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).
Over the past three years, IKEA’s services have extended to nearly 1 billion Chinese consumers with the online platforms such as the Tmall store and online shopping mall on WeChat.
Ingka Group, the parent group of Swedish home furnishing giant, will invest 5.3 billion yuan ($772.9 million) in China in the fiscal year 2023.
Unlike people in the West, Chinese consumers don’t have a role model from older generations when it comes to home decor. Two decades ago, home ownership was non-existent, and it was common for a family, sometimes three generations, to share a 300-square-feet room that they used for sleeping, eating and daily activities. A kitchen was not even a necessity as many people simply cooked in a common area outside their room.
In the last 25 years, home ownership has gone from practically zero to about 70 percent.
However, many people have little sense of how to furnish or decorate a home, but they are eager to learn from the West. This is one of the reasons IKEA is so popular in China. Their Western-style showrooms provide model bedrooms, dining rooms, and family rooms showing how to furnish them. Their stylish and functional modern furniture is particularly appealing to young couples.
IKEA’s stores offer more than seven thousand products and feature a restaurant and a spacious and colorful children’s playground. Some people come to IKEA to experience the Western style of living, or simply for recreation, as if it were a theme park.
In 2022, 57% of furniture was bought offline, and 43% online and the numbers are to stay on a similar level in the next years. This presents huge opportunities for foreign furniture manufacturers, as it gives them a chance to reach consumers in the Chinese furniture market rather easily, as they search for high-quality furniture, especially from abroad, online.
Currently, China is the biggest furniture manufacturer in the world, exceeding famous Italy. There are thousands of furniture factories, and the local furniture industry is thriving, leading the world in terms of wooden furniture, metal furniture, and glass furniture.
Yet, after years of hearing about luxurious furniture from Italy or Spain, Chinese wealthy 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.
In the past decade, China became a major destination for multinationals corporations. This resulted in an increasing demand for office furniture – but not just any kind of furniture: due to the environmental harm caused by deforestation, plastic and glass furnishings are becoming increasingly popular.
The office furniture market continued to grow due to the COVID-19 pandemic, which forced people to work remotely. Home-Office furniture is one of the home décor segments that experienced the biggest growth in recent years, and the trend is here to stay, as more and more people continue to work from home.
At the same time, Chinese parents are prioritizing their children’s safety, comfort, and style when purchasing home décor. 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.
Since 2004, Chinese surpassed Italy in furniture exports. Cost-effective production and labor resources are 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 on this market landscape; a trend further spurred by urbanization 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. Registering your brand in China is a crucial step before marketing any type of product.
Other problematic sectors are glass and porcelain, with foreign companies struggling to sell their pieces to Chinese consumers. This is mainly because China has a highly developed glass and porcelain industry with cheaper products and higher quality.
China is the biggest export country of glass and porcelain products in the world, with 25.1% share of worldwide market.
Branding is therefore key to any marketing strategy in the home décor industry in China. The first step is the development of a Chinese website, where consumers can read about the brand and see your product with all the necessary specifications. It is essential to add a chat box and all contact information with social media links so that you seem reliable and professional.
Having a website in Chinese increases your score in Baidu search results, which makes it easier for consumers to find your products online. Baidu is the first place that Chinese people check for information, so it is important to focus on Baidu to increase exposure.
Smart furniture is becoming a mainstream feature in newly completed, furnished apartments. Advances in AI, big data, and 5G have enabled convenient features to make households smarter than ever before – offering users higher levels of comfort while also helping reduce carbon emissions.
Examples include dining tables that can monitor the weight and body temperature of infants as well as self-adjusting heights for greater user convenience. With 89% adoption rates according to All View Cloud’s figures, it looks like smart homes are here to stay.
To maximize success in the Chinese market, it is essential for any brand to establish an e-commerce presence. As far as platforms go, Tmall and JD are top contenders to consider when promoting home décor products. Unlike Taobao (a platform mainly geared towards cheaper home decoration items), these two giants offer a more luxurious environment that works well with luxury brands – helping you differentiate yourself from competitors while increasing trust among customers who can be confident, they aren’t receiving counterfeit products.
Currently, the digitalization of the home décor industry is a priority among leading Chinese companies.
Digitalization has certain applicable conditions that will help leading companies grow. Model innovations such as custom home improvement, require a high degree of digitalization from the product and service processes. This will further enhance the value brought by the model innovation.
Internet home furnishing promotes multiple links online and part of the link standardization degree, which will bring the advantages of constantly precipitated data assets. The digital transformation of the home improvement industry has improved the overall quality of service, especially the aura of the first A-share listed home improvement companies, attracting more and more consumers, which will be an irreversible trend in the development of the industry.
The various trends of personalization, 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. The home décor market has a vast room for growth.
To learn more about our services in China, contact our Head of Business Advisory - Ms. Kristina Koehler-Coluccia at kristina@woodburnglobal.com. DISCLAIMER: All information in this article is verified to the best of our ability and is assumed to be correct at time of release; however, Woodburn Accountants & Advisors does not accept responsibility for any losses arising from reliance on the information provided within. The information provided is for general guidance and does not replace specialized advice.