Furniture staggered – Newspaper Kommersant No. 61 (7506) dated 04/10/2023
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Decrease in demand for furniture in the Russian Federation, the shutdown of IKEA factories and the closure of many export markets for Russian manufacturers led to a decrease in its output in the country by almost 10% in the first months of the year. This is the deepest drop in recent years. Furniture makers avoided a decline in income due to rising prices, which exacerbated the decline in demand. Serious stocks have been formed on the market, which will remain in the next few years. At the end of the year, players expect a drop of up to 20%.
According to the data of the Association of Furniture and Woodworking Industries of Russia (AMDPR) provided by Kommersant, in the first two months of 2023, furniture production in the country in physical terms decreased by almost 10%, to 7.9 million units. Such a noticeable decrease occurs for the first time in the last two years: in January-February 2021-2022, the production of furniture, on the contrary, grew, including against the background of the commissioning of a large amount of housing, experts say. According to AMDPR, in January-February 2022, the production of kitchen furniture increased by almost 40% year-on-year, to 1.9 million units, while the production of sofas and beds increased by 15%, to 650 thousand units.
AMDPR General Director Timur Irtuganov explains the trend by a decrease in the activity of buyers: “Many people began to postpone the purchase of furniture until the situation in the economy normalizes.” Another factor is the suspension of the work of Russian enterprises of the Swedish IKEA, which, according to Business Stat, accounted for more than 20% of furniture production in the Russian Federation.
A number of companies could reduce production due to growing stocks: their volume at the end of 2022 was estimated by Business Stat at 18.9 million units, or 22.5% of all products produced during the year, which is 4–5 percentage points (p. etc.) more than in 2017–2021. Experts believe that a significant amount of unsold products will remain throughout 2023-2025.
The business of furniture makers is seriously affected, among other things, by European restrictions on the export of their products from Russia. According to Mr. Irtuganov, in January-February 2023, the volume of furniture exports abroad fell by 74% year-on-year, to 1.9 billion rubles. Moreover, imports, although reduced by 56%, still remain significant – 13.4 billion rubles. According to Business Stat, in 2021, Germany accounted for 11.6% of all furniture exports, or 713.2 thousand units, 6% each, or 376 thousand, to Poland and Ukraine, 4.5%, or 280 thousand, for the USA. The AMDPR notes that since the beginning of the year, furniture intended for export has mainly gone to the domestic market.
Despite the fall in output in physical terms, the rise in prices allowed furniture makers to maintain their income: in monetary terms, their production in January-February decreased by only 1%, to 53.4 billion rubles, the AMDPR notes. The association insists that the matter is in the growth of expenses of furniture makers. Some of the raw materials previously purchased abroad have not yet been replaced by local ones, the costs for it have increased due to the unstable exchange rate, explains Evgeny Romanov, commercial director of Divan.ru. In general, according to him, only in the first two months of the year, the cost of furniture for end customers increased by 10-15%, and “there are no prerequisites for stabilization.” Growth expectedly led to a decrease in demand, the expert adds.
Against this background, sales of goods with discounts are growing. For example, Inmyroom notes that they account for up to 80% of sales. The growth of installment programs is also noticeable, adds Mr.Doors co-founder Maxim Valetsky. Hoff says that the average check in the network has decreased by 5% since the beginning of the year. At the end of 2023, AMDPR expects a decrease in furniture production by 6.7%. Hoff’s forecasts are more pessimistic: the furniture market may fall by 10–20%, to 500–550 billion rubles, and home goods by 10–16%, to 250–270 billion rubles.
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