The Community Economy

From Market Disruptions to New Opportunities in the Furniture Industry

If, like me, you’ve recently had to repurpose your living space into a work-friendly environment, you may have noticed that any furniture you ordered not only took much longer than usual to be delivered, but it’s also become more expensive. These changes can be traced back to disruptions in global supply chains, which are unfortunately here to stay for a while.

The furniture industry, generally very traditional in practice, is seeing two interesting new trends: increase of e-commerce sales and redesign of office furniture. For manufacturers and distributors to remain competitive in this challenging market, they’ll need to adapt in these changing and challenging times. How did we get here, and what will it take to survive and thrive in this new market?

Increased Market Disruptions

Importing furniture is more challenging now as shipping has become much more expensive. In fact, because of the uncertainty regarding the US government’s import tariff on goods manufactured in China, many manufacturers shifted production from China to other countries in order to offset the effects of these tariffs. Just as companies began figuring out how to reorganize the supply chain in order to minimize the impact of tariffs on their customers, the Covid-19 pandemic hit and caused additional disruption to production, logistics, delivery times, and availability of raw materials.

With manufacturers across the globe operating at reduced capacity because of the pandemic, then trying to respond to unusually high consumer demand as employees created productive at home work spaces, the furniture industry supply chains have been under huge pressure. Companies have had to learn to manage a leaner in-person staff handling scaled-back operations, material sourcing, and inventory while simultaneously navigating the complexity of logistics and freight. With raw materials harder to come by, those goods now demand a higher price, which puts manufacturers and distributors in the position of increasing their sales price, reducing profits, or both.

Companies that relied on single-source suppliers for key components have been looking to spread the risk over multiple suppliers in different geographies (Vietnam, Mexico, Turkey, etc.), adding additional complexity to an already complex supply chain. Some companies are trying to be less dependent on China, but it’s not easy to find viable alternatives to Chinese manufacturers.

In the midst of these market disruptions, the way that consumers are choosing to shop – as well as what they’re shopping for – is also shifting.

Increase of E-commerce Sales

Traditionally, furniture has been considered a product that consumers have to touch and see in person before buying. Interest in online sales was typically low. However, with the introduction of augmented reality (AR) tools, combined with more accurate product descriptions and customer-friendly return policies, consumers have begun to feel more comfortable buying furniture online.

Millennial and Gen Z buyers - now the largest market segment - are extremely comfortable shopping online even when it comes to furniture. The rapid growth of e-commerce sales is transforming the furniture industry, making traditional physical stores less necessary.

According to Statistica, overall e-commerce revenue will reach $2.7 trillion in 2021, with the average user spending just over $700 annually. In the Furniture & Homeware segment, 15% of total market revenue will be generated through online sales by 2023. Considering that revenue in the Furniture & Homeware segment is projected to reach almost $229 billion in 2021 and $296 billion by 2025, it’s clear that furniture companies would be wise to invest in technology, build their brands, and offer an easy-to-use online experience that will keep their customers satisfied, engaged, and interested in coming back.

Redesign of Office Furniture

The global office furniture market reached a value of $71 billion in 2020. However, the Coronavirus pandemic hit the office furniture business especially hard when businesses closed their doors and shifted much of the work to home offices. Not only has the pandemic disrupted supply chains and consumer demand, but also it’s changed what many employees expect in their office and home workspaces.

Sales have increased for residential-friendly office furniture to upgrade home offices into more functional and pleasant spaces. Homeowners also renovated their living areas to make them more comfortable. With employees now returning to work in person, many companies have adopted a hybrid model that still includes some work from home.

In March 2021, Microsoft asked a question that is relevant to all industries, including furniture: “The Next Great Disruption Is Hybrid Work—Are We Ready?” Among other changes the report’s contributors predict, work from home will stay and companies must create an attractive working environment for employees heading into the office. This attentiveness to the work environment will be part of how employers attract and retain talent.

In the August 2020 report “CBRE Perspective on the Future of Furniture: How Will Of-fice Furniture Adapt to Move Forward”, the Furniture Advisory team highlights the long-term changes they expect in the office furniture of the future. The pressure is on to innovate in this industry. How will modular office environments be redesigned to convey a sense of physical space without the blandness and claustrophobia of a typical cubical? Solutions point to lighter and more versatile modular elements with which to more easily reconfigure spaces based on the needs of the moment or the team, and to more comfortable and ergonomic furniture that could be used in a work or home office.

While picking the right furniture and creating an ideal working environment is increasingly important to employee retention, it’s also an opportunity for a company to reflect and promote its brand. Dark wood, bulky furniture and carpeted floors suggest a sense of antiquity and tradition. Industrial-style furniture in a space with large windows, plenty of natural light and wooden floors suggests a company that is cutting edge, while modern European-style furniture, light natural colors and natural flooring conveys a trendier image.

Expandigo Prepares Companies to Meet These Challenges

Understanding the challenges that the furniture industry faces now and in the coming years, Expandigo is designing its platform to support your essential research for global partners and connections. This activity becomes increasingly urgent as companies strive to reorganize their supply chains and identify new opportunities in the furniture marketplace.