After “phase 1” of the epidemic emergency, with losses of about 25% in sales for Italian furniture companies, the signals of a rebound are slow to come. Not until July will we be able to understand how the second half of the year will unfold, and what the rebound will be like – if there is one. The delicate, slow phase of reorganization of work is forcing furniture makers to come to grips with emergency choices, including those regarding the safety of employees. But it is also requiring them to rethink the chain of supply and production, along with systems of communication and distribution. Because nothing will be the same as it was before, at least over the medium term.
Domestic demand and “reshoring”
Daniele Franco, General Director of Banca d'Italia, has emphasized (during the conference “L'Italia Genera Futuro” organized by Corriere della Sera on 11 May) that a lack of financial assistance for the companies of Made in Italy will mean losing the true driver of the country’s comeback. He also urged more public and private investment on research, infrastructure and innovation, in sectors like industry 4.0 and the sustainable economy. To attempt to recover the delay that sees Italy still at the starting gate in investment expenditures with respect to average growth of 35% over the last 20 years in the main European countries. Franco also asserts that the Euro area, in the months to come, will have to rely on domestic demand and manage the options of “reshoring” – the return of operations of companies once done abroad. Italy could intercept a new demand for manufacturing, if the country-system can make itself appealing for foreign investors. And it could carry out the sourcing of materials and goods at a more local level, with a positive impact on production.
The design companies: in-house production and external supply chains
Getting back to the furniture sector, this moment of crisis implies risks and advantages for companies that make their entire product catalogue “in-house,” and for those who rely on a chain of external suppliers. Here’s why.
The importance of working with suppliers accustomed to handling highly variable situations
The Boffi De Padova group does most of the production on its own premises, for the Boffi brand, while the work is totally outsourced to a group of Brianza-based firms, for the De Padova brand. “The latter has a very streamlined structure,” says Roberto Gavazzi, CEO of the group, “capable of great flexibility, absorbing the contraction of orders. It has only a few fixed costs, which instead are distributed across the network of suppliers, small companies accustomed to coping with highly variable situations – just consider the lack of continuity in the contract sector – as long as the drop in orders is not too drastic.”
The relationship between contraction and fixed costs
Boffi, with its connection to the construction market, has had a smaller reduction of production. On the other hand, however, it has more fixed costs linked not only to personnel, for which social safety nets are in place, but also and above all to operative structures and the support of proprietary stores to compensate for the lack of liquidity caused by this period of closure and low client influx. Measures have been taken to cut costs, limiting the losses due to the inevitable drop in sales volume this year.
Capillary distribution and qualified personnel
While the manufacturers are upstream, the retailers are downstream and can represent a point of force or weakness. “The reopening,” Gavazzi continues, “is not a given for those who have not been able to cope with the expenses. Those who have a solid sales network, or one of their own, are best-equipped to survive the crisis. Companies with good capillary distribution, which remain close to clients with qualified personnel, are more likely to weather the storm. In the months to come we will see more omni-channel retailing. It is also probable that sales spaces will be revised to offer experiences that mix physical presence with remote communication. Retail operations that shift towards the digital realm will imply that products have to be more understandable through these tools. For the kitchen, bathroom and wardrobe systems, we will try to facilitate work at a distance with rapid responses, offering the variety of solutions that clients expect. On the retail side, as for internationalization and digitalization, the firms that will succeed are the ones that worked on these factors ahead of time.”
Protection of the supply chain that ensures the unique quality of the collections
While for the brands of the ItalianCreationGroup ItalianCreationGroup (Driade, FontanaArte, Valcucine, Toscoquattro) the year 2020 began with an important influx of orders, after the end of February, due to the Covid-19 emergency, the group has reported a drop of 25% to 30% in overall sales. “Retail,” says the CEO Giuseppe Di Nuccio, “is undoubtedly the channel that has suffered most from the lockdown, while the contract sector has only slowed in part. One of the biggest risks is that of damaging the chain of production that has taken form over the last 100 years, built around unique, precious know-how. The products of Driade [which relies on an external production network, ed.] require different abilities, due to their exceptional level of detailing. And the variety of the catalogue calls various production circuits into play. We have to protect the chain that guarantees the unique quality of our collections, supporting artisans and small suppliers. The economic situation caused by the health emergency could put this heritage at risk, damaging partnerships built across many years of everyday collaboration, endangering the unique forms of expertise of these suppliers. Without them, we would have to establish a dialogue with a different network, if indeed one can be found, and it will certainly not happen over the short term.”
Contract: big and small projects
Carola Bestetti agrees with this assessment. She is the head of marketing & communication of Living Divani, the historic brand of upholstered furniture Made in Italy, from prototyping to cutting, sewing and assembly, in the plant at Anzano del Parco (Como). The rest of the company’s catalogue comes from external suppliers, nearly all located in Lombardy. “The production chain, often composed of small companies, has been hit hardest. Its conservation is of vital importance, in order to meet orders and to continue the rebound. Living Divani relies on the collaboration of solid companies, so the production strategy will not change in the months to come. For safety reasons, however, there will be an extension of production timing, both for workmanship done in house and for processes sourced from suppliers. Fortunately our portfolio of orders is reassuring. The contract sector, above all small projects for hospitality, will by nature continue to advance, because these are investments already made, which have to be concluded. Only the big projects have gone through delays in the preliminary phases, and some have been postponed. We will need to understand what happens in July, and how the entire world will get back to normal. Presumably, the retail channel will be in greater difficulty. We are therefore studying how to support our distribution, developing tools to narrate products to consumers in an engaging, absorbing way, in spite of the lack of physical presence.”
The impact of lockdown on the perception of the home
These months of enclosure have brought greater awareness of the spaces of the home, making us concentrate on the quality of the products surrounding us. “The time spent in our homes,” Di Nuccio continues, “has stimulated us to improve our environment, discovering ‘hidden corners’ of houses and the desire to make them more welcoming and comfortable. The lockdown has made us rediscover our need to be ‘social animals’ and to share moments we used to take for granted. As a company, we have better understood the importance of the digital realm, as an online market that has grown during this period, but also as a way of narrating products, in just a few seconds of attention span. The way we communicate becomes crucial. We have worked and we are working on the platform of websites of the group to make it more innovative and enjoyable to use, and we are concentrating on the launches of new products in live streaming. I believe these methods will remain in the future, enabling us to be on the market with vitality, staying close to our clients.”
If there will also be a change of lifestyle on the part of consumers, “this will translate into the pursuit of real value, of the human side of ‘those who are behind the company and the product,’ to establish a more profound, true relationship, beyond the reputation of the brand, but based on the quality and beauty that are intrinsic factors of Made in Italy,” Bestetti concludes.