FBI brands may have bright future in China
Thomas Russell -- Furniture Today, September 30, 2013
A question many in the industry are asking is, "What does the future hold in store for Furniture Brands International and its iconic brands as it navigates its long-anticipated Chapter 11 bankruptcy?" Many we've talked to say they hope brands such as Thomasville, Broyhill, Henredon, Maitland-Smith, Hickory Chair and others have a long and prosperous future in the hands of new owners.
The reality is that many of the competitive factors that have affected the brands over the years haven't changed. There are still overseas factories producing goods for competitors at lower prices. Some retailers continue to pursue private label strategies that strip the significance of any brand, not just those in the FBI portfolio. Crate & Barrel, Restoration Hardware and Pottery Barn also continue to do a strong business, particularly among younger consumers who don't necessarily know one brand from another.
Ironically, U.S. and other well-known international brands continue to do well in China. There, many consumers see branded product - including furniture - as a status symbol and something to show off to family and friends. That explains why so many furniture malls there carry brands ranging from Thomasville, Century and Henredon to Ethan Allen, Lexington and Universal. These names still means something to Chinese consumers, the same way brands once meant more to consumers here in the U.S. in past decades.
But in selling to huge markets like China there are still challenges. For one, there is more and more competition and not just from brands in upper-middle to upper-end price points. Ashley, Lifestyle Enterprise and even Ikea are competitive forces that seek a growing share of the emerging consumer market. What these latter companies offer is a chance for lower income consumers to access a range of styles offered by other iconic, yet higher priced brands.
True, incomes in China are rising. But much branded product is still beyond the reach of most of the market, where the per capita annual income is around $7,000, according to a report in the Wall Street Journal. A bedroom by any one of the aforementioned resources can easily be priced at half that amount if not more.
So while U.S. brands like Thomasville and Henredon may do well in markets like China, they still need to compete. As in the U.S. market, time will tell how aggressive they will be in this playing field. Consumers everywhere may want nice furniture for their homes. But whether it's branded or not, there is a limit to what people are willing to pay for product.