Thursday, July 17, 2014

Outdoor Furniture Manufacturing in the US Industry Market Research Report from IBISWorld

The Outdoor Furniture Manufacturing industry has suffered over the past five years due to lackluster recovery and high import competition, and smaller enterprises in the United States will struggle over the next five years, as they lack the economy of scale to reduce per-unit costs to a range that can compete with cheaper imports. For these reasons, industry research firm IBISWorld has added a report on the Outdoor Furniture Manufacturing industry to its growing industry report collection.

Two key features characterize the Outdoor Furniture Manufacturing industry: a high level of import penetration and low market share concentration. In 2014, imports are expected to account for 55.2% of domestic demand. Overseas manufacturers, particularly in Asian countries like China and Vietnam, can achieve operational efficiencies that US manufacturers find difficult to match. These efficiencies stem from lower wage costs and looser regulations in these countries. The savings realized through overseas production enable foreign producers to sell their goods at a lower cost relative to US outdoor furniture prices, making it hard for domestic manufacturers to compete. These trends have caused the number of industry participants to decline over the past 10 years. Despite post-recessionary economic recovery, this has not been enough to entice new entrants into the industry.

According to IBISWorld Industry Analyst, Daniel Carusotto, “Operators that continue to manufacture outdoor furniture in the United States are small enterprises that serve regional markets, with the average establishment employing 25 workers.” Establishments that have been able to survive have done so by serving niche markets; for example, industry player Poly-Wood Inc. manufactures outdoor furniture from recycled plastic, appealing to the eco-friendly consumer. However, on a broader scale, consumers seek the most affordable products; as a result, domestic manufacturers have found it hard to compete. Due to intense competition from imports, this industry has experienced rough times in the five years to 2014, with revenue falling an annualized 1.3% to $897.8 million, including a 0.8% decline in 2014.

“During the five years to 2019, prospects for industry growth remain bleak,” says Carusotto. While the industry does not suffer from a shortage in demand, challenges lie in the manufacturing of a quality product at a competitive price point. However, because the United States has the highest corporate tax rate in the world, expensive labor and extensive regulations, creating products domestically has become increasingly difficult. While the wage gap between US workers and Chinese workers has been shrinking, leading some reshoring advocates to claim US manufacturing will rise again, the evidence for this phenomenon remains largely anecdotal. The trend in trade data still favors foreign production.

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