|
KOREA’S FURNITURE INDUSTRY
Korea’s furniture market is driven by demand from new
residential/commercial building construction and remodeling/renovation.
The market has seen remarkable growth over the past four years due to the
continued strength of these industries. This market provides good business
opportunities for high-end American furniture products.
MARKET OVERVIEW
In 2003, Korea’s market for furniture grew by an estimated 10 percent to
reach $5.3 billion. In the same year, imports were estimated to be $412
million, up 30 percent over $318 million in 2002. Domestic Korean brands
such as Borneo, Hanssem, and Ace continued to command an overwhelming
proportion of the domestic market. In 2004, the market is forecast to fall
a sharp 10 percent due to weak demand amid the recent economic slowdown
and a decline in housing industry. For the past several years, Korea’s
economic development has created rising demand for furniture. However,
consumer spending on furniture will be affected by the prospects for
apartment renovation. The remodeling market segment remains positive in
the short term this year. According to industry experts, imports will
increase by six percent with rising demand for remodeling, compared with
the total market’s five percent increase next year.
U.S. imports are recognized as functional products for residential and
commercial buildings in the mid-to-high end market. Italian furniture has
taken a leading position in Korea’s import market. It is particularly
strong in home furniture and European furniture suppliers have a
relatively large share of the import market. Chinese and other Asian
products largely serve the low-end and specialty markets such as for
health-care and kiln refractory furniture. Major Korean manufacturers are
aggressively challenging U.S. and European competitors in the high-end
market since pricing has recently become the primary consideration for
purchases.
MARKET TRENDS
The Korean furniture market has made a sharp turnaround in 2002 with total
market size growing to reach $4.8 billion from $3.3 billion the previous
year. Korea’s market for furniture (including furniture components,
fittings and fixture) was estimated at $5.3 billion in 2003, up 10 percent
from 2002. In 2003, total domestic sales of office furniture reached $3.4
billion as the non-residential building construction market grew faster
than the residential market. As noted earlier, industry experts predict
that the market size will shrink by 10 percent to $4.7 billion in 2004 as
a result of the sharp drop in Korean consumer spending. With Korea’s
domestic market forecast to contract in 2004, the import market will also
decline to $350 million, down 15 percent from the previous year. However,
according to industry experts, the local furniture market will bounce back
during the first quarter of 2005 and the market is projected to grow at
around five percent in that year. In 2002, imports of three major product
categories (metal office furniture, wooden kitchen furniture and furniture
covered with leather) increased by 40 percent to reach $200 million. In
2003, imports of these three major categories increased by an additional
30 percent to reach $260 million. Nevertheless, imports accounted for just
six-seven percent of domestic market demand in 2002 and 2003.
IMPORT MARKET
Despite recent expansion of the entire market, imports still amounted to
only seven percent of the domestic market. U.S. imports are currently
estimated to be around nine percent of the total import market and
expected to reach 10% of the import market in 2005-2006.
The U.S., Italy, Germany, and Japan are all competitors in the high-end
import market. Italy has been the dominant foreign supplier of medium to
high-end furniture, accounting for 35 percent, followed by Germany (20
percent), U.S. (15 percent), and Japan (15 percent). Asian countries
including China are particularly strong in the low-end import market,
accounting for more than 60 percent of the entire import market. Chinese
manufacturers have a relatively large share of the furniture import
market.
Generally, foreign suppliers from the U.S., Europe, and Japan have been
targeting the upper-end of the market, the so-called premium market, by
offering higher quality products with new design through their local
distributors. Recently, these major foreign suppliers have been
introducing “system alliances” (package sales), consisting of built-in
sets of home furniture, targeting high-rise luxurious apartments.
Korea’s Market for Furniture (US$ Million)
2002 2003 2004 (P) 2005-2006 (P)
Import market
318 412 350 6%
Local production
4,620 5,080 4,570 5%
Exports
148 192 220 10%
Total market
4,790 5,300 4,700 5%
Imports from U.S. 30 32 32 8%
Exchange rates 1,247 1,200 1,150 1,150
Estimated future inflation rate: 3 to 3.5%
Import market share in 2003:
China: 30% Italy: 20% Germany:10% U.S.: 8% Japan: 8% Others: 24%
(P): Projected
2005-2006(P): Projected growth rate
Sources: Korea Federation of Furniture Industry Cooperative; Korea Customs
Service
Best Sales Prospects
Best sales prospects include premium or high-end metal and wooden
furniture, kitchen and restaurant furniture and upholstered furniture.
COMPETITION
The major competitors are Korean manufacturers that use approximately 90
percent foreign materials in their products. Their products reach across
various categories: metal furniture, wooden furniture, kitchen &
restaurant furniture, mattresses and beds and upholstered furniture.
However, Chinese suppliers are aggressively challenging these Korean
manufacturers by expanding their distribution networks through strategic
alliances with leading Korean manufacturers that have moved their
production facilities to China. China-based Korean manufacturers largely
target the mid to low-end segment of the market. Currently, there are
3,259 domestic manufacturers. The 12 leading companies account for almost
50 percent of total domestic production. These 12 leading companies are
Borneo, Hanssem, Dongsuh, Sun-Chang, Samick, Hanyang, Fursys, Ace,
Baroque, Dongsung, Happyland, and Kesson. Korean manufacturers depend
heavily on imported materials. The U.S. is a major supplier of hardwoods,
such as oaks, walnuts, and maples, to Korean furniture manufacturers. In
2003, U.S. exports of these woods were valued at $28 million, accounting
for 75 percent of Korea’s total imports of these woods.
Local competition for this medium-high end market is heavy. Foreign
suppliers’ combined market share still remains at seven percent of the
total local market. In the past, American and European brands enjoyed a
high quality image compared to local brands, among Korean consumers.
Nevertheless, Korean consumers have become more price conscious, rather
than simply buying for brand name reputation or image. Price is currently
the most important factor affecting consumers’ purchases of furniture.
END USERS
In the Korean furniture market, general consumers are the major end-user
group for household durable goods. Construction companies that build
residential and commercial buildings are also in the primary buyer group.
In 2003, Korea’s total investment in building construction was estimated
to be $35.5 billion, consisting of $20.7 billion in residential buildings
and $14.8 billion in non-residential buildings. Investment in building
construction is projected to grow 3.6 percent to reach $36.8 billion in
2004. Korea’s housing construction market is expected to supply 250,000
residential units for new apartment buildings in 2004.
Among general consumers, Korea’s furniture market is driven by demand from
newly-wed couples and families moving into newer and larger apartments or
houses. These two groups are the most stable and steady group of buyers
for furniture. The vast majority, about 70 percent, of Korea’s large
apartment complexes were built in the mid-1970s - 1980s, translating to
roughly 3.5 million residential units which are over 20 years old. The
surging demand for remodeling/renovation and reconstruction of old
apartment buildings is contributing to greater demand for furniture
including bathroom and kitchen fixtures, driving the growth of the
furniture market.
MARKET ACCESS
Distribution systems for furniture are very advanced in Korea. Korean
manufacturers and importer-distributors typically offer their furniture
through furniture specialty stores, department stores, discount stores and
exclusive dealer shops. Foreign discount stores in Korea include Wal-Mart
and Costco. Department stores as well as furniture specialty stores have
become increasingly important retail outlets for furniture. TV Home
Shopping networks, such as LG, Hyundai, CJ and Woori, are also becoming
attractive to Korean consumers as an important resource for purchases of
household furniture.
Many small to medium sized Korean manufacturers act as
importer-distributors to offer wider range of products to their customers.
Importer-distributors also sell imported furniture to building
contractors. On average, Korean agents (importer-distributors) require a
10-20 percent commission for furniture sales and imported furniture
mark-ups range from 50 to 100 percent. Large-sized Korean manufacturers
make direct sales to building contractors through their own sales networks
nationwide and operate their own exhibition centers in all major
metropolitan cities.
For most U.S. companies coming into the Korean market, the best way to
sell products to Korea is through local representation. It is important to
appoint a registered commissioned agent or to name a registered trading
company as an agent on an exclusive or non-exclusive basis. Joint ventures
and licensing agreements with local manufacturers are also potential
market entry strategies if the products have good market potential in
Korea and have sufficient resources to sustain such operations.
MARKET ENTRY
The tariff rate for furniture is universally set at eight percent of the
CIF value which, according to the Korean Customs Service, will be applied
for several years. There are no special technical or safety requirements
that may act as entry barriers except infant beds. Under the Korean
“Quality Management Facilitation Act”, infant beds are subject to safety
inspection by the Korean Agency for Technologies and Standards (KATS) of
the Ministry of Commerce, Industry, and Energy (MOCIE). Newly imported
infant beds are required to have safety certificates issued by KATS. The
main objective of this safety inspection requirement is to verify that
these products comply with Korean safety standards.
All imported furniture is subject to country of origin marking
requirements. The Korean Foreign Trade Act requires each imported
furniture product to be marked in a conspicuous place as legibly,
indelibly, and permanently as the nature of the article permits, with the
Korean, Chinese or English name of the country of origin, to indicate the
name of the country in which the furniture was manufactured. A marking
method, such as die sinking, molding, etching, metal plate and special
printing, is acceptable, however, goods that are not capable of being
marked by those methods, due to the nature of the product, may be marked
with adhesive stickers, labels or tags.
Korea's Furniture Export-Import Trend
Korea's furniture exports have increased 1.3% compare to last year to
$41,872,000 in January to March in 2003. By country, there has been 40.5%
increase in Japan, and 145.3% in China. However, in U.S., 18.8% of export
rate has been decreased.
Also, furniture import rose steeply 56.6% compare to last year to
$107,358,000 in the same period of 2002. By country, imports from major
supplier nations such as China and Germany show sharp increase indicate
that Korean furniture market is increasingly reforming to furniture
importing country that has high rate of furniture import.
In addition, a close look at the import figures shows that China has
consolidated its position as the largest supplier for Korea furniture
market. Italy, which has the largest share in Korea market, has been
deprived its first place since 2001 affected by fast growing Chinese
market. This situation has continued in 2001 and the first quarter
settlement of 2003.
From now on, it is expected that incoming from Italy and U. K. is
dramatically increasing this year the field of antique furniture in U. K.
manufacturing in Korea is expected to increase in incoming antique
furniture.
This is expected that there is a growing tendency toward polarization
between high prided imports from such countries as Italy, U. S., Britain
and middle-low priced imports from China, Malaysia, Indonesia, and
Vietnam.
|
