Thursday, January 20, 2011

The Inconvenient Truth of Cheap Furniture Prices

Have you ever wondered why cheap furniture is priced so inexpensively?

Do you ever question how a furniture store can sell at 70% off and still make money?

Most people would assume that the low prices are simply a function of low labour costs in places like China. The Inconvenient Truth is that the low cost of labour is only a small part of a much bigger story.

Recently I received an unsolicited email from a certain Ms. B****i, who represents a large furniture manufacturing concern in Indonesia. She emailed a digital catalogue of her company's products, and followed it up with a price list. Here's an example of what I can buy:

The table in this photo is made of solid teak, and measures 80" long x 40" wide x 30" high. My cost price for the complete table (excluding shipping via container) is $234.40 each.

Something is seriously wrong here.

Based on a 1" top thickness the material required for me to make a table like this would be approximately 45 board ft. of lumber. With legitimately sourced teak (either FSC certified or supported by CITES documention) ranging in price from $31 to $37 per bd. ft., depending on grade, my cost for the teak alone would be anywhere from $1395.00 to $1665.00 per table. I am uncompetitive by 600% before I've even left the lumberyard.

How is this possible? Two words: "Illegal Timber"

In the attached document from World Wildlife Fund it says that roughly 73% of the timber produced in Indonesia comes from illegal sources. Therefore, the odds are high that the teak used on these $234.40 tables is illegally sourced.

To add insult to injury the retail markups on these cheap imports are astronomical, with retail margins of 500% over cost being common. But even with a 500% markup the retail price of $1172.00 is still less than I can buy the material for.

Given that these off-shore imports are often poorly made and designed to fail, it goes without saying that they also fall apart and end up in landfill within a few years time - so the buying cycle can repeat itself.

Therefore, anyone wondering where the rainforests are disappearing to can start by searching their local landfill. (You'll also find a lot of jobs and an economic future there too).

1 comment:

  1. Hello John, Excellent post. Many more people need to be informed about the black market lumber trade.