Office furniture market hurting as demand tapers off
Chic interiors: Despite economic hardships, Poland is still a major market for Finlands Martela.
The office furniture market has doubled in size in the past six years. But after a record year for production in 2000, companies predict that a strong złoty and falling domestic demand will finally buck the trend.
According to Csil, a Milan-based consulting and market research company that specializes in furniture markets, the production of office furniture in Poland increased from Ä117 million in 1995 to Ä240 million last year. In 2000, sales reached Ä180 million, with Ä116.9 million coming from the 20 largest companies. But furniture makers said the decline in orders in the first half of the year bodes ill for year-end profits.
This year has certainly been difficult, said Juha Ihalainen, chairman of Martela Design Center. We are in the lucky position that the first half of this year was better than last year, and we had a very good order stock.
Next to Finland, Poland is the companys second biggest market with a 90.5% increase in sales recorded from 1999 to 2000. The office furniture business in general is very dependent on economic development, Ihalainen said. It means that it is very easy (for businesses) to postpone office furniture purchases. We quickly feel any uncertainty in the air.
Witold Mika, chairman of Warsaw firm Absolut, said the business is often seen as a yardstick for the economy. We depend on the occasional appearance of large contracts, he said. Since (the economy) is not currently in the best state, the turnover of companies in this segment is decidedly lower.
The office furniture market is highly fractured with estimates from Csil giving the 20 biggest companies 64.9% market share, with only three companies holding more than 5% the Polish companies Nowy Styl, with 19.2%, Jarocińskie Fabryki Mebli with 5.8% and Forte with 5.7%. Csil estimates that the remaining 35.1% of the market is occupied by companies outside the top 20 firms, with each holding less than 0.2% market share.
Krzysztof Duliński, spokesman for the countrys largest furniture manufacturer, Nowy Styl from Krosno, said the economic downturn is affecting demand for business and home office products. Normal people cant afford to buy good, ergonomically designed chairs, Duliński said. The general shortage of money is making people buy whats cheapest through supermarkets. It is harder to sell higher grade chairs in Poland.
The recession is forcing many companies to hold back refurbishments to their offices. This has reduced demand for office and boardroom chairs.
But Nowy Styl will have fared better than most in 2001, according to Duliński. We are a holding company, so our subsidiaries make all the essential components, making us price-competitive, Duliński said. We can quickly produce large orders of chairs according to the clients demands. We also have high quality were just completing our ISO9002. In exports were helped by our large network of distributors.
According to Csil, office furniture exports are booming, covering about one-third of production. Domestic office furniture companies attending international office furniture fairs in Milan and Cologne include Nowy Styl, MBB, Mebelux, Maro, Mikomax and Jarocińskie.
Duliński admitted that gloom on the Polish market has made Nowy Styl focus on selling abroad. The firm exports mainly to Germany, France and the U.K., but has secondary markets in the United States, India, Japan, Egypt and South Africa. Our exports last year were around 60%, this year theyre about 70% of production. Duliński said. Last year we produced about 200,000 chairs a month, thanks to investment ... our production capacity is now over 250,000 a month.
But despite this growth in output and exports, Nowy Styl has had its profits hammered by the strong złoty. We took out contracts several months ago when the złoty was at a lower level, Duliński said. Prices and profits were worked out differently then. With the złoty as it is, the company makes profits, but not at the levels we anticipated. Thus we have had to hold back some investment planned for this year, we wont be able to increase employment by as much as we planned.
Csil estimates that some 20% of the market comprises imported products, which come mostly from Finland, Sweden, Germany, Italy, Austria. Western European leaders including Martela (Finland), GDB (Belgium), Kinnarps (Sweden), Bene (Austria), Assmann (Germany), Las Mobili (Italy) invested in Poland during recent years and occupy the highest positions on the local market. But Ihalainen said as the market matures it will turn increasingly to domestically made products. To be successful here you have to be local, Ihalainen said. This is not an import or export market, it is a local operation. To provide effective service we have to be close to the customer.
