Furniture manufacturers: Industry is aiming for price increases: Furniture will probably become more expensive

Furniture manufacturers: Industry is aiming for price increases: Furniture will probably become more expensive

When furniture manufacturers buy pre-products, they currently have a difficult time – the costs are rising, the delivery time is long. In all probability, consumers will soon feel the effects of this.

Anyone who wants to buy a new kitchen, sofa or bed will soon have to dig deeper into their pockets. Because the German furniture manufacturers are making it clear that they will soon want more money for their goods from retailers.

The reason is significantly higher costs for components and logistics in view of the global supply chain problems. “It is an almost necessary business consequence to pass on these extreme price increases in any form,” said the managing director of the associations of the German furniture industry, Jan Kurth, in Bad Honnef.

He predicted a 10 percent increase in sales for the German furniture industry this year – because of the price effects mentioned and not because the companies are selling more furniture.

So will German furniture be ten percent more expensive for the consumer? No, it’s not that simple. Roughly speaking, the share of the product purchase in the final price is only 50 percent, the rest is made up of additional costs for the dealer and his profit margin. An example calculation: If the industrial part were to increase by ten percent on average and the other price components remained the same, the retail price would increase by five percent.

Individual retailers have already seen price increases in the single-digit percentage range, said the managing director of the furniture and kitchen trade association (BVDM), Christian Haeser. “If the shortage of goods and the delivery difficulties persist, then there may be further price increases.” But one should wait and see “how far the summa summarum is reflected”.

One thing is clear: the German furniture manufacturers are in a difficult situation. They did benefit from the “cocooning” trend during the pandemic – instead of traveling or spending money on other leisure activities, people invested in their own four walls or in the garden to have it nice there. But the interim closure of branches as a corona measure was poison for business and the supply chain problems are still there. A recent industry survey found that 44 percent of furniture companies had production curtailed or delayed due to material shortages.

Although the situation with upholstery foams and other supplier products has recently stabilized somewhat, bottlenecks in packaging and electronic components have intensified. As an example of the exploding costs, industry representative Kurth pointed out that wood-based materials – such as chipboard – had become 40.2 percent more expensive in December 2021 compared to the same month last year. The managing director of the association does not see the end of the road to raw material cost increases yet. Kurth emphasized that “there is no way around the fact that such developments lead to higher prices compared to retailers”.

From the point of view of industry experts, however, the ten percent given in the room is a high value. Ralph Niederdrenk from the consulting firm PwC expressed doubts that the industry could push through such a strong price increase. For end customers, the price development in the individual segments will be very different anyway: Due to the increase in material prices, cheap discount goods are likely to become more expensive than high-quality designer furniture or individualized furnishing solutions.

The German furniture industry is not alone with the announced price increase. The Swedish furniture giant Ikea recently announced that it intends to raise prices by nine percent because of higher costs. Other foreign manufacturers are also likely to raise prices because of the higher raw material and logistics costs, says PwC expert Niederdrenk. In his estimation, German manufacturers will not be at a disadvantage in the competition for customers because their products are becoming more expensive – this is actually a general trend on the furniture market.

It is quite possible that end customers sometimes do not even notice the higher prices. Because many furniture stores traditionally rely on time-limited discounts. This is likely to remain the case in the future – only that the companies are probably relying on lower price reductions than before.

According to the information, there are 459 furniture manufacturers in Germany who have at least 50 employees. Around 79,000 people work for these companies. Industry sales rose by around 2 percent to 17.5 billion euros in 2021, as reported by the German furniture industry associations. This is “a very good balance sheet” for the industry, said Managing Director Kurth. However, the pre-corona level of 17.9 billion euros in 2019 was not quite reached. Manufacturers of upholstered furniture, kitchens and office furniture posted higher revenues, manufacturers of beds, dining or living room tables less.

Source: Stern

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