Summary
The UAE and China present furniture manufacturers with different opportunities. Furniture products themselves need to be segmented as they require quite different sales channels and marketing to penetrate these sectors.
Analysis
The UAE furniture market, like its counterpart in China, boomed over the last few years, and again, similar to China, but to a greater extent, declined as the realism of completing and selling apartments without financing, became clear.
Furniture first needs to be looked at in terms of what segments make up the industry. The first main distinction is
a) contract - where the furniture is sold into commercial premises, such as hotels, offices, colleges, schools where the standards are generally far higher than in retail, and where function, wear resistance and strength tend to be as important as design
b) retail/residential - where furniture is purchased by the end user for the home, and for personal use. Standards vary from plain low-end, ready to assemble, and rickety, to extremely high standards of wood finishes, leather and metal, approaching and sometimes exceeding what one could find in the 'contract' category.
The sofa industry is an example. Retail price points for residential range from upward of a few hundred dollars, to thousands, accoring to the material specifications, leather, textile, springs, foam density and general workmanship. China has long dominated the market for the lower end of the spectrum, as labour content is still high. However, high end sofa production is alive and well in western markets, where standards are critical and where clients require a certain textile or fire retardant finish to be guaranteed.
For kitchens, the range of pricing is not quite as extreme. At the low end are the melamine faced panels and formica topped mass market kitchens, which move up in design and cost through laminates, vinyl wrap, veneers and solid wood/granite finishes. Kitchens are frequently supplied locally to the country at the low end as there is little added value with melamine panels. Larger plants are automated, and contain little labour. The actual labour copntent is in the design, but mainly in the installation where the cost can exceed that of the materials used.
This explains perhaps the rise in interest of imported kitchens in China where the major European manufacturers can offer superior finishes, designs and appliances, plus experience. It was only a decade or so ago that Chinese property developers for the mass market started to supply fitted out apartments. Now no apartment is sold without kitchens and bathroom options, like the west. A tough property market can mean that bundling in an imported kitchen is a good incentive as they have to install a kitchen in any event and the extra cost of the imported one can be an effective incentive.
A similar situation exists for the UAE where incentives are needed on a greater scale than in China, to clear stocks of apartments. The least vulnerable of the global kitchen manufacturers are the ones operating in the premium sector where brand and finishes are still relevant and appeal to customers.
The vulnerable sector is that which works at the lower added value end where it is difficult to gain any competitive advantage with low cost labour (as the processes can largely be automated).
Also intent on surviving are the hardware producers, who add the finishing touches to the kitchen with hinges, handles, drawer slides, lighting etc. China tries hard in this sector, with inexpensive copies of western designs, but some of the western producers now manufacture in China (or should be) and can meet demand changes endemic in this industry as stock levels are reduced.
The mattress sector is more like the sofa sector - the bulk of the product, and space needed in distribution has meant that local production has a big advantage when tied in with a brand, often one of the main USA 'big 5' under a license agreement where the local manufacturer pays the licensor a percentage on all branded sales. I expect to see more branding and licensing across the furniture sector as US and European manufacturers look for ways to leverage their brand equity, whilst gaining some access to foreign markets.
