Furniture industry works through challenging times

January 4, 2010
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The U.S. office furniture industry enjoyed a robust period of growth during the 1990s, starting from $7.2 billion in shipment volume in 1991 and reaching a peak of $13.3 billion by 2000. We entered the 21st century with three consecutive years of decline (unprecedented since beginning to track shipment volumes in 1972), dropping to $8.5 billion during 2003, a cumulative 36 percent decline over that three-year period. A period of recovery began in 2004 that saw the industry regain some of the lost volume and reaching $11.4 billion in shipments by 2007.

Then came the implosion of the financial markets during 2008. Office furniture shipments held steady through most of the year, but orders started drying up in the fourth quarter, ultimately resulting in a drop in shipments of just 2 percent for calendar year 2008. The industry is expected to decline about 30 percent in 2009 to a shipment level of about $7.8 billion. And we see another drop of approximately 5 percent in 2010 to $7.4 billion before some recovery in 2011 and beyond.

However, these bleak statistics don’t tell the whole story. Based on shipment numbers alone (an industry down 44 percent from its peak), one might expect dramatic consolidation and wholesale business closures. While there has been some consolidation through acquisitions and a few companies closing down, there have also been several new company start-ups during this time. U.S. Bureau of the Census data indicates a small (3 percent) decline in the total number of furniture manufacturing companies between 2002 and 2007.

Another factor is that the sales volume data cited above are for office furniture shipments only. Many companies that historically focused on office furniture manufacturing are now diversifying their product lines to include educational, hospitality and health care furniture products, and these shipment volumes are not included in the numbers above. So, in many cases, a company’s total sales volume has not declined to the same degree as office furniture shipments.

Additionally, as a result of technological advances (i.e. wireless capability, flat screens, etc.) and facility cost containment goals, as well as overall manufacturing efficiencies, workstations are generally becoming smaller and less complex, and therefore less costly. For example, a typical workstation that may have cost $3,000 years ago might cost $2,200 today. So even if the industry were selling the same number of workstations, it would likely result in a lower total shipment dollar value.

We provide these statistics and numeric data for perspective, but data and numbers aside, there are many issues that will impact this industry going forward. As we’ve pointed out, both industry consolidation and product line diversification are likely to continue. Some of this diversification may be through acquisition (furthering industry consolidation) and some will be through organic growth and line expansion. Successful execution of distribution strategies will be critical to penetrate these other vertical (non-corporate office) market segments, as these segments typically involve a different type of sales process, distribution channel/partner and customer base.

Whether referred to as “green,” environmentally preferable or “sustainable,” the identification and procurement of products that have a reduced environmental (and social) impact is a topic that seems to grow daily with no sign of abating. The commercial furniture industry, our customers and relevant stakeholders have taken a proactive position in developing a common, consensus-based set of metrics to help define the “sustainable” aspects of furniture. This standard and its supporting conformance verification (certification) program, called level, provide a framework for the furniture industry to use in developing more sustainable products, processes and companies, as well as a comparative tool for customers seeking to source more sustainable products.

Our collective research, study and understanding of sustainability will grow and evolve over time. Our understanding of how to measure and evaluate the inherent tradeoffs associated with making informed environmental choices will gradually improve. As a society, we know more today about making these choices than we did five years ago, and in five more years we’ll know even more. The proactive step that the industry has taken in developing this standard puts us at the forefront of the conversation and learning process and ensures that this industry will continue to lead the way as sustainability measurement tools evolve to the benefit of manufacturers, our customers and society in general.

The furniture industry is presently experiencing some challenging economic times, but individually the vast majority of companies are extremely well managed and well positioned going forward. Collectively, we have a vision of the future and are proactively working toward that positive vision.

Headquartered in Grand Rapids, BIFMA’s mission is to lead, advocate, inform and develop standards for the North American office and institutional furniture industry.

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