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 nor🦋mally. But for most export companies, it did experience a bitter winter.

However, behind the sharp rebound in orde🍨rs in the second quarter, there are different reasons, and some people even expressed concern about this "abnormal phenomenon." In addition to speciaᩚᩚᩚᩚᩚᩚ⁤⁤⁤⁤ᩚ⁤⁤⁤⁤ᩚ⁤⁤⁤⁤ᩚ𒀱ᩚᩚᩚl cases, what are the general reasons for this situation?

01. The retail recovery has driven the rapid recovery🅠 of export business, and the rebound in August h🔜as been obvious

The rebound in exports has become a reality, and this is also true at the national level. Since the beginning of 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-speed 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 same. 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 recovere♎d 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 out-of-home consumption and the increase in home consumption caused by the epidemic. He said that he is cautiously o𝔍ptimistic 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 3.8%, 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, A𒈔i Murray's revenue has increased by 20%. As people gradually return to offline consumption, there is more room for growth in the future.

Statistics from the US Departm𝓀ent of Commerce show that physical furniture and household goods stores only increased by 1.8% from June to August, but they have increased by 58.3% co༒mpared to March to May 2020.

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02. Retailers are facing a 🌞large-area shortage of products, stimulating price increases

When offline stores began to resume business graduall♚y, retailers began to face a new problem: a severe s🎃hortage 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 pri𝓀ce 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 weigh💙t 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 doubled from the beginning of this year. Maritime data shows that the container freight from Sha😼nghai 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 severalꦑ weeks? This is likely to delay delivery and affect the commitment to customers." How long will it take for route prices to return to normal? Some experts believe that it may last until the Chinese New Year.

The supply side still needs some recovery time. After reducing production and layoffs 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 fa🥂ce 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 r♏ising raw🍰 materials such as foam and plywood, American furniture retailers may have to prepare for a round of price increases this fall.

03. What are the reasons ওbehind the large-scale rebound in ex🍷ports?

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

1. The rise of e-commerce channels

Si🌺milar 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 withꦆout stores in August 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 orders of man♓ufacturers 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 the 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 suꩲddenly 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 incom🥂e increased from US$2 billion to US$4.3 billion, an inc🐭rease of 83.7% year-on-year. Net income in the United States increased by US$1.7 billion, 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 financial report related datꦯa:

In the direct-to-c🧔onsumer business, active customers reached 26 million, a year-on-year increase of 46.0%;

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

The average customer order value was US$227, compared to US$255 in the same perio🥃d last year;

Direct retail businꦫess has 60.6% of orders completed 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 seco𒅌nd quarter ended July 31, a year-on-year decrease of 8.6%. But on the other hand, the company's e-commerce channel retail sales increased by 72% year-on-year in the second quarter of last year.

2💞. Promotion of personalized 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 ꦦ136 million U.S. dollars. An increase of 54.4%, reaching US$98.423 million.

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

Zhongli Furniture, located in Gaoming, Foshan, is one of RH's main suppliers. Zhu Haizhan, deputy general manager of Zhongli Furniture, said that the company's orders after the outbreak were better t♎han expected, and the reduction in overseas orders was only about 30%.

Since May, Zhongli Furniture's orders have resumed continuous growth, and it has been in a state of "explosive orders" in August. Not only that, Zhu Haizha💎n, deputy general manager, also said that many foreign trade manufacturers that mai🗹nly 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 of opportuni꧒ty

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 August 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 balance sheets of European and American residents have not deteriorated signific☂antly 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 la🃏rgest furniture producer with a complete upstream 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 labor๊, raw materials and other supply chain-related support provided by mainland China. This advantage in supply may prompt overseas buyers to turn their purchasing eyes back to China.

4. Centralized procure🎉ment for promotion 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 fol꧙lowed by "Black Friday" and Christmas. In addition, the first Monday 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 likely to be one of the reasons for the growth of household exports.

04. Can the export succesꦅs continue? Still need to b𝕴e treated with caution

The above factors have plꦏayed an important role in the recovery of househol🅘d 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, a﷽nd may even continue tওo grow. Online traffic will gradually partly return to offline, 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 potentiꦑal 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 macro 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 ot🍸her hand, in the face of a good export market, foreign trade companies still have to be cautious. Sun Hailong, general manager and CMO of Lions International Convention and Exhibition, believ♏es 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 epidemic 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 uncontr🌞ollable fact💮ors. 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 canno🎀t keep up with the increase in costs. This year, the salary of ordinary workers has increased by nearly 20%, and the monthly salary of some production l🐬ine 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 𝐆seize the opportunity to develop high value-added p🔴roducts, improve brand awareness, and enhance international competitiveness.