The reduction in purchasing power and the liberation of a niche in the mass segment of the furniture market have increased the interest of manufacturers in budget lines. Thus, 70% of Russian suppliers in the middle and expensive segments switched to selling more affordable collections in order to maintain market share, the turnover of which may decline by the end of the year. At the same time, the cost of furniture remains under pressure due to imported components.
About 70% of Russian furniture manufacturers in the middle and upper middle segments have switched to selling more affordable collections, according to a study by the E-Promo agency. They note that improving the offer for consumers with low purchasing power will help maintain market share, the turnover of which may decrease or increase slightly by the end of 2023. For the study, the assortment matrix of 15 key companies in the industry was compared and surveys of market participants were conducted.
According to E-Promo, when entering a new niche of budget furniture, manufacturers create new brands in addition to the main brand or develop a separate range for sale exclusively on online platforms. Askona Group of Companies, for example, launched a budget brand of sleep products, buyson, which will be sold online (see “Kommersant” dated October 25, 2022). General Director of the First Furniture Factory Alexander Shestakov says that against the backdrop of growing demand for the economy segment, the company this year introduced standard modular kitchens “Light” into production.
One of the founders of Mr.Doors, Maxim Valetsky, says that active development in the budget furniture segment is facilitated by the weakening of the ruble and the departure of some foreign players. In addition to the Swedish IKEA, the Danish chain Jysk left the Russian market after the outbreak of hostilities in Ukraine, and home goods stores Zara Home and H&M Home were closed. According to the Association of Furniture and Wood Processing Industry Enterprises (AMDPR), cited by E-Promo, in the first half of 2023, the share of imported furniture in the Russian market decreased to 25% against 41% in 2022.
In the high price segment there is higher competition, more costs, including for additional services, so some manufacturers could reorient their capacities to produce more budget and popular furniture, especially for the fast-growing online market, says the managing partner of Vanchugov and Partners (among objects – “Design Center” in Rumyantsevo) Alexey Vanchugov. At Ozon, the turnover of goods in the furniture category in the first half of the year increased by 153%, and sales of large-sized furniture increased by 3.2 times year-on-year. At Yandex Market, from January to September, demand for furniture increased 2.6 times year on year.
As noted in the E-Promo study, to maintain demand in the current conditions, furniture manufacturers and sellers have also become more active in using discounts and promotions, loyalty programs, and installment plans. Maxim Valetsky also notes an increase in the number of purchases in installments. According to him, Mr.Doors’s figure increased by more than 10% compared to last year, and by the end of the year it could increase by 15%. Mr. Valetsky cites the growing inflation rate, which motivates consumers not to postpone planned purchases, as well as the trend for complex furniture orders in one place, as the main factors in the growth of demand for the service.
According to AMDPR, the volume of furniture production in Russia in the nine months of 2023 increased by 27.3% year-on-year, to 46.7 million units, which was a record figure since 2019. Denis Egorov, general director of the furniture company Lazurit, says that furniture sales remain at last year’s level. As Alexander Shestakov notes, due to the rise in real estate prices, buyers have less money to furnish their apartment. And the cost of furniture remains under pressure due to the high share of imported components: fittings, varnishes, paints, fabrics and other things, he points out. Alexey Vanchugov believes that the demand for inexpensive furniture will continue to grow in 2024, including due to the programs of developers offering furnished apartments.