4 reasons behind the boom in home furnishing export orders Retail recovery is the key

Since June, the author has received news that export orders have picked up, especially since July and August began to become very popular, and some factories even had too late to arrange orders. In fact, since the epidemic, not all export manufacturers' orders have been greatly affected, and some have been operating normally. But for most export com❀panies, it did experience a bitter winter.

However, 🅰behind the sharp rebound in orders in the second quarter, there are different reasons, and some people even expressed concern about this "abnormal phenomenon." In addition to special cases, what are the general reasons for this situati𒁏on?

01. The retail recovery has drivenꦡ the rapid recovery of export business, and the rebound in August has been obvious

The rebound in exports has become a reality, and this is also true at the national level. Since the beginning ofꦦ this year, China's export growth rate has turned positive year-on-year in April, and the higher-than-expected situation has continued. In July and August, China’s exports continued to record high-spe🐷ed growth of over 10%; Oxford Economic Research Institute research data stated that China accounted for 17.2% of the global export market in the second quarter, a record high.

From the perspective of the home furnishing industry, the situation is basically the sa🌱me. Hao Xinyan, COO of Dajian Yuncang, a global 🌟home furnishing circulation B2B platform, believes that from an export perspective, orders for soft furnishings such as mattresses and sofas have recovered quickly. In addition, the export of office chairs and dining chairs is also good. From a regional perspective, the Anji region, where chair manufacturing is good at making orders, has been good since May.

Fujian Guohui Group mainly exports solid wood furniture to the European and American markets. Chairman Yang Guohui told reporters that since May and June, the company's orders began to pick up, and it became more obvious in July and August. He believes that the rebound in orders has a lot to do with the increase in consumer home time, the decrease in oℱut-of-home co𒁃nsumption and the increase in home consumption caused by the epidemic. He said that he is cautiously optimistic about the future export of furniture from Europe and the United States, which means staying optimistic, but proceeding cautiously.

The growth of retail sales has driven the export of overseas furniture, and relevant data in the US market confirms this view. According to data from the U.S. Department of Commerce, in August 2020, the nation’s retail sales of furniture and household goods showed a year-on-year growth for the first time, with a growth rate of 3.8𓆉%, compared with a year-on-year increase of 2.1% in August 2019.

The business recovery of Esuri also illustrates this point. Before the outbreak of the epidemic, Essley had exceeded 14%~15% growth for three consecutive years. However, in the six weeks following the outbreak, the company's revenue fell by 15%. However, since August, Ai Muཧrray's revenue has increased by 20%. As peopl♎e gradually return to offline consumption, there is more room for growth in the future.

Statistics from the US Department of Commerce show that physical furniture and household goods stores only increased by 1.8% from⛎ June to August, but tಌhey have increased by 58.3% compared to March to May 2020.

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02. Retailers are facing a large-𒁃area shor🧜tage of products, stimulating price increases

When offline stores began to resume business gradually,ཧ retailers began to face a new problem: a severe shortage of products.

Its CEO Jeffrey Seaman said, “I don’t know if anyone anticipated today’s strong market demand in advance. Obviously we did not. We used to think that 🐟business would be great when the store restarted in May. But this intense and in-depth demand shocked us."

Due to demand stimulus, freight and raw material prices are facing rising. The price of containers has risen by 20% to 25% in the past few months. The shortage of containers in Asia is particularly obvious. The shipping network pointed out that the problem of "bursting cabin" frequently occurred in July and August this year. (The so-called bursting refers to the actual number of containers booked in a certain port for a certain 🍌voyage of a ship, which exceeds the predetermined box quota, or the actual weight of the booked cargo exceeds the predetermined cargo weight limit.)

Container shipping prices on US routes have continued to skyrocket. Starting in June, space for West US and East US routes has become tight. The monthly increase was 28.4% and 20.9%, which doub🐼led from the beginning of this year. Maritime data shows that the container freight from Shanghai to the basic port on the West Coast of the United States has reached the highest level in eight years, and the freight to the West Coast of the United States has broken the $5,000 mark.

Another pain point for American buyers is that even if they find container resources, they still face the risk of towing. A buyer said, "Our goods are being shipped, but has the carrier shipped out our containers or let them stay at the transshipment port for several weeks? This is likely to delay delivery and affect the commitment to customers." How long will i💯t take for route prices to return to normal? Some experts believe that itﷺ may last until the Chinese New Year.

The supply side still needs some recovery time. After reducing production and layoff💮s in the first few weeks of the American factory in Eslite, in response to weak demand and the need for epidemic prevention, the trouble now is that sourcing retailers have to face months of waiting time. Although the factory is ramping up production and recruiting workers, the supply is still in short supply, and the complete relief may have to wait until November.

Rising shipping prices, towing at ports, and rising raw materials such as foam and plywood, American furniture retailers may have to prepare for a round of price increases this fꦇall.

03. What are the𝓡 reasons behind the large-scale rebo𓃲und in exports?

The large-scale rebo♓und in exports is due to insufficient supply in the short term, but the underlying reasons may not stop there. The author believes that there may be the following 4 reasons:

1. The rise of e-commerce channels

Similar to the Chinese market, in addition to the impact of the epidemic on the real economy, e-commerce has also ushered in a round of opportunities. According to statistics from the U.S. Department of Commerce, the nationwide retail sales without stores in Aug🃏ust increased significantly by 22.4% year-on-year. Statistics agency Statista said that online traffic on home decor & furnishing platforms (home decor & furnishing) increased by 7%.

From the perspective of home furnishing exports, the orꦯders of manufacturers who have deployed overseas e-commerce channels in advance are hardly affected, and even the lack of traditional manufacturers has caused a significant increase in business volume. In particular, e-commerce platforms such as Amazon, Wayfair, and Overstock have driven home furnishings. The growth of similar export business.

Among them, although Wayfair cannot be said to be "resurrected from the dead", the performance of the capital market since March is precisely because of the explosion of home online consumption under the epidemic. After listing on tဣhe New York Stock Exchange on October ☂3, 2014, Wayfair's stock price was depressed due to continued losses (a net loss of US$985 million in 2019). However, the outbreak of the epidemic has made Wayfair suddenly become a "sweet cake". Since March, the stock price has continued to rise, from 21.7 US dollars all the way up, reaching a maximum of 349 US dollars per share.

Revenue has also achieved substantial growth. As of the second quarter earnings report on June 30, 2020, Wayfair's net income increased from US$2 billion to US$4.3 billion, an increase of 83.7% year-on-year. Net income💦 in the United States increased by US$1.7 bওillion, an increase of 82.5% year-on-year, and international net income increased by US$310.2 million, an increase of 90.5% year-on-year. CEO, co-founder and co-chairman Niraj Shah (Niraj Shah) said that this quarter created more than $ 1 billion in free cash flow.

Wayfair's second quarter financi♚al report related dat🦄a:

In ♎the direct-to-consumer business, active customers reached 26 million, a year-on-year increase 🎀of 46.0%;

12.7 million repeat customers placed orders, a year-on-year increase♐ of 104.9%;

The average customer order value was 🍒US$227, compared to US$255 in the same period last year;

Direct retail business has 60.6% of orders compl𒆙eted through mobile devices, compared with 53.5% in the same period last year.

In addition, many physical stores that cannot be opened open up omni-channel sales. For example, Conn’s had retail sales of US$279 million for the second quarter ended July 31, a ye🅺ar-on-year decrease of 8.6%. But on the other hand, the company's e-commerce channel retail sales increased by 72% yea🐻r-on-year in the second quarter of last year.

2. Promotion of pers꧒onalized customization business

Personalized customization business generally has a longer cycle, and is also dominated by high-end consumer groups, which is less affected by economic fluctuations. For example, RH Furniture (Restoration Hardware) provides personalized customization services for upholstered furniture in the US market. In the second quarter financial report as of August 1, revenue increased💞 by 31.3% year-on-year, reaching 136 million U.S. dollars. An increase of 54.4%, reaching US$98.423 million.

RH's CEO believes that the company has 𒈔benefited a lot from the extended stay at home caused by the epidemic, of course, because of the series of transformations it promoted several years ago. (Please refer to Yiou related inventory "From furniture store to Internet celebrity art gallery, how does Restoration H🐈ardware "survive the Jedi?")

Zhongli Furniture, located in Gaoming, Foshan, is one of RH's mai🦩n suppliers. Zhu Haizhan, deputy general manager of Zhongli Furniture, said that the company's orders after the outbreak were better than expected, and the reduction in overseas orders was only about 30%.

Since May, Zhon♏gli Furniture's orders have resumed continuous growth, and it has been in a state of "explosive orders" in August. Not only that, Zhu Haizhan, deputy general manager, also said that many foreign trade manufacturers that mainly supply the mid-to-high-end market have good orders.

3. Overseas demand has not dropped significantly, and domestic resumption of work brings a window༺ ඣof opportunity

In addition to the growth of e-commerce channels, the impact on offline retail is gradually recovering. According to statistics from the U.S. Department of Commerce, the sales of Furniture & Home Furnishings in Aug♍ust reached 10.23 billion U.S. dollars, and adjusted sales in July were 10.02 billion U.S. dollars (previously, this figure was 9.82 billion U.S. dollars).

The CICC research report believes that the balance𝐆 sheets of European and American residents have not deteriorated significantly due to the epidemic, so that consumer demand can continue to expand; household consumer demand has not dropped significantly, which is an important reason for the strong rebound of China's household exports.

On the other hand, China's home furnishing exports can thrive in the global market downturn, which also benefits from the opportunity period brought by the rapid resumption of work and production. China is the world's largest furniture producer with a complete upstre🐭am and downstream industrial chain, and the advantages of the supply chain can be quickly brought into play. Southeast Asian countries not only lack industrial chain support, but also rely on the labor, raw materials and other supply chain-related support provided by mainland China. This adv💯antage in supply may prompt overseas buyers to turn their purchasing eyes back to China.

4. Centraliz🐭ed procurement for promoti🐻on at the end of the year

September has always been the traditional peak season for U.S. airlines, behind which is the purchase of materials for traditional American festivals. Thanksgiving Day is followed by "Black Friday" and Christmas. In addition, the first Monda𝐆y after "Black Friday" also has "Cyber Monday" promotions. It is also one of the hottest shopping days in the United States of the year. The factor of stocking up for holiday consumption in advance is like💞ly to be one of the reasons for the growth of household exports.

04. Can the export succesꦓs continue? Still 🌳need to be treated with caution

The above factors have played an iꦕmportant role in the recovery of household exports, but how long can this strong recovery last? Some people are even worried whether it will be a short-term "recovery"?

From the perspective of the US market, consumer demand will not drop suddenly, and may even continue to grow. Online traffic wilওl gradually partly return to o✱ffline, but the total amount will gradually become normal. Many furniture company representatives in the US market believe that this explosive consumer demand will continue until the end of 2020.

From the perspective of China, the sustainability of export potential mainly depends on the global economic situation. If the world recovers steadily, China as the largest furniture producer will still have a great advantage to participate in it, so the performance in the next few months is also very worthy of attention. Zhang Yu, chief mac𓃲ro analyst at Huachuang Securities, said that if the export growth rate can be maintained at 5% from September to December, a positive growth in exports for the whole year can be guaranteed. "At present, the probability of a positive growth rate in exports for the whole year is relatively high." .

On the other hand, in the face of a good export market, foreign trade companies stil༒l have to be cautious. Sun Hailong, general manager and CMO of Lions International Convention and Exhibition, believes that as long as the logistics continues to trade, it will get better and better, but at the same time, we must pay attention to several issues:

1. Some export companies have started to expand reproduction after seeing the market for "picking up money", but the ep꧒idemic will always end and market demand will stabilize. There is a risk of blindly expanding production.

2. The international market is affected by current affairs and fluctuates greatly, and there are many uncontrollable f🍌actors. The exchange rate is a good embodiment.

3. At present, most companies are OEMs to make the difference, while domestic labor wages and raw materials are rising, and the increase in profits cannot keep up with the increase in costs. This year, the salar🍰y of ordinary workers has increased by nearly 20%, and the monthly salary of some production line workers will reach 20,000 yuan under the state of overtime.

In short, the recent export recovery is a rare good news for the industry, but after the cold winter has passed, don't forget to continue to work hard. Especially in the context of the internal and external dual cycle, export-oriented enterprises must seize the opportunity to develop high v🦋alue-added products, improve brand awareness, and enhance international competitiveness.