“The Challenges and Solutions of the Furniture Market During Economic Stagnation and Inflation: An Interview with Valdis Krauklis”

The situation in the furniture market is still not simple, because the market decline with the subsequent stagnation on the one hand and the increase in production costs on the other hand create a paradoxical picture. Currently, the best solution is to get ahead of time – that is, to produce more in one unit of time, or to produce products with greater added value.

SIA tells this in an interview with Dienas Biznesam Bouldering service chairman of the board Valdis Krauklis. He admits that the situation is difficult, because there have been as many changes in recent years as there have been in the previous 30 years in total.

Excerpt from the interview

How difficult is it to work in a situation where the Baltic States are the inflation champions of Europe compared to other countries?

One large customer of furniture for educational institutions from Scandinavia asked to be informed about inflation indicators, unemployment rate, average salary changes in Latvia and risks related to the increase of these indicators, almost or every month. The situation was not and still is not simple, because the decline of the furniture market with the subsequent stagnation on the one hand and the increase in production costs on the other hand form a paradoxical picture. Manufacturers understand that, unfortunately, it is impossible to significantly reduce the prices of raw materials and due to inflation there is pressure on wages, we – manufacturers – must focus on more efficient work. This is a challenge not only in furniture, but also in many other sectors of the manufacturing industry.

Of course, the current situation is not the same as it was during the so-called Great Depression – 2008-2011, when many manufacturers were forced not only to reduce wages, but also to lay off many people. Currently, the best solution is to get ahead of time, that is, to produce more or more expensive output in one unit of time than before. This is a very relevant issue for local capital companies that do not have a mother with financial reserves behind them who can support their subsidiary company for many months. The main difference between the current situation and the one during the recession in 2009, when, when the real estate bubble burst, debt increased for almost everyone, but income decreased, is that now, as costs increase, income also increases, the only question is whether everyone has this increase in income been in sync with the increase in costs or there is some lag in it.

Not a single large buyer of furniture from abroad, neither in 2022 nor in the last 21 years, has left Bolderāja’s service – terminated cooperation. There are foreign customers who have been very understanding of the situation that was and has developed in Latvia, and offered to make payments for the delivered furniture faster than before. Bolderāja service highly appreciated such an offer as a proof of customer loyalty. At the same time, in Sweden, for example, none of the previously planned municipal procurement of furniture was cancelled, even though it undeniably became more expensive in monetary terms. It must be said that there was and still is silence regarding new municipal furniture purchases. Time will tell what the situation will be at the beginning of the active season – end of May, beginning of June – but preliminary news from foreign business partners shows the same picture as a year ago – so hopeful forecasts. At the same time, believing these encouraging forecasts, we are prepared that the market’s recovery may also be slower.

Read the whole interview April 25 in the magazine Daily Business!

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