The global RTA furniture market is highly competitive with key industry players adopting various strategies such as expansions, acquisitions, and product launches to strengthen their market positions. Most companies in the market are focused on expanding operations across regions, augmenting their capabilities and distribution channel, and building strong partner relations.
The graph indicates the percentage of developments undertaken by key manufacturers in the global RTA furniture market. Sauder Woodworking Company accounted for the highest development share of 49% from 2014 to 2018. Sauder Woodworking Company is majorly focussed on product launches to expand the company’s geographical reach and set a strong foothold in the global RTA furniture market. For instance, in 2018, the company Sauder launched a new Manhattan Gate prototype collection. This collection resembles farmhouse furniture style and was designed to create a sophisticated home environment.
Ikea is also focused on product launches into the RTA furniture market to gain the competitive edge across the world. For instance, in 2017 Ikea developed a new type of Wedge Dowel joint. The purpose of which is to assemble furniture’s quickly and easily. Also, this type of joint does not require nuts, bolts, and screws for its assembly. Ikea accounted for 19% of the development share in global RTA furniture market.
HNI Corporation (Sauder) aims at acquiring new companies to grow in the market for that HNI Corporation acquired OFM, US-based furniture manufacturer. The acquisition expanded the business and helped the company to expand its product portfolio. The company holds 10% development share during the period of 2014–2018.
Kimbell Corporation accounted for a 12% of the total developments in the global RTA furniture market from 2014 to 2018. Kimball, a subsidiary of Kimball International, Inc., acquired David Edward, a furniture company, headquartered in Maryland, US. The acquisition extended the company’s product portfolio.
Analysis of the Key Developments by Major Players
The developments undertaken by the key players in the global RTA furniture market include strategic acquisitions, geographic and business expansions, and product launches.
According to Wantstats analysis, product launches accounted for a 43%% share of the total key developments by market players. Companies in the global RTA furniture market are strategizing theirs moves towards launching new RTA furniture types in the global RTA furniture market to extend their business reach. For instance, in 2016, Sauder expanded its product offerings by launching new soft modern collection, which involves elements of mid-century modern styles of furniture.
Acquisition accounted for 29% of the total developments in the market. Key players are taking major steps towards business acquiring small to medium sized RTA regional furniture market players businesses thus reaching untapped markets, thereby increasing consumer base and strengthening global footprints. For example, Dorel Industries, Inc. acquired Alphason Designs Limited, a manufacturer of office furniture in the UK, to expand its business in Europe.
Partnership and expansion by major brands has led to the diversification and penetration of product portfolios. Therefore, both product launch accounted for a significant 14% of developmental share. For example, Sauder Manufacturing Co. invested USD 32 million to move from Grabill to New Heaven. The new avenue was selected in order to double Sauder’s production. It would also ease work flow, logistics, and is expected to create 60 new jobs in the region.
Threat of New Entrants
The RTA furniture market is fragmented with established market players and in order to enter the market, new players need to invest enormously in creating their brand identity through strategies, such as innovative designs and by producing quality products with the help of advanced technology. Moreover, the initial set up cost is quite high, including the cost of space and the advanced machinery required to survive in the competitive market.
However, the production cost of RTA furniture is low with the easy availability of raw materials such as wood, plastic, metal, and steel. Moreover, the rising demand for foldable and easy to dismantle furniture attracts new players to enter the market. There are more chances for new entrants at the regional level, owing to the easy availability of raw materials and labor, which controls the production cost. However, dominant un-organized market of furniture in regions such as Africa and Asia make it little cost intensive for players to enter the organized RTA market due to multiple local options.
The threat of new entrants to the market is moderate.
Bargaining Power of Suppliers
Numerous suppliers supply the raw materials required for furniture, where the manufacturers have a plethora of options. Thus, they have the liberty to shift between suppliers as they are not dependent on a single supplier, which reduces their operational risks. The suppliers are not only concentrated in one region but also have a cross-regional presence, which reduces the switching cost among the manufacturers. Moreover, unorganized supplier base further limits the bargaining power of the suppliers. These factors result in the overall low bargaining power of the suppliers.
Therefore, the bargaining power of suppliers is low.
Threat of Substitutes
Furniture has no substitutes available. However, the market is highly fragmented and faces intense internal competition at the quality, price, and convenience levels. For instance, consumers are still buying assembled furniture over ready-to-assemble (RTA) furniture due to their incapability convenience to dismantle the furniture as required, along with the comparative finish and look. Also, luxury furniture market is majorly non-RTA type and has a considerable market in the developed regions. Thus, it is identified that there are chances of product substitutes at an internal level based on raw material, convenience, prices, disposable income and quality but there are no substitutes to furniture in general in the market.
The threat of substitutes in the RTA furniture market is low.
Bargaining Power of Buyers
The presence of many industrial players in the RTA furniture market has attracted a huge consumer base. Due to a large number of existing manufacturers in the market, the switching cost of consumer falls. However, the number of options available in the RTA market are comparatively less when compared with the non-RTA type. Consumers in many developing regions are still unaware of the benefits and types of RTA furniture and still purchase the conventional furniture types. Nevertheless, the RTA furniture market is gaining popularity due to its low cost, easy transport, and majority of the market is still price sensitive and tends to switch to offerings with a comparatively lower price.
The bargaining power of buyers is moderate in the RTA furniture market.
Rivalry
The furniture market is marked by high rivalry. Established players are targeting their competitors in terms of quality and price, making the industry competitive, reducing profit margins for all the existing firms. Additionally, players operating in the market are competing based on customized offering and technological advancements. Owing to the huge scope of the RTA furniture market, numerous players are entering the market at the regional level, which increases the market competition for the global players with the local vendors.
The competitive rivalry in the RTA furniture market is high.
