TRENDS IN THE EU HOME FURNITURE RETAIL
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Western Europe represents a significant market for furniture, comprising about 422 million consumers, but its global consumption share is declining due to emerging markets, particularly in Asia. While the market faced downturns from 2008 to 2013, recent years have shown recovery, with projected growth of 1.6% annually through 2019. Additionally, the competitive landscape is shifting with increased trade integration, a rise in specialized retail channels, and an ongoing trend towards e-commerce and the consolidation of major retail players.
TRENDS IN THE EU HOME FURNITURE RETAIL
- 1. www.worldfurnitureonline.com28 June 2018 • WF estern Europe is a large and mature market for furniture sales, boasting around 422 million consumers, accounting around one fifth of world furniture consumption. Over the last 10 years the share of Western Europe home furniture con- sumption on the global consumption has constantly decreased. The geography of the world furniture market is changing with the emer- gence of fast growing markets in dif- ferent parts of the world (particularly in Asia), thus rebalancing the share W of Europe in the global scenario. The market faced difficulties espe- cially in the years 2008-2009 and between 2011 and 2013, but is now in a process of recovery: over the last four years, the market has fol- lowed an upward path, benefitting from an improved macroeconomic environment, in particular in 2014 and in 2015, whereas in 2016-2017 the growth rate slightly slowed down. The market is forecast to keep grow- ing also in 2018 and 2019 (1.6% each year, in real terms). COUNTRIES SHOW DIFFERENT PERFORMANCES Different performances by countries and furniture segments are observed. Over the last five years market performances have been significantly different across different countries. The United Kingdom, Ireland, Denmark, Sweden and Switzerland have been the best performing mar- kets. Kitchen furniture and uphol- stered furniture constitute the largest home furniture segments in Western Europe. THE FURNITURE DISTRIBUTION IN EUROPE. RECENT TRENDS HIGHLIGHTS STUDIES CSIL MARKET RESEARCH WESTERN EUROPE. DEVELOPMENT OF HOME FURNITURE CONSUMPTION (AT RETAIL PRICES) BY SEGMENT, 2011-2016 Source: CSIL processing by Cecilia Pisa CSIL Industry Studies
- 2. www.worldfurnitureonline.com 29WF • June 2018 HIGHLIGHTSCSIL MARKET RESEARCH STUDIES HIGH DEGREE OF TRADE INTEGRATION The Western European home furni- ture market is characterized by a high degree of trade integration with- in the countries belonging to the region, but it is opening fast to home furniture imports coming also from extra-Western Europe countries. Such imports rose from 25% of the market in 2011, to 31% in 2017. China is by far the greatest trade partner, but the weight of Central Eastern Europe region out of total import is growing. Increasing pro- duction costs in China, mirrored in increasing prices, and the need for quicker deliveries have improved production competitive advantage of Central Eastern Europe. The opening of the Western European furniture market is favoured by both the international- ization strategy operated by local manufacturers, locating plants in countries with low cost of labour, and by global sourcing strategies operated by large scale retailers. IKEA is among the best successful examples of the outsourcing model, accounting for around 1,000 home furnishing suppliers in 51 countries. RETAILING IS CHANGING Furniture retailers’ role is changing: in many cases there are mixed types of business. In particular, manufac- turers that have got their own distri- bution network or sell directly to con- sumers (e.g. online) and retailers that have got their own production facilities, or source directly products in large volumes, engaging in prod- uct development with an exclusive design. A part from the noticeable example of IKEA, other examples of retailers with production facilities include DFS, BoConcept, and Steinhoff. On the other hand, exam- ples of manufacturers carrying out retailing activities include Nobia, Natuzzi, and Gautier. Furniture specialist retailers get the lion’s share of home furniture mar- ket. Over the last years the weight of the different distribution channels has changed considerably in the Western European home furniture market. The specialists’ channel has increased its importance during the last ten years: it accounted for about 80% at the beginning of 2000s, and it stood at 83% in 2017. Nevertheless, a major change has been occurring within the specialists’ category: the aggregate market share of the organized chains spe- cialized in home furniture has grown in Western Europe over the last five years, whereas specialized small scale independent stores have seen a constant decrease against other channels. The competition on prices from the large-scale distribution channel has been tough for small ‘traditional’ retailers, especially in the years fol- lowing the crisis, when European middle classes faced tightened budget constraints. The small scale independent retailers channel is still exceptionally important in Italy and in Spain, despite the quick decline in their share in both countries over the past years. The organized specialized distribu- tion has got the highest market share in Austria, France, the Northern countries and Germany, where the market is dominated by buying groups, which constitute a transversal category including both chains and small scale independent retailers. Since 2014 main changes occurred in the landscape of major groups. XXXLutz left Begros (later joined by Steinhoff Group’s ex-Atlas member Kika-Leiner) and founded with Zurbrüggen and Pforzheim the Giga Buying Group. In 2017 an agreement for a gradual merger over the next three years of the two purchasing associations Union and Einrichtungspartnerring VME was signed. The share of the non-specialized channel increased in the last 5 years, mainly driven by the fast growth of ‘pure’ e-tailers. Mail order companies are progressively trans- forming into e-commerce business. All the most important cataloguists introduced transactional websites over the last years. Home furniture retailing in Western Europe is increasingly concentrated. According to CSIL estimates, the top 15 retailing companies generate nearly 30% of the total value of the Western European market. The increase in the level of concen- tration is due to the good perform- ances, acquisitions, agreements and the growth in market shares of large furniture chains. Among these, it’s worth mentioning the recent acquisition (in 2016) of the French retailer But by the Austrian Lutz Group, as it is a further sign of the internationalization strategy of the largest European furniture players and of their integration path on the European market. The CSIL Report “Furniture Distribution in Europe”, XIV edi- tion, year 2018 is available for online purchase and download at: www.worldfurnitureonline.com