Furniture industry fighting 'China Price'

By Dennis Seid/NEMS Daily Journal

The furniture industry, like other industries facing stiff competition and cost pressures, must adapt to survive, experts said Tuesday at a business seminar.
Executives and others in the furniture business gave one another suggestions at the “Strategy 2010″ conference at the BancorpSouth Conference Center.
But there is no single strategy that fits for everyone.
“We got a lot of advice, but not a lot of answers,” quipped one furniture executive.
One piece of advice was from Charles Campbell, a professor of finance and economics at Mississippi State University, who said the furniture industry could look at more automation to cut costs and waste.
But that doesn’t always work, especially in the furniture industry.
One furniture company said it bought a $500,000 piece of equipment several years ago to cut leather covers, only to see that China could still do it cheaper. That machine sits idle today.
That’s a result of the so-called “China Price,” which refers to the lower cost of manufacturing – 30 to 50 percent or more – in China compared to the U.S.
Because of lower labor rates and lower materials cost overseas, the “China Price” has taken its toll on virtually every industry, from apparel to steel. In furniture, it’s meant the loss of 200,000 jobs alone in North Carolina.
“We cut costs where we can everyday,” said Al Wiygul, president of Bauhaus USA, a division of La-Z-Boy. “There are a lot of efficiencies in manufacturing. But what will help us the most is a crystal ball.”
Wiygul was half kidding, but few at the conference would argue that the future is anything but clear.
The economy still is recovering, and consumers’ tastes have changed.
Richie McLarty, president of Albany Industries, said consumers today put more emphasis on price, and don’t really care where furniture is made.
Quality is less of an issue, so furniture manufacturers must find the right balance.
And Albany, like many furniture manufacturers, gets components and materials from China in order to stay competitive.
“Doing business with China, it’s a contentious issue,” McLarty said. But he said it’s a move that Albany decided it had to make to stay in business.
Industry leaders also said tariffs on rolled fabrics, used by companies for their upholstered furniture, can hit 17 percent. In addition, imported furniture, which competes directly with Mississippi and American-made products, faces no tariff at all.
“That make no sense at all,” McLarty said.
Judith Phillips, of MSU’s John C. Stennis Institute of Government, said local, state and national governments need to do what they can to help the furniture industry.
“Unfortunately, the furniture industry is small, unlike the steel and auto industries, and it doesn’t get any attention,” said Phillips.
Tuesday’s seminar was sponsored by Mississippi State University’s Franklin Furniture Institute, College of Business, Forest and Wildlife Research Center, Technology Resource Institute and the U.S. Economic Development Administration.