Is the upholstery sector in crisis?

11th March | analysis | Falling demand and rising costs have been an unpleasant but harsh reality for many sofa manufacturers in the past six months.

The term manufacturer is used loosely, for upholstery importers have been equally hit by the fall in the value of sterling against the dollar and euro and the gradual slowdown in consumer demand for big-ticket sofas.

Sofa Brands International this week said it is looking at restructuring its manufacturing operations and this could result in the closure of its Cameo Sofa Company in South Wales.

Another volume business, Mack-Line, went soon after the January show in Birmingham, and major Italo-Chinese supplier DeCoro voluntarily liquidated at the start of the year.

Retailers Land of Leather and Sofa Workshop have both hit the buffers this side of Christmas, although a dozen of the latter’s stores have returned under the ownership of founder Andrew Cussins.

So far, despite rumours of ex-management interest, Land of Leather remains in administration and hopes for a buyer dwindle with each passing week.

Supplier Cameo is housed in one of the last remaining Christie-Tyler factories – the group that once dominated UK upholstery manufacture. Its private label offerings are supplied to a range of mid-market independents and multiples and its proposed closure says much for what is happening in this market segment.

The mid-upper end of the sector is holding up better, and Sofa Brands International hinted as much in a statement this week that said it would ‘concentrate on its strong brand positions in the independent and department store sectors’ and would develop its position with private label customers at the middle and top ends of the market.

SBI certainly has some powerful brands. Parker Knoll, G-Plan Upholstery and Duresta are just about as strong as they come in UK manufacturing, from a consumer recognition perspective.

But they are not without challenges. Duresta, along with being among the best-known UK upholstery brands, is also among the most ubiquitous. Just because it manufactures at the top end of the quality spectrum doesn’t mean potential customers are not sensitive to price.

Take the following exchange which appeared on one of the consumer forums on the website moneysavingexpert.com.

“I want to buy a Duresta Ruskin sofa and the list price is £2003 for the large sofa. Does anyone know where I can get a cheaper price? I'm in Essex so it needs to be a southern furniture supplier.”

To which the first response was:

“Try using the store-locator which will bring up a list of local dealers, then its a matter of phoning around and playing one off against the other.”

The Internet has driven this kind of consumer behaviour and as infuriating as it is for both retailers and manufacturers, it now comes with the territory when selling branded goods.

In real terms, the retail price of furniture has consistently fallen in the past two decades, partly through lower specification product being sold in the volume sector and also through promotional pricing being at the heart of many retailers’ marketing, irrespective of where they sit from a quality perspective.

But perhaps this recession represents the biggest threat to that situation continuing. The BFM’s State of Trade Survey last week showed many British manufacturers have either been on short time working or made redundancies in the past four months.

And yet it is the British manufacturers who are in a stronger position. The Furnishing Report knows of at least one major supplier that is about to ditch its Far East manufacturer in favour of having the same designs made by a British company, and others could well follow suit.

The sterling/dollar exchange rate is threatening many volume suppliers who are now finding it cheaper to source goods from closer to home. Even last year, few would have thought that scenario would be possible ever again.