The furniture industry can only flourish with a booming real estate industry as a pre-condition. Furniture is the first need to make a property ready for living. But according to the latest data of the second quarter of the current fiscal, housing sales have dipped over 9%. This is expected to hit both the organised and the unorganised furniture markets in the country. The annual consumption rate of furniture in India is considered to be low when compared to global economies, reflecting a strong growth potential. The industry in India is growing at CAGR of 12.91% and by the end of 2019, it is projected to cross $32 billion.
India’s organised furniture industry is expected to grow at 20% per annum. The home furniture segment, the largest segment, is expected to account for around 65%. The segment is followed by the office furniture segment.
The furniture market is overtly unorganised. Approximately 85% of it is in the unorganised sector. The remaining 15% comprises of organised players including Godrej, BP Ergo, Haworth, Mobel, Kian, Millennium Lifestyles, Furniturewala, Zuari, Featherlite, PSL Modular Furniture and others.
Ananya Nag, Assistant Manager, Mobel India informed BE, “The market has observed a steady evolution in customers’ perception to choose organised brands instead of developing furniture products from carpenters. People have moved from traditional wooden furnishing to eclectic home decor designs of different materials keeping in mind the comfort and luxury trends, thematic and customised offerings and the need of modern-day lifestyle like spacing.” Such positive market trends are gradually increasing the scope of the organised market.
Raw material issues
While the industry is fighting ulterior weakening factors such as a slowdown in the real estate sector, it is also reeling from spiralling costs of production. Cost of raw materials such as metal, wood, plastic, glass, leather, recycled wood and stone is increasing. Nag also stated, “The scarcity of skilled and educated manpower and the high rates of taxation are important roadblocks.” Along with this, the National Forest Policy has restricted industrial wood production and prioritised fuel wood. So, a reduction in timber plantation for furniture has been noticed.
Along with the production cost issues, the recent slowdown in the Indian economy has impacted the consumer purchasing ratio negatively and hampered the furniture market. Around 11% of the total wooden furniture in India is now being imported and it is increasing by 50%-60% yearly. Many premium class customers are increasingly taking to imported furniture for their international designs and decors. The entry of strong online players in the sector has posed serious challenges before the offline players and has increased competition.
India’s domestic producers are now using a more intensified distribution policy through distributors, wholesalers and retailers. Big furniture producers having large local customer bases are selling directly in the market, without involving distributors or third party retailers in tier 2 and tier 3 cities. The big brands are also having own online portals and have simplified furniture delivery. Banks are also helping the customers by smoothing their debit and credit card policies.
The online market of the furniture industry accounts for above of $200 million. Nag added, “In a time of blurring of lines between the online and offline markets, the cohesive experience across offline, e-commerce and social media channels are being measured to understand consumer purchase patterns. We have introduced digital displays to showcase our products. Our in-house 3D/interior designers are helping us to improve our customer reach.”
Customer penetration in various dedicated online platforms like in Pepperfry was 5.2% in 2018 and is expected to 7.8% by 2022. Revenue generation can reach a CAGR of 16.4% and turn the online market volume to $2,988 million by 2023.