The furniture industry and digitalization: a winning team during the Covid 19 crisis

For the furniture industry, the health crisis has indeed been the catalyst for change.

Conversation with Olivier Nold, Senior Vice President, Business Development at Lectra

The Covid-19 pandemic placed us in an unprecedented situation with an unexpected impact on our consumption patterns. Successive lockdowns and widespread working from home prompted consumers around the world to reorganize their homes and adopt new shopping habits. For the furniture industry, the health crisis has indeed been the catalyst for change.

Olivier Nold, Senior Vice President, Business Development at Lectra

The long months of lockdown, the closure of schools and businesses, as well as widespread working from home gave rise to new needs in terms of home decoration. Working and living full-time at home made it necessary to adapt our living space and improve its comfort. Many households indeed took advantage of this time and their available savings to transform their homes.

As the furniture industry had already started its digital transformation, well before Covid-19, it was able to respond to this massive increase in demand. Digital transformation has thus enabled manufacturers and brands to be more agile in adapting their production, sourcing, and logistics processes, notably through automation. 

The transformation of consumption patterns led by e-commerce, such as production models operated through more agile and flexible processes closer to consumer markets, will continue after the crisis and encourage other players to take the leap too. The opportunities offered by digital transformation are key elements to ensure success in the future.

Investing in digital technology

Until a few years ago, investing in digital technology was not an immediate necessity for the main leaders of the furniture industry, who preferred to rely on their high street distribution network. In spring 2020, this strategic choice resulted in widening the gap between newcomers to the market, digital native companies that were able to instantly react to the lockdown, and the main players in the industry. For them, access to e-commerce platforms then became imperative for their survival, and also a lever for their sustainable growth. However, adapting so quickly to e-commerce processes is a challenge that involves a profound change in a company’s value chain. Digitalizing one’s production processes and services is not limited to simply listing products on an online platform and connecting to an efficient delivery service. The impact of e-commerce begins with the consumer’s shopping cart, with automated order management, highly effective stock management and optimized logistics. Regarding manufacturers, digitalization requires optimizing real-time order planning, production, and material management processes, as well as connecting with end customers who increasingly want to be able to personalize the products they buy.

Brick-and-mortar retail networks take on a new dimension

The recent boom of digital technology does not change the fact that, in terms of furniture, consumers still prefer a touch and feel experience. Consumers need to test the product, to touch it, to feel the material, but also to benefit from recommendations and support in order to be reassured in their choices. Still extremely popular, high street shops and customer support provided by in-store sales teams give consumers the opportunity to visit attractive showrooms where products are at their best. Digital technology is an added tool that complements brick and mortar retail channels, which still account for a significant percentage of purchases. It does not therefore compete with these stores, but instead makes them a unique place to fully experience the brand. The challenge is similar for both historical market players and online retailers and requires diversifying supply chains and improving their agility.

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Building an agile and diverse supply chain

Embracing the transformation of the value chain by changing production processes, increasing product availability, and shortening delivery times is essential to ensure a successful customer experience.  Increasingly drawn to immediacy, consumers often prefer the more digital-savvy, younger brands to big brands that lack agility. The three key words here are: digital, retail and supply chain transformation.

But let’s not bark up the wrong tree – building a supply chain is above all about keeping end customers happy. They are now mainly divided between the residential furniture market and the office furniture market.

The lockdown caused a spectacular upturn in the residential furniture market in the summer of 2020. Manufacturers have been able to adapt to demand and get closer to their customers through their product offerings but above all their services. But this boom has also limited customization because to meet the demand, some manufacturers have developed standard designs to build customer loyalty.

In the office furniture market, the recovery came later, weakening the financial results of certain manufacturers in the sector in the second quarter of 2020 before meeting with real success in the fourth quarter. The office furniture market indeed had to meet specific challenges during this crisis. The challenge was to create B2C products for employees who had to work from home, digitize catalogs, integrate PIM (Product Information Management) and ERP systems, create high quality products less expensive than in BtoB, all in record time.

In these two markets, digitalization is strengthening the link between consumers and brands, which helps reduce lead times and develop smart stock management processes.

Aiming for permanent resilience

As the health situation goes up and down, will the digital transformation of the furniture sector continue in the long term? In order to sustain the growth the furniture industry has experienced overall since the start of the pandemic and to implement new levers for growth, players must continue to invest in the digital transformation of their supply chain to make it even more agile and diverse.

The crisis ultimately proved to be a catalyst for the necessary changes in certain sectors, notably the furniture industry. This market must continue to capitalize on this growth, although it is difficult to predict, and take advantage of the financial resources available in order to progress in a sustainable and innovative manner. Major investments must be made and selling online is no longer an option, it is becoming a key tool for growth. The most successful companies, whether brands or manufacturers, will be those who have implemented a vision, as well as a medium and long-term investment strategy. Digital transformation indeed requires the automation of processes and methods, while consumer services must adapt their strategy to improve the customer experience by opting for a multi-channel approach.