STEPHEN POWNEY: HOW HAS THE EUROPEAN FURNITURE SECTOR FARED DURING THE PANDEMIC?
EDI SNAIDERO (ES): It was a difficult year for the European furniture industry but not dramatic – the sector reduced 7.4% in 2019-20. Some sub-sectors were more affected, such as the office furniture sector which was down 11%. The kitchen segment was only -0.1% and was one of the better performing areas, showing the focus was on the home. The pandemic brought people home and home became more important than before. Home furniture had a reduction of 10%, but within this bedroom and kids’ furniture had a wonderful performance because of e-learning. One of the main factors affecting the furniture industry was the closing of shops for specific periods in several countries. Quarter 3 and Q4, 2020 were wonderful because there was a recovery in almost all sectors and this is a very good sign for the future, despite all the difficulties with logistics and lack of material.
ULRICH BUHLER (UB): The furniture industry is a very important customer group for Egger, roughly 40% of our turnover. And 80% of our business is related to interior design, shopfitting and carpentry etc.
The first phase of lockdown was a shock for everybody, especially the UK and France. Then in July 2020 we saw a sharp increase in order income from all the customer bases in all the markets.
In the first lockdown we did not see any hit from the building industry, which is 10-15% of our turnover. A lot of construction sites have remained open so we have been able to supply our customers, even the DIY shops have been opened.
Shopfitting and trade fair related business was hit very hard by the Covid pandemic, but we see this recovered at the end of 2020. So, since the last quarter of 2020 all market segments are far above previous levels. Our industry is faced with order incomes of +15-20% compared to regular levels. The panel industry is working 24/7 so there is no capacity left and if demand exceeds existing capacity, then lead times will rise. Everybody is trying their best to serve the market and be stable. In the first phase of the pandemic, 30% of the panel industry stopped production or reduced production significantly. We cannot recover the volume that has been lost. I think this is one of the effects – the sharp hit followed by a fast recovery resulted in many cases in empty warehouses because there had been no stock building.
PAOLO FANTONI (PF): Unofficial data from the EPF is that the decrease in [panel product] volumes in 2020 is estimated at about 2% below 2019 levels, which is quite extraordinary and reflects the exceptional recovery since June, 2020. Companies did run through [at high business levels] the second half of the year and we took advantage of existing warehouse stock levels to satisfy the huge demand which had arisen. Unfortunately, I have to say that in 2021 we won’t have that same situation and there will probably be a bit more difficulty in meeting demand. The level of activity of Q1 2021 and Q4 of 2020 statistics show how the volumes of the furniture industry overall are around 15-20% of normal years. There is a differentiation within this – contract furniture, not only for the office but also for hotels and restaurants did suffer and is still suffering heavily, not to mention for shopfitting and for exhibitions, where we estimate reductions of volumes for 2019-20 of 85-90% in Italy.
SP: IS THE TREND OF HOME WORKING GOING TO BE PERMANENT? HOW DOES THIS TREND AFFECT THE SUPPLY OF MATERIALS TO THE FURNITURE SECTOR AND THE DESIGN OF FURNITURE?
UB: I believe it will get more flexible in the future but office space is still necessary. It is not a trend that was just due to the pandemic but a trend that had already started. Office space is getting more flexible which means different furniture is used, different meeting spaces and technologies. We might see people do two days home work and three days office work in the future. There will be trends of how the office will look and also individual work stations – with more flexibility to change desks so offices can reach the flexibility that is necessary.
PF: The trend of home / agile working was started before the pandemic. This does require more furniture, with homes in Italy required to be larger and families preferring to move from the city centre to outlying areas. I also strongly believe the function of the office as a place to meet and learn will remain.
The past 18 months has shown different visions – originally it looked like everybody needed flexiglass separation in the office but now that trend has slowed down. It is true offices in cities will reduce a bit and the types of furniture used at the home office will be simpler. But I think in the longer-term offices will feature more common areas, seating places and kitchens, which will make offices more modern and friendly to people working there. Companies will challenge themselves to offer a better living place in the office. This is one of the areas where our company has been expanding – the use of sound absorbent panels in the office – bringing higher level of living standards.
ES: There are a couple of multi-national companies in Milan which are moving offices in June – 2,000 people, to a different environment, a different way of working, with many fewer working places and no fixed working place for each office worker. Instead, you have to book your space there because they will be working partly from home and partly in the office. It will completely change the way of work.
Of course, this does not represent the majority of offices but it is a trend being accelerated by the pandemic. So, many of the big offices will most probably disappear in the direction of having a more flexible working arrangement. The office space at home is becoming more important, as is the trend of looking for better and bigger houses. E-learning at home is a key point affecting the children’s room for furniture.
And the kitchen is becoming more important in the house because we learn again how to cook at home. In Germany, despite it having the weakest year for the furniture industry, the kitchen furniture sector was up 7% in 2020.
SP: WHAT ARE YOUR HOPES, EXPECTATIONS AND CONCERNS FOR THE NEXT 12 MONTHS?
ES: We must not forget about the difficulties there have been in the shops, the furniture industry and with distribution. We have to pay attention to what happens in our companies and the distribution/supply chain. We need to think about the future – the next year rather than just the next two months. We have to have a common approach – furniture industry, panel industry and raw material suppliers taking care for the ongoing relaunch of the sector and taking care not to destroy it on the one hand with the lack of material and exaggerated price increases.
I think the conference/event and office furniture business will restart and people will start investing. And the green transition will be a key point for the future of our industry.
UB: It’s definitely a challenging time for the customer relationship between the industries – furniture industry and panel industry. Communication has to get better from the panel sector. In the end there are market dynamics that we can’t control but we need to secure raw materials.
My big hope is that the sales channel gets wider for the furniture industry – we are in regular conversation with customers and see a big increase in their online sales. This channel for sales has been under-estimated by the traditional furniture industry. And this brings some opportunities to work on product assortments and IT systems. We see it as an opportunity for all of us because it opens up new possibilities of seven days a week online sales. In Europe, consumers have the money available to spend.
PF: In many markets, the attitude of buyers has been ‘cash and carry’, increased by the current vulnerability of materials. The big losers in this period are companies approaching suppliers on a spot basis. Today the delivery terms are around five to seven weeks, which is creating a great inability to manage operations in the furniture industry properly. And I really hope that out of this mess there is a cultural change in people and companies arrange their relationship much more on the basis of allocation of capacity to give greater stability to the volumes and sales operations.
Green attitudes and use of recycled wood are important. Average consumption in the chipboard industry in Europe has already arrived at 54% of wood coming from recycled materials. In Italy we already have 93% of the wood in the chipboard industry coming from recycled wood. I think we will start approaching new technologies and we hope MDF and OSB will start being produced with recycled wood. The larger distribution chains are very aggressive in marketing sustainability and changing the perception of consumers.
