Ghost cities show China crisis, but is the Chinese furniture market still interesting?

3 min read

Yujiapu is one of the most impressive ghost cities in China. An almost empty agglomerate of half-finished buildings and skyscrapers modelled on Manhattan’s skyline.

Many say it’s one of the most scary landmark of China’s failed ambitions: a ghost city that was once supposed to become a world financial centre.

Many others say it’s an emblematic effect of a pathological unbalanced growth, based on accumulated debt and the funding of worthless projects, challenging the global economy.

But the furniture market is still confirming, at least in some segments, the good performances scored during last year.

Sales value increased by 10% in 2014 and scored a good performance in 2015, while the influence of online retailing and cross-industry cooperation became increasingly evident in home furnishings.

One of the best performing segments was the LED market, with and approximate growth rate of 30% and a very good forecast in terms of sales and market price pressure.

It’s an interesting industry performance if we consider the whole Asian-Pacific area context: during the last three years it became the largest region for home retail sales, overtaking Western Europe and North America, with China leading the troops, together with an impressive performance by India and Indonesia.

Home improvement, for example, reached unprecedented growth peaks compared to the last ten years even if the current slump and economic slowdown are expected to have a negative impact on it.

If we have a look at the distribution structure, it is still important to consider the local market shares, with the homeware and home furnishing stores remaining at the top of the leading channels covering more than the 50% of the national sales, while department stores and home improvement and gardening stores are struggling to grow above the 10-16% market share.

While the Chinese destiny is still uncertain and the real estate market situation is expected to have a negative impact on the sales, the international supplier could think about a smart pivot to other interesting Asian markets.

Homeware direct sales scored a great performance in emerging countries over the last two years, while developed markets have experienced flat or declining shares of sales.

This is due to greater competition from other channels, especially modern grocery retailers and internet retailing, which are less established in emerging economies.

Among the top five countries by direct selling penetration, three (Malaysia, Mexico and Indonesia) are developing markets with young and growing populations.

Malaysia and Indonesia could really be a great pivot move for those suppliers paying attention to the Asia Pacific region next future.

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Tony Simon

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