Costs on Imported Office Furniture Rising?

Posted by Expert Gadget Reviewer on Wednesday, 24 June 2009

Very interesting article in Business Week's June 15, 2009 edition titled: China's Eroding Advantage. The article explains that the costs for products imported from China are rising and the price advantage versus domestically produced goods is shrinking.

This shrinking cost advantage may significantly impact the office furniture industry in a number of ways - currently there is an entire industry of "importers", which I define as companies that have their products built in China, shipped (flat-packed in a box) to the U.S., and then sold through distributors (including Sam Clar). These importers (companies like: Cherryman Industries, Office Star, and Mayline) have grown extremely rapidly over the past 5 years, primarily by providing product that was typically 25% to 40% less than comparable products manufactured domestically.

As the cost of imports begin to rise, the downside to imported products (the lack of choice and ability to customize, lack of consistent inventory, and extended lead-times) will begin to offset the shrinking price advantage, as buyers migrate back to domestically produced items.

This trend could then cause a quick negative spiral due to the tremendous capital required to import products (everything is paid in full prior to the order leaving the factory, and importers must carry a tremendous amount of inventory due to the 9-12 weeks it takes to receive an order). Because of these capital requirements (combined with the horrible credit markets in the U.S.) even a small "hiccup" in order flow (and cash-flow) could be catastrophic to some of the import players.

So what does this mean to the Office Furntiure buyer? -- Ultimately it could mean that the days of $99.00 full function ergonomic chairs, and $599 executive veneer desks will disappear, as prices migrate back to where they used to be (in the late 1990's and early 2000's).

When will this take place? Look for cost increases over the next two years, with the squeeze really taking place in about 18 months.