The rapid expansion of China’s real estate market and the growing urbanisation process have also lead to the growth of the home décor market, representing an interesting business opportunity, writes Kristina Koehler-Coluccia, Head of Business Advisory at Woodburn Global
Items in the home décor sector can be found in virtually every room within the home and are typically used to showcase style and creativity. With a population of about 1.4 billion people, China has the world’s largest housing market, making it the perfect country for home décor companies wanting to sell their wares.
In 2023, the Chinese home décor market is estimated to reach £16.65 billion, with an annual growth rate of 9.26% (2023-2027). In global comparison, the size of the world’s home décor market is estimated to be £548.2 billion in 2023.
China home décor market trends
Urbanisation and the gradual growth of second-hand housing have traditionally been the main drivers of the home décor market in China, the latter because people usually redecorate when they move into a new home. Customised furniture and premium home decorations have also experienced significant growth, with kitchen cabinet and wardrobe categories leading the demand for custom-made furniture.
Chinese consumers are also increasingly interested in smart home devices. Advances in AI, big data and 5G have enabled convenient features that make households smarter than ever before, offering users higher levels of comfort. Examples include dining tables that can monitor the weight and body temperature of infants as well as self-adjusting heights for greater user convenience.
The rising number of people living in small houses has also promoted the use of products with extra storage features and those that could enhance the visual appeal of residences. Another crucial factor is the rising customer preference for eco-friendly home design items, which is a consequence of increasing environmental concerns.
The customised furniture and high-end home décor segment in China have experienced significant expansion and offer great opportunities for brands. For consumers, whole-house customisation ensures style uniformity. It also allows for one-stop procurement and cost control to manage their budget. On the other hand, for home décor companies, customising a whole house means lower cost and higher profit.
Between 2016 and 2020, the housing supply structure in China’s home décor market changed. “Refined Housing”, houses that already have cabinets installed, walls painted, bulbs set, and floors tiled, are gradually becoming more popular. Meanwhile, “roughcast housing”, houses that are left undecorated, became less attractive.
The growth of per capita disposable income and the rise in the proportion of expenditure on housing, as well as the increased demand for soft furnishings in the major categories of home décor, represent an important market trend. This change in the distribution of expenditure will bring structural growth opportunities in the industry.
Home décor market consumer profile
Home décor consumers tend to be younger, with a consumption capacity that continues to grow and transform from simple need-oriented purchases to enjoying the process of consumption. It has been observed that lifestyle is the core element of the new generation of consumers, who are more concerned about the presentation of their home.
While their parents were more concerned with practicality, young consumers increasingly pursue quality and personality and are willing to pay a premium for high-quality, personalised products or services. “Small town youth”, “post-1995s”, and “single people” will become the three new main forces of consumption.
If the past decade of the home décor market was driven by product, price, channel, and promotion, the new decade will be defined by product, design, service, and experience as the core elements. At this stage, Chinese consumers are more concerned with distinctive product design, consumer-centred service, and experience than with products and prices, forcing traditional decoration companies to make changes in their marketing models.
Therefore, companies offering more personalised design services will have a competitive advantage.
Safety and quality concerns are paramount
Over the last few years, and especially since the Covid-19 pandemic, health has become the industry’s new trend, and environmentally friendly materials are also becoming more popular. Chinese consumers are putting forward higher requirements for home environmental protection and are willing to pay extra for higher-level environmental protection products.
According to recent data, 80% of Chinese users said that their first consideration when choosing wall paint materials, wood flooring, furniture, and wood panels, is the environmental safety of the material (no formaldehyde and other harmful substances), followed by the basic performance of each decoration material.
According to the same survey, consumers not only expect aldehyde-free home decoration but are also willing to pay 14% more. Almost 54% of the Chinese renovation population said they would choose to use aldehyde-free products for the whole house if they were available.
The official “Technical Standards for the Control of Indoor Decoration Pollution in Residential Buildings” is a comprehensive and effective solution to indoor decoration pollution and is also expected to make home environmental protection a simple quantitative upgrade and achieve a qualitative breakthrough.
Furthermore, the Environmental Protection Law introduced in 2015 provided clarity regarding foregone toxic materials such as formaldehyde. While this may have initially caused difficulties for manufacturers, ultimately, these steps will help create healthier living conditions going forward.
As a result, Chinese consumers’ awareness of formaldehyde prevention has increased significantly. Decoration pollution has become their primary concern, since it is considered the main source of formaldehyde from furniture, panels, wall materials and other interior decoration items. Formaldehyde testing is considered a necessary process for new decoration.
Parents in particular are concerned about how their home décor affects their children’s safety and comfort. A recent study revealed that 72% of Chinese families opt for premium pieces – wooden furniture designed with non-toxic materials, smooth edges, and a multitude of elegant designs adapted to suit the individual needs (and tastes) of kids.
Top companies in China’s home décor market
The five top companies in the furniture market in China are Macalline Group, Ikea Group, Beijing Easyhome Investment Holding Group Co. Ltd., Yuexing Group and Markor Furnishing Co. Ltd.
In 2019, IKEA announced a three-year strategy tailored to the Chinese market, which included CNY 10 billion of investment (£1.12 billion). Over the past three years, Ikea’s services have extended to nearly 1 billion Chinese consumers with the launch of its online stores on Tmall and WeChat. Ikea’s parent company, Ingka Group, will invest CNY 5.3 billion (£596.6 million) in China in the 2023 fiscal year.
One of the reasons why IKEA is so popular in China is that over the last 25 years, home ownership has gone from practically zero to about 70%, and many people have little sense of how to furnish or decorate a home, so they are eager to learn from the West. Ikea’s Western-style showrooms provide model bedrooms, dining rooms, and family rooms. The brand’s stylish and functional modern furniture is particularly appealing to young couples.
The state of the home décor market for foreign brands
Currently, China is the biggest furniture manufacturer in the world, exceeding the more famous Italy. There are thousands of furniture factories, and the local furniture industry is thriving, leading the world in terms of wooden, metal, and glass furniture.
Yet, after years of hearing about luxurious furniture from Italy or Spain, wealthy Chinese people and the growing middle class are visiting malls and searching the internet to find the best foreign furniture for their homes, believing their quality exceeds the local. This market presents great opportunities for foreign furniture companies, but they need to know how to sell their products properly to a demanding Chinese customer.
Since 2004, China has surpassed Italy in furniture exports. Cost-effective production and labour resources are the key factors behind this success; coupled with increasing domestic demand for home decoration as people’s standards of living improve. Consequently, both quality and price have kept up with traditional Italian manufacturers making China emerge victorious in this market landscape; a trend further spurred by urbanisation initiatives from leading policies aimed at stimulating internal consumption.
Many leading furniture brands from abroad produce their items in China, as traditional Chinese furniture makers usually make the products better than their Western counterparts and for a lower price. The trick is that many wealthy Chinese don’t know that, and they still prefer to pay more for products believed to be from overseas, when in fact, they are produced in China’s Pearl River Delta.
One of the main problems faced by foreign home décor designers is counterfeit products. Leading furniture designers can often find their products on Chinese e-commerce platforms or in furniture shops across China, especially when it comes to wood furniture. Therefore, registering your brand in China is a crucial step before marketing any type of product.
The various trends of personalisation, quality and openness to innovative models shown by young people in home consumption are forcing a change in the home décor market in China. In the post-pandemic era, there are numerous companies in the industry that are attracting cross-border investors to enter and successfully raise funds. It is clear that the home décor market has vast room for growth.
