Furniture Exports Are Subject To Bottlenecks

- Mar 24, 2018-

Following the first negative growth in China's furniture exports in 2016, on March 24th, the reporter of “Daily Economic News” was informed by Zhang Bingbing, Secretary General of the China Furniture Association that from January to November 2017, the enterprises above designated size in the furniture industry in China The accumulative total income from principal operations was RMB 8,281,600, an increase of 10.24% over the same period of last year; cumulative exports of enterprises above designated size were US$ 46.293 billion, an increase of 5.29% year-on-year.

However, "Daily Economic News" reporter learned that China's furniture exports suffered bottlenecks and could not break through for a long time. Regarding the status quo of furniture exports, on January 25, Qin Xu, the person in charge of China Liansu (02128, HK)’s Leading Global House, said in an interview with reporters that most domestic furniture exports are OEM (OEM In the way, the profit space is very limited. "There is no profit for OEM. There is no order without OEM."

Industry: Low gross margin for furniture exports


  On March 24th, the report on "Status and Future Trends of China's Furniture Industry" was released. According to the report, January-November 2017, the furniture industry above designated size achieved a total of 828.106 billion yuan in revenue from main operations, an increase of 10.24% year-on-year; the cumulative total profit was 49.968 billion yuan, an increase of 9.42% year-on-year; the cumulative output was 735,205,900. It increased by 3.47% year-on-year. In terms of import and export, from January to November 2017, the total value of the furniture industry enterprises above designated size was 46.393 billion US dollars, a year-on-year increase of 5.29%, and the cumulative import value was 2.758 billion US dollars, a year-on-year increase of 15.72%.


 

  Guangdong Province is a major province of furniture production and sales in China. On March 24th, Wang Ke, chairman of the Guangdong Furniture Association, told the Daily Economic News that in 2017, the total value of furniture sales in the province is estimated to be about RMB 420 billion, a year-on-year increase of 5.5%. Among them, furniture exports were about 137 billion yuan, up 4.1% year-on-year; domestic sales were up 6.2%.


  In 2016, China's furniture exports showed a negative growth. From the data for 2017, the national furniture export situation seems to have improved. However, Qin Xu told reporters that China's furniture exports are "do not make OEM profits, do not do OEM orders."

  This sentence points out the long-standing difficulties in the Chinese furniture industry. According to Qin Xu, nearly 90% of domestic furniture exports are OEM products. In recent years, with the increase in domestic labor costs, coupled with the increasingly stringent requirements of the importing countries on furniture product quality evaluation, the gross profit margin of furniture exports is very low.

  The reporter learned that the traditional market for furniture exports in China is mainly concentrated in the EU, the United States, Japan and other countries and regions. In recent years, Southeast Asian countries such as Vietnam, which has a strong cost advantage, are also occupying China’s original share of the export market.


Overseas sales difficulties to be solved


  At the beginning of 2018, the furniture industry received a heavy news. Dongguan Dongguan Taisheng Furniture Co., Ltd., a well-known furniture OEM in Dongguan (hereinafter referred to as Dongguan Taisheng), announced that production was suspended due to a decline in business. Afterwards, Guo Shanhui, chairman of Taisheng International Group, a subsidiary of Dongguan Taisheng Group, responded by holding a press conference. The Dongguan plant was shut down because it was engaged in smart manufacturing. To upgrade it, it is expected that the Dongguan plant will be restarted soon and the Dongguan factory will Exported to domestic sales.

According to Qin Xu, since 2017, the prices of furniture raw materials have continued to rise, further squeezing the gross profit margin of furniture companies. He also stated that the lack of understanding of the overseas market by Chinese furniture manufacturers is an important reason for the difficulty in opening up overseas markets.

  He said that the reasons for the low gross margin of Chinese furniture exports also include the high transparency of the Chinese furniture market. "They (foreign buyers) know too much about what they need. How much money is your template, and how much money is imported, they all know that Chinese furniture is most exposed to the international market and basically started from the show, so there is no profit Space, great competition, everyone grabs each other."


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