by Some domestic producers have limited capabilities and skill sets compared with their Asian counterparts, which could result in a void of styles in the marketplace
HIGH POINT — Anyone who knows just a little something about the history of the furniture industry knows that it always has chased the lowest cost labor to produce the best quality and value products.
Whether we’re talking the shift of manufacturing from New England and New York to the upper Midwest and from there to Virginia and North Carolina, the goal has been to build products with those willing to do the job and do it for relatively modest wages. The American South largely benefited from this shift, not just in wood furniture but also upholstery produced in places like North Carolina, Tennessee, Alabama and Mississippi.
Following this same model, many of us in the industry today witnessed the shift of manufacturing to Taiwan, China and even the Philippines in the early and mid-to-late ’90s to the early 2000s. There, workers would earn a fraction of what they were making to build not just similar products, but products that ended up becoming even more complex in their construction and use of materials.
Other lower-cost countries soon also would benefit from this race to lower-cost labor including Vietnam, Malaysia, Indonesia and eventually India.
Ultimately, the products coming from every one of these countries would bring an enhanced fashion statement largely to case goods that showcased highly carved elements along with mixed-media elements from mirrors and glass to decorative marble, metals and more.
China was largely the main source for these looks, but Vietnam soon caught up as many Taiwanese and Chinese-owned plants moved to Vietnam to produce bedroom in response to antidumping on Chinese-made wooden bedroom furniture dating back to 2003 and 2004.
Other categories such as home office, home entertainment and dining soon followed as it became more efficient to produce these categories in factories that could match finishes and veneers along with other decorative elements in-house, creating not just a one-stop shop for many customers, but also vertically integrated facilities that were steadily gaining expertise in the fabrication and incorporation of mixed materials into the product mix.
The upholstery segment, which has largely remained domestic, would benefit from the global production of leathers, fabrics and other woven materials used in the mix, not to mention imported frames, mechanisms and motors that are part of the ever-growing motion upholstery segment.
Most consumers likely understand that this type of global supply chain has benefited not just the furniture industry, but many other product categories as well, from autos to phones and computers to washers and dryers and refrigerators, to name several.
Even the venerable C.F. Martin & Co., which has produced high-end guitars in this country dating back to 1833, has a label on the bracing inside its instruments that reads, “Made in Nazareth, Pa. with Materials Sourced Around the World.”
This is more than just a requirement from the FTC regarding information about where its products are actually produced: made mostly with several exotic wood species — whose tonal properties can calm the soul and even ease a blistering headache — the instrument is a living, breathing testament to reality of the global supply chain.
So here we are once again facing the prospect of tariffs. The ideas being bandied about are not only to raise tariffs on China-made products to 60%, but also potentially impose tariffs on most other countries that could be as low as 10% to 20% but in some cases as high as 100%. Canada and Mexico face tariffs of 25%, as we’ve reported previously.
It’s a possibility that has the industry concerned to say the least, although we collectively have to admit that we saw it coming, just as we saw it coming several years ago with the threat of tariffs on China, which were imposed in 2018 to the tune of around 25%.
At the time, many companies were able to move production to other parts of the world, namely Vietnam, which ended up being a major beneficiary as its furniture shipments to the U.S. expanded significantly.
For example, according to Mann, Armistead & Epperson, furniture shipments from Vietnam rose from $4.3 billion in 2018 to just over $10 billion in 2021, while shipments from China fell from $19.1 billion to $13.9 billion during the same period. During that same period, wood furniture shipments from Vietnam would eclipse those from China, rising from $3.3 billion in 2018 to nearly $5.8 billion in 2021. China’s furniture shipments, meanwhile, fell from $5.7 billion to $2.7 billion during the same period.
If tariffs are imposed as anticipated, it’s unclear what the outcome will look like, although some retail customers have reportedly been shopping domestic sources. That’s a good thing for American companies and U.S. workers as it could help bring some jobs back to the U.S., which is among the key goals of tariffs in the first place.
The challenge for the furniture industry is that most of the manufacturing and jobs have long since disappeared, with only a handful of key players on the wood side of the business. While the domestic producers we’ve spoken with are eager and able to take on some of that business moving forward, there will be some other challenges.
+ U.S. wood production capacity is nowhere near what it was before the shift in manufacturing to Asia. With many plant closings and thousands of jobs lost in the process, it would take years to rebuild a furniture manufacturing base. Most banks for one would probably never fund such a thing, given what they know about the industry’s draw to low-cost labor. Thus, the investment would be considered risky at best should tariffs decrease and retailers once again push for lower-cost product from Asia. That’s not to say that existing producers would not continue to survive and thrive with increased demand. It’s just unlikely that we will see much future investment in new start-up wood furniture plants.
+ Many younger workers have seen the devastation and havoc the industry imposed on their parents and grandparents whose jobs were lost during the transition to Asia. Hence while many younger workers are still entering the furniture workforce, it’s likely in product development, sales, marketing and retail. For many, working in a furniture plant is nowhere near as attractive as it was a generation or two ago, particularly on the wood side of the business. The question then becomes, who would fill these jobs? Plus, with an increase in automation and robotics, there may not be as many jobs for manufacturing workers after all.
+ Consumers stand to lose out both in terms of the looks and overall values they have come to expect. As we alluded to earlier, Asia has long filled the void in style-driven looks resulting from their ability to incorporate mixed-media elements into the mix ranging from marble and stone to metal, glass and mirrored accents made popular by collections ranging from Tommy Bahama at Lexington, Jessica McClintock at American Drew to Jane Seymour at AICO. Most U.S. wood plants simply don’t work with these materials any longer. Thus, we’ve come to see a host of clean-lined designs, some of which are void of much shape, texture or depth. Finish is where many of these producers excel, but that is just one aspect of what many consumers are seeking in design. Of course, luxury furniture producers still provide these types of multidimensional designs, but many of them are still having them produced in Asia.
+ With the exception of say Vaughan-Bassett and John Thomas, there also are few other mid-to-upper-middle-priced resources in domestic case goods. What’s produced in the U.S. is either starting-priced promotional, or at the upper end with producers such as Century, Gat Creek, Vanguard and Hickory Chair, to name a few. That leaves a huge void in the middle, where most furniture is sold. Thus with tariffs in place, consumers could either have to become accustomed to the very entry-level starting price points or expect to pay more for their furniture. Of course, some imported furniture still could be affordable, but it will come at a higher price with additional tariffs. So inflation as we know it could reach levels far beyond what all the critics of the Biden administration ever dreamed.
+ Upholstery is a bright spot for the U.S. consumer as there are plenty of domestic manufacturers across nearly every price point in places such as North Carolina, Virginia and Mississippi, for example. And those with available capacity could take on even more business in the months ahead, which is certainly a positive for those businesses and their employees. But as we’ve noted previously, they too could fall victim to tariffs, particularly those that import components such as plywood frames, fabrics and leathers along with mechanisms and motors for motion furniture. As those components are as vital to the upholstery mix as wood and veneers are to case goods, consumers should expect prices of those goods to increase as well.
These are just several factors for the furniture and other U.S. companies to consider as the issue of tariffs begins to emerge in the coming weeks and months. Fortunately, the industry can begin planning as we’ve heard many are already doing. But given the depth of the global supply chain, this is not going to be an easy one to figure out. And it could end up to be painful not only for suppliers and the retailers they serve, but also consumers who truly believed the inflated sales pitch that they were going to be better off than they’ve been in the past several years.
