|
In 2006, the UK Office Furniture market was
estimated to be worth around £728 million at MSP.
Following several
very difficult years between 2002 and 2004, the office furniture market
has experienced some easing of pressure in 2005 and early 2006, with
most sources suggesting that the market is no longer in decline, in
current price terms. In mid 2006, the Office Furniture dealers
sector is currently estimated to be worth around £380 million at
manufacturers selling prices, representing just over 50% of the
total Office Furniture market.
With the Office
Furniture market stabilising in mid 2006, supported to some extent by an
upturn in business confidence, indications are more positive and that
the sector will experience growth levels at 1-2% per annum in the short
to medium term.
The overall
performance of the market, disguises the varying levels of performance
in certain sub-sectors. The home office furniture sector, for example
has consistently outperformed the overall market in recent years and
this is likely to continue to be the case in the short to medium term.
In terms of
distribution, sources indicate that the office furniture dealer channel
has maintained share of the overall market, despite there being
suggestions that the growth in the home office sector has provided
growth for the more consumer oriented distribution channels, such as
furniture multiples (ie IKEA, MFI etc). Clearly, however, the
development of the home office sector has little impact on the
commercial sector, and these considerations are unlikely to provide
concern for manufacturers focusing on the commercial sector in the short
to medium term.
The Office
Furniture dealers are currently estimated to account for around 52% of
the overall Office Furniture market in 2006, reflecting a stable share
in recent years. As such, the dealers channel has mirrored the
performance of the total Office Furniture market, and this trend is
expected to continue in the next few years.
Overall
international trade in office furniture also decreased significantly in
2005 and early 2006, although imports from low wage countries such as
China increased marginally, reflecting companies shifting to low cost
manufacturing environments in order to maintain margins.
The taken by
office furniture dealers has remained relatively static in recent
years, although has come under increasing pressure due to growth in the
SOHO sector and subsequent growth in superstores and furniture
retailers. The dealer channel has performed well during the last few
years, with many dealers having expanded their range of products with
almost every dealer offering turnkey office solutions in order to
broaden their customer base, and to sustain market share.
The definition of
office furniture dealers is becoming increasingly blurred in 2006, with
many larger commercial interior refurbishment companies offering turnkey
solutions in terms of office design and fit-out services – including the
supply of office furniture and related products. As such, these
companies have continued to benefit from a reasonably healthy office
relocation market, which has also sustained this channel’s share in 2005
and 2006. Indications are that this provision of ‘value added’ services
offers significant opportunities for the dealer / contractor channel to
continue to grow in the short to medium term, negating, to some extent,
the relatively lacklustre performance of the overall office furniture
market.
A large proportion
of office furniture dealers are small companies and the dealer network
is largely fragmented, with an estimated 2500 branches in the UK.
However, there are some larger dealers with multi-branch operations,
although the majority of these companies operate within a local or
regional environment only. Dealers primarily source their furniture
from UK‑based manufacturers, but are also willing to source 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 prefer to trade with manufacturers who do not trade direct with
customers, in order to lessen the risk 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.
The majority of
dealers operate independently, sourcing their products from several
manufacturers, which enables them to offer a wide and comprehensive
range of products at different price levels. As a result, many dealers
will select and promote specific ranges from different manufacturers,
within their overall portfolio. However, in some cases dealers will have
close links with individual office furniture manufacturers, notably the
larger suppliers.
An analysis of
dealers’ facilities in mid 2006 indicates that around 75% have a
showroom, although the quality of these facilities can vary
substantially between dealers, whereas 85% of dealers have some kind of
warehouse facility. Approximately 65% 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 few years, and now only accounts for
around 20% in mid 2006, with the rest supplied from the manufacturer for
a specific contract.
The majority of
dealers’ customers are private sector companies, with other important
customer groups including public sector/local authorities and private
individuals. Many dealers are attempting to increase share in the
growing SOHO market, although sources suggest that 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 owner of the company, though the larger dealers
tend to rely on their sales manager or a buyer to influence and make the
decision. Over half the dealers interviewed will review their
product and supplier portfolios at least once a year, with several
indicating that this is an ongoing process.
Range and quality
of products
along with competitive prices are key criteria influencing
supplier choice, although more recently delivery lead times, after sales
support and additional services offered by the manufacturer have become
increasingly important criteria. This is predominantly due to increasing
competition in the market and the fact that end customers are becoming
much more sophisticated and demanding more services 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 wide range of
suppliers to choose from. However these decisions will depend on the
dealers’ market position, with some preferring to offer exclusivity as
their key point of differentiation.
In the medium
term, prospects for the dealer network appear to be increasingly
optimistic with growth in the overall office furniture market expected
to pick up over the next 3-4 years. With the SOHO sector continuing to
expand and furniture retailers and superstores responding with new
extensive product ranges it still remains a highly competitive and
fragmented market. However more dealers are continuing to expand their
services, offering turnkey solutions to customers’ furniture needs,
extending their product and service offerings and these initiatives
should ensure that dealers still retain a significant market share.
|
