Rising appetite for home decoration

Vietnamese people show a rising appreciation and demand for decorative furniture for their homes Photo: Le Toan

In the latest move, Sweden’s home furnishing giant IKEA is planning to pour $450 million into Hanoi to develop a supply chain system or retail centre for the whole Southeast Asian market.

One year ago, the CEO of Inter IKEA Holdings confirmed that Vietnam and the Philippines would be the next Southeast Asian countries for IKEA to enter in its five-year global expansion plan, in addition to South America, to realise the corporation’s ambition of dominating the global furniture market.

IKEA has more than 400 stores in 49 markets across Europe, Northern America, the Middle East, Asia, and Australia, and is known for its huge stores displaying a full range of household appliances, furniture, kitchenware, gardening tools, and home appliances.

The size of each store is on par with large department stores, with multiple areas designed as complete apartments or rooms. Customers said that IKEA items are of simple design, focusing on effective use.

Foreign moves

The Vietnamese furniture market is said to carry great potential. In 2018, the total consumption value of the Vietnamese furniture market was estimated at $4 billion, excluding the export turnover of the wood sector which posted a record of $9 billion. However, very few Vietnamese furniture brands are known across the playground, according to the Handicraft and Wood Industry Association of Ho Chi Minh City (HAWA).

Foreign experts said that despite being the world’s leading wood and wood furniture exporter, the market has been largely held by giants from Germany and France (in the luxury segment), and Japan, China, Malaysia, Thailand, and some Northern European countries.

The imported wooden furniture segment has been dominated by China with the proportion of 63 per cent, followed by South Korea (11 per cent). In 2018, Vietnam was estimated to have spent around $500 million to import furniture, and this trend will continue increasing in the years to come.

With annual expenditure of over $21 per capita, the Vietnamese furniture market has been attracting foreign brands. Commenting on furniture marketing in Vietnam, which is said to be largely dependent on the real estate market, especially the apartment segment, a representative of JYSK Vietnam told VIR, “The Vietnamese real estate market has become ‘hotter’ in the past several years, so the demand for furniture has also increased.”

Despite entering Vietnam only three years ago, JYSK, a global furniture brand from Denmark, has developed with 13 stores across Hanoi, Ho Chi Minh City, and Danang, targeting young middle-class families.

Highlights of JYSK products are the Nordic style, focusing on furniture for the living room, dining room, bedroom, and bedding of European standards.

However, the eldest brand is UMA, a half-foreign furniture company founded by a Swedish person which manufactures products in Vietnam in a Swedish style. This brand operates 15 showrooms in the two biggest cities, Hanoi and Ho Chi Minh City. Despite several scandals related to product quality, UMA is still a good choice in modern times with their convenience and diverse products.

Talking about market demand, Vu Tien Thap, owner of Home’Furni, an online furniture supermarket, said that domestic purchasing power is now very strong. Customers are becoming more and more interested in living space, paying attention to the utility of furniture.

He estimated that most people owning apartments worth more than VND25 million ($1,090) per square metre are ready to spend on home decoration design services. However, there are not many large furniture supermarkets, while the quality of imported items is not assured.

Efforts by domestic players

Realising the potential of the furnishing market, local companies like Chi Lai, NhaXinh, Pho Xinh, An Duong Home Center, and AKA Furniture, among others have been on the warpath of expansion, mainly targeting furniture and home decoration in the high-end segment.

Local companies are also working to increase their market shares and exploit market potential by continuously expanding their furniture and home decoration product showrooms.

Founded by Nguyen Quoc Khanh, chairman of the HAWA, the NhaXinh furniture brand focuses on designing and manufacturing Asian-style furniture from local materials. This brand is expected to launch its ninth showroom at Sun Plaza in Thuy Khue street, Hanoi.

Meanwhile, Hoang Nam Group, the owner of the Pho Xinh brand, decided to open an online showroom utilising virtual reality technology to set itself apart.

According to Duong Quoc Nam, CEO of Hoang Nam Group, modern customers buy furniture to decorate their houses, so their requirements are very high. They often shop around and check multiple stores before making a decision and they are very interested in technology that creates a 3D model of their home on their smartphones.

Besides, Hoang Nam has always invested a great amount of money in keeping up with trends and new technologies. At the same time, the company maintains a team of professional designers and regularly invites experts from Italy, Singapore, and China to train their employees and transfer production technologies to improve customer service.

“I look for new market information, management methods, as well as new elements for our business strategy every day. Without keeping our eyes constantly open, Pho Xinh’s business results would not be half as bright,” Nam said.

Along with investing in technology, the group also co-operates with famous furniture manufacturers to bring Vietnamese customers leading high-end products.

Hoan My Furtniture takes a different tack in innovation. While almost all foreign and local companies focus on large cities, including Hanoi, Danang, and Ho Chi Minh City, as their target markets, Hoan My Furniture gives equal love to the provinces as well. At present, Hoan My Furniture has showrooms in Haiphong, Thanh Hoa, and Thai Nguyen. Most recently, on January 1, it launched a showroom in the northern province of Quang Ninh’s Halong city, marking its 10th showroom in the country.

According to EuroSphere, with a forecasted annual growth rate of 9.5 per cent to 2020, the Vietnamese home décor and furniture industry will grow at a rapid rate to meet the increasing demand for furnishing. Household expenditure on home décor, furniture, and services is estimated to reach $18 billion in 2020.

As the upcoming free trade agreements (FTAs) between Vietnam and its partners will come into effect, the demand for home décor and furniture exports will increase as the cross-border movement of goods will become easier.

Moreover, Vietnam is becoming more attractive for foreign investors as more international brands are looking to relocate manufacturing plants to Vietnam to reap the benefits that come with the FTAs or are looking to expand their business in Vietnam as import taxes on home décor and furniture will be lifted.

The rising demand for real estate pulls along the demand for home décor and furniture. Vietnamese consumers are shifting towards high-quality, western-style furniture at an affordable price. The potential of the market is quite large, but competition remains fierce.