Furniture and design, the new China is flying

Michele Caprini
In brief
Italian design, which has always been one of the world's leading exporters, may find increasing room for development in the Chinese market, where the furniture market is expected to reach a volume of 160 billion dollars by 2021, at an annual growth rate of 6.61% between this year and 2025. This is not just an opportunity, but a long-lasting trend that is rooted in contemporary Chinese society.

The furniture market in China is booming, and in 2021 it is expected to reach a volume of $160 billion, with a CAGR of 6.61% between this year and 2025. The presence of Italian design, always among the top exporters in the world, can still find vast room for expansion. Not only for furniture and interior furnishings, but also for lighting products, ceramics and porcelain, accessories for the kitchen, garden and urban areas. This is not merely an opportunity, but a long-lasting trend that is rooted in contemporary Chinese society.

Who buys, and why: income and demographics

According to World Bank analysts, China’s middle class has had some of the fastest growth rates in the world, rising from 39.1 million people (3.1% of the population) in 2000 to around 707 million (50.8% of the population) in 2018. An increase of 47.7 percentage points, which no other country has matched, with the partial exception of Russia which grew from 28.2% of the population to 71.5%. In order to grasp the real scale of the phenomenon and its commercial importance, it is useful to mention the trend relating to the three other BRICS countries: Brazil 21.1%, South Africa 7.4%, and India 4.5%.

Today, much of the world’s middle class lives in the Western world, but, by 2030, more than half of consumer purchasing power, adjusted for inflation, will be in the East. China, in particular, by 2030 is expected to be the first country in the world to count on a heterogeneous middle class (according to local income levels) with more than one billion individuals.

In 2020, according to China’s National Bureau of Statistics, per capita disposable income grew by 4.7% year-on-year. The higher spending capacity, which has been growing steadily for years, is one the reason for the sector’s positive performance, exceeding the natural pandemic-induced pause. Generally speaking, the average age of the population has dropped and the target audience has widened considerably in recent years.

Who buys and why: the cities

“Cities occupy 1 percent of the Earth’s land surface, but are home to about 55 percent of the human population. To put it another way: the Earth’s surface is 510 million square kilometres, and cities occupy roughly 5 million of them. With their 4 billion inhabitants, cities are home to an average of 800 people per square kilometre – quite a crowd”. From ‘2030’, by Mauro F. Guillén, Director of the Cambridge Judge Business School.

The global process of urbanization finds one of its highest expressions in China. Data from the National Bureau of Statistics show that the percentage of permanent residents in China approached 64% in 2020, up more than three percentage points from 2019. More than 850 million city dwellers, therefore, largely workers and peasant families who settled there and which constitute a large part of the natural target of the furniture market, in the different ratio permitted to them by their position in the income scale included in the definition of ‘middle class’.

This is, moreover, the leading policy chosen by the Chinese government to stimulate domestic demand. The 14th Five-Year Plan, in fact, sets a target of 65% urbanization rate by 2025.

Which furniture?

The most important element of this market is living and dining room furniture, accounting for just under 40% of the global value. With an estimated annual growth of 20%, bespoke furniture captures a substantial portion of the industry’s revenues, expected to grow to $52 billion by 2024.

Demand for children’s furniture is increasing at a rapid rate. Always according to data from the National Bureau of Statistics, the number of Chinese under the age of 15 hit 253 million in 2020, including 10.04 million newborns. With the improvement of living standards, the propensity of families to purchase furniture suitable for the comfort of their children is growing. This particular branch of the furniture market could be worth $30 billion over the next three years.

The outdoor furniture sector (homes, hotels, restaurants) is also experiencing a year-over-year increase, though on a much smaller revenue growth rate.

The target and communication

If appearance and design are one of the main reasons for choosing furniture, making this a definite prospect of advantage for Made in Italy players, Chinese consumers participate to an important extent in problems relating to environmental impact by rewarding producers more attentive to the sustainability of their offer and public health.

Today, the privileged consumer segment is between the age group of 30 to 40, with a good level of education, very sophisticated in the way it moves on the market, tied to tradition but attracted by the quality of the furniture and the beauty of international design, without particular obligations to the brand and, more generally, towards luxury.

The market is very varied and demand is, of course, wide ranging, and one fact immediately stands out on the way in which this manifests itself: by 2021, 52% of purchases will be made online. Resultantly, brand awareness is linked to effective communication on the web, in particular on the main Chinese social media and on the principal and most important digital platforms such as WeChat, Weibo, Little Red Book, Baidu.