This motion group is among the products that will be in stock for the fall selling season from Emerald Home Furnishings’ new Lexington, N.C., warehouse.
HO CHI MINH CITY, Vietnam — Sustained consumer demand for furniture at retail has been one of the silver linings the industry has seen evolving out of the COVID-19 pandemic.
Now that demand is starting to become a challenge, particularly as overseas factories are just starting to come online after being shut down for weeks earlier this spring.
Lead times have been extended so much that many importers say they can’t get product shipped until sometime during the fourth quarter for orders placed now.
The situation is not unique to any one country in Asia. In fact, importers say there are shipping delays from China, Vietnam, Malaysia, India and even Indonesia.
Part of the reason has to do with the fact that many factories are struggling to rehire workers following shutdowns and furloughs earlier this past spring. That leaves some with limited capacity to produce for major markets such as the U.S., not to mention Europe and the Middle East.
In addition, there is competition for existing capacity from larger retailers and importers alike that are fueling factories’ push for higher minimum order quantities aimed at boosting efficiencies as they ramp up.
Up to now many importers have been in a good position due to high inventory levels that sustained their operations in May and June, particularly as retail in the U.S. opened back up. But those inventories are starting to dwindle.
That leaves many in need of new product at a time when factories are stretched to their capacity.
“A lot of the bottleneck has to do with factories conservatively ramping back up,” said H. Kelly, senior vice president, case goods and outdoor furniture at Klaussner Home Furnishings, which sources nearly all of its case goods line in Vietnam. “Some had to shut down due to COVID-19 and had furloughs.
“What happened to us is we ramped up for Chinese New Year; then COVID-19 hit, and everything sort of shut down,” he added. “We still had a bubble of inventory, but now the inventory has been depleted. The demand has been very strong for us. Now we are trying to play catch up. We are bulking back up on inventory that is tried-and-true product. It is product that sells. We are not bulking back up on new stuff.”
The challenge for Klaussner and others is competing for capacity with other manufacturers in its source factories in Vietnam and other parts of Asia. As a result, lead times are reportedly extending from 90 to 120-plus days from the time of order till when it ships from the factory. Then there is another 30-45 days on the water, which means that orders that come in now won’t likely hit retail until mid-December.
Others are saying to expect some product even later, particularly from places like Malaysia, India and even China.
“It is filling up everywhere,” said Dean Banks, general manager of case goods and upholstery resource Emerald Home Furnishings. “It is supply and demand, and with business taking off the way it is … factories are pretty much filled up for November. We are already starting our Chinese New Year forecasting.”
He noted that although it depends on the factory, orders placed today for product from Vietnam will ship in November, meaning product probably won’t hit retail floors until the end of December. Goods shipped later might not arrive until even after the first of the year.
For example, goods such as bedroom and dining shipped from Malaysia is not expected to ship before the end of November, meaning the product likely won’t hit retail until sometime in January.
“I think everyone is in the same boat,” Banks said, adding that dealers are being asked to get orders in now for product to be shipped before Chinese New Year. “We are doing everything we can to get them product. It is feast or famine right now. Everything is getting pushed back.
“It also depends on how big you are, too. Are you going to be at the top of the list or slide to the bottom? It is a pretty tough time right now.”
Banks noted Emerald is fortunate to have just added a warehouse in Lexington, N.C., which is already shipping product. Some 100 containers now on the water are targeted to hit the warehouse by late August. Another 200 are expected to land in September, which will allow retailers plenty of product on hand for the fall selling season.
Don Essenberg, president of case goods importer Legacy Classic Furniture, said the company finds itself in a strong inventory position that it expects to carry it through the fall.
“The forecast is to get us through the fall selling season, but no one knows what that means,” he said of whether demand will continue amidst ongoing uncertainties with COVID-19.
“No one wants to be sitting on a bunch of inventory if the consumer can’t shop or doesn’t feel comfortable shopping,” he added.
Essenberg said the current situation with tight shipment schedules results largely from Asian factories downsizing during the slowdown due to the cancellation of orders from the U.S. What surprised many — factories, wholesalers and retailers alike — was the way consumer demand surged once retail reopened in late April and early May.
“What we are hearing is that they are trying to ramp up; it depends on the number of workers you can get,” he said of the Asian factories. “It passes the logic test. If you reduced your order intake and didn’t plan for demand picking up like it did, you are scrambling. If you don’t have inventory, you can’t service floor placements.”
While he expects the company’s strong inventory position will carry it through the fall, the future beyond that is unknown.
“You have to work three weeks out to get containers and space on a ship, and if your production ends in November, you are still look at 60 days. It’s July, and we are now booking orders to get before Chinese New Year.”
Of course, none of this means consumers won’t find any product at retail at the end of the year or early 2020. However, their choices could be limited, forcing them to settle for their second or third choice vs. their first choice of product. Thus retailers could have to work harder to land the sale, particularly due to competition from e-commerce players such as Amazon and Wayfair.
Moe Samieian Jr., president of Moe’s Home Collection, said that not all factories are having trouble shipping. Some, he noted, can ship in October or roughly 45 to 50 days from the time of order. For example, he noted, sources in Vietnam are pretty much on a normal schedule, only facing delays of roughly 10 days.
“Their production time isn’t that much different than normal,” he said of source factories in Vietnam.
But he added of China in particular that “we almost have no factories that will produce in less than 70 days from the time of order.” With another 30 days on the water plus delivery times, that won’t have some product hitting retail until sometime in mid-autumn. This includes one of its source plants in China that can’t deliver to the West Coast until late October or early November.
“Where we have the biggest swing is China,” he said of the nearly 80-day lead times versus a more typical 45. “I can see November out of China…unless you have inventory that is not spoken for or not sold, you will not be able to fulfill anything new until November.”
And with countries such as India, he said, “The best case we are talking about is delivering in the New Year.” That projection factors in not only lead times of up to 120 days, but also an estimated 50 days transit time to the west coast. “So now you are at six months.”
“India is a big struggle as some of the factories were closed 45 to 60 days,” he said. “Then they took time to rehire and train. This is potentially a four- to six-month kind of issue. They are much slower getting product out. This has also happened to us in China. Due to COVID-19, they have slowed down orders for two months.”
As with others, one of the big challenges at Moe’s has been managing inventory throughout the pandemic. High demand in June and early July, while indeed welcome, eventually caused a drop in inventory levels.
“As COVID-19 hit, we didn’t slow down our ordering,” Samieian said of the push to be in a strong inventory position in the spring and beyond. “When things got back to normal, we were back to the best inventory positions we have been in. For August and September, we are forecasting it being lower than we want it to be.
“The first two weeks of July, we were almost 40% up year-over-year, and that has taken a hit on our inventory, so in August we will be looking for some product. We will definitely hit a low point in August and September.”
Dan Kendrick, president of case goods resource Progressive Furniture, said that most of the factories it deals with in Malaysia and Indonesia are quoting October and November for new shipments, with some running into December.
“With the factories we deal with, we started to order heavy in April and maybe as early as March because we saw this coming and knew they were going to shut down,” he said, of the push to be in a strong inventory position in spring and beyond. “We wanted to get as much (product) as we could.
“Vietnam may be a little better because of the capacity we have,” he added, noting that Progressive also has tried to order additional quantities to be able to service its dealers.
Kendrick noted that because they haven’t been able to get workers, some of the small to mid-size factories Progressive works with are running at 40% to 50% capacity.
In addition, some have had trouble getting raw materials ranging from hardware to cartons. “It is not all labor. Some of it is raw materials. Raw materials and supplies are difficult for factories in Malaysia and Vietnam when they are getting those materials from China.”
Rob Halsten, vice president, marketing for Chromcraft Revington Douglas, said the surge in demand affects almost every category coming from Asia, from accent pieces to upholstery.
“What I am picking up is that it is difficult right now,” he said. “The economy has really exploded, and consumers are sick and tired of looking at what is in their home. They are looking to get something new, and they want to get it right away. This has taken everyone by surprise. No one can get their pipelines filled.”
He said the situation is further compounded by issues ranging from higher minimum order quantities at factories to large retailers taking up much of the capacity at those same plants. Add in worker shortages, and the situation gets even more challenging.
“It is almost unprecedented to have something like this all across the board,” he said, noting he hasn’t seen anything like it in his 38 years in the industry. “It is almost unbelievable.”