both now and also down the road?
The (value-added tax) benefit reduction is one problem, and some manufacturers are having trouble renewing their leases—the furniture industry is not desirable in South China right now, but these are general statements. There’s going to be business in China, and we still do a lot of volume there.
The other risk in China is pressure on the currency. Personally, I think that change will be gradual. I’m convinced that a lot of these issues are driven by the government.
Our case goods are primarily sourced in Vietnam, where we’ve opened our distribution center, and I think Vietnam is the hot spot for the next eight to 10 years. Wood and wood products export is high on the government’s list of priorities, in the top three I believe.
We’re overwhelmed by the quality of people in Vietnam and the education they have. The average age is, what, 26? They’re young and aggressive, and want to get their careers going.
Our IT people went over there—IT people tend to have a certain sense of ability and self-confidence—and they were extremely impressed with the people they worked with in Vietnam.
Outside China and Vietnam, which Asian source countries do you believe have the most to offer the U.S. market and why?
Indonesia offers custom manufacturing, which is what we look for, while Malaysia and Thailand are strong for mass production in generic looks.
Cebu offers high-quality, primarily accent pieces. We still do good business in fossil stone out of there, and I don’t know many that are right now.
What is your favorite part of Magnussen’s line and why?
I’d have to say our Seven Oaks bedroom, which is part of our Biltmore collections, for a combination of reasons, going back to when my father started this company in 1931.
I’m fascinated by (George) Vanderbilt and his vision in building that estate, and while you aren’t talking about the kind of wealth the Vanderbilts built, it makes me think of the whole history of our company with my father starting out building furniture on his own.
It’s more than a beautiful group of furniture, it’s a reflection of history and vision. Some of our Biltmore hang tags have our own story, with my father on one side. I think he’d get a kick out of being paired with Biltmore and the Vanderbilts.
What do you like to do in your spare time?
I like fast boats, and I like building homes and decorating. I enjoy the creative side of home building, and while I build to “do it right” rather than for numbers, we’ve sold all the homes we’ve built.
I’m very much involved in church volunteer work and non-profit work. We’re working right now on a drug rehabilitation center, a $25 million project in Kitchener, Ontario.
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