Furniture is one of the essential products for our home or office use. Besides being a necessity for everyday usage, furniture is also used for decoration purposes. In many ways, furniture portrays the customer’s taste of aristocracy. With time changing and keeping pace with the evolving tastes and needs of the customers, the furniture industry of Bangladesh has developed. According to a report by The Business Standard, the revenue of the country’s furniture industry exceeds 10,000 crores every year. At present, along with meeting the demand of local customers, manufacturers are also exporting to other countries, which has created new possibilities in Bangladesh’s export trade. With the increase in furniture exports of Bangladesh, domestic brands are also expanding their activities abroad. In this article, we will shed light on the history and emergence of Bangladesh’s furniture business.
Furniture Industry Overview
In the Indian subcontinent, the furniture industry has a long history and tradition. Prior to independence, several small traditional furniture businesses were operating in Bangladesh, but most of the big furniture brands have been operating in the country since independence. As demand increased in the early ‘90s, the industry transformed into a mass-production-oriented industry and gradually became one of the major economic contributors in the country. The country’s furniture exports began in the mid-1990s.
The furniture sector in Bangladesh can be divided into two types; organized and unorganized. These two types can also be called branded and non-branded. However, non-branded or unorganized industries are dominating 65% of the country’s furniture market. Based on brand value, brands can be further subdivided into three levels. According to Databd, brands like Hatil, Otobi, Navana, and Akhtar Furnitures are known as high-end brands. And, brands like Partex and Brothers Furniture are known as mid-tier brands, and Legacy and Homes Furniture are known as low-end brands.
Founded in 1975, Otobi Furniture was once the market leader of the furniture industry in our country. The company started exporting in the mid-90s. However, in the last few years, the company has lost its position due to several reasons, including wrong business strategy. According to TBS, Otobi currently holds 5% of the market share. On the other hand, Akhtar Furnishers, established in 1976, is currently occupying the second position. Starting their journey as Hatil Doors in 1989 at Badda, Dhaka. Hatil Furniture has now become the market leader with a 10 percent market share. Partex, meanwhile, began its journey in 1962, but they only produced particle boards. Later in 1999, they started manufacturing furniture. Navana Furniture, another giant in the country’s furniture industry, started its operations in 2002 and now holds a market share of 5%.
In the last 50 years, more than 100 medium and large furniture factories have been set up in the country. Among the types of furniture produced in the country are solid wood furniture, processed wood furniture, metal furniture, cane furniture, etc. According to a report by The Business Standard, 93% of manufactured furniture is sold in the local market. At present, more than 2.5 million workers are employed in the furniture industry. The Bangladesh government has declared the furniture industry as a “thrust sector.” The thrust sector generally refers to those industries or sub-sectors that significantly contribute to a country’s GDP growth, create employment opportunities, and export income growth.
Besides, in the 2015-2018 export policy, the furniture industry of Bangladesh has been included among the top priority sectors. According to a January 2020 article of The Business Standard, Bangladeshi furniture is exported to the United States, Canada, Australia, the United Kingdom, some countries of the Middle East, and Europe. India and some other countries in South Asia are also included in this list. Although the export target for the fiscal year 2019-2020 was 90 million, the total amount was 76.41 million, which was more than 2 percent (2.03%) of the previous year.
According to Statista 2019 data, China is the world’s largest furniture exporter. In 2019, China’s total furniture exports amounted to about 63.78 billion dollars. On the other hand, Poland and Germany were in 2nd and 3rd place with about 13.17 billion and 13.11 billion dollars respectively. According to Statista data, the market value of the worldwide furniture industry in 2020 was about 509.8 billion. The market is expected to reach 650.7 billion by 2026.
The Bangladesh Furniture Export Association and the Bangladesh Furniture Industries Owners Association (BFIOA) are constantly working on the potential and growth of the country’s furniture industry. According to a January 2020 report by Business Standard, Bangladesh’s furniture industry was growing at an annual rate of 18 to 20 percent.
However, the covid-19 epidemic has had a significant impact on the furniture manufacturers in Bangladesh. Especially the small and non branded markets were more affected. According to a report from The Financial Express in September 2020, almost 600,000 workers lost their jobs in the furniture sector due to the epidemic. This number was expected to increase further by the end of the year. However, now that the situation has become normal, the industry is turning around a lot.
Automation in Production
Reviewing the current state of the furniture industry in Bangladesh, several trends can be noticed. Presently, Robotics and automation are now becoming more popular in factory production. According to The Independent BD, Hatil Furniture added automatic machinery and automated robotics systems to their factory in Savar and has invested over 200 crore BDT in renovating their factory.
Rise of E-commerce and Online-based Furniture Sales
With the increase in e-commerce and f-commerce platforms, online sales of furniture have also increased. According to the popular e-commerce platform Daraz’s statistics, among their top ten best-selling products in 2020, two were furniture products.
Some online based furniture shops have recently gained popularity. One of which is ISHO. Launched in 2017, ISHO mainly manufactures trendy and modern furniture targeting the young generation. In this context, furniture brands like Hatil are also trying to enrich their shopping experience by using e-commerce platforms, virtual showrooms, smartphone apps, and Augmented Reality for their customers.
Minimalistic, Convertible and Knock-down Furniture Concept
Presently, many customers are turning to simple and minimalist furniture instead of traditional ornamental designs. Although the trend of minimal furniture has been prevalent globally for a long time now, its market is still in a growing stage in Bangladesh. Inspired by IKEA, Otobi Furniture was the first in Bangladesh to introduce a simple design of minimalistic particle board furniture. However, at that time, customers preferred furniture made of solid wood over boards. Currently, ISHO and several other companies are offering minimalistic furniture, and the popularity of this type of furniture is increasing gradually. At the same time, convertible furniture is currently gaining popularity for its multi-purpose and space-saving features.
The Demand of Steel Furniture is Decreasing.
At one time, steel cupboards, file cabinets, steel racks, show-cases, chairs, tables, etc., made of steel furniture were in high demand in Bangladesh. However, in recent times the steel furniture market has fallen. According to the English Road Steel Furniture Multipurpose Cooperative Society, there are about 70 to 80 thousand steel furniture manufacturers in the country. The total investment in this industry is about 10 thousand crore BDT. But as the demand continues to decline, various corporations in this industry are slowly closing down. As a result, about 60% of the industry’s 3 million employees have already lost their jobs.
The Reason Behind the Growth
After the RMG sector in Bangladesh, the furniture industry is one of the major contributors to the country’s employment. It also contributes to the country’s GDP, exports. And there are several notable reasons behind this.
Low Labour Costs & Woodworking Skills
Low-cost labor is one of the vital reason behind any major industrial growth in Bangladesh. The furniture industry is no exception, where the opportunity to hire skilled workers at lower wages is taking the industry further. Also, the woodworker’s exceptional woodworking skills are helping to bring aesthetic products to the market.
Increase in Export
One of the major reasons behind the rapid growth of the country’s furniture industry is the increasing demand of Bangladeshi manufactured furniture in the foreign market. The main reason for this is its diverse and international standard product line. According to the Export Promotion Bureau, Bangladesh’s furniture exports have increased by about 267% in the last decade. In the fiscal year 2011-2012, the country’s furniture exports amounted to 27.14 million USD, which increased to 76.41 million in Fiscal Year 2019-2020.
Rising Demand in Corporate Sector
Another major reason behind the rapid growth of the country’s furniture industry is the increase in the demand for furniture in the corporate sector. According to various stakeholders in the last 20 years, the country has witnessed tremendous growth in the corporate sector and with it the demand for office furniture has also increased. According to a 2019 report by DataBD, 70% of the furniture produced in the country is home furniture and the remaining 30% is office furniture.
Growing Consumer’s Spending Capacity
Currently, with the rising of the country’s GDP, the consumer’s spending capacity has also increased. According to the Household Income and Expenditure Survey of the Bangladesh Bureau of Statistics, the per capita monthly income of the country in 2005 was Tk. 7,203, which increased to Tk 11479 in 2010 and to tk 15988 in 2016 respectively. Which means, per household monthly income has more than doubled (* 2.22) in a decade.
In addition, the amount of Expenditure per household in 2005 was tk 6134, but by 2016 it has increased to tk 15715. Furniture sales, like many other things, have grown as a result of the improved quality of living.
Challenges to Overcome
Although the furniture industry is growing fast, there are still many challenges to overcome.
Dependency on Imported Raw Materials
Because Bangladesh lacked the required amount of forest land, cutting of trees in some protected forest regions was banned in 1990. According to a report by The Business Standard, among the 14 million hectares of total land area, currently, 1.2 million hectares is protected forest land. Other than that, due to the scarcity of other sources, it is not possible to supply sufficient raw materials from the country. As a result, an average of 60% of the raw materials currently used in the furniture sector are imported from other countries. In addition, Myanmar, one of the major timber import sources of Bangladesh, banned timber exports in 2014. The banning of timber export had a huge impact on the country’s furniture industry.
Scarcity of Technical Skilled Manpower
Most of the factories in Bangladesh, being in the unorganized sector, have more traditional work. As most of the furniture factories in Bangladesh belong to the unorganized sector, there is still a lot of traditional and manual work in the factories. In this context, the lack of technically skilled workers in the country is tied to modern equipment management and innovation.
Lack of Government Incentives
The lack of proper government incentives for various developments in the furniture industry is also creating challenges for the industry. According to industry leaders, the furniture industry is likely to reach the level of ready-made garments if an adequate supply of raw materials and government subsidies are available. In addition, government incentives are also important to promote locally produced artificial wood products.
Excessive Business Operation Costs
Excessive cost is another big challenge for this industry in conducting business in Bangladesh. Poor port infrastructure, poor internal transportation etc, are increasing the overall cost a lot. Also, the additional cost of cross-border trading has become an issue for import-export.
While some people prefer minimalistic branded furniture, a large customer base still feels more comfortable using non-branded, traditional, heavily designed furniture. Some customers make furniture locally by copying designs from popular brands. Which, in turn, serves as a drawback for branded furniture companies.
Future Opportunities and Suggestions
Huge Export Market
As a result of global industrialization, the demand for home furniture as well as office furniture in the foreign market is constantly increasing. According to DataBD, there is a huge market for office furniture in various countries, including the United States and Japan, along with all the other major countries. Bangladeshi manufacturers can utilize this opportunity to capture the global market for office furniture. At present, Hatil Furniture has 15 showrooms in India and 2 in Bhutan. However, since wooden furniture is not environmentally friendly, it faces a lot of criticism in the global market. Therefore, while manufacturing furniture, particleboards made from unused wood powder and bark are being used in different combinations rather than direct wood. As well as being environmentally friendly, such boards are quite cost-effective, making the price of the product quite reasonable. Also, this type of furniture is very easy to transport due to its lightweight. At present, companies like Hatil, Akhtar, and Akij in Bangladesh have factories for making in-house particle board furniture. As a result, there is an opportunity to export particle board as well as furniture in the future.
Quality up-gradation and Positive Branding
It is necessary to upgrade Product quality to fight global competition and attract international buyers, investors. Bangladeshi brands can further promote their diversified product line internationally through proper branding.
Although there are many skilled laborers in the furniture industry of Bangladesh, the use of automated technology machinery in furniture manufacturing is increasing. For this, technical training facilities should be extended to enhance the technical skills of the existing and upcoming workers. Ideas like equipment management, high-quality products, and global standard designing can be easily implemented when an efficient workforce is available.
Solidifying Backward Linkage
Reliance on imported raw materials of Bangladesh’s furniture industry is a major issue in the growth of the industry. According to the Export Promotion Bureau, furniture export earnings declined by 8.5 percent in 2014 after Myanmar imposed a ban on timber exports. To avoid such problems, the government should work with private companies to import raw materials at competitive prices with neighboring countries for nail, varnish, and other material sourcing to strengthen the backward linkages.
Provide Stimulus to the Steel Furniture Industry
According to a report by Allied Market Research, the market size of the world’s metal furniture industry reached 141 billion dollars in 2020 and is expected to increase to 191 billion dollars by 2026. Despite the declining demand for steel furniture in Bangladesh, this market is growing globally, and there is a lot of potential for export for the country’s steel furniture manufacturers. To export steel furniture to the international market, the government should provide stimulation to Bangladeshi manufacturers and create a favorable environment for export.