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Furniture industry In India growing at 20% per annum

The Indian Furniture Industry is poised to grow rapidly as Demand exceeds Supply. The Annual per capita consumption of furniture in India is not more than 2000 Rupees, which is considered to be low when compared to international standards, hence showing strong potential for growth.

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Definition / Scope

  • Furniture is a movable object that supports various human activities such as seating (example includes chairs, stools and sofas), eating (example includes tables) and sleeping (example includes beds).
  • Furniture is a product of design and can serve as a form of decorative art. It can also serve as a symbol of stature or religious practice.
  • Furniture can be made from several materials including metal, plastic and wood. It can represent the local culture with the variety of woodworking joints it is built with.
  • The furniture market can be categorised into four categories including domestic furniture, office/corporate furniture, hotel furniture and furniture parts. Globally domestic furniture accounts for 65% of the production value, office/corporate furniture accounting for 15%, whilst hotel furniture accounting for 15% and the remaining 5% comprised by the furniture parts.
  • According to a world bank study the organized furniture market is expected to grow at a compounded annual growth rate of 20%. A major part of this growth is expected to be contributed by the rapidly growing consumer markets of Asia, implying significant growth potential in the Indian furniture sector.
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Market Overview

  • India’s furniture market is valued at US$25.7 Billion in 2016 and is expected to clock a CAGR of 12.91% during the forecast period of 2016-2023.
  • As of 2016 the furniture market is valued at US$25.7 Billion.Of this wooden furniture accounts for US$4.40 Billion. About 11 per cent of this (wooden furniture) is imported and imports are growing at 50 to 60 per cent every year.
  • The furniture sector in India makes a marginal contribution to the Gross Domestic Product (GDP) representing about 0.5 per cent of the total GDP.
  • The major part of the Indian furniture market of approximately 85% is in the unorganized sector. The remaining 15% comprises of organized players including Godrej & Boyce Manufacturing Co. Ltd., BP Ergo, Featherlite, Haworth, Style Spa, Yantra, Renaissance, Millennium Lifestyles, Durian, Kian, Tangent Furniture Concepts, Furniturewala, Zuari, Truzo, N R Jasani & Company, V3 Engineers, PSL Modular Furniture, etc.
  • The largest segment in the Indian Furniture Industry is the Home Furniture segment which accounts for about 65% of the total furniture sales. While office furniture segment comprises 20 per cent share and the remaining 15% comprised by the contract segment.
  • The organized residential furniture market is set to triple in size to become US$ 1.3 Billion in the next 5 years, growing at a CAGR of 27%, this would be around ~9% of the US$ 15 Billion (expected) residential furniture market by 2020.
  • By the year 2019 India’s furniture industry is projected to cross US$ 32 Billion. Rapid growth is expected in the country’s furniture market due to rising disposable income, growing middle class and increasing number of urban households.
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Key Metrics

Metrics Value Explanation
Base Year 2018 Researched through internet


Market Risks

Threat of New Entrants

  • Fragmented Industry: The furniture market in India is highly fragmented with majority of the revenue being generated from the local players.
  • Industry is not investment intensive: The inflow of Investments from global investors into the Indian furniture sector is weak when compared to international standards

Competitive Rivalry

  • Moderately competitive Industry: The furniture industry in India is not competitive as majority of the market is still unorganized, with the existence of moderate competition among handful of players in the organized sector.
  • Transitioning from highly unorganized to organized sector: The furniture industry is still unorganized with 85% of the market share held by the unorganized players. Hence the transition from unorganized sector to organized sector will be a daunting task for the industry players

Supplier Power

  • Supplier base not organized: With the ban on the felling of trees in all forests. This has restricted industrial wood production to farms and wastelands. As a consequence, there has been dramatic reduction in supply of raw material to the needs of furniture industry
  • Imports getting easier: With the reduction in customs tax, and the preference of the middle class and the upper class turning towards imported furniture.Imports are getting easier and cheaper.

Customer Power

  • Increasing demand from key user segments: the demand for engineered wood furniture is rising in metro cities
  • Demand for lifestyle products: rising trend for modular and state of the art furniture among the population living in urban cities is challenging the capabilities of the furniture manufacturers.
  • Majority of the market is still price sensitive: The cost of the furniture manufactured depends on the raw material used.

Top Market Opportunities

Untapped Market Huge market still untapped with a middle class population of 500 million and as India is poised to become fifth largest consumption economy by the year 2020 the furniture market is expected to propel in growth.

Unorganized Market The business model is outdated and unorganized thereby paving way for organized furniture manufacturers.

Low Per capita consumption The Annual per capita consumption of furniture in india is not more than 2000 Rupees, which is considered to be low when compared to international standards, hence showing strong potential for growth

Forward Integration Leading Laminate and plywood manufacturing companies are venturing into branded furniture business as a consequence of forward integration

Rising popularity of Kids Furniture The rise of single-child-double-income families has lead many urban parents to invest in high quality furniture and furnishings for their kids rooms

Traditional Furniture Gaining popularity The traditional Indian Furniture is gaining popularity as they are considered as luxury lifestyle statement

Rising popularity of Modular kitchen

  • The concept of modular kitchens is rapidly gaining popularity in urban areas
  • Awareness levels of modular kitchen is expected to grow 10 times in the next 3 to 5 years

Recycled wood is emerging as a new source of Raw Material The shortage of wood has caused many manufacturers to make furniture from recycled wood.

Market Drivers

  • The rising trend of online and mobile shopping in India is expected to propel the demand for furniture through online channels.
  • The ease of doing business and the policies in India gives rise to new businesses across the country. In addition, the increasing number of small and medium businesses further boosts the demand for low cost plastic furniture products. This factor is expected to foster the growth of India furniture market over the forecast period.
  • Growing consumer interest towards home decor has increased significantly in the recent years. The impact of this factor would increase during the forecast period, thereby consequentially fostering the demand of home decor products, during the forecast period.
  • Rapid urbanization in India and growing demand for modular and compact furniture is expected to positively impact the growth of furniture market in near future.
  • The rapid growth of real estate sector in India is anticipated to boost the demand for modular furniture in urban areas in India.
  • Increasing cost of raw material such as metal, wood, plastic, glass, leathers, rattan, fabrics and stone that are used for manufacturing furniture. However, by 2020, it is expected that the cost of raw materials such as plastic and glass, would decrease owing to advancements in production technology of these raw materials Thereby, these factors would create a favorable environment for home decor market in future.
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Market Restraints

Decline in Timber Harvest

  • Forest plantation is an important source of raw material for branded furniture industry. Majority of India’s forests are state owned with only 10% being classified as private forests.
  • The National forest policy (NFP) of 1988 has put a ban on the felling of trees in all forests situated above an altitude of 1000 meters. The NFP has laid priority on planting fuel wood and fodder producing trees in government forests. This has restricted industrial wood production to farms and wastelands. As a consequence, there has been dramatic reduction in timber harvest volume.

FDI Regulations

  • Branded furniture falls into the multi-brand category for which there is a limitation of FDI, hence foreign players find it difficult to enter India.

Market concentration limited only to cities

  • Branded furniture market is primarily restricted to urban areas. Top 784 centers contribute 41% of the total consumer furniture market. A and B type cities contribute 33% of the total market.

Industry Challenges

Increase in raw material prices Major raw materials costs were turned higher thereby increasing the manufacturing costs. The high cost of wood and leather increases the manufacturing cost of furniture.

Fragmented Market Indian furniture industry is considered as a non-organized sector with handicraft production accounting for 85% of furniture production in India.

Low cost furniture offered by unorganized players The furniture offered at dirt cheap prices by the unorganized players puts dent on the revenues of major market players in India.

High cost for Quality The high cost of quality and durable furniture is a major headwind for furniture industry.

Technology Trends

The Emergence of online Retailing in the furniture Industry

  • The technological advancements such as availability of high speed internet networks such as 4G and increasing adoption of smart gadgets is boosting the e-retail sector in India. These advancements further provide ease to the customers to buy furniture through online channels.
  • In order to cater to the rising requirements of online shopping in the country, a number of companies have stepped afoot in the online channel of furniture market in the last few years. For instance, leading offline retailer of ready-made furniture products named @Home, which is a flagship brand of Nilkamal Pvt. Ltd. has launched its online shopping portal for the exclusive range of @Home furniture, furnishings, and home decor items.
  • The online market accounts for revenue of US$ 200 million. But it is growing rapidly and expected to be worth US$ 2,000 million in the next three years.
  • User penetration is 5.2% in 2018 and is expected to hit 7.8% by 2022. Revenue is expected to show an annual growth rate (CAGR 2018-2023) of 16.4%, resulting in a market volume of US$2,988 million by 2023.

Technologies applied in Furniture Manufacturing

Virtual Prototyping The advent of advanced 3D imaging tools and, more recently, virtual reality has unlocked a new world of possibilities for furniture prototyping.Rather than expending the time and resources to create physical models of their products, furniture designers can now create digital representations of them.This promises to add a great deal of speed and flexibility to the overall product development process.

Jointers, Planers, and Edgers Jointers take the warp and bend out of the bottom of a board so that it will lie flat when it goes through the planer. Planers flatten the top of a board, and cut it down to the desired thickness. Edgers take the rough wood and any warp or bend off the sides of a board. High production facilities often combine these functions in single multi-purpose machines that are able to joint, plane, and edge in a single pass.

CNC Routers CNC stands for Computer Numerical Control. CNC routers are used extensively in the modern furniture industry to cut coves, mortises, and slots, and to do a wide variety of shaping tasks.

Sanders Stationary sanders are made of one, two, or more large rotating belts with a feed table beneath them. Wooden panels can be fed through them in order to sand the surfaces of the wood and to smooth out glue joints.

Finishing Booths Finishing booth are areas in furniture factory where protective finishes such as polyurethane are sprayed onto the furniture as a final step in its manufacture.

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Pricing Trends

Raw Materials and Tools up-gradation cost of raw material such as wood, steel, polish, paint etc. is an important factor affecting cost of furniture as these are variable cost. The high demand will nullify the effect in longer run.

The spiraling increase in the cost of raw materials has been witnessed with the cardboard prices increasing by 40% and the prices of other materials such as wood, packing materials and metal increasing in the range of 10%.

Labor cost The craftsmen and Interior designing cost vary according to the market demand which is usually on the upper side, adding to the cost of the furniture manufactured.

Pricing trends A $1 increase in production costs usually leads to a $4 to $6 increase in retail price, So a 10 percent tariff on a product that costs $50 to make would lead to a retail price that's $20 or $30 more.

Regulatory Trends

  • The government of India has implemented 100 percent FDI policy for townships and settlements development project, this is attracting more foreign investors in the real estate sector which increase the quality of residential apartments. Further, rising demand for high-end and western style furniture is envisioned to bolster the growth of India furniture market by the end of 2024.
  • The implementation of 51% FDI in multi-brand retail has opened up opportunities for International players to bet big on the growing furniture industry in India.

Market Size and Forecast

  • The furniture industry in India is valued at US$ 25.7 Billion in 2016. Of this wooden furniture accounts for US$ 8,358 Million
  • India is the largest importer of furniture in the world with a 19% share in the furniture imports worldwide
  • Home furniture is the largest segment in the Indian furniture industry accounting for about 65% of furniture sales. This is followed by office furniture segment with a 20% market share and the remaining 15% comprised by the contract segment.
  • The furniture market in India is estimated at US$ 26 Billion with furniture and furnishings having an equal share in the market. Within the furniture market of US$ 13 Billion, the residential sector accounts for a 70% share (US$ 9.1 Billion) and ~6% of this is organized (US$ 5,460 Million)
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Market Outlook

  • According to a study by the World Bank, India’s organised furniture industry is expected to grow 20% per annum over the next few years and is projected to cross US$ 2.5 Billion by 2019.
  • Online home decor market in India is projected to grow at a CAGR of 50.42% in revenue over the period 2014-2019.
  • The Luxury Furniture Market is expected to garner $27.01 billion by 2020, registering a CAGR of 4.1% during the forecast period 2015-2020.

Distribution Chain Analysis

  • Indian furniture companies operate both, through direct selling in the market and distributors. Companies with a large local customer base normally sell directly, without involving distributors. The larger companies typically have their own commercial offices and showrooms in all the larger cities in India. Many organisations prefer, however, to operate via organised outlets.
  • For projects of large volume, companies typically sell directly to the customer - the primary customer is often the ‘specifier’ (architects, builders or project managers) or building owners/lessees who are responsible for fitting out buildings and offices. Armed with the choice of local and imported products, these purchasers exert significant influence on the sector.
  • Currently in India, Indian Manufacturers use a Three-Tier Selling distribution structure, which are distributor, wholesaler and retailer. A typical company operating on an all-India basis could have between 400-2300 distributors
  • The gross percentage margin for Distributor, Wholesaler and retailer are 4-5%,3-4% and 10-15% respectively
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Competitive Landscape

Furniture market is dominated by unorganized sector Unorganized players offer customized furniture as with the needs of the end user at lower price.

Competition from Smaller Players There are a large number of smaller furniture retailers and franchises engaged in furniture retailing in India who pose threat to the larger organized players with their offering of customized furniture at lower cost.

Entry of Specialty Furniture Chain The furniture industry has witnessed entry of specialty furniture chains in furniture retailing, the brands include @Home from Nilkamal, Home Town from Future Group, Home Stop from Shoppers stop

Key Market Players

Godrej Interio Godrej manufactures all kinds of furniture like Cabin furniture, executive series, office desks, Beds and Cupboards, Sofas, Dining sets, dining tables and dining chairs coffee tables, wall units etc.

Godrej has over 52 exclusive showrooms in 19 major cities across the country.

Zuari Furniture Zuari furniture has a network of 25 distributors, 15 wholesalers and over 475 dealers spread all across the country.

It offers a wide range of furniture like bedroom accessories, TV trolleys, cabinets, computer tables, kitchen and dining furniture, office equipment etc.

Durian Durian has some of the best furniture for office needs like office Chair with Leatherlite seat cushion and Backrest,Regal Night stand, High Back office chair etc.

Usha Lexus Furniture The unique thing about Usha Lexus Furniture is if offers one-year replacement warranty for its wide range of products.

Damro Damro’s one-third of the outlets are in India and the rest are elsewhere. Out of 160 outlets, there are 55 outlets present in India. Its products are sofas, tables, bedroom, kitchen and office furniture. However, Sofas are the best because they are very affordable.

Strategic Conclusion

The Indian furniture industry is mainly unorganized paving way for large players and e-retailers to organize the furniture market. The Annual per capita consumption of furniture in India is not more than 2,000 Rupees, which is considered to be low when compared to international standards, hence showing strong potential for growth. Customers expectations around convenience, value and choice have driven higher proportion to shop online.

The future of the Indian furniture industry requires an agility and multiplicity of delivery platforms that can leave non-responsive retailers behind.

Further Reading

Appendix

  • CAGR - Compounded Annual Growth Rate
  • FDI - Foreign Direct Investment
  • NFP - National forest policy
  • US$ - US Dollar


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