THERE ARE SOME GROUPS OF NUMBERS WORTH PONDERING OVER.

First is the per capita consumption of furniture from different countries: 
Germany: 390 Euro per year per person; 
U.S.: 210 Euro per year per person; 
Russia: 70 Euro per year per person; 
China: 44 Euro per year per person. 

The above data comes from the Germany Furniture Association. It demonstrates that Germans have the highest per capita spend for furniture, which is nine times more than the Chinese. This amount is also higher than the Americans. Perhaps the Americans are more geared towards the lower prices while the Germans seek higher-quality products. 

The most interesting thing about the data is Russia’s higher per capita consumption in comparison to the Chinese, rather unexpectedly. Taking a look at the furniture market of Russia, we can see that in Russia most of the furniture are imported either from the former eastern bloc countries or Asian countries like China. Prices of furniture in Russia is naturally higher than that in China taking into account the freight, import duty and importers’ profits. 

In any case, the Chinese furniture consumption still stand at a low level due to the following reasons: 
1. Consumption habit. The Chinese are not used to replacing furniture frequently except when moving to a new house or preparing for marriage. 
2. The supply exceeds demand in domestic production, thus the market price is depressed. 
3. The per capita income is rather low in China, which is the equivalent of one-eighth to one-ninth in developed countries. As such, consumption is consistent with income. 
4. Inadequate urbanization. Industrialization goes hand in hand with urbanization but although the industrialization rate nowadays has gone beyond 65%, urbanization lags behind at about 50%. The consumption of furniture in rural area is much smaller than that in urban area. 

From the data of per capita consumption, we can calculate the scale of the furniture markets of the various countries. 

Germany: with a population of 80.8 million has a market of €31.5 billion (the equivalent of RMB236.3 billion).

Russia: With a population of 143.7 million has a market of €10 billion (RMB75 billion). 

China: With a population of 1.3 billion has a market of €57.2 billion (RMB429 billion) 

It is US that still takes the lead as the largest furniture market in the world, with €10billion (RMB70 billion) more than China. From this, we can make many interesting observations. Here let’s focus on production and marketing. 

Industrial Production 
According to various reports concerning the US furniture market, half of its furniture is imported while the remaining half is produced locally in the US. But according to an IBIS world industry report, the revenue of America’s furniture industry in 2014 reached US$25.5 billion (RMB158 billion), which was less than half of China’s. 

Imported furniture accounted for 66% and domestic production accounted for 34%. However I would assume that the actual import volume to be more than that. This is because with imports, the goods may be reclassified as locally manufactured so long as they are not completely finished. For example, if a table is not assembled with a top or if some small components are added in the US. As such, I would estimate the amount of US domestically manufactured furniture to be just 20%. 

Even with twenty percent, their per capita productivity is still high. There are only 4,900 furniture factories in US, in which there are 1.2 million employees (source: Chen Jiaan, US Furniture Industry Analysis, Woodworking & Furniture Digest 360th edition). The output value is RMB90 billion. I am skeptical about such high productivity.

Furniture Marketing 
Here I refer to the domestic market. First let’s have a look at the sales through furniture stores in the U.S.

We measure the performance of retail stores using the following standards: 
1. Profits: usually 46%-48% gross profit. 
2. Inventory turns: about 5-6 times.
3. Per square meter sales: average RMB25,000 per square meter per year.

Therefore, the total retail area in US is supposed to be 2.5 million-3 million square meters.

The gross profit of China’s furniture stores is 45%-50%, identifcal to that in the America. However the rent in China is much higher than that in the US. Besides, it is low in per square meter sales, thus the net profit is much lower, so much so that many stores suffer losses. 

In China most of the statistics are estimated. If there is only RMB429 billion in our market and divided by so many stores, each square meter will achieve an annual sales of less than 4,000 yuan. It is little wonder that stores loses money with such low sales numbers.

Even if we use an estimated RMB600 billion for calculating the Chinese domestic sales, each square meter will have achieved sales of 6,000 yuan, which amounts to one-fourth of America’s per square meter sales. Outlets in China still suffer losses.

However, more stores are being built in China. It is said that the total has exceeded more than one hundred million square meters. If the expansion continues, the retail market will face further dilution. Both retailers and mall operators will suffer great losses. 

The €44 (RMB 330) per capita consumption in China refers to the retail price. If it is converted into ex-factory price, then the domestic sales would be RMB300 billion. Adding that amount to the export sales of less than RMB300 billion, the surplus output would be staggering if the total output value is really in the trillions as estimated by the Furniture Association. 

These numbers really ought to be straightened out.