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Table of Contents

Executive Summary

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TABLE OF CONTENTS

1. INTRODUCTION 5

2. SUMMARY 7

3. ECONOMIC ENVIRONMENT 10

3.1 INTEREST RATES 10

3.2 INFLATION 11

3.3 PUBLIC SPENDING, GDP AND UNEMPLOYMENT 11

3.4 CONSTRUCTION ACTIVITY 12

4. OFFICE FURNITURE MARKET 13

4.1 MARKET SIZE 13

4.2 OFFICE FURNITURE SECTORS 15

4.3 DISTRIBUTION 17

5. OFFICE FURNITURE DEALERS 20

5.1 OVERALL DEALER MARKET 20

5.2 DEALER CHARACTERISTICS 20

6. SOURCING BY DEALERS 29

6.1 OVERALL VIEW 29

6.2 MANUFACTURERS / IMPORTERS 31

6.3 WHOLESALERS 35

6.4 BUYING GROUPS 36

7. BUYING PROCESS 39

7.1 KEY INFLUENCERS 39

7.2 SECONDARY INFLUENCERS 40

7.3 SOURCES OF INFORMATION 41

7.4 FACTORS INFLUENCING CHOICE OF SUPPLIER 43

7.6 MARKETING SUPPORT 47

8. CUSTOMERS 50

8.1 MAJOR CUSTOMER GROUPS 50

8.2 DISCOUNTS 51

8.3 MARKETING METHODS 52

APPENDIX 54

TABLES & CHARTS

CHART 1: OFFICE FURNITURE MARKET 1990-1997 (£M MSP) TABLE 1: UK MARKET FOR OFFICE FURNITURE 1990-2000

CHART 2: MIX OF PRODUCTS WITHIN THE UK OFFICE FURNITURE MARKET - 1996 BY VALUE

CHART 3: OFFICE FURNITURE - MARKET INFRASTRUCTURE

CHART 4: DISTRIBUTION CHANNEL SHARE BY VALUE - OFFICE FURNITURE 1996

CHART 5: DEALERS SHARE OF THE UK OFFICE FURNITURE MARKET 1992, -1996

CHART 6: percentAGE OF UK DEALERS HOLDING STOCK OF OFFICE FURNITURE

CHART 7: percentAGE OF UK DEALER TURNOVER FROM STOCKED OFFICE FURNITURE

CHART 8: percentAGE OF UK DEALERS WITH WAREHOUSE FACILITIES

CHART 9: percentAGE OF UK DEALERS WITH SHOWROOM FACILITY

CHART 10: SHARE ACCOUNTED FOR BY MAJOR CHANNELS OF OFFICE FURNITURE

TABLE 11: UK MARKET FOR OFFICE FURNITURE SUPPLIERS percent BY VALUE 1996

TABLE 12: KEY INFLUENCE ON SUPPLIER CHOICE

TABLE 13: POSITIONS OF OTHER MANAGERS/COLLEAGUES INVOLVED IN THE DECISION MAKING PROCESS

TABLE 14: MAJOR SOURCES OF INFORMATION USED WHEN SEEKING AN ALTERNATIVE SUPPLIER

TABLE 15: OVERALL RANKING OF FACTORS INFLUENCING DEALERS CHOICE OF SUPPLIER

TABLE 16: OVERALL RANKING OF FACTORS RELATING TO SALES & MARKETING SUPPORT

CHART 17: MAJOR CUSTOMER GROUPS FOR DEALER OFFICE FURNITURE BUSINESS

CHART 18: MAJOR MARKETING METHODS USED BY DEALERS - percent MIX

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EXECUTIVE SUMMARY

Following several very difficult years in the early 1990s, the Office Furniture market has experienced a strong recovery since 1994, with 1996/97 proving to be particularly buoyant years.

Recovery in the performance of the UK economy and steady growth in commercial construction activity are the major driving forces behind market growth for office furniture. In addition, the service sector of the economy is particularly buoyant which is the key end-use sector for office furniture.

In terms of distribution, the dealer channel is estimated to account for 58 percent of the market, equivalent to around £500 million turnover in 1997. This figure, however, understates the total turnover of dealers as this figure relates to office furniture only and excludes dealer sales in other products, additional services etc.

The dealer network is very fragmented, with an estimated 2500 furniture dealers in the UK. The vast majority are small companies with annual sales of less than £1 million. While there are some larger dealers with multi-branch operations, the majority operate within their local environment only.

While some dealers are closely linked with individual office furniture manufacturers, the majority are independent operations sourcing from several manufacturers. Multiple sourcing is essential for most dealers to enable them to offer a comprehensive range of product options at different price levels. As a result, many dealers will select and promote specific ranges from different manufacturers, within their overall market portfolio.

Analysis of dealers in terms of their facilities indicate around 64 percent held some stock, though only a limited proportion of sales are met from stock, with the rest supplied direct from the manufacturer for a specific contract. Some 86 percent of dealers indicate they have showroom facilities, though the quality of these facilities can vary substantially between dealers.

Most of the leading manufacturers including Steelcase, Arenson, Senator etc supply through the dealer network, though Steelcase have a small number of highly committed dealers. Project, part of Bullough Group, are the leading direct supplier of office furniture, particularly into the public sector. Matthews are, perhaps, unique in that they are both a manufacturer of office furniture and also operate a network of distribution outlets.

In terms of the buying process, most dealers are small and therefore the choice of supplier rests with the owners of the company. Larger dealers may operate more of a 'committee system' which could include sales, purchasing and design staff. Delivery, quality and back-up services are key criteria influencing choice. Price levels are obviously important to dealers but primarily in the context of value within price segments of the market, rather than in absolute terms.

Product range and brand exclusivity are not considered important factors as most dealers are not sourcing from a single supplier and will choose appropriate ranges from different manufacturers.

Support with literature/brochures and showroom display models are considered important issues, but generally dealers do not expect a high level of marketing support from their supplier. The level of support from manufacturers declined substantially during the recession as overheads were reduced and have not recovered to any significant extent to date.

Future prospects for the dealer network appear to be relatively optimistic at least in the medium term. The overall office furniture market is forecast to grow by around 5-6 percent per annum over the next 3 years reflecting continued buoyancy in the service sector and general construction activity.

The growing range of services offered by dealers should ensure they retain a significant share of the market, though the superstores are likely to be a key distribution channel supplying into the home office (SOHO) market.

This comprehensive report represents a detailed assessment of the market, reviewing major trends, key factors influencing developments and future prospects for the sector. Analysis is both quantitative and qualitative, based on our substantial experience of the building and home improvement markets.

Text © 1997 AMA Research

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