INDIAN FURNITURE INDUSTRY

BYKAMAL BATRA

SCENARIO OF FURNITURE INDUSTRY IN INDIA

COMPOUND ANNUAL GROWTH RATE (CAGR)

According to “India Furniture Market Forecast & Opportunities, 2019, FY-2014-19

~ 26%

CONTRIBUTION TO GDP 0.5 %

MARKET SIZE INR 65000 CR

PER CAPITA CONSUMPTION OF FURNITURE INR 2000

LEADING SEGMENT HOME FURNITURE

ACTIVE COMPANIES 5000

FURNITURE INDUSTRY EMPLOYS 5,00,000 WORKERS

UNORGANISED FURNITURE INDUSTRY 85%

FURNITURE TYPE PERCENT

DOMESTIC FURNITURE 65 %

CORPORATE/OFFICE FURNITURE 15%

HOTEL FURNITURE 15%

OTHER FURNITURE 05%

 BREAKDOWN OF FURNITURE PRODUCTION

DEMAND: FURNITURE INDUSTRY IN INDIA 

ONE STUDY CARRIED OUT BY THE WORLD BANK ATTRIBUTED 33% OF PRIVATE CONSUMPTION IN INDIA TO THE RICHEST 10% OF THE POPULATION (IN TERMS OF PER CAPITA INCOME), WHEREAS THE POOREST DECILE OF THE INDIAN POPULATION CLAIMED ONLY 3% OF CONSUMPTION.

IF THE RICHEST 20% OF THE POPULATION ARE CONSIDERED, THE QUOTA OF TOTAL CONSUMPTION ATTRIBUTABLE TO THIS GROUP IS AROUND 47%.

PRO’S AND CON’S PRO’S

HUGE MARKET STILL UNTAPPED.500MN* MIDDLE CLASS .BY 2020 5TH LARGEST CONSUMPTION ECONOMY*

LARGEST OPEN MARKET ECONOMY.

CONSUMERS ARE EXPOSED TO INFORMATION AGE AND BECOMING MORE DEMANDING IN TERMS OF PRODUCT QUALITY, USAGE AND DESIGN.

BUSINESS MODEL IS OUTDATED ,UNORGANIZED AND HIGH ON OPERATING COST.

CON’S

NO “DO-IT-YOURSELF” CULTURE

NEEDS TO CHANGE SOURCING STRATEGY

COMPETITORS WITH VERY LOW PRICES

LOW HOME AND GARDEN EXPENDITURE • US: US$2,000 • CHINA: $300 • INDIA <$75

TYPICAL INDIAN COMPANY’S OPERATION-BUSINESS MODEL

A TYPICAL MODEL CONSISTS OF

• SOURCING AND MAKING

• DISTRIBUTION

• MARKETING AND SALES

SOURCING

Italy,

Germany,

Spain

China

Japan

Korea

Philippines

Indonesia

Malaysia

To serve the demand, India Imports

TOTAL PRODUCTION 1 MILLION CUBIC METERS

RUBBER WOOD INDUSTRY

40 %

PACKING INDUSTRY 44 %

PLYWOOD AND PANEL INDUSTRIES

16 %

FURNITURE SECTOR 08 %

INDIAN STATES WELL KNOWN FOR WOODWORK INCLUDE GUJARAT, JAMMU & KASHMIR, PUNJAB, UTTAR PRADESH AND KERALA

CONTINUE…

Kerala

Uttar Pradesh Punjab

Jammu & Kashmir

Gujarat

MAKING:THE WORKFORCE

• THE NON-ORGANIZED SECTOR IS VERY STRONG IN THE INDIAN FURNITURE INDUSTRY (85 % OF LOCAL PRODUCTION). THIS 85 % IS LINKED TO CRAFTSMEN WORKING ALONE OR AS MANY TWO OR THREE ASSISTANTS. THESE CRAFTSMEN USE EXCLUSIVELY SOLID-WOOD AND PRODUCE FURNITURE REQUEST. 

• ON THE OTHER HAND, THERE IS FURNITURE PRODUCED ON A MEDIUM-LARGE SCALE AND INTENDED FOR PROFESSIONAL USE, WHICH IS PROVIDED BY THE ORGANIZED SECTOR. FINISHED PRODUCTS ARE OFFERED IN MODULAR SYSTEMS IN STANDARD SIZES AND CUSTOMIZED. THESE KIND OF WORK IS MAINLY EXECUTED IN WORKSHOPS OR SMALL FACTORIES.

• HIGH END DESIGNER FURNITURE ARE STILL IMPORTED DUE TO TECHNOLOGICAL CONSTRAINS IN INDIA.

DISTRIBUTION

• INDIAN COMPANIES OPERATE DIRECTLY ON THE MARKET AND THROUGH DISTRIBUTORS.

• A NUMBER OF COMPANIES, ESPECIALLY THOSE WITH A PREDOMINANCE OF LOCAL CUSTOMERS, SELL DIRECT TO CUSTOMERS WITHOUT PASSING THROUGH DISTRIBUTORS. THE MAJORITY OF THESE COMPANIES ARE INVOLVED IN THE PRODUCTION OF OFFICE FURNITURE AND IN SOME CASES THEY HAVE DOZENS OF FREE-LANCE SALESMEN WORKING ON A COMMISSION BASIS.

• THE LARGER COMPANIES HAVE THEIR OWN COMMERCIAL OFFICES AND SHOWROOMS IN ALL THE LARGER CITIES IN INDIA. MANY ORGANIZATIONS PREFER, HOWEVER, TO OPERATE VIA ORGANIZED OUTLETS (FRANCHISE). THIS ENABLES THEM TO REDUCE SALES COSTS AND TO CONCENTRATE ON PRODUCTIVE ASPECTS AND ON IMPROVING PRODUCTIVITY AND QUALITY.

.

DISTRIBUTION CONTINUE…

• CURRENTLY IN INDIA, INDIAN MANUFACTURERS USE A THREE-TIER SELLING AND DISTRIBUTION STRUCTURE, WHICH ARE DISTRIBUTOR, WHOLESALER AND RETAILER. A TYPICAL COMPANY OPERATING ON AN ALL-INDIA BASIS COULD HAVE BETWEEN 400-2300 DISTRIBUTORS,

• SALES STAFF COULD VARY BETWEEN 75 AND 500 IN NUMBER. TYPICAL GROSS PERCENTAGE MARGINS FOR A DISTRIBUTOR, WHOLESALER AND RETAILER, ARE 4-5, 3-4 AND 10-15 RESPECTIVELY. WHOLESALING IS PROFITABLE BY MAINTAINING LOW COSTS AND TURNOVER HIGH. MANY WHOLESALERS OPERATE OUT OF WHOLESALE MARKETS AND SERVE THE FINAL CONSUMER.

• DISTRIBUTOR PROFILING:  

BUSINESS REPUTATION AND BUSINESS STANDING; BUSINESS CAPACITY AND SALESMANSHIP; EXPERTISE AND PREVIOUS EXPERIENCE IN THE LINE; FINANCIAL CAPACITY AND WILLINGNESS TO INVEST IN THE LINE; CREDIT WORTHINESS.

MARKETING• “MARKETING IS THE PROCESS OF PLANNING AND EXECUTING THE CONCEPTION, PRICING,

PROMOTION, AND DISTRIBUTION OF IDEAS, GOODS, SERVICES, ORGANIZATIONS, AND EVENTS TO CREATE AND MAINTAIN RELATIONSHIPS THAT WILL SATISFY INDIVIDUAL AND

ORGANIZATIONAL OBJECTIVES.”

CONTEMPORARY MARKETING WIRED (1998) BY BOONE AND KURTZ

• ALL THE USERS, OF COURSE HAVE THEIR OWN LIKES AND DISLIKES; THE EXPECTATIONS ARE DIFFERENT- THE KIDS, TEENS, YOUTHS, MEN, WOMEN, MARRIED AND UNMARRIED, YOUTH AND GREY, TECHNOCRATS AND BUREAUCRATS, BUSINESS FURNITURE .

• SEGMENTATION :  MARKET SEGMENTATION ON THE BASIS OF PRODUCT

UPHOLSTERED SEATING –

KITCHEN FURNITURE

DINING AND LIVING ROOM FURNITURE

MARKETING MEDIUMS

• TRADITIONAL MEDIUMS

MAGAZINES

TV ADS

BILLBOARDS

• NON TRADITIONAL

SOCIAL MEDIA

DIGITAL MARKETING

SPECIAL BTL CAMPAIGNS

SALES

• MOST IMPORTANT ASPECT IN ORGANIZED SECTOR

• HIRING OF COMPETENT WORKFORCE

• CONSTANT TRAINING

• TRAINING OF CHANNEL PARTNERS

• QUICK MARKET INFORMATION FLOW FROM TOP TO BOTTOM VICE

VERSA

BRANDS IN ORGANIZED MARKET

• GODREJ INTERIOR

• HOME TOWN

• ZUARI

• USHA LEXUS

• DURIAN

• DAMRO

GODREJ INTERIO

• HIGH INVESTMENT MINIMUM 50 LAKHS.

• SPACE IS PROVIDED BY DEALER CUM FRANCHISER MAINLY FOR DISPLAY.

• PRODUCTS ARE NOT AVAILABLE IN SMALL RETAIL SHOPS. SO TERRITORY EXCLUSIVITY IS GIVEN TO THE STAKE HOLDERS.

• GOOD ROI IS GIVEN TO THE INVESTORS

• IN HOUSE STAFF – MANAGERS- COMPANY’S PAYROLL

OTHER SALESMEN THIRD PARTY PAYROLL.

• CNF IS MAINLY OUTSIDE. THEY PROVIDE EITHER IN-HOUSE LOGISTIC SUPPORT OR THROUGH 3RD PARTY.

• PARTS ARE ASSEMBLED @ CUSTOMERS PLACE BY GODREJ IN-HOUSE TRAINED STAFF.

• DUE TO STRONG BRAND EQUITY ,IN HOUSE MANUFACTURING CAPABILITY WITH HIGH TECHNOLOGICAL EXPERTISE GODREJ IS A FORCE TO RECKON WITH.

ZUARI, DAMRO, DURIAN

• SAME MODEL

• TYPICAL DISTRIBUTOR, DEALER AND RETAILER MODEL

• NOT HIGH BRAND EQUITY AS GODREJ INTERIOR

• NOT MUCH INTO PRODUCT INNOVATION AND DESIGNING

NEW ENTRANTS

• FAB- FURNISH

• PEPPER-FRY

• URBAN-LADDER

FAB- FURNISH

• HYBRID MODEL: FABFURNISH.COM MAKES USE OF BOTH ONLINE AND OFFLINE MEANS TO RETAIL FURNITURE AND DÉCOR PRODUCTS. THE COMPANY SELLS PRODUCTS THROUGH ITS ONLINE STORE AND PARTNERED SHOWROOMS LOCATED IN BANGALORE AND DELHI-NCR.

• INVENTORY MODEL: PRODUCTS SOURCED FROM VARIOUS BRANDS ARE STORED AT FABFURNISH.COM’S WAREHOUSE AND THE ORDERS ARE DISPATCHED TO THE CUSTOMERS FROM THERE.

• PRODUCT ASSORTMENT: THE E-COM SITE RETAILS 60,000 PRODUCTS FROM OVER 500 LOCAL AND INTERNATIONAL BRANDS. FABFURNISH.COM OFFERS A DYNAMIC RANGE OF PRODUCTS FROM ITS PRIVATE LABEL BRANDS TOO. 

PEPPER-FRY

• MARKETPLACE MODEL: PEPPERFRY.COM FOLLOWS A MANAGED MARKETPLACE MODEL. IN THIS MODEL, THE ORDERS ARE DISPATCHED DIRECTLY FROM THE VENDOR TO THE CUSTOMER.

• ONLINE STORE: THE SITE PROVIDES A PLATFORM FOR A LARGE NUMBER OF SELLERS TO SHOWCASE THEIR PRODUCTS. IT WORKS IN CLOSE ASSOCIATION WITH 1000 MERCHANT PARTNERS TO OFFER A HUGE RANGE

• PRODUCT ASSORTMENT: IT GIVES AN OFFERING OF 45,000 PRODUCTS FROM OVER 200+ BRANDS.

URBAN LADDER

• URBAN LADDER HAVE CUSTOMIZATION OPTIONS : SAME SOFA DESIGN, WE CAN SELECT MULTIPLE SIZE OPTIONS: 3+2, 2+1+1, 3+2+2.-SAME WARDROBE DESIGN, THIS IS USER FRIENDLY AS CUSTOMIZATION IS NOT EASILY AVAILABLE IN MKT.

• TAKE ACTIVE ROLE IN PRODUCT DESIGN, CLOSELY WORK WITH SMALL MANUFACTURERS AND KEEP A VIEW ON PRODUCT DESIGN, QUALITY, MATERIAL.

• THEY ALSO PROVIDE SUPPORT TO MANUFACTURERS ALSO IN SCALING UP THEIR OPERATIONS

• ALL THE PRODUCTS ARE TRANSPORTED AND DELIVERED USING THE URBAN LADDER DELIVERY NETWORK. THEY TAKE CARE OF THE SUPPLY CHAIN.

PEPPERFRY IN THE TOP SEVEN CITIES FROM WHERE THEY GET ABOUT 70 PER CENT OF ORDERS, THEY HAVE THEIR OWN BRANDED TRUCKS. THEY SEND ORDERS TO THESE CITIES THROUGH A NETWORK OF LOCAL SUPPLIERS AND TRANSPORTERS

URBAN LADDER HAS HIGH LEAD TIME THAN FAB. UL MIGHT BE HAVING MTO(MAKE 2 ORDER), AS THEY HAVE CUTSOMIZABLE PRODUCTS. FAB FURNISH HAS MTS(MAKE 2 STOCK) MODEL. SO LESS LEAD TIME.

LEADING PLAYERS IN INDIAN ONLINE FURNITURE MARKETONLINE PLAYER MARCH 2015 FURNITURE GMV

(ESTIMATED, POST CANCELLATIONS), IN USD MILLION

PEPPER-FRY 24SNAPDEAL 17URBANLADDER 21FABFURNISH 19OTHERS –TOTAL 81

PARAMETERS MARKET SIZE

OVERALL FURNITURE MARKET

22

RESIDENTIAL FURNITURE MARKET

15

ONLINE FURNITURE MARKET

0.7

VERTICAL MARKET 0.4

HORIZIONTAL MARKET 0.3

EXPECTED ONLINE FURNITURE MARKET SPLIT 2020

• THE NEED FOR TOUCH AND FEEL

• LOW TRUST WITH THE WEBSITE

• LONG DELIVERY TIMES 

• ADVANCE PAYMENT

KEY CHALLENGES IN THE FURNITURE MARKET

THANK YOU