The Furniture Manufacturing Industry in America

Industry Overview

The furniture manufacturing industry in America is at a critical point in its lifecycle. Over the last couple of years the industry has been declining and it is projected to continue its decline with an estimated .4% yearly loss in revenue the next 5 years (Ruiz, 2015). In order for the industry to continue to make profits over this same time frame, there will need to be an emphasis on cost reduction and overall product quality. The current structure of the industry and the type of furniture being produced can be split into two categories; those companies focused on less expensive and mass produced products that appeal to the price conscious customer, and those that are focused on high quality and specialized furniture that appeal to the quality conscious customer. The manufacturing industries main customers are the wholesalers and retailers of their products, which make up 75% of its customer base. Most competitors in the industry provide similar products and compete on costs rather than innovation. A growing trend in the last several years has been for companies to offshore production to take advantage of lower overhead costs in construction and labor. Most of the major competitors in the low cost segment of the industry have already began importing products and expansion has been increasing consistently. For domestic manufacturers, this increase in competitor offshoring and the amount of other imports coming from overseas has created a shift in process and competition. Manufacturers in the United States have started focusing their advantages on high end quality and customer service. This is a smaller niche market but one that generally yields higher profit margins and allows for future profit growth. The companies in the industry that are poised for the most success are those that have manage to implant themselves in both of these markets. Ashley Furniture, and Heritage Home Group, two of the largest manufacturers in the industry both contain multiple market segments within their business. They manufacture overseas to compete in the low cost market but also say competitive in the high quality market by manufacturing within the country as well. Many manufacturers also compete with similar supply chain structure in order to keep costs down. Ashely furniture, La-Z-Boy, Klausser, Ethan Allen, and Basset furniture are all major players in the industry and all of them are vertically integrated. Manufacturing and selling their products in their own stores allows for strong price competition in all segments of the industry. Ashley Furniture is the largest producer in the United States and accounts for 10.3% of the market share, but they also have manufacturing capabilities overseas that allows for foreign sales and cheaper prices with their imports. Ashley Industries operates over 400 stores in several countries to sale their own products (Ruiz, 2015).

Industry Environment

Historically, the furniture industry is strongly tied to the changes in economy, technology, consumer culture, and global/political changes. The purchase of furniture is generally not something that happens frequently, but rather something that occurs at a milestone major change in the customer’s life. Going to school, moving into a first apartment, and buying a home or great examples. The state the elements listed above are in when a person hits these life milestones will determine the types of purchases being made, and without a keen understanding of these trends a corporation is likely to fail. Constant changes in the external environment will create a challenge for those in the industry to stay competitive and satisfy customer demand.