China is the largest furniture manufacturer and exporter in the world today. Cheap labor and land costs, and the prospect of a growing domestic market with the world’s largest population continues to keep the furniture market optimistic.
Modern Chinese furniture industry started to thrive from the 1980s. Under the opening-up and reform efforts, China implemented many preferential policies to attract foreign investment, such as preferential tax schemes. In addition, cheap labor and land costs, and the prospect of a growing domestic market with the world’s largest population all played a part in attracting enterprises from Taiwan, Hong Kong, other countries and regions to invest in China. At the beginning, the investment activities were confined to the cities in Pearl River Delta, such as Dongguan, Shenzhen, Zhongshan, Guangzhou, and Foshan and later on, gradually extended into inland cities. Over the years, Chinese furniture industry has grown significantly and today, China is the biggest furniture manufacturer and exporter in the world.
In 2010, the gross sales generated by the Chinese furniture industry reached more than RMB 900 billion, with a 32.24% increase year-on-year. Furniture export increased by 31.3% and reached RMB 1577.93 billion; furniture import also increased by 30.3% and the total value was RMB 1394.83 billion.
The modern Chinese furniture industry began during the 1980s, when manufacturers from Taiwan, Hong Kong and other countries relocated their factories to South China because of the cheaper land and labor cost there. Later on, the manufacturing gradually expanded to Yangtze River and other parts of China. By 30 December 2010, the number of furniture manufacturers formed by foreign investment was close to 3,000.
Statistics show there are currently more than 40,000 privately owned furniture companies (with an annual output value averaging over 5 million CNY) in China, more than 8,000 of whom are from Pearl River Delta region (cities like Shenzhen, Dongguan, Foshan, Zhongshan, and Guangzhou) with close to 2 million people working in these companies.
China produces a wide range of furniture products and most furniture manufacturers are located in the following regions:
1. Pearl River Delta region: mainly in Dongguan, Shenzhen, Foshan, Zhongshan, and Guangzhou;
2. Yangtze River Delta region: mainly in Zhejiang province, Jiangsu province, and Shanghai;
3. Southwest region: mainly in Chengdu, Sichuan province;
4. Bohai Rim: mainly in Beijing, Tianjin, Shandong province, and Hebei province;
5. Northeast Region: including Heilongjiang, Jilin, and Liaoning three provinces;
Regions like central and Southeast China also see some furniture manufacturer, but most of these companies tend to be in small size and cannot be put on par with those in the above mentioned five regions.
Pearl River Delta accounts for 48.3% of China’s overall furniture manufacturing power. The rest spreads over China: Yangtze River Delta region, 13.1%; Bohai Rim, 9.2%; Northeast region, 7.6%; Southwest region, 12.1%, and other regions 9.7%. Most of the leading furniture brands in the Chinese markets come from South China.
Dongguan is the center of furniture production base in Pearl River Delta. The idea of “Guangdong leads Chinese furniture and Dongguan leads Guangdong furniture” is widely accepted in the furniture industry. Today, there are more than 1,700 large-scale furniture manufacturing enterprises in Dongguan. Amongst them, more than 100 enterprises have achieved over RMB 100 million in industrial gross outputs . Dongguan is the city with the largest number of furniture factories invested by Taiwanese and Hong Kong businessmen, with a total of close to 500. According to incomplete statistics, furniture industrial gross output value has reached approximately RMB 150 billion in Dongguan, out of which around USD 9.5 billion worth is exported, mostly to American and European markets. Dongguan is home to many big players in the industry both in the field of export and domestic sales. Many well-know furniture companies set up their marketing head offices in Houjie Town in Dongguan. Dongguan produces a wide range of furniture, be it panel furniture, solid wood furniture or furniture of mixed materials.
Furniture Wholesale and Retail
Since 1990s, the swift increase in furniture-production capacity resulted in the urgent need of establishing proper distribution channels. This brought about the emergence of the Chinese furniture malls. The first modernized furniture mall “JSWB International Furniture Fair Center” opened in Shanghai in 1995. It started the modern Chinese-styled whole and retail format. In the next decade, the total space of Chinese furniture malls quickly expanded. It is said that there are over 10,000 furniture malls of various sizes all across China, with a total of 40 million square meters. In recent years, the construction and opening of furniture malls seems to be overheating and bubbles are appearing with surplus of retail space in furniture malls in some regions.
Paired with the development of furniture manufacturing industry in China, furniture distribution business has been developing in China for over 30 years. The Reform and Opening-up policy attracted foreign investment into China, which in turn boosted the rise of private enterprises and triggered a revolution in the Chinese retail sector. Well-tested retail models including franchising chain stores commonly found in international market were fully adopted by Chinese enterprises and the number of franchising stores grew exponentially in China.
Distributors, who sell to consumers in furniture malls, are an important means for furniture manufacturers to sell their products. Therefore, the rapid growth of the Chinese furniture industry also saw the rapid growth of furniture malls and in turn the distributors. At present, furniture malls are still expanding at a high speed, both in terms of numbers and sizes. This is despite the space surplus in some regions. The beginning of the boom of the real estate market around 1990s, especially the increasingly popular commercial property concept, to a certain extend, accelerated the growth of furniture malls in China. Most of the furniture malls operators currently seen in the market were born during that period of time.
Manufacturers, trade shows, furniture malls and distributors are the four building blocks of a complete furniture distribution chain in China. Generally speaking, a majority of furniture (up to 90%) are sold through franchising stores. Most of the Independent stores, lifestyle stores and multi-brands stores also adopt franchising as a major way to expand their business. The rest of the market shares are taken up by factory outlets and old fashioned stores. In recent years, e-commerce in the furniture industry enjoys exponential growth, some estimate at a rate of tens or hundreds of times, even though it is contrary to the popular concept of “experiential sales” (that customers need to touch, see, smell and feel the furniture).
The number of retailers also increased quickly. At present, there is an estimated 1 million or so furniture retailers in China. However big the number may be, this group of retailers remain largely unorganized.
Recently, Furniture Today China conducted a survey on the furniture retailers in China. A total of 530 retailers participated in the survey. According to observations drawn, out of the participants, 35% have only one store, 42% own 2 to 4 retail stores, 15% have 6 to 10 retail stores, 8% own more than 10 retail stores; In terms of store sizes, 42% of the stores are below 500 square meters; 52% are with a size between 500 to 1,500 square meters; 6% of stores are over 1,500 square meters.
Compared with year 2009, 40% retailers have reduced the number of furniture brand they carry in 2010. 36% have increased the number while the rest experienced no change.
Furniture Trade Shows in China
At present, trade exhibitions are a central component to furniture distribution in China. Increasingly, exhibitions are becoming a major platform for exchanges amongst local furniture manufacturers, foreign manufacturers and distributors. 3 leaders in the trade fairs sector are namely China International Furniture Fair in Guangzhou, International Famous Furniture Fair in Dongguan and Furniture China in Shanghai. These events are getting ever larger in size and have become “barometers” of furniture business in China. Equally important, these fair also play a very important role in bringing made-in-China furniture to the global market.
China International Furniture Fair in Guangzhou (held in March and September yearly at the China Import & Export Fair Complex at Pazhou) and Furniture China in Shanghai (held annually in September at the Shanghai New International Exhibition Center in Pudong) give significant focus to the export markets, and are two of the most influential international exhibitions in China.
International Famous Furniture Fair (Dongguan), also known as 3F, has over the years stuck to a strategy of balanced development – targeted to serve both domestic and international market. It has grown to be the leading show for selling into the Chinese domestic market. Over 70% of the leading furniture manufacturers from Hong Kong, Taiwan and mainland China are exhibitors at 3F. It is also the window for many renowned international furniture brands to enter the Chinese local market.. Two times a year in March and September, 3F is held at the Guangdong Modern International Exhibition Center in Houjie, Dongguan. The fair attracts hundreds of thousand of local distributors, retailers and designers, as well as tens of thousand of international buyers from over one hundred countries.
The Promising Chinese Domestic Market
In recent years, China has become one of the most important furniture producing and exporting countries. However, the potentials of the domestic Chinese market is only beginning to be appreciated, especially after the world economic crisis in 2008, with huge government effort to boost domestic demand.
Over the past 20 years, China maintained an annual growth rate averaging 10% and is one of the fastest growing economies in the world. It is projected that by 2050, China will become the largest economy gobally.
According to government figures, the gross domestic product in 2010 was RMB 39.7983 trillion , up by 10.3% over that of the previous year at comparable prices. In 2010, the net income of urban residents per capita was RMB 21,033 with an increase of 11.5% compared to the previous year. The disposable income of the urban residents per capita was RMB 19,109 with an increase of 11.3%, The net income per capita of the rural residents was RMB 5,919 with an increase of 14.9%. Although the absolute sum may not be particularly impressive, but such numbers multiplied by the population of 1.3 billion speaks volume. The rising income of Chinese people means the increase of the population’s consumption power and it certainly will lead to a much larger market.
In 2010, Forbes China and China Construction Bank jointly published a whitepaper with the title of “2010 Chinese Private Wealth”. According to the paper, there are 224,000 high net value individual in 2009 and the number will increase to 331,000 by the end of 2010. Here high net value individual refers to individuals with assets over RMB 10 million, excluding real estate.
The reform and opening-up policy started over 30 years ago and it has been propelling Chinese economy to grow at an average rate around 10% annually. With a careful and conservative attitude, China can fine-tune its economic policy continuously to keep the economy growing constantly.
The rise of China and its ever expanding market is certainly a positive news to people in the furniture industry, not only in China but outside of the country too. While more and more Chinese furniture manufacturers are shifting their attention from the export market to the domestic market, an increasing number of international furniture companies are trying to sell into Chinese market too.