Indian Furniture Market – Online, Offline

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Industry estimates show that furniture market has an overall market size of Rs.120,000 crores and home decor and utilities is at Rs.130,000 crores. According to a Redseer Consulting report, by 2020, India’s furniture industry is expected to grow to $35 billion, with the online section being worth about $700 million. The Indian furniture market has grown at a CAGR of 17.2% for the period FY’2008-FY’2013 and is projected to grow at a CAGR of around 26% during 2014-19  according to “India Furniture Market Forecast & Opportunities, 2019”.

The furniture sector in India makes a marginal contribution to the Gross Domestic Product (GDP), representing about 0.5 percent of the total GDP. The major part of this industry, approximately 85 percent is in the unorganized sector. The remaining 15 percent of organized sector comprises of large manufacturers, such as Godrej & Boyce Manufacturing Co. Ltd., BP Ergo, Featherlite, Haworth, Style Spa, Yantra, Renaissance, Millennium Lifestyles, Durian, Kian, Tangent, Zuari, PSL Modular Furniture, Furniturewala and Truzo. A small emerging segment is the contribution from online retailers such as Pepperfry, Urban Ladder, HomeLane and others.

Demand Segments

Domestic home furniture comprises of 65% of the Indian furniture demand, followed by office furniture comprising of 20% and contract furniture comprising of 15% demand. The contract furniture is primarily for hotels and this sector has seen strong growth in the last two years. There are around 1200 hotels in India with more than 10% in the five star category as mentioned below.

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Different types of wood used by Indian manufacturers

Wood accounts for 65% of all furniture made in India, followed by metal and plastic at 25% and 10%. India abounds in natural resources of several tree species and the industry uses both indigenous wood and imported wood (in cases of short supply in the domestic market). Walnut, Sandalwood, Teak, Sheesham, Deodar, Ebony, Redwood, Rosewood, Red Cedar and Sal. Teak accounts for almost 50 percent of the total wooden furniture produced, Sal and Deodar account for about 20 percent and the balance includes Mahogany, Cedar, and other tree types. Bamboo Material Boards (BMB) are increasingly being used in place of plywood. India also has abundant rubber wood supply. Natural rubber plantations cover 520,000 hectares with an additional 6,000 hectares being replanted almost every year since 1994. The southern state of Kerala produces 95 percent of the total supply of rubberwood in India. MDF boards are imported from Europe, soft and hardwood are imported from Russia and other South East Asian countries. Veneered panels are becoming increasingly popular in India and are imported from the European Union, Canada, and USA. In the recent years, molded plastic, wrought iron, board and bamboo furniture too have been widely purchased by the households in India.

Retailing – Offline & Online

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 readymade 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. Catering to the urban demands for latest and trendy designs, Urban Ladder, Pepperfry,  Livspace have seen a huge growth across categories. The emergence of rental commerce driven by Furlenco, Rentomojo, GoZefo and others is building up the organized sector for furniture in an otherwise dominated by local small furniture retailers.

The share of furniture in e-commerce is still very low – according to RedSeer consulting, mobile phones and fashion accounted for 42% and 20% of the overall e-commerce sale in 2016 and furniture only accounted for 1-1.5% of the overall e-commerce sales in 2016. One of the major challenges for online retailers is still the supply-chain costs of storing and moving large boxes of furniture which are not easily stackable in the warehouses and prone to damages. Lack of brands, supply chain complexity, high storage and delivery costs and abundant local suppliers makes this category a difficult category to retail online vs. offline with a geographical captive customer base. This drove a lot of  online retailers to shift their focus to home furnishing and home decor categories. A few months ago, ecommerce market leader Flipkart re-launched the furniture category at scale and also unveiled a furniture private label, Perfect Homes. They provide bedsheets and other décor items under another private label, Flipkart Smartbuy. Similarly, the popular online marketplace Pepperfry is shifting its focus to home decor and furnishing from furniture to drive profits. Most of the retailers take the private label route in this category in the absence of established brands and the increased penetration of local players.

Conclusion

The Indian furniture market is largely unorganized and dominated by small local players. However, the market is witnessing an increase in the contribution from organized sector across demand segments. The entry of global players such as IKEA in India will further this trend for organized retail sector consolidation and backward integration with manufacturers and raw material suppliers, driving the entire value chain towards organized retail.

Thank you.

 

References:

https://inc42.com/datalab/what-the-financials-pepperfry-pulls-the-chair-from-underneath-urban-ladder/

http://indianonlineseller.com/2017/01/5-furniture-etailers-making-a-mark-in-the-indian-market/

https://yourstory.com/2018/04/new-product-lines-fresh-funding-grabonrent-continues-make-things-easy-renting-generation/

https://economictimes.indiatimes.com/small-biz/startups/newsbuzz/pepperfry-to-focus-on-decor-and-utility-category-in-2018-to-build-next-leg-of-growth/articleshow/64028298.cms

https://www.livemint.com/Companies/1mGp1gLk4smR6ooxSwREKM/Pepperfry-sees-4050-reduction-in-FY18-loss-to-double-offl.html

 

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Indian Online Furniture – Rent or Buy

Renting vs. buying furniture is the same argument as op-ex vs. cap-ex.

When does renting make sense?

  1. When you are sure that you will only use it for less than a year
  2. When you are sure that you would want different furniture in about a year’s time or less
  3. When you want additional furniture for a special occasion such as some party, relatives, etc.
  4. When you are not willing to spend a bulk amount on furniture or in a cash crunch and yet want to have good furniture in your house (you are a customer who is in a cash crunch)
  5. When you desire for high-quality furniture but you don’t want to spend a large amount on really good design furniture (in this case you are a customer who genuinely wants good design furniture and who doesn’t want to spend a bomb)
  6. When you don’t care to do the math of rent vs. buy and just look at your life one month at a time

When doesn’t renting make sense?

1. When you are reasonably sure that you will use it for more than 12 months and you are okay with having the same furniture for a few years. In the case of using the furniture for more than a year, the customer would have most likely paid the cost of the furniture and now feels the pain of not owning the asset and that he or she still has to pay the monthly rental to just use it. This is the stage at which the customer starts comparing to ownership and feels bad about renting the product.

2. When you have money to buy it! If you have the money to buy it, then it does make financial sense to buy it and sell it out later. With options such as buy-back guarantee and credit card no interest EMI options, it is very convenient to buy and sell the product back and even buy it in small installments.

GoZefo, which is one of the online furniture companies in India, wrote an interesting post comparing rental vs. ownership. Click here to refer to GoZefo’s rent or buy.

Thank you

The Consumer journey on an ecommerce app (Home->CLP->PLP->PDP->Cart)

We all read about marketing or consumer journey funnels in school. Ecommerce apps too have a unique consumer journey from clicking the app and entering the home page to category listing page to product listing page to product detail page and then the cart.

In today’s world of progressive web apps (link) there is no guarantee that the consumer will journey through the above funnel as they might be linked from a newsfeed or a target advertisement and practically the consumer journey can start on any page. However, for most direct traffic, the journey traverses as Home -> CLP -> PLP -> PDP -> Cart. For some of the apps, these pages could be mixed, say the Home Page itself might be the category page.

Home Page

An e-commerce home page shows various key promotions and a clear structure of the various categories you want the consumer to access immediately, the search bar and the menu structure. It is very crucial for the app to be very discoverable to the users.

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Category Listing Page (CLP)

The category listing page shows the sub-categories/sub-segments within the category in terms of genres, pricing, sub-categories, specifications, etc. It doesn’t showcase any products and will make you feel that you are one step closer to the purchase and one step away from the purchase. Below pictures are examples of two category pages, apparel on left and mobiles on right.

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Product Listing Page (PLP)

This is a page that shows all the products listed within a certain category or sub-category. It is different from a CLP as it showcases all the products in a list and not categories.

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Product Detail Page 

Product detail page is a page that offers complete detailed description of the chosen product along with an option to purchase the product (called buy-box button).

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And then the checkout flow…

 

Thanks

Safety Stock & Re-order points – simple explanation

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Safety stock is the additional number of units of stock held by a company to mitigate several market risks. Without safety stocks, the company could have negative customer experience, lost revenue, lost market share and long-term customer value. However, a higher safety stock strains the organization in the form of higher working capital requirement. Safety stocks help in mitigating several risks as below:

  1. A Sudden spike in demand
  2. Offset inaccurate forecasts
  3. Longer than expected lead times to delivery (from the supplier)
  4. Quality issue rejects of stock, leading to stock-outs
  5. Increase in manufacturing or production time
  6. Transportation strikes or non-availability of transport
  7. Warehouse space issues due to which inbound gets delayed

So, how does one calculate the safety stock needed for an item?

The answer is that there is no one definite way of calculating the safety stock required. One shouldn’t use the available formulas blindly as the specific case of each company x product x market is very different.

Method 1: Let’s start with intuition (I love intuition!).

Intuitively, safety stock is designed to cover for maximum delays in delivery from the supplier. So, what can be the maximum delay from a supplier that you want to guard against – it is the maximum lead time minus the average lead time from the supplier.

So, the most common formula for safety stock is:

(Max Daily Sales * Max Lead Time) – (Average Daily Sales * Average Lead Time)

Re-order Point = Lead Time Demand + Safety Stock

Method 2: EOQ Formula (For a full blog post on EOQ refer this link)

A toys company deals in one single toy and procures from a single supplier and has an annual demand of 4000 units of a single toy. The cost of placing an order is Rs. 50 each time with the annual costs of holding the toy being at 40 % of the purchasing cost. The company purchases the toy at Rs. 120 per unit. How much should the company order at a time?

EOQ= √ (2*C*D)/CH

EOQ= √(2*50*4,000)/(0.4*120)

EOQ= √(400,000)/(48)

EOQ= 28.87 units

Method 3: Formula used in SAP ERP system

A buffer stock or safety stock has to be designed to cover various deviations. A delay in any of the lead times mentioned below affects the procurement pattern.

  • ordering lead time
  • manufacturing lead time
  • transportation lead time
  • stock conversion lead time (inward lead time or QC clearance lead time)

Moreover, the determination of safety stock depends on the forecast accuracy. Higher the accuracy, lower the safety stock requirement. Hence, we have the below

R = Relationship between forecast accuracy and service level (Service Factor)
W = Delivery time (in days) / Forecast Period (in days)
MAD = Mean absolute deviation (parameter for forecast accuracy)

Now, if replenishment lead time is greater than the forecast period by factor W then:

Safety Stock = R x Sq.rt. W x MAD

Else

Safety Stock = R x W x MAD

Method 4: Safety stock should cover supply and demand variability

Safety stock should have two components: supply safety stock and demand safety stock.

Demand safety stock = k*sd(forecast error)*sqr rt(lead time)

k = factor for number of std deviations required for given service level (refer link)

Supply safety stock = k*std dev lead time

Total safety stock = sqrt( demand safety stock + supply safety stock)

As you saw from the above methods, there is no one clear way of calculating safety stocks. It depends on a whole range of parameters such as lead times, forecast periods, order cycle times, forecast accuracy, service levels, lead time variances and others. Therefore, it is very important to test and observe the trends of all variables periodically to ensure that the best safety stock values are used by the firm.

Thank you.

Source:

http://www.inventoryops.com/safety_stock.htm

http://www.erpgreat.com/materials/safety-stock-calculation-in-sap.htm

 

Top 3 Dale Carnegie Quotes

Here are my top 3 quotes by Dale Carnegie

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1) “It isn’t what you have or who you are or where you are or what you are doing that makes you happy or unhappy. It is what you think about it.” Dale Carnegie Quotes

Our ability to change our perception means we have the ability to change our reality. By choosing to see difficulties as challenges and hard times as periods of growth, we inevitably alter our perception and create happiness for ourselves.

 

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2) “Success is getting what you want. Happiness is wanting what you get.” Dale Carnegie Quotes

Having gratitude for all of the blessings in your life is the key to lasting happiness. If you focus on counting your blessings instead of your problems, you will notice how rich you truly are.

 

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3) “Any fool can criticize, complain, and condemn—and most fools do. But it takes character and self-control to be understanding and forgiving.” Dale Carnegie Quotes

How easy it is for us to point the finger of blame, but it takes true courage and humility to practice forgiveness and compassion.

Your fear of looking stupid is actually making you look stupid! – by Benjamin Hardy

This article was written by Benjamin P. Hardy and the original link to the article is hereI loved this article and hence posting it here.

According to psychological research, the greatest emotional need is security.

Who doesn’t want to be liked?

Yet, trying to be liked and living in alignment with your goals and values often conflict. That is, if you’re trying to be liked by everyone.

John Lennon once said, “Trying to please everybody is impossible — if you did that, you’d end up in the middle with nobody liking you. You’ve just got to make the decision about what you think is your best, and do it.”

Wanting approval and needing approval are two very different things. We all want approval. But when you need it:

  • You come-off as desperate
  • you say “yes” to stuff that clearly doesn’t resonate
  • you lack an internal compass
  • your relationships are co-dependent, one-sided, surface-level, and bound to fall apart at some future point

Your need for approval has you eating unhealthy foods you don’t want to eat.

It has you working on projects you’re not excited about.

It has you ruminating and obsessing about problems and regrets you could easily remove or fix.

Joyce Meyer, in her book, Approval Addiction: Overcoming Your Need to Please Everyone, explains that the need for approval stems from insecurity, which is often the product of some form of abuse — physical, verbal or emotional.

The addiction for approval is fueled by unhealthy emotions:

  • guilt
  • shame
  • anger

None of these emotions are a healthy foundation for creating relationships with yourself or other people. If you want to live a life of purpose, you’ll need to let go of your need for approval. You’ll need to be willing to follow your gut. To express your views. To be honest…

Read more here