Editors Comment

 

Selling the big ticket

 

Steve Odland reckons the office furniture market is dead – but is he right?

 

It hasn’t been a stellar year for many manufacturers with lots of red on the exchange boards and the wheels coming off the sector. The old adage that there is always someone worse off than you isn’t true if you’re involved in the business of office furniture, it would seem.

 

I hope by now we all understand the economics of the office products industry. Less money, lower demand, lower employment, less stuff sold. Smaller ticket items shift, but in fewer numbers, and big ticket items get hit hardest. None more so than furniture, especially when companies are losing people and there’s plenty of spare chairs going.

 

Those with even moderately short memories will remember the pain of the early part of the decade when the market also swung wildly from boom to bust. Things were bad then, moving one dealer to say that "things are slow" but, he added, "not dead". If anything the situation is worse this time around. As John Schwartz of Concord and a blogger points out: "Unlike 2001-2003, where pockets of the country related to ‘tech’ (northern California, the north west, parts of Texas) were devastated, while the rest of the country was merely ‘nicked’, it is crystal clear that ALL parts have been devastated this time around."

 

He also points out that the story of 2009 in the US has been – almost uniformly – one of a deathly quiet first half and an uncertain third and fourth quarter. He’s not exactly optimistic about the near-future either, predicting that the tough conditions could last for a long time.

 

Those with medium-term memories may remember the glory years of the late 1990s where growth of 25 or 35 percent was the norm not the exception. It was a time when you could walk into the marbled halls of a start-up dotcom and come out with an order for an array of guilt-edged executive rides and a transparent boardroom table with a shark swimming inside.

 

Those dealers may find BIFMA’s prediction of sales in North America falling by 31 percent in 2009 a depressing read. And it’s not a good sign that the figure has just been surpassed by Herman Miller – a company which takes cost cutting so seriously its executives took a pay cut this year – in the third quarter (at 31.9 percent). Elsewhere Knoll’s sales were down 36 percent in Q3 and the company has announced it is looking to diversify into the already crowded space at the high end to improve sales. The entire sector is cost cutting to preserve its future. Presumably it’ll stop at lopping off the arms of executive chairs – even in a recession there have to be standards – but when or will things improve?

 

The noises from the manufacturing community is that there might be a slowing in the decline of sales. There may even be the whiff of an uptick.

 

BIFMA itself is suggesting that 2010 will see a further 1 percent fall. However, the organisation has been wrong before. In 2008 its predictions for 2009 were downgraded to a 6.3 percent decline despite its previous estimates of a slight 2.6 percent decline. Let’s hope that this time it’s wrong again. But in a good way.

 

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