It is ironic that in 2019, just before the market chaos created by COVID-19, the EU recorded its strongest year for wooden furniture imports since 2007. That was, of course, when the last consumer boom was at its peak just prior to the market meltdown of the financial crises.
As reported by ITTO, the EU imported wooden furniture from outside the bloc with a total value of €7.07 billion in 2019, 10% more than the previous year. Last year was only the second time in history, alongside 2007, when annual imports of wooden furniture into the EU exceeded €7 billion (at constant 2019 prices).
Several factors on both the supply and demand side combined to drive growth in EU imports of wooden furniture in 2019. Last year was the culmination of a period of slow but consistent expansion of the EU economy which began five years before in 2014.
The slow growth in EU imports was interrupted in the second half of 2018, particularly in the UK owing to Brexit uncertainty, which in retrospect turned out to be an over adjustment and led to increased imports last year.
At the same time China, embroiled in a bitter trade dispute with the U.S. during 2019, was looking to the EU as an alternative outlet for furniture products. Meanwhile, several tropical suppliers – notably Vietnam, Indonesia and India – were also seeking to build on new investment in capacity and to diversify markets by targeting the EU.
The long-term trend towards increased imports from several neighbouring countries on the Eastern borders of the EU, notably Turkey, Bosnia, Ukraine, Serbia and Belarus, also continued last year.
Economic integration drives strong EU internal furniture trade in 2019
The trade data suggests that there was a real increase in EU consumption of wooden furniture in 2019. This is implied not only by rising imports from outside the region, but also by a resumption of the rising trend in internal EU trade of wooden furniture during the year.
This last trend which also began in 2014 had slowed in 2018 but picked up again in 2019. In 2019, internal EU trade in wooden furniture was valued at €21.46 billion, 3% more than in 2018 and 23% greater than 5 years before.
Rising internal EU trade in wooden furniture is being driven by increased market integration within the region, the shift in manufacturing from higher cost countries in the western EU to lower cost eastern locations, particularly Poland, and the growing presence and influence of large-scale retailing chains operating at cross country level, most notably IKEA.
85% of wooden furniture sold in Europe are produced by EU-based manufacturers
More wooden furniture imports into the EU from outside the region are also now being funnelled via larger ports in Western Europe, particularly the Netherlands and Belgium, before being redistributed to other parts of the EU.
The drive towards greater integration in the EU furniture market and access to relatively lower cost manufacturing locations in the eastern EU, explains the continuing dominance of EU-based manufacturers in the region.
ITTO’s estimates based on analysis of Eurostat data indicate that EU-based manufacturers account for around 85% of all wooden furniture sold in the region.
More European manufacturers invested in advanced and automated manufacturing to increase cost savings
In recent years, European manufacturers have boosted productivity and competitiveness through investment in more advanced computer-controlled and automated manufacturing, cutting overheads and reducing the relative labour cost advantages of overseas producers.
There’s been a particularly large investment by Western European furniture manufacturers in Eastern European countries, notably since their accession into the EU from 2004, and this is now maturing. From being principally production satellites for large western European brands, Eastern European manufacturers are now developing their own identity and market momentum.
Furniture manufacturers in the EU area are also making a virtue of their shorter supply chains which not only reduce transport costs but also allow products to be delivered more rapidly.
External suppliers face other more direct challenges to expanding sales in the EU. Despite some recent consolidation, there is still a relatively high degree of fragmentation in the retailing sector in many European countries which complicates market access. Many overseas suppliers remain reliant on agents and lack direct access to information on fashions and other market trends.
The progressive migration of European furniture sales online has also tended to favour local manufacturers better placed to meet the short lead times demanded by internet retailers and consumers.
Another fall in EU wooden furniture exports
Nevertheless, the gradual rise in EU imports of wooden furniture since 2014 suggests that external suppliers are becoming progressively more competitive in this market.
Their heightened competitiveness is also suggested by the fact that EU manufacturers have been struggling to expand sales outside the region. Last year the value of EU wooden furniture exports to non-EU countries fell 2.3% to €8.68 billion.
This continues a trend of flat-lining, or slowly declining exports to countries outside the EU after reaching an all-time high of just over €9 billion in 2015. Since then the competitive benefits of the relative weakness of the euro against the dollar and other cost saving efforts of EU wooden furniture manufacturers have waned.
Competition for EU-based manufacturers has intensified from newly emerging producers in Eastern European countries outside the EU and from Vietnam which in the last 5 years has rapidly overtaken all other tropical countries in the global league table of wooden furniture producing nations.
EU wooden furniture manufacturers have suffered in higher-end export markets in Asia, the CIS and Middle East from a range of factors including cooling of the Chinese economy, the diversion of Chinese products away from the U.S. to other markets, a sharp fall in global equity markets towards the end of 2018, extreme weakness of the Russian rouble, relatively low oil prices and political instability.
Overall, the combined effects of rising EU imports and declining exports is that the total EU external trade balance in wooden furniture fell 35% from €2.45 billion in 2018 to €1.61 billion last year.