Korean Furniture Industry

Posted in Korea on Monday, 18 March 2013. Print

Korea concluded 2012 with a GDP growth of around 6%, way above the previous year's two percent growth rate.

Korean Furniture Industry
— by Irena Lee

Korea concluded 2012 with a GDP growth of around 6%, way above the previous year’s two percent growth rate. Taken together, the country has averaged just over a 2.0% growth over the last three years. For 2012, most economists forecasted growth in the 3.5% to 4.5% range, a rate that would be considered normal for the country.

But Local authorities have already acknowledged that the growth momentum is slowing down as the European debt crisis continues to cloud the global outlook.

In Korea, the economy is still expected to expand smartly this year, thanks to robust exports. Yet, pockets of weaknesses are emerging. At least, 37% of homeowners say they regard buying a home as a “risky investment,” while a total of 86% believe that home prices in their area will either stagnate or fall over in 2013.

That’s a striking contrast to much of the past few decades, when many Koreans concluded that home prices inevitably appreciated by an annual average of 10%. It does suggest that potential homebuyers have been so badly traumatised that their psyches have a lot more healing to do before the market can fully recover. Needless to say, the real estate recession will and has affected the furniture market.

Spring and autumn are usually peak season for the furniture market because it is the Korean wedding season. In Korea, the bridegroom is traditionally asked to provide a home upon marriage, while the bride is expected to fill the home with appliances and other goods.

The increased job insecurity and income imbalances following the Asian crisis have reduced the number of marriages and raised the average age for tying the knot; that which remain the main factors behind the current low fertility rate.

Korea’s furniture market’s most important change is the rapidly growing online market. If there are 10 prospective customers out there, four of those 10 actually visit a store to buy furniture. Top brand Hanssem’ online sales compared to 2011’s two-fold increase of 65 million dollars which was launched in three years has grown to more than four times.

The nation’s online vendors’ market share of total households is growing rapidly every year and this growth rate will likely continue for the time being.

In addition, the issue of Korea’s largest is IKEA. The Swedish furniture giant plans to speed up its expansion to capture market share and feed the Korean middle class’s appetite for Scandinavian home furnishing.

The brand’s core customers are those between the ages 25 and 35 who have relatively higher incomes than the average and a higher education than the average. They are often more open to a Westernised lifestyle, and in most instances, these are also those who buy homes. And as Korea’s growing middle class competes for living space in the mega cities, IKEA is well-suited to serve their living needs. In relation to large companies, IKEA’s expansion is advantageous as it spurs marketing investments whilst strengthen human resources. However, the profits and sales of small businesses continue to struggle as uncertainty grows. Interestingly, while copycat stores only show the power of IKEA’s concept, the real competition comes from local competitors who are quickly becoming more sophisticated.

They are moving quickly beyond mere imitation to establishing themselves in their own way. While at present the market competition is already fierce, it continues to grow fiercer by the day.


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