Shenwan Hongyuan Group Co., Ltd. has released a research report indicating that the furniture manufacturing industry's revenue is projected to reach 612.5 billion yuan by 2025, with a compound annual growth rate of 4.6% from 2011 to 2025, reflecting steady demand growth. Policy optimization is boosting market sentiment, expectations for the property sector are shifting, and purchasing power is expected to be released. The low valuation of home furnishings stocks has released risk. Long-term support from the existing housing stock, coupled with market consolidation, and companies launching new smart home products, with leaders following AI trends to innovate, are stimulating replacement demand through functional iteration. The firm is optimistic about a valuation recovery for home furnishings companies. The main views are as follows.
Home furnishings are durable consumer goods in the post-property cycle, with stable demand growth. Customized furniture has a strong service attribute, is positioned further upstream in the industry chain, and shows clear channel differentiation but possesses the advantage of being a traffic entry point. Finished furniture has a high degree of standardization and is expected to benefit from the rise in demand from the existing housing stock, with stronger production scale effects and channel structure stability, favoring industry concentration. As home furnishings companies develop multiple categories and channels, the boundaries between categories are weakening. The industry initially benefited from the property boom, but in recent years, demand from the existing housing stock has continuously increased its share, solidifying the industry's foundation.
Industry Retrospective: From Property Dividend to Multi-Dimensional Growth
The period before 2016 was an industry dividend phase: driven by property and rising penetration rates. From 2009 to 2016, the compound annual growth rates for residential sales and completed floor area were 6.9% and 2.7%, respectively. Although there were periodic adjustments in the property market, the overall trend was upward. Additionally, the penetration rate of home furnishings categories continued to rise, and there were channel expansion benefits. Taking Sofia as an example, relying on the rapid expansion of single-category wardrobe stores, its revenue compound annual growth rate from 2008 to 2018 reached 43.2%.
From 2017, industry growth diverged, with leading companies integrating the market through multi-dimensional competitive advantages. The home furnishings industry is a typical "large industry, small companies" sector, with concentration still at a relatively low level (by 2025, the CR4 for domestic mattresses, fixed sofas, and the custom industry are all below 20%). Leading companies are building multi-dimensional competitive advantages, maintaining leading growth rates by: 1) deploying high-growth, high-barrier smart home products such as functional sofas, smart beds and mattresses, smart bathroom fixtures, and smart drying racks; 2) diversifying channel development to capture high-traffic positions; 3) tapping into the existing housing market; and 4) implementing multi-category layouts to provide one-stop solutions, which is expected to continuously consolidate the fragmented market.
AI is empowering home design, stimulating consumer renovation demand. Platforms like Kujiale and Juran Design have launched AI home design products, lowering the design threshold, coordinating upstream and downstream design, production, and sales, improving industry chain operational efficiency, and stimulating consumer renovation demand. Beyond real-space applications, Kujiale is also suitable for virtual environments like embodied AI training and e-commerce product displays, opening new growth avenues.
Overseas Case Studies
Reviewing the growth paths of three major overseas companies—Nitori, Hänsel, and The Home Depot—overseas leaders achieved counter-cyclical growth during property downturns by strengthening front-end retail capabilities, implementing whole-home strategies, and integrating back-end supply chains and warehousing capabilities. After Japan's property and stock market bubble burst in the 1990s, Nitori achieved high counter-cyclical growth by consolidating product capabilities, integrating its supply chain, and strengthening core retail competitiveness. Following the Asian Financial Crisis, Hänsel implemented a whole-home strategy, expanding beyond cabinets into other categories and a multi-tier brand matrix. After the US financial crisis, The Home Depot refocused on retail capability building, strengthening its core competencies of high efficiency and strong service through building distribution centers and supply chain integration.
Review of Domestic and International Companies
Overseas review: After the property market bottom is confirmed, home furnishings stocks show greater persistence. Examining the relationship between stock prices of the property chain and housing prices in Japan and the US, the stock price trends of home furnishings companies and property companies are quite consistent, with their price bottoms occurring at similar times, generally leading the bottom in core city housing prices. Property company stock prices show stronger elasticity on the left side of the national housing price bottom, while home furnishings company stock prices exhibit better persistence on the right side.
Domestic review: Before 2018, benefiting from rising industry penetration and the property dividend, home furnishings stocks accumulated increasing excess returns relative to the property sector. After 2018, the correlation between their stock prices and the property sector increased, but with each industry cycle reversal, they showed significant excess returns (both valuation and EPS increased). Since 2021, the correction in home furnishings stock prices has been more pronounced, with valuations at low levels, suggesting significant upside potential. Among them, finished furniture has a higher proportion of demand from the existing housing stock and exports, leading to stronger earnings stability. Customized furniture has a higher proportion tied to new homes, making it more sensitive to property market changes. Capturing the traffic entry point and the ability to iterate business models are key to success.
Risks include a decline in property completions suppressing home furnishings performance, persistently weak consumer spending power, and property policies falling short of expectations.