The pandemic continues: 2021 in Melaco and the furniture industry
2020 was full of surprises and challenges that each industry had to face. Is 2021 different? We are talking about the past 6 months with Dariusz Piotrowski, Vice President of Melaco.
We’ve made it to mid-2021. The pandemic is still not fully contained, although we are dealing with some loosening of the restrictions. Is the influence of the coronavirus still growing in the furniture industry?
Definitely, we are still operating in a crisis caused by pandemic, because, as we know, 2021 began with the so-called ‘third wave’. Both in Poland and in other European countries, the economy was frozen, lockdowns were introduced to a greater or lesser extent. Still, the first six months of this year are different from what happened in the industry last year.
When it comes to the industry, for Polish manufacturers and exporters related to the furniture market, the challenges are still considerable. Our serious partner, Germany, is experiencing a significant downtime when it comes to sales. From December 2020, furniture stores on the other side of the border are closed. The only sale that German sellers can make at the moment is via internet, which accounts for 10% to 15% of their business.
How do companies from across the western border cope in such conditions?
Despite the fact that sales opportunities in stores have dropped to zero, retailers continue to order the furniture that is now filling their warehouses. They have been doing it until now, because they are aware that they need to stock up and prepare for the moment when their customers leave their homes and start buying new furniture in stores.
When the restrictions were eased in June and the stores were opened, they didn’t, however, record such a significant increase in sales as they had expected. It was certainly influenced by the fact that we have a holiday period. However, the warehouses are full – in the case of larger producers up to 90%. In such plants, you can pack an average of 120 thousand packages with furniture per month, while the sale at the moment is about 50 thousand. This means that the 70,000 products stay on shelves and in storage.
In the furniture industry, the increase in the prices of products and semi-finished products is also a big problem. Did you note that too?
Prices are sky-high not only in the furniture, but also in the construction industry. Both wood-based panels, films and adhesives, which we use in production, are more expensive. However, while adhesives or foils recorded a price increase of 4-7%, chipboards and MDF boards are becoming more and more expensive practically month to month.
It certainly doesn’t make production planning easier …
It’s difficult, and in some cases it’s not even possible. At the moment, the price of MDF board has increased by 90% compared to December 2020. So the increases are huge. In addition, the delivery time of MDF board has grown significantly and now it takes 20 weeks. During these 20 weeks, the price may increase five more times.
How do you see the future in the furniture industry and the related construction industry? Will it end with the pandemic or is it more a matter of increasing demand for furniture and renovation?
The pandemic has a huge impact on the current situation, but also the demand is indeed very high and it is related to two other phenomena that we observe in the construction industry. The first is the emergence of a new market which has not existed in Poland so far and which appeared together with foreign investors. This is the tendency to buy apartments for long-term rental.
The second phenomenon is what we can call a speculative market. Poles are beginning to treat flats as an investment of capital. So they buy flats, which are often left empty, in a developer standard. They put their savings in them so that the money does not end up in the bank account. This action, of course, drives the economy, but on the other hand, people who actually want to buy an apartment to live in, lose out. These speculations are rising prices really high today.
In the United States, the Fed is already openly talking about raising interest rates and in Poland it will surely change soon as well.
What is the significance of the current market situation for furniture manufacturers? How can they adapt to rising prices and limited selling opportunities due to lockdowns?
As a result of the pandemic, the market experienced many revaluations, and the increase in prices contributed to it to a very large extent. It forced producers and sellers to look at the product in a completely different way. Today it has to be much more valuable than it used to be. Precisely because it will be more expensive. At a higher price, the furniture will have to serve the customer longer. They will have to be more durable, better, more solid. Therefore, sellers must take into account that there will be fewer buyers and that they will pay more attention to quality.
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