Table of contents
Key takeaways
The home furnishing market comprises players that develop, design, manufacture and/or retail a wide range of large- and small-scale furniture products. Herein, we specifically focused on the market for indoor furnishings and excluded kitchen and sanitary pure-players. We segmented the European market by activity: (i) manufacturing, (ii) design & distribution and (iii) retail.
The European home furnishing market is highly fragmented. The landscape is dominated by a handful of European furniture retail giants, while the manufacturing and design & distribution segments do not house any clear market leaders. However, the retail segment has been characterised by ongoing consolidation, mainly driven by retail giants' lust to acquire smaller peers reeling under financial pressure. As a result, the manufacturing segment is likely to follow due to their weaker bargaining position versus retailers.
Sponsor-led interest has been mediocre, with ~45% of identified assets being backed by financial sponsors (May 2023). Herein, the design & distribution segment sees the most PE-led interest, with ~65% of assets being investor-owned. We expect the segment's limited CAPEX requirements and relatively high flexibility (i.e. via an outsourced manufacturing model), as well as the attractiveness of premium players to be the key reasons. However, due to the current economic climate and forecasted volume decreases, we expect investor-led interest to be significantly lower in the near future.
ESG topics in the home furnishing market primarily relate to environmental and social topics. With a significant amount of furniture being manufactured in Asia, shipping has a significant impact on the environment. Incumbents limit their footprint by using recycled and biodegradable materials as well as by reusing frames (e.g. for sofas). From a social perspective, we see that topics primarily concern working conditions throughout the supply chain. Working conditions in Asia tend to be below par compared to the EU. To eliminate unethical sourcing throughout the supply chain, the largest incumbents engage in mandatory audits for their suppliers.
Company benchmarking
Market growth
CSIL (February 2023) estimated that the European furniture market generated ~€120bn in sales in 2022
Statista (April 2023) estimated that the European indoor furniture market (excluding kitchens) generated ~€145.3bn in 2022 and expects the market to reach ~€186.6bn by 2027 (+5.1% CAGR 2022-2027)
CEOs interviewed by Gain.pro expect the value of the European home furnishing market to grow at low single-digit annual growth rates in the near term. However, one industry executive foresees a volume decrease in 2023 and 2024, which is corroborated by CSIL (February 2023)
Positive drivers
The increased emotional weight consumers put into their living space, accelerated by the COVID-19 pandemic as well as the work-from-home model (which is here to stay), drives the demand for higher-quality furniture which can be sold at more attractive price points (interview by Gain.pro; Forbes, March 2023)
The relatively conservative home furnishing market is set significantly benefit from the digitisation of the sector and the subsequent availability of data to better tailor product offerings and services as well as improve product design and marketing ROIs leading to bottom-line improvements (interview by Gain.pro; DFS, October 2022)
Opportunities for retailers to boost both in-store and webshop traffic by optimising the customer’s experience. Through the seamless integration between offline and online sales channels, consumers can physically test and experience home furnishings to subsequently order the pieces online (interview by Gain.pro)
Negative drivers
As interest rates rise (Reuters, May 2023) and housing prices decrease (Eurostat, April 2023), Europeans are expected to move less. With moving being a typical moment to replace furniture, this will pressure players’ top-line upside (interview by Gain.pro)
The current uncertain economic climate, with high inflation (+7.0% YoY in April 2023 for EU; Eurostat, May 2023) and rising energy prices, pressures consumers' purchasing power (CBS, May 2022). As a result, consumers are expected to spend less on discretionary goods such as furniture (interviews by Gain.pro; CSIL, February 2023)
Designers and retailers stocked up during the pandemic, in times when container and raw material prices skyrocketed. As the COVID-induced demand is now falling, this means players are left with expensive inventories and decreased volume (interviews by Gain.pro; Furniture Today, January 2023)
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Home furnishing industry industry.
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