Panels & Furniture Asia July/August 2020

42 | FURNITURE MANUFACTURING
July / August 2020, Issue 4 | Panels & Furniture Asia
In 2019, the main growing trend was in furnishing new buildings.
This is beneficial to our industry, which receives a distribution
channel, as well as customers who purchase furniture at
wholesale prices and move into turnkey housing.
Unfortunately, however, there is little prospect of a sharp increase
in demand for furniture in Russia. Household incomes are not
increasing, borrowing is on the rise, and since furniture is not
considered a consumer good, many potential buyers put off
updating furniture to better times. Hence, there is demand but
this is not reflected in sales. The driver of growth in the demand
and sale of furniture could be the adjustment of standards for
housing under construction. This could mean the inclusion of preinstalled
wooden furniture in new apartments and a simultaneous
change in mortgage mechanisms, so that mortgage agreements
would not just include the cost of the house, but furniture as well.
All these initiatives have been discussed at the government level
for more than half a year, and the Association of Furniture and
Woodworking Enterprises of Russia is actively involved in this.
We hope that in the near future, the market will see the results
of their work.
In the past two years, due to state support, Russian furniture
makers have become a strong competitor to foreign manufacturers.
This was reflected in in 2018, where the share of sales of domestic
furniture rose to a record of 50.1%. Last year, the trend was
confirmed. Modern buyers are guided primarily by the pricequality
ratio. The leaders of the Russian furniture industry
are not inferior to, and even somewhat surpass, their foreign
counterparts.
We forecast that in 2020, the market growth will remain at 5% to
7%; we do not expect a sharp jump in demand in one direction
or another. Buyers will be more carefully prepared when making
purchases and will be even more patient in waiting for discounts
and promotions.
PROHIBITION OF PURCHASE OF FOREIGN
FURNITURE
AS: The entry of the well-known government decree number
1072, under State Law 44, on the prohibition of public
procurement of foreign-made furniture played a crucial role in
the development of the modern Russian furniture industry. It has
been two years since the decree was passed and many enterprises
have significantly increased production and sales. The volume
of furniture purchased by the state in 2018 and the first half of
2019 increased by 15% and exceeded 35 billion rubles ($501.9
million). Companies were able to invest in updating collections,
fixed assets, training and hiring personnel, expanding dealer
networks and developing new markets.
POTENTIAL UPCOMING CHALLENGES
AS: Furniture makers face similar problems to companies in
other sectors: expensive loans and the lack of “long” money; an
increase in tariffs of natural monopolists and domestic fuel prices;
unpredictability of legislative changes; a drop in real incomes of
households; and a small number of highly qualified personnel.
In addition, it is difficult to find reliable suppliers of high-quality
components inside the country, especially for furniture fittings.
In terms of online commerce or e-commerce, furniture –
especially large items such as beds and cabinets – is still not the
kind of product that is bought through the Internet. It is true that
consumers save time and effort by using Internet resources at
the stage of preparation for acquisition – they study the products
online, look for the most favourable offers and read reviews.
However, at the final stage, they would still visit the showroom of
their selected manufacturer. Especially for products with a long
lifespan, consumers would first want to evaluate their capacity
and convenience, compare selected models with others, and
select their preferred colours, shapes and details.
EXPORT PROSPECTS FOR RUSSIAN FURNITURE
AS: Currently, First Furniture Factory sells about 50% of products
to corporate customers, including export contracts. The volume
of the latter is constantly increasing but not as fast as we would
like. The process of penetrating foreign markets turned out to
be longer than we initially thought, but we are systematically
developing in this direction.
However, the export of Russian furniture has indeed been growing
since 2015. First, Russian manufacturers penetrated the markets
of countries in the Commonwealth of Independent States. By
2018, Western Europe accounted for up to 20% of Russian
furniture exports, and our products are especially popular in
Germany and Sweden. There is also a demand for our products
in the Middle East, India and South East Asia. In terms of quality
and design, our furniture is in no way inferior to the best world
standards, but at more democratic prices. Our entry into foreign
markets is mainly constrained by bureaucratic procedures. Many
permits and confirmations of our furniture's compliance with the
each country’s standards are required and it takes a lot of time.
LOOKING AHEAD
AS: The plan is simple: grow, develop and improve. First Furniture
Factory is a rather ambitious company; it’s not enough for us
to be a leader in the Russian market and we strive to become a
world leader in furniture manufacturing. P
This article was first published in Lesnaya Industriya Journal.