Chinas Furniture Market

I. Market overview

1. In China, as living conditions continue to improve, people are becoming more and more willing

to invest in home decoration. Peoples increasing purchasing power has driven the furniture market to

develop in leaps and bounds. In 2015, the total retail sales of furniture products by units above a

certain scale grew 16.1% year-on-year to Rmb244.50 billion. According to data from the National

Bureau of Statistics, there were 5,290 furniture enterprises above a certain scale in China while a total

of 769.61 million pieces of furniture were produced during the year.

2. Chinas furniture market has vast room for expansion. Take the furniture replacement market

as an example. According to figures given in the Chinese Family Development Report 2014, there

were about 430 million households in all provinces, autonomous regions and municipalities in the

Chinese mainland. Based on the assumption that people would replace their home furniture every 10

years on average, around 43 million households would replace their furniture each year. The furniture

replacement market will be worth Rmb43 billion based on the average spend of Rmb1,000 per

household. The number of Chinese households is expected to hit 500 million by 2040. Moreover,

urbanisation, as Chinas leading policy of stimulating domestic demand in the years to come, is bound

to bolster the development of the furniture market. Data from the National Bureau of Statistics of

China shows that the urbanisation rate in China reached 56.1% in 2015, rising by about 1% on

average every year. In this urbanisation process, wage and salary earners as well as peasant families

who have settled in towns and cities have become major consumer groups in the furniture market. In

addition, it is estimated that, by 2020, 37.6 million houses will have been renovated under the

countrys shanty town reconstruction project, and these renovated houses will also generate demand

for furniture.

3. Mainland furniture consumers can roughly be divided into three groups, namely, avid

consumers, luxury/branded goods consumers and average wage-earning consumers.

o Avid consumers: these consumers are a very rich group with little concern for prices.

They are usually partial to expensive Western style, classical Chinese style or avant-garde furniture.

o Luxury/branded goods consumers: these consumers want their furniture reflect their

taste and personality. While making their purchase, they would also like to enjoy the pleasures

brought about by aesthetics and cultural elements. They are at the forefront of trends when it comes

to aesthetic pleasure, lifestyle and price concepts.

o Average wage-earning consumers: they constitute the majority of consumers. To

them, price and quality are dominating factors in their consumption behaviour and they would often

shop around in making a purchase.

4. According to the Industrial Classification and Codes for National Economic Activities issued by

the National Bureau of Statistics of China, the furniture manufacturing Industry is divided according to

product type into wooden furniture manufacturing, bamboo/rattan furniture manufacturing, metal

furniture manufacturing, plastic furniture manufacturing and miscellaneous furniture manufacturing.

Among these, wooden furniture is the main component of the industry, accounting for more than 60%

of the players.

5. At present, a wide range of products are available on Chinas furniture market and they can

mainly be classified into home furniture, hotel and guesthouse furniture, office furniture, and public

institution furniture.

o Home furniture: This refers to furniture used in the homes of urban residents,

including sofas, TV cabinets, tables and chairs, kitchen furniture and bedroom furniture.

o Hotel and guesthouse furniture: This refers to dining tables and chairs, sofas as well

as guestroom furniture for hotels and guesthouses.

o Office furniture: This refers to desks, chairs, bookshelves and cabinets for use in the

office.

o Public institution furniture: This refers to furniture for use in public organisations such

as medical, sports, cultural and educational institutions.

6. An increasing number of consumers, in particular mid-to-high end consumers and children

furniture consumers, choose to embrace new living concepts, such as the eco home, in their life.

These consumers have a strong preference for eco and environment-friendly furniture, such as

odour- and formaldehyde-free products, despite the fact that the price of most of such furniture is

higher than like products. According to HKTDCs consumer survey, over 90% of the respondents are

interested in using green, eco-friendly materials and are willing to pay a premium of 14% on average

in purchasing products made of green materials. In view of this, many furniture and building materials

brands have added the idea of eco-friendliness in their brand concept. Examples in the mainland

market include smart furniture incorporating indoor air purification function and light-weight

honeycomb board furniture.

7. Furniture products on the mainland market have the following characteristics:

o For many years, the mainstream design of furniture has been embracing elements of

culture, nature, environmental protection, and trendiness. Where personalised design is concerned,
 consideration has been given to ergonomics in terms of colour, shape, silhouette and size. Such

personalised design is gradually winning the hearts of many people.

o In the choice of furniture materials, consumers tend to go after the back-to-basics

trend such as solid wood furniture with minimalistic design or wood veneer furniture showing the wood

grain. While plywood furniture is the mainstream of wooden furniture, solid wood furniture is gaining

increasing popularity. More and more consumers with certain economic strength now opt for solid

wood furniture. Meanwhile, plywood furniture is moving towards imitation solid wood.

o For classical style Western furniture, it does not only come in colours rich and

exuberant, fresh and bright, or quaint and nostalgic, but also a great variety of styles and designs for

buyers to choose from. As more people are buying villas in China, the demand for large furniture

pieces for such luxurious villas is rising. Chinese consumers pursuit of Western home styles benefits a

number of foreign chain brands.

o Modern classical furniture combining Chinese and Western elements is emerging as

new hot picks in the furniture market, a trend which could be attributed to the prevailing social

culture. Nowadays, more international and domestic home brands are incorporating Chinese elements

in their designs. This type of furniture uses a great diversity of materials such as Manchurian ash

wood, elm wood and paulownias wood, as well as pheasant wood, pine wood, catalpa wood and cherry

wood which are more expensive. Some furniture items are even decorated with such details as rattan

webbing and hand carving to give them a touch of trendiness.

8. Demand for childrens furniture is on the rise. As living conditions improve, parents are

increasingly willing to buy suitable furniture for their children to create a good environment for their

development. With the full implementation of the two-child policy under the 13th Five-Year Plan,

pundits believe that the market has further room for growth. According to preliminary data from the

National Bureau of Statistics, the number of children aged below 15 reached 240 million in 2015,

including 16.55 million newborns, representing a growth rate of 12%. Surveys show that in the

childrens furniture market, beds and tables and chairs take up the biggest shares. Currently in this

market, the ratio of plywood furniture to solid wood furniture is approximately 7:3, but as peoples

income level rises and they become more health and environmentally conscious, the ratio of solid

wood in childrens furniture may rise.

9. Outdoor furniture is increasingly popular in the China market. Available in an increasing

variety, outdoor furniture mainly falls under the following categories: beach beds, rattan chairs, leisure

chairs, bamboo chairs, and other outdoor furniture items. Among these, rattan chairs and leisure

chairs account for a bigger share. Demand in the outdoor furniture market has been extending from
 specialised sectors such as star-grade hotels, restaurants, exclusive clubs, leisure venues and

residential communities to the home sector, including private gardens, rooftops and terraces.

Development in the home sector is gathering momentum.

10. Rosewood is a type of quality hardwood and furniture made of such material is generally

regarded as exquisite pieces. As the rosewood furniture industry thrives, in addition to traditional

rosewood markets representing respectively the Beijing, Jiangsu and Guangdong schools of

craftsmanship, there are now markets representing craftsmanship schools from Dongyang in Zhejiang,

Xianyou in Fujian, Shanxi and Shanghai. The rosewood furniture industries in Pingxiang in Guangxi

and Guangfeng in Jiangxi are also growing fast.

11. Currently, as consumers care more about what the home decor they install than how the home

is fitted out, the potential of the soft decor market is revealing. Soft home decor generally refers to

the installation of easy-to-change and easy-to-move-around decorative and furniture items (e.g.

curtains, sofas, lightings, decorations and home wares) after basic refurbishment to create a spacious

and harmonious domestic environment. This usually involves improvement and innovation in terms of

dimensions and looks. Soft decor is mainly targeted at high-end consumers and people pursuing

refined lifestyles. Higher living standards have also bolstered the demand for home displays. The

potential of the home decor market is huge.

12. Custom-made furniture is becoming popular in tandem with the growing demand for

personalised home products. Furniture makers treat each customer as a unique market and tailor-

make products according to individual needs. At present, a number of large bespoke furniture

manufacturers are developing rapidly. Companies such as Shangpin Home Decoration, Shoufeiya

Home Collection and Oppein Home are now offering bespoke manufacturing of different types of

furniture or even furniture for the whole house. In addition, the trend towards elegant refurbishing is

bringing opportunities to custom-made furniture.

13. Star-graded hotels are a major source for the demand of upmarket furniture. Statistics from

the China National Tourism Administration shows that the number of five-star hotels in the mainland

has multiplied from 492 in 2010 to 807 in 2015, averaging an average annual growth rate of 10.4%;

the number of four-star hotels has increased from 1,817 in 2010 to 2,398 in 2015 or at an average

annual growth rate of 5.7%. Average annual demand for new furniture from these hotels is worth

about Rmb3.6 billion. Based on the frequency of replacing furniture at least once every five years in

hotels, it is estimated that demand from furniture replacement in hotels will reach almost Rmb13

billion in 2017.

14. Chinas imports of selected furniture products in 2015:

 II. Market competition

1. After more than 20 years of rapid growth in its furniture industry, China has now become the

worlds largest furniture production base and exporter. According to information released by the China

National Furniture Association (CNFA), among all regions in China, the Pearl River Delta has the

highest concentration of the furniture industry with the highest production output and strongest

integrated support capability. Next come Fujian, Zhejiang, Jiangsu, Shandong and Shanghai, which

have an edge in product quality and operations management. In the Yangtze River Delta region led by

Shanghai, the furniture industry is developing fast with the highest average growth rate in the

country. The northern and northeastern regions with Beijing as the centre have a sound furniture

industry base and rich wood resources. As for the central and western regions, the furniture industry

is actively capitalising on the opportunities arising from the urbanisation and Belt and Road Initiative.

2. Furniture (home furnishing) industrial parks (bases) completed or on the drawing board are

mainly found in eight central and western provinces, including Jiangsu, Anhui, Henan, Hebei, Hubei,

Sichuan, Yunnan and Shaanxi. The development of these industrial parks can help consolidate and

improve the industry chain, shorten the production-marketing distance, reduce logistics cost, change

the employment distribution pattern, and promote industrial restructuring, specialised division and

industrial cooperation between regions. In 2014, CNFA chose Dayong in Guangdong and Anji in

Zhejiang as experimental towns for leading breakthroughs in the upgrading and transformation of

Chinas furniture industry clusters.

3. Furniture production enterprises in China are much less concentrated than in other industries

and most of these are small and medium-sized. As a result of the low industry concentration, there

are hardly any brands with strong influence in the market. However, after years of competition, a

number of branded enterprises of a certain scale and possessing considerable strength have emerged.

Examples include QuanU, Qumei and Red Apple.

4. Competition among industry players in Chinas furniture market shows that rivalry in this

market has come of age. Today, furniture brands are no longer fighting for first-tier cities but are

gradually shifting their focus to the furniture market in second- and third-tier cities. Rapid urbanisation

has also spurred the growth of home marts in second- and third-tier cities. Besides, the market for

furniture marts and brands is almost saturated in first-tier cities. While the economic and consumption

scale is smaller in second- and third-tier cities, the market offers more room for development. So

tapping into the medium- and low-end market will become a key marketing strategy.

5. China's furniture industry has started its upgrading process, with advanced manufacturing and

the application of information technology in production as the main direction. Furniture enterprises

need to upgrade their products and give their products greater added value by raising the level of

technology innovation to achieve the aim of "low cost, high quality and high efficiency". The future

development trend is green manufacturing, that is, the whole life cycle of products must be conducive

to environmental protection and the reduction of energy consumption. For example, greater attention

paid to the protection of the ecological environment, human health and home safety in the production

process will help sustain the development of the furniture industry.

6. Foreign furniture industry players have now stepped up their pace of entering the China

market. For example, Airland, a mattress and bedding manufacturer from Hong Kong, has in recent

years snapped up the distributorship of foreign brands such as Serta for the Greater China region;
 while Ashley Home Furnishing, a major American brand, has been expanding into the China market on

a major scale. Up to the third quarter of 2015, global furniture retail giant IKEA had opened 18 stores

in China. The company intends to expedite its pace of expansion in China to take the number of stores

in the country to 34 by 2020.

7. In the childrens furniture market, domestic brands account for the lions share. Currently,

some famous brands including Aokok and Colorlife have already emerged in the mainland childrens

furniture market. In entering the mainland market, some childrens furniture brands choose to go

localised or import boards for processing in the mainland in order to appeal to the local market.

III. Sales channels

1. Traditional furniture enterprises mainly market their products in three ways: first, consignment

through distributors in various places; second, renting an outlet in various places and selling the

products themselves; third, displaying and selling products through large furniture malls or furniture

marts. Meanwhile, some specialised stores and chain stores with financial clout have emerged.

According to the consumer survey conducted by HKTDC, large home centres are the major channel

through which consumers obtain information on furniture products.

2. In recent years, furniture hypermarkets have been developing rapidly. Many of these

hypermarkets develop in various places across China in the form of chain operation offering a single

brand. There are also hypermarket clusters, i.e. a high concentration of different types of furniture

hypermarkets within the same region, as well as general merchandise stores, which do not only sell

furniture but also other household supplies and even building materials. Where product mix is

concerned, many chain operated hypermarkets are also general merchandise stores. Red Star

Macalline is currently the leading home mart operator on the mainland.

3. The operation focus of different sales channels varies. For instance, large furniture marts

mainly offer home furniture but also sell office furniture. Specialised stores generally sell their own

brand, with the majority of these stores being larger domestic production enterprises and famous

foreign brands, such as IKEA from Sweden, the earliest foreign brand which set up specialised stores

on the mainland. Such sales format is often adopted by foreign furniture companies.

4. In recent years, to make furniture part of the everyday life of consumers, some branded mart

chains have been creating shopping district effects by such measures as bringing in famous foreign

brands, setting up home experience stores, building commercial complexes or establishing furniture

villages. This way, they have achieved the double benefits of raising brand awareness and increasing

sales several folds.

5. The O2O e-commerce model is gaining popularity in Chinas furniture market. O2O refers

to the linkage of online sales and marketing with offline business operation and consumption. There

are now different types of O2O e-commerce operators on the mainland and the O2O model takes

various forms in practice. QM (Qumei) is a typical example of furniture manufacturing enterprise and

e-commerce operator. The company uses its website as its sales platform, showcasing the images of

various products and accepting online orders from the consumers. Consumers may also opt for offline

experiences by visiting dealers physical stores and place orders there at online prices. This not only

allows furniture brands to carry out sales and marketing but also boost product sales within a short

time, therefore speeding up cash flows and reducing inventory pressure. Another type of furniture e-

commerce is conducted by traditional furniture sellers. Easyhome, for example, has developed the

Juran.cn website to move the offline experience stores online. It targets consumers who like the

brand but wish to select products online. Some O2O e-commerce operators start as pure online brands

and open offline experience stores afterwards. In other words, they build up their e-commerce

platform by extending their coverage from online to offline channels. Meilele.com is an example of

such practice.

6. Selected furniture exhibitions to be held in China in 2016-2017:

IV. Import and trade regulations

1. After China became a WTO member, tariffs on furniture dropped significantly. Apart from the

furniture products listed below which are still subject to import duties, zero tariff has been applied to

all other furniture items since 2005.

2. Starting from 1 October 2004, the Instructions for Use of Products of Consumer Interest Part 6:

Furniture came into force. According to the requirements of the new national standard, all furniture

products manufactured after 1 October 2004 must come with a manual providing such information as

date of manufacture, materials used, performance, model, structure, specifications, installation, use,

maintenance, main technical parameters, and trouble shooting tips, in compliance with the relevant

regulations. The standard also requires that all furniture on sale in the market thereafter must comply

with the relevant laws, regulations and standards on safety, health and environmental protection.

Information on any hazardous or radioactive substances contained in the materials and coatings of the

furniture must also be given.

3. A number of national standards for furniture were amended or newly formulated in recent

years. Standards such as the Testing Method for Burning Behaviours of Furniture and Subassemblies

Exposed to Flaming Ignition Source, Determination of Furniture Dimethyl Fumarate Content, Safety

and Technical Requirements for Glass Furniture, Furniture Industry Terminology, and Technical

Requirements and Testing Method for Connectors Used in Furniture were successively implemented in

2012. General Safety Requirements of Outdoor Leisure Furniture, Seating and Tables came into force

on 1 May 2013, while Limits of Harmful Substances in Plastic Furniture became effective on 1 July

2013.

4. Children's Furniture General Technical Requirements (GB 28007-2011), Chinas first

mandatory national standard for childrens furniture, came into force on 1 August 2012 and is

applicable to furniture designed or intended to be used by children aged from 3 to 14. In other words,

the materials used in the production of childrens furniture are subject to a specific standard which is

different from that of adults furniture in order to protect the health of children and prevent accidents.

Focusing on safety and environmental issues, the standard lays down the structural requirements for

childrens furniture, such as stipulating that these products should not have edges or pointed parts
 which may pose safety risks to the user. It also limits the content of hazardous substances in

childrens furniture and specifies the flame retardant performance of these products.

5. The Rosewood Furniture General Technical Requirements (GB 28010-2011), which went into

force on 1 August 2012, set out regulations on the jargon and definition, product name and

classification, main dimensions, quality description, test methods, inspection rules, marking,

instruction of use, packaging, transportation and storage of rosewood furniture. It is also stipulated

that rosewood furniture products must come with three documents, i.e. product manual, product

quality description card, and product qualification certificate.

6. Three sets of furniture standard setting out even higher requirements for the choice, improved

production processes and regulation of the raw and auxiliary materials of furniture are expected to be

implemented in the coming year. The three standards are: Indoor Decorating and Refurbishing

Materials - Limit of Harmful Substances in Wooden Furniture; Upholstered Furniture - Limit of Harmful

Substances in Mattresses; and Upholstered Furniture Limit of Harmful Substances in Sofas.

7. Also to be introduced is the New Standard for Environmental Testing in Furniture Production.

Under this standard, destructive testing of furniture will be replaced by non-destructive testing. In

other words, whole pieces of furniture items will be tested under a specific environment whereby no

destruction of any degree will be done to the furniture. Hence, the test will not in any way affect the

sale and use of the furniture product.

8. SB/T 11147-2015 Standard Management Practices for the Sales and After-sales Services of

Rosewood Type Merchandise is expected to be promulgated for implementation on 1 September 2016.

The purpose of this standard is to lay down specifications in the sales and after-sales of rosewood type

merchandise. For example, this type of merchandise should be accompanied by information such as

tree species, grade and material inspection labels. This standard also lays down detailed requirements

on the sales personnel and sales venue for rosewood merchandise and there are also specific

requirements on the warranty period. If a piece of rosewood merchandise is involved in repurchase

and lease sale, processes such as third-party evaluation and third-party guarantee will be invoked.

9. The Test of Mechanical Properties of Furniture implemented in May 2014 updates the original

standards and introduces stricter parametric test requirements. Seven standards, i.e. GB/T 10357.1-

2013 to GB/T 10357.7-2013, have been revised, covering the stability and durability of furniture such

as chairs, cabinets, single bunk beds and tables. These performance tests can help ensure the life

span and safety of furniture items. The eighth update, i.e., GB/T 10357.8-2015, fills a void in China's

furniture standards. It was put into implementation in January 2016 to ensure the safe performance of

tilting chairs, rocking chairs and lounge chairs and protect consumers' personal safety and rights.
10. A number of product standards and related testing standards in China have recently been

updated. These are summarised as follows:

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