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In the face of a macroeconomic slowdown and a downturn in the real estate market, furniture manufacturers closely tied to the construction industry have been closing down at an alarming rate. Dongguan, a major hub for furniture production in Guangdong Province, has seen its small and medium-sized furniture businesses struggle with a sudden drop in domestic orders and expanding losses, intensifying industry consolidation.
Hypermarkets that once thrived on furniture sales are now experiencing declining foot traffic and merchant exits. Some stores in Dongguan have turned to "side businesses," introducing restaurants and hotels as a means of transformation. However, industry experts warn that such moves carry significant risks.
Two days after going missing, Zeng Guangming changed his phone number, temporarily escaping the relentless calls from suppliers and employees. Yet, unavoidable debts continued to haunt him. By the end of May, he announced the closure of two long-standing furniture factories in Dongguan. On June 1st, another factory in Chashan Town shut its doors, marking at least three closures within a week.
Zeng Guangming told reporters from *Daily Economic News* that his employees were unaware they were insolvent until recently. Meanwhile, the furniture industry in Foshan is also struggling, with many companies unable to wait for a better 2015. “It was hard last year, and it’s even harder this year,†is a common sentiment among industry players.
A furniture factory with over 40 years of operation has gone bankrupt. On May 25th, Du Jie, manager of Yujian Furniture Factory, held a weekly meeting for staff, unaware that it would be their last day. Later that afternoon, the village committee informed them that the boss had disappeared. These two factories, belonging to Zeng Guangming, were suddenly closed without warning.
Yujian Furniture, established in 2002, focused on domestic sales, while Guansheng Furniture, founded in 2006, specialized in exports. Employees reported that shipments were still being made up until the 25th, and orders were still coming in. But by noon, the boss had vanished.
According to several factory workers, last year the two factories had over 18 million yuan in debt, and this year, they still owed more than 6 million yuan in goods. Two months ago, the company could no longer afford the rent at the Expo Park in Houjie Town, and operations were pulled out.
Du Jie mentioned that the industry has been getting worse each year. Last year, monthly output was between 2 to 3 million yuan, but this year it dropped to about 1.6 million. According to Yujian Furniture staff, Zeng Guangming owed a total of 18.8 million yuan in debts, including supplier arrears, rent, utilities, and employee salaries.
Zeng admitted that this year’s monthly output was 40% lower than last year. “The factory I've operated for over ten years is like my child. No one wants to reach this point. I can guarantee it, but I can't help it. It's just too difficult.â€
Guansheng Furniture was sold for 2 million yuan to a sports equipment company. Zeng said the village committee took over the factory, sold it, and used the proceeds to pay off wages and utility bills. “I didn’t get a penny.â€
Fan, a former employee of Guansheng Furniture, confirmed that 2 million yuan was used to pay around 180 employees approximately 1.3 million yuan, with the rest covering rent and utilities. “It’s estimated the boss got nothing.â€
With the economic downturn, the Dongguan furniture industry is facing even tougher times this year. On June 3rd, when the reporter visited Guansheng Furniture, the factory name had been changed overnight, and workers were in the process of clearing out. However, Yujian Furniture remained unsold due to debt issues.
Zeng said the old factory was also ready to sell, but it was hard to get rid of the inventory and workers’ wages. He also mentioned that another furniture factory in Dongguan, Yalai Te, had lost contact with its owner. The manager revealed that the boss owed over 800,000 yuan in salaries, and suppliers were also unpaid.
According to the Ministry of Industry and Information Technology, the main business income of China’s furniture manufacturing enterprises in 2014 reached 718.74 billion yuan, a 10.9% increase compared to the previous year, but it was the lowest growth in five years. In Dongguan, the main revenue of large-scale furniture manufacturers fell by 0.34% in 2014.
The Dongguan SME Bureau noted that the local furniture industry faced challenges such as plummeting domestic orders, increasing losses, and stagnant output and sales growth, expecting continued pressure in 2015.
Downstream retail stores are also struggling. Passenger flow has declined, and many merchants are leaving. Some stores are attempting to diversify by introducing food and entertainment formats, but the shift is not without risks.
Upstream furniture manufacturers are suffering, and downstream sales are in decline. Recently, several professional home stores in Dongguan and Houjie Town were nearly empty. Merchants reported a sharp drop in foot traffic and difficulty making profits. Many have started clearing goods, and some are preparing to change products or vacate the store.
In the context of a weak home market, Yingfeng Home Plaza in Dongguan has introduced food and entertainment formats like Haidilao and KTV. While some stores have managed to maintain a slight increase in foot traffic through promotions, overall sales have dropped significantly.
Chen Jiao, a manager at a local brand furniture store, said the market is extremely difficult this year. She added that her store only broke even in May, and business has not improved since then.
Feng Kunkun, director of Fantasia Home Furnishings Mall, acknowledged that passenger flow has decreased compared to the same period last year. Ms. Chen, a salesperson at Emperor Furniture, said this year’s order volume has dropped sharply, and many shops are struggling to stay afloat.
Mr. Fu, a salesman at a children’s furniture store, confirmed that sales have dropped by 20-30% year-on-year. Many merchants attributed the decline to the poor property market and overall economic conditions. Most sales depend on returning customers or referrals.
Stores across the three malls have signs of “store upgrades†and “clearing goods.†Some are changing product lines, while others are exiting the market.
Li Ting, a salesperson at a sofa brand store, said the store is considering replacing products or leaving the mall. Due to location, many stores in the second phase of Yingfeng Home have already exited, moving to other malls.
The situation is similar at Guanghui Home, where brands frequently change, and many contracts are not renewed upon expiration.
With saturated markets and low sales, some shopping malls are turning to “side businesses.†Yingfeng Home, for example, has introduced sea fishing and other formats.
While some see cross-border transformation as a way to boost revenue and foot traffic, industry experts warn that it may dilute the core identity of home stores. They argue that professional stores should focus on their core business to provide quality furniture at competitive prices.
The furniture industry is showing signs of the Matthew effect, with larger brands gaining market share while smaller firms continue to struggle. Zhu Changling, chairman of the China Furniture Association, pointed out that while demand is still growing, SMEs face rising labor costs, taxes, and environmental pressures.
He also noted that factors like blind expansion, lack of technology, and insufficient funds contribute to the closure of many small furniture companies. With the economy entering a new normal, the industry will continue to consolidate as customization, automation, and diversification become more important.
While many SMEs are struggling, listed furniture companies are performing well. Companies like Meike Home, Hao Laike, and Sophia have seen growth in revenue and net profit this year. This trend highlights the growing dominance of large brands in the furniture market.
For more information on China’s furniture industry, visit the official website of Xianghe Furniture City.
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