Coping with rising prices

Sarah Elhosary , Tuesday 9 Jan 2024

Sarah Elhosary reports on the innovative solutions being used in Egypt’s furniture and appliance markets to cope with rising prices in the first of two articles

Egypt s furniture



In response to soaring prices and with the sluggish sales of Egyptian furniture and electrical appliances, there is now a thriving second-hand market for various goods, alongside the introduction of products crafted from low-cost materials.

“The electrical appliances sector has been stagnant since August, with a 60 per cent drop in sales. Sales have deteriorated since the beginning of the global economic crisis and with the exchange-rate liberalisation, and prices have risen as some manufacturers have upped their prices to allow more profits to be made by traders,” George Zakaria, head of the Electrical Appliances Division at the Giza Chamber of Commerce, told Al-Ahram Weekly.

“Some traders have gradually introduced additional profits on goods in anticipation of reducing them during the usual January discount season in order not to compromise base prices,” Zakaria said.

“In addition to the slump in sales of household appliances because of the price rises, the furniture market has also experienced a slump alongside the seasonal stagnation in May, September, and October. The sales downturn in these months coincides with the exam seasons and the beginning of the school year, and parents concentrate on educational expenses, resulting in a general decline in other sales.”

“The furniture market relies on importing wood and other production materials, and some importers have raised the prices of these materials, taking advantage of scarcity in the market. We find ourselves compelled to purchase these materials at higher prices in order to fulfil orders,” said Walid Abdel-Moniem, the owner of a furniture factory in Basateen in Cairo.

“High prices have driven prospective couples to buy furniture made of MDF, which is of lower quality and shorter lifespan compared to natural wood but is also significantly cheaper. The price of fittings made from this material starts at LE12,000,” Mounir Al-Qasab, the head of the Wood Division at the Cairo Chamber of Commerce, told the Weekly.

“Some families have refrained from buying at all, opting to repair their old furniture instead. Renovating a room could cost LE3,000, whereas the cost of a new room could be 10 times that amount.”

In terms of electrical appliances, many prospective couples refuse to buy used devices, and some seek second-grade items with minor flaws that do not affect functionality,” said Ahmed Wahba, the owner of an electrical appliance centre in Moqattam.

“A dent could cut the price of a new appliance from LE5,000 to LE2,000, for example. Because of price rises of up to 120 per cent for some appliances, some families prefer to buy old things in good condition,” he said.

In addition to consumer efforts to repair furniture or purchase lower-cost items, merchants and manufacturers have employed a variety of strategies to lower their production costs.

“In the past, my profit margin per piece used to reach up to 40 per cent, but now a profit margin of 10 per cent is considered a success. As a result, I have taken steps to try to cut production costs. Since the beginning of this year, I’ve been travelling to Damietta and purchasing wood directly from the merchant who imports it, thereby lowering the commission that a chain of traders would otherwise collect before the wood reaches me in Cairo,” Abdel-Moniem said.

“I’ve had to reduce the workforce by 15 per cent and raise wages so that the remaining workers will be committed to their work. I have replaced some workers who were previously paid LE350 per day with others who are paid less and assist the remaining workers. I’ve been able to make savings by decreasing the amount of time skilled professionals used to spend carrying out routine duties.”

He has also worked on increasing volumes to compensate for decreases in profit margins. “I’ve introduced discounts for large orders, encouraging companies to increase the volume of their orders and thereby compensate for lower profit margins with increased sales,” he said.

MAKE DO AND MEND: Also aiming to increase volumes, Abdallah Mahmoud, the owner of a furniture production company, has begun fixing second-hand furniture in addition to selling new furniture.

“We began selling new furniture at our showroom in Haram two years ago, and a year ago we added a section for repairing and refurbishing furniture based on customers’ requests,” he said. “Many consumers visit our showroom and request that we repair or refurbish old furniture rather than purchasing new pieces at a significant cost.”

However, as the prices of new furniture have risen, so have the costs of the paint and other supplies needed to repair used furniture. “The price of the cloth we use has gone up by 30 per cent per metre. The cost of repairing a couch is now LE5,000 or above, depending on the customer’s material and price preferences,” Mahmoud said.

The higher cost of restoring used furniture may encourage some to sell their existing furniture and purchase new pieces made of less expensive materials such as MDF. In contrast, some clients may prefer to repair wooden furniture if the wood is of high quality and in good condition. However, in both cases furniture is now only being replaced or purchased when needed, leading to a decrease in impulse purchases in both the used and new furniture industries.

Said Hussein, the owner of a workshop in Shobra in Cairo that refurbishes and sells second-hand furniture, agrees. Renovating pieces that used to cost LE2,500 now costs twice as much due to the high prices of materials.

“I inherited my father’s profession and have been working in it for about 40 years. I used to acquire used furniture at markets like the Tunisian and the Thursday markets, renovate it, and sell it. However, there are fewer purchasers of furniture these days. I used to finish about six sales daily, but now I rarely make a sale,” Hussein said.

“Despite their lack of purchasing power, my customers used to sell me their old furniture and buy other pieces for home renovation. However, due to the escalating prices, customers now prefer to refurbish and keep their existing furniture. As a result, I now focus on customer repairs rather than buying used furniture and restoring it.

“I don’t spend time refurbishing or repairing the furniture I buy because my customers can’t afford the high costs these days,” said Mohamed Abdel-Hakim, the owner of a workshop for buying and selling used furniture in Birak Al-Khiyam in the Marg district of Cairo.

“People who buy used furniture from me do so in its original condition with no refurbishing, taking advantage of the price differential between new and used pieces. Customers want a piece within a specific budget, and I search for items that suit their needs. I visit residential neighbourhoods where I know demolitions are taking place and ask people if they have any furniture they want to sell when they move out,” Abdel-Hakim said.

“I have amassed a vast number of pieces of furniture from demolished buildings in Old Cairo. I price each piece based on its condition and then polish it and resell it.”

STRATEGIES IN THE CRISIS: Adopting an opposite strategy, Alaa Al-Naggar, the owner of a showroom for selling used furniture and electrical appliances in New Cairo and founder of a group specialising in luxury used furniture, sells upscale furniture in like-new condition.

 “We endeavour to address the requirements of the middle-class section of society as well as the segment that was deemed upper-class prior to the economic crisis. These people are constantly on the lookout for high-quality furniture, but with the growing prices they can sometimes no longer afford it,” Al-Naggar said.

“As a result, the used furniture industry is gaining and will continue to gain popularity in the future. Despite the fact that I began selling used furniture and electrical equipment by happenstance, the market’s desire for this expertise has contributed to the development of my firm, transforming it from a Facebook group to a real furniture store.”

Al-Naggar started selling furniture through a Facebook group he created with the intention of selling his used household furniture at a fair price. “I received an offer of LE60,000 from used furniture dealers for my household furniture that I bought for LE280,000 and was in excellent condition. So, I created a Facebook group and managed to sell it for LE250,000 in just 20 days.”

“From this point, I got the idea of using the group to showcase other used furniture. I established a monthly subscription system, allowing group participants to post a specific number of advertisements on the group’s page to sell their used furniture. I also opened a showroom for selling used household furnishings, charging an eight per cent commission fee. This covers transportation, warehousing the furniture, marketing, and the entire selling process, relieving the seller of extra efforts,” he said.

Nihad Rozeik has also been motivated by the used furniture market. After working as a tour guide, she developed a passion for art classes, one of which taught her how to restore furniture.

“I loved the idea of offering a furniture-refurbishing course myself because I felt it was a way to breathe new life into old and neglected pieces of furniture, giving them a second chance to be unique and different,” Rozeik said.

“When I started teaching the course a year ago, many students were reluctant about painting their antique furniture themselves. But the idea gained acceptance as the participants witnessed the results.”

The idea of refurbishing furniture is not just an aesthetic concept, as it also has many practical reasons behind it. Old wood, for instance, can be unmatched in quality, and many newer pieces are no longer made with natural wood like older ones.

“The cost of refurbishing furniture is relatively limited, as it only involves paint, materials, and some required tools,” Rozeik said, adding that it offers considerable savings over trying to buy new pieces of comparable quality at often high prices.

Rozeik had difficulty refinishing furniture at first because of the lack of necessary materials. “Sometimes the required paints were not available, either locally or imported, so I opted to use substitute paint, which considerably reduced the expense of restoration. As a result, many people were encouraged to join us in restoring their own furniture,” she said.  

Finding local alternatives for imported supplies is currently an issue in numerous industries, ranging from furniture to electrical appliances. “Importing supplies is common practice,” said Ashraf Hilal, chair of the Cairo Chamber of Commerce’s Electrical Appliances Division. “Even China, the world’s factory, imports industrial supplies.”

“But we need to take steps to minimise imports. One way of doing so is to set up facilities to produce the stainless steel and sheet metal used in all electrical products and many household items,” he said.

Many efforts are being made to replace imported supplies with local ones. According to Zakaria, one of Egypt’s biggest electrical appliance firms recently opened a factory to make refrigerator and air-conditioner compressors in order to avoid importing them.

The factory in Beni Sweif will begin producing high-quality refrigeration components at the beginning of the year, and this should reduce the cost of the final product by 20 per cent, he added.

“Efforts are underway to establish an integrated industrial zone in Ain Sokhna for the manufacture of automobiles, electrical appliances, and other goods. Collaboration with other countries is also in progress to create a comprehensive manufacturing hub, encompassing various components and production requisites,” Zakaria said.


* A version of this article appears in print in the 11 January, 2024 edition of Al-Ahram Weekly

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