INDIAN FURNITURE INDUSTRY

SCENARIO OF FURNITURE INDUSTRY IN INDIA

THE RANGE OF INDIGENOUS FURNITURE AVAILABLE IN INDIA INCLUDES BOTH

RESIDENTIAL AND CONTRACT SYSTEM FURNITURE, WITH AN INCREASED

CONCENTRATION IN OFFICE AND HOUSEHOLD FURNITURE.

THE MOST POPULAR FORMS OF INDIAN FURNITURE INCLUDE

HOME

GARDEN FURNITURE,

OFFICE FURNITURE

KITCHEN FURNITURE

BEDROOM FURNITURE

UPHOLSTERED FURNITURE,

SEATING,

FURNITURE PARTS AND CONTRACT FURNITURE IN WOOD, METAL, PLASTIC,

CANE AND BAMBOO.

CONT…

MARKET SIZE- APPROXIMATELY RS. 65000 CRORES *CURRENTLY

80% OF THIS FALLING INTO THE UNORGANIZED SECTOR.

THE ANNUAL PER CAPITA CONSUMPTION OF FURNITURE IN INDIA IS NOT MORE THAN INR. 2000*

THE FURNITURE INDUSTRY EMPLOYS AROUND 5,00,000 WORKERS IN INDIA.

THIS SECTOR HAS SOME 5,000* ACTIVE COMPANIES OF WHICH 65% PRODUCE WOODEN FURNITURE, 25% METAL FURNITURE AND 10%MANUFACTURE ACCESSORIES AND FURNISHING ITEMS IN PLASTIC.

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 THE INDIAN GOVERNMENT.

*ACCORDING TO AC NIELSON REPORT

BREAKDOWN OF FURNITURE PRODUCTION

• 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 DOMESTIC FURNITURE (GARDEN, HOME OFFICE, SMALL FURNITURE) ACCOUNTS FOR 4 % OF THE TOTAL PRODUCTION

*ACCORDING TO KPMG MARKET AUDIT REPORT

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

• 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.

• NORTH EASTERN STATES,MADHYA PRADESH AND KERALA ARE HAVING MAXIMUM DENSE FOREST LAND.BUT DUE TO ENVIRONMENTAL ISSUES WE STILL HAVE TO DEPEND ON EXPENSIVE IMPORTS.

MAKING:THE WORKFORCE

• THE NON-ORGANIZED SECTOR IS VERY STRONG IN THE INDIAN

FURNITURE INDUSTRY 80 % OF LOCAL PRODUCTION). THIS 80 % 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, 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.

• 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; 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

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 : IT MAKES THE WAYS FOR KNOWING THEIR UNIQUENESS AND FORMULATING THE SUBMIXES IN SUCH A WAY THAT AN OPTIMAL DEVELOPMENT OF MARKETING RESOURCES IS MADE POSSIBLE.

MARKET SEGMENTATION ON THE BASIS OF PRODUCT

UPHOLSTERED SEATING -UPHOLSTERED SEATING MEANS SOFA SETS OR ARMCHAIRS. NOWADAYS UPHOLSTERED SEATING OFFER COMFORT, RELAXATION, AND ALSO LOOK STYLIST.

KITCHEN FURNITURE -THE PERFORMANCE OF THE ECONOMY HAS A STRONGER INFLUENCE ON KITCHEN FURNITURE SALES THAN MOST OTHERS. REPLACING A KITCHEN IS A COSTLY ITEM. TV COOKING PROGRAMMES AND NEW COOKING HABITS HAVE STIMULATED THE SALES OF KITCHEN FURNITURE. MOST CONTEMPORARY KITCHENS ARE FITTED AND THERE IS A TREND TOWARDS REMOVABLE FREE-STANDING ITEMS LIKE CUPBOARDS, DRESSERS, WORK SURFACES WHICH ARE MADE OF SOLID WOOD

DINING AND LIVING ROOM FURNITURE THERE IS A VARIETY OF ITEMS UNDER THIS SEGMENT AND THE DISTRIBUTION IS RELATIVELY SIMPLE.

• FURNITURE RETAILERS USUALLY SELL THE COMPLETE RANGE. HOWEVER THEY TEND TO STOCK FEWER ITEMS WHEN TAKING THE ENORMOUS DIVERSITY OF CHOICE IN FURNITURE ITEMS INTO ACCOUNT.

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 INTERIO

• 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 INTERIO

• 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

• ON UL WE HAVE CUSTOMIZATION OPTIONS : - SAME SOFA DESIGN ,WE CAN SELECT MULTIPLE SIZE OPTIONS: 3+2, 2+1+1, 3+2+2. -SAME WARDROBE DESIGN, WE CAN SELECT MULTIPLE SIZE OPTIONS. - THIS IS USER FRIENDLY AS CUSTOMIZATION IS NOT EASILY AVAILABLE IN MKT. - FAB DOESN’T HAVE SUCH CUSTOMIZATION FACILITIES

• 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 END TO END.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

• UL 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.

THANKS