Dive Brief:
- Lovesac is making headway in moving more of production out of China as the furniture company looks to diversify its supply chain.
- CEO Shawn Nelson noted on a Q3 earnings call last Wednesday that China now makes up less than 30% of overall production, down from 90% three years ago.
- Now, Lovesac is pushing to produce in areas such as Vietnam and Mexico, among other countries. The company noted difficulty, however, in finding alternate sources for its fabric.
Dive Insight:
The maker of the popular "Sactional" sofa has been pushing to move more production out of China for years.
In 2019, the company embarked on a strategy to relocate manufacturing out of China during the height of the U.S.-China trade war. Lovesac worked with multiple of its suppliers at the time to set up facilities in locations like Vietnam to cut costs and diversify supply chain risk.
Lovesac is one of many companies reevaluating their presence in China amid the country's stringent pandemic control measures.
During last week’s earnings call, Nelson highlighted the company's prioritization of creating a more vertical and sustainable production supply chain that is less exposed to the risks posed by China.
"And we think that as much as China has been a great supply chain for – in many realms, we're all watching the same news. We all believe that there can be risk there," Nelson told investors. "And we've seen of late, through COVID, what happens when there are shocks to the supply chain."
In the home goods space, Williams-Sonoma is also attempting to relocate outside of China, but has struggled to find high-quality vendors for some of its furniture products in other locations.
The Lovesac CEO acknowledged some similar difficulties when it comes to fabric, noting it remains the most difficult piece to move outside of China. The company is working to find new fabric sources in Mexico and other locations in North America to build in greater redundancy.
"Our focus is on bolstering, creating a strong business with diversity in the supply chain, redundant manufacturing," he said. "And I think we've done a good job of that so far, and we hope to be ahead of that curve as that curve continues to present itself in real time.
