The furniture business is considered a very profitable business. An investor, when properly conducting business, can receive a return of 40% per annum in foreign currency and higher. The main thing is to choose a market niche.
The nuances of small and medium furniture business
Small and medium-sized furniture manufacturing companies focus on specialization, trying to gain a foothold in some narrow market niche. So, there is a wide range of companies producing furniture for trade organizations: furniture for pharmacies, bookstores, jewelry stores, supermarkets, etc. An interesting direction is the so-called advertising furniture used to design points of sale (which allows customers to pay attention to a specific type of product), conduct presentations, etc.
In general, the number of possible specializations from furniture manufacturers is not limited. Most likely, in the coming years, the trend towards specialization will continue to develop. Already, there are companies on the market that manufacture glass furniture, products made from specific materials (for example, bog oak, plastic), narrowly functional products (computer tables, office partitions, bar counters), etc.
Recently, companies specializing in furniture restoration have been established in the regions. This direction is relevant for the subjects of the Russian Federation, characterized by a low standard of living. For economically developed regions, it narrows to an extremely narrow segment of the restoration of antique furniture.
A significant part of domestic upholstered furniture is manufactured by small enterprises, which also strive to provide customers with a range of additional services.
This is not only delivery and assembly, but also professional design (selection of color, shape, material), the offer of non-standard products (for example, tall cabinets for country houses, furniture for penthouses, etc.). Another example of a niche where small companies have virtually no competitors is the wicker furniture market. Such products are either imported to Russia from abroad (high price segment), or they are produced by small furniture enterprises.
One of the most promising segments of the furniture market is the production of built-in furniture. In this area, the leading role is also played by small and medium-sized companies that are maximally focused on meeting the needs of any client. For example, with the release of sliding wardrobes, each system is created for a specific order, taking into account the architectural features of a particular room. The manufacturer strives to meet the unique needs of each customer.
When choosing a direction of specialization, an investor may be advised to focus on the dynamics of related sectors of the economy. This is not only about such obvious indicators as the dynamics of the real estate market, household appliances (including built-in), imported cars, but also about the state of the advertising market (furniture as POS material) 1, the antiques market (restoration of antique furniture ) etc. In fact, if a market demonstrates a growth trend that lasts at least two years, then the demand for furniture from the companies operating on it will increase. The pattern confirmed by many owners of firms operating in local segments of the furniture business.
Monitoring the preparations for adoption of legislative acts (both local and federal) that can stimulate the growth of a certain segment of the market can help to choose a specialization effectively. A typical example is the growth in demand for pharmacy furniture, which occurred after an increase in the requirements for the minimum area of drugstores.
A significant role in the furniture market is played by the demographic factor: if the production of children's furniture is actively developing, then the offer of specific products for adolescents and youth is now practically absent.
Furniture business: How to start a business?
Having decided on a specialization, they begin to search for a room. To organize the production of built-in furniture, you will need a workshop (the minimum area is 200 sq. M with an average rental rate for premises of this type in Moscow $ 80 per 1 sq. M per year), a warehouse (at least 250 sq. M, rental rate - 70 dollars per 1 sq. m per year), office (its area depends on the ambitions of the entrepreneur, but for a small company to function normally it needs at least 100 sq. m, the rental rate is 80 dollars per 1 sq. m per year). When building its own sales network (salons, shops), the manufacturer of built-in furniture will require retail premises with an area of 30 square meters or more. m
The rental rate for them ranges from 400-1200 dollars per year for 1 quarter. m
Thus, the minimum rental costs of various premises for the novice manufacturer of sliding wardrobes are more than $ 45 thousand per year. If the sale of products is carried out through its own network of stores, the costs are tripled. The manufacture of cabinet furniture requires large areas (not less than 700 sq. M). In this case, only the production building will “eat up” about 60 thousand dollars a year.
The organization of the furniture business will require significant costs for the purchase of equipment. As a rule, it can be purchased directly in Moscow: a wide range of standard machines is available from suppliers at the warehouse. Complex production lines are often delivered individually, on order, which leads to an increase in delivery times.
We can say that the cost of purchasing equipment for the production of cabinet furniture will be at least 136 thousand dollars, for the manufacture of built-in furniture - 28 thousand. To this amount you can add the cost of acquiring vehicles (about 14 thousand dollars), office equipment, etc. d.
To produce high-quality furniture, high-quality components are needed. It is impossible to create high-quality and competitive furniture using only domestic parts. This problem is solved when manufacturers independently provide themselves with components of the required quality, or through the purchase of imported products. They are easy to obtain from several Moscow distributors.
Domestic manufacturers of high-quality furniture most often use such imported components as MDF boards, laminated boards and films for them, accessories, adhesive materials for lining, paints and varnishes. Almost all manufacturers of built-in furniture purchase rigid aluminum profiles and sliding systems that determine the high quality and durability of the goods directly from Western companies (Germany, Great Britain).
Most often, furniture companies at the first stage of work seek to expand the number of suppliers. Over time, natural screening of counterparties occurs - only 8-10 partners remain who, under optimal conditions, supply the necessary materials.
The furniture business makes high demands on the level of training of employees. Even an ordinary “production worker" must be able to read drawings, control CNC machines. The staff of a furniture company should include not only craftsmen (salaries from 300 to 1000 dollars per month), but also fitters (250-300 dollars), joiners (250-500 dollars), glaziers (200- 300 dollars). In addition, we must not forget about supervisors, sales managers, drivers, couriers, storekeepers, store employees, programmers, designers, and executives.
The staff of a small furniture company, as a rule, is 35-40 people, the cost of paying for their labor is 10-15 thousand dollars a month. The organizational structure of such an enterprise is most often built according to the classical linear-functional scheme, providing vertical subordination.
According to statistics, up to half of consumers of household furniture, making a purchase decision, are based on their previous experience, if it is not (as often happens when a new type of furniture is bought), the recommendations of acquaintances take on special significance. Therefore, the most important factor influencing the choice of the buyer is the quality of the products. Channels such as information in newspapers of free announcements, advertising on television, in specialized magazines, and other print media are in second place in terms of effectiveness. Online advertising is gaining in popularity. Good return, but within a separate store is able to give a billboard outdoor advertising. But the materials distributed at the points of sale (booklets, brochures, catalogs) do not bring quick returns.
One of the advantages of custom-made furniture production is that it is not subject to certification. Quality certificates should have only the components from which the products are assembled. In the manufacture of serial furniture for each series of products, confirmation of compliance with GOSTs (GOST 16371-93 "Furniture. General technical conditions" and GOST 19917-93 "Furniture for seating and lying") must be obtained.
The profit of a furniture company depends on many factors. Investments in the creation of such an enterprise usually pay off in 2-3 years. Of course, individual companies go to this line in a shorter time.
Furniture business: Distribution channels
Sales are key to the success of a furniture company. There are several groups of channels through which furniture gets to the final consumer. Of course, the main role is now played by traditional sales mechanisms through various retail outlets. They can be classified as follows.
Large specialized shopping centers (hypermarkets with an area of 10 thousand sq. M, having over 1000 items of furniture of all styles), which continue to be actively built now. Some of these centers are built by a specific manufacturer "for themselves" (IKEA), and some are leased to various sellers and manufacturers. The sale of products through this channel is of interest to firms manufacturing household furniture, which is in demand among representatives of the middle class.
Network stores created by the manufacturer to sell only their products. A fairly effective sales mechanism, which also provides good opportunities for the development of franchising. Novice entrepreneurs willingly open stores of well-known brands, ordering furniture directly from the franchisor. It is important to remember that the interior should be located on the main street and have shop windows facing the oncoming traffic of cars.
Non-network stores that may belong to either a particular manufacturer or a furniture company. As a rule, such retail outlets specialize in "exclusive" imported products, but are sometimes purchased from domestic manufacturers. A normally working company that does not have its own sales network often cooperates with a significant number of such stores.
Furniture stores of the “Soviet type”, selling inexpensive products of a large number of manufacturers, remained in sufficient quantities only in the provinces. Often they sell not only furniture, but also related “home goods”. The disadvantage of cooperation with such retail outlets is that, firstly, they do not provide a high level of service. Secondly, the area of such stores is small (up to 300 sq. M) and does not allow us to offer a wide range of products, and also limits the possibility of efficient distribution of goods. Thirdly, these organizations prefer to take goods for sale, which is unprofitable for most small firms focused on quick turnover of funds.
Furniture sections in multidisciplinary shopping centers can be regarded as a weak analogue of specialized supermarkets. The main advantage of this distribution channel is the possibility of renting a small area (several square meters) for installing a presentation stand or samples. This does not provide a large volume of sales, but, as a rule, it fully pays off.
Markets ("bazaars") belong to the category of dying canals, but retain their popularity in small towns.
Another major sales channel is direct sales, which play a large role in the activities of companies focused on corporate orders. Distribution of catalogs, dialing and personal meetings of managers with potential customers are an important part of the work of many companies producing the so-called "special" furniture.
There are a large number of alternative distribution channels: installation of presentation stands directly on the street, in passage places, in particular near metro stations; the promotion of specific types of products in places of accumulation of its direct consumers. So, furniture for newborns can be presented to mothers directly in maternity hospitals.
Furniture business: Buying a ready-made business
One of the forms of investing in the furniture business is the purchase of existing furniture companies or shares in them. The profitability of investments in the purchase of Moscow furniture manufacturers, as a rule, exceeds 60% per annum, and the average business value is at the level of $ 270 thousand. Regional enterprises are more expensive and pay off somewhat more slowly, due in particular to the high cost of their facilities real estate. This fact makes regional proposals interesting for large participants in the furniture market, as well as for holdings diversifying their investments.
Based on the materials of the Director-Info magazine
* The article is more than 8 years old. May contain outdated data