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As reported, the gross profit margin in the furniture hardware sector currently stands between 20% and 30%, with a net profit typically around 5%. The situation is even more challenging for those engaged in agent processing, where gross profits are capped at 15%.
The furniture industry is approaching a plateau once it reaches a certain scale. Many large furniture manufacturers in Shunde have shifted towards diversified growth strategies after reaching a certain size. Their capital is increasingly flowing into industries like steel, textiles, real estate, and credit, reducing the proportion of the furniture sector within their overall business.
Per capita furniture spending in China remains significantly lower than in developed Western countries, indicating potential for further market expansion. Competition in the furniture market is evolving beyond just manufacturing capabilities, encompassing areas such as product R&D, marketing, branding, communication, and management. Luo Baihui, an expert in Chinese manufacturing brands, notes that while the Foshan furniture industry cluster boasts a comprehensive supply chain and efficient distribution, its overall strength needs enhancement. To address this, he suggests focusing on brand strategy development and fostering influential major brands to drive regional industrial upgrades.
In August, the Shunde Furniture Association launched initiatives such as the Pan-Furniture Union, the Shunde Furniture Brand Alliance, and the Raw Materials Alliance. These efforts were seen by some as a move to leverage premium brands to strengthen Shunde's furniture brand influence and gain greater marketè¯è¯æƒ (market discourse power).
Despite industry challenges, there are still local enterprises in Shunde maintaining steady growth. Researcher Lan Xiaohua from the Chinese University of Hong Kong discovered that a leading fabric sofa brand in Longjiang has successfully explored a new development path through channel innovation. This brand avoids traditional store openings and distributor recruitment, instead fully entrusting its distribution network to top interior designers. Through these designers, their products reach the market, with the brand rewarding them based on business generated. According to the brand's leadership, market inspections revealed that discussions about high-end furniture sales often center around interior designers. When designers create models for residential spaces, hotels, villas, or governmental buildings, incorporating their products often leaves a stronger impression on target customers compared to conventional promotional methods. Lan Xiaohua estimates that orders placed via designers could generate hundreds of millions in sales annually. By leveraging the designer channel, the brand ensures consistent product sales while enhancing its brand reputation.
Luo Baihui also highlights that diversifying channels serves as an effective risk management strategy. Multi-channel models typically include domestic and international markets, direct operations alongside distributors, and private-label production combined with OEM services.
Our approach primarily focuses on dual-channel development—both domestically and internationally. Over the years, while expanding our national footprint, we've also prioritized international market growth. Our product designs consistently reflect an international outlook, evident during events like the March and September trade shows, where foreign attendees outnumber locals. Annually, our sales reach approximately $200 million, with three-quarters coming from overseas markets. A brand representative mentioned that this year alone, orders from Japan amounted to tens of millions of dollars, with positive performances in South Korea and Dubai. Domestically, we've also adopted a multi-channel strategy, with distributors as the backbone and direct-operated stores complementing them.
Luo Baihui believes that multi-channel approaches effectively distribute risks. Following this round of industry restructuring, entry barriers will rise, and development will become more standardized. Companies with innovative and forward-thinking strategies will seize greater market opportunities.