High cost pressure on Chinese furniture industry

Recently, Da Vinci's high-priced furniture fraud incident has made the domestic furniture consumption market a huge space. In fact, after the financial crisis, furniture exports have encountered a cold current. Many foreign trade furniture enterprises have begun to switch to the domestic market, and the competition in the furniture industry is becoming increasingly fierce. At the same time, under the weight of rising costs, domestic trade furniture companies are looking for better production bases. A shift from the coast to the central and western regions and from west to north is underway.

"Now participate in the exhibition of the furniture industry, even the booth can not be set, especially in Sichuan, many furniture companies began to set up factories in the central and western regions of Sichuan." An industry insider told the "China Business News" reporter.

Dilemma

As the fourth largest traditional manufacturing industry, the total output value of China's furniture industry reached 900 billion yuan in 2010, making it the world's largest producer of furniture.

“Although the output value is huge, after the financial crisis, the furniture industry has faced a difficult time. Especially this year and next year.” Zhu Changling, chairman of the China Furniture Association, said that due to the appreciation of the renminbi, the sharp rise in raw materials and labor costs, and upstream The impact of real estate regulation and control policies. This year, the domestic furniture industry's production growth rate and export growth will drop a lot.

Since the second half of 2007, the export-oriented coastal furniture industry has felt a cold winter. In Guangdong, the largest province for furniture exports, more than 300 furniture companies have closed down. In 2009, the province's furniture industry exports continued to grow for 11 consecutive months, and it has only eased in 2010. But this year, the export form of the furniture industry has deteriorated again.

"This year's coastal labor costs have increased by at least 20% over last year. In three years, the wages of the Guangdong furniture industry have risen from 1,600 yuan to more than 3,000 yuan, and the number of technicians has climbed from 4,000 yuan to nearly 10,000 yuan." Secretary General of Shenzhen Furniture Industry Association Hou Kepeng said. In addition, timber prices have risen by 20% this year. The rising exchange rate of the renminbi has made the coastal export-oriented furniture industry even more fearful. According to estimates by the Zhejiang Furniture Industry Association, for every one percentage point increase in the exchange rate of the RMB against the US dollar, the province’s furniture industry will lose RMB 350 million in annual profit.

“Many companies I have contacted have seen a sharp drop in export orders. Some companies have fallen 50% compared to last year,” said Su Zhibin, an adviser to the Guangdong furniture industry researcher.

Under this background, coastal furniture enterprises that mainly manufacture high-end products and export furniture began to transform the domestic trade market and increase the transfer of industries to the central and western regions.

Tan Jun, the furniture director of Guangdong Dynasty, frequently visited the provinces of the central and western regions. “Sichuan and Jiangxi are the provinces we focus on, and we are ready to choose a place to establish a production base.”

Previously, the Shenzhen Furniture Association had organized a number of well-known enterprises to go to Sichuan and Hubei provinces for investment investigations. Song Qiqing, president of Xingli Furniture Group, who has been a member of the delegation, has decided to establish a software furniture production base in Chengdu and Wuhan. Previously, the company has always been export-oriented, "now the domestic sales ratio has reached 65%."

The transfer of eastern enterprises to the central and western regions has been greatly welcomed by local governments. Local governments in central and western China, including Chengdu, Xi'an, Wuhan, Kunming and Chongqing, have launched targeted investment projects. For example, Wuhan introduced the concept of “Chinese Furniture CBD”, and Chengdu, which has been bent on taking over the transfer of coastal furniture industry, has slogan “Global Furniture Building Materials CBD”. The total investment of the project is more than 10 billion yuan, which can accommodate 500 furniture enterprises.

Tu Xian, deputy director of the Chengdu Furniture Industry Park Management Committee, said that since last year, it has received inspections and consultations from a number of coastal furniture manufacturers. In the furniture industry park, it has gathered ten foreign investment projects such as Zhejiang Yashilin, Dezhongrun and Jusen.

Westward migration

The transfer of traditional manufacturing from east to west seems to be a matter of course. But the complicated economic situation has brought changes to the furniture manufacturing industry.

"Now the furniture manufacturing enterprises in the west are also shifting industries to the north. From the east to the west is just the era of the furniture industry's pre-transfer." Wang Xuemao, president of the Sichuan Furniture Industry Chamber of Commerce, said.

Since the second half of last year, as the country's second largest furniture production base, Sichuan's furniture industry has begun to brew industrial transfer to the north. “We have organized Sichuan furniture enterprises to go to the Xianghe River in Hebei Province to inspect and prepare to build a large Sichuan furniture industrial park covering an area of ​​8,700 mu.” Prior to this, Sichuan furniture enterprises had begun to enter Shaanxi.

The peculiar reverse industry transfer in the furniture industry has opened.

“The coastal furniture industry has been a first-tier city in China, and Sichuan furniture has occupied more than 70% of the country’s second- and third-tier markets. As the coastal furniture industry turns to the domestic market, the competition between the two sides will inevitably increase.” Sichuan Furniture Rong Yiwei, executive vice president and secretary general of the Chamber of Import and Export.

As the leader of the furniture industry in the Midwest, the Sichuan furniture industry broke out to the north, precisely because of market competition. “Xianghe is very important for the north to market the whole of North China, including the northeast region, and to the south directly to the Central Plains market.”

In addition to proactively confronting market competition factors, an important external factor driving the reverse transfer of the furniture industry is rising cost pressures.

“Chengdu is one of the most developed regions in the western economy. In many aspects, the cost gap is not much different from that in the coastal area.” Xu Mingde, deputy general manager of Sichuan Langdu Furniture, said, “The wages of Chengdu’s furniture companies are now different from those along the coast. Three or four hundred yuan, the advantage is slowly disappearing."

“In addition, the logistics cost this year has increased by 15% to 20% compared with last year. Only logistics costs have accounted for more than 30% of the furniture sales price.” Wang Xuemao said, “In order to have a long-term development in the future, furniture companies must Gradually build a manufacturing and distribution base within a radius of 500 kilometers, otherwise it will be difficult to be competitive."

"A traditional manufacturing industry like the furniture industry is a nomadic industry that lives in the water." In Wang Xuemao's view, two-way industrial transfer is an increasingly significant trend.

Scramble

Under the big change of the two-way industrial transfer of the representative traditional manufacturing business of the furniture industry, the competition among regional industries has become increasingly fierce. Competition is not only about physical struggle, but also in the competition for sales platform resources.

"In the next five years, the country will build 25 million sets of affordable housing. This year, it has started 10 million sets. It will be available in the second half of next year. This is a great opportunity for furniture companies." Hou Kepeng, secretary general of the Shenzhen Furniture Industry Association, said that Under the competition, the domestic and foreign furniture companies will have more competition for the sales platform.

A few large-scale furniture exhibitions in China, including Chengdu International Furniture Industry Exhibition and Shanghai International Furniture Exhibition, have now become the trading platform resources for furniture companies to compete for.

According to Chen Lin, director of the Chengdu Expo Bureau, “the purchase of 150,000 professional buyers attending the Chengdu exhibition this year reached 8.67 billion yuan, and the efficiency of the industrial chain driven by the industry exceeded 40 billion yuan.

The fierce competition situation has also made all large-scale furniture exhibitions “one hard to find”. “This Qingdao furniture enterprise group will have an exhibition space of 8,000 square meters, which will only solve 450 square meters. Due to fierce competition, hundreds of companies have not got booths.” Chengdu Expo Bureau said that the background of the furniture industry has changed. Under the competition, the market and platform competition in the furniture industry will become more intense.