After IKEA left Russia, local furniture factories continued to produce IKEA’s furniture under their own brands, according to the Russian Association of Furniture and Woodworking Industries of Russia (AMDPR). As the association said in its first quarter report, “already today, almost all the furniture presented in IKEA can be found on the market, since all of it was produced by domestic plants.” At the same time, the association accused IKEA of the fact that the closure of its stores in Russia "violated the communication system" between furniture factories and the consumers.
“The first quarter of 2022, or rather March, reset all our previous forecasts of how the Russian furniture market will develop this year. After a successful 2021, we rejoiced at the full recovery from the pandemic and were confident of continued strong growth. Now there is no need to talk about this: the market is still in a turbulent state, and furniture makers have two scenarios for its development,” said Alexander Shestakov, president of AMDPR in the report.
According to the stress scenario, the explosion in demand, recorded in March-April, will come to naught in May, and by the end of the year, furniture makers expect at least a 50% drop in sales due to a demand decrease associated with an income reduction and high inflation.
According to the optimistic scenario, by autumn the market will balance and furniture enterprises will continue to work as usual. The reason for optimism, according to Alexander Shestakov, is the continued growth in the construction sector (a large number of new housing is planned for commissioning in 2022), as well as the upcoming change in the criteria for standard housing, the list of which will include mandatory fine finishing and minimal kitchen furnishing, bathrooms, hallways. “We really hope that such a decision will still be made. Without it, the furniture industry in Russia may not survive in the medium term,” emphasizes the president of AMDPR.
Consumer prices for furniture in the first quarter of 2022 increased by an average of 12.5%, which already exceeded the same indicator for the whole of 2021. As in 2021, the increase in furniture prices in January-March 2022 was higher than inflation over the same period (9.95%).
“This situation is due to the fact that Russian furniture manufacturers depend on imported components. For many indicators, such as fittings, varnishes and paints, furniture fabrics, PVC films, chemical components, this dependence reaches 90-100%. In recent months, these goods have greatly increased in price due to the depreciation of the ruble, logistics has become much more complicated, which also had a negative impact on the cost of production of final products. So far, large Russian furniture plants have a stock of raw materials and materials, which makes it possible to restrain the growth of consumer prices. However, sooner or later it will end, and prices will go up again,” Alexander Shestakov warns.
The forecasted short-term decline in the segment of affordable and high-quality furniture is largely due to the exit from the Russian market of its main manufacturer and seller, the Swedish retailer IKEA. “The suspension of the work of the Swedes gives Russian furniture manufacturers a lot of opportunities to develop new market niches and diversify their product line. I am sure that domestic plants will cope with this task, but this takes time: to develop new collections, search for suppliers of components, introduce new production technologies, and build communication with the consumer,” said Alexander Shestakov in the report.
In March 2022, IKEA annouced decision to temporarily pause its operations in Russia and Belarus due to Russian invasion of Ukraine. "The devastating war in Ukraine is a human tragedy, and our deepest empathy and concerns are with the millions of people impacted", said IKEA in a statement.
