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Tom Russell

Indonesia finds diversity may be key to success in tough economic times

The U.S. furniture business has been good to Indonesia in recent years. Between 2004 and 2006, furniture shipments from Indonesia to the United States rose from $528 million to $614 million, giving the country a solid number four spot on Furniture/Today’s list of major furniture exporters. Only Malaysia, Vietnam and China exported more to the U.S. in 2006.

This comes as no surprise, especially when you talk to the number of companies that are turning to countries like Indonesia and Vietnam as a resource for finished goods. Indonesia’s assets include a skilled work force and plenty of experienced factories. It’s also a good option to fall back on when you consider some of the pricing issues challenging China, such as rising labor costs and the ongoing antidumping duties on wood bedroom furniture.

But like other exporters, Indonesia is paying close attention to the housing situation and the overall economy in the United States. With the threat of a U.S. recession looming larger on the horizon — some say it’s already here — Indonesia apparently has grown wary of having too many eggs in the U.S. furniture basket.

That message was loud and clear in an article on the Jakartapost.com Web site with the headline, “Furniture businesses seek new markets to avert downturn.” It mentioned the U.S. mortgage and credit crisis as a cause for concern. In response, the Assn. of Indonesian Furniture and Handicraft Manufacturers predicted these issues could trim demand from U.S. importers by at least 5%. Chairman Ambar Tjahyono suggested the industry quickly start looking for other markets.

Many Indonesian manufacturers have probably already adopted this strategy. Others that aren’t might be wise to follow suit, as Tjahyono states. This presents challenges to companies not used to adapting product lines to new markets. But as manufacturers, they should be prepared for such challenges.

The same could be said for the U.S. furniture suppliers, which could benefit too from Tjahyono’s advice. The weakness of the U.S. dollar against currencies in Europe and Brazil presents huge opportunities to sell in those countries. The same is true in China, where consumers of luxury merchandise are not so susceptible to high U.S. prices.

Companies like Bernhardt, Broyhill, Thomasville, Maitland-Smith, Ethan Allen, Acrylicore, Fairmont Designs, Henredon, Theodore Alexander, Century and Fine Furniture Design & Marketing are several that are looking to foreign markets for a percentage of sales.

So are Ashley, Leggett & Platt, Coaster and Top 100 retailers including Seffner, Fla.-based Rooms to Go, Fort Lauderdale-based City Furniture, and High Point-based Furnitureland South, which PIERS (Port Import Export Reporting Service) Global Intelligence Solutions lists as some of the top U.S. furniture exporters.

Like foreign-based manufacturers, they know the value of looking to other global markets for a portion of their revenues.

What is your company doing to increase its sales overseas?