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The impact of the global economic crisis on furniture industry

The corona virus pandemic has affected just about every area of our lives. Prior to the announcement of the pandemic, the furniture industry’s growth had traditionally been thought of as unstoppable, as sales could come from a variety of sectors, namely – from traditional channels or through the private & public sector, and commercial office spaces among others. The logic behind this assumption is that rising expenditures on listed sectors expands the revenue of the furniture industry as almost no brand across industries goes without the basic need for furniture. In this way, the furniture industry is one of a kind that supports the other sectors of the society.

Ashish Aggarwal, CEO of Indo Innovation

In the last couple of weeks, the internal audit teams at many Indian companies noticed a gradual decline in revenue. Further, across the industry, the deals that had to be finalised in the upcoming months have been more or less cancelled due to financial reasons. Essentially, the industry is facing its worst nightmare with no guaranteed stability. The continued decline in sales due to the pandemic will make it difficult for brands/sectors to have an upper hand anytime soon in sales.

In fact, the office furniture business – a marketplace that has always been on an upswing for brands like ours – requires a strategic algorithm of ethics, craftsmanship, dedication, patience, and discipline. And since the lockdown business has been dipping gradually.

Having said this, even during the present crisis, many brands such as Fursys (a leading Korean Furniture brand) and thought leaders in the industry are looking to expand to better sources of products i.e. eco-friendly furniture. According to high level executives at companies like Fursys, 46% of the growth in this market will be seen in the APAC (Asia-Pacific) region with market growth accelerating at a CAGR of almost 6%. In fact, the studies also show that the incremental growth of the industry in USD, between the years 2018-2023, was found to be 22.32 billion.

Ashish Aggarwal CEO of Indo Innovations said, “The COVID-19 crisis will have a substantial impact on the global economy. Businesses all over the world will have to evolve to accommodate this fluid situation. Your website will become your business card, your store, and your showroom. Prioritizing digital merchandising and online presence can help you navigate through this difficult time. The digital activities will include a series of podcasts or webinars, virtual product tours, 360-view showroom presentations, and more. Other major impact of Covid-19 on furniture industry will be on supply chains. Furniture brands need to develop an effective supply chain response plan to mitigate risk and prepare for any interruptions that the coronavirus outbreak can cause. This can involve, among other things, aspects like supplier engagement response with cross-tier risk transparency, inventory critical part identification, production-capacity optimization, demand management, logistics-capacity pre-booking, and route optimization.”

Although the market is fragmented between major suppliers of office furniture like Fursys and minor suppliers as well, brands will be offering eco-friendly furniture going forward. Further, it believes that market vendors will focus on the growth prospects in the fast growing segments, while maintaining their positions in the slow-growing segments.

Finally experts saw an industry wide decline in output by 10% decline in the first three months of this fiscal. But the manufacturing of MDF board, which is also used in packing and construction, saw an 18% jump. It could also have been helped by an 8% rise in exports in that period. This means that government intervention may help in creating an upswing in sales for brands such as ours. By encouraging exports of modular furniture, the government will not only allow the industry to grow during a slump, but it will also pave the way for future deals that can be made with foreign brands. Therefore, allowing the opening of a bilateral channel of communication and opportunities of collaboration between the Indian and the global brands. This, we believe, could provide the right stimulus that our industry has been waiting for these past couple of weeks.

(Inputs By- Ashish Aggarwal, CEO of Indo Innovation)

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