- Impact of Covid-19 on the office furniture market
- The road ahead
Office furniture is specially designed for use in commercial and corporate workspaces such as workstations, conference rooms, cafeterias, and lounges which include seating furniture, storage units, overhead bins and tables being some of the basic furniture items that help in enhancing aesthetics of these spaces as a whole. The global market for office furniture is propelled by factors like rising number of office spaces and employees across the world, rapidly growing real estate industry and increasing demand for comfortable, smart, premium, and designer furniture. An increase in the number of corporate offices naturally leads to the construction of IT Parks and commercial zones further emanating the demand for modernized modular office furniture worldwide.
The noble pandemic of Covid-19 has sent shockwaves across the globe, affecting almost all sectors, disrupting economies and inflicting the global supply chain. The office furniture manufacturing industry is no exemption wherein since the onset of the lockdown, business of the players operating in the industry has been dipping gradually. Prior to this pandemic, the growth of furniture industry was expected to be consistent as it could generate revenue from a variety of sectors: from traditional channels or through the public and private sector, and commercial workspaces, amongst others.
The above chart depicts the plunging revenue of top five players in the office furniture industry as on June 30, 2020 compared to the comparable prior year periods mostly because of the pandemic. Furthermore, the revenue of Steelcase Inc. has drastically fallen by 41% in Jun 2020 compared quarter on quarter basis primarily due to shutdowns of manufacturing units & physical stores, delay in shipping of products and cancellation of orders placed. The pandemic has caused a lot of damage to the industries but even during the present crisis, players are trying to innovate and keep up the growth of the business. For many decades, makers like Herman Miller Inc and Steelcase Inc targeted sales through their own dealers and agents to companies across the globe, that bought a truckload of comfortable chairs and desks and commissioned teams of designers and technicians for delivery and installation. None of them were, however, prepared for a wave of orders for a single adjustable desk from people working from home who were now suddenly trying to figure out the way to conduct web meetings from spare bedrooms. While these companies faced challenges like order postponement and cancellations of short-term sales volumes but on the other hand demand of home office furniture surged.
The disruption of supply chain due to COVID-19 has had another major impact on the furniture industry. The companies in this industry need to develop an effective supply chain plan to mitigate risk and prepare for any interruptions that any crisis like coronavirus outbreak can cause. There is a battle going on right now as commercial office furniture manufacturers have been shutting down factories, laying off thousands of workers and cutting compensations. Share prices of these companies have been pounded even lower than the hard hit aviation industry and trade at inferior valuations to the other players and industry average in their respective stock exchanges. Major reason being companies in this industry are not considered as essential businesses and are unlikely to get any huge salvage by government.
Moreover, few organizations are now considering office expansion or renovation projects in the near future. Many major employers like twitter have already announced that they expect one-half to two-thirds of their desk workers to remain “WFH” indefinitely now. Recently IBM did a survey of 25,000 office workers and discovered that 54% of desk workers want to pursue the option of work from home full time, whereas 75% were comfortable to work both part time or full-time depending on the requirements and 40% felt that their employers should at least have the option of working remotely. Many employers like Google and Amazon has also started offering up to US$1,000 expense reimbursements for home office equipment in order to become as productive working from home as they were in the office.
At present, to keep up with influx of demand in home office furniture, vendors are adopting online retail strategies to reduce cost and increase their profit margins. Moreover, with the growth in the number of online furniture stores the retailers have also managed to reduce their cost of rental space and enhanced the efficiency on inventory management. Amazon, Wayfair and Ikea are some of the leading online retailers for office furniture. The growth opportunity for the sales of office furniture through online channel has forced online retailers to improve the process of procurement in terms of safety and reliability, which, in turn, has lifted the demand for office furniture. Several policies that encourage consumers to buy online includes cash on delivery options, secured payments, hassle free returns, integrated, and centralized customer service. People are also buying couches and dining tables along with work-desk and ergonomic chairs, that too in bulk through online channel. Brands have also started recognizing an increasing consumer inclination towards multifunctional and customised furniture as one of the primary reasons driving the office furniture market expansion during the next several years.
The global office furniture industry was pegged at US$ 67.6 Billion in 2019 and is poised to grow at a healthy CAGR of 5.2% over the next few years as published by The Daily Chronicle. Although we have witnessed the decline in the order volume and revenue of the companies in this industry, but nonetheless the organizations also claim that this decline is being offset by huge demand in offerings of furniture for work from home online segment. Office Furniture that have growth prospects are the ones that are smart, eco-friendly, easy to handle and can be used by the consumer for other purposes. Given that it is uncertain that how long the slowdown in building new centralized offices will continue, innovation and creative thinking is the need of the hour for the industries that are in difficult situation to safeguard their survival after the pandemic eases out. Thus, with the increase in work from home concept and home office, demand for desktop chairs and tables will continue to increase in the coming years.