Due to the unstable exchange rate of the national currency, the demand for non-food products has increased, over the last week of the summer, sales have increased from 10 to 80% compared to the August average. Furniture was no exception, citizens, no longer knowing what to expect tomorrow, are starting to spend money on more expensive interior items, due to which the market situation is improving.
Today in Russia there are about five hundred large and more than two thousand small furniture manufactures. The total volume is about three billion dollars, of which exports account for only 14%.
The most popular among Russians is upholstered and cabinet furniture.
Also recently, furniture for bathrooms and children's rooms has been gaining momentum, in addition, in order to save usable space, people began to give more preference to built-in furniture. As for office furniture, here the sales volumes increased by almost half.
Eighty percent of Russians support the domestic furniture manufacturer, of course, mainly because of the price - for our products it is much lower. In terms of quality, domestic products, of course, differ from foreign ones, but only slightly, since some materials and components still come from Germany, China and Italy, despite the sanctions, there are also such industries that have been modernized and use modern equipment. Only a few citizens order furniture from foreign manufacturers, but for the bulk of people, given the current economic situation, this is not advisable. As for the factories in Ukraine, here, according to Rospotrebnadzor, the number of components harmful to health in manufactured products is several times higher than the permissible amount, so there are no places for such materials on the Russian market.
In addition, government purchases play an important role for furniture companies, which are a promising and profitable solution, but unfortunately, the number of auctions has decreased recently, which has led to increased competition. In the struggle for orders, manufacturers have to offer more favorable terms to potential customers. In addition, small companies began to show interest in public procurement to be limited to the production of furniture only for the home in the current situation, they do not intend. We wish them good luck in this matter, because, as you know, companies with many years of experience in conducting such procedures will not give up their "bread" so easily.
In public procurement, the time has come for furniture manufactures that are engaged in the production of non-standard products. Here the competition is much lower, because only not many companies can fulfill such an order in compliance with special GOSTs.
There is no consensus on the prospects for the development of the public procurement market. Some experts believe that the number of government orders will decrease, and the requirements for the selection of suppliers will become more stringent.
On January 1, 2016, the decree, which has already been signed by Dmitry Anatolyevich Medvedev, will become valid, it will talk about the permissible cost of furniture for the offices of civil servants. Now state purchases of furniture made of valuable wood species, as well as genuine leather, will be available only to top officials, which will certainly have a negative impact on manufacturers.
Others are more optimistic, they believe that the need for state purchases will continue, and with an improvement in the economic situation, the number of orders will increase significantly.
The same companies that manufacture furniture for the Ministry of Defense and law enforcement agencies will not lose their income, as defense spending will increase.
In general, the Russian furniture market has great potential, we have large raw material bases, which can significantly reduce the cost of importing and processing raw materials. Under the conditions of sanctions, as well as due to the instability of the national currency, the import of materials such as particleboard and MDF becomes difficult, and the prices for these domestically produced materials, paradoxically, are several times higher.
Experts believe that in the context of import substitution by 2018, Russia will completely switch to domestic materials.
Yana Sabaevskaya for Kit Otsenka LLC
Macroeconomics: slowing down the pace of decline
Since 2013, there has been a slowdown in the growth rate of furniture production (in real terms, there is a decline). For comparison: in 2009, furniture production fell by 30%. The largest decline in production in the first quarter of 2016 was recorded in the segment of kitchen furniture, the minimum decline was in the segment of furniture for offices and institutions.
In physical terms, in the first quarter of 2016, the production of wardrobes decreased by 22%, tables by 16%, wooden beds - by 13%. In the segment of sofas, there was an increase of 15.4% compared to the first quarter of 2015.
Import of furniture
In 2015, furniture imports to Russia decreased by 45.8% compared to 2014. From non-CIS countries - by 48%, and from CIS countries - by 36%. In the first quarter of 2016, the decrease in foreign supplies of furniture to the Russian market amounted to 44.1% compared to the first quarter of 2015 (from non-CIS countries it decreased by 41.4%. From the CIS countries - by 56.7%).
In dollar terms, imports of furniture in 2015 decreased by 46%, while domestic production - by 37%. In the first quarter of 2016, imports decreased by 44%, while domestic production decreased by 22%.
In 2015, the ratio of imports and domestic production on the Russian furniture market began to change dramatically. So, until 2014, there was a decrease in the share of domestic products and an increase in imports. In 2015, the shares of sales of domestic and imported furniture were equal. In the first quarter of 2016, the share of domestic production exceeded the share of imports. The Ministry of Industry and Trade plans to increase the share of domestic production to 60% by 2020
Main trends
Acceleration of import substitution in the “medium” and “economy” segments. With a general decrease in demand, imports decreased more significantly than domestic production (production by 13.6% in 2015, imports - by 44%). In the first quarter of 2016, the decline continued - by 17% and 44%, respectively.
Continued decline in the share of the shadow sector in the volume of Russian furniture production (from 42% of the total production in 2012 to 30% in 2014)
Increase in prices for both imported and domestic furniture. Due to the high share of imported components used in the production of furniture, the rise in prices of domestic manufacturers in 2015 amounted to 24% (according to Rosstat)
Furniture retail: results of 2015 and forecast for 2016–2017
The decline in retail sales of furniture in 2015 is more significant than in the DIY segment. In real terms, sales fell by 13%, in nominal terms, due to higher prices for products, sales did not change. In 2009, the decline was less significant (by 10% in real terms).
Key retail trends:
Decrease in demand and purchasing power in all market segments, including mid-high and high segments.
Changes in consumer behavior, expressed in the transition to a model of saving and saving, reasonable consumption (reducing impulse purchases, increasing the importance of the "price-quality" ratio)
Market consolidation from both manufacturers and retailers is increasing
Market leaders
The furniture market is one of the least consolidated retail segments. The top 10 chains account for about 30% of the market. In 2015, the growth rates of the market leaders' revenue significantly exceeded the growth of the market as a whole. For example, sales at Hoff's comparable stores grew by 6.9% in 2015 (+ 21.4% in 2014). The company "Ikea" in 2015 financial kept the rate of growth of revenue at the level of 2014 (14.7%).
The Ikea company remains the undisputed market leader in Russian furniture retail. Its share is 22% of the entire market. Also, according to MA Research estimates, in 2016 the share of the top 10 players will reach 35-40%.
In 2016, the influence of negative factors on the market will continue (a decrease in real incomes of the population, inflation, high rates of consumer and mortgage lending, a decrease in the volume of housing construction). We can expect a decrease in the indicators of the retail furniture market by at least 8% in real terms.
Anti-crisis strategies for furniture retailers
Optimizing networks, closing ineffective stores. Expansion can only be planned by very large trading companies with a stable financial position.
Restraining product prices, reducing the share of imported goods in the assortment, switching to products of domestic manufacturers.
Revision of the assortment and introduction of models of "economy" and the middle price segment, entering other segments.
Development of private brands, development of production within the country - furniture from Russian manufacturers has gained a significant advantage over imported products and has become more competitive in the economy and medium segments.
High-quality development, internal optimization, improving the efficiency of business processes and individual stores.
Using various distribution channels (offline, online).
Marketing cooperation of companies, joint promotion of brands.
M. A. Research specializes in the research of retail and consumer markets; transport and logistics services, cargo transportation and other areas of business.
In the world furniture market over the past 10-12 years there have been significant changes of a qualitative nature: the closure of national markets, the internationalization of furniture production. These factors largely determine the changes in the dynamics and structure of the international furniture trade. Over the decade 2002-2012. the furniture market has more than doubled with a CAGR of 13%. Further growth is currently due to the transfer of furniture production to developing countries with the active development of exports from a whole group of countries in Latin America, Southeast Asia and Eastern Europe. The capacity of the global furniture market increased from US $ 56 billion in 2002 to US $ 118 billion in 2008, after which, due to the negative impact of the global financial crisis in 2008-2010, furniture trade fell to US $ 95 billion in 2009. However, the negative impact was leveled off, and the sector showed further growth, reaching the pre-crisis level by the beginning of 2013 and continuing to actively develop to date.
Along with an increase in the volume of furniture production, its quality level is increasing, new technologies are being introduced, and a new design is being developed. The highest growth rates of furniture trade are observed in China, the lowest - in European countries (Italy and Germany). Along with the movement of production from developed countries to countries with lower costs, there is also a gradual replacement of local producers in countries that were previously leaders in terms of furniture production.
Russian market
In 2000-2008. the domestic furniture market was actively developing. The growth rate in certain segments reached 15% per year. In 2009, the industry faced a sharp decline in demand caused by the financial crisis. To the greatest extent, the crisis has affected the manufacturers of premium furniture and office furniture. At the end of 2009, the furniture market showed a 7% decline. The structure of demand has also changed: the decline in household incomes has led to an increase in the share of economy class furniture.
In 2010, the furniture market was actively recovering from the financial crisis. At the end of the year, both domestic production and import volumes increased. The market volume in 2010 reached the pre-crisis level, and in 2011 it grew by 11% compared to the previous one. This was facilitated by two main circumstances - an increase in the volume of new buildings put into operation and an increase in the incomes of citizens of the country. Individual orders for the manufacture of furniture according to the author's original sketches also had a certain influence.
In 2011, one of the main events that significantly influenced the Russian furniture market was the decision on Russia's accession to the WTO and, as a result, a gradual reduction in import duties on imported furniture.
The segment of "gray" furniture, which includes illegal imports, counterfeits and products of small companies that do not submit data on production volumes to the state statistics authorities, has also been actively developing over the past five years, reaching, according to expert estimates, an annual growth of 5-7% ...
In 2013-2014 the furniture market in Russia continued to grow at a rate of 8-10%. The most dynamic is the segment of upholstered furniture, which was growing at a faster pace. This is facilitated by the simplicity of its production technology. It does not require either expensive equipment or high technology. As a rule, manufacturers of upholstered furniture sell the bulk of their products in the region where they work, since transport costs are very high and imported goods are much less expensive than local manufacturers, especially if the quality is the same.
Another segment in which domestic manufacturers have successfully worked and continue to work is kitchen furniture. Many Russian firms began their production activities with the assembly of kitchens, purchasing components for facades from Italy and Germany, made frames from chipboard and assembled finished furniture on their own. As a result, the kitchen practically did not differ in quality from the imported one, but it was much cheaper.
Having accumulated some experience and money, many companies have gone further. Having installed the same equipment as that of foreign manufacturers, they have closed the entire production cycle. And smaller companies that do not have the funds to create a full cycle production continue to engage in assembly. Until now, this has allowed them to stay in the market, but from a long-term perspective, they certainly lose out to manufacturers. According to experts, in the future, small companies will be able to survive only through an individual approach to the client or through their own original developments. For example, some companies specialize in custom-sized kitchen cabinets, while others specialize in curved kitchen facades.
The most difficult segment in terms of production is cabinet furniture for living rooms and bedrooms. Its production requires many machines, each of which costs tens or even hundreds of thousands of dollars. At the same time, the profitability of the business, as well as in the furniture industry as a whole, is low - 10-15%. It should be noted that Russian cabinet furniture is quoted in the West. It is sold in Germany, the Netherlands, Japan, Italy, the Scandinavian countries and is appreciated for its environmental friendliness and competitive prices.
Most of the Russian furniture companies use imported materials and components, which are either not produced in Russia at all, or produced by us, but of low quality. In the structure of the cost of finished furniture, raw materials and materials account for more than 50% of all costs. More than 30% of all components used in production are imported, which significantly increases the cost of furniture and makes it uncompetitive. The heads of furniture enterprises are unanimous in the opinion that they would gladly use domestic components, but of good quality. It is too expensive to organize such a production, it takes time and multi-million dollar investments.
It is also worth noting that due to the great demand for "our" furniture in stores, until recently, there has been a constant rise in prices. For example, in 2011 the average price was about 8,000 rubles per unit of furniture products, and in 2012 and 2013 buyers had to pay more than 12,000 rubles (data from Expocentre Fairgrounds and TPP-Inform were used).
Market structure
There is fierce competition in the Russian furniture market. At the moment, the Furniture of Russia catalog includes more than 14,000 companies that operate on the Russian furniture market. Of these, directly manufacturers - more than 5,000 companies (hereinafter, the statistical data of the portal www.mebelrus.ru are used).
The largest part of furniture companies is concentrated in the Central and Volga federal districts - approximately ¼ of the total number of manufacturers in each federal district. The regions and republics of the Southern, North Caucasian and Far Eastern federal districts, as well as a number of large cities, continue to be imported regions for furniture (the volume of retail sales alone significantly exceeds the volume of its own production).
The furniture market itself is represented by two large sectors - the household furniture market and the furniture market for public buildings. The furniture market for public buildings is a rather attractive piece of the pie for manufacturers: if in the 1990s its share fluctuated in the range of 15-20%, then in 2014, according to various estimates, it occupied up to 40% of the total market volume.
The key segments of the household furniture market are the production of cabinet and upholstered furniture. A promising growing area is the production of kitchen furniture.
Small companies that do not develop their production base are gradually disappearing. Although they are highly competitive in terms of price, since their rental costs and taxes are low, they do not compete in quality with large manufacturers.
Regionally, the furniture market is not homogeneous. The larger the city, the more trade formats and the higher the competition. For example, in Moscow, where up to half of all sales are concentrated, all large retailers (IKEA, Hoff, etc.) are present, there are large shopping centers, furniture studios, markets, online stores. There are no network players in cities with a population of less than 500 thousand people, there are fewer furniture centers, and there is no delivery in many online stores. The competition is shrinking and the buyer's choice is narrowing.
For successful work in the furniture market, you must have a large stock of working capital. They are needed to purchase and store a large assortment of fabrics and components. In addition, the situation is complicated by the fact that funds are frozen for a long time in the form of finished products. Experienced manufacturers say: to sell 500 units of products, at least 2000–3000 units must be delivered to stores. Therefore, the company must have working capital to create inventory.
The International Conference Center "On conference" invites you to take part in the conference "Furniture Industry of Russia - 2015", which will be held on November 14, 2005, at the Hotel Baltschug Kempinski, Moscow.
This project is intended to trace the development trends of the furniture industry market until 2015. The purpose of the conference is to consider and discuss topical issues, the state and prospects for the development of the industry in the near future.
The plenary session will cover the following topics:
General development trends and future problems of the furniture industry in Russia in 2006 (introductory topic).
Accession to the WTO is a fundamentally new business environment.
State programs to support the furniture industry
Technology development is a lifeline for Russian companies
Attracting large investors as a basis for development
Foreign companies: partners and competitors
Global trends in the furniture business
Import and export duties: possible changes
Prospects for the development of large retail chains
Discussion sessions:
Session I Accession to the WTO - fundamentally new conditions for doing business
Session II Foreign companies: partners and competitors
Session III Prospects for the development of large retail chains
Confirmed Speakers:
Kushnerenko Andrey Konstantinovich, Deputy Head of the Department of Trade Negotiations of the Ministry of Economic Development and Trade
Portansky Alexey Pavlovich, Director of the Information Bureau on Russia's accession to the WTO of the Ministry of Economic Development and Trade
Kochetkov Anatoly Mikhailovich, Deputy Head of the Department of Consumer Market and Services of the Government of Moscow
Kravchenko Mikhail Vyacheslavovich, President of the 8 Marta Holding
Savelyeva Svetlana, managing director of the President of the Holding on the issues of conceptual development "March 8"
Galina Martynenko, Marketing Director of "Solo"
According to preliminary estimates, in 2015 in Russia there was a drop in the volume of the furniture market in physical terms by 24.6% compared to the level of 2014. This was caused by the deterioration of the economic situation in the country.
The size of the household furniture market decreased by 24.4%, and the market for office furniture - by 25.2%. Thus, the decline in the share of office furniture that began in 2012 continued. If in 2012 this segment occupied 23.2% of the Russian furniture market, then by the end of 2015 its share dropped to 18%.
Last year, sales of all types of furniture fell, and in 2014 the market was shrinking only due to office furniture. Within the household furniture segment, the largest drop in sales fell on upholstered furniture - the largest segment of this market.
Due to the increase in the cost of raw materials and components, the devaluation of the ruble and, as a result, the rise in import prices, the average price of producers (and importers) on the Russian market in 2015 exceeded 4,000 rubles, which is 34% more than in 2014. As a result, the volume of the country's furniture market in value terms increased by 1.5%.
Due to the crisis, Russians have changed consumer behavior in the past year. According to the All-Russian Center for the Study of Public Opinion (VTsIOM), the share of buyers of less expensive products increased from 22% in January to 39% in September. The share of those consumers who buy less often or refuse to purchase certain things has also grown. This trend is also typical for furniture market... Despite the sharp rise in prices for furniture manufacturers, consumer prices rose by only 13.5%, which was due to a shift in demand towards cheaper types of furniture. The growth of retail sales of household furniture in 2015, according to the analytical company Express-Obzor, slowed down significantly, the growth rate did not exceed + 1% against the level of 2014. Taking into account the dynamics of average consumer prices, this indicates a serious decline in sales in in kind. If we divide the total cost of retail sales by average consumer prices, then the resulting volume of sales in physical terms in 2015 will amount to 20.3 million units of furniture, and in 2013 it reached 22.9 million units (-11.3%).
There were no significant changes in the structure of retail sales of household furniture by region. Most of the furniture was traditionally sold in the Central Federal District. According to the preliminary results of 2015, the share of this region amounted to 40.1%. The second place in this indicator is occupied by the Volga District (13.9%), the third - by the Ural District (10.5%).
Furniture production declined
According to the preliminary results of the past year, based on data up to November 2015, inclusive, the volume of furniture production in Russia in physical terms decreased by 6.1%. The negative dynamics was formed by a decrease in the production of office furniture (-18.6%), mattresses and mattress bases (-16.1%) and upholstered furniture (-8.5%). Average prices of furniture manufacturers in 2015 increased by 18.4% against the level of 2014, when the growth rate was + 12.4%. This is the largest growth since 2010. According to Express-Obzor estimates, in addition to the devaluation increase in the cost of imported furniture, the price increase was also supported by the technical regulations of the Customs Union "On the safety of furniture products" that came into force on July 1, 2014, according to which the maximum permissible formaldehyde emission at the level of 0.01 mg / m3 (E0.5). The prices for upholstered furniture, which use a lot of imported furniture (+ 44.1%), rose the most, followed by the rise in prices for bedroom furniture (beds and wardrobes), which uses a lot of wood-based panels. The growth in average producer prices led to an increase in the volume of furniture production in value terms by 11.1%.
Furniture exports and imports are falling
In 2015, the volume of furniture exports did not change, the rate of decline in exports amounted to 0.04% - at the level of 2014, when there was a significant increase in the supply of these products. The demand for Russian bedroom, kitchen and upholstered furniture has increased. The rest of the categories of furniture products showed negative dynamics. Since the export of furniture remained at the level of 2014, and its production decreased, the trend of an increase in the share of products intended for export continued. At the end of 2015, the share of exports amounted to 11.8% (+0.7 pp against 2014).
The depreciation of the ruble against the dollar, which occurred last year, led to a sharp increase in the cost of imported furniture and, as a result, to a decrease in demand for it. According to the preliminary results of 2015, the decrease in the volume of imports in physical terms on an annualized basis was 36.3%, and the volume of imports returned to the indicators of 2011. Such a sharp drop led to a reduction in the share of imported products in the Russian market from 57.9% in 2014. up to 48.1% in 2015
At the same time, the trend towards a shift in demand towards cheap furniture continues. This is influenced by the change in the ruble exchange rate, as a result of which the price of even inexpensive furniture has almost doubled, which has led to the refusal of buyers from expensive furniture in favor of cheaper ones. In dollar terms, the volume of imports decreased by 42.6%, and the average cost of imported products decreased by 8.4%, to $ 51 per unit of furniture. In addition, the change in demand was influenced by a decrease in customs duties on imported furniture in accordance with the agreements on Russia's accession to the WTO. The main decrease in rates occurs precisely in the segment of cheap furniture costing less than 1.8 euros per 1 kg of gross weight. At the time of Russia's accession to the WTO, the customs duty on this type of furniture was 0.75 euros per 1 kg of gross weight, and by 2018 this figure will be 0.23 euros.
There were no changes in the structure of furniture imports by countries at the end of 2015, China still occupies the leading positions, the Republic of Belarus is the second with a significant lag, and Ukraine is the third.
