DECORATION INDUSTRY PROFILE

Traditionally, domestic companies in this fragmented, labor-intensive industry have concentrated on wholesale manufacturing. But, recently, the rising cost of production, along with intense overseas competition, has forced a consolidation and shift to the retail side. Duty-free imports have left the U.S. market wide open to foreign producers, which have increased their market share. Overseas companies, especially those in China, have an advantage, given their low-cost facilities and workforces, efficient distribution, and good-quality products. They are a challenge to American manufacturers, particularly in the residential furniture segment.

Faced with tough international competition, domestic companies have attempted to produce more with less plant and staff, improve materials supply, and enhance distribution. Even with these efforts, it can still be hard to earn a decent profit. Too, difficult economic times, most notably in the housing sector, can exacerbate the pressure on margins. Many companies have chosen to source economical finished goods from overseas and customize them for customers. Greater attention to design and finish can be a key differentiator.

Increasing urban population is one of the strong impacting factors affecting the home decor market. Urban culture influences an individuals’ living style. Presently, most of the world population lives in rural areas. According to the data released by United Nations, near about 54% of the world’s population were living in urban areas in 2014, and more of rural population is expected to shift to urban areas during the forecast period. The impact of this factor would increase during the forecast period, thereby consequentially fostering the demand of home décor products in the future.

Raw materials such as metal, wood, plastic, glass, leathers, rattan, fabrics and stone are used for manufacturing furniture. For floor covering, manufacturing tiles, wood & laminate, vinyl & rubber, carpet & rugs and others (linoleum, cork, bamboo, concrete), are essential raw materials.

Cost of raw materials has increased significantly in the past few years. However, by 2020, it is expected that the cost of raw materials such as plastic and glass, would decrease owing to advancements in production technology of these raw materials Thereby, these factors would create a favorable environment for home decor market in future.

Value chain of the home decor market comprises various stakeholders, such as raw materials and components suppliers, manufacturers or furniture integrators and distribution channel. Each of these stakeholders share a specific value at their point of operation, which, in turn, contributes to the competitive value of the product. Materials, design, style and furnishing of the home décor products enhance the value associated with the end deliverable by each player.

Globalization facilitates easier and wider availability of home decor products and designs for consumers. Moreover, growing consumer preference towards adoption and usage of eco-friendly products, known for their minimal impact on the environment, has also boosted the growth of the market.

On the environmental side, the Lacey Act has come into play. This Act has traditionally prohibited trade in fish, wildlife, and plants that are procured in violation of state or federal law. Recently, the U.S. government has expanded the law’s reach to prevent the sale of timber obtained through illegal logging. All timber and wood products, including furniture, have to be reported and declared for fees and taxes to the government by importers and suppliers, with the country or area of origin recorded. The Act surely will entail more costly record keeping and, possibly, supply disruptions for furniture companies

Premium high-end beds made using materials such as hand-tufted horsehair, memory foam, silk, latex, flex, cashmere and lamb’s wool will be in growing demand over coming years. The baby boomer generation will opt for premium beds, attracted by their superior comfort level. Manufacturers are responding to this demand by offering a wide range of luxury beds and mattresses. Luxury towels are also in greater demand, with consumers willing to pay extra for stylish colors and more fashionable designs.

The phasing out of incandescent bulbs across several nations is sparking demand for alternatives such as CLFs and LED lamps. Demand for lamps in other applications including LEDs in mobile devices will also drive demand.

International trade, safety, and environmental regulations have an impact, sometimes beneficial, sometimes detrimental, on the industry.
For a number of years, a big concern of domestic manufacturers has been the importation of low-priced products, most importantly from Asia. In international trade, when manufacturers exports products at a substantial markdown to a developed country, where production and labor costs are high, claims of dumping may arise.

U.S. law provides for anti-dumping duties to be imposed on imports, if the Department of Commerce and International Trade Commission determine that a domestic industry will be materially injured. The tightening or relaxation of trade barriers, depending on the political climate, affects the competitive standing and profitability of domestic furniture producers in the home market; U.S. exports are essentially nonexistent.

In the United States, the Consumer Products Safety Commission (CPSC) holds sway over the furniture sector. For decades, the commission has worked to improve the flammability standards regarding various materials, and the bedding segment has been affected. Increasingly stringent standards on mattress/fabric safety have led to higher costs for manufacturers.

The global market for home furniture and decoration was negatively impacted by the housing crisis as homeowners cut down drastically on non-essential spending, postponed home improvement and decorating projects, and delayed buying new homes. Due to recovery in the housing sector and in the wider global economy, demand for home furniture and decoration has begun to turn around. With employment figures improving and levels of disposable income rising, property owners are more readily investing in their homes.

Expansion in the battered new residential construction sector will also help drive demand for area rugs and tufted carpet. Increased construction in the US will see consumers and businesses alike opt for new carpet and rug products to furnish their homes and offices. Growing consumer confidence and increased discretionary spending will see demand from the residential sector grow, while the nonresidential sector will be a source of demand due to expansion in commercial and new office space. Replacement markets will similarly reflect economic recovery. Nylon, the most used fiber in the manufacture of carpet and rug products, is likely to remain the leading choice over the coming years. However, polyester fibers are becoming more attractive due to high petroleum prices and improved fiber quality, making them more appealing than polypropylene fibers.

The world home decor market is segmented based on products and geography. The product segment is further segmented into furniture, textiles and floor coverings. The furniture segment is sub-segmented into kitchen, living & bedroom, bathroom, outdoor and lighting. The textiles segment is further categorized into rugs textiles, bath textiles, bed textiles, kitchen & dining textiles and living room textiles. The floor coverings segment includes tiles, wood & laminate, vinyl & rubber, carpets & rugs and others. Based on geography, the market is segmented into North America, Europe, Asia Pacific and LAMEA regions.

Based on product, the market is broadly classified into home textile, floor covering and furniture. Furniture has witnessed an increased adoption among consumers, owing to the increased disposable income and influence of western culture, especially growing adoption of modular kitchen and lighting. The furniture segment encompasses furniture used in kitchen, living and bedroom, bathroom, outdoor and lighting.

Furniture are used for domestic as well commercial purposes. Various materials such as metal, wood, plastic, glass and leather are used solely or in combination with other materials to manufacture parts of furniture. Shape and structure with reference to design are important factors in the furniture industry as it directly influences the consumers’ decision to buy a particular product. Multifunctional furniture is gaining popularity among urban consumers.

Nowadays, consumers prefer online retail platforms for buying furniture, owing to availability of a wide array of home decor products at discounted/affordable price. Increasing cost of raw materials, such as leather and superior quality wood, is limiting the market growth. Improving lifestyle and increasing disposable income of individuals would offer several growth opportunities to the players operating in the market.

Other factors that are influencing the growth of the market are the rise in the disposable incomes and improving lifestyle of people.

The home furnishings retail industry allows consumers to make their homes truly their own with their very choices of furniture and decor to make attractive. Along with the struggling housing markets, so too are retailers of home furnishings and furniture. Demand for home furnishings is cyclical, influenced by housing starts, as desires to remodel and redesign are not necessary during slow economic times. Demand is also driven by consumer income. Large companies compete through volume purchasing, breadth of products, and effective merchandising and marketing. Small companies focus on a market segment and compete through depth of products and superior customer service. In 2016, furniture and home furnishings store sales amounted to about USD 111.47 billion. As of 2018, among all the sources like social media, home decor magazine, families homes, television and stores, 29% of customers responded that social media was their main source of home decoration inspiration.

The industry is exposed to the following threats and opportunities:
The percentage of services conducted online represents the portion of activities consumers and businesses conduct online that used to be conducted in person.