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FURN I TURE I NDUSTRY SECTORAL UPDATE
FURNITURE INDUSTRY
Changing Concept,
Booming Market
Indias demographic prole has made the
furniture market ripe for the pickings.
RAVI SAGAR
T
he Government of Indias nod to foreign direct
investment in single brand retail format earli-
er this year, opened the doors for Swedish fur-
niture retailer giant IKEA to enter India with
a proposal to invest `10,500 crore (US$ 16.96
billion) in setting up 10 home furnishing stores. It plans to
scale up operations by opening 15 more stores in the future.
Apparently, the desire of the furniture behemoth to set its
foot in India has much to do with the immense opportuni-
ties unfolding in this sector.
Booming Market
The organised Indian furniture market which accounts for
just 15 per cent of the total market, is valued at `52,192 crore
(US$ 8 billion) and is growing at a compounded annual
growth rate (CAGR) of 30 per cent. In its 2011 CSIL Market
Research India Furniture Outlook, which was a part of the
Country Furniture Outlook Series,
covering 70 countries, international
research organisation CSIL Milano,
classied the Indian furniture retail
market as the 14th largest in the
world. The opportunities thus in
the consolidated market are only
limited by imagination. The CSIL
Milano report is by far the most
comprehensive document which
has mapped the movement of the
retail furniture business taking
wings in the country.
According to another study by The
World Bank, the organised interna-
tional furniture industry is expected
to grow by 20 per cent each year,
and India, Brazil and Russia will
witness a boom.
Demographic Dividend
In the post-liberalised India, the purchasing power of over
400 million middle class people has been rising steadily.
Traditional handcrafted indigenous wood furniture has given
way to international, imported aesthetic tastes. Teak, mango
wood and sheesham furniture is being replaced by imported
moulded or pre-fabricated wood, glass, chrome, leather and
steel variations. Lifestyles are changing with living spaces
shrinking from sprawling suburban bungalows to smaller
urban dwellings. The changing tastes are dictated as much by
needs of space as by pockets.
Zuari is the agship brand of Indian Furniture Products
Limited (IFPL), a part of the KK Birla Group. The CR Park,
New Delhi branch of the store sees a continuous inux of
customers from both mid-income and afuent classes, says
Manager Girishankar, who is also a dealer of the brand.
The obvious difference between the two is their spend-
SECTORAL UPDATE FURN I TURE I NDUSTRY
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AUGUST-SEPTEMBER 2013 www.ibef.org
ing habits, according to his observations. The middle class
customer is price conscious and so their obvious choice is
Indian wooden furniture. But the upper middle class or rich
consumers dont mind spending money on doing up their
house. For them, well-designed, superior-nish furniture
which would give their house a unique look is the priority.
So, they go for imported furniture.
The availability of funds also guides the replacement habits
of the Indian customers. While 70 per cent of the upper
bracket believes in use and throw and replaces furniture
after 5-10 years, for the middle class, it is often their one-
time purchase, informs Girishankar. Zuari has now forayed
into the eld of interior designing for home and ofce in
partnership with builders, informs Girishankar.
A Necessity For All
What is keeping the market buoyant are the various eco-
nomic factors promising incremental demands in the future.
Furniture is rst a need, and with rising incomes, a luxuri-
ous fancy. From a basic cot to a queen-size four-poster bed,
enhance costumers understanding of imported furniture vis-
-vis other alternatives.
The metro lifestyle has ushered in the era of designer
homes with bespoke interiors. Apartments are pre-fabricated
and designed either in contract with the builder or with the
buyer, with furniture retailers at the centre of these ready-to-
live or serviced apartment concepts. Furniture retailers like
Durian are, in fact, trying to educate customers about the
benets of opting for customised furniture. We have cus-
tomised sofas. We try to explain to people how a customised
sofa can solve their space problem. Some understand and go
for it, others insist on traditional varieties, Varma shrugs.
The Ranchi branch which has a turnover of approximate-
ly `2.53 crore (US$ 306,560.39 to 459,840.58) also caters
to neighbouring districts like Gumla and Lohardagga.
Varma candidly adds, Brand sells. But you need good
people to sell it.
As far as market preference is concerned, Traditional fur-
niture still has a market in India, says Varma and concedes,
There are many who prefer traditional furniture. He also
agrees that Both traditional furniture and what we sell are
equally good and that durability of a product depends basi-
cally on how people maintain and use it. If a customer buys
a sofa worth `50,000 (US$ 766.40) and uses Colins to clean
it then it will obviously spoil, he adds.
The sales graph of Mahendra Furniture & Interior, Khanpur,
New Delhi, echoes that of Ranchi. A middle class area of Delhi,
here, there are more customers looking for Indian wooden
furniture and Chinese imports than expensive imported pieces
from other countries. The reason for this, Ravinder, Store Man-
ager, says is not just the middle class price consciousness but
also the easy availability of servicing facility for indigenous fur-
niture as compared to imported furniture.
The rich customers to his store prefer buying the entire
house furniture in one go to match the dcor or colour theme
while the middle class buy one or two pieces at a time. Our
rich customers nd happiness in buying costly furniture.
Money is not a factor for them. They prefer every type of
furniture. Most of the middle class customers prefer to buy
furniture in pieces.
Changing Concepts
Though modular kitchens and bathrooms with ttings and
furnishings were ushered in with the concept of premium
apartments some years ago, fully furnished apartments, ser-
vice apartments and studio apartments have been concepts
that are gaining ground in metros and Tier I and II cities in
the last few years. These apartments come with pre-installed
furniture as also wall cabinets and other household goods
like refrigerator, television sets and air-conditioners, all
matching the dcor and colour scheme of the apartment.
Furniture retailers are now being roped in by builders as
interior partners in their endeavour to provide ready to live
each segment of society invests in its furniture according to
its economic means. This makes furniture an industry that
is somewhat immune to a recessionary downturn. It is also
considered a long-time investment by most. Hence, consum-
ers do not mind investing sizeable sums in aesthetic and
durable items. Indians, by and large, are also house-proud.
Owning a home is a dream come true and every homemaker
desires a showpiece home. And, the new Indian is not willing
to compromise on this cherished dream.
Take for instance the Tier II city of Ranchi, the capital
of Jharkhand. Durian, which became synonymous with
imported home range furniture in the late 1990s, has three
showrooms in Jharkhand. Asked if there exists a market for
this premium brand of expensive furniture in Ranchi and
other Tier III cities of the state, Nandan Varma, Area Man-
ager, Eastern Zone, Durian, said There is prospect, we only
need the right kind of sales people who can knowledgeably
Upwardly Mobile: The modular kitchen sector is growing at 50 per cent annually.
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dwellings. Urban householders are becoming increasingly busy
and nd it difcult to spare the time to nd the perfect interiors
solution and prefer to leave it in the hands of the profession-
als. They are willing to pay for these value-added products and
services. For all the three parties, the developer, the furniture
retailer and the consumer, it translates into a win-win situation.
Talking about their involvement in this, Varma says, We take
up turnkey projects and we provide customised solutions. We
are traders as well as manufacturers, so, we can cater to such
needs of customers. However, specialised orders
have to be in bulk. We cant make one piece on
order. For instance, we can take small orders for
hotels. Though he rues the lack of big orders in
the small city, the retailer did bag some prestigious
orders like Radisson Hotel, where he says, We
have done some small work, as they get their bulk
orders imported. For now, Durian in Ranchi is
catering to clients in several districts of Jharkhand
like Godda, Pakur, Deoghar, Dumka, Sahebganj,
et al. They have won their clients trust, with one
year warranty and free service for four years.
Companies like Timbor Home too have moved
into the space and are providing intelligent high-end solu-
tions in kitchen and home furniture. The modular kitchen
segment in India is worth `20,000 crore (US$ 306.56 mil-
lion), growing at 50 per cent annually. The growth of the fur-
niture market hinges on three segmentsresidential, ofce
and contract furniture. With all the three segments growing
uninhibitedly on the back of real estate, hotel and tourism
industries growth, the furniture sector never had it so good.
Attractive Market
Indias demographic prole of the expanding middle class
population with rising disposable incomes has made it the
worlds eighth-largest consumer base. This aspirational class
has a penchant for branded goods and this has spelt good for-
tune for the modular branded furniture companies.
It is this huge market that has attracted many foreign play-
ers like Cavalli, Fendi Casa, Hurtado, et al, and traditionally
advanced furniture markets like Malaysia to India. In 2012,
Malaysia External Trade Development Corporation (Matrade)
started pursuing the Indian furniture sector keenly, looking
at the opportunities presented by the expanding Indian mid-
dle class, the widening construction industry and the escalat-
ing demand for ofce space in metros and major cities that
were pushing the demand for furniture in various segments.
The Indian urban sector is design and quality-conscious,
hence price is not a factor in the consumption of top-range
furniture, Matrade had observed in Trademart, its publica-
tion for Malaysian exporters. Demand for furniture of inter-
national standards is very high in the larger
cities like New Delhi, Bombay, Calcutta (Kol-
kata) and Chennai, it added. It was an astute
commentary on the consumer tastes and the
furniture market of the country. According to
Matrade, there were 10,500 importers in the
organised furniture sector in India importing
mainly from China, Italy, Germany, Singapore
and Malaysia (Source: Economy watch). The
local demand is still largely being satised by
the unorganised sector that comprises 85 per
cent of the market.
The furniture industry, furnishings indus-
try and industries like real estate, hospitality and tourism
are interdependent. Thus, the growth in the tourism and
hospitality industry in India is boosting the demand for the
organised furniture sector. The tourism sector in India is a
big contributor to Indias Gross Domestic Product (GDP),
accounting for 6.23 per cent and nearly one in 10 jobs. With
the country extending facilities like visa on arrival to boost
tourism, the sector is recording major growth. As a corol-
lary, the hospitality sector is also expanding with the need for
space rising.
The residential space demand in India is expected to reach
3.67 million units in 2014 growing at a CAGR of 20 per cent
and the top seven cities will account for 60 per cent of the
total demand for housing, according to a study by real estate
services rm Cushman and Wakeeld Research. The com-
mercial space demand will reach 160 mn sqft by 2014.
All this will lead to commensurate rise in requirement for
quality furniture. The furniture industry which itself contrib-
utes approximately 0.5 per cent to the countrys GDP, thus
provides ample opportunities for the three main segments to
penetrate further into the organised space with the residen-
tial seeing a major contribution from the high-spending mid-
dle class population, expanding growth in ofce construction
and contracts being driven by growing developments in hos-
pitality and tourism sectors.
A new dimension being added to the retail furniture sec-
tor is the online retail sector with portals like pepperfry.com
pitching in with home buying comfort for the consumers,
especially women, who make up 25 per cent of Indian online
e-customers, (Source: JuxtConsult).
(BASED ON SECONDARY RESEARCH AND INTERVIEWS)
The residential space demand
is expected to reach 3.67 mil-
lion units in 2014 growing at a
CAGR of 20 per cent...The fur-
niture industry thus provides
ample opportunities.
15%
Share of
organised
sector in the
furniture
industry