Table scraps

A $124 billion market

Buddhism is deeply assimilated into Chinese culture. One lesser known area where it had an impact was the adoption of furniture.

One theory posits that prior to the religion’s arrival more than 2,000 years ago, it was common for the Chinese to sit on bamboo mats. Chairs only made an appearance after high-ranking officials started sitting on a raised dais, emulating how Buddha would appear in many Indian scriptures and paintings.

Over the centuries, Guangdong and Fujian became two of China’s largest furniture makers thanks to their coastal locations, which facilitated the export of the country’s famous mahogany and rosewood furniture. But as the Chinese press has been reporting, traditional furniture makers are under increasing threat from a perfect storm of rising prices and global trade tensions.

In August, two well-known local companies went under. One is Shenzhen-based Changfeng, which employed 5,000 people. It specialised in office furniture (it was one of the central government’s biggest suppliers) and classical furniture. Set up in 1992 by Hong Kong businesspeople, it was in the first wave of manufacturers from the territory to take advantage of cheaper labour costs across the border.

Fujian-based Haolaiwu also went bust in the last month. The kitchen cabinet maker had recorded explosive growth until about five years ago. The Global Times conjectures that the unhappy fate of both companies is a “microcosm for the whole of China’s furniture industry”. Caijing magazine adds that many local furniture makers are unable to move up the industrial chain and cannot compete against lower-cost rivals in nearby countries – Vietnam, for example. It also notes that furniture is one of the industries most exposed to trade tariffs. These were raised to 25% as part of the US administration’s assault on Chinese goods over the summer, hitting $29 billion in furniture exports.

Shen Jiemei, Secretary General of the Fujian Furniture Association tells Caijing, “Everything is going up for manufacturers. Only profits are going down.”

China overtook Italy as the world’s largest furniture maker in 2004 and the National Bureau of Statistics said the country’s overall home furnishings market was worth Rmb856 billion ($124 billion) in 2017. But it also reported that industry concentration is low, with the top 10 manufacturers accounting for less than 5% of sales.

Newer entrants are trying not to make the same mistake as Changfeng and Haolaiwu, which relied heavily on US exports. Instead they want to forge stronger brand identities and move up the value chain from mass production to custom-made pieces that appeal to China’s growing middle classes.

As a result, a string of similar companies have started to make their mark in recent years. Many have listed on local stock exchanges: Qumei (2015), Jason Furniture (2016), Oppein (2017) and Guangzhou Shangpin (2017).

What a number of them share is a distinct business model: high levels of automation in production, combined with customised design. For example, Shenzhen-listed Suofeiya Home Collection has recently ploughed Rmb400 million into a factory that makes 650 custom-designed cabinets per day with only 150 staff, thanks to its use of robotics.

As we reported in WiC412 Qumei has been making waves in the industry with its attempt to acquire a prestigious Scandinavian brand.

Others will have to learn how to rely less on the US and sell more at home. Guangdong-based furniture maker Zhuo Peihei tells Bloomberg he has spent 13 years selling his furniture to American stores. But now he and his 100 staff will reboot their strategy and try to sell to Chinese consumers. He concludes that, “although the domestic market is new to us and competition is very fierce, at least the demand is here. The market is huge and customers are paying more for good products.”

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