The carpet manufacturing industry in Australia declined over the last five years and was characterised by falling revenue, fewer establishment and employment numbers, growth in competing imports, rising competition from overseas countries where production is substantially less expensive, and greater competition from substitute flooring products.
After several years of difficult operating conditions, the industry is expected to recover slightly in 2009-10 due to significantly higher housing starts during the year, offset by continued competition from substitute flooring products. The industry is expected to report revenue of $1.15 billion in 2009-10, up 1.7% for the year.
Strong Australian housing and construction industries saw industry revenue increase with higher demand for carpets and textile flooring. However, exports are projected to fall by 3.3% for the year, while imports are forecast to increase by 4.6%. Exports to key markets such as the United States and United Kingdom are projected to fall significantly over the year.
The outlook for the carpet manufacturing industry in Australia is largely dependent on the fortunes of the domestic housing and commercial building markets, raw material prices and competition from substitutes.
Key success factors for this industry are:
- Access to highly skilled workforce: Access to qualified and original designers enables manufacturers to create innovative and marketable textile floor coverings.
- Production of goods currently favoured by the market: For carpet manufacturers the ability to produce tufted carpet is critical since it is highly desired in retail markets.
- Having marketing expertise: Marketing expertise, especially in overseas markets is important for expanding client bases and creating new market opportunities.
- Ability to pass on cost increases: The ability to pass on increasing input costs to the final consumer helps reduce volatility caused by shifts in upstream industries and helps manufacturers maintain profit margins.
- Access to the latest available and most efficient technology and techniques: The degree of technological efficiency achieved by firms is often positively related to product quality and productivity.
- Provision of a related range of goods/services ("one stop shop"): The degree of vertical integration within firms allows them to capture sales opportunity across the floor covering market.
- Establishment of brand names: The establishment of brand names helps generate customer loyalty and therefore, higher sales for manufacturers.
Barriers to entry
New firms have difficulty in establishing their product in the market place due to a relatively high number of competitors promoting their products. Existing well-established products, downstream loyalty of carpet brands and floor covering as well as manufacturers that control retail carpet outlets means it can be difficult for new firms to attract sales and gain market share. Despite this, the establishment of brand strengths does not represent a critical impediment to entry. Like most products, brand recognition plays a role in consumers' buying decisions. However, this is restricted since carpet can be not as easily differentiated once laid.
Robert Bryant is the general manager of business information firm IBISWorld.
Related Items :
