As the price advantage diminishes...
Carole Sloan, Senior Contributing Editor -- Furniture Today, January 13, 2008
We began hearing rumbles last year about price increases in most parts of the world that make furniture and the stuff that goes into it. The buzz grew even more intense last week as much of the fabric world focused on Heimtextil in Frankfurt, Germany. From energy costs to shipping costs to general cost increases in the far-flung places where furniture and its components are now made, it's clear that "stuff" could be up anywhere from slightly to the low double digits.
And that doesn't take into account shifting currency values, or the various pressures on governments in some countries where furniture-related production is taking place to raise wages and clean up the environment.
This means the previous price separation between "them over there" and "us over here" will become less of an advantage for "them." With the price advantage diminishing, quick delivery, close-at-hand communications and myriad other merchandising and marketing advantages can be a major boost for folks still making product domestically.
One argument often heard is that some offshore suppliers will maintain prices even in the face of all the cost pressures. How? Most people who make this argument say it will be via a subtle decline in quality — small elements that aren't likely to be immediately noticed but that will, over time, affect the durability and quality of the furniture.
Meanwhile, other people say shipping capacity might fall short. Think of how many exotic pairs of shoes or cashmere sweaters and scarves can fit into a container, compared with sofas or beds or tables. Could shipping companies choose to take the former and leave the furniture in an overseas warehouse?
Another interesting thing will be watching how retail private-label programs will pass muster under quality testing. The testing labs should have a field day.
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