Los Angeles, CA - The Office Furniture Manufacturing industry has suffered through tough economic conditions during the five years to 2012. According to IBISWorld industry analyst Sean Windle, “Weak corporate profit and high unemployment following the recession significantly reduced demand for new office furniture.”
Meanwhile, rising import penetration from China, which produces comparable goods at a much lower cost, has further hurt industry revenue. Consequently, industry revenue is expected to decline at an average annual rate of 6.5% over the five years to 2012. Fortunately, demand conditions are slowly improving as the US economy recovers from the recession and businesses expand operations. As the number of businesses increases and companies hire more employees, industry revenue is forecast to rise 3.6% to $20.6 billion in 2012.
Volatile input prices have adversely affected the industry. From 2007 to 2012, the price of steel increased at an average annual rate of 2.8%, with four of the five years recording double-digit price changes. Steep price increases in 2010 and 2011 came off the back of a 25.1% price drop in 2009. In contrast, the price of steel is expected to decline 2.9% in 2012. “These price fluctuations have made it difficult for manufacturers to anticipate future spending and control costs,” says Windle.
As a result, profit margins decreased from 3.2% of revenue in 2007 to 3.0% in 2012. In the face of diminished demand, high overhead costs and falling margins, many firms were forced to merge or exit the industry completely. During the five years to 2012, the number of industry manufacturers is estimated to decrease at an average annual rate of 1.1% to total 3,697 businesses.
The Office Furniture Manufacturing industry has low market share concentration. IBISWorld estimates that the four largest players will account for about one-fourth of total industry revenue in 2012. The remainder of the market is captured by a large number of small and privately owned businesses that successfully supply the local community's retail demand. As such, in 2012, over 70.0% of companies will employ fewer than 20 workers, while just over 6.0% will employ more than 100 workers. In the five years to 2012, industry concentration has increased because many office furniture manufacturers have gone out of business. High unemployment rates and low business sentiment following the downturn of the US economy have created an intensely competitive environment for existing player. Faced with eroding profit margins and volatile input costs, many underperforming operators were forced to exit the market. As a result, the number of industry firms decreased at an average annual rate of 1.1% over the past five years.
Despite recent declines, the industry is expected to return to growth over the next five years. However, some mitigating factors will remain. Higher import penetration will likely constrict growth, lowering domestic demand and increasing price pressures on domestic manufacturers. Also, raw material prices are projected to continue increasing and will adversely affect profitability over the period. Manufacturers can pass the additional costs on to buyers, but in doing so they risk losing business to lower-cost foreign imports. Still, as economic conditions improve the number of businesses is projected to rise through 2017, driving growth in office-based jobs and industry demand and revenue.
For more information, visit IBISWorld’s Office Furniture Manufacturing in the US industry report page.
IBISWorld industry Report Key Topics
The Office Furniture Manufacturing industry produces a wide range of office furniture, including bookcases, cabinets, chairs, desks and filing cabinets. It also manufactures office and store fixtures, such as cafeteria countertops (except kitchen and bathroom), furniture parts and partitions. Furniture may be ordered predesigned or customized, and may be sold assembled or unassembled.
About IBISWorld Inc.
Recognized as the nation’s most trusted independent source of industry and market research, IBISWorld offers a comprehensive database of unique information and analysis on every US industry. With an extensive online portfolio, valued for its depth and scope, the company equips clients with the insight necessary to make better business decisions. Headquartered in Los Angeles, IBISWorld serves a range of business, professional service and government organizations through more than 10 locations worldwide. For more information, visit http://www.ibisworld.com or call 1-800-330-3772.
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