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Practical guide to the home décor market in China

The rapid expansion of the real estate market and the growing urbanization process in China, represent an interesting business opportunity for companies in the home décor market. In 2023, the Chinese home décor market is estimated to reach US$20.23 billion with a CAGR (2023-2027) of 9.26%.

In global comparison, most revenue is generated in the United States (US$33.39 billion in 2023). The size of the world’s home décor market is estimated to be US$665.92 billion in 2023. By 2030, the market is anticipated to reach US$939.64 billion, expanding at a CAGR of 3.9%.

Europe and Asia are the fastest growing and largest markets, respectively. According to a report by Technavio, Europe accounts for 42% of the growth of the global home décor market from 2020 to 2024.

Home décor is a fundamental part of a house because it affects all aspects of its inhabitants’ lives, from elevating a person’s self-perception to improving their confidence and productivity. And just like fashion and culture, each country has its own décor styles and trends.

The Home décor segment includes a variety of accessories and furnishings used to make a space more aesthetically appealing. Items in this sector can be found in virtually every room within the home and are typically used to showcase one’s unique style and creativity.

With a population of about 1.4 billion people, China has the largest housing market, which makes it the perfect country for home décor companies.

Urbanization, the real estate sector, the rapid recovery after COVID-19, and the growth of second-hand housing were the main drivers of the home décor market in China. Customized furniture and premium home decorations 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.

Housewarming is the number one motivation for the Chinese to decorate their house. Moreover, people living in lower-tier cities seem to spend more compared to those in higher-tier cities.

Consumers in China prefer to buy decorations from traditional home décor companies rather than high-end design studios and online furniture markets.

Window treatment is one of the most popular categories in the Chinese home décor market. Within this segment, the smart curtain is rising in popularity.

The Home décor segment is divided into four categories: Decorations -decorative items used to enhance the aesthetics of indoor spaces-, Carpets & Rugs -products designed to cover and enhance the flooring-, Candles -decorative and aromatic wax-based products- and Curtains & Blinds -products designed to cover windows and regulate the amount of light in a room.

There are around 2.3 billion houses in the world, with Asia having the highest number of houses. In 2018, urban areas were home to 55% of the global population, according to the United Nations. By 2050, this percentage is expected to rise to 68%, with India, China, and Nigeria accounting for 35% of the predicted increase in the global urban population.

Due to the shift in lifestyle, high-end, high-quality furnishings and appliances are also being adapted.

The rising popularity of 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 in the growth of the global home décor industry is the rising customer preference for eco-friendly home design items, which is a consequence of increasing environmental concerns.

The customized furniture and high-end home décor segment in China have experienced significant expansion and offer great opportunities. Personalized, diversified consumption is the mainstream of modern consumption.

Kitchen cabinets and wardrobes are two of the most popular furniture categories in China’s customized and premium home décor market trailed by bookshelves and wooden doors.

For customers, whole-house customization ensures style uniformity throughout every part of the house. It also allows them to have a one-stop procurement and cost control to manage their budget. On the other hand, for home décor companies, customizing a whole house means lower cost and higher profit.

For the home décor industry, complete house customization results in overall cost reduction while also helping build distribution channels for small and medium size companies.

Between 2016 and 2020, the housing supply structure in China’s home décor market changed. “Refined Housing”, houses that already have cabinets installed, wall painted, bulbs set, and floor adorned, is gradually becoming more popular. Meanwhile, the “Roughcast Housing” type, houses which insides are left blank, became less attractive.

Currently, there is an increasing trend of home renovation and premium home décor consumption in China, which represents an opportunity for future expansion. There are a few reasons why this industry offers interesting opportunities:

The steady progress of urbanization stimulates the demand for commercial housing. Thus, promoting the growth of home decoration market demand.

The real estate golden decade accumulated a large housing inventory for the home decoration industry and laid a solid production value foundation.

The rapid recovery of the home decoration market in the post-pandemic era stimulates demand.

The second-hand housing market in fast-developed cities is active, giving rise to a large demand for housing reconstruction.

The main motivation for home décor consumption in China is decorating a new house, followed by wanting to change the home’s aesthetic and to replace old décor. There also seems to be a correlation between the city tier and the consumption rate of home décor. The lower the tier of the city, the higher the consumption.

Home furnishing products and services have distinctive characteristics, low standardization, low consumption frequency, heavy service, and experience, which makes China’s home furnishing industry in the rapid growth phase of natural fragmentation.

Currently, the home décor industry is entering the “people-oriented” era around the consumer, which will bring important changes to the market.

From the governmental perspective, the latest policies released in 2020 are a continuation of the “housing without speculation” policy. China has entered the stage of new infrastructure to support economic development.

China’s annual land acquisition area has remained between 200 to 300 million square meters since 2015, and the stable land supply will support the steady development of China’s real estate market, which in turn will support the development of the home improvement industry’s basic plate, but the total number of new houses will not have a significant growth.

On the other hand, the useful life of a property is generally 50 years, but most home products have a useful life of 8-10 years, which means a house will be renovated at least four times, with about 5 million sets of renovation and decoration market each year.

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 consumers tend to be younger, with a consumption capacity that continues to grow, from the purchase of products gradually transformed to enjoy the service. It is observed that lifestyle is the core element of the new generation of consumers, who are most concerned about the decoration.

While their parents were more concerned with the pursuit of the practical first concept of decoration, young consumers increasingly pursue quality and personality, willing to pay a premium for high-quality, personalized products or services. “Small town youth”, “after 95”, “single aristocrats” 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-centered service, and experience than with products and prices, forcing traditional decoration companies to make changes in their marketing models.

Companies offering more personalized design services will have a competitive advantage.

In the last few years, and especially since the COVID-19 pandemic, health has become the industry’s new trend, while environmentally friendly materials are more popular. Along with the upgrading of consumption, Chinese consumers not only put forward higher requirements for home environmental protection but are also willing to pay extra for higher-level environmental protection products.

The “Technical Standards for the Control of Indoor Decoration Pollution in Residential Buildings” is not only a comprehensive and effective solution to indoor decoration pollution, but it is expected to make home environmental protection a simple quantitative upgrade and achieve a qualitative breakthrough.

The Environmental Protection Law introduced in 2015 provided clarity regarding foregone toxic materials such as formaldehyde. While this may have initially caused difficulties among many manufacturers, ultimately these steps will help create healthier living conditions going forward.

Environmental protection has become the main consideration of Chinese consumers in the purchase of renovation building materials and home décor.

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 protection of the material (no formaldehyde and other harmful substances), followed by the basic performance of each decoration material.

According to the survey, consumers not only expect aldehyde-free home decoration, but are also willing to pay 14% more. 53.5% of the Chinese renovation population said they would choose to use aldehyde-free products for the whole house if they were available.

Chinese consumers’ awareness of formaldehyde prevention has increased significantly, as shown in the safety issues related to living. 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.

Chinese culture places a strong emphasis on home life. After spending the day outside of their house, Chinese people love to reconnect with their families through time spent in cozy homes that help emphasize the bond between them. They invest heavily in tangible items such as furniture or other home décor objects for a comfortable environment where they can spend quality time together.

The 5 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.

IKEA announced a three-year strategy in 2019 especially for the Chinese market, which included 10 billion yuan of investment (US$1.5 billion).