Market Intelligence
Furniture Slovakia

Slovakia Furniture Industry 2022

Small Slovak furniture retailers struggle to compete against international brands benefiting from new trends, technologies and excellent customer service. 

Slovakia is a country of 5.4 million people and is strategically located at the geographic heart of Europe. The Slovak market is increasingly dominated by the automotive, electronics, engineering, and service industries. In addition to its strategic location and educated population, Slovakia’s stable macroeconomic policies have made it a good place for U.S. exporters to do business.

Slovakia is a member of the North Atlantic Treaty Organization (NATO), the Organization for Economic Cooperation and Development (OECD), the European Union (EU), the Organization for Security and Cooperation in Europe (OSCE), the United Nations (UN), the Council of Europe, the Visegrad 4 (V4), the Central European Free Trade Agreement (CEFTA), the International Monetary Fund, the World Bank, the International Finance Cooperation, the World Trade Organization (WTO), UNESCO, INTERPOL, and other multilateral organizations. It is also a member of the EU Schengen Agreement, which allows for the free movement of people.

Slovakia adopted the euro (EUR) as its currency on January 1, 2009, becoming the 16th member of the European Monetary Union, resulting in the facilitation of trade through lower transaction costs, higher pricing transparency, and greater monetary stability. Slovakia has a stable financial outlook according to Moody’s and a negative financial outlook according to S&P. Registered unemployment nationwide has decreased from 6.8 percent in December 2021 to 6.7 percent at the end of March 2022 but varies widely from region to region. Inflation in 2021 was 3.2percent. While real GDP growth declined by 4.4 percent in 2021 (y-o-y), the Ministry of Finance of the Slovak Republic projects a GDP growth rate of approximately 3 percent in 2022.

Cheap and skilled labor, relatively low taxes, a reasonably balanced labor code, and a favorable geographical location are Slovakia’s main advantages for foreign investors. Slovakia is one of the most open economies in the EU. The government’s overall attitude toward foreign direct investment (FDI) is positive, and the government does not limit or discriminate against foreign investors.  FDI plays an important role in the country’s economy, with major foreign investments in manufacturing and industry, banking, information and communication technologies (ICT), and Business Service Centers, where U.S. companies have a significant presence. While average wages in Slovakia continue to be significantly below the OECD average, high social insurance payments increase the overall cost of labor, particularly for low-skilled, low-wage workers. In 2021, the national minimum wage in Slovakia remained fixed at 646 € per month. Slovakia ranked 52nd on Transparency International’s Corruption Perceptions Index in 2021. International companies doing business with the Slovak Government or attempting to obtain licenses required by the Slovak Government to do business in the country report poor transparency in bureaucratic processes. Corruption is perceived as widespread in courts, government contracting and public procurement, and in the health care system. While the legal system generally enforces property and contractual rights, decisions may take years, thus limiting the utility of the courts for dispute resolution. The most common and simple option for establishing an office in Slovakia is the limited liability company (LLC). It takes around 22 days to start a business in Slovakia and involves seven procedures.

The furniture market in Slovakia is limited. The trend is in Western-style retailing, which offers a wide variety of products. It is challenged by international retail players including Swedish IKEA, Danish Jysk, German Sconto, Austrian XXXLutz, and Mobelix. Polish brands such as Black Red and White and Merkury Market have also a significant presence. IKEA with the sales of 114 million EUR in 2021 remains the number one furniture retailer in Slovakia having only one store in the capital – Bratislava. The second largest retailer in 2021 was Jysk. Jysk had sales of 79 million EUR. Kondela, the third largest retail chain in 2021 with sales of 52 million EUR is owned by a local company. In 2020 XXXLutz took over five KIKA stores and is ready for further expansion. Industry experts predict XXXLutz taking the lead in the future due to the significant number of large-scale shops. In 2021, XXXLutz along with its affiliate Mobelix reported sales of 82 million EUR. Younger Slovaks living in larger cities admire Scandinavian and modern style available mostly at all large international brands. The older generation is more into the country and national folk style. Domestic production is represented by several local manufacturers mainly exporting to neighboring countries. Despite growing purchasing power in the country, budget home furnishing retailers are being very popular reporting dynamic sales growth each year. Polish Black, Red, and White and Polish Merkury Market adopted an aggressive outlet expansion strategy across the country. Small Slovak furniture retailers struggle to compete against international brands, with major players benefiting from new trends, technologies, and excellent customer service. It has been extremely difficult for domestic retailers to compete with international brands as they cannot offer special prices and discounts on a daily basis. The Slovak furniture industry is an entire part of the EU furniture industry and represented international brands are more or less the same. Please note that all management business decisions in these international furniture outlets are made outside of Slovakia and it is very hard to obtain the primary contact information for decision-makers. The growing number of internet and smartphone users has changed consumer behavior and shopping habits. E-commerce is being the most dynamic distribution channel in 2021. Its expansion was supported not only by a large number of small online retailers selling a wide selection of branded products but also by most giant furniture brands offering e-commerce sites. These online furniture shopping websites include Vivre, Bonami, and Westwing. Increasing demand for online shopping is expected to help the furniture manufacturing market grow. Manufacturers can now sell their products on a larger platform than before, which will increase their customer base.

The global COVID pandemic has changed the rules of the game for sellers of household furniture. Brand XXXLutz had encountered this challenge in practice. Initially, the company planned to open the first store in 2019 but rescheduled to the late fall of 2020. The entire industry sector was drowning and some of the companies had to take drastic steps. They recorded a substantial drop in orders and closure of retail outlets, which led to redundancies and a temporary slowdown in production. The virus outbreak had a negative impact on businesses throughout 2020 and into 2021. However, it is expected that the furniture industry will recover from the shock soon.

Overall, the furniture market in Slovakia seems promising. Home furnishing has recorded positive sales growth benefiting from the ongoing boom in real estates and residentials.  Slovak consumers are replacing their furniture or at least home accessories more frequently than in the past. Customer behavior research shows that the cheaper the home decor, the more often it is replaced. However, product price is the key element.

 Below is the table showing the average product prices in several stores (EUR currency): 

 

Brand Name

 

 

Product category

KARE

IKEA

XXXLutz

Mobelix

Accent Tables

200

35

55

50

Small Sofas

1,900

450

500

400

TV Sets

700

100

220

150

Rugs

550

120

170

120

Cushions

50

10

25

15

Small Ottoman

70

40

40

40

06/14/2022