For decades, manufacturers such as Herman Miller Inc MLHR.O and Steelcase Inc SCS.N focused on selling through their own dealers to companies that bought ergonomic chairs and desks in bulk and hired teams of designers and technicians to deliver and install them. None of them were prepared for the sudden influx of orders for single, adjustable desks from home office workers who were suddenly trying to figure out how to hold Zoom meetings in their spare bedrooms.
A Gallup poll found that at the start of the pandemic, in late April, 52% of working Americans said they always worked from home to avoid catching or spreading the coronavirus, and another 18% said they sometimes worked from home. A later survey found that half said they wanted to continue doing so full-time, and 27% said they both enjoyed working remotely and were concerned about the coronavirus.
When Alphabet Inc’s Google told employees in May it would reimburse up to $1,000 for home office equipment, most of the options they found were cheap imports sold at big box stores or on Amazon.
“The pandemic has caused a tsunami in the industry,” said Ron Wiener, CEO of iMovR, a Seattle-based maker of adjustable desks. “Large companies are simply not built to keep people at home. Providing services.”
Steelcase, the largest U.S. office furniture maker, and Herman Miller, the second-largest, reported deep losses and double-digit sales declines in the three months through May. Steelcase’s sales were about $483 million, the lowest level since its initial public offering in 1998.
Investors are already realizing how dire their situation has become, with some experts predicting the virus will spread widely as more companies discover they can operate with dispersed employees while saving on expensive real estate.
While the stock market as a whole has recovered almost all of its losses from the early days of the pandemic, shares of Steelcase and Herman Miller are still down sharply. Since the outbreak, Steelcase’s share price has fallen 69% from its 52-week high and is still down 51%. Herman Miller shares fell more than 71% and are still down more than 50%.
Herman Miller and others say they’ve made progress since the pandemic began in expanding online capabilities and finding other ways to sell to individuals.
Lori Gee, vice president of productivity services at the Zeeland, Michigan-based company, said they quickly created a way for Google employees to purchase products directly from the company.
“Part of this is accelerating what we were already doing, making it easier to install optimally,” no matter where the furniture will go or the size of the order.
Manufacturers of many other products have pivoted to new products, including those needed to fight the pandemic, or stepped up services to offset other business losses.
Office furniture manufacturers are facing difficult times, mainly due to logistical problems. For example, the average work-from-home customer wants a product that can be shipped in a box via a delivery service and that can be easily assembled—ideally without the need for special tools.
Price is also a factor. The Aeron chair, sold by Herman Miller, is a classic design that comes in several versions and can easily cost $1,000. Office workstations can cost more, depending on their complexity and additional features such as an adjustable desk and built-in arms for mounting a computer monitor. Workers stuck at home are less likely to splurge on such expensive options, at least in part because many are worried about keeping their jobs.
The way large companies make their products is a complicating factor. Many manufacturers outsource component production, purchasing bases from one company, such as desktop computers, from another, and then assembling them into configurations based on the larger plant’s design.
“We’re not used to dealing with end users—if a customer called us about a missing screw, we wouldn’t be able to handle the situation,” said Soren Stig-Nielsen, president of LINAK US Inc. An American subsidiary of a Danish company that produces a variety of actuators used throughout the world to raise and lower table bases for height adjustment. The company owns a large factory in Louisville, Kentucky, and sells its equipment to most of the country’s largest furniture companies, including Steelcase.
“COVID-19 has created huge demand for home offices, but we have not traditionally been a significant player in this market,” Stig-Nielsen said.
Herman Miller’s Gee said it’s unclear how long the slowdown in new central office construction will last. But she said the company’s designers are already working on concepts for a new way of working that will include more of the “small satellite offices” they think companies will want to build to serve a more dispersed workforce than in the past.
“We believe there will always be a need for a physical workplace where you can collaborate and embody company culture,” Gee said.