The International Furniture and Interior Design Fair (imm) in Cologne is the industry's annual high mass. But instead of celebrating its own successes alongside new trends, as in previous years, there was little sign of a party atmosphere last week. Quite the opposite: according to official figures from the associations, the turnover of furniture manufacturers and retailers fell by 5 to 7 per cent last year, with a drop of almost 12 per cent for living room, dining room and bedroom furniture. Six out of ten manufacturers are working short-time. enomyc industry expert Marc Fahrig spoke to Jan Kurth, Managing Director of the German Furniture Industry Association (VDM/VHK) and Markus Meyer, President of the German Furniture and Kitchens Trade Association, about the causes of the crisis, current priorities and new opportunities .[1]


Mr Kurth, Mr Meyer, how do you see your industry developing over the next one to two years?

Kurth: Our industry is suffering from strong consumer restraint as a result of inflation and the protracted heating debate. Unfortunately, there is no sign of a rapid improvement in the underlying conditions. 2024 will also be a difficult year.

Meyer: In my opinion, the current situation is characterised by four factors: consumer uncertainty caused by politics, inflation, the wars in Ukraine and the Middle East and the shortage of skilled workers. There is no sign of a change for the better in three of these parameters in the short term. Although inflation has slowed down, it is likely to get a boost again once the next wage agreements have been approved and the increases are reflected in significantly higher product prices.

Where do you currently see the biggest challenges for the industry?

Kurth: In addition to the weak consumer climate, we are particularly concerned about the stagnation in residential construction. Experience has shown that every new build results in the purchase of two to three more homes. Added to this are the issues of cost pressure, conversion to a circular economy, digitalisation, supply chain legislation and the purchasing power of the furniture trade.

Meyer: For me, the biggest challenges are the aforementioned shortage of skilled labour and the reluctance to buy. Without the right staff, growth and innovation are difficult to achieve. Even existing processes are difficult to maintain. At the same time, the poison of purchasing restraint is paralysing the entire industry, as falling sales and rising costs are exacerbating the already critical earnings and liquidity situation of many companies.

How do you assess the developments on the cost side?

Kurth: Material prices are falling in some cases, albeit at a high level. Packaging materials and logistics services continue to become more expensive. In addition, high energy costs and rising wages are a major burden for companies. The cost pressure is therefore still very high.

What about procurement and logistics?

Meyer: The situation on the procurement side has basically calmed down. Supply chains are stable and delivery times are short. However, the worsening economic situation of many suppliers could lead to a rise in total cancellations by producers. There is a shortage of drivers in logistics and a lack of fitters in the retail sector to be able to assemble the kitchens ordered by the end customer.

On a scale of 1-10: How is digitalisation progressing in industry and retail?

Kurth: The furniture industry has been working intensively on this topic for years. Data communication between industry and retail is now at a high level. Internally, however, there are still a few challenges to overcome in view of the batch size of 1.

Meyer: The industry is further along than the retail sector when it comes to digitalisation. This is largely due to the significantly larger units on average. In my opinion, we are at 7 here. In retail, there are large companies such as IKEA, OTTO or the Lutz Group, which are probably at 5. But there are also many small companies, such as kitchen studios with 150 square metres of showroom space, which operate without an inventory management system and may score 3.

The topic of sustainability is also becoming increasingly important in your industry. Customers, regulation and cost pressure are demanding more initiative and the implementation of measures. Where do companies stand from your perspective?

Kurth: Our manufacturers are working intensively on this topic, both in terms of energy consumption and in terms of products, there are numerous efforts, such as chipboard with a high proportion of waste wood, components made from recycled plastics or natural fibres such as hemp. In the coming years, however, we can expect further challenges in this area, for example with the introduction of the digital product passport.

Can and will companies invest at all in the current situation?

Meyer: Many companies are currently stopping their investments. The most urgent task is to secure liquidity. Future projects, such as in the area of digitalisation, are sometimes postponed in such a situation.

Kurth: Depending on the financial situation of the companies, raising capital is indeed likely to be one of the biggest challenges at the moment. There are also fears that external investors will be less willing to provide financing as a result of the insolvencies, making it even more difficult or expensive for banks to lend. In principle, however, the willingness to invest remains high, which can be seen in production expansions or product innovations relating to sustainability, for example. In my opinion, the current weak phase following the strong demand for furniture in the coronavirus years also offers the opportunity to push ahead with new projects.

Do you see new business models, such as rental, customised furniture, fee-based craftsman services, etc. for the sector?

Kurth: In the course of the EU-driven transformation to a circular economy, the industry will also look for opportunities in new business models such as rental, repair or remanufacturing.

Meyer: There have been many new approaches in the industry in recent years. However, most of these were driven by the internet. However, the crisis in e-commerce has also affected these providers. Prominent providers of customised furniture have run into economic difficulties. The sharp increase in concentration in the retail sector is leading to less choice and variety. This opens up new opportunities for smaller, specialised retail formats.

In view of the current crisis, do you expect a wave of insolvencies in the industry?

Meyer: Unfortunately, the industry will not be able to prevent other companies from going bankrupt. And every closure of an industrial company brings with it further suppliers and sub-suppliers. The retail sector is generally coping better with the crisis. There will be fewer insolvencies here. However, I assume that many smaller companies will make an orderly retreat. Self-employment in one's own family business will become less attractive for the next generation. Smaller city centre spaces in particular will be increasingly closed and repurposed in future.

Complete the statement "In my view, companies from industry/retail which are well-prepared for the future ...

Kurth: ... have their liquidity and costs under control and are able to generate demand through innovations or attractive additions to their product range.”

Mr Meyer, Mr Kurth, thank you very much for the interview and for giving us an insight into the issues currently affecting your industry. The present situation is certainly anything but easy. Nevertheless, I would like to emphasise your assessment from a consultant's perspective: Those who have done their homework and know how to convince customers with good ideas have the best chances of economic success, even in difficult phases.


[1] The documented meeting took place at the end of 2023.

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