WWW.IBISWORLD.

COM Household Furniture Manufacturing in the USMay 2013   1

Room to improve: Despite positive housing

trends, rising imports will constrain revenue

IBISWorld Industry Report 33712

Household Furniture
Manufacturing in the US
May 2013 Brandon Ruiz

2 About this Industry 16 International Trade 32 Key Statistics

2 Industry Definition 18 Business Locations 32 Industry Data
2 Main Activities 32 Annual Change
2 Similar Industries 20 Competitive Landscape 32 Key Ratios
3 Additional Resources 20 Market Share Concentration
20 Key Success Factors 33 Jargon & Glossary
4 Industry at a Glance 21 Cost Structure Benchmarks
22 Basis of Competition
5 Industry Performance 23 Barriers to Entry
5 Executive Summary 23 Industry Globalization
5 Key External Drivers
6 Current Performance 25 Major Companies
8 Industry Outlook 25 Ashley Furniture Industries Inc.
10 Industry Life Cycle
28 Operating Conditions
12 Products & Markets 28 Capital Intensity
12 Supply Chain 29 Technology & Systems
12 Products & Services 29 Revenue Volatility
14 Demand Determinants 30 Regulation & Policy
15 Major Markets 30 Industry Assistance

www.ibisworld.com | 1-800-330-3772 | info @ibisworld.com

WWW.IBISWORLD.COM Household Furniture Manufacturing in the USMay 2013   2

About this Industry

Industry Definition This industry manufactures a range of and other facilities. Furniture may be
furniture for personal, household and made on a stock or custom basis and
public use. Public furniture is used for may be sold assembled or
hospitals, theaters, cafeterias, schools unassembled.

Main Activities The primary activities of this industry are

Upholstered household furniture manufacturing
Nonupholstered wood household furniture manufacturing
Metal household furniture manufacturing
Household furniture (except wood and metal) manufacturing
Institutional furniture manufacturing
Wood television, radio, and sewing machine cabinet manufacturing

The major products and services in this industry are

Household furniture (except wood and metal)
Institutional furniture
Metal household furniture
Non-upholstered household furniture
Upholstered household furniture
Wood TV, radio and sewing machine cabinets

Similar Industries 23551 Carpenters in the US

This segment includes contractors that specialize in the installation of institutional furniture.

33711 Cabinet & Vanity Manufacturing in the US

This industry manufactures wood or plastics laminated on wood kitchen cabinets, bathroom vanities and
countertops.

33721 Office Furniture Manufacturing in the US

This industry manufactures office-type furniture and office or store fixtures.

33911a Medical Instrument & Supply Manufacturing in the US

This industry manufactures laboratory and hospital furniture.

42321 Furniture Wholesaling in the US

This segment consists of establishments that wholesale furniture.

44211 Furniture Stores in the US

Furniture stores retail a range of household furniture, home electronics, home furnishings and floor
coverings.

81142 Furniture Repair & Reupholstery in the US

This industry repairs or refinishes furniture.
WWW.IBISWORLD.COM Household Furniture Manufacturing in the USMay 2013   3

About this Industry

Additional Resources For additional information on this industry

www.cfma.com
California Furniture Manufacturers Association
www.furnituretoday.com
Furniture Today
www.nam.org
National Association of Manufacturers

IBISWorld writes over 700 US

industry reports, which are updated
up to four times a year. To see all
reports, go towww.ibisworld.com
WWW.IBISWORLD.COM Household Furniture Manufacturing in the US May 2013   4

Industry at a Glance
Household Furniture Manufacturing in 2013

Key Statistics Revenue Annual Growth 08-13 Annual Growth 13-18

Snapshot
$24.5bn -4.9% -1.1%
Profit Exports Businesses

$318.6m $2.7bn 4,870

Revenue vs. employment growth Import penetration into the manufacturing
Market Share sector
Ashley Furniture 10 32
Industries Inc. 31
13.4% 0
30
% change

29
−10

%
28

27
−20
26

−30 25
Year 05 07 09 11 13 15 17 19 Year 04 06 08 10 12 14 16 18
Revenue Employment
SOURCE: WWW.IBISWORLD.COM
p. 25
Products and services segmentation (2013)
4.6%
Key External Drivers Household furniture
(except wood and metal)
2%
Import penetration into 5.8% Wood TV, radio and
sewing machine cabinets
Metal household
the manufacturing sector furniture
Per capita disposable
income
38%
Trade-weighted index 18.4% Non-upholstered
household furniture
Institutional furniture
Price of sawmilled lumber
Housing starts

p. 5
31.2%
Upholstered household furniture SOURCE:
SOURCE: WWW.IBISWORLD.COM
WWW.IBISWORLD.COM

Industry Structure Life Cycle Stage Decline Regulation Level Light

Revenue Volatility High Technology Change Medium
Capital Intensity Low Barriers to Entry Medium
Industry Assistance Medium Industry Globalization High
Concentration Level Low Competition Level High

FOR ADDITIONAL STATISTICS AND TIME SERIES SEE THE APPENDIX ON PAGE 32
WWW.IBISWORLD.COM
Industry Performance
Executive Summary   |   Key External Drivers   |   Current Performance
Industry Outlook   |   Life Cycle Stage
Executive The Household Furniture Manufacturing
Summary industry is expected to make marginal
improvements in 2013, following dismal
returns during the recession. Revenue is
estimated to increase 6.3% to $24.5
billion over the year, thanks to growth in
per capita disposable income. In
addition, improvements in housing starts
are expected to fuel demand as home
Demandfor furniture will rise, but import
competition will hamper revenue growth
furniture is often purchased when
consumers relocate. Nonetheless, these
expected gains will not be enough to
offset revenue lost by foreign
manufacturers going forward.
The influx of low-cost imports
continues to adversely affect the
industry. Since countries like China have
lower labor and overhead costs, they can
offer lower prices on comparable
Key External Drivers Import penetration into the
manufacturing sector
Growth in the volume of imported
household furniture has created an
intense trading environment for domestic
furniture manufacturers. While their
quality is often lower, these furnishings
have become increasingly popular over
domestic goods because of their lower
prices and extensive varieties. Import
penetration into the manufacturing
sector is expected to increase over 2013,
posing a potential threat to the industry.
Per capita disposable income
Changes in household disposable income
affect the industry. During periods of low
disposable income, consumers generally
delay purchases of new furniture or opt
to repair existing furniture. As a result,
retail demand declines, leading to lower
Household Furniture Manufacturing in the USMay 2013   5
products, effectively eroding domestic
demand for US-made products. As a
result, revenue is estimated to decline at
an annualized rate of 4.9% in the five
years to 2013. With revenue tightening,
household furniture manufacturers have
either consolidated to minimize overhead
costs or exited the industry by offshoring
production as well. Consequently, the
number of establishments within the
industry is estimated to decrease at an
annualized rate of 4.6% over the five-year
period.
Household furniture manufacturers
will continue to face challenges over the
next five years, despite anticipated
growth early on. With disposable income
and housing starts expected to rise,
demand for household furniture will
grow in the short-term, however,
competition with imports will ultimately
thwart long-term growth prospects. In
the five years to 2018, industry revenue is
forecast to fall at an annualized rate of
1.1% to $23.1 billion.
demand for furniture items at the
manufacturing level. Per capita
disposable income is expected to increase
slowly over 2013.
Trade-weighted index
The trade-weighted index measures the
strength of the US dollar relative to the
currencies of its trading partners. As the
value of the dollar falls, it leads to lower
relative export prices and higher relative
import prices, benefiting industry
revenue. Conversely, when the trade-
weighted index rises, there is greater
import competition and industry exports
are relatively less competitive in the
global market. The trade-weighted index
is expected to increase during 2013.
Price of sawmilled lumber
Changes in raw-material prices affect
WWW.IBISWORLD.COM
Industry Performance
Key External Drivers the prices of household furniture items.
continued When the prices of wood and other
input materials increase, the cost of
producing furniture items rises. If
manufacturers choose to pass on these
higher costs in the form of high prices,
it could effectively reduce demand for
household furniture. The price of
sawmilled lumber is expected to
increase over 2013.
Import penetration into the manufacturing
sector
32
31
30
29
%
28
27
26
25
Year 04 06 08 10 12 14 16
Current The Household Furniture
Manufacturing industry has dealt with
Performance tough conditions over the five years to
2013. Rising import penetration of
cheap Chinese substitutes has adversely
affected demand. Furthermore, since
household furniture is often purchased
when consumers buy new houses or
relocate, the collapse of the housing
market was a major blow to industry
operators. The subsequent recession
exacerbated the decline in demand, with
shrinking household disposable income
Competition from In the five years to 2013, competition
abroad from imports has increasingly threatened
domestic furniture manufacturers. As
such, imports are expected to rise at an
Household Furniture Manufacturing in the USMay 2013   6
Housing starts
The number of housing starts measures
new privately owned housing units in a
given year. Similar to existing home
sales, a rise in housing starts reflects a
higher level of households relocating,
leading to increased household furniture
demand. Housing starts is expected to
increase over 2013 and is a potential
opportunity for the industry.
Trade-weighted index
88
84
80
Index
76
72
68
18 Year 04 06 08 10 12 14 16 18
SOURCE: WWW.IBISWORLD.COM
causing consumers to delay purchasing
big-ticket items, such as furniture.
However since the recession has ended,
disposable income and housing starts
are on the rise, propelling an expected
6.3% revenue increase in 2013.
Meanwhile, rising import penetration
and high input prices further hampered
industry revenue, as well as profit.
Consequently, revenue is estimated to
decline at an average annual rate of
4.9% to $24.5 billion over the five years
to 2013.
average annual rate of 0.3% from 2008
to 2013. With lower labor and overhead
costs, manufacturers in those countries
can offer lower prices for their home
WWW.IBISWORLD.COM
Industry Performance
Competition from furniture goods, effectively eroding
abroad demand for US manufactured products.
A significant chuck of domestic demand
continued
is satisfied by China, which will account
for about 64.0% of industry imports in
2013. Chinese manufacturers enjoy more
relaxed labor and environmental
regulations, and can therefore produce
comparable products at a much lower
cost. Ultimately, these cost savings get
passed on to the consumer in the form of
cheaper goods. In 2013, imports of
household furniture are expected to total
$20.0 billion, accounting for 47.9% of
domestic demand.
Furthermore, China’s weaker
currency has increased purchasing
power for domestic buyers. In other
words, since China’s currency is weaker
relative to other currencies, domestic
buyers can purchase more products for
Downstream demand Furniture wholesalers and retailers make
dives up the largest buying markets for
household furniture manufacturers,
accounting for nearly three-quarters of
the industry’s total revenue combined. As
such, the decline of these downstream
industries has adversely affected
household furniture manufacturers in the
five years to 2013. As consumer demand
for home furniture subsided with the
tanking economy, many underperforming
wholesalers and retailers were forced to
shut down. To this end, the number of
establishments in the Furniture
Wholesaling industry (IBISWorld report
42321) and Furniture Stores industry
(report 44211) are estimated to decrease
Participation declines Faced with declining demand from
downstream buying markets and lower
profit due to intense price competition
with foreign importers, many domestic
household furniture manufacturers have
Household Furniture Manufacturing in the USMay 2013   7
Fierce
competition from
imports has been the
biggest threat for domestic
furniture firms
less. This has stimulated competition
from abroad and placed significant
pressure on household furniture
manufacturers in the United States. To
remain competitive, domestic
companies have either lowered prices or
differentiated themselves by offering
high-quality products and superior
customer service. For example, Ashley
Furniture Industries, the largest
furniture manufacturer in the nation,
focuses on quality while still
maintaining affordability.
an average of 1.2% and 1.1% per year over
the five-year period, respectively. The
result is fewer locations for
manufacturers to supply, which led to
less demand. This hurt the Household
Furniture Manufacturing industry
significantly, causing revenue to plunge
by 27.9% in 2009.
During the recession, the housing
crash adversely affected demand for
industry products. Since industry
products are often purchased when
individuals and families move to new
homes, the poor housing market reduced
sales during the downturn. Nevertheless,
IBISWorld estimates housing starts to
remain stable from 2008 to 2013.
either merged or exited the industry.
Industry mergers and acquisitions have
been a more common trend among the
larger and more established operators.
In the five years to 2013, the number of
WWW.IBISWORLD.COM
Industry Performance
Participation declines industry enterprises expected to decrease
continued at an average annual rate of 4.6% to total
4,870. With operators exiting the
industry, industry employment is
expected to contract at an average
Industry IBISWorld projects the Household
Furniture Manufacturing will sustain
Outlook recent growth through 2013, but growth
prospects look bleak in the long term.
Revenue is expected to grow 4.0% in
2014, fueled by the increase in housing
starts and disposable income but is
forecast to decline onward since imports
will continue to eat up domestic
demand. Furthermore, as more
manufacturers exit the industry or
relocate overseas to better compete with
lower-priced imports, industry
participation will also decrease. In the
five years to 2018, industry revenue is
expected to decline at an average annual
rate of 1.1% to $23.1 billion.
Although industry revenue is expected
to decline in the five years to 2018,
several factors are supporting industry
revenue from plummeting further such
as per capita disposable income and
housing starts. Per capita disposable
income is forecast to grow at an
annualized rate of 2.1% over the same
period. With more money in consumer
wallets, households will likely increase
spending on big-ticket items, such as
furniture. In response, retail and
Foreign competition While improving economic conditions
and high input costs will bolster downstream demand for
the industry, a significant amount of
that demand will be swallowed by
imports. Lower production costs in
countries like China allow importers to
consistently offer lower priced
furniture to consumers. Adding to the
dismay is the fact that there are limited
Household Furniture Manufacturing in the USMay 2013   8
annual rate of 6.0% during the same
period, as businesses outsource
operations abroad and shift toward
higher automation in their
manufacturing processes.
Revenue vs. exports
20
10
0
% change
−10
−20
−30
Year 05 07 09 11 13 15 17 19
Revenue Exports
SOURCE: WWW.IBISWORLD.COM
wholesale furniture stores will increase
their volume of inventory purchased
from industry operators, boosting
demand at the manufacturing level.
Additionally, as families take advantage
of historically low housing prices,
housing starts are expected to soar at an
average annual rate of 14.8% from 2013
to 2018. The growth in housing starts
will boost demand for new home
furniture items, as consumers tend to
purchase furniture when they buy a new
house or move.
protections for intellectual property
rights overseas; therefore foreign
producers can replicate popular
furniture designs and innovations
established through the research and
development of American companies.
In the five years to 2018, imports are
forecast to grow at an average annual
rate of 7.1% to $28.3 billion.
WWW.IBISWORLD.COM
Industry Performance
Foreign competition Along with competition from imports,
and high input costs industry operators will face stable costs
for raw-material inputs, particularly for
continued
lumber, which are used for industry
products. IBISWorld estimates lumber
prices are expected to rise at an average
annual rate of 0.1% through 2018.
Although prices are expected to remain
relatively stable, they are still high
compared to previous years. As a result of
price pressures from foreign imports and
high raw material costs, industry profit is
expected to remain low, falling from 1.3%
in 2013 to an estimated 1.0% in 2018.
As more companies produce abroad to
capitalize on lower overhead costs,
Household Furniture Manufacturing in the USMay 2013   9
Risingcommodity prices
will increase operating
costs for manufacturers
and limit profit
industry participation will decrease.
Consequently, the number of enterprises
is expected to decline at an annualized
rate of 1.8% in the five years to 2018 to
total 4,436 businesses. In turn, the
number of employees is also projected to
fall an average of 2.0% per year over the
same period to 120,463.
WWW.IBISWORLD.COM Household Furniture Manufacturing in the USMay 2013   10

Industry Performance
Life Cycle Stage The industry is expected to grow at a
slower rate than the economy
Consumption of domestically
manufactured furniture is decreasing
The number of enterprises is declining
as a result of consolidation

Maturity Quality Growth

% Growth in share of economy

20
Company High growth in economic Key Features of a Decline Industry
consolidation; importance; weaker companies
level of economic close down; developed Revenue grows slower than economy
importance stable technology and markets Falling company numbers; large firms dominate
Little technology & process change
15 Declining per capita consumption of good
Stable & clearly segmented products & brands

10

Quantity Growth
Many new companies;
minor growth in economic
importance; substantial
5 technology change

Wood Paneling Manufacturing

Department Stores
Cabinet & Vanity Manufacturing
Carpenters
–5
Decline
Household Furniture Manufacturing Shrinking economic
Textile Mills importance

–10
–10 –5 0 5 10 15 20
% Growth in number of establishments
SOURCE: WWW.IBISWORLD.COM
WWW.IBISWORLD.COM
Industry Performance
Industry Life Cycle The Household Furniture Manufacturing
industry in the United States is in the
decline stage of its life cycle. Over the 10
This industry years to 2018, industry value added
is D
 eclining (IVA), which measures the industry’s
contribution to GDP, is projected to fall
at an average annual rate of 4.0%. This
falling rate indicates that the industry
will perform below the domestic economy
overall, as GDP is projected to increase
an average of 2.1% per year over the same
period. Decreasing demand for
domestically manufactured furniture, a
shrinking number of enterprises and
slowing changes in technology also
indicate a declining industry.
With respect to imports, domestic
household furniture manufacturers face
increasing competition from foreign
producers in countries such as China,
Household Furniture Manufacturing in the USMay 2013   11
which enjoy more relaxed labor and
environmental regulation. Consequently,
producers in these countries can
manufacture comparable industry goods
at a much cheaper cost, and pass the cost
savings on to US consumers in the form
of lower prices. The intense competition
from imported household furniture items
is largely to blame for this industry’s
declining life cycle status. In 2013,
imports are expected to account for
46.1% of domestic demand, with that
figure forecast to rise to 52.4% in 2018.
Furthermore, the lure of low production
costs has led many operators to exit the
industry and offshore production
overseas. In the ten years to 2018, the
number of industry enterprises is
expected to drop at an annualized rate of
3.2% to 4,436 companies.
WWW.IBISWORLD.COM Household Furniture Manufacturing in the USMay 2013   12

Products & Markets

Supply Chain  |   Products & Services  |   Demand Determinants
Major Markets  |   International Trade  |   Business Locations

Supply Chain KEY BUYING INDUSTRIES

23551 Carpenters in the US
Contractors that specialize in the installation of institutional furniture items such as restaurant
furniture, work benches and seating for theaters, stadiums and park seats demand products
from this industry.
42321 Furniture Wholesaling in the US
Wholesalers demand finished goods from household furniture manufacturers.
44211 Furniture Stores in the US
Home furniture retailers demand finished goods from this industry.
45211 Department Stores in the US
Department stores demand finished products from household furniture manufacturers, as they
stock and sell a wide variety of household furniture and other home furnishings.
9901 Consumers in the US
Consumers in the US demand finished good from this industry.

KEY SELLING INDUSTRIES

31310 Textile Mills in the US
The Household Furniture Manufacturing industry demands a selection of durable fabrics for
the manufacture of upholstered furniture items, such as chairs and lounge suites.
32121 Wood Paneling Manufacturing in the US
The Household Furniture Manufacturing industry demands various timber cuts from this
industry for the production of wooden furniture items, such as tables, chairs and dressers.
32721 Glass Product Manufacturing in the US
The Household Furniture Manufacturing industry demands glass as an input for various
furniture items, such as glass-top tables, glass cabinet doors and outdoor furniture.
33321 Woodworking Machinery Manufacturing in the US
The Household Furniture Manufacturing industry uses machinery from this industry for the
manufacture of furniture products.
33322 Plastics & Rubber Machinery Manufacturing in the US
This industry supplies furniture manufacturers with plastic components and materials, such as
plastic furniture and foam for upholstery filling.
42351 Metal Wholesaling in the US
The Household Furniture Manufacturing industry demands metal as an input for the
manufacture of its metal furniture pieces.

Products & Services Products and Services manufacturers, accounting for an

This industry is responsible for producing
a range of household and institutional
furniture items. IBISWorld categorizes
industry products four groups:
upholstered furniture and case goods,
institutional furniture, metal furniture
and other.
Nonupholstered furniture (case
goods) and upholstered
Upholstered furniture and case goods
collectively make up the largest product
segment for household furniture
estimated 69.2% of industry revenue in
2013. Upholstered products (31.2%)
include couches, recliners, chairs and
ottomans, while case goods (38.0%)
include items bed frames, bookcases,
desks and dining tables. Since this
product segment accounts for the largest
share of the market, it has also faced the
most competition from imports in the
five years to 2013. Overseas
manufacturers can leverage lower labor
and overhead costs to produce furniture
at more competitive prices than domestic
WWW.IBISWORLD.COM
Products & Markets
Products & Services Products and services segmentation (2013)
continued
Household furniture
5.8% (except wood and metal)
Metal household
furniture
18.4%
Institutional furniture
31.2%
Total $24.5bn Upholstered household furniture
manufacturers. Therefore, retailers and
wholesalers that have traditionally
purchased domestic goods are
increasingly turning to imports as a way
to save money. Unfortunately for the
industry, import competition is expected
to increase in the same period, which will
cause demand from this product segment
to decline.
Institutional furniture
Institutional furniture, which includes
furniture for libraries, schools, theaters,
churches and other public
establishments, is expected to account for
18.4% of industry revenue in 2013.
Examples of products in this group
include desks, chairs, food wagons, carts,
chairs, cafeteria tables, cubicles, seating
for stadiums and theaters, and
bookshelves for schools and libraries.
Revenue derived from public furniture
has enjoyed relative stability over the
past five years, fueled by consistent
demand for furniture for public spaces,
and a steady stream of federal aid for
local and state governments. However,
demand for institutional furniture is
expected to decrease over the next five
years as federal aid dries up, and state
and local municipalities deal with
looming budget deficits.
Household Furniture Manufacturing in the USMay 2013   13
4.6%
2%
Wood TV, radio and sewing
machine cabinets
38%
Non-upholstered
household furniture
SOURCE: WWW.IBISWORLD.COM
Metal household furniture
This product segment includes furniture
made of metal, such as wrought iron
furniture, outdoor metal furniture, bed
frames, stools, TV stands, tables and
wardrobes. In the five years to 2013,
revenue from this product segment has
declined significantly, primarily the
result of steep rises in steel prices.
Attempts to pass the higher raw-
material costs on to consumers resulted
in weaker industry demand during the
current period. Additionally, the
decreased value of the US dollar has
greatly increased the value of imports in
the last few years for this sector. As a
result, metal household furniture is
expected to account for 5.8% of industry
revenue in 2013.
Other
Other products manufactured in this
industry include nonwood, nonmetal
household furniture, which is made of
materials such as plastics, reed, rattan,
wicker and fiberglass. This product
segment is estimated to account for 4.6%
of industry revenue in 2013 and has
gained popularity over the past five years,
as it is often cheaper and more stylish
than traditional wood and metal
furniture. In addition, some
WWW.IBISWORLD.COM
Products & Markets
Products & Services manufacturers also produce wooden
continued television, radio and sewing cabinets,
which are expected to account for 2.0% of
industry revenue in 2013.
Demand The Household Furniture Manufacturing
Determinants industry receives the bulk of its demand
from wholesalers and retailers, such as
furniture stores, department stores and
mass merchandisers such as IKEA,
Walmart and Costco. Since wholesalers
and retailers adjust their inventory
purchases according to their own
demand, changes in retail and wholesale
demand directly affect industry demand.
In turn, demand at the retail and
wholesale level is directly affected by
general economic conditions, such as
disposable income.
Most products offered in the industry
are expensive and discretionary in
nature. Therefore, consumers typically
delay purchasing industry products
during times of economic uncertainty
and low disposable income. This trend
has been the case since the economic
downturn, as high unemployment forced
many Americans to cut spending on
big-ticket furniture items. As a result,
retail and wholesale demand have fallen
significantly, which has slashed the
demand for manufactured household
furniture items.
Housing market and homeownership
Because a significant amount of furniture
is purchased when individuals or families
move into a new home, the housing
market is a significant source of demand
for industry operators. Relocation spurs
re-decorating and remodeling projects,
Household Furniture Manufacturing in the USMay 2013   14
which typically involve purchasing a
number of new furniture items.
Not surprisingly, demand from the
housing market was dismal over the past
five years in the wake of the subprime
mortgage crisis and recession. From
2008 to 2013, housing starts, a key
measurement of the health of the
housing market, fell 54.4% and 55.3% in
2008 and 2009 respectively. Fortunately
for the industry, housing starts stabilized
and are beginning to trend upwards.
When these factors increase, demand for
household furniture increases.
Price and import demand
Industry demand is also affected by
price, as consumers are generally
cost-sensitive. Given the fact that
furniture products are regarded as ‘big
ticket’ or discretionary items, consumers
will shop around for the best available
price. More and more households are
finding that the best deals are with
imported furniture, which is cheaper to
produce and more affordable for cost-
conscious consumers still nervous about
spending money in uncertain economic
times. Although prices for domestically
produced furniture items have fallen
over the past five years, it has not been
enough to slow demand for imports,
which have virtually swallowed up
domestic demand. In 2013, IBISWorld
expects imports will account for 47.9% of
total domestic demand.
WWW.IBISWORLD.COM
Products & Markets
Major Markets Major market segmentation (2013)
11%
Exports
13.1%
Contract outfitters
30.9%
Wholesalers
Total $24.5bn
Retailers
Retailers are expected to make up the
largest market for household furniture
manufacturers in 2013, accounting for
42.7% of total revenue. From 2008 to
2013, this market segment has grown
thanks to the rising trend of wholesale
bypass. By purchasing directly from
manufacturers, retailers can avoid
wholesale markups and control their
costs. Manufacturers also benefit from
wholesale bypass, as it allows them to
maintain direct contact with retailers.
Wholesalers
The second largest market segment for
the Household Furniture Manufacturing
industry is furniture wholesalers, which
are estimated to represent 30.9% of total
revenue. Wholesalers buy furniture
items in bulk from producers to resell to
furniture galleries, department stores,
mass merchandisers and other retailers.
Some wholesalers also resell stock to
foreign countries, actively participating
in international trade. In addition, the
rising prevalence of imports has helped
offset some of the adverse affects of
wholesale bypass on this market
segment. With such a huge influx of
lower-cost, foreign-made furniture
coming in, wholesalers’ role in the
Household Furniture Manufacturing in the USMay 2013   15
2.3%
End users
42.7%
Retailers
SOURCE: WWW.IBISWORLD.COM
distribution chain has strengthened.
Wholesalers are expected to continue
expanding as imports increasingly gain
popularity in the domestic market.
Contract outfitters
The contract outfitters segment is
characterized by sales of industrial
furniture to corporations and various
facilities. Contract outfitters are
independent distributors that work with
household furniture manufacturers to
customize their furniture selections to
meet specific tasks and functions. In this
segment, furniture is generally
purchased through dealers that prepare
a custom-designed layout emphasizing
image and design. Over the past five
years, this segment has slowly declined
as buyers increasingly favor dealing
directly with manufacturers and
retailers to save money. In 2013, this
segment is expected to represent 13.1%
of revenue.
Exports
Exports represent 11.0% of revenue in
2013. The majority of US household
furniture manufacturers’ exports are the
result of foreign wholesalers that
purchase stock from the US and resell it
to foreign retailers and end users. Also,
WWW.IBISWORLD.COM
Products & Markets
Major Markets there are independent importers in
continued foreign countries that purchase stock
from US manufacturers and resell this
stock to smaller furniture chains abroad.
As the value of imports increases, more
furniture manufacturers are expected to
export surplus.
End users
Accounting for an estimated 2.3% of
revenue in 2013, end users are
International Trade Imports
The influx of imported household
Level & Trend furniture into the United States has
significantly altered the domestic market
 xports in the
E over the past five years. In particular, the
industry are cost of production has largely been
Mediumand S teady affected by low overhead costs across
China and Vietnam, since these and other
Imports in the developing countries are able to produce
industry are H igh goods at a fraction of the cost of
and S
 teady developed nations. As such, they have
evolved into key manufacturing sources
of home furniture. In response, domestic
firms have offshored or outsourced their
production overseas to take advantage
lower production costs. This has led to an
explosion of imports, which has caused
the average price of home furniture to
fall. As a share of domestic demand,
imported furniture has increased from
40.5% in 2008 to 47.9% in 2013. On a
per country basis, China is estimated to
account for the largest share of imported
furniture in 2013 at 64.0% of total
industry imports. Vietnam ranks second
at 10.2% of total imported furniture,
followed by Canada at 4.2% and Mexico
at 3.6%.
The value of imported household
furniture is expected to rise at an average
annual rate of 0.2% in the five years to
2013, to $20.0 billion. This has primarily
been a result of the economic recovery as
consumers are expected to increase
expenditures. Additionally, the rise in
Household Furniture Manufacturing in the USMay 2013   16
consumers and other buyers who
purchase furniture items directly from
industry manufacturers. This often
includes corporations and other large,
private buyers who have the capacity to
purchase furniture items in bulk. While
the recession hindered growth from this
market segment, it is expected to grow
over the long run as buyers increasingly
favor bypassing wholesalers to avoid
price markups.
Industry trade balance
10,000
0
$ million
−10,000
−20,000
−30,000
Year 05 07 09 11 13 15 17 19
Exports Imports Balance
SOURCE: WWW.IBISWORLD.COM
offshoring and outsourcing has changed
the competitive landscape for the
industry by reducing manufacturer’s
overhead costs, thus making it more
attractive and necessary for competitors
to follow suit. Imports are expected to
continue to jump 7.1% in the five years to
2018 based on these factors.
Exports
In the five years to 2013, exports of home
furniture are estimated to grow at an
average annual rate of 2.5% to $2.7
billion. Exports as a percentage of
revenue have increased considerably over
the past five years from 7.5% in 2008 to
an estimated 10.9% in 2013, fueled by a
depreciated dollar. Canada and Mexico,
which border the United States and
WWW.IBISWORLD.COM Household Furniture Manufacturing in the USMay 2013   17

Products & Markets

International Trade benefit from favorable trade conditions
continued under the North American Free Trade
Alliance, account for the largest share of
industry exports at 56.8% and 7.9%,
respectively. However, while Canada and
Mexico are the most common export
destinations, export growth has also been
driven by United Kingdom and China,
which account for 2.9% and 1.5% of
industry exports, respectively.
With the value of the US dollar falling,
countries are expected to take advantage
of cheaper high quality US imports.
IBISWorld anticipates exports will grow
at an average annual rate of 7.3% to $3.8
billion from 2013 to 2018.

Exports To... Imports From...

4%
4% Mexico
Canada

10%
Vietnam
2%
3% China
8%
United Kingdom
Mexico

18%
64%
China
31% All Other
All Other

57%
Canada

Year: 2013 Total $2.7bn Total $20.0bn

SIZE OF CHARTS DOES NOT REPRESENT ACTUAL DATA SOURCE: USITC
 WWW.IBISWORLD.COM Household Furniture Manufacturing in the USMay 2013   18

Products & Markets

Business Locations 2013

West
AK
0.1 New
England
ME
Mid- 1.0

Great Atlantic 1 2
Lakes NY 3
WA MT ND 7.6
5 4
2.2 0.3 MN
Rocky
0.6 1.8
WI
OR Mountains SD
0.2
Plains 2.6 MI
2.8
PA
4.5
6
7
1.5 ID IA OH 9 8
0.9 WY 4.3
0.3
NE
1.1
IL IN WV VA
3.3 2.8 2.4

West NV
0.3 0.2
KY
UT MO
1.1 NC
0.3
1.5 CO KS 1.8 7.4
1.5 0.5 TN
SC
Southeast
2.0
CA 1.0
13.2
OK AR GA
0.6 1.0 AL 2.5
AZ MS 1.1
2.1 NM
0.9 Southwest 2.0

TX LA
0.5 FL
5.5 5.3

West
HI
0.2 Additional States (as marked on map) Establishments (%)

1 VT 2 NH 3 MA 4 RI Less than 3%
0.8 0.6 1.9 0.2 3% to less than 10%
10% to less than 20%
5 CT 6 NJ 7 DE 8 MD 9 DC
0.9 2.0 0.1 1.1 0.0
20% or more

SOURCE: WWW.IBISWORLD.COM
WWW.IBISWORLD.COM Household Furniture Manufacturing in the USMay 2013   19

Products & Markets

Business Locations Proximity to downstream markets is an

Establishments vs. population
important competitive strategy in this
industry, as it allows manufacturers to
30
increase the speed of delivery while
reducing transportation costs. Not
surprisingly, the regions accounting for 20
the largest number of establishments also
have the highest population distributions.

%
At 26.4% of industry establishments 10
and accounting for more than a quarter
of the US population, the Southeast
region of the United States houses the 0
largest number of industry facilities. The

West

Great Lakes

Mid-Atlantic

New England

Plains

Rocky Mountains

Southeast

Southwest
region also accounts for the highest
number of furniture wholesalers and
retailers, making it an ideal location for
household furniture manufacturers that
want to be in close proximity to Establishments
downstream buyers. Population
The Western region of the United SOURCE: WWW.IBISWORLD.COM

States accounts for the second largest

share of industry establishments at
17.5%. This figure is in line with the
region’s 17.1% share of the US
population. The Western region also
benefits from California, which is the
densest state in terms of total
establishment and population share at
13.2% and 12.1%, respectively.
Rounding out the remaining top four
regions are the Great Lakes and Mid-
Atlantic regions, which account for 15.8%
and 15.3% of industry establishments,
respectively. In addition to high
population distributions, these two
regions contain some of the largest
seaports in the US, making them
attractive locations for manufacturing
industries to receive raw materials and
ship exports. The Great Lakes region in
particular is an ideal region for
shipments to and from Canada, a major
importer and exporter of industry goods.
WWW.IBISWORLD.COM Household Furniture Manufacturing in the US May 2013   20
Competitive Landscape
Market Share Concentration  |   Key Success Factors  |   Cost Structure Benchmarks
Basis of Competition  |   Barriers to Entry  |   Industry Globalization
Market Share The Household Furniture Manufacturing
Concentration industry exhibits a low market share
concentration. Although the industry’s
four top players account for nearly a
Level
quarter of total industry revenue, the
Concentration in majority of firms are small and privately
this industry is L ow owned manufacturers. In fact,
IBISWorld anticipates more than 79.5%
of industry firms will employee fewer
than 20 workers in 2013, while only
7.9% of household furniture
manufacturers will employ more than
100 workers.
Over the past five years, industry
concentration has increased slightly as a
result of operators being driven out of
business by the recession and lower-
priced furniture imports. Imports have
created an intensely price competitive
environment for existing players. Faced
with eroding profit and loss of demand,
Key Success Factors Contacts within key markets
Manufacturers need to establish links
with a number of customers, including
IBISWorld identifies wholesalers, contractors and retail
250 Key Success outlets. They should deal with a variety of
Factors for a customers rather than have one or two
business. The most that account for the majority of their
business.
important for this
industry are: Guaranteed supply of key inputs
Established links with key suppliers
assists a steady flow of key inputs and
may provide cost savings for bulk
purchases. This includes a steady flow of
high-quality, low-priced raw materials
used in the production process.
Ability to alter goods and services
produced in favor of market conditions
Household furniture production is
Enterprises by employment size (2013)
No. of employees Share (%)
1 to 4 51.6
5 to 9 16.5
10 to 19 11.4
20 to 99 12.6
100 to 499 4.7
500+ 3.2
SOURCE: US CENSUS BUREAU AND IBISWORLD
many underperforming operators were
forced to exit the industry. To remain
competitive, some manufacturers have
moved their production facilities to
China and other overseas locations
where production costs are cheaper. As a
result, establishments in the industry are
expected to decrease at average annual
rate of 1.8% in the five years to 2018.
determined by fashion trends, so the
ability to alter designs to suit trends can
increase sales and earnings. This is
particularly true because furniture is
often made to measure.
Production of goods currently
favored by the market
If the products are premium goods, then
they should be of high quality; otherwise,
the products should be perceived as
offering value for money.
Highly trained workforce
Staff are required to assemble wooden
cabinets and counter tops efficiently and
provide quality workmanship. Strong
product quality will ensure repeat
purchases; therefore, a highly skilled and
trained staff is essential.
WWW.IBISWORLD.COM Household Furniture Manufacturing in the US May 2013   21

Competitive Landscape

Cost Structure Profit Purchases

Benchmarks Profit varies depending on the size of the
firm’s operations, the market segment it
operates in and the firm’s location.
Generally, larger companies can achieve
higher profit, as they are better equipped
to spread their fixed costs among a larger
number of facilities. In addition, larger
businesses can also achieve cost savings
by purchasing raw materials in bulk.
Profit within the Household
Furniture Manufacturing industry is at
a low level and has been declining over
the past five years. IBISWorld
estimates that the industry will
generate profit equivalent to 1.3% of
revenue in 2013, down from 2.1% in
2008. This decline in profitability has
been primarily due to falling demand
during the recession, coupled with
rising input costs and intense price
competition with imports.
Purchases are the largest expense for the
Household Furniture Manufacturing
industry, accounting for an estimated
53.0% of industry revenue in 2013. This
is typical of manufacturing industries, as
operators purchase large amounts of raw
materials to manufacture their products.
Input materials used for home furniture
manufacturing include wood, metal,
plastics, leather, textiles and oil. During
the five years to 2013, purchase costs as a
share of revenue increased due to the
rising prices of commodities. For
example, the price of sawmilled lumber
has risen at an average annual rate of
1.9% in the five years to 2013.
Wages and Depreciation
Wages represent an estimated 19.1% of
industry revenue. The relatively large
share of wage expenses is a reflection of

Sector vs. Industry Costs

Average Costs of
all Industries in Industry Costs
sector (2013) (2013)
100 1.3 ■ Profit
8.6 ■ Wages
10.4 19.1 ■ Purchases
80 ■ Depreciation
■ Marketing
■ Rent & Utilities
■ Other
Percentage of revenue

60

60.1 53.0

40

1.5 0.7
2.4
20 2.7
2.9 1.6
22.0
13.8
0
SOURCE: WWW.IBISWORLD.COM
WWW.IBISWORLD.COM
Competitive Landscape
Cost Structure the skilled design and craftsmanship
Benchmarks involved in the production of furniture
items, especially classic designs that
continued
involve woodworking skills. Furthermore,
labor is also needed to manage furniture
assembly lines.
The manufacturing industry is faced
with growing depreciation expenses.
Manufacturing is capital intensive
because of its use of various machinery,
equipment and tools to produce
furniture. These assets will endure a lot
of wear and tear and will eventually have
to be replaced, adding to the overall costs
for the manufacturer. Depreciation for
the Household Furniture Manufacturing
industry is estimated to be 1.5% of
revenue in 2013.
Marketing
Marketing costs have steadily declined
Basis of Competition Internal competition
The industry is highly competitive, as
there are a large number of
Level & Trend
companies offering similar types of
 ompetition
C in this products. Firms in the Household
industry is H
 ighand Furniture Manufacturing industry
the trend is S teady compete mainly on price within each
market segment. Industry operators
also compete on product design,
including ergonomic and esthetic
features that offer extra value to
consumers. Manufacturers can also
gain an edge through excellent service
provided by employees. Industry
operators must ensure that staff has
the relevant expertise to address
customer queries.
Timeliness of deliveries is another
important consideration for
manufacturers that compete on product
availability and punctuality of delivery.
In an industry where tastes and fashion
trends change consistently, industry
firms must calculate inventory carefully
so as not to be overstocked or under-
Household Furniture Manufacturing in the US May 2013   22
over the past five years and are expected
to account for 0.7% of industry revenue
in 2013. Manufacturers such as Ashley
Furniture spend more on marketing and
advertising because it also retails its
products in showrooms and through
websites. Many US manufacturers also
distribute their products.
Other costs
Rent and utilities are expected to account
for 2.4% of industry revenue in 2013.
Other expenses include research and
development, insurance, freight and
administrative costs, which collectively
are expected to amount to 22.0% of
industry revenue for the same period.
Unfortunately for the industry, insurance
costs have increased and increasing oil
prices have caused freight prices to rise in
the five years to 2013.
stocked, which runs the risk of
decreasing revenue.
External competition
Industry operators are facing
increasing competition from imports,
particularly from China and Vietnam,
which together account for more than
three-quarters of all imported
household furniture. These countries
have much lower labor and production
costs than US operators, enabling them
to import cheaper products into the US
market. This has created a significant
amount of price competition for
domestic operators that must deal with
higher labor and production costs,
while at the same time maintaining
competitive pricing. While some US
manufacturers can charge a premium
for products with superior quality or
innovative designs, price competition
with foreign manufacturers has
resulted in a significant decline in
profit for domestic players.
WWW.IBISWORLD.COM Household Furniture Manufacturing in the US May 2013   23
Competitive Landscape
Barriers to Entry Barriers to entry outline factors that
prevent new companies from entering
Level & Trend the industry. Key factors used to assess
these barriers include the industry’s
 arriers to Entry
B buying and selling markets, the industry’s
in this industry are level of market dominance and entry
Mediumand S  teady costs.
Existing and well-established
distribution networks among operators
and suppliers may deter potential
operators from entering this industry.
For new entrants to be successful, they
need to establish upstream supply
relationships with manufacturers and
wholesalers in order to secure high
quality, low-priced inputs. Lastly, a
disruption to the supply of raw materials,
component parts or labor in the
production process could adversely affect
an industry operator by slowing down
furniture production.
Despite a low level of market share
concentration, the industry’s top four
players account for an estimated 22.9%
of industry revenue in 2013. Market
share among the top four players has
been growing over the past five years as a
result of industry mergers and firms
closing due to heightened competition
with imports. The projected rise in
Industry The industry currently has a high level
Globalization of globalization. Most of the major
players operating in the industry have
manufacturing and retail facilities
Level & Trend overseas and also supply household and
 lobalization
G in institutional furniture to establishments
this industry is based overseas. Major industry player
Highand the trend Ashley Furniture operates several
factories, including its largest, in China
is I ncreasing and other Pacific Rim countries. Another
major player, Furniture Brands, has
Barriers to Entry checklist Level
Competition High
Concentration Low
Life Cycle Stage Decline
Capital Intensity Low
Technology Change Medium
Regulation & Policy Light
Industry Assistance Medium
SOURCE: WWW.IBISWORLD.COM
market share concentration over the next
five years from the industry’s top
operators creates pressure on new
entrants that must invest more in
advertising to develop brand and market
awareness. Marketing and promotional
activity must exceed that of current
players in order to build customer
awareness and overcome retailer
resistance.
The initial outlay and cost of
equipment is also a significant barrier for
new entrants. The establishment of a new
manufacturing plant will be costly and
entrants must consider both the initial
cost of machinery and equipment, and
the ongoing costs of maintenance, labor,
rent and utilities.
progressively shifted its focus from
domestic production to overseas
operations. The company maintains
company-owned manufacturing
facilities in China, the Philippines and
Indonesia.
In addition, the industry’s global
footprint has increased with the rising
share of exports. As a share of revenue,
exports have risen from 7.5% in 2008 to
10.9% in 2013.
WWW.IBISWORLD.COM Household Furniture Manufacturing in the US May 2013   24

Competitive Landscape

Industry
Globalization
continued

International trade is a Trade Globalization Going Global: Household Furniture

major determinant of Manufacturing 1998-2013
an industry’s level of
200 Export Global 200 Export Global
globalization.
Exports offer growth
opportunities for firms. 150 150

Exports/Revenue
Exports/Revenue

However there are legal,

economic and political risks 100 100
associated with dealing in
foreign countries. Household
50 50
Import competition can Furniture Manufacturing
bring a greater risk for 1998
2013
companies as foreign 0 Local Import 0 Local Import
producers satisfy domestic 0 40 80 120 160 0 40 80 120 160
demand that local firms Imports/Domestic Demand Imports/Domestic Demand
would otherwise supply.
SOURCE: WWW.IBISWORLD.COM
WWW.IBISWORLD.COM Household Furniture Manufacturing in the USMay 2013   25

Major Companies
Ashley Furniture Industries Inc.   |   Other Companies

Major players
(Market share)

86.6%
Other

Ashley Furniture Industries Inc.

13.4% SOURCE: WWW.IBISWORLD.COM

Player Performance Founded in 1945, Ashley Furniture
Industries is based in Wisconsin and is
the largest furniture producer in the
Ashley Furniture nation. The company manufacturers and
Industries Inc. imports upholstered, leather and
Market share: 13.4% hardwood furniture through its
manufacturing plants and distribution
Industry Brand Names
centers located in the United States and
Ashley Furniture
abroad. Ashley Furniture also licenses its
Industries
name to more than 400 Ashley Furniture
Home Stores in the United States,
Canada, Mexico and Japan. The company
specializes in living room, dining room,
bedroom, entertainment, home office and
other furnishings.
The reduction in per capita disposable
income and housing starts weakened
demand for household furniture during
the recession. As a result, Ashley
Furniture employed cost-cutting
measures, one of which resulted in
shedding 200 jobs from its Mississippi
production facilities in 2008. However,
the company started to recover in 2010
and opened its first low-cost franchise
store during the year. Since then, the
number of low-cost Ashley Furniture
retail stores has jumped to more than
300, offering furniture, such as sofas and
couches, at a set price. The new stores are
designed to compete with the low prices
offered by mass-merchandiser
competitors like IKEA.
Ashley Furniture Industries has not
acquired any companies in the five years
to 2013; however, the company has
expanded production capacity. For
example, the company purchased a
manufacturing complex in North
Carolina for $10.4 million in 2012.
Although Ashley Furniture does import
some of its products from foreign
countries, the company continues to
increase production capacity in the US.

Ashley Furniture Industries Inc. (US household furniture

manufacturing segment) – financial performance*
Revenue
Year ($ million) (% change) Employees (% change)
2008 1,834.0 -6.1 13,500 N/C
2009 2,062 12.4 12,000 -11.1
2010 2,317 12.4 11,800 -1.7
2011 2,600 12.2 13,000 10.2
2012 2,920 12.3 13,500 3.8
2013* 3,277 12.2 13,700 1.5

*Estimates
SOURCE: IBISWORLD
WWW.IBISWORLD.COM
Major Companies
Player Performance Financial performance
continued Due to being a private company, financial
information for Ashley Furniture is not
made public. Despite growing concerns
from foreign competition impeding on
market share, IBISWorld expects the
company’s revenue to increase at an
average annual rate of 12.3% to $3.3
billion in the five years to 2013, fueled by
higher disposable income and resurgence
in housing starts. Additionally, the
Other Companies La-Z-Boy
Estimated market share: 4.0%
Synonymous with reclining chairs,
La-Z-Boy is the third-largest furniture
manufacturer in the United States by
revenue, the largest reclining chair
manufacturer in the world and North
America’s largest manufacturer of
upholstered furniture. The company
manufactures and imports wood
furniture products from outside the
United States for resale in North
America. Today, the firm operates two
manufacturing divisions: the upholstery
group, which produces and distributes
upholstered furniture; and the case goods
group, which primarily manufactures and
distributes wood furniture. The company
distributes its products through a
network of nearly 300 La-Z-Boy
Furniture Galleries, as well as more than
300 in-store galleries at furniture
dealers, department stores and other
outlets. In addition to recliners, chairs
and sofas, the company also makes desks
and other business furniture. In the five
years to fiscal 2013, industry-relevant
revenue derived from La-Z-Boy’s
upholstery and case goods groups is
expected to decline at an average annual
rate of 5.6% to $964.2 million. This
represents a total industry market share
of 4.0%.
Similar to other players in the
industry, much of the company’s decline
Household Furniture Manufacturing in the USMay 2013   26
company is expected to have 13.4% of
total industry-relevant market share.
Also, since Ashley Furniture is the largest
manufacturer of industry products in
North America, the company has
purchasing power over suppliers that the
competition does not have. This allows
the company to save money on major
inputs, which it passes on to its
customers in the form of lower prices,
thus attracting more demand.
in revenue can be attributed to falling
demand during the recession. As
consumers refrained from buying
household furniture during tough
economic times, total company revenue
fell 11.1% and 17.0% in fiscal 2008 and
2009, respectively. Nonetheless, the firm
attempted to minimize its losses by
consolidating its manufacturing facilities,
reducing its workforce and outsourcing
its fabric cutting and sewing operations
to Mexico.
Furniture Brands International Inc.
Estimated market share: 3.0%
Furniture Brands International is one of
the largest manufacturers of residential
furniture in the United States. The
company produces an assortment of
furniture through its nine brands:
Broyhill, Lane, Thomasville, Drexel
Heritage, Henredon, Hickory Chair,
Pearson, Laneventure and Maitland-
Smith. Each of the firm’s brands are
targeted toward specific customers in
relation to style and price points; for
example, Broyhill has collections of
mid-priced furniture primarily made of
wood, while Maitland-Smith
manufactures premium handcrafted
furniture that are antique-inspired. The
company’s goods are typically
distributed to a network of
independently owned, full-line furniture
retailers for resale.
WWW.IBISWORLD.COM
Major Companies
Other Companies Furniture Brands operates nine
continued upholstery facilities, three case goods
facilities, one component manufacturing
facility and one multifunctional facility in
the United States, which accounts for
about three-quarters of the company’s
sales. In 2013, Furniture Brands
International is expected to generate
$741.8 million in US industry-specific
revenue, giving it a 3.0% industry market
share.
Ethan Allen Interiors Inc.
Estimated market share: 2.0%
Founded in 1932, Ethan Allen Interiors,
Inc. is a high-quality furniture and home
furnishing manufacturer and retailer.
The company is well known for its
vertically integrated operations – in
addition to producing its own furniture,
the firm also wholesales its products via
two distribution and fulfillment centers.
Ethan Allen also maintains retail
Household Furniture Manufacturing in the USMay 2013   27
operations through its 136 company-
owned retail stores. However, while it
manufactures and assembles its home
furnishing products, the firm out-sources
a significant portion of its upholstery
production to Mexico. The remainder of
the company’s production is outsourced
to third-party suppliers, most of which
are located outside the United States.
Since the Great Recession, Ethan
Allen’s revenue has declined significantly.
As poor demand conditions plagued the
industry, revenue fell 34.5% in fiscal
2008 and 10.1% in fiscal 2009 (year-end
August). The housing market and the
economy started to recover in 2011, and
Ethan Allen’s total revenue increased
15.1% over the year, totaling $679.0
million. IBISWorld estimates that Ethan
Allen will generate $484.5 million in US
industry-relevant revenue in 2013,
representing 2.0% of the industry’s total
market share.
WWW.IBISWORLD.COM
Operating Conditions
Capital Intensity   |   Technology & Systems   |   Revenue Volatility
Regulation & Policy   |   Industry Assistance
Capital Intensity
Level
The levelof capital
intensity is L ow
Tools of the Trade: Growth Strategies for Success
New Age Economy
Recreation, Personal Services,
Health and Education. Firms
benefit from personal wealth so
stable macroeconomic conditions
are imperative. Brand awareness
and niche labor skills are key to
product differentiation.
Labor Intensive
Traditional Service Economy
Wholesale and Retail. Reliant
on labor rather than capital to
sell goods. Functions cannot
be outsourced therefore firms
must use new technology
or improve staff training to
increase revenue growth.
Household Furniture Manufacturing in the USMay 2013   28
The level of capital intensity for this
industry indicates that for every dollar
spent on wages, firms in the industry
spend $0.08 on machinery and
equipment. This figure is considered a
low level of capital intensity, which
reflects the importance of manual labor
for the assembly of furniture, as well as
the need for qualified personnel for the
architectural and design components of
the production process. The industry also
consists of many small- to- medium-sized
firms. Generally, the smaller the
establishment, the higher the labor
intensity, as smaller companies usually
cannot afford to put up large amounts of
capital. However, over the past five years,
the industry cut labor costs through the
Household Furniture Manufacturing
Cabinet & Vanity Manufacturing
Department Stores
Carpenters Wood Paneling Manufacturing
Textile Mills
Change in Share of the Economy
Capital intensity
Capital units per labor unit
0.5
0.4
0.3
0.2
0.1
0.0
Economy Manufacturing Household
Furniture
Manufacturing
Dotted line shows a high level of capital intensity
SOURCE: WWW.IBISWORLD.COM
implementation of computerized
inventory management systems and
Investment Economy
Information, Communications,
Mining, Finance and Real
Estate. To increase revenue
firms need superior debt
management, a stable
macroeconomic environment
and a sound investment plan.
Capital Intensive
Old Economy
Agriculture and Manufacturing.
Traded goods can be produced
using cheap labor abroad.
To expand firms must merge
or acquire others to exploit
economies of scale, or specialize
in niche, high-value products.
SOURCE: WWW.IBISWORLD.COM
WWW.IBISWORLD.COM Household Furniture Manufacturing in the USMay 2013   29
Operating Conditions
Capital Intensity electronic processing technology. A small
continued but significant proportion of industry
costs are allocated toward the purchase
Technology Technological change in the Household
& Systems Furniture Manufacturing industry
impacts the manufacturing and selling
Level process, the materials used in products
and the design elements incorporated
The level
of into furniture. The level of technology in
Technology Change the industry varies by firms depending on
is M
 edium their size. However, on average, the
industry experiences a medium level of
technological change. Generally, larger
players can afford to buy technologically
advanced manufacturing equipment and
invest more in research and
development.
With respect to the production
process, companies have focused on
making manufacturing facilities and
processes more flexible, while reducing
costs and improving product quality. To
achieve flexibility and attain efficiency
goals, new production techniques are
being adopted such as cellular
manufacturing, focused factories, just-in-
Revenue Volatility The Household Furniture Manufacturing
industry is sensitive to changes in
economic activity. In particular, changes
Level
in the level of household disposable
The level of income influences demand for household
Volatility is H
 igh furniture, since retail furniture demand
ultimately determines production
demand. Similarly, housing starts also
drive demand for furniture, as new
furniture is often purchased during a
move. The industry is also sensitive to
fluctuations in the value of the US dollar
versus foreign currencies. If the dollar
becomes weaker, raw materials imported
from other countries will cost more for
US producers to purchase. Consequently,
companies have to increase prices, which
of equipment. However, once the
machinery is purchased, running costs
are relatively low.
time inventory management, value
engineering, business simplification and
80/20 principles. These techniques have
helped optimize inventory levels, increase
floor space and lower production costs,
delivery times and set-up times -- all
while improving quality and improving
workplace safety.
Technologically advanced equipment
used by this industry includes electrical
cutting and sanding machines, and
advanced conveyor belts that move goods
through different stages of production. In
addition, advances in materials are
benefiting industry participants. As with
other manufacturing industries, new
glues are becoming popular replacements
for nails in the assembly of furniture. In
turn, this development will be replaced
over time with new edgebanding
technology, which utilizes laser to form a
bond between panels and edges without
the need for additional adhesives.
weakens demand, or let profit take a hit.
In the five years to 2013, the economic
downturn and the housing market
collapse adversely impacted industry
demand and revenue. As household
disposable income dropped, consumers
refrained from buying furniture, which
caused industry revenue to plummet.
Furthermore, low housing starts created
little impetus for home furniture
purchases. Industry revenue has
exhibited a high volatility over the five
years to 2013, in particular a 27.9%
revenue drop in 2009. However, in the
five years to 2018 revenue is expected to
return to low volatility as economic
conditions slowly stabilize.
WWW.IBISWORLD.COM Household Furniture Manufacturing in the USMay 2013   30

Operating Conditions

Revenue Volatility
A higher level of revenue Volatility vs Growth
continued volatility implies greater
industry risk. Volatility can 1000 Hazardous Rollercoaster
negatively affect long-term

Revenue volatility* (%)

strategic decisions, such as 100
the time frame for capital
investment.
10 Household Furniture
When a firm makes poor
investment decisions it
Manufacturing
may face underutilized 1
capacity if demand
suddenly falls, or capacity 0.1 Stagnant Blue Chip
constraints if it rises –30 –10 10 30 50 70
quickly. Five year annualized revenue growth (%)
* Axis is in logarithmic scale
SOURCE: WWW.IBISWORLD.COM

Regulation & Policy Companies within this industry use federal regulations are contained with
glues, coating and other materials the Federal Water Pollution Control
containing chemicals deemed Act, the Clean Air Act of 1970, the
Level & Trend hazardous under various environmental Resource Conservation and Recovery
 he level of
T laws; therefore industry firms are Act and the Comprehensive
Regulation is subject to a wide range of federal, state Environmental Response,
Lightand the and local laws related to the protection Compensation and Liability Act.
of the environment, worker safety and Along with environmental
trend is S
 teady
the emission, discharge, storage, regulations, the industry is subject to
treatment and disposal of hazardous rules via US Customs and Border Patrol
materials. These include restrictions on for fabrics and other imported raw
discharges into the air and waterways, materials. On top of this, manufacturers
regulations on the storage and disposal must abide by US patent and trademark
of chemicals and limits on the disposal laws that relate to the protection of
of waste and by-products. Specific intellectual property rights.

Industry Assistance Tariffs vary depending on the furniture Anti-dumping

item and the material used to make the As manufacturing activity in China and
good. For example, upholstered chairs other lower-cost production countries
Level & Trend with wooden frames made of teak are not heats up, US household furniture
 he level of Industry
T subject to a tariff for countries under the manufacturers have adopted a blended
Assistance is Normal Trade Relations (NTR) duty rate. strategy of domestic manufacturing and
Mediumand the However, a 40.0% tariff applies to importing. Not surprisingly, as domestic
non-NTR countries. Similarly, furniture production slows down and activity
trend is S
 teady
casings and covers for sewing machines moves overseas, industry employment
are subject to a 2.5% tariff for NTR numbers have fallen. In response, 35
countries, with a 20.0% rate for non-NTR domestic furniture manufacturers and
countries. five unions lodged an anti-dumping
WWW.IBISWORLD.COM Household Furniture Manufacturing in the USMay 2013   31

Operating Conditions

Industry Assistance petition against Chinese wooden

continued bedroom furniture imports in October Key Tariffs
2003. In June 2004, the preliminary
Low High
ruling of this petition saw a 198.0% tariff Goods Rate Rate
duty imposed on 120 Chinese furniture
manufacturers. The tariff has since been Seats 0 1.3
dropped for most of these affected Bedroom furniture 0.8 1.3
companies after it was determined they Cabinets, wardrobes, bookcases 0 1.3
were not government-owned and Tables 0 1.2
operated. The final tariffs were Institutional seats 0.8 1.1
announced in November 2004 when it Metal furniture 0.8 0.8
was found that Chinese bedroom
furniture was materially injuring the SOURCE: USITC

domestic US furniture industry.

However, this anti-dumping strategy has caused furniture manufacturers to
not been effective in limiting imports. relocate to other low-cost countries, such
Regulations for Chinese imports simply as Vietnam, Malaysia and Indonesia.
WWW.IBISWORLD.COM Household Furniture Manufacturing in the USMay 2013   32

Key Statistics
Industry Data Industry Domestic Housing
Revenue Value Added Establish- Employment Exports Imports Wages Demand Starts
($m) ($m) ments Enterprises (People) ($m) ($m) ($m) ($m) (Thousands)
2004 34,237 8,712 7,124 6,731 227,322 1,548 19,660 7,748 52,349 2,070
2005 34,448 8,248 6,884 6,538 219,054 1,701 21,083 7,347 53,830 2,155
2006 32,723 8,149 6,693 6,379 205,342 1,944 21,819 6,896 52,598 1,839
2007 32,457 7,956 6,634 6,364 192,625 2,058 21,668 6,417 52,067 1,398
2008 31,460 7,241 6,433 6,154 181,540 2,375 19,798 6,171 48,883 905
2009 22,682 4,779 5,412 5,227 141,970 1,963 15,894 4,734 36,613 583
2010 22,290 5,227 5,115 4,942 131,210 2,168 18,762 4,536 38,884 605
2011 21,991 4,684 4,983 4,813 127,675 2,333 18,755 4,420 38,413 624
2012 23,051 5,313 5,009 4,824 130,157 2,544 19,035 4,553 39,542 751
2013 24,506 5,369 5,079 4,870 133,410 2,682 20,047 4,689 41,871 906
2014 25,486 5,556 5,130 4,906 135,496 2,867 21,471 4,804 44,090 1,226
2015 24,347 5,224 4,925 4,717 129,053 3,012 22,996 4,557 44,331 1,594
2016 23,366 4,904 4,823 4,622 124,499 3,272 24,629 4,373 44,723 1,765
2017 23,002 4,901 4,693 4,497 121,143 3,538 26,379 4,259 45,843 1,885
2018 23,140 4,813 4,630 4,436 120,463 3,814 28,253 4,247 47,579 1,936
Sector Rank 69/403 72/403 21/403 19/403 18/403 87/373 26/373 43/403 39/373 N/A
Economy Rank 337/1243 405/1243 452/1242 392/1242 269/1243 104/431 28/432 290/1243 46/431 N/A

Annual Change Industry Establish- Domestic Housing

Revenue Value Added ments Enterprises Employment Exports Imports Wages Demand Starts
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
2005 0.6 -5.3 -3.4 -2.9 -3.6 9.9 7.2 -5.2 2.8 4.1
2006 -5.0 -1.2 -2.8 -2.4 -6.3 14.3 3.5 -6.1 -2.3 -14.7
2007 -0.8 -2.4 -0.9 -0.2 -6.2 5.9 -0.7 -6.9 -1.0 -24.0
2008 -3.1 -9.0 -3.0 -3.3 -5.8 15.4 -8.6 -3.8 -6.1 -35.3
2009 -27.9 -34.0 -15.9 -15.1 -21.8 -17.3 -19.7 -23.3 -25.1 -35.6
2010 -1.7 9.4 -5.5 -5.5 -7.6 10.4 18.0 -4.2 6.2 3.8
2011 -1.3 -10.4 -2.6 -2.6 -2.7 7.6 0.0 -2.6 -1.2 3.1
2012 4.8 13.4 0.5 0.2 1.9 9.0 1.5 3.0 2.9 20.4
2013 6.3 1.1 1.4 1.0 2.5 5.4 5.3 3.0 5.9 20.6
2014 4.0 3.5 1.0 0.7 1.6 6.9 7.1 2.5 5.3 35.3
2015 -4.5 -6.0 -4.0 -3.9 -4.8 5.1 7.1 -5.1 0.5 30.0
2016 -4.0 -6.1 -2.1 -2.0 -3.5 8.6 7.1 -4.0 0.9 10.7
2017 -1.6 -0.1 -2.7 -2.7 -2.7 8.1 7.1 -2.6 2.5 6.8
2018 0.6 -1.8 -1.3 -1.4 -0.6 7.8 7.1 -0.3 3.8 2.7
Sector Rank 59/403 269/403 126/403 132/403 92/403 154/373 159/373 144/403 85/373 N/A
Economy Rank 215/1243 926/1243 566/1242 584/1242 397/1243 176/431 181/432 492/1243 101/431 N/A

Key Ratios Imports/ Revenue per Share of the

IVA/Revenue Demand Exports/Revenue Employee Wages/Revenue Employees Average Wage Economy
(%) (%) (%) ($’000) (%) per Est. ($) (%)
2004 25.45 37.56 4.52 150.61 22.63 31.91 34,083.81 0.07
2005 23.94 39.17 4.94 157.26 21.33 31.82 33,539.68 0.07
2006 24.90 41.48 5.94 159.36 21.07 30.68 33,583.00 0.06
2007 24.51 41.62 6.34 168.50 19.77 29.04 33,313.43 0.06
2008 23.02 40.50 7.55 173.30 19.62 28.22 33,992.51 0.06
2009 21.07 43.41 8.65 159.77 20.87 26.23 33,345.07 0.04
2010 23.45 48.25 9.73 169.88 20.35 25.65 34,570.54 0.04
2011 21.30 48.82 10.61 172.24 20.10 25.62 34,619.15 0.04
2012 23.05 48.14 11.04 177.10 19.75 25.98 34,980.83 0.04
2013 21.91 47.88 10.94 183.69 19.13 26.27 35,147.29 0.04
2014 21.80 48.70 11.25 188.09 18.85 26.41 35,454.92 0.04
2015 21.46 51.87 12.37 188.66 18.72 26.20 35,311.07 0.04
2016 20.99 55.07 14.00 187.68 18.72 25.81 35,124.78 0.03
2017 21.31 57.54 15.38 189.87 18.52 25.81 35,156.80 0.03
2018 20.80 59.38 16.48 192.09 18.35 26.02 35,255.64 0.03
Sector Rank 279/403 74/373 251/373 356/403 96/403 291/403 364/403 72/403
Economy Rank 911/1243 83/431 281/431 791/1243 561/1243 435/1242 886/1243 405/1243
Figures are inflation-adjusted 2013 dollars. Rank refers to 2013 data. SOURCE: WWW.IBISWORLD.COM
IBISWorld Glossary
continued WWW.IBISWORLD.COM
Jargon & Glossary
Industry Jargon 80/20 PRINCIPLEAlso known as the Pareto Principle, it
states, as a rule of thumb, that 80.0% of a business’s
revenue should come from 20.0% of its customers.
CASE GOODSA classification that includes furniture
made of hard materials like wood, metal, glass or plastic.
CELLULAR MANUFACTURINGA lean method of
producing similar products using cells, or groups of team
members, workstations, or equipment, to facilitate
operations by eliminating setup and unneeded costs
between operations.
CONTRACT OUTFITTERAn independent distributor
that works with office furniture manufacturers to help
clients customize their furniture selections.
IBISWorld Glossary BARRIERS TO ENTRYHigh barriers to entry mean that
new companies struggle to enter an industry, while low
barriers mean it is easy for new companies to enter an
industry.
CAPITAL INTENSITYCompares the amount of money
spent on capital (plant, machinery and equipment) with
that spent on labor. IBISWorld uses the ratio of
depreciation to wages as a proxy for capital intensity.
High capital intensity is more than $0.333 of capital to
$1 of labor; medium is $0.125 to $0.333 of capital to $1
of labor; low is less than $0.125 of capital for every $1 of
labor.
CONSTANT PRICESThe dollar figures in the Key
Statistics table, including forecasts, are adjusted for
inflation using the current year (i.e. year published) as
the base year. This removes the impact of changes in
the purchasing power of the dollar, leaving only the
“real” growth or decline in industry metrics. The inflation
adjustments in IBISWorld’s reports are made using the
US Bureau of Economic Analysis’ implicit GDP price
deflator.
DOMESTIC DEMANDSpending on industry goods and
services within the United States, regardless of their
country of origin. It is derived by adding imports to
industry revenue, and then subtracting exports.
EMPLOYMENTThe number of permanent, part-time,
temporary and seasonal employees, working proprietors,
partners, managers and executives within the industry.
ENTERPRISEA division that is separately managed and
keeps management accounts. Each enterprise consists
of one or more establishments that are under common
ownership or control.
ESTABLISHMENTThe smallest type of accounting unit
within an enterprise, an establishment is a single
physical location where business is conducted or where
services or industrial operations are performed. Multiple
establishments under common control make up an
enterprise.
Household Furniture Manufacturing in the USMay 2013   33
EDGEBANDINGVeneer or laminate used to conceal the
exposed edges of furniture or cabinets and made of the
same type of material.
OFFSHOREThe relocation of a company’s business
process, such as manufacturing or accounting, from one
country to another, whether the work is outsourced or
stays within the company.
VALUE ENGINEERING (VE)VE is a systematic method
to improve the value of goods or products and services
by using an examination of function.
EXPORTSTotal value of industry goods and services sold
by US companies to customers abroad.
IMPORTSTotal value of industry goods and services
brought in from foreign countries to be sold in the
United States.
INDUSTRY CONCENTRATIONAn indicator of the
dominance of the top four players in an industry.
Concentration is considered high if the top players
account for more than 70% of industry revenue.
Medium is 40% to 70% of industry revenue. Low is less
than 40%.
INDUSTRY REVENUEThe total sales of industry goods
and services (exclusive of excise and sales tax); subsidies
on production; all other operating income from outside
the firm (such as commission income, repair and service
income, and rent, leasing and hiring income); and
capital work done by rental or lease. Receipts from
interest royalties, dividends and the sale of fixed
tangible assets are excluded.
INDUSTRY VALUE ADDED (IVA)The market value of
goods and services produced by the industry minus the
cost of goods and services used in production. IVA is
also described as the industry’s contribution to GDP, or
profit plus wages and depreciation.
INTERNATIONAL TRADEThe level of international
trade is determined by ratios of exports to revenue and
imports to domestic demand. For exports/revenue: low is
less than 5%, medium is 5% to 20%, and high is more
than 20%. Imports/domestic demand: low is less than
5%, medium is 5% to 35%, and high is more than
35%.
LIFE CYCLEAll industries go through periods of growth,
maturity and decline. IBISWorld determines an
industry’s life cycle by considering its growth rate
(measured by IVA) compared with GDP; the growth rate
of the number of establishments; the amount of change
the industry’s products are undergoing; the rate of
technological change; and the level of customer
acceptance of industry products and services.
WWW.IBISWORLD.COM Household Furniture Manufacturing in the USMay 2013   34

Jargon & Glossary

IBISWorld Glossary NONEMPLOYING ESTABLISHMENTBusinesses with VOLATILITYThe level of volatility is determined by

no paid employment or payroll, also known as
continued nonemployers. These are mostly set up by self-employed
individuals.
PROFITIBISWorld uses earnings before interest and tax
(EBIT) as an indicator of a company’s profitability. It is
calculated as revenue minus expenses, excluding
interest and tax.
averaging the absolute change in revenue in each of the
past five years. Volatility levels: very high is more than
±20%; high volatility is ±10% to ±20%; moderate
volatility is ±3% to ±10%; and low volatility is less than
±3%.
WAGESThe gross total wages and salaries of all
employees in the industry. The cost of benefits is also
included in this figure.
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