Who is afraid of the second largest economy in the world, with its record-breaking growth rates? Maybe who sees 1 billion and 385 million people as a huge market instead of fierce competitors.
For Western traders, the economic miracle of China is a double-edged sword: opportunities and risks, all in one. Scenario is equal and opposite: branding vs serial anonymity, niche market vs homogenization, creativity vs conformism and tradition.
More to the point, let’s see what happens in the furniture sector.
In the last 20 years the progressive growth of furniture industry transformed China in an impressive production and exportation furniture platform: the largest in the world. And the internal demand chooses national brands eight times out of ten, thanks to their widespread presence on the territory and to their low prices.
But in a context where niche markets worth millions of consumers and where attraction and organizational capacity of western big brands can still be a competitive advantage, foreign brands have a positive trend.
For example, an HKTDC research concerning the sector trend during 2016 in China mentions the continued strong growth of the American brand Ashley Furniture and the increasingly presence of Ikea with 21 stores and 13 more not later than 2020.
It happens because there is room for everybody in the middle class of consumers. Also for who comes from abroad and proposes style and quality in an optimal ratio with price. Desire for what is new and functional guides consumers’ behavior, characterizing life in middle and small centers, whenever market in big cities seems already saturated.
National Institute of Statistics attests an urbanization rate of 57,4% in 2016 with an average yearly increase of 1%. New furniture consumers are and will always be more workers and ex-farmers. According to the national plan of residential building, they will move in 37,6 million of old renovated houses in renewed urban centers within 2020.
So, knowing that Chinese people change their furniture on average every 10 years and that families in China are about 630 million, HKTDC assumes that in the next decade almost 63 million of families will substituted each year their furniture. Maybe they will pay it about $ 152 per family and the entire amount in the decade will be 96 billion of dollars.
Also the Contract segment is not entirely insignificant. China National Tourism Administration states that five-star hotels in continental China (except for islands such as Taiwan and other smaller whose territorial revindication is in dispute) have almost doubled in six years (492 in 2010 and 809 in 2016), likewise four-star hotels: 1.817 in 2010 and 2.367 in 2016. This phenomenon generates an annual furniture request of about 550 million of dollars. Presuming a furniture replacement in the hotels every five years, at the end of 2017 the turnover will be about 2 billion of dollars.
Compared to the basic features of furniture, new Chinese consumer is very strict about eco-friendly materials. During a survey, HKTDC pointed out that more than 90% of the interviewees demands a low environmental impact so much that they are willing to pay 14% more for the final product.
For this reason, “ecology” is one of the main features for many brands which use honeycomb woody fibres (this structure permits a wider air circulation and loses chemical treatments residues) and water-based varnishes for furniture in children rooms.