New financing program for Mexican furniture manufacturers

Furniture manufacturing in Mexico is projected to export $1.87 billion in 2021 and grow on average 4.2% annually to reach $2.2 billion by 2025. In 2019, it shipped $1.2 billion in product to the U.S. - 95% of Mexican furniture exports - behind China, Vietnam and Canada [1]. Other countries where demand is growing steadily include Canada, the UK, Spain, and neighbors like Guatemala.

There are over 675 furniture manufacturers employing 52,000+ ranging from international powerhouses to domestic brands. The biggest exports include wood furniture, wood- and metal-framed upholstered seats/chairs, and bedroom furniture serving many sectors like kitchen furniture, seating, and home and office furniture. Companies that build furniture in Mexico include global brands like La-Z-Boy, Pottery Barn and IKEA, which is building its first North American manufacturing plant there, expected to become operational in 2021 [2]. 

Home-grown or foreign firms that source production to Mexico tout U.S. market proximity, the country's higher-skilled-but-lower-waged work force (as wages rise in China) and well-established - and increasingly sustainability-minded - supply chains as key advantages in an environment challenged by issues ranging from China tariffs to rising transportation costs. Customization is another selling point. "Competitors offer customization, but from China or Vietnam, meaning 12 instead of four weeks to get your shipment", says Madi Cash, a senior director at the Canadian sofa and chairmaker Palliser [3].

More Furniture Companies are Moving Production to Mexico 

Nearshoring has become an increasingly critical strategy for companies seeking to lower shipping costs or leverage trade agreement benefits that exist between companies near their target sales region. For example, the new USMCA*  - which replaced NAFTA** in 2018 - require portions of furniture products to be manufactured in one of the signatory countries; hence, many companies are moving production to Mexico [4]. Seattle-based bedmaker Seahawk Designs has shifted some of theirs from China to two facilities in the Mexican border city of Tecate. CEO William Jahn notes not only the cost efficiencies resulting from being closer to Seahawk's client base but also the production quality achieved by its Mexican workforce as big plusses [5]. Even Chinese companies are taking note: Kuka Home, China's largest furniture manufacturer, soon will be launching new operations there to meet demand from the North and South American markets [6].

Future Trends for Furniture Manufacturers

Demand continues to grow as the global need for home and office furniture as well as the shift to smaller urban living spaces increases. Also, Covid-inspired office furnishing trends are evolving dramatically: the switch to flexible workspaces and projected migration to flexible at-home offices have manufacturers working hard to fill orders. Finally, consumer expectations keep evolving: Sustainability is becoming increasingly important for them, and many are seeking products made from non-threatened wood species or by firms with a history of eco-friendly processes. Mexican furniture manufacturer Parotas has taken notice: they focus exclusively on using native Parota trees, one of a few hardwoods that is not a threatened species [7]. 

Going forward, the Mexican furniture sector is primed for solid growth in a global trade landscape with more city migration and home office setups among cost- and eco-conscious consumers and businesses alike. 

To drive this growth and assist Mexican businesses in overcoming the post-covid crisis, Stenn launched "Made in Mexico!", a special fast financing program for Mexican furniture manufacturers and exporters. The program is supported by a pool of world-known investors with a reserve of $500 million (USD), and intends to help companies unfreeze working capital and avoid deferred payments with pending invoices.

Stenn - Fueling Export Growth Via Innovative Invoice Financing 

Smaller furniture manufacturers and other exporters are increasingly trading without relying on the financial clout of banks, turning instead to booming state-of-the-art fintech financiers like Stenn - especially since, as the WTO recently reported, banks reject a good 50% of financing requests stemming from SMEs. Whether supporting SME Mexican furniture exports to the US, Argentine beef demand in China or regional coffee grower shipments to Europe, Stenn is committed to filling the financing gap, providing working capital where it is most needed. By maximizing the promise of digitalization, automation, blockchain technology, it can help SMEs throughout Latin America bypass antiquated banks and profit from the lower costs, reduced transaction speed, reliability, safety and flexibility Stenn offers - all with no hassles!


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Sources:

[1] U.S. Foreign Trade Census Bureau, 2020

[2] Offshore International, Inc. (Tetakawi), February 2020

[3] Furniture Today, April 2020

[4] Tetakawi, June 2020

[5] The Tecma Group of Companies (website)

[6] Tetakawi, June 2020

[7] Tetakawi, June 2020

*United States-Mexico-Canada Agreement  

**North American Free Trade Agreement