I M P O RT S O F F U R N I T U R E T O T H E C Z E C H R E P U B L I C A ND P O T E N T I A L F O R T H A I L A ND

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1 I M P O RT S O F F U R N I T U R E T O T H E C Z E C H R E P U B L I C A ND P O T E N T I A L F O R T H A I L A ND MARKET STUDY PREPARED BY: OFFICE OF COMMERCIAL AFFAIRS ROYAL THAI EMBASSY HOLEČKOVA PRAHA 5 CZECH REPUBLIC SEPTEMBER

2 INTRODUCTION - SUBJECT OF THE MARKET STUDY This market study is focused on position of the Czech Republic in furniture trade, analysis of imports including information on customs tariffs, trade fairs and opportunities for Thailand. Source of information were data from the Czech Statistical Office, Ministry of Industry and Trade, Ministry of Finance and researches carried by specialized agencies. CONTENTS OF THE MARKET STUDY CHAPTER SUBJECT PAGE INTRODUCTION - SUBJECT OF MARKET STUDY 1 1 POSITION OF THE CZECH REPUBLIC IN THE FURNITURE TRADE SITUATION ON THE LOCAL MARKET LOCAL PRODUCTION OF FURNITURE FUTURE DEVELOPMENT OF INDUSTRY TOP CZECH PRODUCERS MEDICAL FURNITURE ANALYSIS OF FURNITURE IMPORTS MARKETING INFORMATION TARGET CONSUMERS CONSUMER BEHAVIOUR CZECH RETAIL MARKET 14 6 CUSTOMS TARIFFS 16 7 TRADE FAIRS 17 8 CZECH FUTNITURE ASSOCIATION 19 9 SUMMARY OPPORTUNITIES FOR THAILAND 21 1

3 IMPORTS OF FURNITURE TO THE CZECH REPUBLIC AND POTENTIAL FOR THAILAND 1. POSITION OF THE CZECH REPUBLIC IN FURNITURE TRADE CZ is net exporter of furniture for homes and offices made of wood, metal or plastics (HS 9403). DEVELOPMENT OF IMPORTS AND EXPORTS OF FURNITURE FOR HOMES AND OFFICES HS 9403 TO/FROM THE CZECH REPUBLIC TOTAL VALUE OF: Imports to CZ (in mil. USD) Exports from CZ (in mil. USD) Jan-July/ ,9 428,3 384,6 424,0 429,7 456,4 459,4 251,2 285,6 Jan- July/ 767,9 549,4 563,1 600,7 658,0 737,9 732,8 413,5 474,1 Source: The Czech Statistical Office, September 2016 The table above shows development of exports and imports of furniture since the year We can see, that both imports and exports are rising. Since the year 2012, furniture exports from the Czech Republic are rising faster than Czech imports of furniture. During January July, 2016 exports of furniture grew by 14,7 % while imports recorded growth of 13,7 %. When we analyze the whole period since the year 2008, we can see, that positive development was interrupted in the year 2009 by economic crisis. After few years of slump, the situation stabilized in 2012, however value of exports and imports have not reached the pre-crisis level yet. Based on the above table we can conclude, that the Czech Republic mantains position of a net exporter of furniture. Czech Republic exports furniture mostly to EU countries, but also to U.S.A. and Switzerland. 2

4 2. SITUATION ON THE LOCAL MARKET 2.1 LOCAL PRODUCTION OF FURNITURE The manufacture of furniture has had a long tradition, especially in Moravia. Popular in Europe as well as worldwide is bent furniture, medical futniture (hospital beds) and also kitchen furniture. Interesting solitary furniture has been recently produced by many Czech smaller manufacturers (for halls, living rooms etc.), which represents an assortment that used to be weakness of Czech production. The manufacture of furniture in the Czech Republic is at present concentrated in small and medium sized enterprises. Furniture is manufactured in all regions of the Czech Republic but mainly in South Moravia and Zlín (due to a long tradition). South Moravia accounts for more than 20 % of total furniture production in the Czech Republic, the region of Zlín for more than 17 %. The third place belongs to the region of South Bohemia, followed by Vysocina Region and Central Bohemia. Competition advantage of the Czech Republic is the domestic origin of raw materials and at the same time raw material being a renewable source. Raw materials are supplied to the furniture industry by the Czech woodworking sector with the exception of tropical wood and selected variety of materials which are imported incl. paints, varnishes, metal accessories, but their share on total supplies is of no great importance. The branch still faces many problems which will have to be tackled in the coming period. This applies to the improvement of technologies and production and their consolidation into larger entities, the improvement of management and increase in profitability. Concerning number of employed persons, the declining trend started in the year 2008 (economic crisis), between the year 2008 and 2014, the decrease in number of workers in furniture industry reached -23 %. 3

5 2.2 FUTURE DEVELOPMENT OF CZECH FURNITURE INDUSTRY The branch currently should focus on the modernization of factories and their effective concentration, and improvement of organization and management. Big advantage of Czech furniture industry is sufficient sources of the domestic raw material wooden mass, nevertheless, the investment activities have been still low and insufficient. Significant problems with investing are especially in small enterprises. However, furniture industry as the whole have favourable prospectives to the future, not only to maintain existing positions but also to strengthen and enlarge them. Further expected advancement of the Czech economy will be to a great extent a decisive driving force accordingly, which should be accompanied by growth of standard of living as well. It should be witnessed in such a way, that people in the Czech Republic will replace earlier especially living room and bedroom furtniture. The average time of utilization of these kinds of furniture is almost 20 years in CZ, whereas in advanced countries of the EU it is 10 years on average, and then the futniture is replaced by new one. 2.3 TOP CZECH FURNITURE PRODUCERS Among biggest furniture producers in the Czech Republic are following companies: TON, JITONA, KORYNA, and SYKORA. TON, a.s. BYSTRICE POD HOSTYNEM - domestic leader in bentwood furniture, chairs and armchairs - one of biggest producers of chairs in the world - chairs account for 95 % of production - annual production of chairs reaches 1,5 million pcs - 30 % of production goes to domestic market, rest abroad (to 40 countries) - turnover in 2014: USD 50 million - number of employees: operates network of own retail stores in CZ (13 stores) 4

6 JITONA, a.s. SOBĚSLAV - one of biggest producers of wooden furniture in CZ - established in 1954, when state enterprise with 23 production plants was created - in 1991 was transformed into joint stock company - operates 3 production plants in CZ - number of employees: turnover in 2015: 60 mil. USD - JITONA operates newtork of own retail stores and showrooms (7) - JITONA uses 2 brands on Czech market: JITONA DESIGN COLLECTION and JITONA CLASSIC COLLECTION - more than 95 % of production is exported - big customer is IKEA - JITONA CLASSIC COLLECTOIN JITONA DESIGN COLLECTION 5

7 KORYNA NABYTEK, a.s. KORYCANY - one of the biggest producer of kitchens - in kitchens controls more than one third of domestic market - 60 % of production is meant for domestic market, rest for export (mainly to Slovakia, Russia, Bulgaria, Baltic States) - number of employees: turnover in 2014: USD 25 million SYKORA, s.r.o. VIZOVICE U ZLINA one of biggest producers of kitchen units made to order (fitted kitchens) - established in new production plant was built in 2001 top level of machines, technology, computer equipment, production is fully automated - number of employees: turnover in 2014: USD 15 million - exports account for more than 40 % of total production 6

8 2.4 MEDICAL FURNITURE The Czech Republic is net exporter of medical furniture (HS 9402). Exports from the Czech Republic in the year 2015 reached 141 mil. USD, while imports to CZ 13 mil. USD. Main export destinations are E.U. countries, U.S.A., Saudi Arabia, United Arab Emirates, Switzerland. Market leader in medical furniture is Czech company LINET ( Czech company LINET CO., LTD., manufacturer of hospital and nursing beds, became No. 1 in Europe in the year The turnover in the year 2015 recorded 25 % growth and reached the volume of EUR 218 mil. The fastest growth in Europe was reached especially in Germany, Italy, Spain and Sweden. 7

9 The company s portfolio includes solutions designed for intensive care, products for regular in-bed treatment and also special beds for senior citizen s homes and long-term care facilities. The LINET range also includes a wide range of accessories such as anti-pressure ulcer mattresses, mobile equipment, healthcare furniture, etc. LINET headquarters, as well as its production plant, is based in Zelevcice near Prague, where it has been located since its establishment in The plant manufactured hospital beds in In the year 2016, LINET is going to open another factory in Zelevcice. 95 % of production goes for export to 100 countries of the world. Another factory of LINET is located in Germany, in Wickede. The total number of employees of LINET is 1 350, in the Czech Republic it is over 900. Total number of beds manufactured by LINET in the year 2015 reached ( of hospital beds of special beds for senior citizen s homes). KEY MARKETS FOR LINET CO. COUNTRY TURNOVER in 2015 (mil. EUR) GROWTH in 2015 the U.S.A % Germany % Midddle East and Africa 16,6 32 % The highest growth in 2015 was reached in the U.S.A., where the turnover increased by two thirds, from EUR 27 mil. to EUR 45 mil. In the market segment of intensive care beds, LINET became No. 3 player in U.S. market reaching the share of 20 %. The significant growth of 26 % was reached also in German market with the revenues reaching EUR 44 mil. in The third most important market for LINET are countries of Middle East and Africa with turnover of EUR 16,6 mil. and growth of 32 % in In Saudi Arabia, the U.A.E., Qatar and Bahrain, the most exclusive range of products are in demand. The latest order from Middle East comes from HAMAD hospital group in Quatar delivery of 400 hospital beds incl. special beds for intensive care unit for children. Main competitors of LINET in Middle East are U.S. companies Hill Rom and Stryker and british Arjo Huntleigh. 8

10 As for the plans of LINET in the year 2016, the company wants to focus on Asia. In April, LINET will join the biggest medical fair in China, the CMEF Shanghai. In China, LINET started to co-operate with Chinese pharmaceutical company XIUZHENG. Due to high quality, long time experience and reasonable prices, LINET could be considered as supplier of hospital beds for Thailand. Currently, LINET is considering to invest in Thailand (FDI). Major competitors of LINET in Europe are FAMED of Poland and VOKER Co. of Germany. In the U.S. market, it is HILL-ROM Co. and STRYKER Co. 9

11 3. ANALYSIS OF IMPORTS OF FURNITURE TO THE CZECH REPUBLIC IMPORTS OF FURNITURE FOR HOMES AND OFFICES HS 9403 TO THE CZECH REPUBLIC COUNTRY 01-07/ 2015 IMPORT VALUE ( thous.usd) 01-07/ MARKET SHARE (%) 01-07/ GROWTH (%) 01-07/ Poland 58,500 69, , , Germany 52,695 66,613 89, , China 34,476 37,155 59,391 57, Italy 17,618 16,499 35,640 28, Slovakia 18,459 18,563 35,342 34, Austria 14,064 15,083 24,182 26, Sweden 5,825 6,037 15,000 10, Lithuania 6,287 8,396 14,743 12, Thailand Other countries 42,837 47,264 75,816 75, TOTAL 251, , , , Source: The Czech Statistical Office, 2016 Major suppliers of furniture to the Czech Republic are EU countries (advantage of border-free trading). Market leader is Poland with stable market share of 24 %, followed by Germany (market share in 2015 reached 22 %). The third most significant supplier of furniture to Czech market is China. Market share of China in the year 2015 reached 12,4 %. Market share of Thailand is less than 1 %, in the year 2015 furniture in the total value of 942 thous. USD was imported to CZ from Thailand. From Asian countries, China is leading supplier of furniture to Czech, its market in the year 2015 reached 12,4 %. From China, mostly wooden indoor furniture, 10

12 metal furniture and furniture parts of metal are imported. Market share of other Asian countries, such as Malaysia, Indonesia, India, Vietnam and Thailand, on Czech market is lower than 1 %. Imports from Vietnam in the year 2015 reached 3,9 mil. USD., main items are: furniture parts, metal furniture, wooden kitchen furniture and rattan/wicker furniture Volume of imports of furniture from India reached 2,8 mil. USD, main item is wooden furniture for living and dining rooms. From Indonesia, volume of imports in 2015 was 1,7 mil. USD, teakwood furniture for both indoor and outdoor, rattan and bamboo furniture was imported. From Malaysia, mostly wooden furniture for homes is imported,value in 2015 reached 0,8 mil. USD. From Thailand, major item is HS Wooden Furniture for Homes made of exotic wood. 4. MARKETING INFORMATION 4.1 TARGET CONSUMERS The decisive factor in purchasing furniture is the performance in entire Czech economy. It relates mostly to increases in the scope of housing and industrial constructions, larger reconstructions and to general increases in standards of living. This would free up financial means, which could be used for purchase of furniture. As for the target groups for furniture in the Czech Republic, two categories can be identified: 1. corporate sector (offices, schools, hospitals, hotels, restaurants etc.) 2. households 11

13 4.2 CONSUMER BEHAVIOUR Demand for furniture in the Czech Republic can be classified into two categories: 1) low-priced furniture made from lower quality materials and technologies and sold mainly in big shopping centres group of cheap furniture is not expanding. The number of customers who are interested in new opportunities is decreasing, as they are discovering that low-priced furniture does not correspond with the idea of a quality interior furnishing 2) high quality furniture with attractive design, made from quality materials using state-of-art technologies. New lifestyles are changing the former habits for furnishing flats. Travel, exhibitions, magazines and television contribute to the customers knowledge and demands. General knowledge about materials is improving and the demand for materials with certain properties not harmful to one s health is on the rise. Furnishing new flat When furnishing new flats, people make it step by step. Most frequently, they start with a quality bed equipped with a quality frame and a compatible mattress. The number of customers who realize how important a bed is for their health, is increasing. The kitchen, along with the bathroom, is at the forefront of interest not only in new households, but also in the renovation of old flats. Companies KORYNA NABYTEK ( and SYKORA Co. ( are biggest producers and exporters of kitchen furniture and control more than 50 % of domestic market in kitchens. In both cases, export accounts for more than 40 % of the total production. Competition between producers is constantly increasing quality. The bodies of the kitchen units are made not only from chipboard materials, but also from quality laminated wood. Materials used for the doors and the fronts of the full pull-out drawers, which have replaced the former, inaccessible internal shelves, are hard specially processed fibreboard, three- and five-layer bioboard, perforated boards in frames, toughened glass in frames etc. New designs are being sought for better utilization of space, and also drawers and doors, that close silently. Stone, CORIAN, and other current materials are used for the top boards, the work surfaces are lit by built-in cool safe lights. 12

14 Metal is making a re-appearance in flats again (the comfortable living of the 1920s is returning in new materials) on appliances, handles, edges and legs of kitchens, on the legs of upholstered furniture, on the visible parts of armchair structures. Based on the latest research of INCOMA GfK market research agency, the breakdown of the different cathegories of furniture purchased most frequently by Czech customers in the year 2015 was as follows: Source: INCOMA GfK,

15 As for furniture accessories, the cathegory most in demand in the year 2015 was bedclothes purchased by 70 % of customers, tableware (purchased by 65 % of customers) and lamps + lighting (purchased by 64 % of customers). In the year 2015, the average spendings for furniture was CZK ,- per year and CZK per home accessories. Furniture is most frequently purchased by age cathegories below 39 years of age. 5. CZECH RETAIL MARKET According to latest research of INCOMA GfK market research agency, more than two thirds of Czech customers prefer buying furniture in large specialized stores. Key players on the Czech market are 7 large international chains stores selling furniture and home accessories. INTERNATIONAL CHAINS SELLING FURNITURE IN THE CZECH REPUBLIC COMPANY TURNOVER in 2014 (bil. CZK) NUMBER OF STORES IKEA 7,22 4 KIKA 1,83 8 JYSK 1,69 79 XLMX Co. (XXXLutz and MOBELIX stores) 1,67 2 XXXLutz 9 MOBELIX SCONTO 1,59 8 ASKO 1,34 13 Source: INCOMA GfK 14

16 Market leader in terms of turnover is IKEA, leader in number of branches is JYSK, that operates 79 stores in the Czech Republic. JYSK is famous especially for home accessories and decoratons. Some of big Czech furniture producers have networks of their own retail stores and showrooms, such as companies TON or JITONA. Big international companies import furniture directly through their purchasing departments (centralized for whole Europe) Among importers of furniture and accessories from Thailand (mainly teak, water hyacinth etc.) is for example DONATE Co. ( or HD NABYTEK ( Thai furniture and accessories can be also purchased in IKEA (IKEA is buying furniture through centralized purchasing department). 15

17 6. CUSTOMS TARIFFS There are no trade barriers concerning imports and exports of furniture and parts. CUSTOMS TARIFFS H.S. Description EU rate Office furniture of metal 0,0 % Other metal furniture 0,0 % Wooden office furniture, 0,0 % Wooden kitchen furniture 2,7 % Wooden bedroom furniture 0,0 % Wooden furniture for living 0,0 % and dining rooms Furniture of plastics 0,0 % Furniture of other materials 5,6 % (rattan, bamboo, etc.) Furniture parts of metal 2,7 % Furniture parts of wood 2,7 % Source: EU TARIC Since 1st May 2004, the Czech Republic has became an EU member and since than EU customs legislation applies on all imports. Details of customs duties and possible restrictions can be viewed on internet website of EU dealing with customs tariffs: 16

18 7. TRADE FAIRS IN THE CZECH REPUBLIC MOBITEX INTERNATIONAL TRADE FAIR OF FURNITURE AND INTERIOR DESIGN MOBITEX fair is organized together with several other fairs: IBF International Building Fair, ENVIBRNO International Enviromental Fair and URBIS TECH Fair of Communal Technology Period: April 2017 Venue: Organizer: BVV Exhibition Grounds, city of Brno BVV Co. LAST MOBITEX FAIR IN FIGURES Total number of exhibitors 116 from 5 countries Total exhibition area sqm number of visitors is Total number of visitors summary of visitors to IBF, ENVIBRNO and URBIS fairs Detailed information on MOBITEX fair in English can be found on the internet websites of BVV Co., the organizer: 17

19 FOR INTERIOR FAIR - INTERNATIONAL FAIR OF INTERIORS AND DESIGN FOR INTERIOR fair is held simultaneously with FOR GASTRO & HOTEL FAIR Period: 29th September 2nd November, 2016 Venue: Organizer: Prague 9 PVA Letnany ABF Co. FOR INTERIOR 2015 IN FIGURES Total number of exhibitors 487 Total net exhibition area sqm Total number of visitors (together with FOR GASTRO fair) This fair is primarily focused on public final customers (B2C event) Detailed information on FOR INTERIOR in English can be found on the internet website 18

20 8. CZECH FURNITURE ASSOCIATION Association of Czech Furniture Manufacturers was founded in Main target of the association is to promote and represent interests of companies involved in development, production and sale of furniture. The association has almost 70 members, majority of them are furniture and accessories producers based in the Czech Republic. Contact address of the association is: ASSOCIATION OF CZECH FURNITURE MANUFACTURERS Office: Na Poříčí Praha 1 acn@czechfurniture.com Telefon : , Fax : Details on CZ association of furniture and directory of its members can be viewed on the internet website 19

21 9. SUMMARY CZ is net exporter of furniture for homes and offices made of wood, metal or plastics (HS 9403). Exports in 2015 reached 733 mil. USD while imports to CZ 460 mil. USD. Furniture is imported mostly from Poland (market share of 24,3 % in 2015), Germany (22,1 %), China (12,4 %), Italy (6,2 %), Slovakia (7,5 %). Imports of HS 9403 from Thailand reached 942 thous. USD in 2015 (mainly wooden furtniture for homes). According to latest research of INCOMA GfK market research agency, more than two thirds of Czech customers prefer buying furniture in large specialized stores. Key players on the Czech market are 7 large international chains stores selling furniture and home accessories, such as IKEA, KIKA, JYSK, ASKO etc. Some of big Czech furniture producers have networks of their own retail stores and showrooms, such as companies TON or JITONA. Big international companies import furniture directly through their purchasing departments (centralized for whole Europe in their countries of origin). Thai furniture and accessories can be found in large international stores, such as IKEA (IKEA is buying furniture through centralized purchasing department in Sweden). Average spending for furniture in 2015 by Czech customers was CZK ,- The average time of utilization of these kinds of furniture is almost 20 years in CZ, whereas in advanced countries of the EU it is 10 years on average, and then the futniture is replaced by new one. With the growing standard of living, the period of utilization of furniture will decrease in the Czech Republic. 20

22 10. OPPORTUNITIES FOR THAILAND We can see opportunities for Thailand especially in wooden furniture made of exotic wood. Currently, teak wood is getting more popular in the Czech Republic not only for garden furniture as in the past, but especially for indoor furniture (furniture for dinning rooms, living rooms etc.). From cheaper materials, in CZ we can see potential for furniture and accessories made of rubber wood (especially kitchen tables, chairs, accessories etc.). Also rattan furniture and water hyacint furniture have their customers in CZ, however currently rattan furniture is imported mostly from Indonesia due to lower price. Apart from teak wood, other kinds of exotic wood (such as rose wood) are totally unknown among Czech consumers. More education and promotion is necessary in order to increase consumers awarness. As exotic wood is attractive alternative to traditional woods used in CZ (oak, pine, beech), there is potential for Thai companies in this segment. The first step for Thailand to take, should be connected with making furniture from Thailand better known, for example by attending fairs held in the Czech Republic, by co-operating with domestic importers and wholesalers, establishing contacts with furniture associations etc. When considering the fairs, we would recommend for Thai exporters to join the MOBITEX INTERNATIONAL FAIR, that is held in the city of BRNO MOBITEX is the most biggest furniture fair in the Czech Republic. As the furniture market in the Czech Republic is dominated by 7 big international players, we can see more chances in modern trade, such as e- commerce (furniture e-shops). 21