Entrepreneurship

Designing homes – A $20 billion dollar market

Of 148 326 000 km2  of this planet, everyone belongs to a four-walled space called home – a space customized according to a person’s choice of comfort. This in itself is an interesting industry, that constantly works on catering to choices of people.
As per Technopak estimates, the Indian Home Décor market which stood at $13 billion in 2010 is likely to touch $20 billion by  end 2015. Recently, this segment is witnessing many verticals of expansion that is opening diverse avenues for home-decor players in the market. There is a considerable increase in scope and acceptance among consumers when it comes to e-buying. High average ticket size and profit margins in home-decor industry is making it rather more attractive for new players to enter in. Home-decor has been an unorganized market until recently, when startups and established home-decor businesses have rolled up their sleeves to include it in online retail.

Facts about the category as per various experts (source)

1) Home Decor is almost a $15-$20 billion category including offline and online.

2) Out of this $20 billion market 40 % – 50% is furniture and rest includes items such as cutlery, kitchen items, fancy lamps etc.

3) Talking about furniture market, out of 40%, 25 % is the larger furniture items such as Sofa, Beds etc while rest are small furniture items such as linen, bar table, chairs,stools etc.

4) There is a huge scope of this 25% of smaller furniture items and rest 60% of pure home decor items in e-retailing segment because of their smaller sizes,not much need of touch and feel and easy logistics, comparatively.

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Challenges

1) Supply chain and inventory management are the biggest challenges. Demand forecasting is difficult in current changing economy as the interests and trends change rapidly, thanks to the internet.

2. A change is consumer behavior is also observed despite increasing disposable income among urban consumer segment.

“People’s taste of home-decor is changing rapidly as coIMG_9325 copympared to the rate at which it did 5 years back. They want to invest in buying things they like, however, the impromptu consumer behavior has dropped. It is very unlikely that someone who has come to your store to buy a table cover will also buy something else because he or she liked it”, says Rohan Saraf, founder of Ratios.

2) If the demand for a particular products soars up, it is difficult to fulfill it from the back-end in comparison to other categories such as apparel or groceries.
“It is very important to keep a tab of changing preferences and options available across the country. I travel a lot and have tied up with a lot of small scale manufactures who otherwise sell only for international market”, Rohan points.

3) 25% of furniture category constitutes of large items such as bed, sofa, etc. and these are the items which Indian consumers still want to refrain from buying online as they want to have a touch and feel factor involved.

Scope (source)

1) Home-decor segment, especially online, is emerging as one of the profitable categories in eCommerce market.

2) Average ticket size is larger, with a margin of 30-40% thus consumer acquisition cost is justified.

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3) Almost every horizontal player is expanding in home-decor.

4) Mainly mom and pop shops are operating in this category catering to a smaller consumer base within a village, town or city except few large players who have geographical limitation, hence an online retailer can leverage the reach component.

5) A consumer sitting in Andhra Pradesh has no access to the furniture made in Rajasthan ideally, but with online he/she can get hold of that inventory at almost same prices. Intensive research into different unstructured manufacturers can prove to be massively beneficial to compete in the market.

With a lot of established offline brands shifting online, a few players like Godrej Interio and D’Decor, are yet to make the move. (D’Decor’s online e-store currently reads ‘Coming Soon’).

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Shruti Chaturvedi

Telling inspiring, powerful, (extra) ordinary stories brewing around on Chaaipani. @adhicutting on Twitter.

About the Author

Shruti Chaturvedi

Telling inspiring, powerful, (extra) ordinary stories brewing around on Chaaipani. @adhicutting on Twitter.

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