This article has been written to help the corporate audience to gain in-depth knowledge of current market trends in China’s furniture market. This book is a comprehensive guide to help potential furniture businesses to understand the demand of the market, the various customer segments, the current growth factors, Digital Business, and E-commerce solutions to enter the furniture market of China.
Investing in the Chinese market has become increasingly attractive for Western businesses. China’s business environment is equipped with a unique digital presence along with tech-savvy demographics, rising incomes, and increased consumer spending. The western businesses now have a profitable outlet after facing declining sales in their home markets, due to which many US and European companies are relocating to China to witness their long-term global growth strategies.
Breaking into the Chinese market successfully may seem like an impossible task for foreign companies. Therefore, having the right set of skills and knowledge about entering the Chinese furniture industry is necessary.
Furniture Market in China: Market Overview as of 2020
China’s furniture market has progressed rapidly in recent years. Increased household income and better living conditions have encouraged people to invest more in home decoration. In 2017 the market value exceeded 1005 billion yuan, and it’s expected to reach 1.34 trillion yuan by 2020. The market is expected to grow annually by 6.8% (2020-2025). According to the China Statistical Yearbook 2018, there were about 630 million households in all provinces, if people replace their home furniture every 10 years on average, then around 63 million households would replace their furniture each year.
Wood furniture manufacturing accounted for the largest proportion of the Chinese furniture manufacturing sector in 2019, contributing approximately 59.0% of total furniture manufacturing revenue.
Chinese consumer taste is gradually opening to western furniture and lifestyle, which contributes to an ‘increased westernization effect’ in China. Now Chinese consumers want to have contemporary designed, branded furniture. On the other hand, the Chinese population is moving from the countryside to major cities. It is quite usual for a family to live in a small apartment but with a good design.
Factors that drive the Chinese Furniture Market demand
Population division by age group
According to Index Mundi (July 2019), 47.84% are between 25-54 years of age. This age group is most relevant for this study as it is considered as the prime working age. According to the National Bureau of Statistics, per capita, disposable income in China had an increase of 7.5% in 2018.
Households and urban population
In response, there was a significant increase in the purchasing power of the households. Another factor that has given a boost to the furniture market in China is urbanization. Currently, 57% of Chinese have moved to the cities, while by 2030, 70% of the population will be living in the cities.
The prime working group
In the process of urbanization, the prime working group of China now like to settle down in towns and cities. This working-class has become a major furniture consumer group. In addition, by the end of 2020, 37.6 million houses will have been renovated under the country’s policies that support low labor costs. These renovated houses will also generate demand for furniture.
3 Types of Furniture Market Consumers
There are mainly three types of consumers in the furniture market in China. These consumers are classified into different groups according to their tastes, income, and lifestyle.
This type of consumer belongs to the high-income group. They are more concerned about quality, heritage value, and style of the furniture than about price. Avid consumers show more interest in western designs, classical Chinese style, or innovative, ultra-modern furniture.
These consumers want to own furniture that resonates with their taste and style. While selecting their furniture item, they also pay attention if the item is aesthetically beautiful and if it gives importance to cultural elements. Luxury consumers like to own trendy, eco-friendly furniture and, if the price is a bit higher due to the aesthetic value attached to it, then they don’t mind paying a little extra.
Average income group Consumers
The number of this group of consumers is the highest in the furniture market in China. Average-income group consumers look for “value for money”. They are attracted to a good price and good quality. They make regular purchases and tend to change furniture very often.
Market Trends in China: Consumer Demand and Behavior
The social positioning of a person, among Chinese consumers, has become extremely important over the years. Chinese consumers want to portray their lifestyle and social status by buying expensive luxury items. With this mindset, now Chinese consumers consider their home as an extension of themselves.
Brand Loyalty and Commitment
Chinese consumers are becoming more selective and quality-conscious. They want to spend on premium brands, therefore foreign brands have a bigger share, compared to local brands.
Research also suggests that Chinese consumers are increasingly becoming brand loyal and prefer not to switch between different brands. Expert’s advice on this distinctive Chinese consumer behavior is that foreign brands must carefully select the target group, whose demands and taste match with the brand values and offerings.
China’s Middle-Class Aspiration for a better quality of Life
The new affluent class, also known as the “new rich” described as average or middle class of China, are young, tech-savvy, and free spenders. They are now aspiring to meaningful experiences to elevate their lifestyles. They want to buy products from brands that value sustainability and provide health benefits.
Furniture Brands and designer Awareness
Chinese consumers are keen readers and want to research a brand as much as they can before buying. Before investing in furniture, they learn about the quality, benefits, and usefulness of the furniture brand. Furniture magazines are an extremely popular source among Chinese consumers. Through magazines, they learn about various ideas of interior decoration. Some popular magazines work as influencers and trend launchers and consequently boost sales of furniture brands.
Consumption of Furniture in China: Coming Trends
Since Chinese consumers are becoming more aware of the products used to manufacture furniture items, they are embracing environmentally friendly options. Let’s analyze the three main trends of the market.
After a long time being exposed to pollution, now the Chinese government as well as Chinese consumers are taking steps to overcome environmental issues. Consumers are gradually moving towards new living concepts such as “Eco home” products.
The Kid Furniture Segment is growing fast
A huge amount of consumers is now showing great interest in children’s furniture: this development has been noticed after the end of the one-child policy. Chinese consumers are impressed by western ways of decorating children’s bedrooms providing the highest quality and comfort for their children. According to research results from reasonable sources, 72% of Chinese parents buy furniture for their children. The children’s furniture market has great potential.
Office and Hotel Furniture
China has become one of the biggest hotel construction countries in response to accommodate local and international tourists. The hotels are provided with exclusive decoration and furniture.
With awareness of employment rights and a comfortable working lifestyle, now more and more offices are constructed following western-style offices providing comfortable and premium furniture in open areas.
Outlook for the Local Furniture Market in China
The furniture Market industry has the highest growth potential in China. Currently, the market counts for more than 60,000 companies, and the majority of furniture manufacturing companies are small medium-size enterprises. China’s furniture industry has low entry barriers, which facilitate new entrants to set up business in the Mainland. Local brands still have a better competitive advantage compared to overseas brands, since they have better distribution channels and can attract consumers in rural areas and second-and third-tier cities with cheaper prices.
However, fraud, quality issues, sustainability issues, and copyright infringement have slowed down the growth of local furniture brands
Are Domestic Furniture Companies able to meet the needs of Chinese consumers?
Due to the extreme development in the furniture market of China, the top ten Chinese companies are not enough to meet the demand of Chinese consumers. These companies just account for around 3% of the production value. Even if the market is saturated in the first-tier cities, there is huge growth potential in second and third-tier cities.
Market Competition: a Highly Competitive Market
The Chinese furniture market has become highly competitive. And there is even bigger competition among foreign brands. At present, foreign brands are moving their furniture industry to China, to satisfy the huge demand in the industry. In the next 3- 5 years, foreign furniture enterprises will be flocking to transfer to China. Foreign furniture companies mainly target the high-end segment.
International Brands in the Market
The most active and successful foreign furniture brand in China is IKEA. In China, there are 30 Ikea stores. Ikea faced major problems when entered the Chinese market with respect to high import taxes and promotion. Soon Ikea changed its global strategy to gain market share in China by sourcing raw material locally and opening factories in Shanghai.
Moreover promoting and advertising on Chinese social media rather than using its main marketing tool: Ikea catalog. IKEA has announced its largest investment in China, 10 billion yuan (about 1.45 billion U.S. dollars) in August 2020. That mainly went to the company’s digitalization strategy and its offline business expansion. Its online sales in China surged 67 percent during the past year. And this year, it’s heading to some new markets like Nanning, Kunming, and Fuzhou.
Other than Ikea there are Spanish and Italian furniture brands that cater high-end segment.
Furniture Distribution Channels in China
In China, there are various distribution channels to sell furniture goods. Chinese consumers prefer buying furniture from chain stores and furniture hypermarkets. Imported products are sold in specialized stores, generally selling their own brand. Some SME furniture brands sell their furniture items through targeted high-end shopping centers. The high-end segment mainly operates from its own flagship stores to maintain exclusivity.
Online Furniture Market in China
Chinese consumers account for more than 30% of global furniture consumption. Meanwhile in China e-commerce is flourishing catering to 460 million online shoppers. The e-commerce channel accounts for 4% of global furniture sales. E-commerce Platforms such as JD Worldwide and Tmall Global are the most popular e-commerce platforms. E-commerce platforms of China are expected to develop even further and contribute hugely to the rise in sales. E-commerce is expected to take on an important position in distribution channels in China due to its convenient payment method. For the furniture market in China O2O is also an exceptionally important channel where the company uses its website as its sales platform, showing the images of various products and accepting online orders from consumers. Consumers can also opt for offline experiences by visiting dealers’ stores and place orders online.
How to use Digital marketing tools to promote Designer Furniture in China?
Brand activation refers to creating awareness about your brand. Chinese consumers are one of the most digitally dependent nations. Therefore, for any business, the way to succeed in China market is through digital strategy. Chinese digital ecosystem is completely different from elsewhere in the world, and the same is true for Chinese consumer behavior. Businesses need to know in-depth digital consumers’ spending, behavior, and patterns. There is immense competition in the Chinese digital market, businesses need to stand out with their digital marketing strategy and provide a competitive advantage to its customers to be successful.
Social Media in China
Chinese netizens follow social media platforms religiously. A big part of their spending decision depends on reviews they read from other users. Chinese consumers do not trust advertising from the company itself. It is critical for companies to have social media presence to be successful in the Chinese digital ecosystem. It is vital to collaborate with a reputable digital agency in China for guidance on social media presence.
Furniture Designer should use Baidu in China
Baidu is China’s most powerful search engine, with a whopping market share of over 70%. To promote a domain on Baidu, there are some tips to follow:
- A top-level-domain (.cn) leads to a higher ranking on the Baidu search results;
- A proper Keyword Analysis is absolutely necessary;
- The page description (meta-tag) plays an important role;
- Well written content plays an important role;
- Backlinks lead to a higher ranking;
- Host the website in China.
The Ethnicraft Designer Furniture in China case study
Enthicraft is a European furniture brand and offers high-quality products but nobody heard of it in China until Enthicraft launched its powerful digital marketing strategy. Baidu was the first step, with the help of a local digital marketing agency, Ethnicraft worked on two distinct strategies: SEO based on Keywords ranking and PPC campaign on Baidu. By implementing these two powerful strategies, Ethnicraft quickly gained popularity among consumers who were interested in furniture shopping in China.
Furniture Designer in China & B2B: Distributors Lead Generation
When a new foreign furniture brand with little reputation and low brand awareness enters China, it needs to find a local partner. In China B2B connections and introductions takes place online before meeting face to face. To connect with a furniture distributor, a foreign brand first needs to be visible online and create an e-reputation on digital platforms. A reputable local digital agency can help a company to achieve these two crucial steps toward entering the Chinese furniture market. A brand needs to have SEO (Baidu) optimization so that the information and content about the brand are visible to the distributors.
Franchise Business needs a strong Branding strategy
In recent years seeing the economic boom in China, many foreign franchises are entering the Chinese market. There are various opportunities for foreign franchises in China due to the increasing wealth of the middle class. People in China like to show off by purchasing foreign items as western brands are highly regarded for their service and quality. With numerous opportunities, foreign brands have also some challenges to face. China is a huge and difficult market. Chinese people like things in their way, this can be true for their cultural values, tastes, or language.
Big Brands or Furniture designer: Viral Marketing is your friend in China
Foreign brands need to be highly visible on Chinese social media. It is crucial to create the buzz with their profile on Weibo, WeChat, and Forums by gaining visibility and maintaining E-reputation. There are over 904 million netizens, 600 million of these fall under the ‘middle-class consumers’ category. Foreign brands need to be highly visible on these platforms where online generations spend most of their time learning about new products.
Influencers Campaign to promote Designer Furniture in China
In China, the influencer campaign plays a big part in digital marketing strategy. Chinese consumers tend to follow KOL (Key Opinion Leaders), who are celebrities or just people with a huge number of followers that give advice and follow the latest trends. Influencers in China are more or less like Youtube celebrities. Netizens trust KOL more than advertising campaigns from the brand itself. They follow KOL on Chinese social media sites. Moreover, KOL influence Chinese consumers with their attitude and believes.
Offline2Online (O2O) market
The increasing trend of spending on premium products among Chinese consumers led to the growth of the O2O market. Consumers want to feel and experience the products before spending money on it. This is the reason why physical outlets still exist in China even if e-commerce has enormous numbers. In China, more than 30% of customers buy their furniture in a furniture shop or at malls, while 21% purchase online, according to a report by Fang.com, a Chinese real estate portal.
Sell your Furniture Brand on Tmall
Among China’s B2C E-commerce platforms, Tmall is the most dominating player, with a market share of over 50%. Tmall is an online retailer and it is a by-product of Taobao, which is run by the Alibaba Group. Tmall has over 50,000 shops that sell over 70,000 International and local brands. There are different store formats operated by Tmall which are known as:
Flagship Store: This kind of e-store is an exclusive shop for trademarked goods. To open a flagship store, the owner has to be a formal representative of the brand or have exclusive authorization documents provided by a formal representative of the brand.
Specialty Store: For e-store owners who have the required authorization from a brand to distribute on their behalf in China. In this case, Chinese companies may distribute on behalf of foreign brands, there are benefits in terms of the local expertise they provide.
Monopolized Store: For marketers who want to sell two or more brands within one of Tmall’s product categories.
This is the first time IKEA offers its products and home furnishing solutions through an external e-commerce platform, marking an important milestone for IKEA China’s “Future+” strategy, which was launched in August 2019. Being more accessible and digitalization are two crucial parts of this plan.
The virtual IKEA store on Tmall will offer Chinese consumers access to around 3,800 IKEA products, and home furnishing solutions, complementing the existing sales channels.
The virtual store will offer the same services provided as existing sales channels, including home delivery, assembly, and product return. The partnership with Alibaba also enables IKEA to become more accessible for the many people in China and also allows it to test and learn how to meet customers in a new way. Based on this test IKEA will evaluate if and how third-party platforms fit into the IKEA channel mix
WeChat Store a great place to be closer to your customers as a furniture designer in China
WeChat is China’s most ubiquitous social media app, with over 800 million monthly active users. The app is used not only for keeping in touch with people but also for carrying out different transactions, from buying coffee to booking taxis.
WeChat offers mobile payment optimized digital stores. Chinese technology giant behind WeChat (Tencent), is making it possible for international brands to run business in China, bypassing license requirements if the business is only carried out on the platform.
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