21 Aug 2017
China’s Furniture Market
I. Market Overview
As living conditions continue to improve in China people are becoming more and more willing to invest in home decoration. Consumers’ increasing purchasing power has driven the furniture market to develop in leaps and bounds. In 2016, the total sales of furniture manufacturing enterprises grew 8.6% year on year to RMB855.95 billion, while total profits grew 7.9% year on year to RMB53.75 billion.
China’s furniture market has vast room for expansion. According to the China Statistical Yearbook 2016, there were about 630 million households in all provinces, autonomous regions and municipalities on the Chinese mainland. On the assumption that people replace home furniture every 10 years on average, around 63 million households would replace their furniture each year. The furniture replacement market is worth up to RMB63 billion based on the average spending of RMB1,000 per household.
As China’s leading policy of stimulating domestic demand in the years to come, urbanisation is bound to drive furniture market growth. Data from the National Bureau of Statistics shows that the urbanisation rate in China reached 57.4% in 2016, rising by about 1% on average every year. In this urbanisation process, wage and salary earners as well as peasant families who have settled in towns and cities have become major furniture consumer groups. In addition, it is estimated that by 2020 37.6 million houses will have been renovated under the country’s shanty town reconstruction project, and these renovated houses will also generate demand for furniture.
Apart from domestic sales, China’s furniture exports also show sustained growth. According to the 13th Five-Year Plan for the Development of China’s Furniture Industry, the value of China’s furniture exports increased at an average annual rate of 8.8% from US$38.9 billion in 2011 to US$54.3 billion in 2015. Furniture exports are expected to show an average annual growth rate of 3%-5% during the 13th Five-Year Plan period (2016-2020).
Mainland furniture consumers can be divided into roughly three groups, namely, avid consumers, luxury/branded goods consumers and average wage-earning consumers.
Avid consumers: A very rich group with little concern for prices, they usually favour expensive western style, classical Chinese style or avant-garde furniture.
Luxury/branded goods consumers: These consumers want furniture to reflect their taste and style. While making their purchase, they would also like to enjoy aesthetics and cultural elements. They are at the forefront of trends in aesthetics, lifestyle and price concepts.
Average wage-earning consumers: Representing the majority of consumers, with price and quality as dominating factors, they would often shop around in making a purchase.
According to the Industrial Classification and Codes for National Economic Activities issued by the National Bureau of Statistics, the furniture manufacturing industry is divided according to product type into wooden, bamboo/rattan, metal, plastic and miscellaneous furniture manufacturing. Among these, wooden furniture is the largest, accounting for more than 60% of manufacturers.
At present, a wide range of products are available on China’s furniture market and can be mainly classified into home, hotel and guesthouse, office, and public institution furniture.
Home furniture: Furniture used in the homes of urban residents, including sofas, TV cabinets, tables and chairs, kitchen furniture and bedroom furniture.
Hotel and guesthouse furniture: Dining tables and chairs, sofas as well as guestroom furniture for hotels and guesthouses.
Office furniture: Desks, chairs, bookshelves and cabinets for use in the office.
Public institution furniture: Furniture for use in public-sector facilities such as medical, sports, cultural and educational institutions.
An increasing number of consumers, in particular mid-to-high end consumers and children’s furniture consumers, choose to embrace new living concepts, such as the ‘eco home’. These consumers have a strong preference for environment-friendly furniture, such as odour- and formaldehyde-free products, despite the fact that the price of most of such furniture is higher. According to HKTDC’s consumer survey, over 90% of respondents are interested in using green, eco-friendly materials and are willing to pay a premium of 14% on average in purchasing products made of green materials. In view of this, many furniture and building materials brands have added the idea of eco-friendliness in their brand concept. Examples in the mainland market include ‘smart’ furniture incorporating indoor air purification function and lightweight honeycomb board furniture.
Demand for children’s furniture is on the rise. As living conditions improve, parents are increasingly willing to buy suitable furniture for their children to create a good environment for their development. With the full implementation of the two-child policy under the 13th Five-Year Plan, pundits believe that the market has further room for growth. According to preliminary data from the National Bureau of Statistics, the number of children aged below 15 reached 230 million in 2016, including 17.86 million newborns, representing a birth rate of 13 (per 1,000 people). Surveys show that in the children’s furniture market, beds and desks and chairs make up the biggest share. Currently in this market, the ratio of plywood furniture to solid wood furniture is approximately 7:3, but as people’s income levels rise and they become more health and environmentally conscious, the ratio of solid wood in children’s furniture may rise.
Green is the underlying trend in the furniture industry and more and more enterprises are using water-based rather than traditional solvent-based paints. Water-based paints refer to coatings that are water soluble or dispersible. The biggest difference between water-based and traditional solvent-based paints is that the former require no addition of hardener or thinner and therefore do not contain toxic substances such as formaldehyde, benzene and xylene, which makes them more safe and compliant with environmental standards.
Outdoor furniture is increasingly popular in the Chinese market. Available in an increasing variety, outdoor furniture mainly falls under the following categories: beach beds, rattan chairs, leisure chairs, bamboo chairs, and other outdoor furniture items. Among these, rattan chairs and leisure chairs account for a bigger share. Demand in the outdoor furniture market has been extending from specialised sectors, such as star-grade hotels, restaurants, exclusive clubs, leisure venues and residential communities, to the home sector, including private gardens, rooftops and terraces. Development in the home sector is gathering momentum.
Faced with rising property prices, young home-buyers have limited choice in the size of flats and are inclined to choose multi-function and foldable furniture for easy storage. Sofa beds are immensely popular because they are ordinary sofas that can be used as beds for overnight guests. Data from Euromonitor reveals that retail sales of sofa beds amounted to RMB19 billion in 2016, accounting for 32% of the total retail sales of seating furniture.
Rosewood is a type of quality hardwood and furniture made of such material is generally regarded as superior. As the rosewood furniture industry thrives, in addition to traditional rosewood markets representing respectively the Beijing, Jiangsu and Guangdong schools of craftsmanship, there are now markets representing craftsmanship schools from Dongyang in Zhejiang, Xianyou in Fujian, Shanxi and Shanghai. The rosewood furniture industries in Pingxiang in Guangxi and Guangfeng in Jiangxi are also growing fast.
Custom-made furniture is becoming popular in tandem with the growing demand for personalised home products. Furniture makers treat each customer as unique and tailor-make products according to individual needs. At present, a number of large bespoke furniture manufacturers are developing rapidly. Companies such as Shangpin Home Decoration, Suofeiya Home Collection and Oppein Home are now offering bespoke manufacturing of different types of furniture or even furniture for the whole house. Industry commentators predict that custom-made furniture will grow at an annual rate of over 18% on average and China’s custom-made furniture market will be worth RMB160.6 billion by 2020. In addition, furnishing trends will also generate opportunities for custom-made furniture.
Star-graded hotels are a major source for the demand of upmarket furniture. Statistics from the China National Tourism Administration show that the number of five-star hotels on the mainland has increased from 492 in 2010 to 809 in 2016, representing an average annual growth rate of 8.6%. The number of four-star hotels has increased from 1,817 in 2010 to 2,367 in 2016, an average annual growth rate of 4.5%. Average annual demand for new furniture from these hotels is worth about RMB3.6 billion. Based on the frequency of replacing furniture at least once every five years in hotels, it is estimated that demand from furniture replacement in hotels will reach almost RMB13 billion in 2017.
China’s imports of selected furniture products in 2016:
HS Code Description 2016
94016900 Other seats, with wooden frames 86.7 1.3 94016190 Other upholstered seats, with wooden frames 80.9 11.8 94036099 Other wooden furniture 338.9 -0.1 94034000 Wooden furniture of a kind used in the kitchen 140.2 45.0 94035099 Other wooden furniture of a kind used in the bedroom 162.2 5.2 94032000 Other metal furniture 58.7 -2.1 94038990 Furniture of other wooden materials 24.8 -38.2
Source: Global Trade Atlas
II. Market Competition
After more than 20 years of rapid growth in its furniture industry, China has now become the world’s largest furniture production base and exporter. According to information released by the China National Furniture Association (CNFA), there are 45 furniture manufacturing clusters in China, covering the six regions the Pearl River Delta (PRD), Yangtze River Delta (YRD), Bohai Rim, northeastern China, central China and western China. The PRD has the highest concentration of the furniture industry with the highest production output and strongest integrated support capability. Next come Fujian, Zhejiang, Jiangsu, Shandong and Shanghai, which have an edge in product quality and operations management. In the YRD region, led by Shanghai, the furniture industry is developing fast, with the highest average growth rate in the country. The northern and northeastern regions, with Beijing as the centre, have a sound furniture industry base and rich wood resources. As for the central and western regions, the furniture industry is actively capitalising on the opportunities arising from the urbanisation and Belt and Road Initiative.
Furniture (home furnishings) industrial parks, whether completed or on the drawing board, are mainly found in eight central and western provinces, including Jiangsu, Anhui, Henan, Hebei, Hubei, Sichuan, Yunnan and Shaanxi. The development of these industrial parks can help consolidate and improve the industry chain, shorten the production-marketing distance, reduce logistics costs, change the employment distribution pattern, and promote industrial restructuring, specialised division and industrial co-operation between regions. In 2014, the CNFA chose Dayong in Guangdong and Anji in Zhejiang as experimental towns for leading breakthroughs in the upgrading and transformation of China’s furniture industry clusters.
Selected specialised regional production bases in China:
Location Specialised base Dayong, Zhongshan city, Guangdong Rosewood furniture production base Longjiang, Shunde district, Foshan city, Guangdong Furniture materials capital Dalingshan, Dongguan city, Guangdong Top furniture export base Sanxiang, Zhongshan city, Guangdong Classical furniture base Anji county, Zhejiang Home of the chair industry Yuhuan county, Zhejiang Western style classical furniture production base Ningjin county, Shandong Table and chair capital Zhuanghe, Dalian city, Liaoning Solid wood furniture production base
Furniture production enterprises in China are much less concentrated than in other industries and most of these are small and medium-sized. As a result of low industry concentration, there are hardly any brands with strong influence in the market. However, after years of competition, a number of branded enterprises of a certain scale and possessing considerable strength have emerged. Examples include QuanU, Qumei and Red Apple.
Competition among industry players in China’s furniture market shows that rivalry in this market has come of age. Today, furniture brands are no longer fighting for first-tier cities but are gradually shifting their focus to the furniture market in second- and third-tier cities. Rapid urbanisation has also spurred the growth of home marts in second- and third-tier cities. Besides, the market for furniture marts and brands is almost saturated in first-tier cities. While the economic and consumption scale is smaller in second- and third-tier cities, the market offers more room for development. As a result, tapping into the medium- and low-end market will become a key marketing strategy.
Compared with overseas brands, local furniture brands have a greater competitive edge on the mainland. In 2016, eight of the top 10 brands in retail sales are local ones. The main reason is that they have better distribution channels and can attract consumers in the rural areas and second- and third-tier cities with cheaper prices.
China's furniture industry has started the process of upgrading, with advanced manufacturing and the application of information technology in production as the main direction. Furniture enterprises need to upgrade their products and give greater added value by raising the level of technology innovation to achieve the aim of low cost, high quality and high efficiency. A key future development trend is green manufacturing, in which the whole life cycle of products must be conducive to environmental protection and the reduction of energy consumption. For example, paying greater attention to the protection of the environment, human health and home safety in the production process will help sustain the development of the furniture industry.
Foreign furniture industry players are stepping up their pace entering the China market. For example, Airland, a mattress and bedding manufacturer from Hong Kong, has in recent years secured the distributorship of foreign brands such as Serta for the Greater China region; while Ashley Furniture, a major American brand, has been expanding into the China market on a major scale. Up to 2016, the global furniture retail giant IKEA had opened 21 stores in China. The company intends to expedite its pace of expansion in China to increase the number of stores in the country to 34 by 2020.
In the children’s furniture market, domestic brands account for the lion’s share. Currently, some famous brands including Aokok and Colorlife have already emerged in the mainland children’s furniture market. In entering the mainland market, some foreign children’s furniture brands choose to use locally sourced materials or imported boards for processing in the mainland in order to appeal to the local market.
III. Sales Channels
Traditional furniture enterprises mainly market their products in three ways: first, consignment through distributors in various places; second, renting premises in various places and selling the products themselves; third, displaying and selling products through large furniture malls or furniture marts. Meanwhile, some specialised stores and chain stores with financial clout have emerged. According to the HKTDC’s consumer survey, large home centres are the major channel through which consumers obtain information on furniture products.
In recent years, furniture hypermarkets have been developing rapidly. Many of these hypermarkets develop in various places across China in the form of single-brand chain operation. There are also hypermarket clusters, i.e. a high concentration of different types of furniture hypermarkets within the same region, as well as general merchandise stores, which not only sell furniture but also other household supplies and even building materials. Where product mix is concerned, many chain operated hypermarkets are also general merchandise stores. Red Star Macalline is currently the leading home mart operator on the mainland.
The operation focus of different sales channels varies. For instance, large furniture marts mainly offer home furniture but also sell office furniture. Specialised stores generally sell their own brand, with the majority of these stores being larger domestic production enterprises and famous foreign brands, such as IKEA from Sweden, the earliest foreign brand which set up specialised stores on the mainland. This sales format is often adopted by foreign furniture companies.
In recent years, to make furniture part of the everyday life of consumers, some branded mart chains have created ‘shopping district’ by such measures as bringing in famous foreign brands, setting up home experience stores, building commercial complexes or establishing furniture villages. This way, they have successfully raised brand awareness and increased sales several folds.
The O2O e-commerce model is gaining popularity in China’s furniture market. O2O refers to the linking online sales and marketing with offline business operation and consumption. There are now different types of O2O e-commerce operators on the mainland and the O2O model takes various forms in practice. Qumei is a typical example of furniture manufacturing enterprise and e-commerce operator. The company uses its website as its sales platform, showcasing the images of various products and accepting online orders from consumers. Consumers may also opt for offline experiences by visiting dealers’ stores and place orders there at online prices. This not only allows furniture brands to carry out sales and marketing but also to boost product sales within a short time, therefore speeding up cash flows and reducing inventory pressure. Another type of furniture e-commerce is conducted by traditional furniture sellers. Easyhome, for example, has developed the Juran.cn website to move the offline experience stores online. It targets consumers who like the brand but wish to select products online. Some O2O e-commerce operators start as pure online brands and open offline experience stores afterwards. In other words, they build up their e-commerce platform by extending their coverage from online to offline channels. Meilele.com is an example of such practice.
Selected furniture exhibitions to be held in China in 2017-2018:
Date Exhibition Venue 11-14 September 2017 China International Furniture Fair (Shanghai) National Exhibition and Convention Center (Shanghai) 12-15 September 2017 China International Furniture Expo Shanghai New International Expo Center 18-21 March 2018 (Phase 1);
28-31 March 2018 (Phase 2)
China International Furniture Fair (Guangzhou) China Import and Export Fair Pazhou Complex & Poly World Trade Center Expo, Guangzhou 28-31 May 2018 China International Solid Wood Furniture Expo Meijiang Convention and Exhibition Center, Tianjin
IV. Import and Trade Regulations
After China became a WTO member, tariffs on furniture dropped significantly. Apart from the furniture products listed below, which are still subject to import duties, a zero tariff has been applied to all other furniture items since 2005.
China’s import tariff rates on furniture in 2017
HS Code Description % 94012010 Seats of a kind used for motor vehicles, of leather or composition leather 10 94012090 Other seats of a kind used for motor vehicles 10 94019011 Seat angle regulating devices 10 9404 Mattress supports/articles of bedding and similar furnishing fitted with springs 10
Source: Customs Import and Export Tariff of the People’s Republic of China 2017
Starting from 1 October 2004, the Instructions for Use of Products of Consumer Interest Part 6: Furniture came into force. According to the requirements of the new national standard, all furniture products manufactured after 1 October 2004 must come with a manual providing such information as date of manufacture, materials used, performance, model, structure, specifications, installation, use, maintenance, main technical parameters, and trouble-shooting tips. The standard also requires that all furniture on sale thereafter must comply with the relevant laws, regulations and standards on safety, health and environmental protection. Information on any hazardous or radioactive substances contained in the materials and coatings of the furniture must also be given.
The Technical Requirement for Environmental Labelling Products – Furniture came into force on 1 February 2017. Compared with the previous edition, the new edition requires the classification and disposal of wastes by furniture manufacturers. The direct discharge of sawdust and dust is prohibited. In the course of painting, enterprises must also take effective gas gathering measures and carry out standardised treatment of the waste gas collected.
The General Technical Requirements for Indoor Stone Furniture (GB/T 32282-2016) came into force on 1 July 2017. It defines the meaning and definition of indoor stone furniture and sets the technical parameters and requirements for matters such as size, shape and position tolerance, external appearance, physical and chemical properties, mechanical properties, limits on toxic substances, logo and usage descriptions, and intellectual property descriptions.
A number of national standards for furniture were amended or newly formulated in recent years. Standards such as the Testing Method for Burning Behaviours of Furniture and Subassemblies Exposed to Flaming Ignition Source, Determination of Furniture Dimethyl Fumarate Content, Safety and Technical Requirements for Glass Furniture, Furniture Industry Terminology, and Technical Requirements and Testing Method for Connectors Used in Furniture were successively implemented in 2012. General Safety Requirements of Outdoor Leisure Furniture, Seating and Tables came into force on 1 May 2013, while Limits of Harmful Substances in Plastic Furniture became effective on 1 July 2013.
General Technical Requirements for Children's Furniture (GB 28007-2011), China’s first mandatory national standard for children’s furniture, came into force on 1 August 2012 and is applicable to furniture designed or intended to be used by children aged from 3 to 14. In other words, the materials used in the production of children’s furniture are subject to a specific standard which is different from that of adult’s furniture in order to protect the health of children and prevent accidents. Focusing on safety and environmental issues, the standard lays down the structural requirements for children’s furniture, such as stipulating that these products should not have edges or pointed parts which may pose safety risks to the user. It also limits the content of hazardous substances in children’s furniture and specifies the flame retardant performance of these products.
Standard Management Practices for the Sales and After-sales Services of Rosewood Type Merchandise (SB/T 11147-2015) came into force on 1 September 2016. The purpose of this standard is to lay down specifications in the sales and after-sales of rosewood type merchandise. For example, this type of merchandise should be accompanied by information such as tree species, grade and material inspection labels. This standard also lays down detailed requirements on the sales personnel and sales venue for rosewood merchandise and there are also specific requirements on the warranty period. If a piece of rosewood merchandise is involved in repurchase and lease sale, processes such as third-party evaluation and third-party guarantee will be invoked.
The Test of Mechanical Properties of Furniture implemented in May 2014 updates the original standards and introduces stricter parametric test requirements. Seven standards, i.e. GB/T 10357.1-2013 to GB/T 10357.7-2013, have been revised, covering the stability and durability of furniture such as chairs, cabinets, single bunk beds and tables. These performance tests can help ensure the life span and safety of furniture items. The eighth update, i.e., GB/T 10357.8-2015, fills a void in China's furniture standards. It was put into implementation in 2016 to ensure the safe performance of tilting chairs, rocking chairs and lounge chairs and protect consumers' personal safety and rights.