Consulate General of Denmark, Trade Council, Sydney Page 1 of 11 The Trade Council

Date 22-01-2014 File No. 01 Our ref. anwmor Case No. 01

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1. General Facts ............................................................................................................... 2 2. Industry Facts: Furniture and Design ...................................................................... 3 3. Market Overview ......................................................................................................... 6 4. Market Trends ............................................................................................................. 7 5. Case Stories .................................................................................................................. 8 6. Recommendations ...................................................................................................... 9 7. More Information .....................................................................................................10

Geography:

Capital: Canberra

Area: 7,692,024 km2 (180 times the size of Denmark)

Claims an extensive Exclusive Economic Zone of 8,148,250 km2

The world's smallest continent and sixth largest country by total area. Australia has six states—New South Wales (NSW), Queensland (QLD), South

Australia (SA), Tasmania (TAS), Victoria (VIC) and Western Australia (WA) — and two major mainland territories—the Australian Capital Territory (ACT) and the Northern Territory (NT)

Surrounded by the Indian and Pacific oceans Within close proximity to the dominant economies in Asia

Population:

Language: English

Population: 23,34 million (2013)

Largest cities:

Rank City State Population

1 Sydney NSW 4.6 million

2 Melbourne VIC 4.2 million

3 Brisbane QLD 2.2 million

4 Perth WA 1.9 million

5 Adelaide SA 1.3 million

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Political situation: Federal constitutional parliamentary democracy. Stable political situation after the election in 2013 where Tony Abbott was

elected Prime minister.

Economy overview: (CIA – The World Fact book, 2013) Currency and exchange rate: Australian dollar. US$ 1= AUD$ 1.12 GDP (Official Exchange rate); US$1.542 trillion GDP (Purchasing Power Parity); US$986,7 billion, per capita (US$): 43.300 –

21st highest in the world.

Consumer spending per household is the 6th highest in the world (2012).

Real GDP growth: 3.6% (2012). Country competitiveness: (IMD World Competitiveness Yearbook, 2013)

16th most overall competitive country. 17th in business efficiency. 13th in government efficiency. 23rd in economic performance. 20th in infrastructure.

Trade: (CIA – The World Fact book, 2013)

Export markets – 23rd

largest exporting country: China: 29.5%, Japan: 19.3%, South Korea: 8%, India 4.9%

Import markets – 21st largest importing country: China 18.4 %, US 11.7, Japan:

7.9 %, Singapore: 6%, Germany: 4.6%

Import Duty: The imp ort duty / tariff rate on furniture and design items are 5% and Goods and Services Tax (GST) is 10%. Trade Fairs/Events:

Reed Gift Fair (Melbourne) www.reedgiftfairs.com.au, 1-4 February, 2014

Home & Giving (Sydney www.homeandgiving.com, 15-18 February, 2014

Reed Gift Fair (Sydney) www.reedgiftfairs.com.au15-19 February, 2014

Life in Style www.lifeinstyle.com.au – 13-16 February, 2014

designEX www.designex.info, 28-30 May, 2014

Reed Gift Fair (Melbourne) www.reedgiftfairs.com.au, 2-6 August, 2014

Melbourne Indesign www.indesigntheevent.com 22-23 August, 2014

Reed Gift Fair (Sydney) www.reedgiftfairs.com.au, 20-23 September, 2014

Sydney Indesign www.indesigntheevent.com, 2015

Key Statistics – Furniture Wholesaling (IBIS Clothing Retailing 2013-2014)

Revenue: AUD $4.8bn

Profit: AUD $216.0m

Annual Growth 2009-2014: 0.5%

Annual Growth 2014-2019: 1.6%

Wages: AUD $479.0m

Businesses: 2,000

Key Statistics – Furniture Retailing (IBIS Clothing Retailing 2013-2014)

Revenue: AUD $8.0bn

Profit: AUD $481.2m

Annual Growth 2009-2014: 1.1%

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Annual Growth 2014-2019: 1.4%

Wages: AUD$1.0bn

Businesses: 4,390

Danish Lighting Brands in Australia (not exhaustive):

Louis Poulsen Lighting (distributor in Sydney)

Lightyears (distributor in Sydney)

Danish Furniture Brands in Australia (not exhaustive):

Cane-line (local set-up)

Carl Hansen + Søn (distributor in Sydney)

Ege (distributor in Melbourne) Eilersen (NEW) HAY (distributor in Sydney)

Howe (distributor in Sydney)

Mater (distributor in Sydney)

Muuto (distributor in Sydney)

Normann Copenhagen (distributor in Sydney)

Onecollection (NEW)

Paustian (distributor in Sydney)

PP Møbler (distributor in Sydney)

Republic of Fritz Hansen (distributor in Sydney)

&tradition (retailer in Melbourne)

Danish Interior Design Brands in Australia (not exhaustive):

Anne Black (distributor in Sydney)

Bang & Olufsen (local set-up)

By Lassen (distributor in Sydney)

By Nord (online retailer)

Dorte Agergaard (online retailer)

Dorthe Hybel (distributor in Sydney)

Eva Solo (distributor in Sydney)

Helbak (distributor in Sydney)

Kay Bojesen ApS (NEW)

Kristina Krogh (online retailer)

Normann Copenhagen (distributor in Sydney)

OYOY (NEW) (online retailer)

Rosenberg Cph (distributor in Sydney)

Sia Mai (distributor in Sydney)

Stelton (distributor in Sydney) Danish Kitchen Wear Brands in Australia (not exhaustive):

BODUM (local set-up)

SCANPAN (distributor in Sydney)

Nuance (distributor in Sydney)

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Gallery of Highlights 2013:

25 Danish design companies are promoted at large-scale exhibition “Danish Design at the House” at the Sydney Opera House from October-November 2013.

BoConcept opens their first franchise store in Crows Nest in Sydney, January 2013.

Corporate Culture, a Sydney based distributor, re-launches its major showroom, strengthening the brands of Fritz Hansen, HAY, Gubi, Lightyears and Mater, June 2013.

Eilersen, Onecollection and Kay Bojesen signed with new Australian partners through their participation in Danish Design at the House, October-November 2013.

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The Trade Council in Sydney have witnessed how furniture wholesalers and retailers have faced a challenging market over recent years, although the Australian economy is doing comparatively better than the European markets. Despite growth in disposable incomes over the past 5 years, demand for furniture has remained weak as Australian consumers remained concerned about their ability to repay future debt given the tough economic climate. Industry revenue is forecast to post modest growth over 2013-14, rising by 1.6% to $8.0 billion.

The good news is that furniture retailers are forecast to benefit from improved trading conditions over the next five years from 2013-2018. Industry revenue is projected to trend up by an annualised 1.4% over the coming five years to reach $8.6 billion by 2018-19. Demand is expected to be driven by continued growth in disposable incomes, which will positively influence expenditure on furniture goods. An upturn in the house construction market over the first half of the five years through 2018-19 is expected to aid growth in industry revenue.

By-Passing of Wholesalers

The most important factor affecting industry competitors is the growing incidence of

wholesale bypass. Retailers are increasingly dealing directly with manufacturers and importers and squeezing traditional wholesalers out of the furniture supply chain.

IKEA and Replica Furniture

Swedish furniture retailer IKEA is successful in the market, doubling its store base from 5 on the east coast to at least 4 in Sydney, 4 in Melbourne and 3 in Brisbane. There is also discussion of building a store in Canberra and on the Central Coast.

Danish design and furniture companies need to be aware that Australia, like Britain, has slack laws when it comes to protecting furniture design. In Australia, furniture designs can be protected for a maximum of 10 years. Once the design registration lapses, or if the design was never registered in the first place, it's a virtual free-for-all, as long as the person selling it doesn't try to pass it off as an original. Replica stores like Matt Blatt has expanded rapidly over recent years.

Fragmented Market Structure

Overall, the Australian furniture and design industry is highly fragmented and market share concentration is low. The top 4 players in Australia account for just 32% of the market. The geographic spread of operators across the industry broadly follows population demographics and income distribution across each state. On this basis, the more populated states, such as New South Wales (33%), Victoria (27%) and Queensland (17,8%), account for the majority of industry establishments.

Furniture and design retailers have been affected by competition both within and external to the industry. Internally, operators compete with each other on the basis of price, product range and quality. Externally, furniture retailers are subject to competition from department stores and online operators. While online retailers are viewed as a threat for operators at the bottom end of the market, retailers catering to the mid-range and upper end of furniture markets are largely excluded from this threat due to the ‘touch-and-feel’ nature of the products sold.

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More Focus on Product Design and Differentiation Product design and innovation are expected to remain a crucial part of industry success. Moreover, store layout and design will remain an important way of providing consumers with an impression of how the furniture may look in their own home. The placement of accessories will also expand potential sales and influence impulse buying. Growing Market Consolidation The mature nature of the industry suggests that existing operators may continue to expand by acquiring smaller industry participants, due to the difficulty and competitiveness of finding suitable store locations. Through acquisitions, operators are likely to increase their market share while increasing or diversifying their product range and potentially broadening their range of clients. Consumer Preference for Outdoor Furniture Lounge and dining furniture has traditionally dominated the product market, and is expected to account for an estimated 45.0% of industry revenue in 2013-14. This segment includes lounges, modulars, recliners, lamp/hall/coffee tables, dining tables and chairs, buffets and hutches. However, as a proportion of revenue, this segment has declined in size over the past 5 years. Traditional demand for lounge and dining furniture has been weakened by a shift in consumer preference for outdoor furniture and more casual living. Auction Websites Gaining Popularity Auction websites have proven popular with consumers seeking new and used goods and value-for-money purchases, despite the restriction on evaluating furn

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The Trade Council in Sydney has worked closely with the furniture and design sector in Australia over a number of years. Overall, we have experience with finding potential partners, hosting or planning events, setting up meetings with the right decision makers and conducting initial market research.

Our latest project to promote Danish exports in this sector was a high profile Danish design exhibition, Danish Design at the House, at the Sydney Opera House in late 2013. This exhibition marked the 40

th anniversary of the Opera House and the strong

ties between Danish and Australian architecture, design, fashion and art. The exhibition ran for four weeks in October-November 2013, was launched by TRH The Crown Prince Couple of Denmark, was visited by more than 500,000 visitors and received incredible attention from Danish and Australian media.

Danish furniture and design companies included Paustian, Fritz Hansen, Louis Poulsen, Lightyears and Bang & Olufsen. Furthermore this was a launching platform for Eilersen, Onecollection and Kay Bojesen ApS.

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Partner Searches in Australia

Furthermore, the Trade Council in Sydney has helped a number of Danish companies getting into the Australian market through a partner searches. Here is a case example: bObles bObles is a children’s furniture company in Denmark that used TC Sydney to enter the Australian market in 2010 with their creative and imaginative range of soft furniture. We identified a number of potential distributors across the major states of Australia and took the initial contact to these to gather impressions and interest levels before reporting back to bObles with our recommendations for potential partners.

Results: we identified a local distributor,

Exquira that imports high-quality, stylish

infant and children’s products which was

a good match to bObles.

Now: bObles and Exquira have developed

a strong partnership in the last couple of

years and bObles have a growing

presence on the Australian market.

The Trade Council in Sydney recommends Danish furniture and design companies who are considering the Australian market to develop strong multichannel retailing strategies and position themselves in niche markets to flourish in this increasingly competitive environment.

Things to consider before entering the Australian market are the opposite seasons, longer transportation time and the fact the time difference makes it more difficult to maintain an easy working relationship with the local partners.

However, the fact that Australians are willing to pay for Danish design and quality is worth considering while determining a company’s export strategy. The more design conscious population that are willing to pay for premium products is a market suitable for Danish furniture and design companies.

The Trade Council in Sydney can assist with advising which entry strategy is most suitable for you based on our extensive network and experience in the market place. We personally know the furniture and design agents, distributors and retailers that deal – or have dealt with – European and Scandinavian fashion brands. We work closely with Danish furniture and design companies to make tailor made solutions for you to provide the best possible outcome for your products and services in Australia.

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For more information, please contact: Name: Rikke Scheel Gamborg, Deputy Consul General & Trade Commissioner Direct phone: +61 2 8298 5703 E-mail: rikgam@um.dk Name: Anne Weisz Mortensen, Commercial Advisor Direct phone: +61 2 8298 5708 E-mail: anwmor@um.dk www.australia.um.dk

Sector analysis written by Anne Weisz Mortensen, January 2014.

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The Trade Council is a part of the Ministry of Foreign Affairs and is the official export and investment promotion agency of Denmark. The Trade Council benefits from around ninety Danish Embassies, Consulates General and Trade Commissions abroad. The Trade Council advises and assists Danish companies in their export activities and internationalisation process according to the vision: Creating Value All the Way. The work in the Trade Council follows specific procedures and quality guidelines. In this way our customers are secured the best possible quality under the varying working and market conditions at any given point of time.

Ministry of Foreign Affairs of Denmark Consulate General of Denmark, Trade Council, Sydney Gold Fields House, Level 21 1 Alfred Street Circular Quay Sydney N.S.W. 2000 Tel: + 61 2 8298 5777 Fax: + 61 2 9251 7504 sydhkt@um.dk www.australia.um.dk