Bangladesh’s furniture industry, with a market size of over BDT 10 thousand crores, is one of the fastest-growing sectors. The Bangladesh government has classified the furniture industry as a “thrust sector” and has included it among the “top priority” sectors in its Export Policy 2015-18. Earlier, furniture brands made products only to meet the needs of the local market. However, after meeting local needs, they have begun exporting their furniture to different countries around the world, resulting in new opportunities for the country’s export trade. As Bangladesh’s furniture exports grow, domestic brands are also expanding their operations internationally.
Prior to independence, traditional furniture manufacturers in the country operated on a limited scale. However, following independence in 1971, most of the well-known furniture brands that are currently operating in Bangladesh began their journey. Among them, Otobi Furniture started manufacturing in 1975, Akhtar Furniture in 1976, Hatil in 1989, and Partex Furniture in 1999.
Among them, Hatil Furniture is currently leading the market with more than 70 showrooms and a 10 percent share of the furniture market in Bangladesh. On the other hand, Akhtar Furniture is in the second position with 35 showrooms and more than 100 dealership outlets. However, Otobi Furniture, which once led the furniture market, is now lagging behind. Apart from these three furniture brands, other furniture manufacturing brands like Navana, Regal, Pertex, Brothers, Nadia, and Hatil Furniture are also in a strong position. All of these companies operate within the furniture industry in Bangladesh as branded or organized companies. However, 65 percent of the country’s furniture industry market is dominated by unbranded or unorganized businesses.
As the demand for furniture increased in the early 90s, the country’s furniture manufacturing sector transformed into a mass-production-oriented industry and gradually became one of the country’s major economic contributors. At present, more than 2.5 million people are directly involved in the furniture industry, which produces solid wood, processed wood, metal, and rattan furniture. Around 93 percent of these manufactured furniture products are sold on the local market in Bangladesh. In the mid-1990s, Bangladeshi-made furniture began to be exported abroad. Back then, most of the furniture was exported to the US, Canada, Australia, the UK, the Middle East, and European countries as well as India and a few other countries in South Asia. Among the top furniture manufacturers, Otobi started exporting its own furniture in the mid-90s. Following that, brands like Akhtar furniture, and Hatil also started shipping their furniture to the international market.
Among them, Hatil is currently exporting its manufactured furniture to more than 18 countries around the world, including India, Bhutan, and the United States. Apart from this, Otobi, Regal, Akhtar, and Navana Furniture are also exporting their products to different countries around the world.
According to Bangladesh Export Promotion Bureau, despite the target of furniture export of 100 million dollars in the financial year 2020-21, the total export amount that year was 79.47 million dollars which is 4 percent more than the previous year. On the other hand, the furniture export target for the financial year 2021-22 was 90 million dollars, but the export amount came to 110.36 million dollars, an increase of about 39 (38.87) percent. However, what exactly is the reason that these domestic furniture brands are focusing more on exporting their products?
Why Brands Expanding Globally
Competitive Local Market/Saturated Local Market
Currently, the market size of the furniture industry in Bangladesh is BDT 10 thousand crores. However, traditional furniture manufacturers occupy 65 percent of the market. Earlier, Bangladeshi consumers preferred wooden furniture with handcrafted designs on it. However, this preference is currently changing. In such a situation, even though there is an opportunity for branded furniture manufacturers to increase their market share in the Bangladesh market, they have to compete with non-branded furniture manufacturers. Moreover, furniture products such as tables, sofas, beds, cupboards, or wall cabinets have a long service life to satisfy customers.
Besides, Bangladeshi people do not like to change their furniture very quickly. They are more likely to use the same product for a couple of years. Currently, the majority of the furniture market in Bangladesh has already been served. As the domestic market became saturated, brands began to focus on exporting to global markets to sustain their business expansion.
Economy of Scale
In the past few years, several furniture manufacturers in Bangladesh have been using robotics and automated machinery for production in their factories. According to The Independent BD, Hatil Furniture has invested more than BDT 200 crores to renovate their factory in Savar and added automated machinery and a robotics system to their production facility. Besides Hatil, several other furniture manufacturers have also invested in automated and semi-automated machinery to ensure quality and efficiency in their production. To cover these investment costs and reduce production costs, achieving economies of scale is critical for brands. This is because, if brands can do more production, the per-unit production cost will come down due to the economy of scale.
Therefore, these manufacturers will also retain their pricing advantage. But, in the current context, increasing production based on local demand alone will not be effective for brands. That’s why furniture brands are gradually shifting towards the global market to achieve economies of scale. For example, Bangladeshi consumer electronics giant Walton began exporting its products abroad in addition to serving domestic consumers in 2010. Currently, the company exports locally manufactured electronic products to a total of 40 countries in the Middle East, Africa, and Europe. Apart from electronics, domestic FMCG conglomerate Pran has also been exporting after capturing one of the top positions in the country’s FMCG market.
Currently, the company is exporting its products to a total of 110 countries in 5 regions of the world, South-East Asia, the Middle East, Africa, Europe, and North America. The main reason behind these two companies’ exporting is to maintain the economy of scale and growth as their market in Bangladesh was decreasing.
Growing Global Demand
In first-world countries, people change furniture every 2 to 3 years or according to the latest trends. Due to this, the demand for furniture on the global market is constantly increasing. According to Statista, the market value of the worldwide furniture industry in 2020 was approximately $509.8 billion. It is estimated that the international furniture market will reach $650.7 billion by 2027.
On the other hand, China, the world’s largest furniture exporter, exported more than $69 (69.07) billion of furniture in 2020. In addition, Poland and Germany were in the 2nd and 3rd positions with furniture exports of about $13 billion (12.85) and $12.33 billion. Accordingly, the size of the domestic furniture industry in Bangladesh is more than BDT 10000 thousand crores or $1 billion, which is very small compared to the global market. Thus, even if a furniture brand captures a big portion of the local market, on the contrary, even a 1 percent share of the global market will generate several times as much revenue for the brand.
In addition, the Middle East and European countries, as well as countries like the US, Canada, Malaysia, and India, are constantly developing new startups and businesses due to the business-friendly environment, and the number will increase in the future. Local brands in Bangladesh have been able to realize the demand and growth opportunities of the global market through their business activities over the last few decades. Due to this, manufacturers have also started exporting globally and expanding their businesses.
Manufacturing Cost Advantage
When it comes to manufacturing operations in Bangladesh, lower manufacturing costs are the biggest advantage that domestic manufacturers get. Although furniture manufacturing factories of Bangladesh started using advanced robotics and automated machines, many of these machinery and production processes are still done manually or semi-automated. Due to the availability of the labor force in Bangladesh, the labor cost in Bangladesh is less than in most other countries.
Due to this, manufacturers are able to import various raw materials including solid wood and paint but enjoy manufacturing advantage due to low labor costs while exporting. Although the manufacturing cost is somewhat increased due to having to pay 60-percent duty on raw material imports, the government has given manufacturers a 15-percent cash incentive on furniture products imports. If bonded warehouse facilities are introduced in this sector like the garment sector, then the furniture manufacturing industry of Bangladesh has the potential to become one of the prominent exporting sectors of the country just like the garment industry.
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