Tired of looking at those old drapes or that sunken couch? Need to better use the space at home since it is now not just the place you live but also your office? Well, it seems this is what many Germans have been feeling since the start of the coronavirus pandemic — especially since mounting travel warnings are keeping many Germans from taking their much loved holidays this year.
For months with little else to do, millions of people cleaned incessantly and threw out old things. Now still stuck in their clean homes with all that extra cash in their pockets, they have gone shopping for new things to decorate. And with the value-added tax at 16% instead of 19% in Germany until the end of the year, they are buying big-ticket items now to save an extra 3%.
The coronavirus effect
Holzconnection, a Berlin-based specialist in made-to-order wood cabinets, shelves, tables and other pieces of furniture, is busier than ever. Its 12 showrooms throughout Germany have not only made it through the first six months of 2020, but have gone into the digital age with the help of the company’s boss, Denys Nagel.
During the coronavirus lockdowns the company was able to keep its manufacturing site open since it makes its own furniture in Poland. Additionally, its planning department was able to stay open.
And while the company’s showrooms had to close to the public, they quickly beefed up their capabilities to “meet” and engage with clients virtually. Within two weeks salespeople who were working at home had the technology they needed to help customers who were also at home.
Through these tactics the company hardly noticed a change to its bottom line. Not only that, “we were able to reach a new target group who, during the lockdown and travel bans, realized that it is important to make your home comfortable,” Nagel told DW.
The manufactures’ rollercoaster
Other companies were not so lucky as the spread of COVID-19 closed factories and tore up supply chains. In all the economic chaos, home interior design at first fell by the wayside.
“Furniture manufacturers’ sales fell by 28.7% in April and by 23.3% in May due to the lack of incoming orders,” the Association of the German Furniture Industry (VDM) wrote in a press release on August 24.
Now that retail shops have opened, shoppers are lining up to buy household items big and small. In Berlin, retailers selling furniture are so busy that it’s hard to get assistance without an appointment. Walk-ins have to wait, which is unusual in the otherwise slow summer season.
Yet it seems like more than just catch-up for lost shopping time. Buyers are refocusing on what is close — and what can be closer than one’s own home? Sales in June were up; still overall sales for the first half of the year were down compared with the same time last year.
In a VDM member survey 42% of businesses said they would end the year in the black, which led the industry group to anticipate an overall industrywide turnover decrease of 5%. A month ago the talk was about a decrease of 10%. This improved outlook should be a consolation for the 83,000 employees of the 469 manufactures with more than 50 workers, not to mention the many smaller manufactures and others supported by the industry.
And despite the fact that Holzconnection’s order books are “still full to overflowing,” Nagel is worried about the coronavirus crisis and a possible second wave. Nonetheless, he sees the year ending well, though “we have to stay just as active and alert, always keeping our eyes open to see what the market is doing.”
The only way is online
Up until now Germany has been a laggard in digital investments. The furniture business in particular is structured around old business models. “Anyone who has manual processes in their company will not be able to survive in the long term, as online shops will beat them on the cost side,” noted Nagel.
On July 5, bevh, an association of e-commerce and mail-order retailers, reported that overall online sales in Germany increased by 9.2% in the first half of the year for a total of €36.7 billion ($43.4 billion). Of that total, €5.6 billion was related to household goods like furniture, decoration and appliances.
For Holzconnection, it is just another sign pointing to the need for digital strategies. Digital sales without sales staff assistance already account for around 25% of business, well ahead of the industry average. Even after stores reopened for face-to-face appointments, the demand for virtual meetings have not let up. The company is now investing in more technology like 3D tools and automatic price calculators.
“Digitization does not mean setting up an online shop with five products, but rethinking the entire company,” warned Nagel. Nonetheless, he sees the need for a brick-and-mortar presence. “Showrooms will of course continue to be important, but rather as meeting places to build trust, for events and to see a product live.”
A ‘Made in Germany’ quality seal
According to numbers from VDM released on August 24, Germany exported €3.3 billion worth of furniture in the first half of 2020 compared with the previous year. That’s a drop of nearly 12%. Switzerland is the top consumer, followed by France, Austria and the Netherlands. Now 70% of German furniture production is bought by Germans.
At the same time imports of furniture were €3.9 billion, down 8.4% compared with the first half of 2019. Currently over 55% of imports are from Poland, China and the Czech Republic; nearly 30% of that from Poland alone.
One way the industry wants to attract customers is to appeal to their sense of German quality with a new initiative called “Möbel Made in Germany” or “Furniture Made in Germany.” The label was released on August 1 and is supposed to insure where a product is from and guarantee its quality. So far, 31 out of 78 interested manufactures have been approved to use the seal.
Another way to push up sales would be to allow shops in Germany to open on Sunday, something many retailers have been fighting for. This has long been a bone of contention, but as online sales increase in general, stores are losing out since the internet never closes.
But no matter how good a furniture retailer’s online experience is, you can’t test a mattress virtually and furniture is not something people buy every day. Germans also don’t move as often as Americans, for example, and have less reason to buy new things. It’s not clear yet if this summer’s post-coronavirus bump was a one-off home revamp for people cocooning or the start of an interior design revolution in Germany.