Some "nice to know" information in this article on "Made in China" furniture. But how can it be played profitably in the markets?
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China's Latest Export: Early American Look
Cheap Furniture Gains Quality and Popularity
By DAN MORSE and KATY MCLAUGHLIN
Staff Reporters of THE WALL STREET JOURNAL
Philip and Tonya Cooley shopped for months in search of a home entertainment center: They wanted one big enough to house a wide-screen TV, yet stylish enough to blend into a recent addition to their home. But everything they liked cost $2,000 to $3,000.
Then they walked into Olde Salem Fine Furnishings, outside Roanoke, Va., where they were shown a solid wood, 5-foot-tall unit for $595. Surprised by the quality, the Cooley's promptly wrote out a check. The origin of the piece: China.
As recently as three years ago, a made-in-China label (often slapped inconspicuously on the bottom of chairs and the backs of cabinets) could mean warped tops, weak drawers and loose legs. But thanks to new factories, cheap labor from China's countryside, and design and manufacturing advice from Americans, the quality of Chinese furniture has improved substantially.
Consumers have noticed, making furniture the latest import tidal wave from China. Measured by container volume, furniture is China's leading export, with more containers arriving here than the combined volumes of TVs, toys, shoes and auto parts, according to first-quarter statistics from trade-tracking firm Piers. One industry analyst estimates China-made products represent 35% of the $23 billion American wood-furniture market.
The influx is taking a toll on U.S. manufacturers and this week triggered a trade protest from 14 companies that say China's factories appear to benefit from subsidies and currency issues. Domestic companies have closed scores of factories and laid off more than 34,000 workers during the past 2½ years in the wood-furniture-making industry alone.
While Chinese manufacturers have proved better at some types of furniture than others (don't look for a lot of sleek modern pieces, for example), they are making particular inroads in a few key areas. Chief among them is wooden furniture, including beds, dressers and tables. Consumers -- shying away from American-made counterparts that can cost twice as much -- are buying eight-piece dining room sets for $2,500 to $3,500. Chinese-made leather sofas also are popping up for less than $1,000, undercutting U.S. and European products by hundreds of dollars. The Chinese furniture being snatched up by shoppers here is generally based on traditional American designs, as opposed to an Asian look.
Furniture from China is sold at most major furniture retailers, including Ethan Allen Interiors Inc., Rooms To Go, Haverty Furniture Companies Inc., Bassett Furniture Industries Inc. and Thomasville, a unit of Furniture Brands International Inc. They are also sold in big department and discount stores, Macy's, for example, and even in local stores in the heart of American furniture-making country such as the place where the Cooleys bought their entertainment center.
"It's sad," says Dr. Cooley, a chiropractor. "It's the Wal-Mart syndrome. I'd rather not shop there, but how can you beat the price?"
Prices at the stores are expected to fall even more during the next six months, as the Chinese factories compete against each other on price. Indeed, the Chinese furniture is made so inexpensively, factories there can afford to use wood from U.S. forests that is shipped to China.
Not all Chinese furniture is created equally. Quality can still be spotty. Watch out for poor leather spotted up with insect bites and scratches, for example. If the furniture breaks, spare parts can be impossible to get. Shipments also can get delayed on the high seas. One good rule: Ask the retailer where he imports from and if the company has inventories built up in Asian or American warehouses.
In some areas, Chinese manufacturers still lag behind. Steve Williams, owner of NC Furniture House, a retailer in Jamestown, N.C., sells a lot of Chinese-made products. He recalls going to a furniture show in nearby High Point earlier this year and seeing Chinese upholstered furniture that "looked like something made in the '20s and '30s."
There can be other trade-offs as well. Natuzzi, a line of leather sofas made in Italy, recently launched another line of sofas called Italsofa, which are made in China, Brazil and Romania. Italsofa uses lower quality leather, which means it isn't as smooth and buttery feeling as the European versions. It also comes in far fewer models, and can't be customized with as wide a variety of colors and textures. However, an Italsofa couch can cost about 30% less than a Natuzzi.
For the most part, Chinese furniture is aimed squarely at the middle of the price spectrum. A $400 sofa is generally considered too inexpensive to cover shipping costs, and $20,000 bedroom sets represent too a small slice of the market to interest many of the Chinese factories.
Goods from China are clearly taking a toll on American furniture makers. This week, a coalition of 14 companies said they intend to petition U.S. trade officials to investigate and possibly impose antidumping duties on Chinese-made furniture. The coalition, called the American Furniture Manufacturers Committee for Legal Trade, says it has a strong case, and points to 44 antidumping duties applied to Chinese imports, ranging from aspirin to tapered roller bearings.
Even if the manufacturers win their case -- and it's far from clear they will -- any duties imposed could be so small furniture buyers won't notice them. At the earliest, any final duties would be imposed late next year. "We commend these efforts to demand more visibility on the (Chinese) cost structure and competitive advantages," Margaret Whelan, a furniture analyst with UBS securities, wrote in a report Wednesday. "However, we believe that proving 'dumping' will be extremely difficult. ...We expect imports will continue to gain share."
Trade issues aside, Dr. Cooley, the chiropractor, is pleased with his new entertainment center. "It's absolutely beautiful," he said. But he warns fellow shoppers to be patient. His piece took several months to arrive. "Must have been on a slow boat," Dr. Cooley says.
Write to Dan Morse at dan.morse@wsj.com and Katy McLaughlin at katy.mclaughlin@wsj.com
Updated July 17, 2003
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