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Four Benefits And Four Trade-Offs Of Direct Importation

Amit Basu is the Founder & CEO of Artisan Furniture, London. He is an LSE alumnus with two decades’ experience in supply chain management.

There are myriad options for sourcing furniture, but what’s best? Retailers generally turn to distributors and wholesalers to supply their stock, and those partners in the chain can source fairly widely in turn, from their local markets to the other side of the world.

There is some evidence that the pandemic has fueled a move away from this and toward more Asia Pacific importation. The global furniture industry was worth $1.3 trillion in 2020 and is estimated to reach $1.6 trillion in revenue by 2025, according to data published by Statista. In 2021, the U.S. furniture market was valued at $227 billion, well ahead of second- and third-ranked China and Germany with $72.5 billion and $53.5 billion respectively.

Some Changing Preferences Worth Noting

Of the global figure in 2020, roughly $191 billion consisted of imports, a figure that was flat versus pre-pandemic 2019, and which has grown inconsistently in prior years, according to the UN Comtrade database.

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However, the numbers threw up some interesting insights when it came to export markets. In 2020, among the top five—China, Poland, Germany, Vietnam and Italy—only the two Asia Pacific countries saw growth versus 2019 while the others contracted. China was up 8.3%, and Vietnam boomed at 23%. Further down the list, Malaysia also grew at 11.7%.

Another upcoming furniture export market is India, in which I have first-hand experience. Here, according to data from the country’s Export Promotion Council for Handicrafts, the handicrafts category has seen rising demand since the pandemic after a slight drop in 2019. EPCH looks after the welfare of small- and medium-sized businesses exporting handmade products from gifts to furnishings, including furniture and rugs.

Companies have turned to cheaper Asian source markets for their furniture needs during the pandemic it seems. This may be partly connected to the e-commerce dropship boom driven by marketplaces such as Shopify, and the huge growth in third-party wholesaling on Amazon. In the final quarter of 2021, year-over-year sales growth by third-party sellers rose by 11% at the e-commerce giant.

These parallel factors are reasons why importation from afar can actually be the better way to go. Despite the negatives of size and bulk, relative fragility and bureaucratic complexity when shipping across thousands of miles, this option makes sense for volume sellers and those wanting to showcase unique, global products.

So let’s set out the pros and cons to test the idea. I would like to start with the negatives as most businesses will have some clear, preconceived notions about these, and I have already listed three, in general terms, above. As to the specifics, here’s the core list as I see it:

1. The Cultural Challenge: It’s difficult not knowing what is happening several thousands of miles away because there are language barriers. Even when you are both communicating in English, what you mean and what your supplier understands can be very different.

2. Partner Credibility: Dealing with a supplier at a distance requires trust and confidence. Building that up can be a tricky process when you might also be dealing across a communications chasm. Here, word-of-mouth or past experience are fallbacks.

3. Foreign Exchange and Pricing: Currency movements affect pricing, and while this might not always be an issue depending on how you negotiate the deal, the current collapse of the Russian rouble is an example of how businesses can be caught unawares.

4. Shipping Logistics and Costs: Covid-19 brought these into sharp focus due to demand outstripping supply as pandemic restrictions eased in the West.

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Looking Past The Complexities

These challenges look daunting, more so at this moment in time as a perfect storm brews, thanks to a preexisting energy crisis and the current global uncertainty. But as an importer myself into the U.K. and the U.S., I can tell you that the benefits can outweigh the risks, and here’s why:

1. Price: When it comes to furniture, you will generally see a huge price advantage when going to markets like China, India, Indonesia and Vietnam. I hesitate to say exactly how much, but it is roughly a quarter of what you might expect to pay if sourcing locally.

2. Bespoke Production and Customization: To stand out from the crowd, offering a product selection that is distinctive is important. Sourcing in low-priced markets in the Asia Pacific gives you the option to do this without breaking the bank.

3. Exclusivity: As an extension of customization, you can also fully personalize products by creating your own ranges or one-offs, and/or supply to certain markets but not others—so-called geo-restrictions—to ensure particular lines are unique to selected markets.

4. Bulk Buying: This enables you to bring down prices even further.

The savings made using direct importation are tangible. If, as a retailer, you were paying say $100 for a product in the dropshipping environment, it would cost perhaps about $60 when managed as a wholesale order.

For example, a retail customer looking for a bedside table from a dropshipper might pay $100 and then go on to retail the item for $300. The same customer via wholesale would pay $60, so their profit margin is significantly boosted.

Of course, there is more to consider than just the price. Remember, there are good reasons why these different prices and services exist. Dropship consignments are smaller and go to the end consumer without you holding any stock, hence they cost more. Wholesale products, on the other hand, go straight to retailers, often as full container loads directly from the factory. Wholesale, therefore, works best when you are dealing in high volumes and you have the space to accommodate the products.

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Whichever of the two supply routes you take, the trend toward sourcing from further afield seems to be growing, and for furniture, that means from Asia Pacific. The pandemic boom in home renovation and rebuilds has fueled demand for furniture, and not just from IKEA. More exotic lines, but without hefty price tags, are what consumers are increasingly looking for.

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