China Focus  



Turning Into A Furniture Company

By Dr CS Lim


Acccording to an estimation by the Electronic Commerce Department of the Chinese Ministry of Commerce, the annual e-commerce turnover in 2014 reached 13 trillion RMB.

Based on their monitoring of some 5000 retail enterprises in the various sectors, they discovered the following:
• E-retailing grew 33.2% (+1.3% yoy);
• Specialty Store.........5.8% (-1.7% yoy);
• Supermarket ............5.5% (-2.8% yoy);
• Department store......4.1% (-6.2% yoy);
• Shopping centre........7.7% (-7.7% yoy)

With the exception of online-retail, the retail sales of all other forms experienced a lower growth rate compared to the year 2013 (the figures in bracket is the year-on-year comparison with that of 2013).

This indicates e-commerce is still booming. I believe the same applies for retail sales of furniture with only online-retail sales experiencing growth last year. Under such favourable circumstances, e-commerce enterprises should quickly turn themselves into real furniture companies.

A few days ago, I talked to one senior executive of IBM, he was surprised that today’s Chinese online furniture retailers were made up of people from the IT sector, instead of coming from the furniture industry. This is unlike that in developed countries. For example American online furniture retailers are basically a part of traditional furniture companies. He suggested that some of the IT companies like IBM, have ready software to aid furniture companies, both their online and offline businesses. These packaged software may be not perfect for e-retailers, however, they are sufficient for individual furniture companies.

At present, many local governments encourage local enterprises to develop their e-commerce capabilities, offering them all kinds of subsidies. It is said that in Ningjin county of Shandong province, e-commerce takes up 36% of all furniture turnover. In addition, there are a lot of companies that have their own O2O platforms, and in the wake of such momentum, the percentage of e-commerce would surely double in no more than two years.

As a result, it is time for domestic e-commerce companies to familiarise with their own offline business in a year or two.

Having frequent encounters with e-commerce companies lately, I believe there are different requirements of the furniture product between them and traditional furniture companies. This is because the two are distinct in their operational forms, scales, targets, scope and so forth.

1. CATEGORISATION

This is probably a tough task for e-commerce companies. There is a vast variety of furniture, especially in China. So e-commerce companies will have to differentiate the categories based on their target markets.

One way to categorise furniture may be on the raw materials used:
• panel furniture
• panel and solid wood furniture
• solid wood furniture
• upholstery
• metal-wood, metal, glass and so on

The classification may also be according to styles:
• European-style furniture
• American-style furniture
• Chinese-style redwood furniture, new Chinesestyle furniture
• Modern furniture
• Chinese-style and Korean-style furniture and so forth

But nowadays a mixture may be adopted:
• European-American、Japanese-Korean style: wood and panel furniture
• Chinese-style redwood furniture: solid wood
• New Chinese-style: may be wood and panel furniture
• Modern furniture: panel (perhaps mainly consisting panel, solid wood and redwood are also included)

Up until now, the Chinese-style redwood furniture have rarely been seen for sales on the Internet. This is probably because of their high prices and the limited market.

As such, we can generally divide into three main categories: foreign designs including European, American, Japanese and Korean; new Chinesestyle; and modern panel furniture.

European and American designs are regarded as the mainstream in today’s market with French style leading, such as the Rococo. Then comes the Italian new classics. The American-style furniture also plays a big part. However, because of its large dimensions, the Chinese have come up with simplified and smaller-dimensions American style furniture. Although such designs are confusing to the Americans, to some extent they suit Chinese demands. The reduced sizes, the absence of knots on the surface, the absence of age and signs of usage, no longer rustic look.

2. RAW MATERIALS
E-commerce companies regard the whole nation as their target market. China is a vast country and thus the natural conditions in the north and south, east and west can be extremely different. Temperature and humidity differences have huge impact on the selection of furniture raw materials.

Ancient emperors in Beijing ordered craftsmen who came from south of the Yangtze River to make furniture with wood having seasoned in local areas for years. They all realized that the furniture made in the south would cracked in the north. (Here I will not discuss about issues regarding the drying and changing the nature of wood)

Hence, furniture sold by e-commerce companies must be made with materials suitable for the whole country. This is easier said than done. Our designers often have little knowledge about the comprehensive utilization of raw materials for furniture. It is already good for them not to follow the so-called 100% solid wood furniture on the market blindly. Currently the Chinese markets preach solid wood furniture blindly, which will expose its faults when the products are sold to the north, because the raw materials are not properly treated during production.

As a result, there is a need for careful selection of raw materials, and understanding the comprehensive usage to ensure the integrity of the product under varying temperature and humidity. Otherwise, complains and returns from customers would cause great losses.

3. ASSEMBLY
Because of the high cost of logistics in China, it is ideal to develop knock-down furniture that can be assembled. However, the only method to assemble cabinets in today’s China, is with the use of the 32mm system. Few have thought about other methods and few designers understand structural design.

The 32mm system, is appropriate for application in kitchen cabinets. However, it is not ideal for large wardrobes, especially for custom wardrobes. Many kinds of fittings and corresponding tools are used. If the cabinet is too huge, the 32mm system will not be strong enough.

The principles of assembling large wardrobes and custom wardrobes are: simple, easy, strong, low chances for error, requires few hardware and tools. You should not believe that you can find a qualified craftsman in a remote area to help you assemble a large 32mm system wardrobe without making mistakes. An online retailer have asked my help regarding this problem, and because of which I developed a new patent.

4. PRICING
Pricing is especially worthy of discussion for online sales and to understand the upper and lower limit of prices.

I do not have access to relevant statistics, but I thought that a set of furniture pricing more than 40,000-50,000 RMB would be relatively hard to sell online. If the prices are too low and cannot offset the cost of administration and logistics, it would not be worth the efforts of the retailers.

Thus online retailers will have to set the upper and lower limits depending on their own data. That would set the basis for the selection of raw materials, quality and so on.

A point to note: when labeling the raw materials used, perhaps broader terms should be adopted. This is because online retailers may not be able to figure out all materials at once. For example when labeling wood materials, it is sufficient to label as tropical hardwood, or medium hardwood in temperate zone. This is to avoid unnecessary problems that may arise from troublemakers seeking to take advantage.

DR LIM CHEOK SIN
President, Council of Asian Furniture Associations Professor, Beijing forestry University , currently the Chairman of the Council of Asian Furniture Association (CAFA). He read at Nanyang University in Singapore and completed his PHD at Beijing University of Forestry. He holds a Post Doctorate from Michigan State University and is a visiting scholar there. Dr Lim has been active in the Singapore furniture industry, chairing both the Singapore Furniture Association and Furniture Association of Asia and Pacific previously.