28 May 2024, 12:12
By Furniture News Feb 12, 2020

Coronavirus and the UK furniture industry

It’s Monday 10th February. Four more people have tested positive for the coronavirus in the UK (taking the total to eight), and the Government has announced its intention to tighten quarantine rules. The number of cases worldwide has exceeded 40,000, with 908 deaths (all in China – so far). While the risk to the UK remains ‘moderate’, the virus itself is still a ‘serious and imminent threat’, states the Department of Health.

In China, the rate of new infections appears to have stabilised, and much of the country is returning to work following a purposefully extended Lunar New Year break. Apart from the human toll, the virus has already made a considerable economic impact – Oxford Economics predicts that China’s GDP will grow by +5.4% in 2020 (-0.6% lower than expected, and a best-case scenario at that).

“The coronavirus outbreak has come at an unfortunate time, when GDP is already on a downward trend and China is facing complex challenges, including a trade war with the US,” comments professor Qing Wang, a professor at Warwick Business School.

Movement in and around China remains restricted, varying according to province – and while China’s service sector is already reeling, manufacturing will be hit hard. Many factories remain unstaffed, their workers quarantined or reluctant to travel.

Although Core Products sources a relatively small proportion of its cabinet furniture from China, one of its factories is located just 250 miles from Wuhan, the coronavirus ground zero.

“We’re anticipating six months of disruption,” says Core’s Mike Rowley. “The orders we expected to receive in May, we’ve put back to August – but there’s a good chance of further delays. Although many Chinese workers will be expected to return now their new year holiday is over, most will have to travel to do so, and that could be problematic.”

Core has enough stock for the coming months – like most suppliers, it had already expanded its stockholdings to see it through the annual Chinese holiday, and beyond.

“There’s plenty of cabinet furniture available right now,” says Mike. “But what happens if the factories get locked down again? We need to carry out our product development selections in March if we’re going to deliver new lines next January.”

Although Mike cannot see the situation getting better in the short term, he points out that the furniture trade will not be hit as hard as other industries more reliant on Chinese exports, such as giftwares (although a nice spring here in the UK could mean garden furniture sells out).

“Ultimately, we won’t see the majority of the repercussions for six to eight months,” he says. “We’re lucky that the majority of our stock comes from Brazil, so we’re not anticipating any major impact on our turnover – but there will be a degree of disruption. We’ve already lost two weeks of production – and it’s going to get worse before it gets better.”

A key component

The outbreak has thrown China’s role in the global economy into stark relief. While China’s response quickly upset stock markets and industrial commodity prices, its role within the wider integrated supply chain – which is far bigger than when Sars struck in 2003 – threatens much greater disruption.

For example, in Seoul, one of the world’s biggest car factories suspended production on 7th February, due to a lack of Chinese parts – and European furniture components suppliers too have warned of delays.

One fabric supplier told customers that a lack of raw materials would hold up shipments by a minimum of a week, while further delays would only create more congestion. In response, it increased its safety stock, ordered additional volumes from non-Chinese sources, and established new regional sources to complement its operations.

Indeed, Trump’s trade war with China had already prompted some importers to reconsider where they manufactured their furniture – and coronavirus is only likely to catalyse their efforts to relocate production.

Meanwhile, the Chinese government’s decision to suspend large-scale economic and trade events means all of China’s principal Q1 trade shows (CIFF, SIFE, Domotex asia and Design Shanghai) have been cancelled or postponed. Suppliers quizzed could not see the sense in pushing these events back to the summer – especially with Shanghai’s September fairs just around the corner.

“UK buyers are a hardy bunch, but the Chinese will have to rebuild confidence over time,” says Mike Rowley.

At the same time, key events elsewhere in the Far East have reaffirmed that they remain open for business. Malaysia’s MIFF, for example, has stressed that the country is on high alert, and that medical personnel and basic hygiene measures will be in place during the exhibition. Nevertheless, the barriers to travel (and aforementioned importance of Chinese materials, businesses and personnel) will have a noticeable impact right across the region.

Other sourcing options are available. For UK-based agents such as ASG, which operates a direct distribution model from a number of Chinese factories and holds a large amount of stock in its Birmingham facility, the disruption represents an opportunity to reinforce its fast-tracked proposition.

“The Chinese government has stopped production, but we can start as soon as the factories are back under our control,” says ASG’s supply chain director, Echo Yang. She explains that the bulk of these factories are in northern China, somewhat removed from the outbreak, and anticipates the resumption of mass production on 20th February (and in March for those factories in the south).

A matter of time

For some sectors, the choice is more restricted. Chinese-manufactured upholstery is set to among the worst-hit sectors, with one importer describing the virus’ effects as “terrible”, prompting delays to factory audits and severe worries about colleagues’ health. “We have orders that still can’t be processed, let alone made and dispatched,” they stated.

Their long-term outlook was more positive, and rooted in the belief that Chinese (principally leather) upholstery production would remain more cost-effective than any Eastern European alternative, regardless of delays. But how long can this argument hold up?

From a retail point of view, Fairway Furniture’s Peter Harding says that while direct imports only account for 10-15% of his sales, and (unlike Core’s operation) his primary suppliers are based far from Hubei province, he is working closely with them to manage the situation.

“We factor in a longer lead time than is actually required, so we hope the situation eases so as to minimise any ‘real’ delays,” he explains. “The additional movement restrictions imposed by the Chinese government coinciding with the Lunar New Year holiday at least meant that if ever there was a ‘good’ time for something as ‘bad’ as this to occur (in terms of the supply chain), then it was now.”

According to Peter, shipping times are set to lengthen due to a lack of ready-to-ship containers in China at present – not to mention crews placed in quarantine. He has also seen some UK-based importers take measures to protect themselves, withdrawing stock purchase offers in anticipation of a drought. “We expect others to follow if the flow of new stock/ranges isn’t restarted soon,” he says. “If there’s not a resumption of Chinese exports within a few weeks, prices will inevitably start to rise.”

Communication breakdown

In the meantime, the rest of the trade will be monitoring the situation closely to assess the likely damage – and the opportunities. For UK (and European) furniture manufacturers without any Chinese ties, any delay to overseas rivals means a chance to recapture market share.

And in China, fear of infection and the quarantine procedures surrounding it could prompt workers to return to rural areas in a desire to work closer to home, meaning less pressure on factories short on staff, suggests Mike Rowley.

Either way, it will take clear, honest communication from all stakeholders to successfully navigate the coming months.

“I remain hopeful – confident even – that the UK can remain essentially virus-free, because of our border controls and health system infrastructure,” says Peter Harding. “But should that situation deteriorate, then face-to-face retail will inevitably suffer – the most dangerous thing we need to be cognisant of is public hysteria and scaremongering.”

Prejudices against Chinese people and businesses in the UK is already more pronounced, and there are fears that this could translate into a reluctance to buy Chinese goods. Speaking to US retailers earlier this month, Dr Anita Patel, deputy incident manager for coronavirus response at the CDC, stated that there had been no reported cases of the virus being transmitted from imported goods from China (or anywhere else), and that the risk of transmission from products or packaging to people was “low”.

Nonetheless, the coronavirus (and its payload, Covid 19) brings fresh disruption to a sector already hurting from an extended period of consumer uncertainty, dampening hopes of a rapid recovery.

While the situation is changing too fast to fully grasp its potential impact (economic, social and personal), most will be monitoring the situation closely, so as not to put their business – or themselves – in harm’s way in the coming weeks and months.

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