End-Market Study for Indonesian Home Accessories
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END-MARKET STUDY FOR INDONESIAN HOME ACCESSORIES DECEMBER 2007 This publication was produced for review by the United States Agency for International Development. It was prepared by Ted Barber of DAI with technical supervision and inputs from Marina Krivoshlykova of DAI. END-MARKET STUDY FOR INDONESIAN HOME ACCESSORIES The authors’ views expressed in this publication do not necessarily reflect the views of the United States Agency for International Development or the United States Government. CONTENTS PREFACE...........................................................................................IX ACRONYMS.......................................................................................XI EXECUTIVE SUMMARY..................................................................XIII I. INTRODUCTION ..............................................................................1 SENADA AND TARGET ENTERPRISES .......................................1 OBJECTIVE OF END MARKET STUDY ..........................................1 II. THE GLOBAL MARKET FOR INDONESIAN HOME ACCESSORIES ...............................................2 DEFINITION OF HOME ACCESSORIES AND CHALLENGES ASSOCIATED WITH DATA COLLECTION .......................................2 GLOBAL MARKET FOR HOME ACCESSORIES AND MARKET SEGMENTS ..................................................................3 KEY PLAYERS AND DISTRIBUTION CHANNELS ............................7 KEY TRENDS IN DISTRIBUTION CHANNELS ...............................12 PRICE SEGMENTS AND KEY TRENDS ........................................13 KEY EXPORT COUNTRIES AND IMPORT MARKETS FOR HOME ACCESSORIES WORLDWIDE...........................................14 Global Trade in Home Accessories............................14 Import Markets for Home Accessories Produced in Any Country ...........................................15 Competition in Home Accessories .............................18 Importers of Indonesian Home Accessories ..............19 III. TRENDS.......................................................................................22 GENERAL TRENDS...................................................................23 KEY TRENDS IN HOME ACCESSORIES.......................................24 THE GREEN TREND..................................................................26 CONCLUSION...........................................................................31 IV. VIEW FROM THE MARKETPLACE: INDONESIAN HOME ACCESSORIES.................................................................................33 STRENGTHS ............................................................................33 WEAKNESSES .........................................................................34 iv END-MARKET STUDY FOR INDONESIAN HOME ACCESSORIES OPPORTUNITIES ......................................................................36 THREATS.................................................................................39 COMPETITOR BENCHMARKING .................................................41 BUYER REQUIREMENTS ...........................................................41 V. STRATEGY RECOMMENDATIONS ............................................43 COMPETING IN A GLOBAL MARKETPLACE ................................43 UPGRADING STRATEGY ...........................................................45 Product design ...........................................................45 Quality........................................................................46 Customer Service.......................................................48 Market Access............................................................49 Going Green...............................................................50 SUSTAINING COMPETITIVENESS ...............................................53 APPENDIX A: SOURCES FOR TREND INFORMATION ................57 APPENDIX B: COMPETITOR BENCHMARKING – COMMENTS FROM INTERVIEWEES ..............................................59 APPENDIX C: BUYERS’ SUGGESTIONS .......................................63 APPENDIX D: PALECEK’S ECO COMMITMENT ...........................69 APPENDIX E: SUSTAINABLE FURNITURE COUNCIL ..................71 APPENDIX F: GREEN GLOSSARY.................................................73 APPENDIX G: ORGANIZATIONS ....................................................79 APPENDIX H: SFC RESOURCES LIST...........................................81 APPENDIX I: PRESENTATION SLIDES FOR USAID/JAKARTA BRIEFING (OCTOBER 30, 2007) .....................................................85 APPENDIX J: HOME ACCESSORIES VALUE CHAIN OVERVIEW .......................................................................................88 ANNEX K: INTERVIEWEES, BIBLIOGRAPHY, AND WEBSITES REVIEWED....................................................................89 END-MARKET STUDY FOR INDONESIAN HOME ACCESSORIES v TABLES AND FIGURES TABLES 1 U.S. Home Accessory Market Segments..................................................3 2 Price Segments for Home Accessories ..................................................13 3 Indonesian Home Accessories ...............................................................15 4 Top Importers of Home Accessories Worldwide.....................................16 5 Top Emerging European Importers of World Home Accessories...........17 6 Top Exporters of Home Accessories ......................................................19 7 Top Importers of Indonesia Home Accessories......................................20 8 Growth Rates in Purchase of Indonesian Home Accessories ................21 FIGURES 1 End-Market Distribution Channels – Where Are Home Accessories Sold?........................................................8 2 Home Accessory Market Channels for Developing-Country Producers...9 3 Top 10 Importers of Home Accessories Produced Worldwide ...............16 4 Top Emerging European Importers of World Home Accessories...........17 5 Top 10 World Exporters of Home Accessories.......................................18 6 2006 Composition of Imports from Indonesia .........................................19 7 Top 10 Importers of Indonesia Home Accessories.................................20 8 Top Emerging-Market Importers of Indonesian Home Accessories .......21 END-MARKET STUDY FOR INDONESIAN HOME ACCESSORIES vii PREFACE This paper was written as part of the Accelerated Microenterprise Advancement Project (AMAP) Business Development Services Knowledge and Practice (BDS K&P) research initiative. The AMAP BDS initiative’s major objective is “integrating micro and small enterprises into productive value chains to create wealth in poor communities.” The research draws on experience and insights from: • Interviews with leading buyers of handicrafts and home accessories in the United States and the European Union, including importers and retailers currently sourcing from Indonesia, those who have done so in the past, and those who source handmade products from other countries; • Interviews with market experts, such as product development consultants, designers, enterprise development consultants, specialists in natural resource management and sustainable manufacturing, and marketing specialists who work with handicraft producers in developing countries; • Discussions with SENADA (the Indonesia Competitiveness Program) staff and consultants; • Discussions with Indonesian micro, small, and medium-size enterprise owners and employees; • Existing literature on the home furnishings market, product trends, and sustainable products and manufacturing. This report provides an overview and analysis of the global market for handcrafted home accessories and the key trends that affect producers in Indonesia; its ultimate objective is to provide practical recommendations for the Indonesian home accessories industry and SENADA. Chapter I provides an introduction to this study, including a summary of SENADA. Chapter II covers the global market for home accessories with a focus on Indonesian exports. Chapter III offers a review of key trends that impact the home accessories industry, including a closer look at the growing trend in sustainable (or “green”) products. Chapter IV summarizes, from the viewpoint of buyers and industry experts, the strengths, weaknesses, opportunities, and threats of the Indonesian home furnishings sector. It also provides competitor benchmarking and a review of buyer requirements. Chapter V presents recommendations for developing a strategy to increase the sector’s global competitiveness, implementing upgrades to address prioritized constraints and capitalize on key opportunities, and sustaining industry competitiveness over time. This paper benefited from the intellectual guidance of Jeanne Downing at the U.S. Agency for International Development and was prepared under the technical supervision of Marina Krivoshlykova of DAI. Appendix K lists the many experts and buyers who shared their time with the authors. In addition, Susan Inglis of the Sustainable Furniture Council and Patrick Kadian of the SENADA program provided invaluable guidance and information. Tim Sparkman of DAI contributed with research and trade data analysis. END-MARKET STUDY FOR INDONESIAN HOME ACCESSORIES ix ACRONYMS AHFA American Home Furnishings Alliance AMAP Accelerated Microenterprise Advancement Program (USAID-funded) ATO alternative trade organization CSR corporate social responsibility FSC Forest Stewardship Council HS Harmonized Commodity Description and Coding System LEED Leadership in Energy and Environmental Design MSME micro,