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Home & Interiors February 2013

Greater control of new home purchases, changes the interiors landscape

The property boom in China over the past few years has in many cases resulted in investors buying homes and then leaving them empty often for many years at a time. But with stricter government control and regulation in many parts of the country implemented in last few years, much more new property is currently being purchased by first time buyers. These people do not have the time or the money to buy an undecorated home, select a decoration company and then wait to move in. They want to move in immediately. As a nation, the Chinese are not DIY experts, and have far less knowledge, interest, or ‘the eye’ to select furniture or colour schemes themselves.

New home interiors and decoration companies

Decoration of a newly built home in China can vary. In Beijing there is a 50/50 ratio of decorated to undecorated new property, however, in Guangzhou 70% of new homes are decorated, whereas in Changsha its only 20%. Having bought a home, the typical redecoration period is 5 to 8 years, and this has over the past year brought opportunity for home design and decoration companies. These organisations will redesign, decorate and furnish the home top to bottom. Currently 40% of the work of Chinese decoration companies in Beijing for example, relates to second hand or older, and not new property.

In the past, these decoration companies have purely focused on new home sales, but government policy has and will, indirectly create a bigger second hand redecoration market according to these businesses. Government statistics indicate that the average vacancy rate of new property in China is 26%; as an example the rate in Chengdu is 30%.

High-end and luxury furniture increases in popularity

Furniture tends to be sold through two channels in China. The first are direct stores owned by either a partner or the brand itself, the second are large furniture malls, often covering three or four floors. According to the National Building Materials Association the sales of large-scale malls in 2012 dropped by 2.46% over 2011, and were 1246.7 Billion RMB.

During 2012, a polarization of the furniture market appeared to some extent caused by government policy and a more cautious spending regime adopted by the middle class; the high and low-end sectors performed well, but the middle range suffered. Consumers who were buying their first home appear to have purchased furniture in the low end category rather than stretching themselves to buy middle range products, whereas the purchasers of high end luxury furniture who are those who already have more than one home, and are by comparison not under the same financial or time pressures to move in. Some furniture malls have therefore determined to move towards the high-end from their previous position.

High-end luxury furniture in China is mainly split between traditional Chinese design, and that from Europe or North America. Within the non-Chinese group, furniture of a style based on the period of Louis 15th or 16th or the equivalent, modern European or traditional American are popular. As a generalisation, older consumers tend to prefer classic styles and more ornate design, whereas younger consumers are attracted to modern European designs.

What classes as high-end or luxury furniture?

As with other sectors in China, the benchmark for luxury is often price and origin related. Brands from France, Italy, Germany, the UK and US are popular, especially those that are clearly imported because like many other luxury products, greater trust is put on authenticity, and in the case of furniture, safety and quality. A consumer would expect to spend 50,000 RMB upwards on a sofa if it was luxury, and often two or more times this amount. It would be typical that the purchaser of a new home would allocate 10 to 15% of the property price to furnish it.

Brand names such as Armani and Fendi would be popular and well recognised, as would Roche Bobis, Flexform, and Ligne Roset as high-end modern European brands. The Chinese furniture retailer Da Vinci, which was at the centre of the news 18 months ago, also represents many more traditionally design brands from Europe and the USA, all of which fit within this category.

Imported furniture

The most recent data indicates that China imported $1.5 Billion worth of furniture between January and August 2012, a 7% year-on-year increase compared to 2011. There have been a growing number of foreign furniture brands entering the country; Arthur Brett & Sons from the UK arrived in October, Italian luxury furniture brand Zanaboni opened its flagship store in Easyhome, a furniture mall in Beijing in November. Hong Kong manufacturer Royal Furniture partnered with British sofa brand Duresta and Treci from Italy in order to maintain its leading edge position in the industry.

Market trends in furniture retailing

Indications are that there will be a boom in imported high-end furniture. The VP of Easyhome a furniture mall chain considers that high-end furniture consumers are those who have multiple homes, and are less influenced by economic and market issues “With the increasing life standard and purchase power, as well as more people who have been studying, working and traveling abroad, Chinese consumers’ cognition on foreign culture and ideology is improving the acceptance of the overseas lifestyle. Therefore, the prospect for the imported furniture market is optimistic.”

According to the GM of another high-end furniture retailer called Blue Morning that represents the international brands Zanaboni, Caspani Tino Group, Savio Firmino, Cantori, Smania, Giorgio Collection, Mis en demeure, Yves Delorme and Gien, “All the international brands we represent are able to provide bespoke products based on specific Chinese consumer requirements. Foreign brands are paying far greater attention to China now, which is demonstrated by their consideration of the consumers’ preferences when new products are introduced. They have asked for our advice as to whether their new products are in line with the Chinese lifestyle.”

The growing home textile market

As a result of the influence of the regulation applied to the new property market and the time lag associated with it, a reported reduction in the number of marriages in 2012 and the general economic slow down; the textile market slumped last year. Moving to a new home represents 25% of the home textile consumption, and weddings approximately 22%.

Government owned and run domestic textile manufactures are under the microscope currently, as the government goes through a process of assessing their commercial viability in order to shake up and professionalise the sector. There is no indication that this is part of a drive to increase domestic consumption, rather to improve general efficiency and reduce waste. When speaking with those selling textiles, it was identified that the textile sector is also polarising between high-end and low-end consumers. Distributors and retailers are trying to move up market where possible as they see this as the future for the sector.

Many experts within the home textile sector predict that consumer requirements for home textiles will increase in the coming years. Due to the slowing economic situation, many wealthy people now have more time for themselves and their families and are looking to improve their quality of life that includes that at home. According to our sources, the same driver is taking affect in the commercial market, where hotels, restaurants and other places where textiles are used are being forced to upgrade their interiors as consumers expect a better quality environment.


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