Section One

Furniture Industry In India

1

Meaning of Furniture

Furniture is the collective term for the movable objects which may support the human

body (seating furniture and beds), provide storage, or hold objects on horizontal surfaces

above the ground. Storage furniture (which often makes use of doors, drawers, and shelves) is

used to hold or contain smaller objects such as clothes, tools, books, and household goods.

It indicates everything which is used while doing interior work. In a house, various

things like sofas, bed, flooring, lighting, glass works, dining table, wall unit, chairs, bathroom

fittings, carpet, ceramics etc. fall under the broad word ‘FURNITURE’. In an office also,

things like workplace, table, chairs, designed structures, conference table lights etc is

categorized under furniture.

Furniture can be a product of artistic design and is considered a form of decorative art.

In addition to furniture's functional role, it can serve a symbolic or religious purpose.

Domestic furniture works to create, in conjunction with furnishings such as clocks and

lighting, comfortable and convenient interior spaces. Furniture can be made from many

materials, including metal, plastic, and wood.

2

The Global Furniture Sector: An Overview

Furniture has traditionally been a resource and labor- intensive industry that includes

both local craft-based firms and large volume producers. Mass producing furniture became a

viable manufacturing strategy with the advent of flat-pack or ready-to-assemble designed

furniture. This product innovation paved the way for firms to design, manufacture and ship

products in large quantities. Firms that mass-produce flat-pack furniture tend to supply

products for the low- to medium-price markets. Solid wood furniture manufacturers have

retained important niche market segments primarily for high-end, expensive and design-led

products. These specialized products tend to be purchased locally while mass-produced; large-

volume products are sold locally and for export.

Furniture is big business. The global size of furniture market is estimated at $ 40

billion. Countries like USA, UK, Germany and Italy are the bigwigs in global furniture

industry. They produce furniture products with latest technology which is not found in India.

Today many companies like Durian, Godrej & Boyce, and Tangent import furniture from

western countries and sell it in the Indian market. This low rank may be explained by

relatively high import duties and low technological competency.

3

SCENARIO OF FURNITURE INDUSTRY IN INDIA

Introduction

India is a country with population over 1 billion

The range of indigenous furniture available in India includes both residential and

contract system furniture, with an increased concentration in office and household furniture.

In the area of decorative residential furniture, India has a heritage of exquisite handcrafted

furniture, made out of teak, rosewood and walnut wood, which has strong colonial roots.

Currently in India, Indian manufacturers use a three-tier selling and distribution structure that

is distributor, wholesaler and retailer.

The most popular forms of Indian furniture include home and garden furniture, office

furniture, kitchen furniture, bedroom furniture, upholstered furniture, seating, furniture parts

and contract furniture in wood, metal, plastic, cane and bamboo. These furniture pieces are

available in a variety of finishes. Choices range from antique or exotic looking furniture to

painted furniture. Popular items of furniture export are mainly a large variety of cabinets,

cupboards, ethnic settees, beds, partitions, chairs, tables, frames, boxes and bajots, and many

other decorative articles.

Another element is the greater attention that the local producers pay to include design

and technological innovation in their supply. Although still bound to a product model that is

typically of the British colonial style, the Indian industry is making great progress in offering

furniture of a modern design to consumers who are increasingly demanding to standards of

quality and design found in western countries.

4

Impact on Indian Economy

The total size of the Indian furniture industry is estimated by industry experts to be

worth, approximately Rs. 30000 crores currently, with an estimated 85% of this falling into

the unorganized sector. The share of the wooden furniture market is estimated at INR 600

million. The annual per capita consumption of furniture in India is not more than Rs. 1500.

The furniture industry in India can still be considered as an unorganized sector.

Handicraft production accounts for around 85 % of furniture production in India. The

furniture industry employs around 3,00,000 workers in India. This sector has some 5,000

active companies of which 8% produce wooden furniture, 10% metal furniture and 82%

manufacture accessories and furnishing items in plastic. The office furniture segment,

particularly metal furniture, is much more advanced (in terms of size and technological

innovation) than the home furniture one and a larger percentage of its production is exported.

Over the period 1996-1999, the average annual growth in the Indian furniture industry

reached 3 %. After four years of prosperity, the Indian furniture sector declined to 10% due to

cyclical situation of the economy. In the last 4 years, this sector has recovered from the 1999

crisis and has shown 4 - 4.5 % growth annually. Despite the forecast growth, India is still a

country with the furniture industry not particularly developed in comparison to western

countries (U.S., Germany and Italy) and South East Asian Countries in terms of absolute value

of the sector and percentage of GDP in the economy. The furniture sector in India only makes

a marginal contribution to the formation of GDP, representing just a small percentage (about

0.5%). The principle cause of this situation is that furniture production is typically a

craftsmen’s activity and the process of industrialization which is fairly advanced in other

industries is yet to be implemented in this sector.

India was the biggest furniture importer in 2004-05, with a 17 per cent share in

furniture imports worldwide. In 2000, India ranked 48th among furniture exporters (€140

million) and 49th among importers (20 million). A total of 10,476 importers shipped furniture

5

to India during this period. The current imports are mainly from UK, Italy, Germany, Spain,

China, Korea, Malaysia, Indonesia, the Philippines and Japan.

According to a survey by global consultancy firm KPMG, India has emerged as a key

FDI destination as foreign investors earn higher returns in India than in other emerging

markets like China, Brazil and Mexico. “The return on every dollar spent in India has a better

return than is the case with other emerging markets that have a more favorable environment,"

it said.

6

Forests and Woodworking

Forests

The forested area of India

amounts to about 20% of the total

country, equivalent to 64 million

hectares. Roughly 38 million

hectares are dense forests, 25 million

hectares are open forests and a

million hectares are covered by

mangroves.

The central state of Madhya Pradesh owns 21 % of the country’s forests, followed in

order by the states of Arunachal Pradesh (11 %), Orissa (7 %), Maharashtra (7 %) and Andhra

Pradesh (7 %). The seven states of the north-east account for 26 % of the country’s forests.

India is one of the largest consumers of wood in South East Asia. Until a few years

ago the country had considerable quantities of available tropical woods. The most common

species in Indian forests are teak, rosewood, ebony, laurel, pine, cedar and rubber trees. These

“ready to use” species were, until recently, freely exploited without recourse to particularly

advanced technology. Subsequently supply became scarcer due to unconditional and

inappropriate exploitation and also due to growing concerns about the environment that led to

policies for the conservation of the forests.

In the wood used for furniture in India, teak accounts for almost 5O%; while Sal and

deodar for about 20% ; mahogany and balance 3O% between white cedar, silver oak and

pinewood. In order to conserve the forests, the cutting of soft jungle wood has been banned by

7

Forest Consumption

1%59%

40%

Dense Forest Open Forest Mangrove

the Indian Government. Consequently there is a great potential for foreign companies to

supply wood to Indian companies.

In India natural rubber plantations cover 520,000 hectares with another 6,000 hectares

replanted almost every year since 1994. Kerala state (South India) produces 95% of the total

supply of rubber wood in India.

Woodworking

Total production currently amounts to about 1 million cubic meters. However, almost

40% of the rubber wood is used as firewood, the packing industry claims a further 44%, and

only about 16% is used for the plywood and panel industries. In the case of the round wood;

construction, joinery and packaging consume 25% of the Indian round wood and the furniture

sector uses only the 8%.

Wood for fuel is the main use of the wood in India and other use as production of

chipboards, MDF, pulp paper or saw wood account for marginal percentage in the total India

Wood consumption.

To serve the demand, India imports wood (logs) from countries like Malaysia,

Indonesia, Myanmar, Ivory Coast, Nigeria, Ghana, South Africa, New Zealand and to some

extent of South America. These logs are imported through various ports in India. However

there are several infrastructural constraints, which may impede further growth in these imports

in the near future. Therefore it is expected that over the next few years until this infrastructure

gets built up, saw timber will also have a market in India.

Production of Rubberwood

There are reportedly over 40 factories manufacturing rubber wood in India, mostly in

Kerala State (South India). Andamans Timber Industries in Andamans Islands is the largest

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manufacturer of rubberwood in India reportedly with annual turnover of over US$ 12 million.

There are other companies like DEECO, Growell India, etc which produces rubberwood.

Bamboo Material Boards

In the recent years, India has developed a new kind of board made with bamboo these

4-by-8 foot mats are soaked in resin, then hot-pressed together in various thicknesses to form

bamboo mat board, a substitute for plywood. These boards are generally as strong as or

stronger than their plywood equivalent and are less expensive. The advantages of the bamboo

board are:

The big advantage of producing bamboo mat boards is that since hardwood trees take

40 to 80 years to reach a worthwhile logging size, but bamboo is ready to harvest in

just two to five years.

Using bamboo not only gives hardwood forests a chance to regenerate, it also fights

soil erosion. This plant grows best in areas of heavy rainfall, which are prone to

erosion after logging, and its shallow root system holds soil well.

One of the key benefits of bamboo mat board is that it can be manufactured by small

factories right where the bamboo is grown.

Technology Transfers

Through the International Network for Bamboo and Rattan (INBAR), bamboo mat

board is now being promoted beyond India’s borders. At a workshop that was organized in

1994, INBAR introduced BMB to seven other Asian nations: Bangladesh, China, Lao PDR,

Malaysia, Nepal, Thailand, and Viet Nam. This technology could also be transferred to Africa

and Latin America.

9

In the India’s case BMB has already replaced about 20-25 % of plywood sales. This

figure could increase through better promotion and new contracts, particularly from the Indian

government, which is the biggest plywood consumer — for its offices and railway carriages.

Currently more than 10 plywood factories have already started making the boards in bamboo-

growing areas of India.

Furniture Production

Production for home use comprises mainly sofas, dining tables, and seating,

professional production is destined for offices and companies and the institutional furniture

sector serves mainly hotels, schools and hospitals.

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 on request. About 65 % of

the furniture produced in India is in

wood, 25 % in metal and the

remaining 10 % in plastic.

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. The segment with the largest no. of

medium-large companies is the office furniture.

The plastic is the most used raw material mainly because it is a new raw material that

has been introduce in India recently and also because it is a really cheap raw material. In the

recent year also the chipboard, MDF and bamboo-board have become popular in the

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Raw Materials Used

25%

10%

65%

Wood Metal Plastic

production of furniture. The most common solid woods used to produce furniture in India are:

Teak wood (60°k) and Rose wood (15-20%). It should also be remembered that for the

majority of companies the production of furnishing items is only a side line and besides often

furniture producers import foreign brands.

Production process and Value Chain

Cut logs are carried to the sawmill, which obtains its primary inputs from the

machinery sector. From there, sawn timber moves to furniture manufacturers who, in turn,

obtain inputs from the machinery, adhesives and paint industries and also draw on design and

branding skills from the service sector. Depending on which market is served, the furniture

then passes through various intermediary stages until it reaches the final customer, who after

use consigns the furniture for recycling or refuse.

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Production Breakup

The Indian furniture industry consists of various sectors in which the manufacturers

are not as specialized in the production of a specific type of furniture as in other industrially

advanced countries. The manufacturers, that are either industrialists or craftsmen, produce

various types of furniture and it is difficult even using questionnaires and contacting them to

get a real picture of the production by types of furniture. In addition, official statistics are not

available either at the national or at the local level.

Globally, domestic furniture accounts for 65% of the production value whilst

corporate/office furniture represents 15% of the production, hotel furniture 15% and other

furniture (mainly parts of furniture), 5%. The upholstered furniture and the bedroom furniture

sectors are the largest ones within the furniture industry respectively representing 30% and 2O

% of the total production. Two other sectors have almost the same weight: the kitchen

furniture sector (6.5% of total production) and the dining room furniture one (6.5%). Other

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Breakdown of Furniture Production

30%

20%15%

6%

6%

5%3%

15%

Upholstery Bedroom Hotel/contract Dining roomKitchen Parts Other Corporate Office

domestic furniture (garden, home office, small furniture) accounts for 4 % of the total

production.

Furniture Consumption

End user’s profile in India

Obviously the purchasing power is completely in the hands of the upper segments of

the Indian population. 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%.

Analyses carried out by important world researchers and the classification of Indian

consumers conducted by research institutes are still not enough to provide an estimate of the

size of the potential market.

Having said that a quarter of the world’s poor lives in India and a not very large

number of rich people, we still need to quantify that middle class of consumers that forms the

potential market for foreign companies wishing to sell on the Indian market.

Annual income range

($)

Number of families (millions)

Urban Rural Total

Less than 490 5.3 27.7 33

490-676 7.1 36.9 44

676-1384 16.8 37.3 54.1

1384-6615 16.6 15.9 32.5

More than 6615 0.8 0.4 1.2

TOTAL 46.6 118.2 164.8

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In India there are 33 million families, or roughly 200 million people, have an average

annual income of over US$ 1,300.

This section of the population is more or less the Indian market for consumer goods

including furniture. Data for income distribution is however not sufficient to be able to

determine the size of the market, which varies according to the type of goods considered. The

number varies from 300 million people to 100 million according to the consumer good in

question. This situation may be the result of a lack of uniformity within the middle class and

of the huge differences in the prices charged in different areas of the country for the same

product.

Consumer purchasing power in India seems to be more closely linked to the location

of the consumer than to the income. Family habits therefore play a greater role in determining

the size of the market than the distribution of income.

If only consumer durables are considered of an international level, an estimate, felt by

many local observers to be rather pessimistic, put the number at around 50 million (which

would still make India a larger market than any European country).

Despite the increasing urbanization of the country, the richer section of the population

does not necessarily live in the large cities. It is certainly true that in the four largest cities

(Calcutta, Mumbai, New Delhi and Madras), which are home to about 60 million people, there

is a concentration of the more “westernized” population in terms of tastes, but it is equally true

that in the rural areas there is a large part of the wealthier classes

Also the population that resides in the country is, in turn, 30% concentrated in villages

that often have the same number of inhabitants. So far foreign investors and local companies

have ignored this segment of the market, which remains firmly rooted in its own cultural and

religious traditions and has not been affected by the consumerism typical of the urban

population. But if this segment were approached with targeted marketing strategies, the

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Furniture Sales

15%

65%20%

Household Office Contract

number of people effectively making up the Indian market for consumer goods would increase

significantly.

Consumption

The Indian market for furniture is worth approximately 30,000 crores and roughly 85%

of this comes from the non-organized sector (craftsmen). There are few Indian companies that

produce or sell brand name furniture. The home furniture segment claims 65% of furniture

sales, the office segment 20% and contract the remaining 15%.

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Distribution and Sales Channel

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

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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. This enables

them to reduce sales costs and to concentrate on productive aspects and on improving

productivity and quality. In many cases the companies that sell through commercial

organizations rely on the same for customer services and are only directly involved in the case

of large quantities.

Introducing foreign products to India’s markets requires careful analysis of consumer

preferences, existing sales channels, and changes in distribution and marketing

practices that are continually taking place.

India is a very big country in terms of area and a new company should in a first

approach forget spread its product in the whole India.

Besides huge distances separate the most populous cities, as example, from Delhi to

Calcutta there are more than 1.500 Km and almost the same distance there is between Delhi

and Bombay.

In India it is easily to talk about two kinds of consumers.

On one hand there is the urban population, which is widely dispersed and rather has

higher buying power than the rural areas.

On the other hand there is the rural India, which constitutes 70 percent of the country’s

population; this is more than 700 million people. Usually the rural India habitants have

low incomes than the urban areas. Nevertheless relevant figures show how in the rural

market has been a rapid growth in last years. The main reason for such growth, apart

from awareness created by various media channels (TV and radio), has been the

adaptation of distribution channels to the needs of the rural market.

Certainly there are still hurdles to be crossed in order to penetrate this market.

17

First problem is one of logistics, the huge differences at an economic and cultural level

among the various areas of the country.

Secondly the distribution system that is not yet sufficiently structured.

But if these are tackled with marketing policies that are targeted and attentive to the

internal diversities (thus not only directed at the part of the population that inhabits the large

urban centers) and based on an understanding of the traditions, habits, and lifestyles that

evolve from “being present” in the country, in the not too distant future the Indian market

could be a source of satisfaction for many sector companies.

Distribution

Distribution coverage is the prime key point for a company pretending sells its

products in India. Indian consumers are dispersed. They are serviced by an efficient, but

fragmented, trade system consisting of over 4 million retail and wholesale outlets, spread over

many urban and rural population centers. The ability to physically deliver one’s goods to the

consumers, therefore, remains a source of significant competitive advantage. 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, always depending of the product and the final consumer.

The retailers served directly by a company’s distributors may similarly be between

250,000-750,000. Depending on how a company chooses to manage and supervise these

relationships, its 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.

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Wholesaling is profitable by maintaining low costs and turnover high. Many

wholesalers operate out of wholesale markets and serve the final consumer. India has

approximately 4 million retailers, mostly family-owned or family-run businesses.

In recent years, there has been increased interest by companies in improving their

distribution logistics in their effort to address a fiercely competitive market. This in turn has

led to the emergence of independent distribution and logistics agencies to handle this

important function. Marketers are increasingly out-sourcing some of the key functions in the

distribution and logistics areas, and looking for more reasons to reach the consumer better.

Recent years have also seen innovative trends by companies in utilizing distribution

channels for products with synergy. While there are no major national store chains,

departmental stores and supermarkets are mushrooming in many of the cities, as well as in

other towns all over India. Most cities have well known market districts and retail sales outlets

are almost always locally owned. Buying and selling is often a process of bargaining and

negotiation. Outside the major metropolitan areas, India is an intricate network of rural

villages. Poor roads make many rural districts inaccessible.

India has both organized and unorganized channels for selling goods. Smuggled goods

such as computer parts, cellular telephones, gold and a vast range of imported consumer goods

are routinely sold through the thriving “unorganized” sector or black market of the economy.

By avoiding taxes and customs duties and using cash transactions, unorganized merchants

offer better prices than those offered by the organized sector. However, with liberalization and

more and more foreign companies coming to India, the volume of business in smuggled goods

has fallen significantly. Most products being sold through the smuggled channel are now sold

in India through direct channels.

In selecting a distributor, the following considerations are important:

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;

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Creditworthiness.

In addition, an ideal distributor will have the capacity to offer customers the required

assortment of products and services and a willingness to extend credit. The distributor will be

able to provide storage facilities, showrooms, shops, service workshops, salesmen and service

commensurate with the expected volume of business.

How to Promote Furniture Sales in India

Advertisements in important national / regional news papers, interior and furniture

magazines, participation in furniture trade shows and organizing workshops and

product seminars will make a company stand out in the competition.

It is not necessary to have an all India distribution network of dealers / franchised

shops from the very beginning. Instead of thinning out, it is better to concentrate in

same regions / zones and to consolidate before expansion.

No Indian or foreign company has held product display shows in India except to some

extent Gautier (France). A furniture company should take lead in this direction and

hold shows in good hotels of India for the consumers, it will become a big hit.

Companies can have a design studio in India. There is complete vacuum, a sort of

dearth of good designers in India, especially for hotels, office and kitchen industry in

India.

In fact the Indian companies can consider opening a design school in India for aspiring

students, which will generate big business (financial gains) for them in India, besides

giving them strong brand equity.

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International Trade

In 2003, the main exports were to the countries like US, Germany, UK etc. Although the

growth rates show that there is definitely a greater propensity to opening the local market to

the influence of foreign producers, incoming and outgoing trade flows are still modest. The

export is much higher than the imports but slowly the gap is bridging.

21

Indian Exports

15%

10%

5%

2%

2%4% 5% 5% 14%

14%

24%

US Germany UK FranceItaly Denmark Canada GreeceBelgium Netherlands Others

India was the largest importer of furniture goods in 2003. The main imports were done

from European countries, UK, US etc. The demand for furniture items manufactured in these

countries is slowly rising in India.

Duties Structure

22

Indian Imports

4%8%

11%

6%

5%

5%8%

8%12%

14%

19%

Germany Italy Korea UKUS Denmark Irish Rep. FranceJapan Poland Switzerland

While importing furniture in India, the following duty structure is applicable. The

goods may be imported by a company, institution or private individuals.

Duty Percentage

Import Duty 20 %

Counter Veiling Duty

(CVD)

16 %

Education Cess (2% of

CVD)

0.32 %

Total Duty 36.32 %

While exporting, there is no duty to the Indian exporters. The duty is nil. Hence the

government is also favoring Indian Exporters by encouraging exports which has resulted in

increased exports from last few years.

Problems Faced by Foreign Companies in India

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Problems from Indian Government Side

Poor labor laws v/s. Quality of workers - Outdated labor laws makes it a bit difficult to

sack I dismiss I retrench surplus or staff.

Power generation shortages and steep electricity prices – More consumption - more the

tariff bracket. Power cuts have forced most organized companies to have their own in-

house captive power plants/ diesel generator sets.

Investment & resources constraints — Attitude of Indian banks /financial institutions,

besides 12% to 15% high lending/interest costs.

Outdated and primitive banking systems

Poor infrastructure - Bad quality of roads cause delays in shipment deliveries.

Dirty industrial areas - No maintenance is done for years.

Corruption - Causes delays and irritants.

High and varied taxes – Which country would have so many types of taxes:

Customs/import duties, countervailing duties CVD ), Special additional import duties,

excise duty ( manufacturing tax ), Central Sales Tax, State Sales Tax, Octroi/municipal

tax, turnover tax, Income tax, corporate tax etc.

Problems from Indian Business Community side

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Poor communication systems - Many SME’s don’t acknowledge or respond to urgent

mails in time. The quality of letter writing is outrageous and subservient.

Disregard of Brand valuation - For many Indian companies selling products at

cheapest possible price is the only criteria rather than brand building exercise.

Dirty industrial areas - Poor roads, unclean and unhygienic.

Quality apprehensions and attitude - Although due to exports and China threat many

Indian companies have incorporated 150/ UL etc., the attitude is still primitive.

Transparent in financial issues - Due to high taxation policies of Indian government

(see above noting) many companies sell their goods to end consumers without any

recorded invoice. This generates black money.

Poor reporting systems - Most things are controlled by owners’ family and reporting

system is non-existent in small companies.

Unsure of requirements - Many Indian companies want foreign alliances / technical

collaborations/joint venture without even bothering to know what it means to them.

Unfocused approach - They want to do it all, have it all, have strange attitude. Lack of

professionalism — closely held companies wants to run the show their way and lose

out in national and international markets.

No importance of R&D and Market Research Study (MRS) - For them just copying a

design / product and selling it cheaper than the original itself is a great achievement.

Regular delays in supplying the end products to consumers - This leads to legal and

commercial complications. The attitude is too casual.

Poor pay masters to employees - Want to have quantity not quality in employment.

This leads to poor quality of workers and production. “No problem” attitude has

created all the problems. . They cannot and it leads to poor taste.

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Action Plan For The Furniture Industry

The action plan for the industry could be on the following lines:

Benchmarking performance : Enterprises need to develop a mechanism to compare

performance with competitors in other countries. Benchmarking with most efficient

producers on all cost parameters is a must to improve the performance and remain

competitive in the globalized scenario.

Better value chain management : Improved value chain management can reduce

costs and increase flexibility. A wide sourcing base can increase flexibility when it

comes to securing raw material from the cheapest source with the quality and design

the buyer expects. Such flexibility will be a critical competitive factor in the future. By

optimizing the supply chain, lead-time will also be reduced.

Increase productivity : Investment in human capital and high-tech machinery to

increase productivity and production of internationally cost and quality competitive

goods.

Quality consciousness : To survive in the integrated world market, the industry has to

focus on the international standards of quality and excellence. To achieve

internationally comparable and quality standard finished goods, it has to be ensured

that quality parameters are maintained at each level of production from raw material to

the finished product. Introduction of latest technology can provide world class quality

in this industry.

Design & Trend : There should be a constant watch on the design trends in the

furniture market in the country as well as worldwide. The design preferences of the

consumer changes often. Hence the companies should strive hard to be in par with the

latest design trend

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Modern management practices : Alongwith technology upgradation, adoption of

modern management practices is also very essential to acquire that essential

competitive edge. Management practices like JIT, TQM, supply chain management etc

form an important link between technology adoption and acquisition of

competitiveness. Adoption of such practices will result in cut-down in manufacture

and delivery lead time, improving product and process quality and improving plant

equipment maintenance. Management accountability through stricter code of corporate

governance is also necessary for balanced corporate growth.

Innovative products : The industry has to focus on innovation for surviving the stiff

international competition. ‘Production innovation’ should be considered as a dynamic

process and not as a one time process. Continuous innovation in the product is the sure

way to win the race in the global market. Companies should have a research and

development team who constantly look out for innovating the products since the taste

of the consumer changes frequently.

Develop ‘e-application : E-applications can be employed not only to sell, but also to

exchange information across electronic networks at any stage of the supply chain. E-

applications facilitate sourcing and supply chain management; production planning,

design and forward integration, including internet sales. The main goal of e-application

is to increase flexibility and to shorten the overall value chain, thus reducing lead-time.

A shift to e-applications also highlights that a company is both competitive and willing

to adjust to the demands of the market.

Alliances Between Indian And EU-USA Companies

Since the economy in India is booming up, it has become a land of opportunities for

foreign investors. Many foreign furniture companies have realized the potential of furniture

market in India and have started investing in India and have entered into tie-ups with Indian

companies. The agreement between Gautier France and the Birla Group of India from

27

Chennai gave rise to Gautier India, which offers the models of the French parent company.

Chairtech (France) is preparing a joint venture with a local seating producer, Vishal Chairs

(Mumbai).

The Swiss company Lista (office furniture) has signed an agreement for product

development with Matrix, a Voltas Ltd company that produces modular office

furniture.

The Germans Wilhelm Bolt & Co. KG and Erich Bolte have technical agreements with

Arvind Furniture for on-the-spot production of furniture.

Steelcase (USA) sells its products in India through the most important Indian producer

of office furniture, Godrej & Boyce.

Another US company, Herman Miller, chose Featherlite as its Indian partner. Sauder

(USA), a specialist in RTA furniture, has set up a joint venture and a technical

agreement with the Indian company Sammarth Overseas & Credits Pvt. Ltd

(Hyderabad).

The Italian companies Arrital Cucine and Divani Chateau d’Aux both have Indian

partners to sell their goods on the local market.

Another Italian company, Saporiti, specializing in upholstered furniture, has built a

productive plant in Pithampur in collaboration with a local company Pinnacle

Industries.

Western companies are already present on the Indian market, but greater satisfaction is

undoubtedly in store from the local market with the economic development of the country

and, most importantly, with the involvement of larger groups of urban and rural residents in

this development. The improvement in living conditions, which is not confined to the large

urban centers, will definitely produce a further increase in the demand for furniture of western

style.

28

29

Section Two

Case Study

30

The Position of Furniture Industry then and now

When tangent opened its first showroom in 2002, it got a negative response because an

average Indian consumer found it costly. In 2002, very few companies had entered the market

of exclusive imported furniture and now hundreds of such companies exist in the market. The

government also favours this industry and supports the growth.

According to Mr. Kunjal Thakkar, an average common man is not able to buy

imported furniture. But the scenario will change in coming years. It is very costly to

manufacture furniture of world class quality made from machines in India. The labour costs

are very high and the raw materials is also found in some specific countries. Hence it is

feasible to import such furniture instead of manufacturing it.

The customers are shifting from hand made furniture to machine made furniture

because carpenters can not make furniture of such quality and design which is made by

machines in other countries. “In 8 – 10 years, this industry would definitely boom, since the

consumer is increasingly being conscious about looks, design and budget”, says Mr. Kunjal

Thakkar.

31

Section Three

A special snap shot….

Modular Office Furniture

32

Overview

New paradigms now define the design of workplace furniture. The human factor is no

longer the incidental element. Having acknowledged the link between productivity and well-

being, the path was set for what is now called “ergonomics” or furniture design as if people

mattered. The understanding of form and functionality developed into a more scientific

approach to designing the workspace and changed the way corporate India looks. Quick to

follow the trend set by the corporate world; small business too has adopted the new look and

in so doing, created an enormous market for workplace furniture. The manufacturers’ story is

lighting to retain the Indian pie. This recent dramatic change is driven by the changing profile

of business, and the pace of twenty-first century life. The cost of rental and the fact that most

offices need to be occupant-ready yesterday ‘have necessitated the quick solution — offices

that can be put together fast, with minimum fuss and maximum efficiency. In addition, the

development of specialized niches in the corporate function, has created whole new office

environments such as communication (call) centers, while the older “new” sectors —

information technology (IT), banking, FMCG and telecom are sprawling displays of the

versatile, new office look While this look incorporates all the right elements of ergonomic

design, its also the new corporate signature. Stuffy cabins with boring, often ugly, functional

furniture are out. An open conversational setting, complemented by elements of elegance and

style, is the pretty new face of the business world. The explosion in the market has pushed the

Office furniture majors - Godrej, Blowplast India, Featherlite, PSL Modular Office Systems,

N R Jasani and Shapoorji Pallonji.

33

I gained knowledge from some key players of this industry, who provided valuable

insights into what are available, trends and materials, to illuminate the dynamics of the

market, but could only confirm that the exact proportion of office furniture to the total

furniture industry is hard to assess.

They manufacture significant numbers and cater to an enormous market, but the

manufacture of office furniture is not their core business. Furniture accounts for a fraction of

the total range of manufacturing of the INR 18 billion Godrej group, at INR 4 billion (400

crores), while the INR 7.5 billion Shapoorji group has a turnover of INR 350 million in the

office segment. Similar proportions hold true for the INR 5 billion PSL group, whose office

furniture accounts for just INR 100 million.

This recent focus on office furniture saw most companies starting manufacture after

1990 or in the early 2000s. Even Godrej, who are perceived as being in the “Business

Forever”, set up their office furniture division only in 1992. This period also saw the entry of

smaller, more focused manufacturers into the offi6e furniture market such as Steel & Woods

and V3 Engineers.

Manufacturers appear segmented at opposite ends of the office furniture spectrum,

with the larger furniture majors offering complete office solutions (desking, storage, seating,

cubicle structures), including design and layout, and a group of chair specialists (Amber,

Eurotech, Euromic,) sticking to their core competence.

Behavioral scientists tell us that matchbox structures enclosing individuals and cutting

out visual and other communication, decrease productivity. Open offices improve teaming,

eliminate non value added activity, and are the new design mantra. Leading manufacturers

have developed variants of this system. Godrej, for instance, offers five variants of the open

plan office with panel, tile, column, desk and combination spine and fin based systems. Such

systems are modular, flexible, and upgradeable and can address needs for acoustics, privacy

34

and cable management while making it easy to configure offices to suit different work

profiles.

Not withstanding the change in trend towards integrated workstations, freestanding

desks continue to remain an important element of office furniture. Senior executive tables

have become more stylish and functional, and may be upgraded with side or back units for an

independent work place.

Most manufacturers offer a range of products at varying price quality levels. A mid-

range executive suite consisting of desking and storage, would vary in price between NP

35,000 to INP 150,000, while the upper ranges would start at about INR 200,000 and zoom

upward,depending on the design component and the degree of customization. The enormous

demand for call center modules has inspired manufacturers to offer systems ranging from

INR. 7,000 to INP. 25,000.The continuous enhancement in information technology has made

an impact on conferencing equipment as well, leading to a range of pre-wired, modular

conference tables of varying contours and finishes. Chairs too have undergone a major

metamorphosis, with the maximum research and studies being carried out on seating systems.

Prices for chairs range from NP 3,500 for regular seating, with CEO level seating going up to

INR 150,000. The middle range of seating at the INR 13,000- 14,000 is most popular.

35

“The current trend is for office furniture that is not only functional but also aesthetic.

A few decades ago, the ‘people’ factor, played almost no role in determining the design of the

office. Offices are being increasingly designed by professionals who, apart from seeing that

the spaces work with optimum utilization, are able to add an aesthetic touch. The atmosphere

in the office can greatly influence work output and an increasing emphasis is being placed on

making the modern office as pleasant as it is functional, This is not always easy, given the

increasingly smaller workspaces to contend with. In such a set-up, going modular is a great

idea.” Ranjit Bakshi - Head, Marketing BP Ergo

Offices are trying to move away from airless, box-like

rooms to better-ventilated, well-lit, ergonomically

sensitive spaces

Like any other furniture, office storage needs have changed. With office space

becoming more and more expensive, it has become imperative to develop storage systems that

36

store more in less footprint space. A clear demarcation of personalized and centralized

storage, which could be modular and integrated with system furniture to stand above

centralized storage, is the trend of the day. Multipurpose storage facilities incorporate the

facility to store a variety of material (box / flat files, books, ledgers) in predetermined, easily

identifiable areas.

The change in the design and planning of office spaces has been complemented by

changes in what makes up furniture and systems. The old standard of wood and steel has been

replaced by more technologically advanced and ecologically friendly fiberboard, glass and

metal. A combination of materials like wood and steel break the monotony of one material,

while the use of technologies like membrane pressing has led to the development of stylish

desking systems at affordable prices.

“Materials used in manufacture tall into two categories”, according to Rajan Bahri of

PSL, “core material and finishing material’. The core materials need to be sturdy and

supportive by definition, steel or aluminum as framework materials, supporting particleboard,

MDF and pre-laminated board. Finishing materials span the gamut from laminate, veneer,

fabric, glass and PVC edge lipping”

New needs and new patterns of manufacturing have engendered a new activity - the

design of office furniture. Designing of storage, for instance, is a science that involves a study

of the flow of documents, frequency of their use, the type and size of document binders before

designing a proper solution.

37

As Anil Mathur of Godrej sees it, “No more is the emphasis only on aesthetics or

engineering, today’s designs integrate not only aesthetics and engineering but material

services, ergonomics, and human behavioral sciences.” So who brings this basket of varied

skills to the table? “A product designer trained in ergonomic norms” according to Amber’s K

D Nirmal, “An engineer” says Manjit Shandil of Steel and Woods, “An architect”, says

Shapoorji’s Chabbra.

Several manufacturers have their own in-house design teams, who work in tandem

with the architect and design community to create products that are a contradiction in terms -

customized system furniture. In reality, the large volumes required by each project make it

feasible to create products that vary within a band, offering a degree of customization to each

project.

Large manufacturers like Godrej push out the boundaries of the concept with a fully

integrated design center and knowledge center where their design cell directly interfaces with

the architect and design community.

Anil Mathur of

Godrej tells , ‘The world

over, furniture manufacturers

are moving towards being

solution providers - right

from designing the layout and

furniture to execution of the

project. Their experience and

research in office furniture

and designing have made

them expand their horizons

into the area of interiors.

Working in tandem with the

38

A&D community, the large manufacturers today offer a ‘Single Window Concept’ to

customers.”

With several global majors selling up communication centers in India, industry pundits

foresee enormous growth in the demand for call center and software industry modules, and

have started manufacturing need-specific modules for these industries.

The need to stay on top of things in a large, but increasingly competitive market, has

inspired manufacturers to add value or maintain their stance various ways, starting with

quality control. The bigger players have international certification on quality norms. For

instance, Blowplast follows ANSI & BIFMA norms and has received ISO 9001 certification

by BVQI, Belgium for ‘design, manufacture, supply, installation and servicing of office

furniture systems’. Similarly, Godrej boasts ISO- 9001-2000 and 180-14000 certifications as

well as manufacture in accordance with BIFMA standards.

In addition, several of the top 5 manufacturers have turned overseas for inspiration,

buying technology, or products, or both from the market leaders of Europe, the USA and

Oceania.( See box Above)

39

All roads, both Indian and international, lead to the design of office spaces as if people

mattered. This is the new marketing mantra. And it works. Ergonomics is the driving concept

of the new office. The importance of ergonomic seating is underscored by the fact that an

average office worker spends approximately 80,000 hours seated, during his career. By

adopting unique communication strategies, companies attempt to create an edge over

competition as well as carve a niche for themselves in the market.

While ergonomics became the buzzword in industry circles, some went a step further,

as did Godrej who made the “Health-Seating” platform their own. Group President P D F Lam

puts it succinctly, “Furniture is an essential part of good health. We do not merely sell pieces

of furniture, like chairs or tables, w sell health”. So while Godrej cornered the niche on health,

BlowPlast explored the pleasure principle. As Ranjit Bakshi, Head Marketing Blow Plast

Ergonomics explains, “Workstations are designed in a manner that facilitate teamwork and

allow free flow of information, while at the same time respecting the employee’s privacy. The

underlying philosophy being to create a healthy work environment that raises the motivation

level of employees creating ‘Pleasure at Work’

Mere mantras don’t do the trick. Indian manufacturers have their marketing plans in

place, coupled with a game plan to target market their products to their main clients -

corporate or the main decision makers. In most cases, this is the specific architects and

designers who work with large projects and are responsible for the design and layout,

including the interiors, of large office projects. Manufacturers have various strategies to attract

and directly interact with the specifier.

Some organize custom mockups of furniture especially for individual architects; a

procedure which J K Chabbra of Shapoorji says is both tedious and expensive. Others offer

the architect a range to choose from at showrooms or specialized design centers, such as the

Godrej Knowledge Centre.

Large manufacturers with a serious scale of operation have an all India network of

showrooms or franchisees. All manufacturers also have partners and tie-ups with retailers

across the country, gaining visibility without the burden of showroom costs. BlowPlast have

40

over 1000 installations across India, with showrooms in 8 metros, complemented by a tie-up

with 40 business associates across India. PSL has a presence in the 10 largest markets, while

Godrej is India’s largest office furniture manufacturer employing more than 800 employees, a

distribution network of over 640 dealers, 24 branches and 31 showrooms, all - India. The

smaller companies usually have a regional focus, with national aspirations. Steel & Woods

with a focus on the Mumbai market relies on a marketing team to ensure the product reach

across the country, as does Amber which sees 60 percent of its material being absorbed into

the Mumbai / Pune market, and the rest being dispatched to other regions via its marketing

network.

Several manufacturers export a part of their production, mainly to Europe and the USA. The

base support to the marketing plan is their promotional plan, which, on overview, appears

conventional rather than adventurous, with all companies favoring advertising and trade fairs

in approximately a 70 30 or 60: 40 ratio of ad spend.

What has been the government response to all this frenetic activity? Rajan Bahri of

PSL says the recommendation of the 5th Pay Commission to incorporate modular structures

into offices was a step in the right direction. However, most manufacturers agree that the

burden of excise and other taxes diminishes the attraction of manufacturing.

A glance around the country confirms the dominance of the big five manufacturers,

who account for most office furniture retailed in the secondary markets. An educated guess at

the size of the office furniture market in New Delhi puts it at about 10 billion INR, where

branded products account for between 10 and 20 per cent of the total. Market leaders Godrej

control an estimated 60 percent of this.

41

Regional manufacturers also handle a significant share of the pie. These include the

Continental Group (LineA furniture) in Delhi, Ergotek and Eurost Products in Bangalore and

Steelco in Kolkata.

Recent Developments As Discussed At Index Furniture Fair In

Mumbai, Sept. 2006

What the world at large glibly refers to as ‘call centers’ encompasses the entire BPO

and call center industry. As one might expect, it’s hardly as simple as that. The gamut of back

office operations falls into several segments, some of which are voice based (real call centers)

and those that provide non-voice- based back office services including data processing,

transcription, pay roll processing, legal analysis and software development for specialized

uses. These include call centers and BPOs for data processing, KPOS involving a more

specialized and better educated staff including scientists, doctors or lawyers, ITES and IT

offices. Icapil Agarwal says the profile of outsourcing to India has itself changed, “As the

importance of India’s quality labor and talent pool is widely being recognized, we will go

higher up in the value chain.”

“We don’t treat all software companies the same way and all BPO5 the same way. Each

company has an inner cultural preference which is different from other companies and which

we try to understand.” Ar. Jessy Jacob (Jessy Jacob associates)

Each niche has its special design requirements. Discussing the differences in profile,

Ar. Jessy Jacob, Jessy Jacob Associates, Bangalore adds, “The average age group in a typical

BPO ranges from 17 to 24 years and 22 to 30 years in a software company, while in corporate

offices the age group is 40 to 50 years. A BPO or a call center has a college campus

42

atmosphere, so the offices have to be fun, young and happy so that it can cater to that age

group.”

The reputation and scale of operation of the service provider or manufacturer is a

factor in who initiates the buyer-seller dialogue. Large architect firms are directly contacted

by the client who then continues the interaction with the architect, while the project

management consultant joins the equation further down the line. In other cases, the project

management consultant assumes a more pivotal role, coordinating and initiating activities

starting from the architect to all service and product suppliers.

The next point in the interaction is the design brief, which varies in length and detail,

depending on the experience of the client. The novelty of the industry itself means that several

clients are first-timers who require a high degree of hand-holding including visits to offices

with a similar design profile as a familiarization exercise. Architects then confer with their

clients to understand their corporate culture after which they work out several design options,

one of which finally selected by the client. 3D images and mock-ups follow and the job enter

the execution stage.

The issues peculiar to this industry have also necessitated sector-specific solutions. Ar.

Brinda Somaya, Somaya & Kalappa Consultants, says, “The biggest change has been in terms

of the services that go into any one of these commercial spaces. When I began many years

ago, it was furniture, accessories, flooring, ceiling, lighting and air conditioning. But today it

is the communication system, the security system, the data cabling and the computer systems

that are very important. I think the skill of the architect lies in how they are able to integrate

all the services.” Ar. Sanjeev Mehta, Director, Ethique, Mumbai adds, “The heart of a BPO is

data cabling and the server room plays a major role.”

43

While

architects say design does not change drastically from a regular software development or other

IT office to a BPO, issues like space and the schedules that BPO staff work, become factors in

designing these spaces. Ar. Asha Kushalappa says, “BPOs are more intense as we fit in 1000

employees into a limited space, while in the IT sector, the same amount of space houses only

500 employees.” The space crunch is balanced out by efficient HVAC, as the conditioned air

must be well circulated to combat oxygen- deprivation and the lethargy it induces. The fact of

employees working shifts creates a bottleneck which architects must factor in. Ar. Jessy Jacob

says, “Employees have to record their log in and log out time. There could be 400 people

waiting to go out and another 400 waiting to come in, so we have multiple access control with

biometric log—in and out systems.” Broader (6 foot) passages reduce congestion and

claustrophobia. Issues arising out of repetitive work such as fatigue and frustration are

addressed by creating ‘break out’ spaces ranging from interesting cafeterias to in-house

gymnasia and chill out zones where employees can re- energize before they get back to the

grind. Architects must also accommodate the fact that shift continues in to the night and the

atmosphere of the bpo must replicate a day time environment making lighting a central issue.

44

“The biggest change has been in terms of the services that go in to any one of these

commercial spaces. I think the skill of the architect lies in how they are able to integrate all the

services.” –Brinda Somaya

The new industry segment has brought a whole new ethos of work culture with it. An

interesting anomaly that’s everywhere in the BPO related construction and interiors industry is

that there is a lot of business, but no one is taking anythingfor granted and competition has

become frenetic. As in most things, the fallout has been of both kinds; while professionalism

has certainly improved, the competition is sometimes gruesome, with aesthetics and design

being the first casualties. The industry that turned time on its head for the staff of the BPO

services industry has also had an effect on the timelines associated with set up.

Architects and builders across the board exclaim over how quickly projects are put

together. Regarding the fit out, Ar. Ashish Gupta, Senior Architect, Design Plus, Delhi says,

“The time taken to set up a BPO is 35 days to 3 months, and Completion to an extent depends

on the size of the project but not much. If it is about 500,000 to a million square feet, it can be

done in 3 to 4 months.”

“BPOs hove completely changed the landscape of interior construction industry. The

scale of projects has gone up tremendously in terms of area and the budgets available have

increased. BPOs, call centers and such big projects demand different kind of office buildings

which comply with their requirements.”- kalhan mattoo,planet 3 studios pvt ltd

The explanation lies in another outcome of the BPO industry. Manufacturers and

suppliers of furniture have become far more organized as well as professional; several have

set up large-scale mechanized manufacturing facilities using German or Italian machinery to

do the job better. Prakash Gurbaxani, CEO, TSI Ventures (India), Bangalore says,

“Deregulation in imports of material has helped. Today, things like furniture and high-end

equipment can be easily imported. There are Indian companies who are in collaboration with

foreign manufacturers and manufacturing in India; so there is an efficient technology

transfer.”

45

“Things have changed dramatically over the years in the construction industry. The

quality of workmanship and equipment used has changed drastically. Today we use laser

technology to level the ceiling which was not there twenty years ago.- prakash gurbaxani tsi

ventures (India)

46

47

The Markets & The Future

The way it works for the greater part of the industry is that builders set up a complete

building and thereafter lease out parts of it, floorwiseorotherwise, to SPOsorcall centers for a

period of between three and five years. Ar. Venkatesh says, “We have a healthy mix of both in

the south. We did almost a million square feet of fit outs last year and we are doing two

million square feet of new shells.”

SANDOZ PVT LTD : EURO OFFICE SYSTEMS LTD,MUMBAI

Builders and developers with a highly diversified portfolio are still focused to the

residential and commercial project market, with the upstart SPO industry quickly growing

within the portfolio. The share of this industry in the portfolio of a well-established developer

with a much diversified range would be in the region of 18 to 20 per cent. Newer entrants like

Regenesis, Pune move this up to 30 to 40 percent of their portfolio. Architects too have seen a

rise in the importance of the BPO segment in their portfolios, with the older and larger

architect firms putting this figure around the 10 per cent mark ,and the newer firms (dwp

interics, Ethique) seeing the segment account for almost half their business. Kshitij Limaye,

Director, Sankalpan, Mumbai says the last two years have seen a drastic increase in the

proportion of BPOs in their portfolio from between 25 and 30 percent to over 48 percent.

48

Commenting upon the constitution of the BPO segment within the larger IT arena,

Ar.Venkatesh says; “BPOs and call centers form 10 percent of the projects that we do,

because we have a pretty diverse portfolio. We do lot of data centers, software development

companies, labs and testing facilities and hardware assembling facilities. The percentage of

the IT sector would be about 50 to 55 percent.” Ar. Sunil Gambani of Architect Hafeez

Contractor also says they have a highly diversified portfolio, including residences, commercial

complexes and airports, making their BPO-centric business a small proportion, but important

part of the total.

lnspite of the huge volumes of business, industry experts have only short term

expectations for what’s called the call center boom. Some put the figure atjust three years;

others let the wave ride to five, while few expect it to last much longer than between three and

five years. Bangalore-based furniture manufacturer Manohar Gopal, Director, Featherlite

Products, has seen the diversification within the IT industry at first hand and he predicts that

there will be more specialized IT enabled services coming in, which will generate the need for

their own specific furniture.

49

Materials and Manufacturers

Materials available on the market include the entire gamut of plywood, marine ply,

veneers, glass and steel. High wearing materials like vitrified tiles, ceramic tiles, wooden

flooring, granite flooring, laminated flooring, vinyl flooring, Italian marbles etc. are preferred

for flooring. Areas which are higher circulation zones normally have hard flooring and areas

which are more cozy have wooden or vinyl flooring and the office areas have carpeting. In

call centers normally glass is not widely used as it’s a non acoustical material. Solid partitions

made of gypsum, laminate, plywood or MDF are common. Newer materials like column

cladding and innovations like glazing partitions are in over the last couple of years.

Wooden worktops have given way to the range of options offered by membrane press

technology. “Nobody uses wood nowadays. MOE and rubber wood are common. Tables are

tucked with aluminum and MS traming,”says Ar. Sanjeev Mehta. Others innovate with local

materials. Ar. Jaisim mentions wood and clay products, while Ashwin Utturkar, Wood

Culture, Pune says materials and panel-based industry has not changed in the recent past, but

the real advances have been madein furniture hardware, which makes for a superior product.

According to Adurthi S. Rao, Director, Form Design, Mumbai, materials can vary according

to the weather conditions in different cities in India. Aluminum is highly recommended in

cities like Mumbai, Chennai and Kolkata where humidity is high. We source it from jindal and

also from a local supplier from Gujarat,” he says.

Kamal Charan, Managing Director, Ergotek Seating Systems, Bangalore, says that all

the component parts of the chairs they manufacture are available on the Indian market, with

only the gas lift mechanism being imported from Korea, Thailand or China, whereas Ganesh

Kudva of Pentavision Pvt. lid., Bangalore, says, they always import components tram

countries like Malaysia and China. Praveen Bohara, Ergomaxx India Pvt. Ltd., Chennai, says

the Indian market services all their requirements.

50

FACTORY OF EURO

OFFICE SYSTEMS AT DAMAN

Furniture as the single largest component of the interiors budget (8O to 70 percent)

commands a healthy respect in the industry as is evident by the number of mid sized

companies who have either entered the manufacturing industry or diversified into the

manufacture of BPO specific products or re-organized themselves to better service the

industry. The rampant growth in the industry has attracted several smaller manufacturers or

interior contractors of varying scale to enter the lucrative ITES furniture market. Firdaus

Chindhy, Chindhy’s Interiors, Pune, active in turnkey projects for residential furniture began

manufacturing to cater to this new segment of the market four months ago and plans to expand

further through a tie up with an Italian brand soon. Similarly, Pan Office Systems Pvt. Ltd.,

Pentavision Pvt. Ltd., Bangalore; Magnaa Modules and Systems Pvt. Ltd. and Ergomaxx India

Pvt. Ltd., Chennai who were earlier supplying finished products to renowned branded players,

have moved away to create their own brands. Among the manufacturers, several medium and

small players say they import almost all their machinery from Italy and Germany; still others

buyall their requirementof pneumatic machinery in India from dealers of imported machinery

and tools. Large players in the industry pay attention to quality to match international

standards for manufacturing facilities. “All the equipment that we have is either German or

Italian. The investments are getting very heavy. If we have to retain the position that we are

in, we need to invest more in the business,” says Manohar Gopal, Director of Featherlite

51

Products, and Bangalore. Constant investment in upgrading technology or adding on new

operations seems to be an imperative for the larger players.

K.A. Parameswaran, COO, Style Spa, Chennai, says, you have to invest in (to service)

certain segments because they will have some specific requirements in terms of machinery

and support activities; we have invested in a paint shop where we undertake various kinds of

painting like powder coating on metal as well as on wood bases.”

“If India has to really come up in

furniture market, all furniture

manufacturers should came together and

put up their furniture far world exposure,

so the world market knows that India is

also capable of giving good furniture at a

reasonable price.” kamal charan - ergotek

seating systems.

52

Costs of fit out

While the general look of the furniture for the ITES industries follows a norm, what

lurks below the laminate creates a quality / price divide between products. Suppliers mention

that the price ranges of the products supplied to BPOs and call centers do differ (see box) and

the market will always have a segment of buyers who are solely price driven rather than

product or people driven. Though design conforms to certain standard norms, the demand is

for sturdy products that can handle a high degree of wear and tear, for at least three or four

years.

According to the general consensus, furniture accounts for about 50 percent of the

budget; while another 15 percent goes into the air conditioning, 20 to 25 percent goes into the

wiring and electricals and the rest goes into furnishing, murals and other artifacts. Architects

and interior designers come up with contrasting figures on the overall spend on the interiors.

While some state that the base prices for interiors start at INR 500 per square foot, the average

figure agreed upon by the most stand sat INR 1200 per square foot while fit-outs for MNCs

stretch this amount to INR 5000 per square foot — the cost of “true international standards.”

All this expertise comes at a cost. Architects and designers fees add to the bill, but are

seen as an acceptable part of the expenditure on set up and fit out. Some bill clients by the

project, with a one time cost (lump sum fees) while others charge a percentage of the turnover

of the project or a per square foot rate. Interestingly, the fee by the hour norms that exist in the

USA have not yet hit Indian markets. “Our service charges vary from about minimum of 5

percent to over 12 percent, depending upon the complexity and the amount of services

required,” says Ar. K. Jaisim, while Ar. Ajit Jam says, “We charge a fee for our consultancy

that depends on various factors like the size of the project and scope of work.” Ar Ashish

Gupta puts this figure at 4 to 5 percent of the total project cost and Ar. Sanjeev Mehta says

larger spaces get a lower charge. “For example if you charge INR 5 per square foot for a small

project, the rate for 100,000 square feet would come down to INR 3 or INR 4. The charges are

now INR 10 to INR 11 per square foot,” he concludes.

53

Section Four

Conclusion

54