Whether 2024 will be a good year for furniture will be decided these days. “January and February are the most important months for the industry,” explains Markus Meyer, President of the Furniture and Kitchen Trade Association (BVDM). “The furniture stores are buzzing and industrial production is in full swing.”
In the first week of January alone, as much is sold as in an entire summer month. At least in normal years. Currently, however, the industry is far from this ideal, as retailers and manufacturers reported on the sidelines of the world‘s largest furniture trade fair, imm, in Cologne. And that bodes ill for 2024.
For example, furniture suppliers are struggling with ongoing consumer restraint. The savings of private households are currently more than 200 billion euros, significantly higher than the previous year’s figures. According to statistics, money is definitely available in many places. “But consumers have lost all trust,” says BVDM boss Meyer, whose main job is managing director of the medium-sized furniture retailer City-Polster from Kaiserslautern.
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Demand has fallen noticeably, especially since the debate about the heating law. “People are afraid that their heating will break and they will then have to invest tens of thousands of euros in new technologies and converting their house. So they keep their money together.” Added to this is inflation, which has been high for a long time. “Now the old sofa or the old wardrobe will be used for a few more years.”
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A study by the consulting company BBE and the Institute for Retail Research (IfH) fits into this. This comes to the conclusion that in many households only those pieces of furniture are purchased that need to be purchased due to wear and tear or as part of a move.
However, such moves are becoming increasingly rare given the crisis on the real estate market with a construction sector that has literally collapsed. “We urgently need impulses from the new building,” complains Jan Kurth, managing director of the Association of the German Furniture Industry (VDM).
Experience has shown that moving into a new apartment or house as a result of subsequent moves entails the purchase of two to three new kitchens and additional furniture purchases.
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Other industries could also benefit. “There is a connection between housing construction and economic growth,” says Michael Voigtländer, the real estate expert at the German Economic Institute (IW), at a conference at the IMM. But unfortunately the federal government has “somehow forgotten” the issue of home ownership.
It is no longer affordable for many households, especially in large cities. “We urgently need prioritization for housing construction and quick political decisions to move this sector forward again,” said Voigtländer. It is not enough to build an LNG terminal quickly and then talk about Germany’s pace.
Furniture industry with eleven percent fewer orders
The result of the double burden of reduced consumption and the construction crisis is a sharp drop in incoming orders in the furniture industry – and thus in tomorrow’s business. For the first eleven months of 2023, the VDM reports a decline in the value of orders for home furniture of almost eleven percent.
Even in the kitchen segment, which has recorded stable growth for many years, there was a decline of almost three percent in order values from January to November. And in terms of unit numbers, the situation is even more negative, according to the VDM. Because price increases distort the picture of sales.
Many manufacturers are therefore too Short-time work forced, as a current industry survey by the Furniture Industry Association shows. In December, 40 percent of the approximately 440 domestic producers had to use this instrument to cushion dips in demand, reports VDM boss Kurth.
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Most of the time, individual shifts or entire days would be removed. For example, at the upholstered furniture manufacturer Cor. Since September, the machines at the East Westphalian family business, which currently has 230 employees and an annual turnover of 47.5 million euros, have been idle on Fridays.
“There is already pressure on the boiler,” says Leo Lübke, the managing partner of Cor. He is now hoping for positive impulses from the furniture fair; interest there is certainly great. “Basically, the situation is very volatile.” All processes are therefore currently being reviewed and optimized.
But the 40 percent affected companies seem to be just the beginning. According to the VDM survey, 57 percent of companies are planning to apply for short-time work in the first quarter of 2024. This means that the level would be even higher than in the financial and economic crisis in 2007 and 2008. “That is unusual,” says Kurth. “Especially at this point in time in the middle of what is usually the busiest phase of the year for furniture.”
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For dealer president Meyer, the description “unusual” is far from enough when it comes to short-time work. “That’s worrying,” says the entrepreneur. In retail itself, there is currently no short-time work. “But it cannot be overlooked that the employees have little to do.”
And this is increasingly becoming a problem for employees. The salespeople in furniture stores usually only receive a low fixed salary; sales commissions are much more important to them. The willingness of visitors to buy in stores is currently high. However, the number of potential buyers is comparatively small.
The businesses simply disappear
“The frequencies have fallen significantly,” reports the BVDM. There are currently around 20 percent fewer visitors, says association boss Meyer. But that seems like progress. During the peak phase of the debate about the heating law, frequencies fell by 30 to 40 percent.
If there is no foreseeable improvement, Meyer expects even faster consolidation in the industry. “Concentration is already increasing,” says the entrepreneur. Around ten percent of dealers have been lost in recent years. Large providers such as XXXLutz, Höffner, Segmüller or Porta often take over the corresponding locations.
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Sometimes the areas, which are mostly on greenfield sites, are also rented to interested parties from other industries, for example as storage or logistics locations. “We are seeing increasing entrepreneurial fatigue in the furniture trade,” describes Meyer. Especially since trust in Germany as a location is dwindling in the face of ever more bureaucracy and constantly rising costs.
The situation is not only threatening the existence of the retail sector. Companies in the furniture industry are also increasingly disappearing. The Federal Statistical Office reported an increase in insolvencies among German furniture manufacturers of around 15 percent for the period January to October 2023.
And industry representative Kurth sees other companies in danger in the foreseeable future. “If short-time work is no longer sustainable, structures must first be adjusted.” And the necessary next step would then be to close the company or go bankrupt.
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