FURNITURE A REVOLUTION IN THE MAKING

Swedish retail giant IKEA made its much-awaited debut in India by opening its first independent store in Hyderabad this August. Despite 100% FDI being allowed, companies still prefer to take the franchising route or partner with local brands because regional players have a better understanding of the market. IKEA, as an exception, took the single brand retail route to enter the country. Doing so, the company is expected to trigger the price war in India’s USD 49.5 billion furniture market and expected to make some amendments to the franchise business models here. IKEA spent more than a decade researching the Indian market and has made many adjustments to its traditional retail and cafeteria model to meet the demands of India’s existing furniture retail landscape. The same goes for the local players. They are also altering their business strategy, which is helping them to set some new franchise trends for the industry, as indicated below.

For people who are frequently on the move or temporarily away from home, till now, the only option would either be investing in expensive new furniture or buying second-hand. Keeping the challenges in mind, Godrej Interio, the furniture arm of Godrej Group, has tied up with a Chandigarh-based company, Redwood Rental, for rental services of its furniture. “Furniture on rent is going to bring about a revolution in the way people use it,” believes Anil Sain Mathur, COO, Godrej and Boyce.

Feeding the Customer

Furniture retailers these days are adding experiential ingredients like cafes, bakeries and restaurants to their stores. The obvious reason: there is a good synergy in the concept as restaurants feed off the footfalls of the store and vice-versa. IKEA too is betting big on tempting the average Indian’s taste buds by launching a 1,000-seat restaurant inside its store in India. The restaurant will serve customers a wide range of food items consisting of staples from Swedish and Indian cuisine.

B2B Growing Faster

The next trend is that of B2B overtaking the B2C segment. “Of the company’s total revenue last year, B2B segment – including office furniture, turnkey projects, healthcare and lab furniture, and others – clocked revenue of Rs 1,200 crore while the revenue from B2C segment was Rs 800 crore,” Mathur states. The company is expecting the B2B segment to grow to Rs 1,500 crore and revenue from B2C is expected to reach Rs 1,000 crore.

The Luxury Boom

In the recent past the luxury market has been witnessing sudden growth in demand from Tier II and III cities. The furniture industry is not an exception. “Although the major contribution is still from metro and cosmopolitan-centric cities, one cannot afford to ignore this new set of luxury home decor lovers because they have huge potential and purchasing power. Initially, major traction was seen among the business class but because of global exposures even the executive working class has moved dramatically into the luxury segment. The best example is that of our online customers from cities like Navsari, Jhansi, to name a few,” shares Nitin Jain,MD, INV Homes.

“We are also in the process of revamping our company’s website and soon the same will be launched with a global shipping facility. Therefore, you will witness a totally new brand with unique products and global presence,” Jain adds.

West Bengal: The Trending Market

Interestingly, West Bengal is one of the key markets for furniture retailers. Brands like IKEA and Godrej Interio are betting big on this market. “West Bengal is among our top three markets and we want to expand it. Around 15% of our revenue comes from this state. We are planning to open three new large-format stores by the end of this fiscal,” Mathur adds.

Franchising Push

The franchisee model helps in business expansion as well as bringing in business insights through consumption pattern in different regions. INV Home, which has its stores in Delhi, Mumbai and Hyderabad, further plans to expand EBOs in all major metros, whereas it will expand its presence in Tier II and III through the franchise model. “We are very selective in choosing our partners and industry experience is always a plus,” says Jain.

COMPANY - Godrej Interio
TOTAL STORES - 207
INVESTMENT - Rs 45-50 lakh
AREA - 5000 sq ft
EXPECTED ROI - 20-22%
EXPECTED BREAK-EVEN - 2-3 years

COMPANY - Pepperfry
TOTAL STORES - 36
INVESTMENT - Rs 60 lakh
AREA - 2000 sq ft
EXPECTED ROI - 200%
EXPECTED BREAK-EVEN - Less than 3 years