Mexico sharpens competitive edge
By Powell Slaughter -- Furniture Today, April 14, 2003
Guadalajara, Mexico — Mexican exhibitors at this winter's Expo Mueble, Mexico's largest furniture trade fair, kept focusing on ways to keep their products competitive with Asian goods in the U.S. market.
While many reported lower sales to U.S. customers — some down 50% or more — the good news was that more small American retailers attended Expo Mueble in late February than in previous years, and the big retailers that regularly shop the show also came back.
"I've seen more Americans here than I've ever seen," said Vernon Piehl, vice president of southwest sales for Sangiorgio, an Italian case goods manufacturer whose products are a regular sight at the stand of Mexican producer Delsa, which has sold Sangiorgio in Mexico for four years.
"This is speculation on my part, but for the people I've seen, China is taking too long, and they're not important to the Chinese because of their (small) size," Piehl said. "They're coming to Mexico looking for product they can get shipped faster, with more dependable delivery dates."
Piehl also noted that Mexican retailers are buying in smaller quantities.
"They like to react faster when the opportunity presents itself," he said. "If business upturns, it takes too long to get imports, so they like to buy from warehouse locations if the price is competitive."
At Delsa, which makes a lot of product for U.S. importer Kemp, exports accounted for about 50% of business last year.
"A couple of years ago it was 80–20 exports to imports," said Mario Amaya, one of Delsa's owners. He attributes the change to a stabilized peso and more importantly, competition in the U.S. market from China, where labor costs are lower.
Delsa is responding in several ways.
"We're trying to sell more in Mexico, because margins are much higher here, but we also have high-volume factories so we need the volume from the U.S.," he said. "We're bringing our lumber from South America — it's much cheaper.
"We have to make people in our plant focus on the whole situation. Right now they know there's more product than buyers. We need to start working more with designs and technology-intensive resins and pressed veneers," Amaya added.
Targeting more domestic sales poses other problems for Mexican producers.
"The middle class here — our market — is shrinking, and it's been a better year for smaller companies with lower overhead," Amaya said. "They're doing smaller orders and lower-end product. Some retailers went a step down in where they were selling."
Federico Cruz, sales representative at case goods producer Gabite, also said the domestic market is tougher than before.
"Mexican buyers are telling us they don't want to make a full-year commitment," he said. "Most furniture stores in Mexico are saying, 'I'll take two of these and three of those.'"
Sales at Del Toro Furniture, which sends most of its case goods to U.S. customers, were up 30% last year, said José Luis del Toro, president.
"Business is good right now — not great, but not bad," he said. "We have very loyal customers. The competitive situation in the States, though, makes it harder to start exporting for first-time players."
Del Toro has revamped its product line, focusing on individual pieces rather than collections and emphasizing a flow of fresh goods and improved service. Average shipping is 20 to 30 days, down from 30 to 45 days two years ago.
"We've improved productivity and we're getting better pricing because we're focusing on items," del Toro said. "Our finishes are improving. Sayer Lack is doing exclusive finishes for us."
Dixy, a full-line manufacturer here, is growing its U.S. business in categories beyond case goods, which has helped offset a decline in case goods for the U.S. market from 60% of production to about 30%.
"In upholstery, we were doing some business in the States, but now that we're manufacturing sofas for Ikea, it's about 60%," said Victor Urquiza, director of sales.
Dixy also reached an agreement with U.S.-based distributor Globiz to expand its customer base to reach customers who can't buy full containers. The arrangement also provides back-up stock for existing container customers.
Tam-Mex, a manufacturer in the hyper-competitive metal bunk bed category, is looking to design creativity to set itself apart. Tam-Mex showed a new line of bunks in college team colors with football or basketball motifs of goalposts and backboards.
"We're trying to make a bunk bed with more design and difference, as well as a bunk bed with more strength," said José Bissu, president. "These aren't cheap bunk beds — $299 to $399 retail. We can paint any color or combination the customer wants."
The bunks meet U.S. safety standards and are available for two- to three-week delivery from Mexico City, which Bissu cites as another way Mexico can compete with Asia.
"We operate so that it's like they're dealing with a domestic source," he said. "We take care of all customs and freight, no letters of credit or paperwork. The customer just has to send a fax. We make 1,500 bunk beds a day and send about 250 to the United States."
The product will be changed a bit for the Mexican domestic market, he added.
"They like it fine, but they're asking for a soccer bunk," Bissu said. "They want the goal on the bottom so the kids can play in the bed."
