Global sales of office furniture rose by 9.7% in 2021. This year, the market will continue its upward trend with a plus of 12.1% and thus reach pre-crisis sales levels by the end of the year. China and the USA in particular are proving to be growth drivers, as a study by Interconnection Consulting shows.

Middle East on the Up

The total volume of the global office market was 56.7 billion euros in 2021 and will rise to 63.5 billion euros this year. In the coming years, growth will slow down but remain high. The average growth is 8.5% per year. The impact on the global office market of lockdowns, trade restrictions and supply chain problems has been dramatic. However, the developments in the individual regions were extremely different during the pandemic. While the decline in China was only around 5%, Latin America lost around one fifth of its business volume. In the USA, turnover fell by 14.4% in 2020. The largest market for office furniture worldwide is China with a 28.2% share by value, ahead of the USA with 25.7% and Europe with 14.6%. The pandemic has also led to a shortage of important raw materials such as steel, aluminium or foam in North America, among others, which will lead to an increase in office furniture prices in the next few years. For China and the USA, Interconnection expects above-average growth rates between 9 and 10% in the next few years. “We also expect strong growth in the Middle East office furniture market in the coming years. The market is driven by high construction activity and a high share of foreign investment,” says Katarina Gajdova, the author of the study.

Swivel Chairs Do Not Dominate Everywhere

Chairs are the strongest product segment in the global office market with a share of 46%. Within this segment, the swivel chair is the most important product group, accounting for about a quarter of the total volume of office furniture sales worldwide. Swivel chairs are particularly popular in Asia and Europe. Despite their dominant market position (about 80% of all chairs worldwide are swivel chairs), swivel chairs are not number one everywhere. In Latin America and Turkey, conference chairs have the strongest market position. Swivel chairs are also the most dynamic product group. In 2022, Interconnection expects swivel chairs to grow 13% in volume worldwide. Room partitioning systems, which have become the new must-have in the office scene due to the pandemic, continue to be one of the fastest growing product categories with double-digit growth. The same is true for office desks. Due to the continuing social distancing in everyday office life, lounge furniture is losing market share. Overall, large private companies with more than 250 employees are the strongest customer segment for the office furniture market with 51%. The most important players in the global market are, in alphabetical order: Fursys, Haworth, Herman Miller, HNI, Kokuyo, Okamura, Onlead, Steelcase, Sunon.

Turnover in the CEE office furniture market grew by 13% in 2021. This year, the market will continue to chase highs with a plus of 12.3%. In addition to inflation, turnover is driven by the increased demand for higher-quality office furniture, as a study by Interconnection Consulting shows.

The consequences for the CEE office market due to Covid pandemic and its economic impact were dramatic. The market crashed by 15.7% in 2020. The recovery of the CEE office market is mainly driven by investments in the refurbishment of old office infrastructure, which also triggers higher demand for premium solutions in the office furniture sector, resulting in higher unit prices. In addition to inflation and a moderate increase in sales, this leads to a strong increase in turnover in the region. The total turnover of the CEE office market amounted to €1.04 billion in 2021 and will increase to almost €1.17 billion this year. In the coming years, growth will slow down but remain high, as the Interconnection study shows. The average growth of the market in the CEE region is 7.7% per year. Poland is the most influential country for the office furniture market with a share of 51%, but the strongest growth in 2021 was achieved by the Czech Republic and Slovenia with +16.8% and 15% respectively.

Seating Dominates

Chairs are the strongest product segment with a share of 50%. The most important product group is the swivel chair, which was sold 2.9 million times in the CEE region in 2021. However, compared to other regions of the world, the swivel chair is not quite as dominant, with a share of around 54% in the seating segment.  Overall, the seating segment is also the category with the strongest growth potential. Partition systems are also a strong growth market after the Corona pandemic and will grow by almost 15% in 2022. In the table segment, it is mainly bar tables that are trending strongly. Lounge sofas and lounge chairs, on the other hand, show somewhat less growth momentum due to the new zeitgeist of social distancing. Overall, the SME sector is the strongest customer segment for the office furniture market with 63%. The most important players in the global market are, in alphabetical order: AJ Products, Antares, Balma, Flokk, Kinnarps, Mobexpert, Nowy Styl, Standard, Steelcase, Techo/Ahrend.

Even if you’ve already discovered a higher beer price at your regulars: Most businesses are planning to raise prices in the next few months, but haven’t done so yet. So here we provide some thoughts on how to do it well. Ahead, also read the next post to get it quantitatively right.

Do I need to increase prices at all?

This question is quite justified. The almost 10% inflation still says little about how much more expensive your company has to buy to date. Electricity and gas may be a very small part of your business, or your margins may be so large that you can simply swallow the higher prices. If so, it’s worth considering keeping prices stable and retaining existing customers and attracting new ones in an environment of sharply rising prices. However, on the one hand, this scenario will only apply to very few companies, and on the other hand, all companies will have to reckon with massive wage increases in the near future. It is therefore advisable in any case to deal with the topic and the technology of a sensible price increase.

When is the right time?

A price increase is rarely received euphorically, yet it is a bad idea to postpone it for too long! The customer does not appreciate it if you have not made a price increase for three years, but now a much larger one at once. This gratitude will not be forthcoming. And in general, now is a very good time to increase prices, because the arguments for doing so are really obvious to everyone at the moment.

Shock prayers to heaven or deeply relaxed

Warren Buffet cites “pricing power” as the most important criterion for a company’s value. If a company can easily push through a price increase in the market, then this pricing power is given, but if one sends prayers to heaven so that the customer does not leave, there is obviously a lack of pricing power. You can (see next article) pre-test the ability to raise prices, and in most cases that makes a lot of sense, because a customer that’s gone is gone. However, if your customers immediately go away when a price increase is appropriate, there is a fundamental problem with your business case and it won’t be saved by reducing your margin.

Rethink pricing models

If a price increase is unavoidable, you could use the opportunity to rethink your pricing model in general. There are many possibilities, from “flat prices” to “everything as a service”. It would go beyond the scope of this article to describe all the possibilities, but I would like to give you some food for thought:

Often, certain prices – also due to years of very low inflation – have already burned themselves into customers’ brains in such a way that an abrupt increase of, say, 10% can actually be risky. The simplest solution would be to keep core prices and signal prices constant and to charge extra for certain additional services that may have been added over time.

In this way, you can often actually increase average prices very well without changing the base price by only pricing additional services according to the acceptance of the target group. A very price-sensitive buyer will actually get a product cheaper without additional services, while a safety-oriented customer will pay a premium for longer warranty periods, for example. Intelligently done, average price and sales increase with high acceptance of the respective target group.

Segment target groups

Inflation in general, and therefore also price increases in your company, have very different effects depending on the target group. When consumers notice that the price increase is nibbling away at affordability, a lot happens in the lower and upper price segments: many purchases move to the entry-level price segment to give themselves breathing room for important purchases. In the upper price segment, the reward takes place, which is also there to reassure oneself that one still belongs to that stratum that can afford something now and then. How this looks specifically with your customers and/or products is something that should be empirically tested in advance.

It should be clear that a linear price increase is rarely the ideal solution!!

Rethinking pricing

Unfortunately, I have not been able to provide a simple recipe for the price increase that may be necessary. There is none. Rather, my idea was to open your eyes to the fact that pricing is an extremely complex tool that can have a very strong impact on the bottom line. Investing in pricing excellence now should help you to get through the next years well and at least defend your margin.

If you have further questions about pricing, contact the author

If you want to increase prices and ask yourself how high a price increase can be without losing customers, or which feature you could perhaps do without for cost reasons in order to keep prices stable, you will soon realize that this is an extremely risky bet without empirical data. In the following, we present a tool that predicts the behaviour of your customers when prices change or when the offer changes. Along the way, you’ll also get information about your brand value.

Price is the most important profit factor for a company. If it is possible to increase prices by a few percent without losing sales, many companies can double their profits. However, this is only possible if the killer application is known, i.e. those product features for which the customer is willing to pay more money. More and more often, these killer applications are not in a technical achievement, but in a special feature of the service (fast delivery, warranty periods) or in an emphasis of an existing feature: Although all windows are “custom-made”, this feature is not communicated by the window industry. However, customers are willing to pay more for custom-made windows. The situation is similar when safety, convenience or sustainability are highlighted, provided of course that this corresponds to the facts

A market simulation also clearly shows whether there are price thresholds, i.e. a price which, if exceeded, leads to a massive drop in sales. However, price increases up to just below the price threshold cost almost no sales. If you know the price thresholds, you can either increase prices without losing sales (a previously wasted profit) or you know the maximum price for a large target group.

In addition to price and product features, the brand plays a central role in the purchase decision. In this context, the market simulation answers a whole series of central questions on the topic of brand: First, it can be determined what share of the overall decision the brand plays at all. There are markets where 60 – 70% of the decision is based on the brand (and thus not on price or product features) and there are markets where brands play virtually no role. Much more important, however, is the question of what value one’s own brand has in comparison to the competition. The market simulation can express in Euros per product whether there is a positive, neutral or even negative brand value. In our experience, there are often astonishing surprises in this area in particular.

The basis of the market simulation is in no case a questioning of consumers about their wishes à la: “What is the maximum you would pay for this brand? This would only result in meaningless wishful answers. Valid market simulations are based on a realistic simulation of purchase decisions by means of a software-based Choice-Based-Conjoint-Analysis, which simulates consumer decisions and very realistically simulates the change of decisions and brand shares. For more details, please refer to “The road to market simulation”

The road to market simulation

The CBC (Choice-Based-Conjoint) in practise

What actually happens if you increase prices by 5%? And what would be the effect of shortening the delivery time to 7 days or extending the warranty to 2 years? What would have been unanswerable years ago can now be done at the push of a button. The market simulation not only shows how market shares are reshaped by price or product changes, it even shows which competitors you lose and from whom you gain market shares. We will show you how this works here:

When customers (whether B2B or B2C) make a purchase decision, this is co-determined by a bundle of characteristics: If you’re an Apple fan, you’ll buy this brand and see if the price still fits into your budget. Someone who is not interested in brands will, for example, look at the price of a computer monitor in relation to the most important product features.

In each case, a choice is usually made from different offers or a purchase is not made. This is exactly what market simulation models based on choice-based conjoint are based on.

In a first step, those features must be defined with the client who significantly influences a purchase decision. Of these, price and brand are almost always predefined. Since a maximum of 6 – 8 features must be queried, it can make sense, especially with technical products, to have a focus group beforehand so that one does not forget an essential purchase criterion, which is often not technical at all, such as “fast delivery” or “user-defined colour”.

Once the decisive product features and their various characteristics (e.g., screen diagonal) have been defined, the field phase can begin: Product feature – screen diagonal; characteristics: 42 inches, 49, inches, 55 inches, etc. the competitors to be included in the analysis defined, the field phase can begin. Using an online survey, the purchase decision process is recreated as realistically as possible by requiring respondents to make several product comparisons. In practice, several different product bundles are suggested to the respondents, which differ from each other in terms of brand, price, and other defined product features. The respondent thus has to weigh the different product features relative to each other and ultimately decide which option to select.

If all the product comparisons have been carried out successfully, it is then possible to calculate how important the brand, the price and all the other product features taken into account are for the purchase decision process.  The software behind the survey enables the statistical calculation of so-called part worth values for the individual product features. In this way, it can ultimately be validly determined which features are particularly important for the product evaluation or decision, as well as the degree to which each feature is preferred from the customer’s point of view.

However, this superior methodology not only makes it possible to analyse the relevance of individual product features in the decision-making process, but also to simulate the impact of product and price variations on the achievable market share. Based on the part worth values determined, the “share of choice” in the sample can be calculated – in other words, what percentage of respondents would opt for a particular product-price variation. All the results of the CBC analysis can thus be combined in a simulation tool that shows, on the one hand, which market conditions – in terms of the “Share of Choice” – prevail in the market for certain offers and, on the other hand, how these market conditions change with price or product variations. In other words, the software allows you to simulate the extent to which you can increase your market share by lowering your prices or improving your product, and from which of your competitors you steal market share in the process.

If you have further interest in a CBC, please feel free to contact us here

Turnover in the office furniture market in Western Europe will rise by 10.7% this year and thus continue the high-flying trend it started last year (2021: +13.2%). Besides inflation, turnover is driven by the growth of smart office solutions that support new work concepts, as a study by Interconnection Consulting shows.

Many producers were forced to increase their prices in 2021 or at the latest at the beginning of 2022, due to higher prices for raw materials and energy. “This year, we are also seeing a high increase in inflation, coupled with supply chain issues and limited access to raw materials and supplies. Therefore, we expect further price increases this year,” foresees Katarina Gajdova, the author of the study. This means that the office furniture market in Western Europe will also grow to a record level of 8.1 billion euros this year. The strongest growth in 2021 was recorded in the UK, Denmark and France, with increases of 26.5%, 18.3% and 16% respectively. Besides inflation, the strong increase in the previous year was driven by deferred projects during the Covid pandemic. While the industry’s revenue growth is impressive, sales in the regions studied are rising only moderately (2022: +3.8%).

Green Trend Despite Higher Costs

The home office is here to stay, the office furniture manufacturers surveyed in this study are also convinced of this. On the other hand, there is growth in smart office solutions, which should support the overall growth of the market. The redesign of office environments should also contribute to growth, as the study shows. This redesign of the office space should counteract the desire for home offices and thus also bring employees back to the office location. Positive developments are seen especially in the segments of sitting and standing desks of lounge sofas and collaborative work environments. The study also shows that consumers in Western Europe are less price-sensitive than other regions of the world. This leads to a greater focus on eco-friendly materials and sustainability in demand. Overall, swivel chairs are the largest product segment in the market with a 26% share. SMEs make up the largest customer segment with a share of 61%. The home office segment already has a share of about 10%. The public sector accounts for about 15%. The most important companies include: Ahrend, Assmann, Flokk, Haworth, Kinnarps, König & Neurath, Sedus, Senator International, Steelcase, Vitra, 

The study examined the markets: Austria, Belgium & Luxembourg, Denmark, Finland, France, Germany, UK, Italy, Netherlands, Norway, Spain, Sweden, Switzerland

Turnover in the office furniture market in Western Europe will rise by 10.7% this year and thus continue the high-flying trend it started last year (2021: +13.2%). Besides inflation, turnover is driven by the growth of smart office solutions that support new work concepts, as a study by Interconnection Consulting shows.

Many producers were forced to increase their prices in 2021 or at the latest at the beginning of 2022, due to higher prices for raw materials and energy. “This year, we are also seeing a high increase in inflation, coupled with supply chain issues and limited access to raw materials and supplies. Therefore, we expect further price increases this year,” foresees Katarina Gajdova, the author of the study. This means that the office furniture market in Western Europe will also grow to a record level of 8.1 billion euros this year. The strongest growth in 2021 was recorded in the UK, Denmark and France, with increases of 26.5%, 18.3% and 16% respectively. Besides inflation, the strong increase in the previous year was driven by deferred projects during the Covid pandemic. While the industry’s revenue growth is impressive, sales in the regions studied are rising only moderately (2022: +3.8%).

Green Trend Despite Higher Costs

The home office is here to stay, the office furniture manufacturers surveyed in this study are also convinced of this. On the other hand, there is growth in smart office solutions, which should support the overall growth of the market. The redesign of office environments should also contribute to growth, as the study shows. This redesign of the office space should counteract the desire for home offices and thus also bring employees back to the office location. Positive developments are seen especially in the segments of sitting and standing desks of lounge sofas and collaborative work environments. The study also shows that consumers in Western Europe are less price-sensitive than other regions of the world. This leads to a greater focus on eco-friendly materials and sustainability in demand. Overall, swivel chairs are the largest product segment in the market with a 26% share. SMEs make up the largest customer segment with a share of 61%. The home office segment already has a share of about 10%. The public sector accounts for about 15%. The most important companies include: Ahrend, Assmann, Flokk, Haworth, Kinnarps, König & Neurath, Sedus, Senator International, Steelcase, Vitra,

The study examined the markets: Austria, Belgium & Luxembourg, Denmark, Finland, France, Germany, UK, Italy, Netherlands, Norway, Spain, Sweden, Switzerland