IT may appear nascent, unorganised or challenging, but the furniture industry in India is riding high on growth and success.
IT may appear nascent, unorganised or challenging, but the furniture industry in India is riding high on growth and success. While local players are going branded, high profile international names are entering the fray sensing pathbreaking prospects that continue to remain untapped. The Indian furniture industry is estimated to be over Rs 60,000 crore and has been soaring in the recent times. Besides, changing taste buds of the new-age Indian consumer and the burgeoning real estate levels has eventually brought about the much desired revolution in this sector.
Franchise fervor
The steady climb that the industry has been witnessing in the recent times can be primarily attributed to the influx of branded players through the franchise format. Leading names like Godrej Interio, Cache Furniture, Luxus India Pvt Ltd, Wood Magic, Bluue Mango Seatings Pvt Ltd etc are reaping rich dividends like never before. Besides paving way for others to follow the suit, the entry of a plethora of international players like Natuzzi, Chateau d'Ax and Otobi have build a competitive retail environment in this fragmented industry.
This has also lead to a rise in franchise developments, preparing ground for investments as well increase in the number of franchisees. Elaborating on the success story of Italian brand Natuzzi- that made its Indian foray in 2010, Nitin Bahl, Country Manager, Natuzzi, India, asserts: “We are happy with the way our three brands- Natuzzi, Italsofa and Editions are progressing in India. We have opened almost nine franchise outlets in the past one year and by this year end we will have 11 franchise outlets operational.”
While several players in the local market are setting up shops and going the branded way, what are the reasons that make them vouch for franchise format despite the unorganised nature of the industry? Franchisors usually attribute this to the local factors that play a predominant role in a brand's success. Quips Bahl: “The furniture business is a much personalised business. It requires good knowledge of the local market and it makes sense to have a franchisee, who has knowledge and contact and who will be able to develop that market.” Justifying the need for franchising in the furniture industry, Rakhil R, CEO, Bluue Mango Seatings Pvt Ltd, explicates: “In dealership, brand loyalty is less with dealers due to dominant unorganised vendors, providing cheap products and low prices. So, we thought of creating exclusive Bluue Mango outlets with franchisee partners. Franchising has helped in creating brand visibility and ensures value is maintained.”
For international brands like Natuzzi, entering India via franchising was inevitable due to existing foreign direct investment (FDI) tussles. Says Bahl: “Given the FDI regulations, franchising is a good option, as it leads to long-term partnerships. It brings investments and retail experience from partners, which are the key elements in the growth of an organisation.”
Hassle-free route, touchwood!
Industry experts also feel that the format is suitable for prospective franchisees, offering a bouquet of benefits! First of all, this can be credited to the zero inventory model that most franchisors favour. Explains Anil Gupta, Managing Director, Luxus India Pvt Ltd: “We have zero inventory model for our franchisees, which means they just need to keep the display stock at their outlet for customers to get the 'feel-n-touch' of products.”
With logistics forming a key aspect in furniture business, franchisees needn't worry, as franchisors take care of logistics, making it a hassle-free process for franchisees. Divesh Singh Gandhi, Executive Director, Cache Furniture, claims: “We have our own brand house and handle our logistics too.” While Gupta says: “When a customer places an order, we get it manufactured and delivered through our parcel services and then get the finished product delivered to franchisees.” Echoing similar views, Mannu Bhanot, Group CEO, Wood Magic, affirms: “We have a master franchisee for every 10 franchisees that hold stocks and look after inter-state tax obligations. The master franchisee is restricted to 'feed' maximum 10 franchisees in order to offer better service to franchisees.”
Stable warehouse solutions are also playing a significant role in riding the success quotient for franchisees, thus thwarting the possibility of bottlenecks in supply chain management. Explains Rakhil: “We are working on a model where logistics, stocks and installation are taken care by the C&F for each region with local warehousing, so that a franchisee can concentrate on the development of the business.”
Returns that count
While investing in an established furniture brand means tying-up with an already proven concept, often franchisees are concerned about break-even and getting their returns on time. According to franchise brands, a franchisee, who has invested in a branded furniture concept, can expect a break-even within a month to 1.5 years maximum. Meanwhile, he/she can count on returns from his investment as early as eight months to two years.
Segment wrap
Given the surge in demand in the recent years, this industry is being categorised into home furniture and office furniture. Several brands prefer to stick to their specialisations and core competencies, while a few are willing to make a diverse move and expand in these two segments. Hopeful Gandhi adds: “Presently, we have left the office furniture part on imports. But soon we will be manufacturing office tables and furniture from our factory.”
Though home furniture segment comprises nearly 65 per cent of the pie, office furniture has an immense scope. Rakhil envisions: “Promising future lies ahead for office furniture industry due to growing demand. The momentum in growth is expected for the next few years, as around 80 per cent consumers for a commercial office space include IT/ITes sector and industry is estimated to employ around 3.75 million persons by 2016.”
Expanding horizons
To get the taste of success, brands are rolling up their sleeves and charting out extensive expansion plans. While most of them are making a move in metros, several others are eyeing tier-II and III cities to extend their operations. While steep prices of products are a deterrent for developing towns, yet Bhanot is optimistic: “It will be foolish to underestimate the power of tier - II and III cities. They hold maximum growth potential. For a concept like ours, the target segments are middleclass and tier-II and III cities.” Elaborating on expansion plans, Bahl says: “We have started to identify partners and contracts. Next year, we plan to open 15 operational stores.” While Rakhil divulges the details: “We are opening around 10 franchisee showrooms in the next two quarters, majorly in tier-I cities. In second phase we will be eyeing tier-II cities and in the next phase, we will spread out across 10 cities.” In a major move to tap this market, Kolkata-based Centuryply is also all set to step up via franchise format in April, 2012.
Pedalling into future
Despite the reigning unorganised factor, India has been classified as one of the 14 large furniture markets in the world by CSIL Milano. Experts believe that the future is rooted within this fragmented segment. Bahl concludes: “The furniture market of India is today what the apparel market was a few years ago. Everyone used to get their shirts stitched from local tailors till a few years ago. But now, all are settled for brands and you can expect the same with the furniture industry, too!”
From elegant homes to chic offices- furniture industry in India is poised for a big leap! Thanks to branded players, who are eyeing growth beyond metros and are yielding rich dividends!
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