In our industry, economic recoveries typically involve a few constants — major product introductions, shifts in inventories back and forth between retailers and their suppliers, and demand shifts by region, product type and relative quality level.
In the 1970s and '80s, the high end appeared to glide through recessions without pause. With lots of customization and long lead times, the short recessions of 1970, 1974–1975, 1980 and 1982 passed before the drop in incoming orders had a major impact on production. The lengthier recessions of 1990–1992 and 2000–2002 had a dramatically different impact. Add to that the role of imports and the issues get more complex.
What's different this time?
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Many Chinese furniture factories have developed their own sales forces in the United States, and more are being created, likely driven by the success of the Lacquer Craft-Universal/Legacy model and the antidumping petition. This will bring new issues because it will require more than container-direct business to U.S. importing entities or major retailers.
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For most of the past 20 years, Asian factories haven't had to worry about creating appealing designs, offering dealers credit, finding the right product mix, or warehouse issues (damage, obsolescence, etc.) because everything they made already was sold. As they begin to be more full service and work directly with a broader range of retailers through their own reps, these factors will add cost and complexity.
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The roles of existing importing intermediaries will be affected as they seek new sources from wherever, new styles, materials and services to differentiate their offerings.
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The way product is financed will continue to evolve, from being paid for at the foreign port many weeks before the buyer sees the product, to paying 30-to-90 days after receiving the goods. All the variations have huge implications for all retailers' GMROI.
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The June 18 antidumping duties on Chinese bedroom furniture are being perceived by too many as modest inconveniences. We believe the potential for higher final rates is sufficiently likely to continue contingency plans for later this year. The modest blended rate gives time to assure the alternatives can meet current quality, delivery and service standards. If higher tariffs had been imposed, we believe the next six to 10 months would have been a quality and logistical nightmare.
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Another effect of the petition has been to accelerate the Chinese manufacturers' moves towards entirely new generations of furniture other than for the bedroom. With so much new capacity coming on line throughout Asia and elsewhere, this should intensify.
Anticipate change. It's coming.
