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HIGH POINT — The economy has U.S. furniture companies singing the blues, but at least this country isn't switching currencies. The European furniture industry faces a changeover to euro coins and notes on Jan. 1, causing additional angst for executives already troubled by Europe's economies.
"There were predictions of the euro getting a one-time boost (with the conversion), but no longer," said Peter Posch, president of IDG, which imports high-end German furniture into the U.S. market. "Logic would dictate a boost, but the economies are so depressed, that hope isn't there."
Posch already has seen German price lists newly rounded up in euros — a price increase, in effect. Retailers fear, among other things, that European consumers will hold onto the euros rather than spend them, or the price changes will chill spending as people adjust.
Price differences previously obscured by variances in currencies and valuations will be unmasked by a common euro, potentially freezing consumers in their tracks, some predict.
"There could be some turbulence," said Erik Stammberger, president of W. Schillig, a contemporary German upholstery producer. "As everywhere in the world, there are price points within each industry. Once the old home currencies are gone ... some countries will lose, some will gain."
If a sofa in Germany is 1,000 marks today, on Jan. 1 it would be 511 euros, based on current exchange rates. Stammberger said retailers likely would lower the price to 499 euros to hit a price point.
"Someone has to absorb the 12 euro difference (about 2.5%)," he said. "As we all know, in 90% of the cases the manufacturers have to absorb it."
Like many European manufacturers, full-line contemporary specialist Rolf Benz is educating both the trade and consumers by publishing suggested retail prices both in German marks and euros, a practice begun July 1. Manufacturers are taking the lead on the conversion.
"For administrative reasons, it seems the majority of European furniture retailers wait for the very last moments to completely switch their operations to euros," said Marc Lehmann, export manager at Rolf Benz. "On Jan. 1, we will change all our invoicing from marks to euros,"
Lehmann believes the consumer is sophisticated and would quickly recognize price increases hidden in pricing conversions.
Human errors likely
Lesser concerns include the inevitable increase in mistakes and discrepancies during the interim period when stores have to handle both the national currency and the new euro.
Holger Wenzel, director of the German Retail Assn., has criticized German banks for their plans to charge exchange fees. Christian Huard, president of a French consumer group, told The New York Times that his country is "headed for catastrophe."
Longer term, the hope is that the euro will lend legitimacy to a currency that hasn't fared well in non-currency forms. The euro currently is worth about 90 cents vis a vis the U.S. dollar, far less than European Union officials and European enterprises had hoped or expected.
In September, the new coins and notes were unveiled and the transition began. It is one of Europe's largest peacetime undertakings, involving 12 of the 15 European Union nations — France, Italy, the Netherlands, Spain, Belgium, Finland, Germany, Austria, Ireland, Greece, Luxembourg and Portugal. The EU countries staying with their own currencies are England, Sweden and Denmark.
Mind-boggling logistics
The logistics of the changeover are mind-boggling. A half-million trucks will be involved, and banks have reinforced their vault floors to support the added weight of all the new coins. To prepare the citizenry, the European Central Bank plans a $90 million advertising and publicity campaign, which began last month.
If some of the hype and talk of potential disaster sounds familiar, perhaps it's because it resembles the Y2K phenomenon of two years ago. Some executives believe the change will be another non-event.
"There are no serious concerns regarding the switchover as far as I am concerned," W. Schillig's Stammberger said. "I think the U.S. dollar and the euro will be the two leading currencies for the whole world."
Of far more concern is the global economic slowdown. The euro perhaps is one convenient scapegoat for the downturn.
"Look at the euro two years ago — close to 70% of Germans were in favor," IDG's Posch said. "Last year, 72% of German citizens said they were against it. What has changed? The economy."
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