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Sep, 19 2013

FURNISH FOR FABULOUS RETURNS

Cashing in on a home décor and furnishings segment can fetch big benefits in abundance for investors with deep pockets. As the market is emerging at a fast pace, check out what's there in store for you to make an apt choice.

As consumers today look for exquisite designs to furnish their homes and offices, the organised players have peeped into India's home décor and furnishing industry to offer a truly contemporary furniture and décor related accessories of all kinds to the style conscious and elite class of consumers. With plethora of brands burgeoning in every part of the country, now the consumers will be able to pick from the widest range of products from a brand's exclusive and flagship stores. As per a market study by research firm Technopak, “The Indian Home Décor market, which stood at $13 billion in 2010, will now touch $20 billion by 2015.” Whereas a report by Ernst & Young on Indian furniture and furnishing sector says that industry is expected to reach Rs 28,000 crore.

The industry observed a major shift in consumer's buying behaviour owing to the rising middle class incomes and an enhanced style of living is further giving bounce to the industry's growth. From home furnishings to modular kitchens and luxury tableware market, the home décor sector is now set for new high as consumers are ready to splurge on it. What is really making it a tremendous sector to invest in is mainly the increasing housing projects, growth in organised retail, changing demographic structure, growing demand of readymade furniture, modular kitchens and attractive wallpapers for walls. Brands are further focused on tapping the metros and small cities owing to the consumers' altering standard of living and development of residential and commercial infrastructure.

The industry is seeing a huge surge with the addition of many brick and mortar and ecommerce portals that are offering diversity to end consumers under one roof. In the offline space, brands like Godrej Interio, Nesta, Green Ply, Magpie Retail, Style Spa Pvt Ltd, Natuzzi  Italian style furniture Maishaa, arttd'inox, Interiors Haat, Marshalls, Creative Portico and Bombay Dyeing are not only leading the market but also disseminating their brand's network via replicating the business models. As per reports by industry insiders, Dubai-based home décor chain Marina Home is looking at India to be its largest market in the next 10 years. While, in the online space, UrbanLadder, Pepperfry, Fabfurnish, Zansaar, Roomstory, liveinart.com, The Home Label, Bedbathmore and Mebelkart are leading the home-furnishing industry by offering the best variety of products. Besides, Jabong, Homestop18, Snapdeal, Goodlife and Yebhi are also offering home décor products.  According to Sumit Dutta, CEO, Nesta, (the home lifestyle retail brand from CenturyPly), “Home furnishing and home decor is a promising sector with a huge potential in the coming years. Currently, the market is pegged at about Rs 10,000 crore.” The major indicator behind the growth of home furnishing chains across India is mainly the changing consumer preferences. Commenting on the various factors, Subodh Mehta, Sr. Vice President, Godrej Interio  Home business, says: “Increased annual household income, coupled with the increased propensity to spend on lifestyle and consumer products has given an impetus to the growth in this industry. Growth is also driven by trends like an increasing number of double income families, increase of financing for consumer durables and exposure to global products.”

On the other side, Karan Sharma, Director at Marshalls (known as a wallpaper brand), says: “Home Décor as an industry has got a fillip and more recognition in the last 5-7 years with higher disposable incomes available with everyone, exposure to western lifestyle and more and more younger people owning homes and being quality and brand conscious.” In the next five years, Marshalls will have about 150 showrooms across India.

Spreading foothold via franchising

Franchising is not only boosting the brand's growth but it's also offering a perfect avenue for prospective franchisees to add wings to their entrepreneurial dreams. Godrej Interio is operating almost 50 company- owned stores and 80 franchise stores today. It is important for a brand like Godrej to deliver a unified experience to customers across the country.  Talking about their journey so far, Subodh Mehta says: “We have moved from dealer model to franchise model for retail expansion. We have developed special modules for retail professional skills, product training, store management, etc., which include videos and innovative role play techniques. Complete assistance is also provided for branding, system support and customer experience management. Business planning, implementation and monitoring is an exercise jointly done by the franchisee and the company.”

On the other side, Sumit Dutta, feels: “Franchising plays a vital role in our brand's expansion as this is the primary model we will be implementing for business growth. The franchisee is an extension of the Nesta brand and will deliver the promise that Nesta makes. Hence, all the franchisees will maintain equal level of operational excellence.”

Arttd'inox, a brand of JSL Lifestyle Ltd which deals in Modular Kitchen and Tableware, has recently initiated expansion via franchise route. Talking about the franchising, Pushpa Chowdhary, General Manager, JSL Lifestyle Ltd, says: “Since we were having great success and we were making good profit margin as an organisation, we decided to enhance our expansion and reach to main cities of India. And going via the franchise road seemed best as it brings entrepreneurship on board. We are looking for franchisees that have ability to invest in a showroom in high street or mall or should have showroom with a minimum carpet area of 1,000 sq.ft with prominent presence and frontage. It would be an added advantage to have some experience in working in the hardware of real estate sector.” Pertaining to tapping the franchisees, Godrej Interio looks for a well -located, attractive and convenient property as well as an entrepreneur who is interested in running a home furniture business. Entrepreneurs who have owned properties in high potential areas may have an edge. The company is looking out for partners with good business acumen, will to succeed and who can identify with the values and vision of Godrej. These requirements take precedence over the financial strength. A detailed projection of business is done in advance and the franchisee is appointed only if the proposal is found to be viable for both the partner and the company. All franchisees are given extensive support to manage and run the business. With a mix of 130 company-owned and franchise outlets, Godrej Interio is looking to open 42 more showrooms via franchise format by end of the fiscal year. With just two company-owned stores in Nesta's basket, the brand is planning to open five more stores by March 2014.

The industry is yet to see its best and grow more in future considering the 15-20 per cent growth it achieved so far. “With increasing exposure to international trends, Indian consumers are becoming more and more design conscious. Consumers are looking for a design element in anything they buy right from lifestyle products to consumer durables. With new international brands entering, we expect the organised market to become stronger and there is enough potential for domestic and international players to cater to this demand. We are quite positive and ready to embrace an environment of healthy competition,” says Subodh.

Currently, home furnishing and home décor sector is going through a transition phase from an unorganised to more organised and competitive one, therefore the industry is expected to see a massive boom in the future.

SUBODH MEHTA,Senior VP, Godrej Interio (Home Business)

“We have moved from dealer model to franchise model for retail expansion. We have developed special modules for retail professional skills, product training, store management, etc.”

SUMIT DUTTA, CEO, Nesta

“Franchising plays a vital role in our brand's expansion as this is the primary model we will be implementing for business growth. The franchisee is an extension of the Nesta brand and will deliver the promise that Nesta makes.”

Franchise facts

Godrej Interio

  • Investment: Rs 30-50 lakh
  • Area: 5,000-8,000 sq.ft
  • RoI: 40-50%
  • Break-even: Approx 2-3 years

Nesta

  • Investment: About Rs 70 lakh including working capital
  • Area: 5,000 sq.ft
  • RoI: 32%
  • Break-even: Rs 3 cr per annum

Arttd’inox

  • Investment: Rs 55 lakh
  • Area: 1,000 sq.ft
  • RoI: 76%
  • Break-even: Rs 10 lakh
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