1 Home Fashion India Week - 2010 Ajay Arora Managing Director – D’ Decor.

1Home Fashion India Week - 2010

Ajay AroraManaging Director – D’ Decor

Strategies of Business Growth & New Opportunities

in Indian Domestic Market for Furnishing Fabrics


Home textile market and opportunity

Urban home furnishing retail market is estimated to be Rs 9,300 Cr. (US$ 2.3 Billion). The market is expected to reach Rs 20,000 Cr (US$ 5 Billion) by 2012.

Institutional home furnishing market in India is estimated to be Rs 530 Cr (US$ 132 Million) and is expected to reach Rs 1,000Cr (US$ 250 Million) by 2012.

Bed and Bath contribute to two third of the market (Rs 6,200Cr.). Curtain and upholstery market is currently estimated to be Rs 3,100 Cr.

2.5 million houses to be constructed by 2012

70 – 90 crore square meters of commercial and residential space needs to be built by 2030 to support urbanization

Hospitality industry projected to grow at 9% YOY

GDP is projected to grow at 8 % between 2009 – 2018, stabilizing at 7% thereafter upto 2030.

Source: Travel & Tourism Competitiveness Report 2009MGI – India’s urban awakening. A T Kearney


Opportunities in India’s Urbanization

59 Crore people will live in cities by 2030, nearly twice the population on US today

India will have more than 68 cities with population of more than 1 million, by 2030

Source: MGI – India’s urban awakening


Urban India will drive a near fourfold increase in average National Income



More than 100 million households will join the Indian middle class



All large states will have more than 50% of GDP coming from cities



Some of India’s largest metro regions would become the size of many countries today



Lets look at challenges in Indian market for furnishing fabrics


Key challenges - Industry

• Only 6% of the home furnishing market is currently organized.

• Low entry barriers• Lack of regulations• TUF supports disorganized sectors

Disorganized sector

• Mass market and bottom of pyramid customer segments expect high value at low price points, however all segments are growing

Domestic market – price and value sensitive

• Customer taste and preferences vary from north to south and east to west which calls for high innovation and product development. This increase complexity

Require very high innovation and product development


Key challenges – Industry (contd..)

• Market still developing and value conscious • Economies of scale required in value products

Need global scale to be strong locally

• Sub standard material and stock lot imports• Under invoicing reduces import costImports come at lower prices

• Mass manufacturing of ready made’s thus not possibleLack of Standardization in

construction

• 88% furniture market is made to order from unorganized sector

Small market of furniture manufactures


Key challenges – Macro Economic Factors

• Underdeveloped infrastructure• Low investment in technology

Difficult to create effective distribution network in large

country

• High imitation in design by unorganized sector• IP and copy right laws not enforced

Intellectual property law not being enforced

• Real estate cost is a key element of cost and can change profitability equationCost of Real estate is high

• Company needs to spend about 10% of sales for first five years and between 5% to 7% thereafter

Cost of making a brand is very high


Strategic Positioning

Operational effectiveness

Can bring enormous benefits, however from

competitive standpoint the best practices are easily

emulated

Competition produces absolute improvement in operational effectiveness, but relative improvement

for no one

Strategic Positioning

Strategic positioning attempts to achieve

sustainable competitive advantage by preserving what is distinctive about

the company

VS

Source: What is strategy – M. Porter


Strategic positioning - Three key principles

Strategy is the creation of a unique and valuable position, involving a different set of activities. Strategic position emerges from three distinct sources:

• Serving few needs of many customers

• Serving broad needs of few customers

• Serving broad needs of many customers in narrow market

Strategy requires you to make trade offs in competition – to choose what not to do

• Some competitive activities are incompatible; thus gains in one area can be achieved only at the expense of another area

Strategy involves creating ‘fit’ among a company’s activities

• Fit has to do with the ways a company’s activities interact and reinforce one another

Source: What is strategy – M. Porter


Strategic thinking

• Product• capacity• People capability• Finance

Evaluate current strengths

• Select• Prioritize

Focus on Few • Organic• Inorganic – Strategic

partnerships, JV’s etc

Expand


Markets/ Geography

Value Chain

Products

Geography

Product Value Chain

Need a multidimensional strategic approach


Need a multidimensional strategic approach - Geography

Market penetration strategy is key – Market vary in terms of taste, preferences, spending power and choice

Target Tier I cities to start, followed by Tier II and Tier III

Another approach could be zone wise penetration i.e North, South, East, West

Select your target customer segment and income group


Need a multidimensional strategic approach - Product

(Source: Datamonitor, A.T. Kearney estimates, SBI – US, International Furniture Association, Ministry of Textiles (India)

Product Options in furnishing

Curtains & Upholstery Fabric

Raw Materials

Cotton

MMF

Silk

Jute

Wool

Product Spec

Rolls

Cut-lengths

Ready-mades

Contract Segment

Office

Hospitality

Healthcare

Others

Technology

Dyeing

Yarn / Piece

Printing

Weaving

Jacquard

Dobby

Processing / Finishing

Fire retardant

Stain protective

Antimicrobial

Thermally adaptive

Curtains & Upholstery Non-fabric

Curtains

Trimming

Hardware / Fittings

Blinds


Need a multidimensional strategic approach – Value Chain

Manufacturing Distribution Brand Retail

Evaluate portion of value captured at each level in the Value Chain, as Return on Capital varies significantly

Product Value - Illustration Value Rs Operating MarginManufacturing 100 15%Distribution 120 10%Retail 180 10%


Thank You

1 Home Fashion India Week - 2010 Ajay Arora Managing Director – D’ Decor.

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