Here are some clues that reveal why domestic wood manufacturers have lost an important part of the internal market.
An informed guide is, as always, Brussels. “The EU furniture market situation and a possible furniture products initiative’’ is a study submitted in November 2014 to the European Commission, DG Enterprise and Industry, by the Centre for Industrial Studies. Maybe it is not accidental that the authors are coming from Italy, Germany and Poland, the countries which are in the best position to talk about the present and to be trend setters. Italy and Germany – due to the fact that these countries have big markets, great producers with state of the art technologies, and Poland – because it is the rising star of the European and even global wood industry, it knows how to obtain maximum profit from its comparative advantages, and is ‘’effective in benefitting from the integration of the EU market’’.
All three states are among the first commercial partners of the Romanian industry, as a market for exports and a source of imports. As a matter of fact, we are more interested in how the former colleagues from the East, the Polish, have succeeded in becoming such important players so that we can now find them not only in statistics, but even on the labels from the furniture we buy for our homes.
Be ready to make more profits from panels!
Actually, this is one of the secrets – the Polish were catching up with the three letter trend – RTA (Ready to Assemble). ‘’Much of the furniture produced in Europe today is based on the assembly of wood-based panels (particle board and MDF – Medium density fiberboard)’’, stated the study. ’’In the last decade, faster growth in wood-based panels production was recorded in Eastern European countries, especially Romania, where production capacity increased from 930,000 cubic metres in 2007 to 2,040,000 in 2011. But Germany is the largest producer of MDF and Poland is in the second position, constantly increasing its production capacity’’.
Nevertheless, while most of our panels production takes the way of export (EUR 530 million in 2013, EUR 100 million more compared to 2012 – according to figures provided by the Association of the furniture producers – APMOB), the Polish panels are incorporated in value-added production. This has made Poland become IKEA’s second supplier. And if you wonder, which is the 5th? … we wish, but it is Lithuania. Yes, this tiny country, but with such a speed in catching up.
Stop being so tied to the chair!
A funny (even controversial) IKEA commercial from the ‘90s was telling consumers: ‘’Stop being so English!’’. Anyway, such a commercial would not be necessary in Romania, as long as local consumers are not so sensitive to the country of origin of the furniture (see table below).
It is hard to imagine here a campaign like ‘’Proud of Polish Furniture’’, through which the producers from this country are targeting the domestic market, in order to preserve their share of 66%.
This is not only about the consumer’s patriotism, but mainly about his needs and how the producers are responding to them. For the Romanian producers (irrespective there are local or foreign investments) it was easier and more lucrative to specialize in what is called upholstered segment (i.e. single / double – triple seater sofas, living room chairs, couches, dining room chairs), where we can see the fastest growth in the world production. Everybody is making chairs (even sofas fit for the Romanians’ tiny apartments) and our producers will not be able to blame it on the huge cost of workforce or even on the huge cost of production if selling prices are not competitive.
Actually, the profit margins could be higher in Romania than on the mature markets. Recently, Pasquale Junior Natuzzi, the third son of the founder of Natuzzi group – the largest Italian furniture producer – said that the facility they have in Baia Mare (North-West of Romania) is working at full capacity and has one of the highest productivity in the industry. He has mentioned, according to a local business publication, that a small share of the production of ItalSofa Romania will be transferred to Italy, without affecting the production in Romania.
On the other hand, it is true that the market is not encouraging investments such as, for example, in the kitchen segment – the most innovative on the market, with a much higher added value, but where the market drive is represented by the investments in residential construction and the income availability of consumers. Note that the furniture consumption in 2012 was still at 60% of 2008, the level before the crisis (in Poland, it was over 80%). And any investor will look at the figures – consumption in Romania is five times lower than in Poland, and incomparable to the West (see the figures).
Bet on the local retail chain!
So, it is not surprising at all to find out that a Polish local producer ‘’has a developed sales network of about 2,300 retail outlets, over half of which are located abroad. In Poland, in addition to partner outlets, the sales of furniture and home accessories is carried out by 56 owned furniture stores, including 12 large surface ones’’.
Anyway, those who understand the market will always find a place to grow. In 2014, the local producer LEMET has continued the investments started in 2013 in its own stores, LEM’s. Recently, it has opened a 2,000 sqm store near the newest Carrefour (Vulcan Value Center). In October 2014, the entire showroom surface of LEM’s in the country was 66,000 sqm, of which 4,000 in Bucharest.
