Competitive Industry Analysis

Term Paper
On

Furniture Industry in India

1. Ramprasaad V. PGP/0054/04

2. Vatsal Thaker PGP/0055/04

3. Vipul Pandey PGP/0057/04

4. Shubham Motiwale PGP/0060/04

5. Sumit Kamboj PGP/0062/04

ABSTRACT
Indian furniture industry is valued at 32 Billion USD, a market that is largely unorganized. The country’s
furniture market is expected to grow at a rapid pace due to rising disposable income, expanding middle
class and growing number of urban households. To understand how the furniture market in India works,
we analyzed how the market is segmented, studied the consumption patterns of the users, and the challenges
faced by the market. We also give a brief on the growth drivers and the growth factors influencing the
market. Based on this data, we gave the market size, and forecasted the growth of the market. We also
analyzed the new entrants in the market, and all the current players in the market. Then we performed a
competitive industry analysis using two tools – SWOT Analysis, Porter’s 5 Forces Analysis.

INTRODUCTION

Indian Furniture Industry is mostly unorganized as handicraft production accounts for about 85% of the
furniture production in India. The local culture and traditions influence the product design & style, making
it attractive in the export market than local markets.

The availability of readymade wooden furniture through various distribution channels provides ease of
access to the customer to buy furniture products. Moreover, the demand for modular furniture is growing
in urban centers India. The development in housing & real-estate sector and rapid growth of metro cities is
changing the living standards and lifestyle of the market population. The rising acceptability of home décor
and home furnishing with modular and stylish furniture is the major reason behind the growth of furniture
industry in India.

MARKET SEGMENTATION

The category’s three broad segments – furnishings, furniture and décor, have been growing considerably.
There is a small shift of market share from furniture to décor during recent years. This is due to the reason
of controlled consumption which resulted in spending less on high value items like furniture, instead
spending it on furnishings and investing more in upgrading interiors and décor items to give new look to
home and office.

The furniture segment consists of small furniture like chair, table, stools, cabinets, desks etc. Collection of
such items generates huge volume business. The large furniture items such as beds, sofa set, dining furniture
set, large wardrobes, cup-boards are high ticket items which require higher spending & hence higher
margins too. The market share of small furniture is 75 per cent and that of large is 25 per cent.
Home furnishings segment enjoys share of 26 per cent, which is further broken into sub-segments of bed
linen, towels and robes, kitchen linen, curtains, upholstery, blankets, rugs and carpets. Among these sub-
segments bed linen has the largest share close to 50% of the total market. But the faster growing sub-
segments are curtains, upholstery, blankets, rugs and carpets.

CONSUMPTION

The frequency of purchase in this category has increased over last decade but it still remains one of the
lowest frequency consumption categories. It is not just because of low consumption appetite/demand but
also due to fewer of players on one hand and low penetration of existing modern players in smaller cities
on the other hand.

The retail presence of home decor and furnishing brands are more in southern India and western India,
whereas northern India is having lowest share of store count despite being densely populated.

CHALLENGES

The furniture and home décor industry in India is largely unorganized which is a major obstacle for its
growth. The perception and outlook of the industry is still not open to innovation and experiment. Also, the
Indian market is also susceptible to global economic uncertainty which makes an impact on the home
furnishing players. Despite, all this Indian artisans, designers and brands have lot of potential to market
themselves globally & locally.

Recently, furniture has also fallen prey to e-commerce trap as more and more people like to shop online
rather than to shop offline. There are many schemes, discounts and pocket-friendly offers that are offered
by many e-retailers that resonates with the market. Poorly planned distribution channels and retail
infrastructure are the major factors affecting growth of this industry. Quality also has been an issue that
needs to be improved.

Technology performance driver – Retailers in the segment have realized importance of technology
innovation and data analytics. They have implemented customized software to have insights from buying
behavior of their loyal customer groups and maintain real time inventory by better demand forecast at each
stage in the entire value chain.

New concept market – This is relevant when a new house/ office is planned which involves everything
from design, architecture, interiors, furnishings, furniture to décor new to create a concept to live or work
in. Though this market has low frequency of consumption, it drives huge volume & value sales. This market
will thrive on innovation.
Refurbishment market – This is the regular market which thrives on upgradation, renovation and
improvement of existing furniture. The consumption frequency is relatively higher but with lower ticket
sale items.

GROWTH DRIVERS

The home décor and furnishing market in India has witnessed fast growth particularly in the last ten years.
Organized home furnishing retailers & brands have the opportunity of a home run if they understand the
customer requirements and modify their value offerings.

This sector’s growth has been driven by the socio-economic changes and rapid urbanization in India. We
are a country with a large base of young population who have a high disposable income and are also willing
to spend for better lifestyle. The new homes for the small families have been a major driving factor as they
are spending a considerable amount of setting it up. This has opened up a major market for home décor and
furnishing brands.

The growing phase of infrastructure and real estate market has augmented the demand for home furnishings
products in the country. With a higher disposable income, home furnishings, once considered a luxury are
becoming an everyday necessity. Exposure to global trends and design has inspired people to decorate their
homes with more appeal. High Martindale canvas, cotton, poly blends, chenille and velvets have started
being used alongside leather for upholstery purpose. Seasonal changes call for change in décor. Curtains,
cushions, smaller pieces of home décor can be changed to bring in festivity along with each season. These
factors are all leading to a growth and boom in the home furnishing sector and creating a very strong future
for the same.

GROWTH FACTORS

 People have started taking their home as the reflection of themselves and so, a lot of people are
now spending more on both furniture and fixtures and also on home decor.
 Disposable income, better education and also the growing trend of individuals opting for
professional services to do their interiors have together led to a rise in this category.
 Indians are well travelled now and have an exposure to lifestyles in other countries, this inspires
them to have a similar lifestyle for themselves too.

The modern players in the segment are giving due importance to marketing and consumer promotions. The
idea behind such promotions is to provide opportunities for customers to experience new product lines,
categories and brands introduced in the stores. These are planned either with season’s mood like Diwali,
New Year, Valentine’s Day or are category-centric to draw attention towards some specific category.
During such promotion the category is filled with complete and exhaustive range of products with various
discounts and offers. The furnishing retailers, buoyed by huge growth opportunities, are investing in
technologies like augmented reality and handholding customers to design theme-based homes

MARKET SIZE AND FORECAST

The market is expected to grow at a CAGR of 12.91% during the forecast period of 2016-2023. India
furniture market growth is driven by various factors such as rising trend for modular and state of the art
furniture among the population living in urban centers, growing urbanization in Indian states, rising demand
for durable and hybrid seating furniture. Also, the rising trend of online and mobile shopping in India is
expected to bolster the demand for furniture through online channels.

Various furniture companies such as Pepperfry, Urban ladder and others are creating huge demand from
these online channels. Besides, the demand for low cost plastic furniture is also increasing in commercial
sector. Rapid urbanization and growing demand for compact modular furniture is expected to positively
impact the growth of furniture market in near future.

Apart from this, 100 percent FDI policy for townships and settlements development project is attracting
more foreign investors in the real estate sector which increase the quality of residential apartments. Further,
rising demand for high-end and western style furniture is envisioned to bolster the growth of India furniture
market by the end of 2024.

However, the low-cost furniture products offering by unorganized players further decrease the revenues of
major market players in India. Further, the unorganized players sell their product through local outlets
which decreases the cost of branded furniture. The high cost of quality and durable furniture in India is the
major constraint for furniture industry. The high cost of raw materials like wood and leather further increase
the cost of overall furniture products.

INDUSTRY PLAYERS

 Damro
 Durian Furniture
 Evok ( Subsidiary of Hindware Home Retail Pvt. Ltd. (HHRPL) )
 Featherlite
 Furniturewalla
 Geeken India
 Godrej & Boyce Manufacturing Co. Ltd.
  HNI BP Ergo India (A holding company of HNI Corporation)
 Home Town
 IKEA
 Millennium Lifestyles
 Nilkamal Limited
 Pepperfry
 UrbanLadder
 Wipro Enterprises (P) Ltd.
 Zuari Global Ltd.

INDUSTRY AND COMPETITIVE ANALYSIS

Industry analysis is a tool that facilitates a company's understanding of its position relative to other
companies that produce similar products or services. Understanding the forces at work in the overall
industry is an important component of effective strategic planning. Industry analysis enables small business
owners to identify the threats and opportunities facing their businesses, and to focus their resources on
developing unique capabilities that could lead to a competitive advantage.

Competitor analysis in marketing and strategic management is an assessment of the strengths and
weaknesses of current and potential competitors. This analysis provides both an offensive and defensive
strategic context to identify opportunities and threats. Profiling combines all of the relevant sources of
competitor analysis into one framework in the support of efficient and effective strategy formulation,
implementation, monitoring and adjustment.

Tools Used:

1. Porter’s 5 Forces Analysis - Porter's Five Forces is a simple but powerful tool for understanding
the competitiveness of your business environment, and for identifying your strategy's potential
profitability. This is useful, because, when you understand the forces in your environment or
industry that can affect your profitability, you'll be able to adjust your strategy accordingly. For
example, you could take fair advantage of a strong position or improve a weak one, and avoid
taking wrong steps in future.
2. SWOT Analysis - SWOT (strengths, weaknesses, opportunities, and threats) analysis is a
framework used to evaluate a company's competitive position and to develop strategic planning.
SWOT analysis assesses internal and external factors, as well as current and future potential. A
SWOT analysis is designed to facilitate a realistic, fact-based, data-driven look at the strengths and
 weaknesses of an organization, its initiatives, or an industry. The organization needs to keep the
analysis accurate by avoiding pre-conceived beliefs or gray areas and instead focusing on real-life
contexts. Companies should use it as a guide and not necessarily as a prescription.

PORTER’s 5 FORCES ANALYSIS

1. Threat of Rivals: Rivalry among industry is quite high. There are several big companies that
provide for the same product and services. For example, Godrej & Boyce Manufacturing Co. Ltd.,
Furniturewala, Zuari, Yantra, Renaissance, N R Jasani & Company, Furniture Concepts, Durian,
Kian, Millennium Lifestyles, Truzo, PSL Modular Furniture, BP Ergo, Tangent, Featherlite and
Haworth. Also, there are startups like Pepper Fry, Urban Ladder, etc. The industry also has a
number of small local producers.
2. Threat of Suppliers: Power of suppliers is relatively low. There is a wide range of providers of
raw materials. Also, it should be mentioned that not only wood can be used for production, but
other materials, like pressed wood dust, plastic or metal.
3. Threat of Buyers: Power of buyers is low because there are no substitute products, customers may
choose only among the industry, but they cannot find anything instead of furniture.
4. Threat of Substitutes: Threat of substitutes is very low as there are no substitute products to
furniture, it is quite hard to imagine that people are going to store their clothes in boxes or sleep on
the floor.
5. Threat of New Entrants: Threat of new entrants is high as it is not hard to start own furniture
production even for small enterprises or private handmade entrepreneurs, especially if to take into
account that the demand is high for furniture, there are no substitute products and power of suppliers
is high. Also, foreign companies like IKEA are also entering the Indian market.

SWOT ANALYSIS

Strengths:

 Increased demand in modern, clean and minimalist designs.

 Highly educated, skilled, young, capable & dynamic human resources.
 Established branding, tradition.
 World-renowned outsourcing hub.
 Diversity vs Ideas (Innovation, Integration)
 Big market and free media

Weaknesses:
  Inefficient stock control.
 Lack of trust in external organizations
 Fear of sharing knowledge & taking risks
 Lack of effective & execution framework
 Decreasing demand in traditional furniture
 Industry has slow absorption of innovation & change
 Lack of quality awareness

Opportunities:

 Big potential market in Design sector & emerging new market segment in services.
 Lower labor costs in outsourcing
 R&D capability
 More efficient production method
 Hybrid solutions – balancing & blending
 Need modernization of infrastructure
 Very little competition in modern furniture design

Threats:

 Large fluctuations in stock control

 Inter-company collaboration in unknown
 Rising cost of imported goods
 Pioneering uncertainties
 Clashes in diversity vs imbalance
 Fast change Internet (IT), new inventions (Technology, Innovations)
CONCLUSION

The Indian furniture industry is gradually transforming into a more organized and competitive sector. The
entry of global brands in the sector, emergence of large retail players and the resultant consolidation, are
trends that highlight this transformation.

Supply chain management is critical for furniture manufacturers for catering to both, the home and
commercial segments. For the home segment, the challenge would be to cater to India’s diverse customer
needs and a spread-out market, without adding to inventory or costs. In case of the commercial (office and
hotel) segment, the key requirement would be to ensure timely deliveries, as per required specifications to
the builder or architect.

The office furniture segment appears the most attractive, as it is growing rapidly and also offers large
volumes. It is estimated that the demand for office space in India will grow at a CAGR of 20 per cent over
the next 3-5 years.