By Bernadette Freund

Is business improving for residential furniture manufacturers? According to respondents to Wood & Wood Products' 14th annual survey of the residential furniture industry, 2002 looks better than 2001.

Furniture manufacturers said 2001 was, in fact, "O.k." with 27 responses, "Very Good" with 14 and "Excellent" with three responses. A little more than half, 33 of 60 respondents, also said they expect 2002 to be a "Very Good" or "Excellent" year.

There was a split in responses, however, depending on shop size. Only three of the "Poor" or "Terrible" responses came from the 26 respondents who had 50 or more employees, with 23 saying 2002 will be "O.k." or better. Four of the 34 companies in the under-50 employee category said 2002 would be "Poor" or "Terrible," with the other 30 saying it would be "O.k." or better.

Furniture Makers' Business in 2001
Excellent	5%
Very Good	23.4%
OK	45%
Poor	18.3%
Terrible	8.3%
Furniture Makers' Expectations for 2002
Excellent	10%
Very Good	45%
OK	33.3%
Poor	10%
Terrible	1.7%
Results based on 60 responses.

"I have heard from many sources that the economy is going to heat up even for residential furniture manufacturers," says Dean Robertson, general manager of Shaw Wood in Cornwallis, Nova Scotia. "Since 9-11, more and more people are staying at home and concentrating on improving their homes."

In the American Furniture Manufacturers Assn. economic forecast, released in April, the numbers show that industry shipments dropped in 2001 by 10.2% with shipments dropping from $25.57 billion in 2000 to $22.96 in 2001. AFMA's estimates do, however, echo survey respondents' optimism. The association predicts that shipments will increase by 4.3% for this year, to $23.94 billion and climb by 5.2% in 2003.

Imports Loom Large
Despite residential furniture manufacturers' optimism for 2002, the threat of imports still looms over most of the survey participants. The threat of imports ranked number one with 19 of 45 responses.

Imports was also the top concern in 2001's survey. Concern over the issue has grown in recent years, as evidenced by its third place ranking in 2000 and its fifth place ranking in 1999.

"We are most definitely concerned with the increasing flood of furniture imports," says Herb Mitchell, president of B & H Panel Co. of Asbour, NC. "We just hope that imports' reputation for lower quality reaches consumers. Our reputation for good quality will hopefully beat out the import competition."

Across the Ocean
Along similar lines, 42 of 60 respondents agree that the U.S. residential furniture industry will move the majority of its operations overseas. Participants reasons for why this will happen varied, but there were a few common answers.

Twenty-six of the respondents said they see more furniture manufacturing moving overseas because of lower operating costs and overhead. More than half of the respondents also think that the vast majority of companies with low- and mid-priced products will move overseas, but the companies with high-end products will remain the dominant supplier in the U.S. market.

"The bigger players have already made their move overseas," says William Jahn, president and CEO of Blackhawk Furniture. "The smaller niche players are adapting by importing parts, some finished goods and full collections. The companies producing lower-end products may completely move overseas, but the major residential furniture manufacturers in China will not be able to compete with the United States' high-end products."

AFMA is working to help the domestic furniture manufacturers. "We are focusing on reducing the legislative burden on domestic manufacturers; reducing the costs associated with doing business in the United States; promoting the enforcement of current and future trade laws and agreements; and providing our members with the knowledge they need to make sound business decisions," says Andy Counts, executive vice president of AFMA.

Insurance and Finding Labor
Health insurance and workers' compensation, as well as finding and retaining employees, come in second and third, respectively, among the top concerns. Many companies related that because overhead costs such as workers' compensation and health insurance are continually increasing it makes importing a more viable solution and tightens price competition.

"We have to continually look at health insurance and workers' compensation and secure more quotes," says Dennis Rose, president of SpaceMakers. "I think the excessive costs of labor are putting a lot of pressure on residential furniture manufacturers in the United States."

The 36% of respondents who say insurance was their top concern say they are attempting to save money by holding more safety meetings and shopping around for the best insurance rates.

Other concerns on the list were material costs, maintaining volume, the economy and customer satisfaction.

Despite these concerns, Counts says AFMA remains optimistic and believes the industry has reason to look toward the future. "All of the major indicators point to a steady turnaround in 2002 with continued improvement in this industry into 2003 and beyond. We are optimistic that the activity at the April Market supports this trend."