INDIAN FURNITURE INDUSTRY

Transcription

1 INDIAN FURNITURE INDUSTRY

2 What we bring to the table : 1. Industry of the Furniture Industry 2. PESTEL Framework 3. Current trends s 6. Sales and Management System 7. 8.

3 GLOBAL FURNITURE INDUSTRY CAGR of 4% from It is categorized into: home (domestic) office (commercial) Organized sector comprises of 15% Organized residential furniture market is estimated to triple in value to become USD 1.3 billion by 2020, at a pace of CAGR of 27% Currently valued at 10 billion USD INDIAN FURNITURE INDUSTRY India is 5th biggest market in the world CAGR of 26% in % 30%

4 POLITICAL : Forest product certification & liberalized Import Policies have led to increase in the number of imported furniture and its raw material ECONOMIC : Disposable income has increased by 8% from 2014 to2015, thereby an increase in demand by 15 % in 2013 SOCIAL : With the advent of Ikea the average age of home buyers has reduced to 28 & with an increasing start ups coming into Indian sector the office market vacancy also reduced by 3%. TECHNOLOGY : It is expected that the online furniture market will grow with a CAGR of 75% and reach the USD 700 million mark by 2020

5 Current trends E- Commerce in Furniture Products: Companies have come up with a managed marketplace model where the order is dispatch directly from the vendor to the customer. Example: Pepperfry.com Renting Furniture: Companies Renting furniture on monthly basis. Ex. RentoMojo. Customized Furniture: There are people in many cities in India who are willing to pay premium for the customized furniture. To serve the demand for such customers there are companies like Custom Furnish. FDI in retail: Indian government increased the FDI in single brand retail storesto 100% while for multi-brand, the limit was increased to 51%.

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7 is a business unit of Godrej & Boyce Mfg. Co. Ltd. - part of the Godrej Group Product Categories: Home Furniture, Office Furniture, Special solutions, Security solutions& Green Products. More than 2,200 Wholesale Dealers, and more than 18,000 Retail Outlets. Divided into geographic zones - North, South, West, and East. Warehouses are as per branch size. E.g. Mumbai has 3 warehouses. The Purchase department takes care of the demand forecasting part

8 Commercial team is responsible for Transportation /logistics of the goods from plant to branch WH and then transporting goods to the retailers. The Plant Sales team is responsible for sales only and hence each branch has a sales force that is responsible for sales and his performance is measured on the same. The head of Interio division is Mr. Anil Mathur (Sr. Vice President and Business head) has been divided into 3 segments: B2B: B2B sales is handled by the sales team and dealers. B2C: B2C sales is handled by dealers, franchisees, showrooms Interior: Interior designing solutions and consulting the head of Commercial team is Mr. Vikas Chaudaha (Sr. Vice president)

9 According to the primary research, presently there are three different distribution channels of Indore has 5 dealers selling home & office furniture For Institutes like IIM & IIT, bulk orders are taken by dealers. DEALER Showrooms are run and managed by employees. Pull Strategy by providing better product display is used to meet their sales target. RETAIL SHOWROOM (COMPANY OWNED) Online site displays products of home & office furniture wherein the price of the products aren t mentioned Online channels have same base price as all other channels ONLINE PLATFORM

10 offers only home furniture and not security line (excluding locks) through online channel Their site doesn t reveal prices however, few product lines are available on sites like snapdeal(mattresses) and Pepperfry (furniture). Online channel has the same base price as the Godrej showroom and only the state tax makes the difference Online orders are fulfilled by the nearest Godrej showroom to the customer If online channel provides any offer, a discount code is provided to the customer when he places the order Discount code is shown to the nearest showroom and offer is availed by the customer. This product sale is considered as the showroom s sale Online channel sometimes helps showrooms in meeting their target. Hence, the concerned retailer did not consider online channel as a disadvantage for his business

11 Dealer Activities: Dealers engage in both direct and indirect selling methods by approaching large clients and institutions like IIT Indore, IIM Indore, DAVV etc., Dealers engage with clients that visit the dealer showrooms interested in purchasing products. Tracking and inventory management: Restocking occurs when the inventory reaches reorder point. has provided ERP BAAN software to its dealers and retailers to analyze their inventory on a real-time basis to reduce the possibility of stock-outs. D E A L E R Division of dealer territories: Dealers continuously engage among each other to ensure no price wars are waged and fair play is maintained for all upcoming projects. The Headquarters geographically allocate dealers territories. Dealers cannot have contracts with other furniture companies. Dealer Margins: Expenses like salesforce salaries, showroom rent, promotional costs, logistics etc. have to be borne by dealers themselves. Tentative margins Furniture: Office & Home: ~14-16% Safes and storage: 12.5% Mattresses: 18%

12 Company initiatives: To improve the sales figures, company trains the sales force once or twice a year for nearly three days each. The training covers issues like negotiation, after-sales services, technical know-how, sales leads generation, conversion etc. Incentives % sales target: ~6-8% 100%: ~10% Dealer meetings are a recent phenomenon to engage on targets/problems/updates where dealers 500+ dealers engage with the company to solve issues that are being faced by the dealers. This meeting typically occurs once a year and is looked forward to by all the dealers. Annual promotional budget: It is allocated by the headquarters and they fund up to 50% for all local level promotions since it is a win-win for both parties. However, national level promotion is funded 100% by the company. D E A L E R Delivery Time: Typically, an order placed at Indore, goes to the Bhopal Warehouse, if there is a stock out, the order is delivered from headquarters at Mumbai. On an average, order takes days for fulfillment. Modular Kitchens, which can be customized, can take approximately a month and a half to be delivered. For ensuring logistical support, dealers tie-up with local logistic providers on a contractual basis. The logistics expense nearly accounts for 2-4% margin erosion. A similar expense is the trade discounts, which further eat up into the profitability of the venture, leaving no space for a price war. After-sales service: Claims, Warranties is provided for 1 year, etc. Dealers provide it and the same is claimed for by them from the company. The processing time for the same is rather slow and blocks working capital.

13 The showrooms are company owned, therefore, are directly controlled by the headquarters. Showrooms offer better display and are associated with better quality services and customer experience. Delivery from the warehouse is done to both Showrooms and Dealers & takes 5-7 days, while from the headquarters to showroom, deliveries take days. The General Lead time 4-6 weeks The prices tend to be similar across Showrooms and dealers, however, dealers can offer higher discounts by reducing their margins. Promotion activities: The Company has a database of 7-8 years of customers, who are targeted by the stores during promotions. Just dial inquiries are directly sourced to showrooms. Promotions are normally done through newspaper advertisements through the company. All expenses are borne by the company. SHOWROOMS Targets and evaluation: Targets are given to stores, on a quarterly basis and based on the branch size by the company. Evaluation of the sales team in the showrooms is done of target achievement, feedback from seniors, and behavior with customers and colleagues. The performance is measured, as bands O, A, B. Salespeople within the showroom are motivated time and again, a quote mentioned in the showroom: Two things define you, your patience when you nothing and your attitude when you have everything.

14 HIERARCHY FOR SHOWROOM OUTLETS

15 SALE & MANAGEMENT SYSTEM FUNCTIONING B2B 60-70% of the sales come from dealers at and the rest at direct orders from big firms like Accenture, BPCL, and ONGC etc. The sales team works independently from the dealers and showroom outlets. However, collaborate with both channels for bulk order dealings.

16 FUNCTION OF KEY ACCOUNT MANAGERS Key account managers or their subordinates remain in touch with Architects for major projects of various institution and ensure proper customer relationship. Mock-up presentations to clients or new customers. Function of Sales team: The sales team is part of company s B2B marketing segment. Training of the Sales Team: New employees training is generally done in three phases 1st Phase :- 3 week training (including 1 week of company information) 2nd Phase: - After 1st Phase, some field work is done by the employees and then again 1 week of training is given. 3rd Phase: - During absorption into the management, another weeks of training is given. Evaluation of the Sales Team: Some of the parameters used are Order Delivery (Billing), Order Booking, Payment Receiving Trend (as sales are made on credit) and tender cancellation refund punctuality.

17 28 outlets (Company owned + Franchisee driven) Biggest outlet in Indore Retail Sales, B2B sales and projects for companies B2B sales via tenders as well as outdoor sales team Stellar Online sales via ecommerce platforms like snapdeal etc. No overall huge competitors but a few firms give competition in specific category Diwali, Dussehra, August, Jan, March

18 24 stores (19 company owned) Focus on imported furniture serving premium customers 2 Mother warehouses (Bhiwandi (S&W) & evok Bahadurgarh (N&E) Send products once a week to all the stores according to the orders placed Online sales via evok.in 3 brand staff and 3 on-role employees Diwali, Dussehra, August, Jan, March

19 Two stores in Indore In operations since 1885 Strong local presence Mehidpurwala Being considered as one of the biggest competitor in Indore Focused in B2C segment

20 Delivery in minimal time 1 month long lead-time With better demand forecasting, proper inventory of products can be maintained at Warehouse and this lead time can be reduced Resolution for channel Instead of providing discounts and waging price war: Complimentary gifts with the Godrej products Division of territory/clientele/ticket size/product lines clearly Inventory Rotation Ability for dealer to decrease working capital expenditure and reduce investment, thereby increasing ROI Investment in better production methods for reducing COGS, Prices & Margins Unorganised & imported furniture market provides higher margins at the same price [more profit] ; equal margins at low prices [more sales] Bringing down COGS can lead to passing over margins to dealers or reducing prices to push sales easily

21 Setting up production plants in areas with taxation benefits Company should make use of fiscal incentives to establish production centres in locations which have taxation benfits [Pharma] Initiatives have been taken to reduce production capacity, but alternatives can be explored other than offshoring production Better dealer engagement Dormant company for more than 2 decades More dealer-meetsto engage meaningfully on concerns, threats & possible remedies Quality engagement activities with dealers [Automobile] other than dealer meets Further improving communication and culture Former PSU culture revamped with new energy, diversified product line, branding activities [Logo, promotions] Increased involvement and efficient line of communication from company

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