Old-for-new furniture plan takes off

A sales woman waiting for business at a second-hand furniture market in Hangzhou. The Chinese government plans to initiate a furniture replacement program around China with detailed policies yet to be formulated. Many Chinese families have now become reluctant to sell their old furniture and plan to benefit from the expected government-subsidized replacement program. [Photo / China Daily]

Fang Jianhui, a 35-year-old Beijing resident, has just bought a new dining table and chairs from Beijing Easyhome to replace his old set. "The old-for-new service saved me 800 yuan ($126) and solved the problem of how to deal with the old ones," he said.

Beijing Easyhome Investment Holding Group Co was one of the pioneers in providing the service since last September.

The company's business rivals, including Jimei Furnishings Co, Red Star Macalline International Furniture and Real Estate Chain, also launched similar policies.

According to Easyhome President Wang Linpeng, the State-owned chain retailer, with 49 outlets around China, persuaded the Beijing Municipal Bureau of Commerce and the Ministry of Commerce to undertake a trial of the service, formulate rules, organized staff training and found warehouse and facilities to help recycle items that could have uses.

The Ministry of Commerce had raised a proposal to promote furniture replacement around China early last year. Beijing was selected as the pilot city to offer the service as soon as possible. However, no detailed policies have been issued so far.

Insiders and analysts said it is government policy to stimulate furniture buying and create a platform for the green recycling of old furniture, but formulating a set of comprehensive, practical and workable policies is not proving to be easy.

"The (replacement) procedure is very simple," said Tong Jian, an assistant at Easyhome's North Fourth Ring Road store. If a customer wants to buy furniture in this store and is willing to have his or her old stuff reclaimed at an Easyhome outlet in Beijing, the customer will in return get a subsidy equal to 5 percent of the new furniture's price tag. Easyhome will be responsible for delivering the new furniture to the customer's home and taking the old stuff to a specific warehouse.

The company said that all old furniture will be divided into several categories. If it is good quality it will be sold as second-hand furniture. Stuff that is too old to be used will be disassembled, then the recyclable components and materials will be sold to businesses at a reasonable price. The non-recyclable items will be destroyed in an environmentally friendly way by professional companies.

Starting from Sept 10, 2011, to May 20, there were 30,515 deals with 53,888 pieces of furniture involved in the replacement business at Easyhome's five outlets in Beijing. Sales of this furniture amounted to 363 million yuan, accounting for 16.8 percent of the stores' business as a whole. Between May 1 and 20, the sales season for furniture, the proportion reached 35.6 percent. Now Easyhome has broadened the service to its nationwide outlets.

In Jimei, some of the old but usable furniture is given to the home rental market in Beijing or donated to charity organizations. Unlike offering subsidies in line with the price of new furniture, Red Star Macalline directly gives cash coupons to customers based on the value of the old furniture.

Despite the retailers' enthusiasm, the policymakers are very cautious.

The government's proposal on the old-for-new policy for the furniture industry was under consideration following the success of the household appliance replacement policy carried out between September 2009 and December 2011.

According to a report by Oriental Securities Co, when the average annual income per capita reached $3,000 in the United States in the 1960s, furniture expenditure per capita was around $150. China's urban income per capita exceeded $3,000 last year, while furniture purchases amounted to just 300 yuan, which suggests scope for growth. However, the property cooling-down policy and inflation in China had a downward effect on furniture expenditure, said Zhang Kai, an analyst at the brokerage.

China's household appliance replacement policy was carried out between Sept 1, 2009, and Dec 31, 2011. It drove sales of 342 billion yuan, around 22 percent of the expenditure in the sector as a whole during the period. "China's furniture buying amounted to 371 billion yuan last year, so we estimate if a similar policy was implemented at least 180 billion yuan is expected to be generated," said Zhang.

Problems with the detailed policy, which had been expected to be issued by July, are down to a series of concerns.

"The policy should be based on either the clearly tagged price of new furniture or a qualified evaluation of old furniture. However, commodities without a price tag and onsite bargains are common practices in China's furniture and decoration stores and there are no clear and united rules on the evaluation of old furniture," said Huang Weiye, chairman of Shenzhen Furniture Industry Association.

Wang Wei, a regional director of Red Star Macalline, said identifying the qualifications of old furniture recyclers is also a challenge. "And who - the government, the furniture manufacturer or the retailer - should be responsible for the funds involved?" he asked.

Zhao Jianguo, president of Jimei Furnishings, said that his company plans to invest 10 million yuan in the old-for-new service this year. "The money will be allocated to transferring old furniture, warehousing and the charges offered to professional companies to recycle these old products," he said, admitting he believes preferential policies or subsidies from the government on related services are needed in the long run.

Du Fangmin, a young civil servant in Beijing, said that she is concerned about the effectiveness of the old-for-new policy. "If prices of all furniture are tagged clearly, the businesses are likely to tag them higher compared with what they were originally to cover the costs of reclaiming the old furniture," Du said.

The policy will not influence her intentions to buy. "But if I really need to buy new furniture, I think the policy is better than nothing."

liujie@chinadaily.com.cn