Office furnishing frenzy

Office World News, Jun 2001

MARKET UPDATE

The office furniture market has held steady, for the most part, for the past three decades. During the early 1990s, the office furniture market, like many others, experienced some rough times because of the recession. However, the office furniture market emerged from this troubling period and in 1999 reported sales of $12.1 billion. This represented a substantial recovery from the period's low of $7.0 billion in 1991.

The office furniture industry is divided into two segments-wood and nonwood. Historically, the nonwood segment has held a larger share of the market, and this trend is expected to continue in the future. After 1991, both segments exhibited rising sales. From 1992 to 1999, wood office furniture sales posted an average annual growth rate of 8.1 percent, while non-- wood office furniture sales advanced at an average annual rate of 6.5 percent.

The office furniture industry has matured over the past few years and has become very competitive. The U.S. industry is primarily dominated by a few large companies. Most of these larger companies have turned in record sales in the past few years. Lately, the smaller office furniture companies have found it harder to compete with the larger firms.

Hence, over the past few years, there have been more and more mergers in the office furniture industry. The mergers have taken place because of the increasing need of larger companies to enter more markets which they may not have thought to enter ten years ago. In addition, many customers in the office furniture industry today are demanding better prices and more service from furniture companies.

Furthermore, office furniture companies have considerably increased their employment levels. The number of production workers is generally on the rise in the office furniture industry, as production remains high. Wages have also increased, as production workers are generally working more hours. Producer prices for non-- wood office furniture have decreased over the past few years with the growing use of new materials such as plastics. On the other hand, producer prices for wood office furniture grew consistently throughout the 1990s, with the exception of 1991.

HOME OFFICE EXPLOSION

One of the reasons for the increase in office furniture sales is the increasing number of people working from their homes. After the downsizing of corporations in the early 1990s, many of the newly unemployed started their own small businesses from home or opted to work at home so that they could spend more time with their children. Working from home has become even more efficient with recent technological advances such as e-mail, the Internet, and faxes. The at-home worker is just one of the emerging markets in this industry.

SOHO STYLINGS

An emerging market in need of office furniture is the small and mid-sized company market. The number of companies with fewer than 50 workers has increased over the past several years. A good indicator of the rising number of smaller companies are the declining office building vacancy rates in most U.S. cities. In addition, the number of new buildings being built for offices has been on the rise since 1995. The number of buildings being constructed for other commercial uses rose throughout the 1990s. The rise in total authorized private construction has occurred primarily in the West and South regions of the U.S.

The office environment in corporate America has changed significantly. The era of separate divisions and working alone has been replaced by the theory of the team concept. The new design of the office has led to a boost in sales of panel system furniture. Work surface modular systems and panel-- supported systems have replaced free-- standing systems.

SEATING SOLUTIONS

Another segment that has recently received a lot of attention is ergonomic seating. With workers spending more time at their desks, the increasing need for greater comfort and less stress on workers is evident. Ergonomic seating design has led to increased sales in both the wood and nonwood segments.

RTA RESPONSE

A segment of the industry that has grown in popularity has been the ready-to-assemble (RTA) furniture market. However, the movement to provide a wide selection of office furniture products for the home office user has not been limited to just RTA companies. Even the larger companies, such as Steelcase, Herman Miller, and HON Industries, have now refocused their attention on smaller and mid-sized companies and home office users. With sales of computers, faxes, and printers on the rise, the proper furniture is needed to hold this equipment. Those who are most likely to have home offices are married and between the ages of 35 and 54. Home workers usually have at least a college education, and they have high income levels.

FURNITURE FACTORS

U.S. exports of office furniture declined in 1999, while imports continued to grow significantly. As a percentage of U.S. manufacturers' sales, exports decreased from 5.3% in 1997 to 4.5% in 1999. All but one of the export product categories exhibited declines from 1998 to 1999. During that period, U.S. exports of wooden frame adjustable swivel seats with variable height adjustment increased by 24.6%. On the other hand, many office furniture products imported into the U.S. posted significant gains from 1998 to 1999. Canada continues to be the leading import source, as well as the top destination for exported office furniture.