Office furniture trade wars- import v. domestic

Keywords: Office Furniture, Domestic v. Import, Blackbird Asset Services, BIFMA

Will Office Furniture Ever Come Back Home?

Ever since I got involved in the furniture business back in 1989, I’ve watched American manufacturing give up ground to foreign competitors– Chinese, Swedish, Brazilian, Korean, and Malaysian, as well as our own companies who outsourced production.

Now some say we are in the beginning of a sea change, as companies begin to repatriate their factories. So far, Apple Computer and General Electric are among those who realize that it pays to have their factories located in or near the home market. Analysts say the trend will spread eventually to other industries, for a number of reasons.

First: Have we hit bottom? At the present time, the “consumption” of office furniture– defined as domestic production plus imports minus exports– is about $11.1 billion, according to the Business & Institutional Furniture Manufacturers Association (BIFMA), an industry trade group (http://www.bifma.org/?page=HistoricalData).

(BIFMA says you can add 15% to that number if you’re counting recycled furniture.)

And keep in mind that nothing’s simple in today’s world. A table can be designed in Denmark, made in China, and assembled in South Carolina. We can only hope that some of the higher-end jobs end up in the U.S.

Domestic production was up 13% last year, while imports increased at a slightly slower 12%. The industry rides and falls with the general economy, so it’s no surprise that we’re still recovering from 2009, when U.S production of office and institutional furniture fell to their lowest level in 20 years.

The Asian Invasion

Over the same 20 years– which roughly corresponds to my time in the business– companies from China, Russia, India and Eastern Europe have jumped into the market, encouraged by the fact that they can penetrate the U.S. market without paying import duties, and backed by government initiatives from countries such as China who are aiming to develop their own domestic industry.

In 1992, imports accounted for 19% of all hardwood furniture sales; by 2008, that percentage had increased to 64%. During the same period, U.S. employment in said industry fell 44%.

Has the trend finally leveled off? There are some reasons to think so, according to Blackbird Asset Services LLC, an auction and appraisal firm based in Buffalo, N.Y.

Blackbird’s President David Fiegel says that foreign manufacturers are facing a number of issues which quite likely will increase the cost of offshore production and make domestic manufacturing more competitive– such as rising wages, pollution, a crackdown on worker safety violations, currency adjustments, higher energy costs for production and shipping, and political turmoil in some third-world locations.

On the plus side, consumers are showing an interest in sustainable energy, green products, ergonomics, and custom furniture. The domestic market is the best laboratory for keeping a finger on these trends.

Blackbird’s Fiegel, who conducts appraisals and liquidations for secured creditors, also believes that we’re seeing a reaction against what he calls the walmartization of the market. For the past 20 years, he says, quality has been sacrificed to price. Durables such as case goods have had shrinking shelf-lives. Now consumers are starting to rebel against the low-cost mentality.

If quality regains some status, smaller makers of custom furniture stand to gain as well. Companies that specialize in niche products (such as ergonomic chairs or adjustable desks) have a good chance of success against international competition, where the production of low-quality items is the main selling point.

Case in point: Herman Miller was a pioneer in ergonomic furniture and stands by its commitment to this day. Based in Zeeland, Mich., the 107-year-old company says its sales in the second quarter of 2012 were up 8% over the prior year’s second quarter.

Weighing the pros and cons

Now to the nub of the matter: We all admit that there is some good imported office furniture. How do you decide whether to buy domestic or imports? Here’s a tip sheet:

• If lead time is an issue, overseas delivery could be problematic. You can usually expect to receive domestic product in 4-5 weeks, as opposed to 12 weeks from an offshore supplier.
• Customized office decor is more easily obtained from local or national companies. Offshore manufacturers tend to specialize in cookie-cutter design.
• Safety concerns can arise because many offshore plants have little or no oversight on the chemicals, solvents, and materials that are used. Say what you will about U.S. regulatory agencies; our sofas don’t catch on fire.
• Dealing with international companies is often caveat emptor– buyer, beware. If the contract is breached; if the shipment fails to arrive on time; if the quality or quantity differs from what you think you ordered . . . . it will be a long and expensive battle to set things straight.
• At the end of the day, when all manufacturers are under the same cost constraints, domestic production is still superior. I say this not as an American, but as the owner of a company who’s watched thousands and thousands of pieces cross my path.

If you do a little shopping (or find a dealer you can trust), you’ll usually find that Made in USA is still the better investment.