3 July 2015
Global Trend for Natural Material Boosts Vietnam's Furniture Sector
Exhibitors at the Vietnam International Furniture & Home Accessories Fair (VIFA-EXPO 2015) proved positive about making inroads into the lucrative US market, while also buoyed by the international preference for wooden furniture.
The eighth Vietnam International Furniture & Home Accessories Fair (VIFA-EXPO 2015) was held against a background of growing concerns over the world's wood supply, the recent signing of a number of Free Trade Agreements (FTA) and growing pressure on China's position as the material's leading exporter. Many of the Vietnamese furniture manufacturers featured at the event were only too keen to seize the export opportunities these changes have opened up, especially with regards to enhanced access to the key US market. Despite this optimism, concerns remained over the provenance of raw materials and the shortage of skilled labour.
A key theme of the event was the potential of the US market for Vietnamese furniture makers. Huynh Van Hanh, Vice President of the Handicraft & Wood Industry Association of Ho Chi Minh City (HAWA), said: "In 2014, Vietnamese furniture and wood export turnover was US$6.23 billion, an 11.5% increase compared to 2013. Most of the major export markets are growing, most notably the US market. Last year it was worth some US$2.23 billion dollars, an 11.1 % rise compared to 2013. Japan is now worth US$952 million, an increase of 15.6%, and the EU US$740 million, an increase of 7.9%. A number of new markets, such as the Middle East, Australia and ASEAN, also have clear potential for export growth."
Vietnamese wood and furniture exports totalled US$1,049 million in the first two months of 2015, an increase of 14.5% over the same period in 2014. Based on these figures, overall export growth for the year is predicted to be around 15%, representing a total value of some US$7.2 billion.
Le Duc Nghia, General Manager of the An Cuong Woodworking Company, a leading furniture and home decor provider in Vietnam since 1994, said that the export market was showing positive signals, with many enterprises growing at 30-50% annually. The An Cuong Company's turnover reached US$10 million in 2014, a 39% increase, year-on-year, with the majority of its customers coming from the US, Japan, Australia and Europe.
Assessing his own company's expectations, Nghia said: "The market is getting warmer in 2015. We believe that turnover will increase by 45% compared with 2014. At the moment, our order book is full for the rest of the year." The company, which was exhibiting at VIFA-EXPO for the first time, reported nearly 10,000 visitors to its stand over the four-day event, resulting in export orders in the region of US$950,000.
Vietnam now is the sixth largest wooden furniture exporter in the world and the second largest in Asia, behind only China. Over the last seven years, its turnover of wood exports has increased by an average of 15% annually, with its export markets expanding to over 120 countries around the world. Its most notable market are the US, Japan and Europe, which together account for some 80 per cent of its exports. The Vietnamese domestic market has also expanded rapidly, growing 40% over the last five years, reaching a trading value of US$2.25 billion.
Van Hanh said: "In 2015 the demand for wood trading across the world is really high, but the export share of Chinese manufacturers has decreased. This provides a great opportunity for getting a greater share for the Vietnamese wood industry. In addition, the free trade agreements negotiated and signed will deliver strong growth for furniture exports."
According to an HAWA report, the trend for furniture at present is for more modern, sophisticated and creative designs. The main products for export are home and office furniture, notably bedroom and kitchen items, tables and chairs.
Commenting on these trends, Nguyen Vong Thien An, a Ho Chi Minh City-based interior designer, said: "My work mostly focuses on interior designs for restaurants, bars, or shops. The new trend this year is to aim to bring the outdoors into indoor space, focusing mainly on a combination of wood, steel, and brick. This trend highlights the beauty of the basic, but also retains some traditional character."
This trend for bringing outdoor elements into an indoor décor context was also cited by Cerri William, a Senior Manager with the 2P Garden Company, a French brand specializing in supplying rock products. She said: "Natural rock and man-made rock are the main materials in use this year. This kind of interior furniture is, nowadays, not only popular in resorts, but also in mix-used buildings and house design.
"Our rock table, for example, was previously only used for outdoor purposes, but if we decorate it with coloured stones and put it together creatively with different kinds of chairs, we won't feel the hard and cold characters of the rock any more. Instead, a simple and beautiful style emerges. The most important thing that is the end users benefit from the comfortable and close-to-nature feeling provided by the rocky material".
These furniture design trend have made a noticeable impact in the real estate sector. Lauri Viilup, the Chief Executive of Vinaplace, a Vietnamese estate agent, said: "From the beginning of 2015, buyers have been more interested in natural material furniture. Wood is always the first choice for luxurious, high-class designs.
"One of the latest trends in interior design is to take advantage of natural elements, the mix of light colours, and especially the contrast of black and white, which creates sophistication and modernity."
This preference for natural materials, while stylish, does present certain problems for end users, especially in Vietnam's tropical climate. Viilup said: "The one big question is how to protect and maintain the wood from wood worms and the humid environment in Vietnam. There are several suppliers of wooden floor and roof protection products, but they're only suitable for short-term use and they're a poor investment. It is also expensive to import protection products from overseas."
In other areas, despite the huge potential for furniture exports to the US, the industry in Vietnam faces a number of key problems when it comes to meeting demand and satisfying trade regulation. Exports to America face strict requirements with regard to a products' origins under regulations intended to combat illegal logging. In total, some 80% of wood used in Vietnam is imported, but not all of it has the appropriate legal documentation. The cost of importing raw materials with clear, legal origins is higher, but this isn't reflected in a higher price for the finished products, inevitably putting commercial margins under pressure.
Production and shipment cost are also high, putting profitability under further strain. Workforce skills are also a problem for Vietnamese manufacturers, with many struggling to hire workers with the right technical knowledge.
The Vice President of the Industry and Commerce Department, Tran Tuan Anh, said: "The production of wood and handcrafts is one of the most important import-export industries in Vietnam. The sector still enjoys good growth, even when the domestic economy and global markets fluctuate. If companies identify difficulties clearly and find solutions to deal with them, then business development and export increase are in their hands."
VIFA-EXPO 2015 took place from 11-14 March at the Saigon Exhibition and Conference Centre in Ho Chi Minh City.
Pham Tuong Vi, Special Correspondent, Ho Chi Minh City