Sofas can look the same but cost differently

Why are There Such a Large Difference in Sofa Prices?

If you have done some online sofa shopping already, you might have noticed that sofa prices vary a lot.

In Singapore, for some online options, sofa prices can go as cheap as $500 whilst others can be as expensive as $5,000. Now, that is a whopping 10x difference.

For some, it is easy to see why there are variances in prices. Maybe the upholstery is different. Maybe the size is different. Maybe it’s the designer markup.

Do take note that even for sofas that look exactly the same, they have wildly different pricings. Does it mean that you should go with the retailer that sells cheaper in this case? Well, we advise caution if you only do comparisons based on looks and prices alone.

In this article, we share with you industry secrets so that you have a better idea about what type of sofa to expect based on the price level quoted:

Breakdown of sofa costs

The total costs billable to you from sofa retailers can be split into these segments:

  • Sofa procurement cost
  • Logistics, warehousing and assembly costs
  • Retailer operating and marketing costs

For our study, we will use a 200cm fabric sofa as a benchmark for all our cost assumptions.

Sofa procurement costs

For sofa manufacturers, the price they charge retailers considers the following:

  • Cost of raw materials
  • Cost of labour
  • Cost of facilities

For raw material costs, the key components are as follow:

  • Fabric upholstery
  • Foams used in cushions
  • Wood used in wooden frames
  • Zigzag springs and other miscellaneous items

For most manufacturers, they will typically charge a 30% - 50% markup to the sum of material costs to cover for manpower costs, facilities costs and manufacturer margins. The actual markup charged depends on the order volume amount.

Logistics, warehousing and assembly costs

Under logistics, there are several components:

  • Shipping from sofa manufacturer country to Singapore
  • Warehousing costs if the retailers maintains inventory
  • Delivery and assembly charges as applicable

Do note that these costs are tied to the packaging volume of the sofa that we have in mind. For our case, we will use 1.5cbm as the benchmark for these costs.

In total, we believe that ~S$150 is required per cubic meter for end to end logistics that includes shipping the sofa from the sofa manufacturer to delivery and assembly at the buyers’ homes.

As a result, the logistics cost for a 1.5cbm 200cm sofa is S$225 by itself

Retailer operating and marketing costs

The last cost component that retailers will pass to you is their cost of operations which include marketing, cost of facilities if they have any, employee costs and profit margins.

This is typically reflected in the final cost of sofas as a % markup to total logistics and sofa manufacturing costs. These typically range from 20% - 40% of the final selling price.

Cost simulation for a cheap sofa

For a sofa that costs $750, using our cost breakdown structure above, we can deduce the sofa procurement costs:

  • Logistics, warehousing and assembly costs: $225
  • Retailer operating and marketing costs: 30% x $750 = $225
  • Sofa procurement cost: $750 - $225 (cost of logistics and warehousing) - $225 (retailer operating and marketing costs) = $300

Out of the sofa procurement costs of $300, assuming that 40% of total costs goes toward covering manpower costs, facilities costs and supplier margins, total raw material costs will be $300 x 60% = $180.

This means that for a cheap sofa, only around 24% of the total retail price ($180) actually goes into buying the raw materials used in making your sofas.

With this budget, we do not believe that it is possible to buy raw materials of acceptable standards, especially if you are looking to buy a sofa that can last for 5 years or more.

Cost simulation for a sofa that can last 5 years or more under regular use

What is an acceptable retail price that I am looking for a sofa that is durable and comfortable? The key depends on us working out the total cost of raw materials of acceptable quality used in making the sofa.

Below is our view of what the raw material costs should be if we choose those of acceptable quality after extensive engagements with sofa manufacturers:

  • Cost of fabric: 10 (meters of fabric required, at 140cm wide for fabric upholstery) x $8 (cost per meter of fabric of acceptable durability and comfort) = $80
  • Cost of foam: $7 (cost per cm thick of foam that is 1.5m x 2.0m wide for 45kg/cbm density foam) x 15 (total thickness of foam in cm required for a 200cm sofa) = $105
  • Cost of wood: $440 (cost per cubic meter of solid larch/ pine wood) x 10% (assuming 0.1 cbm of solid larch wood is used to construct the sofa frame) = $44
  • Cost of other miscellaneous materials such as zigzag spring, webbing, cardboards and plywood for non-stress areas = $50

So total raw material cost is around $279 (sum of all costs listed above).

Factoring a 40% markup for manpower costs, facilities cost and supplier margins, sofa procurement cost for one made with acceptable raw material quality is around $465.

To calculate retail costs, we need to add in the other cost components:

  • Sofa procurement costs: $465
  • Logistics, warehousing and assembly costs: $225 (no change to that for a cheap sofa)
  • Retailer operating and marketing costs: ($465 + $225) / 0.7 (assuming that 30% of the retail price is used for supplier operating and marketing costs) = $985.71

This implies that to get a sofa that is made with raw materials of acceptable quality, you would expect to fork around at least $950 - $1,000 for a 200cm sofa.

Do note that although you are paying more, most of the additional payments goes toward improving the quality of raw materials used.

Shop our fabric selections

Have a better idea about the type of sofa that you are getting based on how much you are paying for it? Looking for a durable sofa but do not know where to start? Why not shop our fabric sofa selections that we carefully curate and are made with durable materials.

Last update: 9th Aug 2023

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