[TRIBUNE] Furniture industry and digitalization: the winning duo of the Covid-19 crisis
The Covid-19 pandemic has put us in a new situation. The repeated confinements and widespread use of telecommuting have prompted consumers around the world to redesign their homes and adopt new shopping habits.
For the furniture industry, the health crisis was definitely a trigger for change. The extended months of confinement, the closing of schools and businesses, and the implementation of widespread telecommuting have led to new needs in terms of home design. Working and living at home full time implies adapting one's home and improving comfort, and many households have taken advantage of this moment and of their available savings to refurbish their home. If the furniture industry was able to respond to the overwhelming flow of these new demands, it is thanks to the fact that it had already begun its digital transformation well before the crisis.
This digital shift has enabled manufacturers and brands to adapt their production, sourcing and logistics methods in a flexible way, notably thanks to the automation of processes. The transformation of consumption models generated by e-commerce, as well as the transformation of production models through more agile, flexible and market-driven processes, will continue after the crisis and encourage players who had not yet taken the leap to do so. The opportunities offered by digital transformation are key elements to ensure tomorrow's success.
Invest in digital
A few years back, investing in digital was not an absolute necessity for the established companies in the furniture industry, who preferred to rely on their physical distribution network. A strategic choice that has resulted in spring 2020 to widen the gap between new players on the market, digital natives who were able to react on the spot to the confinement, and the big traditional players of the sector. For the latter, access to e-commerce platforms has become a necessary requirement for their survival, and also a sustainable growth tool for their activities.
However, adapting so quickly to e-commerce processes is a challenge that implies a profound change in the company's value chain. Making your production and services digital is not limited to listing a product on an online platform and connecting to an efficient delivery service. The impact of e-commerce starts at the consumer's shopping cart, with automated order management, a detailed knowledge of inventory and optimized logistics. For manufacturers, digitalization implies optimized processes for real-time order planning, production, materials management and, finally, a direct link with the end consumer, who increasingly wants to be able to personalize his product.
A physical distribution network that is gaining a new perspective.
The recent digital evolution does not hide the fact that furniture remains a market where consumers prefer the sensorial experience. They certainly need to test a product, to touch it, to feel the material, but also to benefit from customer advice and support in order to be reassured in their choices. Still very popular, physical showrooms and the customer support provided by in-store advisors allow consumers to project themselves in warm places where products are highlighted.
Digital is positioned as a complementary channel to physical distribution channels, which continue to account for a substantial proportion of purchases. It does not compete with stores, but rather sets them up as a place for brand experience. For both traditional market players and online stores, the challenge is similar and relies on the diversification of supply chains and their agility.
Building a diverse and responsive supply chain
Taking into account the evolution of the value chain with changes in production processes, high product availability and shorter delivery times is essential to ensure a successful customer experience. Consumers looking for immediacy prefer the most digitalized brands, often younger, to the detriment of the big brands that lag behind in terms of agility. The key stake therefore lies in the triptych: digital, retail and supply chain transformation. But let's not be mistaken, building a supply chain is above all about satisfying end customers.
Today, these customers are mainly divided between the residential furniture market and the office furniture market. On the residential furniture market, containment has led to a dramatic recovery in activity in the summer of 2020. Manufacturers have been able to adapt to demand and get closer to their customers through their product offerings and especially their services. But this rush has also limited customization because to meet demand, some manufacturers have developed standard models designed to build customer loyalty.
In office furniture, the recovery came later, weakening the financial results of some manufacturers in the industry in the second quarter of 2020 before meeting with real success in the fourth quarter. Office furniture has indeed experienced a specificity during this crisis. It was necessary to create B2C products for employees who were forced to work from home, to digitize catalogs, to integrate PIM (Product Information Management) and ERP systems, and to create high-quality products that were less expensive than those for BtoB, all in record time. In these two markets, the link between the consumer and the brand has been strengthened thanks to digitalization, which has enabled a reduction in lead times and the creation of intelligent inventories.
Seeking permanent resilience
As the health crisis keeps coming back, will the digital transformation of the furniture industry continue in the long term? In order to sustain the growth that the furniture industry has globally experienced since the beginning of the crisis and to implement new levers, it is necessary to continue investing in the digital transformation of the supply chain so that it becomes more agile and diversified. The crisis has finally been a catalyst for the necessary evolutions in certain sectors and particularly in the furniture industry. The furniture industry must continue to capitalize on this difficult-to-predict growth and take advantage of the financial resources available to progress in a sustainable and innovative manner. Major investments are essential and access to e-commerce is no longer an option, it becomes a key growth tool.
The most successful companies, whether brands or manufacturers, will be those that have put in place a vision and a strategy of medium and long-term investments. Digital transformation will require the automation of processes and methods, while consumer services will have to adapt their strategy to the customer experience by focusing on an omnichannel approach.