Architecture & Design, Human Resources, and Manufacturing

Furniture industry not sitting still

Manufacturing reductions, tech, crossover products drive sector: analyst.

June 10, 2016
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Furniture makers from across the country are in Chicago this week to show off their newest products for the workplace, classroom, health care and other commercial environments.

NeoCon, the largest commercial interiors trade show in North America, takes place Monday through Wednesday at the Merchandise Mart in Chicago.

Michael Dunlap is a veteran of the furniture industry and principal of Holland-based Michael A. Dunlap & Associates, which publishes the quarterly MADA/Office Furniture Industry Trends survey.

“I’m hoping to see some interesting, really new products,” he said. “Last year was a little disappointing in that there were very few outstanding or truly new products.”

Dunlap said he thinks Holland-based Haworth Inc.’s new Fern chair will gain accolades at the conference. He had the opportunity to sit in the chair and was very impressed by it.

The chair is said to provide back support and “respond to your every movement.”

Dunlap said he also expects the trend of technology integration to continue and hopes to see some interesting new products in this area.

“When personal computers first hit the modern office, they tended to be stuck on the desk. Nothing was integrated; it was a drop-in accessory. Now we are building the technology into the furniture,” he said.

He said technological integration has come a long way since 2008.

“When Steelcase introduced Media:Scape, which is a conference room setup with an integrated monitor, I think it was the first significant product to come in and integrate technology,” he said. “Since Media:Scape, there’s been an explosion.”

Dunlap said there is still plenty of room for growth, particularly due to how quickly technology tools are changing.

“The use of tablets is going to mandate the design of furniture. You have to have a place to put it and it has to be easy to use,” he said. “A tablet has a different set of challenges than a laptop.”

He suggested flat, monolithic conference room tables are ripe for a makeover, as they are not well suited for use of tablets or other mobile devices.

“Technology is going to demand more individual adjustability,” he said.

Dunlap said furniture designers have to think about what’s next when it comes to technology, not what exists now. That presents a significant challenge.

Dunlap said he also expects to see a lot more crossover furniture.

“The lines are blurring. Furniture isn’t just for one market anymore,” he said. “It’s hard to tell the difference now between health care and hospitality products. Hotels are beginning to look more like living rooms, as are health care facilities.”

Zeeland-based Herman Miller recently announced the opening of its New York “flagship” location, which consolidates its presence in the city into one location and brings many of its brands under one roof. The location will also house the company’s first permanent retail location in North America beginning later this year.

Dunlap said he sees the move as another example of the emerging crossover market — especially the blending of residential and workplace furniture.

He said Herman Miller’s acquisition of Design Within Reach in 2014 signaled Herman Miller’s transition as a company and the blurring of the industry.

He predicted that by focusing more on the consumer market Herman Miller may see less volume but higher specific product margins.

Dunlap said the contract furniture market continues to be altered by smaller office footprints, a decrease in need for paper storage and more open floor plans.

“One thing that has impacted the market has been the shift in product focus and product content,” he said. “With the reduction in systems furniture — the cubicle isn’t dead, it’s just a smaller portion of shipment — but with lower walls and a smaller footprint, you have less product content.”

As a result, Dunlap said a workstation that once cost $5,000 might now cost $3,000, although he noted some of the cost difference could be offset in other ways to bring prices back up.

Dunlap also said the amount of money being spent per worker has decreased, which changes the revenue stream for office furniture manufacturers.

There are also more people working from home and more shared workspaces, all of which will likely continue to impact office furniture needs and order sizes.

Dunlap said he has observed changes in all three of West Michigan’s biggest contract furniture manufacturers over the decade, which speaks to industry changes overall.

“Steelcase has moved from being a very production-oriented, production-focused and a very market- and distribution-focused company to being a little more conservative on the financial side,” Dunlap said.

He said he thinks the Grand Rapids company is becoming less a driver of innovation than it once was.

“It doesn’t mean there is anything wrong with the company, it just means their focus has changed,” he said.

He said Herman Miller has become less production-focused.

“They are an assembler. Their suppliers produce most of the products and, in many cases, complete. It goes from the supplier directly to the distribution system.

“On the other hand, Herman Miller is still a design leader, as they have been for the last 50 years, really. They use a lot of outside designers, many of which are really famous, and that’s been one of their strengths.

“The Aeron chair, which is a real breakthrough, has been on the market for 22 years, since 1994. The Eames products, which have been in the portfolio since 1950s, are still strong products.”

He said Haworth also is going through a shift, pointing to recent acquisitions of design-oriented companies.

“They were what I would call a growth company,” he said. “Year after year after year, they had double-digit growth and were a strong manufacturing-driven company. Haworth has now become more of a design-focused company as well.”

Dunlap said significant manufacturing changes at each company follow the industry trend.

“Manufacturing footprints have been reduced significantly in the past 15 years,” he said.

He noted the two most recent recessions have forced all three companies to reduce their manufacturing footprint.

“They’ve done it in different ways,” he said. “Herman Miller led the way with outsourcing manufacturing to outside suppliers, and Steelcase followed suit by, in some cases, exporting manufacturing. For instance, seating was moved to Mexico, and they closed manufacturing in California and Canada. Haworth did some, but not to the same extent as the other two.”

Despite these changes in manufacturing, Dunlap said the outlook for workers in the industry is positive.

“For people with skills, the jobs are there, and as far as the white-collar jobs, those will always have opportunities,” he said.

He noted West Michigan even has some potential for job growth.

Dunlap said Haworth is bringing some production back to Holland and he said Steelcase has the opportunity to bring some back.

“But we are in a global environment, and companies produce where it’s most efficient, least expensive and serves the most markets,” he said.

Overall, Dunlap said the contract furniture industry is doing well.

He cited recent reports by BIFMA, a nonprofit trade association for business and institutional furniture manufacturers, which continues to value the industry at about $10 billion.

“The industry peak was in 2000, when it hit $13.3 billion, but through two recessions it hasn’t recovered to that level,” Dunlap explained.

He noted the figures could be somewhat misleading, however, because not all company earnings are known.

“I think there is a relatively significant unreported amount out there,” he said.

Dunlap also said public companies’ gross sales numbers are improving.

“Gross sales numbers continue to improve for the most part,” he said. “There is some adjustment downward, but it’s pretty small.

“Probably the more important factor is the profitability. Sales may be down 10 percent from what they were 15 or 16 years ago, but the profitability is as good or better than it was at that time. If you do a measure of profit versus sales, I think the industry is doing very well.”

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