What is the opportunity for furniture retail in Indonesia? What is their strategy to survive the pandemic?
Consumer-home furnishings retail industry gives options to make their homes truly their own with their preferred furniture and decorations choices. Furniture retail is a multi-billion dollar industry, which involves a large number of employees around the world.
For many years, the industry exclusively operated using offline channels. But today, buying furniture online has become a possibility, especially since there are significant advancements in the logistics industry. Furniture retail and trade is one of the important industries of the global economy.
The furniture industry consists of the production, distribution, and retail to deliver the products for residential and commercial use to end customers. It has huge potential because furniture is almost seen everywhere, starting in homes, offices, schools, or even outdoors.
The United States is the world’s largest furniture market, but the APAC region is growing in market size and importance, recorded for three of the top five markets globally. According to data from Statista, by 2025, the global furniture market value is estimated to be more than USD 1.6 trillion, while by 2022, furniture e-commerce is expected to generate revenue of almost USD 400 billion. The United States with almost USD 227 billion in revenue in furniture, became the leading market globally in 2021, followed by China and Germany came in second and third with the second market topping the USD 50 billion mark. Even though most consumers still prefer to purchase furniture offline in stores, the reverse trend is rapidly increasing. In the United States, the home appliance and furniture industry represented approximately 17.3% of the total e-commerce market segment in 2021.
Besides offline channels and e-commerce, augmented reality and eco-friendly furniture are on the rise. The prominent trend nowadays is the emergence of augmented reality technology. Even though most consumers still prefer to buy large-sized furniture in-store, many customers start buying online.
By adopting augmented reality technology, retail furniture facilitates consumer purchasing decisions by allowing shoppers to visualize how a sofa, table, cabinet, or bed would look in their homes. Apart from technology, another trend which growing globally is the concern of climate change and deforestation, which has resulted in interest in sustainable furniture increased.
Which opportunity from furniture retail has successfully expanded its market in Indonesia? What is the strategy of the furniture retail industry in Indonesia? Read this article to know more!
Overview of the Furniture Retail Industry in Indonesia
The whole Southeast Asia region is a potential market for the furniture sector. The current process of globalization has greatly affected the furniture industry in Southeast Asia. Indonesia, Malaysia, and Thailand are the leading furniture exporters. On the other hand, most of the leading furniture companies in Singapore have production facilities in China and other Asian countries.
The Indonesian home furniture market is expected to score high revenues in the future due to the expansion of its customer base across the country. The increasing demand for modern and expensive furniture due to the rising of the middle class in Indonesia is expected to help the market in increasing its income.
The increasing number of domestic and global players is also expected to be one of the main drivers for the overall home furniture market in Indonesia. The expansion of the customer base for domestic and global players rapidly increases the revenue for the overall market. The market is expected to grow from the increasing demand for high-quality furniture because the consumers have specific different preferences and aesthetic values.
Overall demand growth is being driven by increasing urbanization across the country. Versatile furniture such as hydraulic beds, folding tables, sofa beds, and beds with storage are increasingly popular because homebuyers looking to optimize their living space. This trend is important among urban shoppers, which is expected to drive the expansion of the home furniture market to become bigger. The trend is also supported by theme-based home decoration and renovations by the consumers who belong to the middle and upper-middle class in cities continue to follow. These urban dwellers tend to expect beyond the basic functionality of furniture and as such, may seek style and comfort as additional attributes.
Popular Furniture Retailers in Indonesia
There are major players nationally and internationally operating in the Indonesian furniture retail industry which currently dominates the market. Large furniture retail companies today compete not only through buying volume, product breadth, and effective marketing and trade, but also focus on market segments and compete through product depth and superior customer service.
There are three famous furniture retail industry brands in Indonesia. The three brands are IKEA, Ace Hardware, and Mitra10 which are explained further below:
IKEA, as one of the well-known furniture retailers in Indonesia, assessed that the prospect of the Indonesian furniture market is in a positive direction in 2022. The Indonesian IKEA Country Marketing Manager, Dyah Fitrisally, said that they are optimistic that the Indonesian furniture market will continue to grow.
According to The Indonesian Minister of Industry, Agus Gumiwang Kartasasmita, said the increase can be seen in the growth of the furniture industry by 8.04% in the first quarter of 2021 compared to the first quarter of 2020, furniture contracted by 7.28%. This means that the furniture industry has proven to have a high level of resilience during a pandemic.
2. Ace Hardware
Founded in 1924 as Ace Stores, the company changed its name to Ace Hardware Corporation in 1931. Ace Hardware expanded dramatically after World War II, increasing its sales more than three times between the late 1940s and 1959. In 1985, Ace Hardware first reached USD 1 billion in wholesale sales and USD 5 billion in 2015. In Indonesia, PT Ace Hardware Indonesia Tbk IDX: ACES a listed franchisee managed by PT Kawan Lama Sejahtera which owns 59.97%, opened the world’s largest Ace Hardware flagship store in Living World Mall, Alam Sutera, South Tangerang with the area size of 14,695 m2.
PT Catur Mitra Sejati Sentosa (CMSS) with the brand Mitra10, which is a subsidiary of PT Catur Sentosa Adiprana (CSAP), is the first modern retailer to introduce the concept of shopping for building materials and home appliances combined under one roof in Indonesia.
Data from the Jakarta Daily shows that CSAP, which started as a 40 m2 paint shop called Sentosa in 1966, managed to record Sales & Operating Revenues of Rp14.24 trillion, a 12.5% growth compared to the same period last year of IDR 12.65 trillion. At its inception, in 1997-1998, Mitra10 opened 10 supermarkets in the Greater Jakarta area. Sales of Discontinued Goods were recorded at 13.5 trillion while Consignment Sales were at IDR 730.1 billion throughout 2021.
The Strategy of Furniture Retail in Indonesia
During the pandemic and in the new normal period after the pandemic, some industries are expected to recover slowly. But it tells different when we talk about the furniture retail industry. Some well-known companies in Indonesia had formulated several strategies implemented to grab the demand which is created by the pandemic situation and able to survive even growing in times of crisis.
The strategies that we gathered from 3 furniture retail brands are including:
1. Digitalization on Catalogs and Order Process
The coronavirus pandemic has changed the promotion strategy of Swedish retailer IKEA from initially distributing printed catalogs to digital platforms. This digital catalog was launched to increase customers who want to shop online safely, hygienically, and easily accessible.
The covid-19 pandemic has changed the way people live, from socializing, working, and studying. As consumer behavior changes, IKEA offers various room inspirations and its latest product collections through digital catalogs. The company also provides a hot-spotting feature to make it easier for customers who want to retrieve information from the catalog and directly make purchases via IKEA’s website.
2. Expand The Market Reach by Opening New Stores
Retailer Ace Hardware Indonesia prepares Capital Expenditure (CapEx) of Rp 200 billion for 2022. Meanwhile, the company also targets to open 15 new outlets this year which will be carried out in stages. Meanwhile, the company also targets to open 15 new outlets this year which will be carried out in stages. The company sees that the handling of the Covid-19 pandemic will be more controlled and stable in 2022. So the company projects sales growth of around 8-10% in 2022.
The same thing is done by Mitra10. Currently, Mitra10 has 44 stores, as well as 18 Atria Retail Modern Home Furnishing showrooms in major cities in Indonesia. Management’s Mitra 10 decision to aggressively expand is part of Mitra10’s strategy to increase revenue and profit margins, as well as dominate market share, and this strategy yielded positive results.
3. Strengthening the Omnichannel Strategy
The strategy of Ace Hardware in 2022 will focus on three main strategies. The first is continuing digital transformation. The second one, Ace Hardware will also strengthen its omnichannel strategy so that the need to obtain Ace products can be more easily obtained by customers.
The same strategy is executed by Mitra10, for ease of shopping, Mitra10 products can now be obtained online through the partner10.com and Digiretail platform. This is possible because Mitra10’s digital service has an Omnichannel concept or consists of several platforms that are integrated.
4. Providing Relevant Products To The Costumers
The third focus of Ace Hardware is to provide products that are relevant and follow customer needs. This strategy is also adapted to the needs of each region and the target market of Ace Hardware. With those three strategies, ACES is also eyeing sales and profit growth this year.
Enter The Indonesian Furniture Retail Market with BRIGHT Indonesia
Because of the huge impact of the furniture retail industry in Indonesia, of course, it takes a lot of in-depth research about the furniture retail industry market in Indonesia. So, to enter the Indonesian market, you need the right local partner to assist you.
BRIGHT Indonesia is an ideal business partner for you. We will assist you on the ground, including virtual assistants during the mission, logistical planning, and detailed communication. It can cause your company to focus on developing partnership cooperation rather than the hassles of the business trip.
BRIGHT Indonesia provides several services such as Market Insight Research, Business Partnership Engagement, Management and Strategy Consulting, and Foreign Direct Investment. The services will help your business to:
- Provide assistance for you in expanding and developing your business by identification of potential partners.
- Secure the agreement between client companies and future Indonesian business partners by providing a list of potentially suitable partners, arrange business meetings, and act as a liaison.
- Supporting our foreign client companies from the private sector with developing corporate or business unit strategies or helping your company from public sector organizations with public policy.
- Link client companies both from the private and public sectors in global foreign direct investment (FDI) through training and assisting your company in entering FDI source countries to gather investment for your company’s local markets.
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