Furniture makers not yet sitting pretty

China Camerich Furniture Co's store in Cologne, Germany. Launched at the end of last year, it is the Beijing-based furniture company's 43rd overseas outlet.

But armed with advanced machines, Chinese firms build strong presence.

German Theo Lohmann has just opened a boutique featuring the products of China Camerich Furniture Co in Cologne in the belief that it will make him good money.

Located in Hohenstaufenring Street, a hub for internationally leading furniture brands, Camerich's three-story shop has a business area of more than 630 square meters. Visitors are mostly foreigners, not only from Germany but also from other European nations.

The Cologne outlet is the 43rd overseas outlet of the Beijing-based furniture company and also the 10th it launched in 2012.

All of the Chinese furniture producer's stores abroad are in prominent business areas in international urban centers, including Avenue Louise in Paris, Waterloo Street in Brussels and King's Road in London, said Fu Haijun, founder and general manager of Camerich, which was set up in 2005. "We plan to increase the number of our overseas boutiques to 200 by 2016," he added.

His ambitious plan is based on foreign distributors' huge interest in his brand. "Many foreign distributors have been asking us to open more outlets soon. They like what they see of our self-designed and high-quality products but we only grant a small number of requests. We must guarantee everything has been well prepared before launching a new outlet," said 40-year-old Fu, who has been in the furniture industry for nearly two decades.

Camerich is not the only Chinese brand that is lucrative thanks to the interest of foreigners. Guangdong-based Window of Furniture Group, which was set up in 1990, has opened three franchise stores selling products featuring its own brands in Saudi Arabia. The local franchisee is expecting to continue the partnership by opening more chains.

Chinese furniture manufacturer Markor Furnishings Co now has a presence in the Americas, the Middle East and Asia. In addition to selling its self-branded furniture in overseas markets based on foreign partners' sales networks, it, in exchange, introduces the products of foreign partners to China.

Guangdong-based Landbond Furniture Group and Beijing Ilinio Furniture Co also have overseas outlets.

Why China?

For decades, Chinese furniture companies used original equipment manufacturers for foreign brands, with only a small percentage of them focusing on self-designed products and in-house creativity.

Camerich's flagship store in Cologne is designed in line with the company's uniform style of modernity and simplicity. Lohmann's family has acted as a furniture sales agency for more than 100 years. As a veteran dealer, he said: "It is our hope that, the moment people step inside, they will feel the charm of the distinct Camerich culture, discover the change that we could bring to their lives and see what they really need."

"Camerich's designs and product quality are based on high standards. The company often surprises us with amazing products," Lohmann said, citing the Ming Dynasty (1368-1644) series with its unique oriental charm and the Avalon series with a distinct modern style as examples. In 2012, many overseas distributors of Camerich furniture actively upgraded their stores. The floor area of the Antwerp store more than tripled, while the Melbourne boutique reported more than 100 percent in revenue growth.

Window of Furniture's franchising operator Almutlaq Co is also a family business. The current president, Fahad Almutlaq, said the Saudi Arabian people really like their Chinese products, which are not traditional Chinese but a combination of Western modern elements with Chinese characteristics.

Unlike Camerich and Window of Furniture, Markor Furnishings is seeking cooperation or merger and acquisition opportunities in overseas markets. The company, based in the Xinjiang Uygur autonomous region, set up cooperative arrangements with US-based furniture designer, maker and retailer Ethan Allen Group Inc in 2001 and depends on the US company's hundreds of design centers and sales networks to promote its international business.

"I am impressed by Markor's team, especially their designers. They are bold, aggressive and creative," said Christine Alba, a designer at Ethan Allen, a company with more than 100 years of history. "I think we (the two companies) are complementary."

In 2009, its parent company - the Shanghai-listed Markor International Furniture Co - bought the US upholstery and timber importer Schnadig Corp for $8.94 million. Schnadig said in a statement that it was eyeing up the huge capital and production strength of Markor. The deal was conducted during the international economic slowdown, when businesses in the United States and Europe were facing sluggish demand and heavy capital pressure.

"We must admit that the crisis offered opportunities for Chinese companies to go global. I refer to companies with real capital and technological capability in various industries, including furniture," said Zhu Changling, secretary-general of China National Furniture Association.

According to Gao Xiaoshi, an analyst at domestic research firm Forward Business Intelligence Co, Chinese self-branded products come with competitive costs and performance rates. "Owing to their internationalization, Chinese designers are quickly catching up with their counterparts in the developed markets. Self-designed products made by US and European companies are usually priced much higher than their Chinese counterparts," she said.

Concerning quality, Chinese companies accumulated rich experience during their original equipment manufacturing period and some of them imported advanced machines or production lines from the world's leading machinery companies to guarantee the quality of the furniture and to help increase productivity.

Long way to go

Although the scene seems to be blooming, challenges still exist, analysts said.

US and EU requirements on environmentally friendly materials and production processes are ever-increasing. How to deal with trade barriers is a headache for many furniture exporters, according to Zhu. "We should see it this way: It promotes us to further improve ourselves," said Fu from Camerich. In 2012, the company's investment in being environmentally friendly increased by 30 percent compared with the previous year. It funded heavily in a fully automated water-born UV coating line to ensure the quality of its products and to increase the efficiency and environmentally friendliness of its manufacturing processes.

Liu Chunjie, brand and public relations director for Markor Furnishing, said cooperation with US partners helped his company implement a "green" strategy from the designing stage to the end products.

According to Zuo Jianhua, chairman of Zhihao Furniture Co, the latest round of the European Union's environmental enhancements kicked off at the end of last year. It demands all wood furniture imported to the region should have a Forest Stewardship Council certificate from March 3. The FSC is an international nonprofit, multi-stakeholder organization promoting responsible management of the world's forests.

"In China, FSC standards have not been popularized. Few timber providers have the certificate. Even in the US and EU markets, not all furniture sold is made from timber with an FSC certificate," he said. The company, based in Foshan, Guangdong, sells its self-designed brands - Kamina and K.Gdf - in the overseas market. Zuo expects sales to drop this year.

Eric Thomas, a dealer for Zhihao in the United Kingdom, said his store in Birmingham opened three years ago and is now starting to make a profit. "I am not sure whether the barrier will hurt us greatly or not, but I don't think it's fair," he said.

China's furniture industry experienced a chilly winter last year, especially in overseas markets, because of the economic slowdown in developed countries.

Statistics from the Wind Information Co show China's export volume of furniture and related components amounted to $48.82 billion last year, increasing 28.7 percent from $37.94 billion a year earlier. However, a large part of the increase came from the export of components.

"Although our exports declined in terms of the number of units, a rise in unit prices indicated increased added value," said Gao from Forward Business Intelligence Co.

Shirley Wang, Camerich's brand and marketing director, said although her company experienced robust development in overseas markets - currently 40 to 60 percent of the company's revenue is from abroad - it still faces market uncertainty.

"The uncertainty is the result of the gloomy global economy and the slowdown in growth of China's furniture industry chain. I believe it's a common challenge facing all Chinese furniture producers," she said.

Zhu from China National Furniture Association said the overseas expansion of Chinese furniture companies is still in its infancy. "It cannot boom overnight. All of us should adopt a down-to-earth attitude to enhance our capabilities in terms of design, manufacturing and management. At the same time, we should learn the rules of local markets and use the law to protect ourselves," said Zhu, adding there was still a long way to go.