Indonesia’s Homeware and Furniture Industry
How does the industry develop during massive urbanization?
Indonesia has been known as one of the world’s leading players in the furniture industry. The country has a competitive advantage in terms of abundant raw materials available, specifically rattan. Almost 80% of rattan material is produced in the country, making Indonesia the world’s largest rattan raw materials producers (Kemlu, 2020). The industry has been showing positive export trends, valued at USD 1.7 billion in 2019, increasing steadily from USD 1.6 billion in 2016. The main export destinations are the USA, Japan, Germany, Belgium, and the Netherlands (BPS, 2020).
The industry’s revenue is projected to reach USD 3,613 million in 2020 and is expected to show an annual growth rate (CAGR) of 14.1% from 2020 to 2025 (Statista, 2020). The market volume is projected to reach USD 6,986 million by 2025, mainly due to the massive urbanization in the country and the expanding middle-class. The demand for high-quality and modern furniture is also growing as there is a shift in Indonesian consumer behavior.
Indonesia is an archipelago with several potential areas for furniture raw materials in various islands; Kalimantan, Sulawesi, and Sumatra. Indonesia also possesses 120.6 million hectares of forest. With 12.8 million hectares of production forest, the country also has a huge source of wood raw materials.
Domestic Market
Indonesian homeware and furniture industry is expected to grow in the future, mainly driven by the growing consumer base across the country. The urbanization, a 2% increase of urban households each year, that is happening in several parts of the country leads to greater consumer demand for high-quality furnishing with an aesthetic value. The growing middle-class with a higher buying power will also assist the demand for more expensive and modern furniture. The consumer base expansion is expected to give the market more revenue in the future years.
The government stated that they seek to optimize the national furniture industry’s potential. The industry has been one of the labor-intensive industries and has become a priority industry in Indonesia. With huge potential in terms of raw materials, the government aspires to create a skilled and innovative workforce to increase the industry’s competitiveness. The government is hoping to boost the national furniture industry’s competitiveness in the global market (Setkab, 2019).
Currently, Indonesia’s furniture already have a good quality to compete in the global market, as President Jokowi stated. However, innovation and improvement are still needed for the local industry to compete in the global market more effectively.
The Homeware Sector
The home furniture sector is mainly driven by the consumers’ demand for high-quality, comfortable yet aesthetically pleasing furniture. Indonesian consumers often go for theme-based home decor. The upper-middle-class Indonesian often do a regular renovation of their homes, and they often seek furniture more than just its basic functionality. Multi-purpose furniture is gaining popularity as many Indonesian consumers want to optimize their living spaces (Mordor Intelligence, 2020).
Indonesian consumers often opt for a one-stop-solution, mainly due to an inexpensive labor cost. Providing consumers with a free delivery and installation service is a key trend to keep in mind (Euromonitor, 2020).
Commercials Furniture
In the furniture for commercial use sector, the growing demand is driven by the expansion of the tourism sector. The demand for the luxurious bedroom furniture will be rising by the rising number of upscale and luxury hotels in the country (Mordor Intelligence, 2020).
Revenue growth is also expected in the office furniture sector. Again, with the ongoing urbanization, there are many new office building constructions in the country. This will accelerate the demand for office furniture in Indonesia. Wood-based furniture shows increasing popularity for office furniture (Mordor Intelligence, 2020).
Wooden Furniture and Handicraft
The abundant raw materials like wood and rattan that are available in Indonesia has supported the local industry of furniture and handicraft. You can find many unique and creative furniture and handicraft products in Indonesia, due to its rich culture and tradition that is funneled into wood carving. Each region in Indonesia has a different style and form. However, wooden furniture and handicraft manufacturers are mostly located in Bali and Central Java, specifically in Jepara, Semarang and Solo. Indonesian handicrafts came in many types of forms: wayang puppets, ceramics and pottery, metalwork (including the traditional dagger, keris), basketworks, and traditional toys and games.
Globalization Pressure and Challenges
The furniture industry is a labor-intensive industry that has contributed a lot to the nation’s economy. Indonesian manufacturers are facing challenges from globalization. Innovation is needed for Indonesian furniture manufacturers to compete in the global market. More highly-skilled labor and better research and development are also needed.
Another challenge is the case of the illegal timber trade that is affecting the furniture industry. The illegal trade is related to the raw materials supply and therefore could affect the industry (Furniture Indonesia, 2019).
Industry Players
The Indonesian furniture industry is highly fragmented, with many industry players for each segmented market. From local producers to global players are serving the highly segmented furniture market in Indonesia. In the luxury market, many companies sell global well-known brands around the world, such as the Da Vinci Group.
Indonesia-owned furnishing companies are Informa Furnishing, Vivere Group, Republic Furniture Jepara, Vinoti Living, and many other players. The global leading player from Sweden, IKEA, entered the country back in 2014 and has gained popularity ever since, planning on opening two more stores in two big cities in Java.
BRIGHT Indonesia as a Partner to Help Your Company Join Indonesia Homeware and Furniture Industry
Overall, the Indonesian furniture market holds a lot of potential. The industry is set to grow in future years due to the massive urbanization in the country. The abundant raw materials resources give Indonesia a competitive advantage in the industry. Both homeware and commercial furniture will see a growing demand due to urbanization. However, despite the fact of the growing demand due to urbanization, one thing to note in entering Indonesia’s homeware and furniture industry is important to have the right local partner.
BRIGHT Indonesia is a perfect partner for your company. BRIGHT Indonesia will assist you on the ground, including virtual assistant during the mission, logistic arrangement, and communication of every detail. It can make your company focus on developing partnership cooperation without thinking further about the hassle during the business trip.
BRIGHT Indonesia provides several services such as Market Insight Research, Business Partnership Engagement, and Business Registration and Establishment services that can help you in expanding and developing your business, register and establish your products and company, as well as obtain the work and stay permit in Indonesia ((expatriates utilization plan (RPTKA), expatriates utilization permit (IMTA), limited stay permit (KITAS)) easier.
BRIGHT Indonesia always strives to give excellent services designed only to fulfill your company’s needs with experiences in assisting multiple global clients in entering Indonesia and Southeast Asia Market. Having successfully collaborated with several clients, BRIGHT Indonesia has extraordinary experience with global companies. These collaborations are proof of our unrivaled service.
For more information, email info@brightindonesia.net.
