“I don’t see any way for the furniture market, and I mean the businesses that operate legally here, to post growth in 2013. On the contrary, everything points to decline again,” said Dan Sucu, chairman of Mobexpert, the largest furniture business in Romania with EUR114 million revenue in 2011.
The latest available figures for the first 11 months of 2012 show 2.5% drop in sales on the Romanian market to EUR665.6 million, according to the Romanian Furniture Manufacturers Association (APMR).
The country’s furniture market is highly fragmented, with major companies like Mobexpert, IKEA, Elvila, kika, Lemet and many small businesses with only one store, as well as companies selling made-to-order furniture online.
Plant closings are another sign of how difficult the market is now. Mobstrat Suceava and Libertatea Cluj (northern and northwestern Romania) were replaced by malls and business centers.
However, the major players can still find niches to grow on, such as new collections and new export markets.
“Judging from the input of the beginning of the year, we expect a decline of the market in 2013, but it’s too soon to be talking numbers. It will not be a two-digit decline,” said Adrian Rizea, commercial manager of Lemet. “The market will be flat at best.”
Lemet has a plant in Campina (Prahova County, southern Romania) and more than 100 stores, most of which franchised.
The officials of Neoset, a furniture retailer that relaunched in 2012, feel about the same.
“The total market will slightly decline. As the crisis continues in all EU and construction is still moving at a very slow pace, there will be some pressure on sales this year, too,” said John Oikonomou, operations manager of Neoset Mobilier SRL.
Businessman Dan Sucu says that three factors are hurting furniture sales:
The banking system, “almost completely unreformed since 2009”, the VAT, which hinders consumer spending at its current level, 24% and Romania becoming a country captive to the social categories in need of welfare.
“Banks postponed assuming the 2009 losses (…). This led to a general freeze, driving up borrowing costs for new and old customers alike. Unfortunately, almost everyone that borrowed money back then was forced to deal with the sudden change of attitude of banks from lending to savings,” the businessman says.
Sucu has repeatedly talked about the impact of the banking system on the real economy and about furniture retailers vying over customers’ money with banks and government (taxes that people have to pay).
“Many were unable to repay their instalments on the principal, they only paid the interest. Postponing isn’t solving their problems. Banks will eventually have to assume the losses anyway. It’s pointless for the central bank to refuse to acknowledge the fact that there have to be fewer yet healthier banks left,” Sucu added.
He believes that whereas the VAT is already hindering consumer spending, welfare spending is becoming increasingly more burdensome.
Lars Lund, who runs retailer kika’s operations in Romania is more optimistic and expects a slight rebound of the industry.
“I see the market increasing together with the economy. (…) Depending on how the banking industry and real estate goes, the furniture industry will follow. I believe it will increase, but a number is difficult to predict,” Lars Lund said.
Lemet’s Adrian Rizea says that both furniture and other durable goods are not doing well now. For instance, sales of large and small home appliances fell in 2012. So did sales of office equipment and consumables, according to GfK Temax survey. On the other hand, electronics and telecom increased in 2012.
“As one can easily see, the country has not overcome economic instability. This has a direct impact on consumer spending, regardless of the industry. All durable goods markets saw significant decline last year and there doesn’t appear to be any major change in 2013 to modify the current trend,” Adrian Rizea said.
Exports increased again last year by more than 5% in the first 11 months of 2012, but it is not certain they can drive the domestic market.
“Romania exports to Germany, France, Italy etc. and exports might counterbalance the deficit from the local market although due to the large economic crisis prices and manufacturing cost have dropped dramatically in other (even European) countries too. That will put some pressure to export prices from Romania (…) But not all furniture categories will encounter the same issues. Office furniture will probably face more serious problems, with the house furniture probably remaining at the same level as 2012,” Neoset Mobilier SRL’s John Oikonomou said.
Greek Neoset group, with about EUR50 million revenue in the region, entered Romania in 1991 and had developed a network of 25 stores, which generated EUR12 million to EUR15 million revenue before the crisis, according to the information provided. Most stores were franchised. The company later closed most of them and kept those in Timisoara, Constanta and Ploiesti (franchised). In November 2012 it opened a 600 square meter store in Pipera (northern Bucharest) following a EUR200,000 investment and plans to open more.
(English version by Loredana Fratila-Cristescu)
Trend of main furniture industry* indicators in the first 11 months of 2012
| 11 months 2012 (mln. euros) | 11 months 2011 (mln. euros) | Trend (%) | |
| Production | 1,671 | 1,616 | 3.40 |
| Domestic market | 665 | 682 | -2.49 |
| Exports | 1,330 | 1,257 | 5.81 |
| Imports | 324 | 323 | 0.31 |
| Number of employees (thousand people) | 54 | 50 | 8.00 |