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In 2002,
the UK Office Furniture market was estimated to be worth around
£765 million at MSP. Following several very difficult years in the
early 1990s, the office furniture market has generally experienced a
strong recovery due to improving commercial construction trends,
continuing through to 1996/97 which proved to be particularly
buoyant years.
The 1998
to 2000 period was more volatile being affected by factors such as
the strength of sterling, the Asian crisis and higher levels of
interest rates, leading to a period of pessimism and low confidence.
The year 2000 was more optimistic for the office furniture market as
business confidence improved and a backlog of demand emerged from
the 2 years of procrastination by many companies.
The
outlook was more positive for 2001, but towards the end of the year
the market was hit by the events of September 11th. Fears of a
global economic slowdown and low business confidence led to a
decrease in office construction levels and a worldwide decline in
demand for office furniture, which continued throughout 2002.
Overall international trade in office furniture also decreased
significantly across the board, although imports from low wage
countries such as China increased marginally, reflecting companies
shifting to low cost manufacturing environments in order to maintain
margins.
Although
demand failed to pick up in most of 2003, the first signs of a
possible recovery have emerged and 2004 and 2005 are predicted to
show positive growth, driven by increased construction activity and
increasing levels of business confidence, as well as the continued
strong performance of the SOHO sector.
This
figure has declined slightly in recent years due to growth in the
SOHO sector and subsequent growth in superstores and furniture
retailers. However, the dealer channel has performed reasonably well
during the last few extremely difficult years, partly due to many
dealers having expanded their range of products and services on
offer in order to attract a wider customer base.
The vast
majority of dealers are small companies and the dealer network is
very fragmented, with an estimated 2500 furniture dealers in the UK.
However, there are some larger dealers with multi-branch operations,
the majority of which operate within their local or regional
environment only. Dealers primarily source their furniture from
UK?based manufacturers, but also from importers and wholesalers.
Many of
the leading manufacturers such as Steelcase, Senator, EFG Matthews
and Herman Miller supply through a dealer network and in general,
dealers will only trade with manufacturers who do not trade direct
with customers, to try to avoid problems of direct competition.
Project Office, part of Bullough, is the leading direct supplier of
office furniture. Wholesalers are generally used on a top-up supply
basis, where appropriate.
A
majority of dealers are independent operations, sourcing their
products from several manufacturers, which enables them to offer a
comprehensive range of products at different price points. As a
result, many dealers will select and promote specific ranges from
different manufacturers, within their overall market portfolio.
However, in some cases dealers will have close links with individual
office furniture manufacturers, notably the larger suppliers.
An analysis of dealers' facilities indicates that around 74% have a
showroom, although the quality of these facilities can vary
substantially between dealers, whereas 86% of dealers have some kind
of warehouse facility. 68% of dealers claimed to hold some stock,
and this has remained relatively unchanged during the last six
years. However, the percentage of turnover supplied from stock has
continued to decrease over the last three years, and now only
account for 22%, with the rest supplied from the manufacturer for a
specific contract.
The
majority of dealers' customers are private sector companies, other
customer groups include public sector/local authorities and private
individuals. Many dealers are attempting to increase the share they
sell to the growing SOHO market, although this has proved difficult,
as specialised home office ranges are now widely available in
superstores, via mail order, and in furniture stores such as MFI and
IKEA.
In terms
of the buying process, most dealers are small and therefore the
choice of supplier rests with the owners of the company, though the
larger dealers tend to rely on their sales manager or a buyer to
influence and make the decision. More than half of dealers will
review their product and supplier portfolios at least once a year,
with several indicating that this is an ongoing process.
Quality
of product and competitive prices are still key criteria influencing
choice, although in recent years delivery lead times, after sales
support and additional services offered by the manufacturer have
become more important criteria. This is predominantly due to the
increasing competitiveness in the market and the fact that end
customers are becoming much more sophisticated and demanding and
expect more from the dealer.
Sales
and marketing support from manufacturers is not usually expected
from the dealer and brand exclusivity is not considered an important
factor as most dealers are not sourcing from a single supplier and
will choose appropriate ranges from different manufacturers. In
addition the office furniture market is very competitive and there
are a number of suppliers to choose from.
In the
medium term, future prospects for the dealer network appear to be
relatively optimistic with growth in the overall office furniture
market expected to pick up over the next 3 years. Its share may
continue to be eroded as the SOHO sector continues to grow and
furniture retailers and superstores respond, but the range of
services offered by the dealers is continuing to grow and this
should ensure that they retain a significant share of the market. |
