What is the demand for home decoration and home textiles in the European market?

The European market for home decoration and home textiles (HDHT) has improved after an import decrease in 2020 due to the COVID-19 pandemic. Many imports come directly from developing countries. Because European importers often distribute your products across the continent, you should focus on segments rather than specific countries. Opportunities are especially good in mid to high-end markets. If you can make your products stand out by adding unique value, there is potential across the sector.

1. What makes Europe an interesting market for home decoration and home textiles?

After a decrease in 2020 due to the COVID-19 pandemic, European HDHT imports grew strongly again in 2021. Consumers’ renewed focus on the home and garden is expected to drive demand for HDHT in the coming years. At the same time, rising prices may make consumers less eager to spend. Developing countries play a key role in the European HDHT import market. While mass production from countries like China dominates the low-end market, mid to high-end markets offer good opportunities for you.

European imports went up again after the disruption of the pandemic

Marketing and services for the European HDHT market generally take place within Europe. However, a lot of production takes place in lower-cost countries outside of Europe.

Between 2017 and 2021, European HDHT imports increased from €138 billion to €162 billion. The COVID-19 pandemic led to a -6.1% drop in 2020. In 2021, however, imports improved with 16% growth. This resulted in a total average yearly growth rate of 4.1% for 2017-2021. Of course, some imports in 2021 may have been delayed shipments from 2020. The global HDHT import market showed the same pattern. With a stable global market share of 38%, Europe is a key market for HDHT products.

Direct European HDHT imports from developing countries increased from €57 billion in 2017 to €68 billion in 2021. This added up to an average yearly growth rate of 4.5% and a direct import market share of 42%. Because much of the intra-European trade is made up of re-exported products from developing countries, the actual market share is probably much higher. This makes Europe an interesting market for you.

These data mainly reflect home decoration imports, which account for 88% of total European HDHT imports. However, a closer look at home textile imports shows a different pattern.

Most European home textile imports are directly sourced from developing countries. Of a total value of €19 billion in 2021, developing countries supplied €11 billion worth of home textiles. This adds up to an impressive direct European import market share of 59%.

The pandemic led to a bigger focus on the home and rising prices

Since 2020, the COVID-19 pandemic and the measures taken against it have affected international trade. At the same time, the lockdowns have increased consumer focus on the home and garden. For example, 65% of British homeowners invested in renovations during the first lockdown, spending around €4,500 each on average. The importance of home and garden is generally expected to stay high and drive demand for HDHT in the coming years.

The Maison et Objet Barometer of June 2021 clearly reflected the different impacts of the pandemic. Although 8% of the brands, retailers and specifiers interviewed indicated their business was struggling, more than a third of the respondents reported that the crisis allowed their company to grow.

Since then, however, global trade has been disrupted even more. In January/February 2022, key HDHT stakeholders estimated their costs to be 19% higher after the pandemic caused costs of raw materials, energy and transport to rise sharply. After that, costs rose further due to the war in Ukraine.

Figure 3: Impact of cost increases on HDHT companies, January-February 2022

Source: Maison et Objet Barometer – Issue 3

These longer-term cost increases are forcing HDHT companies to raise their prices. This also means that consumer prices are rising. Combined with the low consumer confidence due to the war in Ukraine, this makes consumers likely to not make large HDHT buys and/or choose more affordable options.

Consumer spending and confidence are under pressure

An important indicator for the growth of demand for HDHT products is general consumer spending (‘real private consumption expenditure’). The HDHT sector is sensitive to economic cycles. When economic circumstances and prospects are down, consumers avoid buying items that they do not urgently ’need’. When economic conditions are good, purchases of such non-essential products tend to rise.

Until the outbreak of COVID-19, the leading European markets showed a yearly growth in consumer spending of around 1-3%. Due to the pandemic, 2020 broke with this trend. In 2021, growth improved again, showing positive figures.

In December 2021 the forecasts for 2022 and 2023 were also positive, especially for 2022. However, as discussed, in March 2022 European consumer confidence plummeted due to the situation in Ukraine. This reflected a large drop in the expectations of households about the general economic situation in their country and their own future financial situation. Consumer intent to make major purchases also fell. This lower consumer confidence may well lead to lower spending on and lower demand for HDHT products.

China continues to be Europe’s leading HDHT supplier

* Excluding China

China is Europe’s main HDHT supplier, good for 29% (€48 billion) of the total import value in 2021. This is more than the direct supplies of the other developing countries combined, which add up to an – also considerable – market share of 13% (€21 billion).

The other top six suppliers are all European countries, trading within Europe. Germany is the largest, with 11% of the 2021 HDHT imports, followed by Poland (7%), Italy (6%) and the Netherlands and France (4% each).

Your focus should generally be on the mid to high-end market. Although rising prices may cause more competition in the mid-end market, these segments offer you good opportunities in terms of value addition. This allows you to avoid competition from mass-producing low-cost countries in the lower end of the market, like China.

Other developing countries are performing well

China’s low-cost workforce, availability of (especially man-made) raw materials and efficient shipping to Europe compared to other Asian countries make it the most competitive supplier. In the coming years, however, Chinese producers may increasingly focus on their domestic market. Combined with problems following trade disputes and the COVID-19 pandemic, this may offer opportunities for China’s competition.

When it comes to total HDHT imports, Europe sourced €21 billion worth of products from developing countries (other than China) in 2021. Out of these countries, the six leading suppliers are:

1. India - €4.1 billion
2. Turkey - €3.5 billion
3. Vietnam - €3.4 billion
4. Pakistan - €2.4 billion
5. Indonesia - €1.2 billion
6. Bangladesh - €1.1 billion

Categorising these imports shows that China almost completely focuses on home decoration (92%). The supply from other developing countries is more balanced, with home decoration products accounting for 63% and home textiles for 37%. Individual countries clearly focus on different things.

Home decoration supplies from developing countries other than China

Vietnam is the largest of these suppliers, accounting for about a quarter of Europe’s direct home decoration imports from “other” developing countries in 2021. The second largest supplier is India (19%), followed by Turkey (13%) and Indonesia (9%). All four of these countries have increased their supplies to Europe in recent years. Thailand and Ukraine accounted for about 4% each. While Thailand kept its supplies fairly stable between 2017 and 2021, Ukraine’s home decoration exports to Europe grew substantially in this period.

Like China, Vietnam can produce large volumes at low costs. These producers generally have a good idea of what is commercial and trendy. They effectively combine handmade and mechanised production. As such, they can be an effective (second-sourcing) alternative to China. Although there are of course exceptions, Vietnam mainly produces for the lower-end segments with limited design value. This should not be your focus.

Manufacturers from India, Indonesia and Thailand are generally more direct competition for you. These producers often have access to a wide range of natural materials and skilled craftsmanship. This allows them to compete in the mid- to high-end parts of the European market. Each of these countries has their own offering and an established place in the market.

Turkish suppliers provide a mix of industrial and handmade production, at relatively low costs. They benefit from their closeness to Europe, which allows them to offer short delivery times. This position may have protected Turkish suppliers from some of the trade problems in 2020.

Although the HD category among developing countries is clearly dominated by South and Southeast Asia, Eastern Europe is on the rise. Like Turkey, these countries benefit from their location and affordable labour costs. Ukraine was one of the top six suppliers from “other” developing countries during the COVID-19 pandemic. Most of its supplies are furniture. Ukrainian manufacturers have continued to produce furniture for export since the Russian invasion, which they ship via Germany and Poland.

Home textile supplies from developing countries other than China

Pakistan, Turkey and India are key players on the home textiles market. Together, these countries directly accounted for nearly a third of Europe’s total imports of home textiles in 2021. Bangladesh supplied another 5%, with Egypt and Vietnam completing the top six. After European home textile imports struggled in 2020, all these countries achieved double-digit growth rates in 2021.

The leading suppliers in Pakistan and India are high-volume and low-pricing sourcing hubs for home textiles, with access to cheap labour. Pakistan is a leading cotton producer worldwide, with a large spinning capacity to produce textile products from this cotton. Vietnam also specialises in high-volume, low-cost production. Again, rather than competing with these countries on price, you should focus on the mid to high-end segments.

Bangladesh is more direct competition for you, with its reasonable prices, large skilled workforce and abundance of renewable natural materials. Egypt is famous for its high-quality Egyptian cotton, making the country a strong player in high-end cotton products. As in the home decoration category, Turkish manufacturers benefit from their closeness to Europe and relatively low-cost labour.

South and Southeast Asia dominate the supplies of home textiles to Europe – not just among developing countries but worldwide. Unlike in home decoration, Eastern European developing countries play a relatively minor role in home textiles. Cambodia, Tunisia and Sri Lanka are also fairly large home textile suppliers, but their exports to Europe decreased sharply in 2020. If they manage to bounce back in the coming years, they may make their way (back) into the top six. However, Cambodia and Sri Lanka supplies have not yet returned to pre-pandemic levels.

2. Which European markets offer most opportunities for home decoration and home textiles?

The larger Western European economies are the main importers of HDHT products. However, importers in these countries generally sell their products across Europe. Therefore, your best strategy is to focus on a segment rather than a specific country.

Germany is the leading European importer of HDHT products with 18% of the market in 2021, followed by France (14%) and the United Kingdom (13%). Together, they account for almost half of the total European HDHT imports. Smaller markets with a share of less than 10% – but still in the top six importers – are the Netherlands (9%), Italy (6%) and Spain (5%). All these markets performed well in 2021, but this may include delayed shipments carried over from 2020. Whether new patterns from 2021 are here to stay is not yet clear.

As discussed, most Western European importers re-export their imported products across Europe. This explains why in the HDHT market, small countries like the Netherlands often import much more than they consume.