Despite recent sales fluctuations and the ongoing material and labor supply issues, the outlook for 2022 and 2023 remains optimistic for both residential and contract furniture manufacturers.
According to Allied Market Research, the global demand for furniture — residential and commercial — will hit $800.6 billion USD by 2025, at a CAGR of 3.5% (2018-2025). The residential segment dominates the market due to the surge in renovations, plus the growing infrastructure and real estate market. Commercial furniture growth is being driven by companies investing in refurbishing offices for social distancing and flexible or hybrid workplaces.
Ken Smith, managing partner at Smith Leonard, said, although new orders fell 20 percent in February compared to 2021, it’s “not all that bad” considering 2021 figures were up 24 percent over February 2020. Although shipments were flat compared to February 2021, about 66% of participants in the April Furniture Insights reported year-over-year and year-to-date gains.
The commercial market is also rebounding as employees return full- or part-time (hybrid) to the workplace, the hospitality/travel industry resumes and schools return to onsite learning.
For the education market furniture segment, Research and Markets reports the North American school furniture market reached $2.1 billion in 2021, and is projected for $2.8 billion by 2027, exhibiting a CAGR of 5.2 percent during 2022-2027.
Based on information compiled in the annual FDMC 300 report, along with projections by some of North America’s largest manufacturers, the roughly $14.billion office furniture market (BIFMA/IHS Markit-2020) is also looking up.
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The FDMC 300, an annual ranking of the largest wood products producers in North America, saw sales for those in the contract and residential furniture segments reach an estimated $15.9 billion and $16.3 billion respectively in 2021. Overall, sales in both segments look to be positive for 2022, with those interviewed projecting the same or better revenues as last year.
“2022 sales will be higher than 2021 by 40 percent,” noted Greg Kooistra, production planning manager at Watson Furniture Group (#160). Noting the strong demand for office furniture as people return to work, the company is also projecting 2023 sales to be “excellent.”
“For our overall contract business, we will exceed sales in 2021,” said Todd Holderness, general manager, Contract Interiors for Fellowes, which owns Trendway Corp. (#103) as well as ESI. “Corporate and SLED (state and local government and education) sectors are driving a significant part of that growth in our core product categories,” he added. 2023 also projects to be good, “if the economy holds and the government spend happens on the projects we are working on in the next six months,” Holderness added.
Max Verkamp, president and CEO of Indiana Furniture (#154) also said his company is projecting 2022 to surpass 2021 figures, adding “demand is very strong for all segments of office furniture from case goods to seating.”
And while the company is projecting growth for 2023, Verkamp noted, “it is difficult to ascertain the rate of growth at this time. The amount of increasing discussion from some economists and financial firms regarding a potential recession in the near future is forcing us to look at our growth expectations for next year.”
Likewise, those in the residential segment are also projecting higher sales for 2022 and beyond.
“Our sales will be up in 2022,” said Gat Caperton, CEO of Gat Creek (#220). The increases will result mostly from pricing, he said, noting “we are producing at 100% capacity.”
Projections for 2023 are also “excellent,” he added. “We have worked through the bubble that COVID created and the new normal is nice and high.”
Along with constraints due to COVID, “the foam shortage due to the freeze in Texas severely limited the amount of product we could build for 2021,” commented Rick Coffey, president of McCreary Modern Inc. (#54). 2022, however, is a different story with output up about 25 percent compared to 2021 figures, he added, with projections for 2023 “excellent, with historic backlogs.”
Sales are also on the upswing at Witmer Furniture (#263). “We expect 2022 sales to exceed 2021 sales as our customers’ demand continues to be strong and we have a large backlog as well,” said Kevin Schlinkmann, president. “We are currently in a large expansion phase which will allow us to build and ship more product this year than we did in 2021.”
Schlinkmann added, “We are projecting sales in 2023 to remain good and domestic demand to be strong as the cost and availability of containers continue to be an issue for imported product.”
Projections for 2022 and 2023 are also good for Best Home Furnishings (#45). “2022 sales will be up,” said Steven Wahl, CFO and treasurer, noting the company was still “recovering from the 2020 major sales decline” last year. He added, “We also dealt with major supply chain issues in 2021 that affected our ability to build product. The supply chain issues appear to be getting better now, but we haven’t felt the impact of the Shanghai shutdown yet for imported components.”
“Like other manufacturing industries, supply chain slowdowns and labor shortages continue to work through the system,” said Dierdre Jimenez, president and CEO of BIFMA, the trade association for business and institutional furniture manufacturers.
Jackie Hirschhaut, vice president of the American Home Furnishings Alliance (AHFA) and executive director of its outdoor division, the International Casual Furnishings Association (ICFA), agreed. “There are challenges, especially with material supplies, and the manufacturers are doing everything to battle through until they can return to the robust state pre-pandemic,” she said. “We expect these challenges to soften, although they’ll probably be with us for at least another year.”
Kooistra, Wahl and Coffey were among those also citing supply chain issues, along with inflationary costs, and a shortage of labor among the top challenges facing their companies.
“Our biggest issue continues to be labor constraints. If we could find the people, we would hire 200 people today,” Wahl noted. “This is about an additional 20 percent to our existing workforce.” He added, “Though supply chain issues appear to be getting better, we are so dependent on overseas components that another extended lockdown in China would limit our production capacity.”
“Spot shortages continue to create disruptions in the products we can build,” Coffey said. “Inflation on the two major components in our product increased by 38 percent in the last 12 months. And labor, skilled and unskilled, is impossible to attract and secure.”
“Outside of supply chain challenges and the overall economic indicators, our other top concern for this year and next will be adding quality talent throughout all levels of the organization,” added Holderness.
Caperton concurred. “We need to further expand our workforce and expect the labor shortage will last for years,” he said. “We are all now recruiters. Building an expansion carries a ton of risk - cost to complete, good function, and continuing demand. Plus, we need to find more good employees for the work.”
Verkamp agreed. “The worker shortage and the supply chain disruptions are limiting factors for us in producing the product for which we have received orders. As we look beyond 2022, it is the increasing discussion about a potential recession in the near future.”
Both residential and office furniture manufacturers continue to benefit from consumers investing in products for the home, particularly as the work from home trend shows no signs of waning.
“The macroeconomics for housing and home furnishings look very strong for the next decade,” said Caperton. “Of course, it will be bumpy, but things are strong and improving thanks to demographics and the current shortage of houses.”
It’s not limited to indoors. A new study by Wakefield Research, on behalf of the ICFA, shows that COVID-inspired nesting has motivated 78 percent of Americans to upgrade their outdoor living space in the past year. In addition, 63 percent said they will upgrade their outdoor furniture or accessories this year, according to the annual ICFA Outdoor Furnishings Trend Report.
“Consumers who were thinking about upgrading their outdoor space are doing so now to enjoy their increased time at home in more style and comfort,” Hirschhaut said. “The pandemic has not stopped manufacturers from creating new styles and designs, and retailers are working hard to make sure consumers have access to what makes them happy.”
“People continue to invest in their homes as they are spending more time there,” Schlinkmann also noted. “Building a high-quality, affordable, domestic product will continue to give us opportunities to increase our market share.”
“It appears ‘Made in America’ is starting to mean something again,” Wahl added. “Domestic residential furniture manufacturers should benefit from this. Though we have a global economy, a lot of retailers don’t feel as comfortable relying on import product deliveries as they did prior to the pandemic.”
A number of manufacturers also commented on investments made in technology and facility upgrades to increase their capacity and capabilities.
“We have made major investments in our internal supply chain facilities to enable growth and assure quality components and timely deliveries,” said Coffey.
Watson has also “focused on manufacturing automation,” noted Kooistra.
Verkamp added, “We are optimistic for the future of the office furniture industry and for Indiana Furniture. Here at Indiana, we significantly invested in our product and our operations over the past two years so that we can continue being a strong partner to our dealers. Our new, consolidated manufacturing facility, which will open up in Q4 of this year, will allow us to enhance our abilities to service our customers.”
Holderness also noted, “We have continued our R&D and new product development projects the past two years and are excited about the success of recent and future launches.”
“Speaking as an architect and designer, from my perspective, as humans we continuously seek to improve our quality of life through the safety and functionality of our environments. The evolution of environments we work, learn, heal, and live in depend on the innovation of products that advance these goals,” said Jimenez. “It’s a journey and the furniture industry plays a key role in that journey.”
As a byproduct of the increased focus on environmental and social impacts, the association has seen increased interest in the LEVEL by BIFMA furniture sustainability certification. “We continue to work with manufacturers and industry stakeholders to elevate the work the furniture industry has done in this area,” she added.
FDMC 300 firms offer strategies for success
We asked some of the FDMC 300 furniture manufacturers to share a tip for succeeding in the coming year. Here’s what they had to say:
• “Stay focused on your plan and remain customer obsessive with your best customers,” said Todd Holderness, general manager, Contract Interiors for Fellowes (Trendway Corp. #103, and ESI).
• “Honest communication with your vendors and customers in a timely manner is more important than ever,” said Steven Wahl, CFO and treasurer, Best Home Furnishings (#45). “Our industry has never experienced a time like this. When problems develop, and for most people that happens on a daily basis today, let your vendors and customers know about them as soon as possible. Don’t sugarcoat the problem. Give them honest answers, and don’t set unreasonable expectations that you will not be able to meet.”
• “Invest in equipment and continue to expand your pool of vendors to get raw materials,” said Kevin Schlinkmann, president, Witmer Furniture (#263).
• “Assume nothing and source domestically,” said Rick Coffey, president, McCreary Modern Inc. (#54).
• “Continued creativity in all facets of the business is required!” said Greg Kooistra, production planning manager, Watson Furniture Group (#160).
• “The best way to have a crappy employee is to offer a crappy job,” said Gat Caperton, CEO, Gat Creek (#220). In other words, don’t do it.
• “We have to listen to what our customers and our employees are telling us and make appropriate adjustments. The expectations for both are changing,” said Max Verkamp, president and CEO, Indiana Furniture (#154).
“From a customer perspective, what an office is and looks like is evolving. Thus, we need to understand the needs of our customers and ensure we have product solutions for them. This may involve repurposing some of our current products and/or developing new products. The expectations of employees also are changing, and we must ensure we understand their needs and are addressing them appropriately.”
Verkamp added, “I recently heard a speaker say that the war for talent is over and that the talent has won. I believe there is a lot of truth in that comment. Just as the office is evolving, how we manage our people must evolve. Those that don’t do so will be left behind.”
About the FDMC 300
More than 115 furniture manufacturers are included in the 2022 FDMC 300, an annual report that tracks the largest manufacturers in North America and ranks them by sales. Updates of the FDMC 300 firms can be found at WoodworkingNetwork.com/FDMC-300, along with industry snapshots and interviews. For information on how to be included, contact [email protected].
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