Sales surge seen in Q1 2012
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15% growth expected on increases of both demand and supply sides
Demand for furniture and home-improvement products is expected to surge dramatically as people will spend a lot of money to restore their flood-damaged homes.
The home-furnishing market is expected to enjoy a 15-per-cent jump in sales in the first quarter of next year, according to the Furniture Industry Club of the Federation of Thai Industries (FTI).
Verachai Kunavichayanont, chairman of the club, said yesterday that the flood crisis was expected to be over by the end of this year. Then furniture manufacturers affected by the flood should finish revising their marketing and sales plans and start up production in January.
People in flooded provinces need to rebuild and repair their residences.
With the increases on both the demand and supply sides, furniture sales in the first quarter alone are estimated to soar 15 per cent to Bt1.7 billion from the normal Bt1.5 billion.
Kasikorn Research Centre estimates that the home-furnishing market would expand 7-10 per cent next year to Bt59 billion-Bt60 billion. More than 700,000 homes have been damaged so far, which will create an enormous need for furniture once the waters recede.
This week, the FTI will meet to discuss an estimate of losses in the furniture industry, a joint approach to tackling this crisis and a request to the government for assistance in solving the problems.
Usually the fourth quarter is the peak season for furniture sales but due to the flooding, this quarter seems to be facing a slowdown.
“We have no plan to increase prices for new products during the first quarter of next year,” he said.
However, if the government insists on implementing its policy to raise the minimum daily wage to Bt300 for workers in April, furniture prices would have to be hiked by 10-20 per cent to cover the increase in production costs.
Thailand might lose some of its share in the region’s furniture market to rivals such as China and Vietnam where labour costs were cheaper, he added.
Tanyaruck Chawaldit, marketing director of SB Furniture Industry, believes that the furniture market would experience impressive growth of 15-20 per cent in the first quarter of next year from the same quarter this year.
“We estimate demand for furniture for renovation will average Bt40,000 to Bt100,000 per unit, depending on the design and how much furniture was ruined. Some of them may spend more than that,” she said.
But the outlook for the furniture market for the whole year is uncertain because home-buyer behaviour will change to preferring condominiums over single family homes and to delaying their decision to buy a residence. This will have a direct impact on demand for furniture next year.
“We cannot estimate the demand for furniture all of next year because there is more business risk,” she said.
The company has launched a special campaign for renovations that offers a gift voucher worth Bt10,000 to existing customers and Bt5,000 to other flood victims.
It has also joined hands with Citibank to provide a 10-month instalment plan at zero interest to buyers of its products. Customers can register for the right at www.facebook.com/sb home from now till year-end.
Until Saturday, it will help its customers to remove SB furniture that were destroyed by flood waters. It has contracted with cleaning firm PCS and also Home Renovation Centre to provide cleaning and renovation services for its customers at reduced prices.
This will help its customers to recover from the flood as soon as possible, she added.
Thaksa Busayapoka, CEO of Modernform Group, said demand for furniture in the first half of next year could explode, driven by the replacement market. Furniture damage was estimated at several billions of baht.
Purchasing power still looks good especially for large firms and mid- to high-income earners, though some SMEs might have less spending power as they let their business collapse. Even those customers on low incomes are expected to have some spending power due to the likely injection of recovery funds by the government.
“The flooding has caused business disruption just in the short term,” he said.
But what would change after the floods subside were consumer-buying behaviour and furniture design in response to the possibility of future floods. Customers would tend to buy cheaper furniture to lower the losses from flooding, while portable, smaller and lighter would be the trend-setting designs of the future, he added.
Lars Svensson, marketing manager for Ikano (Thailand), expressed the company’s sympathies for the many Thais who have lost their homes or loved ones or had their property damaged or destroyed. This is not a situation that IKEA or any other company would want to happen or to take any advantage of.
The flooding would have a significant impact on many people’s finances, disposable income and future spending pattern. The first priorities will naturally not be home-furnishing items but more vital aspects such as house, sanitation, transportation like cars and motorcycles, repairs, electronics and white goods.
Then people will start considering clothing and home-furnishing items.
