Furniture prices rise below inflation rate

With a production volume of USD 12 billion and export revenues of approximately USD 5 billion, price increases in Turkey's furniture sector have lagged behind inflation. MODOKO Chairman Koray Çalışkan, emphasizing that furniture manufacturers have not passed production costs onto prices and thus furniture remains affordable, calls for increased installment options to stimulate the domestic market and says the currency must rise at the same rate as inflation to maintain export competitiveness.

The furniture sector, among the leading sectors of Turkey's economy over the past 20 years, continues to expand targets with a production volume of USD 12 billion and export revenues of approximately USD 5 billion. The furniture sector, which exports to 200 countries, focuses on high-value exports.

MODOKO Chairman Koray Çalışkan states that inflation and currency increases must be balanced to boost high-value exports. "Export growth remains below inflation. This creates problems in both the domestic and foreign markets. Turkey's inflation rate should match the currency increase. For example, if Turkey's inflation is 50% and America's inflation is 4%, the difference should be calculated at 46% and the currency should appreciate accordingly. Since this adjustment is not being made, the prices of every product we export abroad constantly fluctuate. A product we sold for USD 100 last year we now have to sell for USD 130. This volatility negatively affects our relationships with both our dealers selling products abroad and our export customers," says Koray Çalışkan, emphasizing that according to TÜİK data, furniture manufacturers have not passed production cost increases onto prices, which is why prices remain reasonable.

Çalışkan states, "As a sector, we have contracted significantly this year. Similarly, there is a serious contraction in dollar-based exports. If we analyze by separating domestic and foreign markets, in the domestic market, furniture is viewed as a luxury consumer good, so aside from furniture purchases for weddings, those wanting to replace their furniture prefer to wait. As for those getting married, when they add up their costs, figures like TRY 600,000-700,000 emerge, so they too are postponing this period. Since furniture is a product needed at every stage of life, actually a necessity, the necessary regulations should be implemented to make consumers' access to furniture, which is fundamentally a necessity, easier."

Installment options for furniture should be increased

Highlighting the importance of increased credit card installment options to ease the constraints in retail, MODOKO Chairman Koray Çalışkan states, "It is essential to increase credit card installment options in furniture sales because when furniture companies offer installment payments to customers, they face significant deductions the next day, so they struggle even to apply the existing installment rates; this situation locks up the domestic market. Current high interest rates and people's tendency to withdraw money and think only about earning interest also slow down the sectors somewhat," he says. Adding that the furniture sector is Turkey's fifth-largest generator of trade surplus, Koray Çalışkan notes that the furniture sector must be protected.

"Without imported inputs, we contribute significantly to the country's economy through exports. As a sector, we have nearly USD 5 billion in exports. In Turkey, there is a total production volume of USD 12 billion. Since the raw materials used in furniture production are sourced from Turkey's own resources, the sector's potential is quite high," explains Çalışkan, adding that another difficulty is the inability to find personnel.

Turkey has 44,000 furniture factories

Stating that regulations regarding company establishment must be implemented to solve the personnel problem, MODOKO Chairman Koray Çalışkan states, "Currently, there are no minimum requirements for establishing a company in Turkey. Because there are no minimum requirements, of the 44,000 furniture companies, 40,000 employ an average of one person. That is, a single craftsman leaves a large firm, establishes his own company, and runs sales, accounting, production, and shipping all by himself. This is not an acceptable situation. Minimum requirements for company establishment, as in developed countries, must be met. Criteria should be set such as employing at least five people, having at least a 500 square meter manufacturing facility, certain machinery, and specific capital in the bank.

After these conditions, perhaps we will not have 44,000 companies, maybe only 15,000 as in Germany. But with these 15,000 companies, we will produce three times the output of 44,000 companies as in Germany. This will create a much more stable and robust structure; by preventing personnel waste and the informal economy, it will allow us to transition to a situation that benefits the sector and the country's economy. For this reason, I believe such regulation absolutely must be implemented."