The Chinese Furniture Industry
The Chinese Furniture Industry
The Chinese furniture industry is the biggest of its kind in the world. China is the number one furniture producer, consumer and exporter. The industry maintained an astonishing growth rate of 17% between 2006-2016.The Chinese furniture industry is mainly driven by real estate sales. The real estate industry, an industry that is one of the backbones of the Chinese economy, had a similar remarkable growth. Therefore it is not surprising that the revenues and profits in the furniture industry in China have increased so much.
Production in the Chinese furniture industry
As mentioned before the income of the furniture industry in China has been rising steadily over the last years. The production side of Chinese furniture industry accounts for around 39% of the world’s furniture production. Chinese furniture manufacturers produce various types of furniture from house furniture to office supplies. Mainly the Greater Bay Area plays an important role in production. Over 70% of the country’s furniture manufacturers are headquartered in the GBA area, because the GBA has a lot of technical and labour resources.
It is no surprise that the GBA’s capital of technology, Shenzhen, is where the majority of innovations within the furniture industry are developed. The technological innovation of furniture in China will have a far-reaching impact on the global furniture market.
However, recently a shift is taking place in where the furniture itself is being produced. The Chinese furniture industry is slowly moving from the Eastern and Southern coastal regions to the central region of China. Most of the furniture enterprises in Beijing and the GBA have moved their production to Hebei, Henan, Jiangsu, Shandong, Anhui and other provinces.
This trend of transferring production and manufacturing bases from large cities to small and medium-sized cities or counties and keeping R&D and headquarters in larger cities, is not limited to the Chinese furniture industry only and can be seen in other industries as well.
There are a variety of reasons why China is the number one consumer of furniture in the world. Furniture is a basic need in every household. Within the Chinese market consumers between the age of 25 and 35, people who mostly just started living on their own or are newly married have the highest demand for furniture. Furthermore, the Chinese middle-class has been growing rapidly and has led to an increased demand for higher quality products.
Moreover, urbanization is a major cause for demand. According to the latest data released by the National Bureau of statistics; at the end of 2017 the urbanization rate in China was 58.52%, an increase of 1.17% from the previous year. People moving to cities from rural areas often leave behind a majority of their belongings and buy new things in the city. This means that a lot of new furniture is needed.
Within the Chinese furniture industry three main demand trends can be seen. First of all, Chinese consumer have an increasing taste for environmental friendly furniture. They prefer furniture made from natural and eco-friendly materials. This demand is not only caused by caring for the environment, but also out of fear for chemicals harming the well being of the customer
Another demand trend that can be identified is the trend of custom made furniture. Of course this trend is mainly seen in the more high end customer segment. However with the rising middle and upper class in China it is definitely a trend worth looking into.
Lastly, intelligent furniture is becoming a trend. According to IDC’s quarterly tracking report on the smart home equipment market in China, shipments of smart home devices in China are expected to reach 150 million units in 2019. The intelligent furniture trend is not only popular in the Chinese furniture market. Mobile phone manufacturers, like Huawei and Xiaomi, and Internet Giants, such as Baidu and JD.com, are actively promoting intelligent furniture.
There are several distribution channels used in the Chinese furniture industry. Firstly, there are the traditional sales channels. Furniture manufacturers sell their good through distributers or they set up their own shops selling directly to the consumers. Examples of these channels are furniture malls, high-end furniture markets, and warehousing type markets like IKEA. More modern sales channels are e-commerce channels. E-commerce is growing trend in China. You can buy anything online, furniture is no exception. Furniture producers either sell their furniture through established web shops, such as Aliexpress or Taobao., or they have their own dedicated online shop. The Chinese e-commerce trend and the trend of custom furniture work really well together. Online furniture shops often have the option to customize the products to a customer’s liking.
International brands penetration of the Chinese furniture market
In 2017, the total amount of imported furniture grew with 15.65% to 30.52 billion USD. There are three ways how a foreign furniture company can enter the Chinese furniture industry: by exporting furniture to China in their original packaging, through manufacturing consignment agreements, and by establishment of a local company.
The furniture that is imported from abroad has a relatively low market share in China, because it is often sold for a high price and is seen as a more high class product. In manufacturing consignment agreements foreign furniture brands entrusts Chinese factories with the production of their goods. However, if the furniture brand is not registered as a company in China, it cannot sell the produced furniture in China. Therefore, all produced furniture has to exit the country first, before returning China to be sold. This is the only way for unregistered companies to legally sell their products in China, even though the furniture is produced in China.
Finally, foreign brands and companies can establish a wholly foreign owned enterprise (WFOE) to enter the Chinese furniture industry. After the registration of a WFOE, the Chinese factory is allowed to handle the production and processing of the furniture, and sell directly to the Chinese market. can be sold in home directly. If you want to learn more about the registration of a WFOE and establishing your own company in China, you can request our white paper here.
China International Furniture Expo
The largest furniture exhibition in China is the China International Furniture Expo, held 9-12 September 2019 in Shanghai. The China International Furniture Expo, better known as Furniture China, has been leading in the industry for over two decades. As one of the world’s leading B2B trade fairs, over 100,000 participants are involved in the show every year. 300,000 square meter of exhibition area and 3500 high quality suppliers.
If you are interested in doing business in China and you want to know more about the market you operate in, feel free to contact us!