Industry profile RESIDENTIAL FURNITURE

Transcription

1 Industry profile RESIDENTIAL FURNITURE 1

2 Industry profile (June 2014) Furniture with a capital F The furniture industry enjoyed some fine years in the late 1990s after the signing of the North American Free Trade Agreement (NAFTA). But the rise of the Canadian dollar, since 2002, combined with the major breakthrough into our markets by countries with low production costs, has exerted even more pressure on manufacturers. The economic and financial crisis added to an already difficult situation, as it considerably reduced shipments and exports. The slow recovery prompted the industry to: develop its resiliency; stay on top of opportunities; maintain better control of its cost structures to raise its competiveness. The current players on the market are emerging stronger and more seasoned to successfully meet the challenges. The furniture industry currently boasts a significant share of the manufacturing sector in Québec. In 2013, the industry accounted for a total of jobs spread out in 1,488 locations across the province, making the industry one of the top 7 employers in Québec s manufacturing sector. Residential furniture The following table shows that residential furniture manufacturers are the main source of activity in Québec s furniture industry in terms of locations and jobs, which we will see a bit farther on. Table 1- Quebec Furniture Industry Segments in 2013 (in French) Industrie du meuble 1488 emplacements Armoires et comptoirs de cuisine 478 emplacements Meubles de maison 671 emplacements Meubles pour institutions 102 emplacements Meubles de bureau 169 emplacements Autres produits connexes 68 emplacements Meubles de maison rembourrés 47 emplacements Meubles de maison en bois 576 emplacements Meubles de maison sauf en bois et rembourrés 48 emplacements Meubles de bureau en bois 57 emplacements Meubles de bureau sauf en bois 36 emplacements Vitrines d'exposition, cloisons, rayonnages et casiers 76 emplacements Source : Statistics Canada, Canadian business patterns (SIC), CANSIM tables , [on-line], April

3 Jobs in the furniture sector Chart 1 provides a breakdown of jobs by residential furniture sub-sectors. It demonstrates the relative importance of the residential furniture industry compared to the furniture industry s sub-sectors. The residential furniture alone accounted for 37% of furniture industry jobs in Québec in Chart 1 Employment sector breakdown in the Quebec Furniture Industry by residential furniture subsector in 2010 (in French) Portrait de la fabrication de meubles au Canada Meubles de bureau 24% Meubles d'établissements institutionnels Autres produits connexes 6% 11% 37% 29% 5% Armoires et de comptoirs de cuisine Meubles de maison en bois 3% Meubles de maison rembourrés 22% Meubles de maison ni en bois ni rembourrés Source : Statistics Canada, Annual Survey of Manufactures and Logging CANSIM table [en ligne], April Products made and the size of furniture companies As previously noted, the residential furniture industry includes three sub-sectors: wood residential furniture; upholstered furniture; residential furniture that is neither wood nor upholstered. The various furniture manufacturing companies are classified according to the products made. In Québec, there are primarily manufacturers of: dining room and bedroom furniture; audio-visual furniture; living room furniture (upholstered or non-upholstered); storage furniture. The products are mainly made of wood, but they can also be made of metal or other materials. Companies often specialize in a product category and their sometimes modest size is not synonymous with lesser quality or low production capacity. But the industry leaders might have as many as a few hundred employees. 3

4 As shown in Chart 2, the structure of the Canadian residential furniture industry outside Québec is similar to that of the Québec industry. Chart 2 Locations of employers in relation to the number of employees in the residential furniture industry in 2013 (in French) Source: Statistics Canada, Standard Industrial Classification (SIC) of Canadian industries, CANSIM table (SCIAN 2012) [online], April * ROC: Rest of Canada. Table 1 Some of the major players in the residential furniture industry in Québec Name of the company Groupe Bermex and its affiliates Industries de la Rive-Sud ltée Ameublement El RAN ltée Meubles Canadel Meuble Idéal ltée Types of products Bedroom, living room, dining room, audio-visual furniture, upholstered furniture and others Adult and children s bedroom furniture, office, audio-visual and storage furniture Upholstered furniture (living room) Dining room furniture Bedroom furniture Source: Ministère de l'économie, de l'innovation et de l'exportation, 2014 Shipments Québec s residential furniture manufacturers shipments went from 1,635 millions of dollars in 2005 to 955 million dollars in 2013, an overall increase of 42%. Over this same span, Ontario and the rest of Canada manufacturers posted decreases of 53% and 44% respectively. Chart 3 below tracks the evolution of this industry s shipments in Québec, Ontario and the rest of Canada. It shows that, apart from 2007 and 2012, Québec s residential furniture shipments declined every year 2005 and But, from 2009 on, the decline is slight. Canadian and Ontario industries have essentially followed the same pattern. Comparatively, revenues for American residential furniture manufacturers fell by more than 30% from 2005 to

5 Chart 3 Residential Furniture Industry Shipments (in French) Source: Statistics Canada, Monthly Survey of Manufacturing (MSM), CANSIM tables and [online], April As for shipments in the various residential furniture categories, the leading sub-sector is wood residential furniture, which accounted for 76% of the sector s shipments in Québec in Upholstered residential furniture and residential furniture that is neither wood nor upholstered represent 14% and 10% respectively of the sector s shipment totals. Chart 4 Residential furniture industry shipments in Québec in 2013 (in French) Source: Statistics Canada, Monthly Survey of Manufacturing (MSM), CANSIM tables [online], April It is interesting to focus on the relative proportion of residential furniture shipments compared to the total shipments of the furniture industry as a whole. The comparison is noteworthy because it underscores Québec s distinctive feature in relation to Ontario and Canada. The figures show that residential furniture shipments account for 28% of total shipments in the industry in Québec in 2013, while the proportions for the same year are 15% and 21% respectively in the Ontario and Canadian industries. What s more, this predominance prevails for the entire time span from 2005 to This characteristic of the Québec industry might be an opportunity to exploit. 5

6 Chart 5 Proportion of residential furniture industry shipments compared to total shipments in the industry (in French) Source: Statistics Canada, Monthly Survey of Manufacturing (MSM), CANSIM tables and [online], April Exports and imports Data on international trade are an excellent source of information. In addition to providing information about our top export markets, the data also tells us where our main supply sources are. The value of Québec s residential furniture industry exports reached the $197 million mark in These exports have declined by 64% since 2005, when they totalled more than $544 million. With the exception of 2007 and 2012, they have been decreasing for the entire time period that was surveyed. The United States, our main trading partner, received 93% of Québec s residential furniture exports in This was a significant change, since Québec s exports of residential furniture to the American market had been gradually falling in recent years, reaching a low of 90% in Meanwhile, Québec s residential furniture imports hit the $468 million mark in 2013, an overall increase of 41% since 2005, when they were $331 million. On the rise since 2005, they hit their lowest point in 2008 and were relatively stable thereafter. Almost 51% of Québec s residential furniture imports in 2013 were from China. The following countries were next on the list of foreign imports of residential furniture: Italy (10%); Poland (8%); Vietnam (6%); United States (5%). Chart 6 shows the relation between Québec shipments and the industry s international trade. The decline in Québec shipments coincides with a rise in imports and a fall-off in exports. 6

7 Chart 6 Québec residential furniture industry shipments and international trade (in French) Source: Statistics Canada, Monthly Survey of Manufacturing (MSM), CANSIM table [online], April Apparent consumption The international data also allow us to estimate the apparent consumption of a country, which is shipments plus imports minus exports. 4. Pegging the apparent Canadian residential furniture consumption to its main suppliers - Québec, Ontario, the Rest of Canada (ROC), China and the United States is informative. Industry Canada advisory about calculating apparent domestic market The following factors are among those that might have an effect on the validity of the calculations: the inclusion of freight costs in the value of imports and exports; wholesalers' markup which inflates the value of imports and exports over the value reported in shipments; time period adjustments or calendarization (i.e. the exported good may have been manufactured in a different calendar period and may have been sitting in a warehouse in the interim); under coverage of shipments, imports or exports; exports of goods produced by wholesaling establishments engaged in manufacturing (i.e. these establishments may not be surveyed if the dominant share of revenues is derived from wholesaling as opposed to manufacturing activities); possible classification differences or errors when data is compiled; double processing of primary goods (e.g. by metal fabricators) which may affect the value of shipments. It is therefore recommended that you exercise caution when using this information, considering all of the readjustments that are required to reconcile the two sets of data. From Chart 7, we note first that the American contribution is on a slight rise, going from 10% in 2005 to 15% of the Canadian apparent domestic market in Then we note that Chinese imports and Québec shipments destined for the Canadian market have diametrically opposed trajectories. Québec shipments went from 25% of the total Canadian apparent market in 2005 to 20% in Meanwhile, Chinese imports went in the opposite direction, increasing by 9 percentage points to reach 30% of the Canadian apparent market in

8 We note that Québec s performance largely surpassed that of Ontario and the ROC. For example, in 2013: Ontario and the ROC respectively contributed to the tune of 7% and 11% respectively; the Québec furniture industry stood out by supplying, alone, about 20% of the Canadian market. And the main supplier of the Canadian martket continues to be the Canadian industry itself, with close to 38% of the market share in 2013, which is quite a rare feat in the Canadian consumer good market. But the share of imports has steadily grown since Chart 7 Residential furniture apparent domestic market share (in French) Source: Statistics Canada, Monthly Survey of Manufacturing (MSM), CANSIM tables and [online], April For each of the regions shown, the calculation of the residential furniture apparent domestic market share is defined as follows: Québec: (Qc shipments Qc exports)/apparent domestic market China: China imports/apparent domestic market ROC: (Can. shipments - Can. exports - (Qc. shipments Qc. exports) - (Ont. shipments Ont. exports)/apparent domestic market Canada: (Can shipments. - Can. exports)/apparent domestic market Ontario: (Ont. shipments - Ont. exports)/apparent domestic market United States: U.S. imports /Apparent domestic market Employment Like other economic indicators, jobs also declined dramatically from 2005 to In Québec, the total number of jobs in the residential furniture industry went from 14,551 to 9,432 workers from 2005 to 2010, a reduction of 35%. The decline was even steeper in Ontario and the Rest of Canada, where employment fell by 42% and 39% respectively over the same time span. During this time period, close to 50% of jobs in the American residential furniture industry disappeared 5. Despite this, Québec continued to be the Canadian leader in the residential furniture industry, since the province had a cumulative 45% of all jobs in this sector in Canada in

9 Chart 8 Residential Furniture Industry Jobs (in French) Source: Statistics Canada, Annual Survey of Manufactures and Logging (ASML), CANSIM table [online, April Compilation and conception: Department of coordination and sector analysis Investments Capital investments that are made in an industry help to ensure its growth and to maintain or increase its production capacity. Moreover, it often contributes to gains in productivity that are required to maintain an industry s competitiveness. But data on investments in the residential furniture industry are, unfortunately, unavailable. Consequently, we are studying data as it pertains to the industry as a whole. (SCIAN 337). This information may be an indicator of investments made in the residential furniture sector. In fact, as previously noted, the residential furniture sector takes up for Québec, Ontario and the Rest of Canada respectively 28%, 15% and 22% of the industry s total shipments in 2013, percentages that seem stable since We roughly estimate that investments in the residential furniture sector are made at the same rate in the furniture industry as a whole as those noted with the shipments. The following chart shows that the Québec furniture industry, like its peers in the Rest of Canada and in Ontario, enjoyed a spike in investments in These investments dropped off substantially in 2009 because of the economic crisis. In 2010, we note a surge in investments in Québec, Ontario and the Rest of Canada. But the growth hasn t been sustained, and since then we have seen a yearly alternating pattern of capital investment rising and falling, in both Ontario and Québec. We note a sizeable difference between the Québec and Ontario industries. The latter consistently invested more substantially than Québec from 2005 to But this trend has been reversed since From that time, we note that in three of the four years, Québec companies invested more than their provincial neighbours. 9

10 Chart 9 Residential Furniture Industry Jobs (in French) Source: Statistics Canada, Public and private investment in Canada: capital and repair expenditures Actual, Preliminary Actual and Intentions, X CANSIM table [online], March data are provisional. Business model The most widespread business model for manufacturers is manufacturing destined for conventional retail sales. Thus, the relationship between the manufacturer and retail is of prime importance. The most common practice is to display the manufactured products to the retailers purchasing managers at trade shows. It should be noted these shows are not aimed at consumers; only industry professionals are invited to attend. In general, the objective of Québec manufacturers is garnering a maximum amount of the retailers sales floor space to attract the attention of consumers toward their collections. But, increasingly, more and more of these products are being found on retailers websites. Like many other industrial sectors, furniture makers can use the service of manufacturing agents and representatives to market their products. These agents and representatives are more prevalent at manufacturers with a high production volume because of the wide range of territory that has to be covered. As we will see later on, other business models rely on direct sales to consumers, and they are on the rise: manufacturers who have their own showroom and commercial websites for sales by the Internet. The major trade shows in North America include: High Point Market in North Carolina; Las Vegas Market; The Canadian Furniture Show in Toronto; other specialty trade shows are also appearing on the list. 1. Source: Statistics Canada, Survey of Employment, Payroll and Hours (SEPH), CANSIM tables [online], April It should noted that data on employment, at this level of industry segmentation (6-figure NAICS), were published for the last time in Source: U.S. Census Bureau, Annual Survey of Manufactures (ASM), March This apparent market estimate has a bias since data on imports and exports include, among other things, transportation and storage costs while those pertaining to shipments are collected upon leaving the factory (apparent market = shipments + imports - exports). 5. Source: U.S. Census Bureau, Annual Survey of Manufactures (ASM), March

11 Trends and outlooks Key factors to success It has become impossible to compete strictly on the basis of quality and price. In fact, for a North American manufacturer, quality is a prerequisite to attain, but quality alone doesn t allow you to stand out. And prices can become so low when compared to those of emerging countries that the cost of raw materials alone might exceed the prices. For these reasons, manufacturers have to use other avenues of development and focus on, for example: niche products; a special design; personalized products; unmatched delivery times. Connecting with the consumer The furniture industry profile published by the Ministry in 2007 outlined the need for a closer relationship between manufacturers and retailers. Now, there would seem to be a need for the manufacturers to advance this line of thinking and look at different ways to connect with end consumers. A closer relationship is required in order to develop a product offering tailored to their needs. Residential furniture manufacturers have a dual challenge: to maintain a relationship of trust with well-established retailers; to go beyond this rapport to attract consumer attention toward their sales offering. For example, without alienating their traditional sales base, manufacturers, based on current trends, are being steered toward: direct selling to consumers through electronic commerce; managing their own showrooms. The consumer is king or queen; he/she is more and more connected! Brand image Very few Québec manufacturers have succeeded in crafting a strong brand image. But this is another way to forge a closer relationship with the consumer, and especially make the consumer aware of you. Brand image is needed to be able to sell products at a decent price, thereby freeing yourself from the shackles of lowest cost. A strong brand helps to enhance the manufacturer s balance of power in the value chain and provides the opportunity to hold on to a greater share of the profit margins in the chain. A popular brand might also make it easier to introduce innovative products into stores. A strong brand image can be based on one or several themes at the same time. It is often based on the intrinsic quality of the product. It is sometimes tied to an obvious technological advantage over the competition or to a resolutely innovative design. It might stem from exemplary customer service, which includes delivery times that are among the best in the industry. It may also be related to the mission of the company, which, among other things, is geared toward an allegiance to sustainable development or making green products. Whatever the source, the brand image must be nurtured and maintained, otherwise it will disappear just like that! 11

12 In this regard, the recent efforts to promote the brand image of local products, such as the Quality Canadian Furniture logo designed by the Quebec Furniture Manufacturers Association (QFMA), combined with a greater awareness of consumers about this, seem to have been fruitful. Increased demand for Québec products has been noted over the last few years. This has been passed on to the retailers, who have had to adjust their product offerings to meet consumer demand. Some retailers have grabbed the bouncing ball and have even made their slogan Product of Québec (or of Canada)! This local buying trend might grow in the future. And the entire Québec manufacturing industry would stand to gain if it does. 12