This is a complex time for the furniture industry internationally, but there are positive short-term prospects

A mixed market moment

The Italian furniture sector continues to grow. Despite the uncertainty due to economic factors and geopolitical instability, 2022 ended with an overall positive trend for the Italian wood-furniture sector. From €50.2 billion in 2021, production turnover increased to €56.5 billion in 2022 (+12.6%). According to the findings of the Monitor developed by the FederlegnoArredo Study Centre, the Furnishing Macrosystem in particular, which represents over 60% of total sales in the wood-furniture supply chain, grew by 3.2% in 2022, both domestically (+5.3%) and in exports (+1.3%). Admittedly, this positive change is likely to be the result of price increases rather than an actual increase in volumes. In the Wood Macrosystem, the situation is different, with a decline exacerbated above all by the contraction in the value of "Panels".

After two years of significant growth, the furniture sector still seems to be on a roll in 2023, although the positive dynamic is tending to slow down. This is revealed by the sample survey conducted by the Mediobanca Research Area and contained in its “Report on home, office and community space furnishings”. 2023 is seen as a difficult year for the industry, even by FederlegnoArredo, for which the real question is whether we are witnessing a simple slowdown, which is to be expected after two years of exceptional results, or a sudden setback. In fact, sales recorded by the wood-furniture supply chain in the first quarter of this year, on a representative sample of companies, amounted to €2.5 billion, with a 1.4% contraction compared to the same period of 2022, resulting from a 2.7% fall in the domestic market and a 0.4% increase in exports. A further decline is almost certain for the second quarter of 2023 as well, as the effect of the tail end of orders placed in 2022 has also disappeared.

Forecasts

National market forecasts indicate that the sector most closely linked to furniture continues to hold up in a complex situation where the loss of household purchasing power, lack of liquidity and relative lowering of consumption go hand in hand with a drop in production, as certified by ISTAT (Italian National Institute of Statistics) data for the first half of the year. The slowdown in Germany, which is the second biggest outlet market in Europe for the supply chain's products, is a further and significant question mark.

However, long-term forecasts contained in the Mediobanca Research Area report on home, office and community space furnishings justify cautious optimism regarding the evolution of global markets. According to Intesa San Paolo, turnover in the furniture sector is expected to grow in 2023, once again supported by foreign markets and the demand for “Made in Italy” products in important markets such as the United States and China, now recovering in the post-Covid period. Speaking of these two countries, the market share of Italian furniture in the USA increased from 2.8% in 2021 to 3.2% in 2022, confirming Italy’s seventh place among US imports. The potential of the Chinese market, where Italian furniture is clearly in first place, remains very high, with a share of Chinese furniture imports estimated at 32.8%.

Looking at the national production sector as a whole, Intesa San Paolo's analysis predicts that the easing of the internal and international operating context, which is expected to start from 2024, will allow Italian manufacturing to re-establish more dynamic growth rates than in recent decades, with a 1.3% average annual growth rate over the 2024--27 period in terms of turnover at constant prices. The contribution of exports will also be crucial: the Italian industry’s good ability to serve high added-value niches will allow the trade surplus to continue to grow, exceeding the record level of €110 billion by 2027.

Despite the soaring cost of energy, raw materials and transport, market analyses tend to confirm good profitability for companies. Looking ahead, particularly for furniture and component companies, it will be crucial to accelerate strategic investments, made all the more urgent by the energy crisis, which include the optimisation of supply contracts, green investments, digitalisation and research and development.

Competitiveness recovery factors

Export therefore remains the most important driving force for the supply chain, especially towards established markets for Italian companies such as France, the USA and Germany. The strong decline in exports to Russia can be at least partially offset by exports to the United States, which are growing. In the global international furniture market, Italy remains the second biggest exporter of furniture in the EU-27 after Poland and the fourth globally, after Poland, Vietnam and China, with China leading the ranking drawn up by the Mediobanca Research Area with 34.1% of overall exports. The EU bloc is still the main sales outlet for Italy, accounting for 45.9% of Italian furniture exports, while European countries that are not part of the Union together make up a further 16.4%. There is therefore a clear prevalence of proximity markets, but looking to the future, even the more distant ones, including North America and Asia, should not be overlooked.

The use of sustainable and innovative materials is considerably important, given the upcoming challenges. Companies are increasingly focusing on innovative, non-toxic, recyclable, certified and safely disposable products. In order to apply the principles of sustainability, there is also an evident focus on extending the useful life of furniture, which consequently requires higher quality products.

A further factor linked to product marketing, to which companies are paying increasing attention, is digitalisation: this is essential to seize the opportunity to develop the online sales channel, which is a strategic tool needed to penetrate overseas markets in particular and broaden the target audience. In 2022, the value of online furniture purchases in Italy exceeded €3.5 billion. This is a significant increase, considering that in the pre-Covid period this figure stood at just under one billion.