Which trends offer opportunities or pose threats on the European home decoration and home textiles market?

Millennials and Gen Z are quickly becoming Europe’s main consumers and professional buyers. As a result, these generations strongly influence the home decoration and home textile (HDHT) sector and strategies. For them, an important key buying motive concerns how products for the home can improve their mental and physical wellness. Sustainability is an important aspect of this. These consumers want brands to contribute to a better world through social and environmental responsibility.

1. Sector transformation: millennials and Gen Z become the dominant consumer group

• In the coming decade, the European HDHT market will increasingly focus on sustainability;
• Shorter distribution chains;
• Digitisation in marketing and services.

However, the most disruptive transformation will be in consumers’ reasons for buying. In the 2030s, a new generation of consumers and professional buyers will be in charge: a mix of millennials (who will be in their forties or fifties by then) and Gen Z (who will be in their thirties). Their values will shape what products are produced and sold, and how.

The market will need to offer products that help these consumers achieve their personal goals. For the millennial and Gen Z generations a key reason for buying is how products can improve their wellness. Simply stated: they want to feel good about what they are buying. They prefer offers that improve their wellbeing and provide meaningful social/environmental benefits. These topics are closely related. For example, 6 out of 10 millennials and Gen Z feel guilty about their negative environmental impact. This makes sustainability another core buying motive.

HDHT companies must adjust

HDHT importers, retailers and brands need to move closer to these new consumers to fulfil their wellness needs.

This has various aspects:

• In-depth market intelligence – marketers need to know what drives these consumers, how they live and work, what buying behaviour determines the market segments, and the disposable income of each group.
• Sustainability – businesses must actively embrace sustainable values and practices, and be transparent to increase trust among and loyalty from customers.
• Storytelling – effective storytelling creates engagement, inspires, and builds loyalty among these consumers, who are more open to new cultures and origins and like to learn about new techniques, materials and cultures.
• Communication channels – sales and marketing must be more online (social media), using consumer reviews and influencers to build trust among peers.
• Content – communication must be brief, to-the-point, visual and transparent, since these consumers demand proof of any claims made.
• Co-creation – these consumers want to be involved in the design process, whether via feedback loops or brand champions/influencers, or simply by being able to modify products at home.
• Convenience – businesses must offer convenience in buying (online, 24/7, delivered and easily returned) and in clever solutions for shared living and tiny spaces.
• Selling and production cycles – cycles must be shorter and less dependent on traditional ideas of seasonality, with less volume but at competitive prices.

Business models are evolving

The business models that can deliver the desired wellness benefits are:

• Sustainable – value-driven concepts with social and environmental values and practices at their core;
• Connected –  market intelligence, customer relationship management and active sales;
• Creative – design-led in terms of product, production, service, staff policy and marketing.

2. Sustainability: social and environmental responsibility

Sustainability is quickly becoming part of the core consumer needs in HDHT. A total of 86% of European consumers consider sustainability important or very important. Similarly, 29% of European consumers are already deliberately and consciously buying sustainable products. Rather than consuming less, people want to consume responsibly. Millennials and Gen Z are committed to creating a better world, and older generations increasingly want to contribute as well. This will reshape the industry.

Solutions are expected to first and foremost come from the industry, in improving both their environmental footprint and their social responsibility. Companies are expected to take a stand, and practise what they preach in terms of the fairness of their own human resource and supplier policies.

True sustainability is a combination of:

• People: social aspects;
• Planet: environmental aspects;
• Profit: economic aspects such as affordability, marketability and productivity.

Figure 1: CBI webinar on sustainability in the European HDHT market

Source: YouTube

Source: Deloitte

In 2022, 89% of the surveyed British consumers valued environmentally sustainable or ethical practices for furniture and homeware. 

The European Green Deal and a circular economy                                                      

European legislation is also moving towards increased sustainability, making it a requirement rather than an option. With the adoption of the European Green Deal, the European Union (EU) strives to become climate-neutral by 2050. This will provide a legal framework for sustainability and will help make sustainable corporate behaviour a must.

A main building block of the Green Deal is the circular economy action plan. In a circular economy, waste is eliminated through repair, reuse and recycling.

Figure 3: Repair, reuse and recycle!

Source: European Parliament @ YouTube

A typical product lifecycle consists of 5 stages. To move towards a circular economy, a product’s end of life starts up a new cycle. Waste no longer ends up in landfills, but is used to create a new material, starting up a new lifecycle. 

Figure 4: A circular product lifecycle

Source: CBI Sustainable Design training

You can introduce new or more environmentally friendly and socially responsible practices in each stage. As a producer, you have the most control over the first 3 stages: material, production and distribution.

Table 1: Examples of sustainable practices per stage of the product lifecycle

A related trend is material innovation, which can be divided into 3 categories:

• Recycling post-industrial or pre-/post-consumer waste;
• Engineering ‘from the lab’;
• Applying agricultural side products or excess harvests.

Figure 5: CBI webinar on sustainable innovations

Source: YouTube

Figure 6: Circular coconut waste-based material

Source: Malai @ YouTube

Another interesting development is that colour trends in HDHT are slowing down. The designer and trend forecasting communities are questioning the endless and fast-moving cycles of colour innovation. Many colours have the potential to last much longer than one season. This leads to longer product lifecycles, as products become less quickly unfashionable. This in turn makes products more timeless and creates less waste.

Forecast

Millennials and Gen Z try to influence things through their buying behaviour. They want to buy from companies that contribute to a better world. Although potentially higher prices for sustainable products are a barrier, the demand is there. 55% of British adults say it is important that their HDHT products are made sustainably (and up to 60% of those aged 25-34). They are willing to pay 15% more for this (up to 21% for those aged 25-34). Nevertheless, affordability is important – an international survey showed that 50% of consumers are not sure whether they would pay a premium price for sustainable products in times of inflation. Similarly, 49% of people in a wide range of markets say a lack of affordability prevents them from living healthy and sustainable lifestyles.

Figure 7: Kave Circular

Source: Kave Home @ YouTube

Sustainability is a central and integrated part of millennials’ and Gen Z’s wellness needs. As these generations become the dominant consumers and professional buyers, this trend is likely to continue to grow. This growing importance of sustainability in HDHT is reflected in a Maison&Objet survey from 2021.

Figure 8: Popularity of ethical products among clients of HDHT retailers

 

Source: Maison&Objet Barometer #1 

Opportunities

• Recycling/upcycling materials from local consumption/production can be an opportunity. Waste or offcut materials from the industry are often readily available and relatively cheap.
• Consumers are interested in the story of your value chain. Not just to make sure that materials are really recycled, but because consumers appreciate knowing that an item used to be part of something else.
• Use your cultural heritage to introduce new patterns and colours to buyers and consumers to make your products unique. You can mix these designs with elements of Western or global culture.
• Being well-prepared for the new (EU) legislation can give you a competitive advantage.
• Social/environmental certification can add value and credibility to your concept.
• Positive gender values can make you stand out.

Threats

• Sustainable products do not automatically lead to a higher price. The price is mainly influenced by design value, quality and finish.
• Western designers are also creating concepts based on recycling/upcycling. This means that design expectations are quite high, and that you will also be competing with European designers.
• You must be able to support any sustainable claims you make, preferably with certifications. Many buyers already require this, and the EU’s proposed Green Claims Directive sets out to make it mandatory.
• Taking a stand on political or social issues creates a following, but you can also risk losing some of your customers. Non-confrontational communication is important.
• In the long term, the trend of buying local (‘Made in Europe’) to reduce environmental impact could become a threat to you.

Figure 10: CBI webinar on wellness in HDHT

 Source: YouTube

4. New circular business models

5. Changing global supply chains

In marketing, distribution channels are becoming shorter. For example through wholesalers creating business-to-consumer (B2C) e-commerce marketplaces, or manufacturers skipping wholesale and selling straight to retail. Physical distribution is concerned with the actual, logistical supply chains of materials and semi-/end-products. Here, different forces make supply chains more complex, and sometimes longer.  

Global supply chains have been under pressure for quite a while. European importers have realised that political shocks can severely disrupt distribution and markets. Governments have imposed bans and tariffs, and consumers want to know where products come from and whether buying products from certain origins aligns with their values.

Importers have been trying to make their supply chains less vulnerable, through:  

• Second sourcing – contracting multiple suppliers for the same (or a similar) product to spread the risk;
• Vertical integration – taking more control over their supply chain by building the capacity of their existing suppliers, or actually taking over suppliers;
• Pre-stocking – building inventory which can be sold in case of new disruptions, often asking manufacturers to keep such (unpaid for) stocks until needed;  
• Reshoring – contracting European manufacturers to produce (part of) an existing collection that was previously imported from outside the EU;
• Longer lifecycles – extending product lifecycles when supply chains are fragile.

 According to McKinsey, value chains shifting away from their current top producers (like in second sourcing) could present a real opportunity for some developing economies in the HDHT sector. Reshoring may be a hot topic, but it is not that easy to realise in practice. Redesigning supply chains takes time, and effects may not be visible in the short term. Also, the value for money of reshored HDHT products often disappoints. In 2022, 26% of HDHT stakeholders planned to localise part of their production or sourcing, but 22% did not – for example because their production relies on skills or materials in specific countries.

Figure 13: Obstacles to reshoring for HDHT stakeholders

Source: Maison&Objet Barometer #4

The changes in supply chains create a more secure distribution system to Western Europe. But they also make the supply chain more fragmented, less efficient and more costly. These costs will be passed on to companies and consumers. For example: if Western importers second-source end products from South-East Asia, but manufacturers there still source components from China, the supply chain will become more tangled, less transparent and, possibly, more costly.

Forecast

Governments will increase their direct involvement in trade through tariffs and other instruments, as well as by encouraging and facilitating sourcing closer to home. This is to increase security in the delivery of goods, as well as to improve sustainability in distribution chains.   

Consumers will become used to longer lead times, higher prices and items not always being available. They may favour quality over quantity when buying products (timeless rather than trendy), learn to like a product longer and/or share and exchange items with others. Younger generations in particular will also ask more questions about a product’s origin and whether it aligns with their values. In 2022, 88% of HDHT professionals confirmed their clients are increasingly aware of product or raw-material origin.

Opportunities

• Importers will look for second sources – especially in East Asia – to become less dependent on single sources.
• This may also lead to a more favourable financial context for East Asian exporters, including government subsidies and improved terms for working and investment capital from banks.   
• Businesses with verifiable sustainable practices have a competitive advantage.

Threats

• East Asia’s dependence on China for inputs may limit its bargaining position. 
• Some production may be re-shored to European suppliers.

Chinese direct investment may replace the original ownership of East-Asian manufacturers and exporters.

6. Home sweet home

In times of disruption, consumers highly appreciate the comfort and safety of their home, family and friends – a revival of ‘cocooning’. The ‘home sweet home’ trend involves people (across generations) enjoying each other’s company, entertaining, cooking and dining, or simply relaxing. This relates to items that create a cosy atmosphere, as well as cookware and dinnerware for ‘slow dining’. In the March 2024 Maison&Objet Barometer, kitchen and gourmet products were the 2^nd best-performing category in HDHT.

This trend also contains an element of disconnecting from the troublesome outside world. For older consumers with a relatively high disposable income, the home forms a retreat – a place of luxury, with high-quality furniture and decoration, often in nostalgic styles. Popular materials include comfortable, heavy textiles, dark wood, and metal. Patterns are bold but colours are cosy and warm, including darker, rich reds and purples, sophisticated blues and browns.

Figure 14: Retro revival

Source: John Lewis @ YouTube

The way consumers decorate their home reflects their personality. In this context, both consumers and buyers appreciate good storytelling that evokes an emotional connection. The story behind your product and company can highlight key aspects like your environmentally sustainable and socially responsible values and activities. As European consumers travel to more distant places, they are discovering new stories.

When products are made by hand, from sustainable materials, this further contributes to the concept of sustainability. HDHT products can reflect their origins in their materials, techniques and meanings. They can have cultural stories to tell, especially in the fair-trade segment. These products can also tell the story of the importance of meaningful work and income in developing countries – especially for women. This has kept many interesting artisan skills alive.

Forecast

As millennials and Gen Z start new families, cocooning will become a mainstream lifestyle trend. For example, of those who started cooking and baking more at the beginning of the pandemic, 65% were still doing so a year on. Now, due to the cost-of-living crisis, 44% plan on cooking more at home. The luxury retro styles that older consumer groups prefer will fade unless they attract younger affluent consumers.

Opportunities

• If you can tap into the luxury aspect of this trend, this may offer good margins. 
• The luxurious ‘home sweet home’ style is not trendy but based on supreme craftsmanship and a stable colour palette.
• Interior decorators carrying this style are found at all major European HDHT trade fairs.
• The cocooning aspect has growth potential and will move along with the preferences of younger generations.
• Cocooning is particularly promising for specialists in home textiles, home accessories, Christmas items and/or cooking and dining. 

Threats

• The luxury trend is fading. Margins may be good, but volumes will be relatively small and the turnaround low. 
• The cocooning trend will become mainstream and mid-market, attracting suppliers who produce high volumes at accessible prices.

Globally Cool B.V.  carried out this study in partnership with GO! GoodOpportunity and Remco Kemper on behalf of CBI.

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