Furniture exports face greater difficulties? Weak consumption in the United States and new challenges of industrial transfer in Southeast Asia

Furniture exports face greater difficulties? Weak consumption in the United States and new challenges of industrial transfer in Southeast Asia

2022-06-08

Just when the domestic epidemic was initially controlled, the adverse news of the export market was also brewing gradually, which may bring alarming consequences.

Today, furniture today learned that big lots, a top 100 retailer, had a net loss of $11.1 million and a net income of $94.6 million in the first quarter. This is in sharp contrast to the booming sales in the same period last year. Although other middle and high-end brands such as Natuzzi performed well in the first quarter, they also expressed great pressure in the second and third quarters.

Big lots executives said that the company was “stepping on the brakes” for the expansion and transformation of stores.

Behind this, in fact, is the great changes in the U.S. consumer market. At the same time, we also had in-depth communication with pan Chunjian, senior account manager of lik systems in Greater China.

Disposable income fell and consumer confidence continued to decline

In the * * quarter of this year, US corporate profits fell by * * in the past two years. In the case of economic slowdown, employers seem reluctant to raise wages sharply in order to retain or attract talents. Wages can not keep up with the pace of inflation or expenditure, and against the background of serious losses in the stock market and bond market, consumers’ enthusiasm continues to decline, and they are not willing to pay casually.

Not only that, American consumers are saddled with more debt to maintain their consumption level. Federal Reserve data show that since the outbreak of the epidemic, the debt repayment rate of American households has been close to the historical * * level, far below 10%. In April this year, the total credit increased by a record $52.4 billion compared with March, and the increase in February was $37.7 billion.

Joanne Hsu, an economist and director of consumer research at the University of Michigan, said that the main reason why consumers are gloomy about the future economic outlook is their concern about inflation. Compared with the same period last year, the consumer confidence index fell by 29.6%.

Furniture consumption “roller coaster”:

From excitement to panic

In 2021, the whole furniture export industry is in a very “excited” state. Many manufacturers said that they were full of orders and were preparing to expand production.

However, by 2022, everything is becoming clearer.

In the first issue of furniture insights, Smith Leonard, a statistical consulting company, said that in March 2022, orders for residential furniture in the United States decreased by 26% over the same period last year.

Pan Chunjian, senior account manager of lik system in Greater China, said that in recent months, especially in late March, many trade and processing enterprises exporting American goods have obviously felt weak orders. Looking forward to May to July, orders also fell sharply, with diving rates ranging from 20% to 50%. Therefore, some factories that cannot “bear the heavy burden” began to reduce their sites and reduce their workers.

It is puzzling that the overall U.S. export business in the fourth quarter of last year and the first quarter of this year was still very strong, and these factories also confidently budgeted various capacity improvement schemes. But the sudden “turning point” that began to appear in late March caught everyone by surprise.

Consumption returns to the “average”,

Inventory becomes an important reason

Pan Chunjian believes that in fact, the national consumption of the United States has been at a low level in recent years. In fact, the so-called market weakness at present, “I personally think it should be the” mean return “of American consumption. In 2020, subsidies from various fiscal and monetary policies stimulated the overall economy and national consumption. “

In 2021, the U.S. economic GDP increased by 5.7%, which is the * * value since 1984. The GDP growth in the fourth quarter was as high as 6.9%, but the GDP in the first quarter of 2022 plunged to -1.4%. In addition, in order to control the overheated U.S. economy, the continuous interest rate hikes of the Federal Reserve since this year have slowed down the overall liquidity of the market. This is the weakness caused by the “retreat” of the overall macroeconomic level in the United States.

At the supply chain level, the “bullwhip effect” in the supply chain caused by the hot sales of consumer goods, especially household goods last year led to a sharp rise in finished goods inventory and in transit inventory. On the other hand, after a round of rapid and strong consumption of durable goods such as furniture, it is unable to quickly follow up the second and third wave of re purchase in the short term, forming a demand cliff situation on the consumer side.

Many American chain stores such as Costco and rooms to go are trying their best to digest their inventory. Therefore, on the one hand, the high accumulation of category inventory, on the other hand, is the poor consumer demand side. This mismatch between the market demand cycle triggered by the epidemic and the supply cycle of the supply chain itself is the second reason we believe that demand is weak.

Export enterprises face “double short positions”,

Industry reshuffle again

Weak furniture consumption in the United States will have a huge impact on Chinese export enterprises. Pan Chunjian pointed out that from the perspective of furniture exports to the U.S. market, due to the weakness of the overall U.S. market consumption and the previous inventory pressure in the U.S. market, its import demand has slowed down significantly, and the foreign trade orders of some domestic enterprises are expected to decline by more than 30% in May and June.

Pan Chunjian believes that domestic export enterprises are facing a double short impact.

On the one hand, the overall demand of the United States is declining, on the other hand, the share squeeze from Southeast Asian enterprises and South America and Mexico. The original cake is becoming smaller, and the cake cut to Chinese enterprises is becoming smaller.

According to the 2021 furniture import and export of the United States released by home furnishings today, the total import of furniture imported from the United States in 2021 was US $29.1 billion (excluding mattresses), US $9.117 billion from China ranked * *, and US $9.1 billion from Vietnam ranked second, accounting for 31% of the total.

In the face of this rapid decline in the U.S. market, export enterprises will face enormous operational pressure. The domestic furniture industry is bound to usher in a reshuffle, bankruptcy, reorganization and acquisition. Those enterprises with large scale, stable operation and sound capital can better consolidate their industry position, and the industry is likely to have another pattern after experiencing this wave of market.

On the other hand, it will also force enterprises to accelerate the optimization of their operational capabilities and rethink their product positioning. All plans that are conducive to efficiency growth and the improvement of product added value should be reconsidered by enterprises.

Secondly, based on industry and strategy, suffering enterprises may need to re-examine their strategic layout in addition to desperately defending their original one mu three Fen land. Is it necessary to open the company to Southeast Asia to seek cost advantages? Or drive to the door of customers to gain the advantage of supply agility? Or seek the support of the capital market to improve the risk resistance.

Furniture production was transferred to Southeast Asia,

The future is more about collaboration than competition

It is undoubtedly an inevitable trend for Vietnam and even Southeast Asia to become a global processing base after China. Ashley (Ashley), a soft furniture enterprise in the United States * *, began its layout in the Singapore Industrial Park in Ho Chi Minh City, Vietnam as early as 2013, and its production scale has reached nearly 30000 people today.

Since 2019, many domestic furniture enterprises have also invested and built factories in Vietnam, such as Minhua, gujia, Henglin, Yongyi and other listed companies.

At present, domestic export-oriented enterprises that set up factories in Vietnam basically undertake orders for middle and low-end products based on running volume. Those high-end and complex products with high added value are still processed and manufactured in domestic factories. In view of the mature industrial chain supporting system in China, the R & D and design of products are basically carried out in China. If the pattern between China and the United States is still irreconcilable in the short term, the upward trend of manufacturing exports in Southeast Asia should not slow down.

In another dimension, we can define the transfer of manufacturing industry from China to Vietnam, not from China, but an overflow of China’s supply chain network. In addition to the current horizontal distribution, orders may also lead to the vertical distribution mode at the supply chain level, that is, as many enterprises integrate Southeast Asian manufacturing into China’s supply chain system, as a supply presentation relationship rather than an isolated operation, they form a win-win cooperation rather than a competitive system, each focusing on their own strengths and division of labor and cooperation.

In this case, for example, although orders are undertaken and exported by Vietnamese companies, raw materials, semi-finished products or key components and processes are still supplied by Chinese enterprises. This model is likely to form a paradigm in export order processing trade.

The market is single, the products are low-grade, and the cash flow is fragile,

Or more difficult

Pan Chunjian believes that domestic factories are bound to be greatly affected by the weakness of the U.S. furniture market. One is the factory that regards the United States as the main export market. Because there is no other market as a buffer, it naked needs to face the pressure of order delay, order decline and order cancellation.

Secondly, factories that always produce low-grade and high-volume products suffer more. Because of the positioning of low price and low profit, intensive and large-scale production mode is bound to be required, so factories have always been at the breakeven point of high sensitivity. Once the similar market end subsides or the shipping cost is high, and at the same time, the factories do not have a certain profit space to absorb these negative growth factors, then the life of these factories is really unsustainable.

Thirdly, finance is the tool. If the above enterprises have not been supported by the capital market, their cash flow will be cut off obviously, and the consequences are self-evident. For example, some soft furniture factories in Anji, Zhejiang Province, which have always been positioned at a low level, suffered from large-scale delays and cancellations of orders caused by the soaring sea freight last year. Now the decline in the U.S. market on which they rely has made their operations even worse, and some factories without financing capacity are on the verge of closure.

The market is a melting pot. The decline of the U.S. market forces and spurs our enterprises to constantly change and seek self breakthroughs. There is no doubt that even if they are not eliminated by the U.S. market, they will be melted by the natural evolution of the market.

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