Furniture makers must be design-driven to compete

Source From (The Sun Daily): http://www.thesundaily.my/news/330949

Published: on 26 March 2012
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sunbiz@thesundaily.com

KUALA LUMPUR (March 26, 2012): Furniture makers must be design-driven to move up the value chain in the face of intense competition from countries such as China and Vietnam given their low cost advantage, Malaysian Furniture Promotion Council (MFPC) CEO Au Leck Chai said.

Furniture makers, especially small and medium enterprises (SMEs) that make up 80-85% of the industry, should cultivate and develop a design-based approach to compete in a challenging industry that has slowed down over the last three years.

"SMEs have limited capital so they should approach the market with better designs and value-added products, targeting the niche (medium to high-end) market instead of mass-producing goods. The furniture industry will be design-oriented, where innovation, design and branding will be the way forward," Au told SunBiz in an interview.

He said the furniture industry, which reached its peak of RM8.6 billion in furniture exports in 2008, had been affected by the economic slowdown, followed by the emergence of China and Vietnam as strong competitors. Last year, Malaysia's furniture exports stood at RM7.6 billion.

"Furniture makers are also struggling with labour and material shortage, two major issues that stifle the industry's capacity and exports."

Some furniture makers have relocated to China, Vietnam and Indonesia to overcome the labour and material shortages so they can take advantage of the countries' resources.

Fewer furniture companies are seeking listing on Bursa Malaysia compared with a decade ago, a sign of diminishing interest in the furniture industry.

"For the past two decades, many furniture makers were making profits due to their rapid growth and were able to get their companies listed. Now, due to the stifling conditions, furniture makers find their margins reduced along with new competitors. They're slowly getting cautious of the dangers of this industry," Au said.
Neither are they on the radar screen of analysts and there is also little or no research coverage on the industry.

An analyst said it will be a challenge for Malaysian furniture makers to move into the medium- and high-end markets as they may lack the expertise, capability, and global reach.

"The current demand is not that strong with all the tepid housing starts in the developed market, so there is less excitement for the sector to begin with. Also, the shortage of foreign workers and the introduction of a minimum wage policy will also impact furniture makers in production and cost," said the analyst.

Au said there needs to be a change in the mindset of furniture-making SMEs towards cultivating a design culture, and this includes working with interior designers, architects and the hospitality industry.

"The demand for well-designed furniture is increasing due to the development of the hospitality industry and lifestyle changes, such as hotel, spa, school and food court. When SMEs are able to cater to that demand, they will start to look towards a bigger production, hence creating a win-win situation."

He said SMEs in the furniture industry look towards the leadership of big companies to expand overseas and for opportunities. "SMEs get a piece of the action in supplying parts and components to bigger companies."

With these changes, Au said big furniture players are reinvesting in marketing instead of production capacity, as they need to study market trends.