Indian furniture market is witnessing hyper-growth

The online home furnishing segment has grown rapidly over the years
and is expected to gain more prominence in the coming years. In a
candid conversation with Retailer Media, Anuj Srivastava, CEO,
Livspace, shares his views about the home furnishing Industry

The online home furnishing segment has grown rapidly over the years
and is expected to gain more prominence in the coming years. In a
candid conversation with Retailer Media, Anuj Srivastava, CEO,
Livspace, shares his views about the home furnishing industry…
Tell us about the inception of your brand?

The idea of Livspace was inspired by our combined frustrations in India, USA, and
Singapore, while getting our home designed and realising that instead of it being a
fun, enjoyable experience - it's a nightmare. I had an apartment in San Francisco and
while I used Houzz to find a designer it literally took me 9 months and lots of misery
to get my home designed, from there I started my journey
Home furnishing is a segment where touch and feel is something that
drives customers in. In that context, how do you satisfy your customers?
Home furnishing and interiors, unquestionably is all about experiential eCommerce
and at Livspace, it is centric to our business model. At the website level, we strive for
top-of-the-line user experience, paying attention to details and assuredly delivering
the exact look to our customers, within weeks, as they have seen online.
In addition, and even more importantly, for all our customers who want the touch-
and-feel experience, we send out swatch boxes. Furthermore, in pursuit of being
responsive to our customer's needs, our experience centres are underway and we
would talk more about them in the near future. Interestingly, our customers, happy
with our service, have been referring Livspace to people in their own circles -
bringing to us potential customers who have already experienced a Livspace home.
Moreover, as a country, we are in the middle of really exciting times - seeing the
transition of the Indian consumer getting comfortable with e-Commerce not only on
computer but mobile as well. A few years ago, selling even a shoe online was a
challenge, but today, the home interiors and furnishings market online is ripe for
disruption. So, the timing is just right as well.

Online is all about discounts. So how have you priced your products
keeping in mind the price sensitive Indian consumer?
The Indian consumer is not only price sensitive, but quality sensitive as well -
especially when it comes to the home design segment. Unlike other product
categories like fast fashion, durables like home design, furnishings and interiors are a
long-term investment and are a lot about building trust as well. Keeping this in mind,
Livspace offers a continually growing spectrum of products, that homeowners can
customise as per price and aesthetic preference. By the same token, we offer our
customers free interior design service and charge nothing for professional design
consultation, delivery or installation, in turn, saving the Indian consumer a lot of
money on end-to-end home design.
What are your strategies to compete with other home furnishing brands?
The positioning of Livspace, is essentially very different from other players in the
market. We aspire to be "your personal home designer". And, as you know, we have
pioneered India's first and only end-to-end home design experience and curated
marketplace for homeowners and designers to help with our goals.
Three innovations unique to Livspace which help us stay ahead over similar players
in the market:
The Dwll and DezignUp acquisition: With Livspace you get the entire home design
experience in one place. On phones or web, homeowners, renters, remodelers can
discover thousands of designer "looks or spaces" for their homes, personalise the
style, colour, etc. to their liking, and then buy the included furniture, accessories, and
décor items in a few, easy steps. Within a few weeks, the products arrive and our last-
mile partners transform the home to look exactly like the "look or space" you
selected.
Online Designer looks or spaces for all rooms in a home: As opposed to buying a
piece of chair or table online, which many furniture e-tailers offer and by nature is a
low-involvement, replacement-buying experience, designing a home at scale is a
highly involved visual and personal experience. Livspace uses design, data science
technology, and our exclusive catalogue to create beautiful looks and thousands of
pictures optimised for every home, which can be personalised and help homeowners
visualise their homes before making an online purchase.
Find that designer look for your apartment before you make any home design
purchase: Livspace uses a proprietary algorithm and design method to create "looks
or spaces" that are designed for your very apartment. We are adding more and more
apartments to our collection and homeowners love the visual experience where they
can see their very apartment, personalise the colour, style, etc. and be confident
before making a purchase online.

How have you positioned your brand?

As mentioned above, from the very onset, we at Livspace have been clear about our
market position as India's first and only end-to-end home design experience and
curated marketplace for homeowners and designers. It essentially translates to
treating "looks or spaces" as a complete product as opposed to single pieces of
furniture and decor items. This solves a big problem for the Indian consumer,
looking to transform their complete house into a beautiful home, as opposed to just
one corner. The consumer today has a strong consumer appetite for a high-quality,
personalised, and predictable experience in the home design & decor market
segment, and Livspace is their one-stop solution.
Furthermore, Livspace is thinking out of the box, re-imagining solutions and
bringing a fresh perspective to the table. Being a technology-and-design first
company - we are using our design, data science, disruptive engineering framework
and execution capabilities to take away complications and make design simple again
for the consumer.

Are you planning to raise funds?

At the moment, we do not have any announcements in this regard. But we will be
raising an appropriate amount of funding to support our growth strategy at the
appropriate time.

What according to you is the future of home furnishing industry?

The home furnishing industry in India, is witnessing hyper-growth and a sea change.
The metrics really speak for themselves.
Across India, many families are now buying their first homes, getting their existing
homes upgraded, or many who're just interested in making their homes look
beautiful. In general, there is an increased consciousness of good home design that is
created with passion and expertise, and products that look good, are personalised
and can be easily acquired.
In India alone, the home design & decor market is poised to grow to over US$ 25B by
2017 from US$ 13B in 2010 fuelled by over 25% YoY growth in the organised retail
sector.
This year alone, as many as 350,000 new homes will be bought across just the major
metros and the vast majority of them will need to get their home designed, kitchens
and wardrobes installed, and make their home beautiful.
How do you plan to expand your foothold in the country?
At Livspace, in the near future we will grow across the top metros in India soon.
We're excited to work very closely with our channel partners and this would include
developers, designer marketplaces like Dwll.in, DezignUp and others, and online real
estate portals to grow the business. We're hiring top talent across the board and the
key functions include engineering, designers, data scientists, and go-to-market
professionals to manage our explosive growth.
Unlike the more traditional Internet companies in India, we're using technology,
data science, and clever experiential tactics to drive demand. One growth tactic is to
build further on our "find your apartment" feature where you can select your
apartment by layout and then discover designs customised for your apartment. Our
consumers love it that they can see designs created for their apartments before they
buy it.

Analysis: India’s Online Furniture Market; What Lies Ahead.

The Indian e-tailing industry is booming and is pegged to become a USD 100 billion
market from current USD 10 billion in the next 5 years. This will account for 7-8% of
the retail market in India (currently this value stands at ~0.5-0.75% of the total retail
market and 3-4% of organised retail in India). This is similar to what has been seen
in developed markets like USA and other markets closer home like China.

A key hypothesis which investors and upcoming startups are constantly debating is,
how the market would be split between the large horizontals (Flipkart, Snapdeal ,
Amazon) and more specialised verticalplayers (Urbanladder, Lenskart, Jabong etc.);
this debate is further strengthened when both sets of players are diving more deeply
into highly specialised service and product deliveries.

We provide an analysis of one such case, the online furniture market, to explore how
this space is expected to evolve, and the kind of market leadership and market share
that would be commanded by various business models.
Defining the Indian furniture market

The Indian furniture &furnishings market consists of furniture, home textiles and the
other home décor products. It does not include home consumables, home
improvement products (hardware, tools paint etc.) faucets and kitchenware
categories.

The above defined furniture &furnishings market in India is pegged to be around

USD 20 billion, with furniture and furnishingshaving almost an equal split in the
market. Within the furniture market of USD 10 billion, the residential sector
accounts for a 70% share (USD 7 billion), and ~ 6% of this is organized (USD ~400
million).

The organized residential furniture market is expected to triple in size to become

USD 1.3 billion in the next 5 years, growing at a CAGR of 27%; this would be around
~9% of the USD 15 billion (expected) residential furniture market by 2020. This huge
opportunity in the furniture market is what the e-commerce players are likely to
target.
2020: USD 1.3 billion Indian organised furniture market – target for online players

50% of the market is present in the top 6 cities and more than 80% in top 46 cities

Large items (beds, wardrobes and sofas) account for 80% of the market share

Woods and its derivation accounts for 60% of the market, rest being metal and plastics

9% of the market is made up of imported goods

The first battle: Indian organized furniture market – Leapfrogging brick

and mortar stores to get online

The current USD 400 million organized residential furniture market is dominated by
Godrej (USD 80 million sales in 2015), Style Spa (USD 30 million sales in 2015) and
some other sub 30 million players. While having a few leading players dominate the
market is consistent with the global furniture market structure, markets in the USA
and UK also have a large number of smaller organized players.

What is distinctive in the Indian market is the small number of such players and
their presence being restricted to bigger cities. They cover only 50 out of close to 500
Indian cities in India, serving just about 10% of the Indian population. The key
challenge faced by these players has largely been around managing the high cost of
real estate, poor logistics and the cost of inventory.

These are some of the key long term challenges restricting the rapid expansion of
offline organized players in the Indian market. To put things in perspective, only 6%
of the overall Indian residential furniture market is organized, while the same for
USA is around 30-40%.
By the time the e-tailing market started to grow in the developed countries, the
furniture market was already organized to the certain extent. Thus the e-tailing
market made furniture players to resort to the omni-channel route.

It is expected that India is going to leapfrog the brick and mortar organized channel
and move to the pure play online market. So while the organized market share in
India and other developed markets would look similar in the long run, omni-channel
would have a limited share in India. RedSeer expects online players to control 3.1%
of the overall furniture retail market (of USD 22 billion) by 2020.

Customers are happy moving online for furniture buying: Key

considerations

Satisfaction with the offline

Key steps in buying
buying process

Travelling to store Challenge in offline

Browsing through selection Worth doing offline as well

Checking availability of desired selection In Metro and Tier-I, it is still an issue

Comparing products at various stores Key challenge in offline

Furniture delivery and installations Delayed deliveries

The Second battle: 2015 market shares of online players and customer
loyalties

In FY 2014 the Indian online furniture market was expected to be USD 40 million
and the cumulative GMV run rate (net of cancellations) as of March 2015 was USD
130 million. It is expected that the online furniture market will grow with a CAGR of
75% and reach the USD 700 million mark by 2020.

The market share of online players in the organized residential furniture market will
increase from current 10% to 51% by 2020.

Leading players in Indian Online Furniture market

March 2015 furniture GMV

Online Player (Estimated, post cancellations), in
USD Million

Pepper-fry 24

Snapdeal 17

Urbanladder 21

Fabfurnish 19

Others –

Total 81
Pepperfry: Market leader in the Indian online furniture space. Sources70-80% of
the products from Jodhpur. USP: Delivers wide variety of designs with customer
reach spreading to 200+ cities.

Fabfurnish: Second largest player in the Indian online furniture space. Has the
widest variety of SKUs among the horizontals. Largely operating in the market place
model. USP: Focus is on providing affordable product categories, appealing to wider
audiences.

Urbanladder: Smallest of the three major vertical players. 100% private label with
a strong focus on quality and customer experience. USP: High end designs delivered
through the best customer experience.

Snapdeal: The largest marketplace for furniture in India, with 15,000 – 20,000
SKUs and 400 suppliers. They are still working towardsgetting the customer
experience and delivery right. USP: Largest and fastest growing selection delivered to
a large range of locations.

Third battle: Change in customer mix will alter the online product mix
and hence shift the competitive advantage

The current online furniture market is ruled by the early adopters. And hence the
product/material split of of the online and offline market look very different.
Whilehardwood constitutes 15% of the overall offline market, in online space this
value is around 47%. As the adoption increases, the split of the online and offline
markets will begin to look similar.
Online players who are targeting to play a pan-India role with a significant market
share would need to realign the product portfolio, sourcing and the pricing
strategies. Players like Urbanladder and Pepperfry who are focused on hardwood
furniture sourced from Jodhpur, would need to source products from other locations
as well; this would not only gives them access to a wider variety of materials but also
a distributed sourcing channel to address larger volumes.

It is also expected that the online furniture market will be governed by the market
place model, due to the very high number of SKUs and the different kinds of product
positioning involved. A key competitive advantage would be the access and
exclusivity to suppliers. Our initial assessment suggests that suppliers have very low
affinity towards online portals and are ready to supply to multiple players. So the
current hold/exclusivity of the supplier might not stay true for the future, as they can
always cross the lines to supply to a wider range of online players.

Snapdeal andFabfurnish, are not currently considered to be quality focused, which is

perhaps a closer reflection of the current market demand; conversely brands
likeUrbanladder and Pepperfryare providing high quality material are aiming to
create a brand image which will make them more acceptable to a wider variety of the
consumers in the long run.

The war of market dominance: How is 2020 split expected to look-like

The war in the furniture space for market share could be fought, won and lost on a
few key strength areas (refer to the table below). While verticals, fast looking for
investor money, are making claims on how they are better , horizontals looking for
the next big growth category are not leaving a single stone unturned to grab a large
pie of the market. Here is a step by step assessment of their strengths and weakness
in the short-term.
Online Furniture Market: Assessment of key competitive areas

Horizontal vs
Assessment Areas And why
Vertical (1-5)

Growing share of MDF, plastic,

metal and non-hardwood products
in online market by 2020 is likely to
reduce importance of Jodhpur as a
Sourcing 3:3
sourcing hub. Horizontals with the
their wide reach of seller
onboarding teams can catch up with
verticals

Horizontals are investing

aggressively in warehousing and QC
capabilities. Also, as online market
become 20X by 2020, the sheer
Quality Control and high volumes to be managed will
3:3
Warehouse allow horizontals to leverage their
skills including technical
capabilities with handling high
volumes and compete effectively
with verticals

Going forward, horizontals can work

equally well with 3P logistics players
to establish robust furniture line
Line Haul 2:3 haul operations. Verticals are
unlikely to gain a significant
competitive advantage from their
current line-haul tie-ups1

Expertise in managing high delivery

Delivery Hub
3:2 hub volumes efficiently is likely to
management
become the key differentiator going
forward. Additionally, horizontals
Online Furniture Market: Assessment of key competitive areas
Last mile delivery
Customer – Brand
recall
Expected Online furniture market split 2020
Parameters
Overall Furniture market
Residential Furniture market
like Flipkart and Amazon already
have a network of 220+ delivery
hubs across India each, which offers
them readymade infrastructure to
build upon for shipping furniture
Horizontals like Amazon and
Flipkart would be able to leverage
their large appliance delivery
expertise for furniture delivery as
well when the category is launched.
Additionally, horizontal’s expertise
3:3
in managing last mile shipment at
scale is likely to help them stay
competitive with verticals, when
furniture volumes shipped grow to
~10,000 units per day from 350-
400 currently1
Unaided brand recall of horizontals
5:2
is 3-4x that of horizontals
Market Size
22
15
Expected Online furniture market split 2020

Online Furniture market 0.7

Vertical market 0.4

Horizontal market 0.3

Globally the online market leader for furniture doesn’t have a market share of more
than 7-8%. India is also set to follow in the same path, thus attracting huge
investments by 2020.

[About the author : Anil is the CEO of Redseer Consulting. His work focuses on
advising clients on growth initiatives in emerging markets around new age
companies and healthcare. ]