by The residential furniture industry has gone through massive changes over the past 40 years as globalization became a mainstay of production, supply chain and consumer demand. China has played a massive role in this change, and we see three particular movements, as follows:
China 1.0
It was the late 1980s and into the 1990s when U.S. manufacturers started looking overseas for sources of cheaper goods. The Philippines and Taiwan were early to the picture, but China opened up and quickly became the gold standard for case goods manufacturing. Pretty soon our leading companies were closing U.S. factories: Bernhardt, Hooker, Bassett, Broyhill, Thomasville. In the hospitality industry, Mark David was the first to move case goods offshore and quickly undermined American of Martinsville’s domestic manufacturing prowess. By the mid-2000s, case goods production in the U.S. was about done. The book Furniture Wars, by Mike Dugan, beautifully tells this story. But John Bassett (Factory Man) and other petitioners fought for anti-dumping duties and won their case in 2005, thus collecting massive amounts of money. But the damage was done. Duties on China wood bedroom furniture created a mass shift of production to Vietnam, mostly built and owned by the Chinese. Case goods made in Asia continued, along with the development of upholstery production, especially motion furniture.
China 2.0
About this time, many Chinese companies decided to move to the U.S. and be a brand instead of just acting as a wholesale supplier to the U.S. brands. Samson Holding bought Universal Furniture, then Craftmaster, Baker, Grand Manor and Robb & Stucky. Markor bought Schnadig (now ART) and Jonathan Charles and Rowe Furniture. Then they built the fantastic showroom on North Hamilton in High Point. Crown Mark bought the old Pennsylvania House showroom. Acme bought the Main Street Theater building. New Classic bought the Elite Furniture showroom on the corner of Hamilton and Commerce and tripled its size. Later, Home Elegance bought the massive 100,000-square-foot Zaki Rug showroom on Main Street. Chinese firms were now entrenched as permanent players in the U.S. market.
China 3.0
With the Trump 25% tariffs in 2018, plus the current Liberation Day series of tariffs, more moves were sure to come from overseas. GigaCloud emerged post-Covid with a roar, bringing AI and enhanced logistics to the U.S. market. They swiftly gained market share, accumulated cash and acquired Noble House in 2023, then more recently New Classic. Manwah’s recent acquisition of Southern Motion is a huge move of an Asia powerhouse acquiring manufacturing in the U.S. If that occurs, will others from China surely follow? We think so.
We believe China 3.0 is still in its infancy, and more Chinese and other Asian companies will invest directly into the U.S. manufacturing market, both as a hedge against tariffs and for better access to the huge American market. With Europe in a recession, Russia off-limits and China becoming more insular, the U.S. market is the best hope for revenue growth. Also, we see a trend of wealthy Asians exiting their native countries and moving to the U.S. and bringing their money.
This is good news for the M&A market. Keep your eyes open as China 3.0 rolls out.
Tim Stump is president of Charlotte, North Carolina-based merger and acquisition specialist Stump & Co.
