Introduction: Ready to assemble (RTA)furniture is a concept
introduced roughly around the 1850’s which allowed for two primary benefits-
the reduced cost of labor as assembly was expected to be done by the customer,
and a reduction in the requirement for space as the furniture was shipped as
parts and not as the finished product. This reduction in labor and space became
a favorable trend for manufacturers which was expected to be continued in
simplistic component based furniture. Another major benefit in using ready to
assemble furniture was that there was a shortage in manufacturing time as well.
The reduction in time requirement and the cost saving from reduced requirement
for space and labor led to manufacturers attempting to maximize the sale of
ready to assemble furniture, primarily for low margin products which would
boost profitability. High value furniture which earned a premium for
manufacturers would not usually be ready to assemble as the price of the furniture
was quite high and did not justify the need for reduction in cost of delivering
and manufacturing. Although the RTA concept did not work with premium
customers, the reduced cost of furniture due to the need for customer assembly
was highly accepted by low and middle income customers who could now manage to
afford better quality of furniture just by assembling it themselves. This began
the trend of assembling furniture for cost savings for consumers and
manufacturers.
Market Overview: The ready to assemble furniture market is
growing steadily. The market, which was valued at over USD 10.5 Billion in
2014, has grown to USD 11.8 Billion in 2017 and is forecasted to grow to over
USD 16 Billion by the year 2025 as per the most recent Furniture
Market Research Reports. The
growth of ready to assemble furniture is primarily attributed to the growing
needs for functional and effective furniture at a lower price for low and
middle income households. Another key driver is the increasing trend of Do It
Yourself market participants towards assembling their own furniture. Given the
growing need for functional and economic furniture which can be fit into
smaller households and still is a low cost for consumers, there is a major need
for furniture that is sturdier and is capable of usage for longer periods of
time. Ready to assemble furniture is primarily purchased on the basis of
utility. The sales channels usually is through direct manufacturer sales as a
majority of categories of RTA furniture are sold directly. RTA furniture covers
almost all sub categories of furniture ranging from tables and chairs to more
sophisticated furniture like book shelves, work desks and sofas. The increasing
popularity from the industrial side is owing to the level of cost savings that
is availed by major manufacturers on manufacturing and transportation. This is
vitally important for furniture which is sold to low and middle income
households where the profit margin for the furniture is considerably low.
Opportunity: There is growing need for viable providers of
ready to assemble furniture which is at lower cost. The market is currently
dominated by players like Sauder Woodworking, Dorel Industries, Bush
Industries, Inter, IKEA Systems, Tvilum, South Shore, Whalen Furniture and Homestar. The major player being IKEA leading
through its reputation for consistently lowering furniture costs year on year.
There is an opportunity for furniture providers capable of delivering superior
design and better functionality at a competitive price. Considering the major
value offering is functionality and cost, there is not significant
differentiation in the RTA market, providing an opportunity for new
manufacturers with innovative and cost effective designs for ready to assemble
furniture to benefit from
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Ken
Research
Ankur
Gupta, Head Marketing & Communications
0124-4230204
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