Local furniture makers to focus on high-end market segment

MANILA, Philippines - In the next eight years, the local furniture industry will focus on the production of high-end furniture for export to alternative markets outside Asia as it loses to competition in the cheap furniture segment in the region.

In a presentation during a forum recently hosted by the All-Asian Centre for Enterprise Development (Ascend), Salvio Valenzuela Jr., executive director of the Chamber of Furniture Industries of the Philippines, said the global economic crisis, coupled with the high cost of production inputs in the Philippines such as electricity, have rendered affordable specially-made furniture uncompetitive to those from Malaysia and China.

The trend for increased production of cheap furniture started when the economic crisis hit the US, gradually spreading worldwide and now lingering in Europe.

Valenzuela said this phenomenon “has created dynamic changes in the distribution market.”

 “Buyers started to cut down the cost and compromise on the quality for the production of low-cost products. We know for a fact that this was what brought China on top of everybody else but we cannot blame these buyers because they just wanted to offer functional products to their consumers at a least possible price,” he said.

He said that compared to the glory days of the Philippine furniture industry in the 90’s “gone are the days when the industry can charge a commanding price for our products.”

To revive the industry’s exporting prowess, the industry must “aggressively” tap the so-called BRICS market composed of Brazil, Russia, India, China South Africa, in addition to the cosmopolitan areas of Hong Kong, Bangkok, Ho Chi Min, Shanghai, Singapore and Jakarta where appetite for high end furniture is strong.

The industry is also actively continuing production for established markets in the US and Europe.

He noted that the Philippine furniture industry, known overseas for its design and quality, would have the competitive edge in these markets.

In the BRICS and Europe market, the industry also sees the potential to achieve up to 300 percent increase in sales due to several high profile sporting event that would be held such as the FIFA World Cup in Brazil to be held in 2014 and the 2012 Olympics that will be held in London.

 “For the furniture industry, when there are events like this, we have a 300 to 500 percent increase in consumption in the renovation for hotels and resorts. And luckily, the events are located in the BRICS market,” said Valenzuela.

Local production is concentrated in Metro Manila, Pampanga and Cebu, which account for 99 percent of output. Only three to five percent of manufacturers are located in special economic zones. As of 2011, the industry employs 2.2 million workers. Subcontractor operations cover 5.4 million workers. The number of people depending on the industry based on a four member household multiplier is 16 million.