Challenges and Trends Facing The Furniture Industry
2020 will go down as a year of volatility. It literally started with a bang with the assassination of Iranian general Qassem Soleimani, sparking global fears of a third world war. Then came the Australian bushfire, blanketing the Down Under for months. And of course, you can’t talk about 2020 without mentioning its biggest villain – COVID-19 – forcing hordes of employees to work from home in silos, along with the acceleration of digital across all departments.
For an industry so dependent on the private and public sector across traditional and digital channels, the pandemic has disrupted the entire furniture value chain. Weeks into the first wave, retail shops were swift to close. Orders were cancelled amid uncertainty. Meanwhile, online activity surged. Later, trade fairs like High Point Market and Salone del Mobile got reformatted or rescheduled. As bleak as it seems, the furniture industry is historically resilient and continues to adapt, and we predict specific challenges and trends to ride on to ensure calm in these choppy waters.
Adopting e-commerce and technology
For furniture brands, online has always been more of a platform to browse than to buy. Now though, the buyer’s journey is expected to be fully online. With that comes the demand for personalization at every touchpoint, competitive prices, speed of delivery and product quality. The challenge on the backend then is to improve operational efficiency and drive down cost.
Through investments in technology, manufacturers can boost production capacity and increase the flexibility of orders. For instance, cloud-based software can automatically connect orders with cutting room machineries, saving both time and costs.
Navigating the economic downturn
In response to the recession, major central banks like the Fed and European Central Bank have lowered interest rates as they utilize the full range of monetary policy tools. While such actions hope to stimulate the economy, the result is a weakening USD and Euro. American and European furniture brands will thus face an increase in the price of raw material imports and a decrease in the price of their exports, a double whammy of declining margins.
Safety regulations further threaten to increase costs. The Prop 65 comes to mind – a law that requires manufacturers to provide warnings to a list of harmful chemicals. Such regulations will gain widespread approval among the growing segment of health-conscious consumers. However, the growing list of 800-plus potentially hazardous chemicals is a nightmare to keep up with, and even more so to test against. The reality is that abiding by safety regulations is a necessary evil that reduces margins.
Of trade and tariffs
As the US-China trade war continues without an end in sight, brands are rightfully concerned on what their next move should be. Continue to rely on China’s manufacturing and face import tariffs, or decouple and pivot to Southeast Asia? Yes, China’s infrastructure scale is unrivalled, but emerging manufacturing hubs like Vietnam and Indonesia are lower in cost. As these economies gradually open, brands will have to decide on what is least risky to their bottom line.
Supply chain shocks
The good news is that a vaccine will eventually be found, and society resumes normality for some time. The bad news is that another pandemic or black swan event is around the corner. It’s just a matter of when. Therefore, preparing a response plan to mitigate such risks might be the difference between survival or ceasing to exist. Key aspects to consider include supplier engagement response, production-capacity and route optimization, demand management, and logistics-capacity.
The rise of online marketplaces
The impact of the pandemic has been asymmetrical. While traditional brands got decimated, those that survived shifted their business to online marketplaces like Wayfair and Amazon. As the industry consolidates, online marketplaces, with their diversity of suppliers and sellers, will thrive in the backdrop of variety-seeking consumers.
For evidence, look no further than Ikea. According to Reuters, the Swedish retailer is eyeing to sell its products on Chinese e-commerce platform Tmall to increase convenience and market penetration. It’s a historic first for the 77-year-old company to be selling through a third party and a sign of the changing times for the rest of us.
Interactive websites are in
As the pandemic depresses consumers’ mood, a plain website that is overly transactional is an unforgivable sin. Online shopping must be a joy, or at least helpful. Features like product customization, 360-views, high-quality zoom, alternate angles, room scenes and augmented reality can do much in easing buyers to purchase high-ticket pieces.
The changing consumer
With most activities becoming home-based and as these homes downsize, consumers will prioritize on upgrading their living space. Brands thus need to design versatile and space-saving pieces. Think functional and modular home office chairs/desks that blends with the home décor, or plush velvet pouffes to unwind after a day in front of the screen.
How SBN is adapting
The challenges are plenty, but so are the opportunities. That’s where our speed to market comes in. With a combined experience of over 200 years in the industry and networks spanning continents, we can act quickly based on the latest market data to serve your furniture sourcing needs. Partner with us, and 2020 may be less a year of volatility, and more of purposeful transformation.