CHAPTER 7
Challenges and Opportunities for the Furniture Industry
Despite the picture of declining employment and enterprises in the furniture industry, the prognosis is far from completely bleak or even uncontroversial. This is particularly true with the American economic recovery underway since 2010. Economic development observers frequently prognosticate that the future profits will flow from higher value added factors such as innovation, creativity, and services rather than the standard “old economy” standbys of low cost labor and capital. Applying such factors to the furniture industry means a combination of higher technology manufacturing, higher skilled workers, better integrated timelier delivery systems, and quality design elements responsive and appealing to distinct market niches. All of these augur well for a future “Made in America” furniture position.
Challenges
A significant and enduring segment of the furniture market will continue to demand lower cost items, which will be difficult for the U.S. furniture industry to supply relative to continuing, competitively lower foreign wage and benefit levels. This is particularly the case in the wood furniture sector which is more conducive to machine manufacture and more tolerant of mass styles, and thus will continue to be an area with large amounts of foreign supplies.
New “emerging countries” will replace China at the low end of the supply chain, as the escalator of development carries them upward, whether in south (India) or southeast (Vietnam, Indonesia, the Philippines) Asia. This region will be particularly influenced by ethnic Chinese networks. A distance diminishing “hemispherization effect” may well tilt new supplier and furniture producer locations to Mexico, Brazil, Bolivia or Peru, though some furniture companies formerly located in these countries have moved to immigrant communities in large U.S. cities in order to diminish uncertainties and costs related to shipping and supervision of production. The urge to find a global spatial fix will remain a capitalist constant. As detailed in the history segment, furniture manufacturing sites follow population and prosperity mobility, from Europe to the New World, north east coast to upper Midwest, the southeast/west to Asia, and elsewhere to new locations of cut price profits. New innovations diminish the dissuading cost effects of distance, but speed, quality, and customization continue to be factors for those who can afford the distinctions.
U.S. skilled labor will likely continue to age out of production, with fewer younger workers choosing to enter what is perceived as a declining industry and dissuaded by knowledge of what happened in previous decades with employment declining following large scale relocation. Wage rates will remain higher than those of global competitors, but be relatively depressed as new immigrants take the place of older skilled retirees in over-whelmingly nonunion locations.
Environmental and safety regulations will continue to make the production process more expensive and burdensome for U.S. furniture manufacturers. Some older firms will extend their presence as “grandfathered” exemptions in locations desperate to retain jobs or where it is difficult to retrain workers. Other firms will adapt by instituting new containment and damage amelioration methods.
Opportunities
A higher profit segment of the furniture market will continue to request customized and speedily delivered products. The U.S. furniture industry is tailored to meet the world’s largest segment of this kind of consumer, as well as supply the demands of an increasingly discriminating and status conscious new group of overseas consumers. The global rise of middle classes in maturing developing countries, from China through the OPEC countries of Russia, South America, and the Middle East, accompanies a rise in demand for quality, prestige brand products such as furniture made in the United States. This growing phenomena is generating a new generation of consumers with money, seeking new choice availabilities, and ripe for developing new brand loyalties reminiscent of a higher quality of life environment.
On the national and regional scale, clarified and liberalized immigration laws are likely to continue to supply U.S. manufacturing with globally-attracted low cost labor for the low end and middle price tier market, supplemented by domestic workers in the traditional low cost locations. Training of furniture workers in local community colleges, or mentored onsite in companies who seek to raise their own, will frequently involve these foreign born workers as new sources of employees.
On the global scale, the likely continued rise in fuel costs and ongoing currency adjustments will make outsourcing less attractive for the fragile, bulky furniture carriers. The time cost of warehousing will also increase the attractiveness of domestically sourced products, whether shipped in as parts designed for final stage domestic assembly or as fully finished goods.
Future Outlook for the U.S. Furniture Industry
The U.S. furniture industry’s recent emergence following two decades of internal reorganization and external global restructuring reveals a more complex and competitive picture than one often depicted as subject to the usual product cycle “sunset industry” model. Companies that adopted new procedures such as the lean manufacturing process—particularly as a more complete system involving open practices with horizontalizing relationships involving management, employees and suppliers, as well as inventory control, just in time, and cellular production units—are flourishing along with a more stable and growing economy. Firms—focused on a custom niche demanding high quality standards are doing well, expanding the quantity of goods produced and the markets served. Mergers, acquisitions, and global partnerships either for particular lines or complete ownership have winnowed the field of less successfully performing companies and will likely continue to do so. The particular country locations of these multinational ventures will certainly shift as manufacturing transitions mobile populations from agricultural to industrial jobs, bringing in turn rising wage costs and demands for better working conditions.
Recent reshoring moves, increasing U.S.-based employment are also predicted to continue as the cost of distance and instability climbs. Components include fuel, time to delivery, intellectual property leakage risks, delays in service delivery, and general product control shortcomings. Furniture is less a “sunset industry” like buggy whips, and more a segmented staple with layers from inexpensive mass products (from Mississippi and Texas to China) to craft production (from Vermont to the Philippines). Areas of strength remain, from Michigan’s office furnishings to North Carolina’s upholstery cluster. The major metropolitan population centers on the North American east coast hold the largest market segments and are at the greatest distance—thus subject to competitive transportation costs by domestic manufacturers—from containerized Asian offerings. Los Angeles area firms are competitively located to handle the U.S. west coast market, from San Diego and San Francisco to Seattle. Both coastal centers of U.S. production—and inexpensive domestic centers in the South such as Texas and Mississippi—continue to attract new global customers in emerging regions and new financing from global partners seeking entry into the lucrative, enduring, and highly diversified U.S. market. As a mid-2013 survey of furniture industry observers indicated, the most important features for establishing a strong American brand were marketing “made here,” great design with innovative features, product support at all levels through advertising through servicing with a consistent message of quality and reliability focused on the consumer experience—all features that distinguish domestic from foreign producers as competitive factors that transcend price considerations and bode well for a brighter future.