INDIAN FURNITURE INDUSTRY Analysis Godrej Interio Distribution Channel Sale Management Competitors...

INDIAN FURNITURE INDUSTRY

What we bring to the table :

1. Industry Analysis of the Furniture Industry

2. PESTEL Framework

3. Current trends

4. Godrej Interio

5. Distribution Channels

6. Sales and Management System

7. Competitors

8. Recommendations

GLOBAL FURNITURE INDUSTRY

• CAGR of 4% from 2016-2020

• 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

Industry Analysis Godrej InterioDistribution

Channel Sale Management

Competitors Analysis

Recommendations

70% 30%

INDIAN FURNITURE INDUSTRY

• India is 5th biggest market in the world

• CAGR of 26% in 2015-2020




Recommendations

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

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%.




Recommendations




Recommendations

• Godrej Interio 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

• 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)

• the head of Commercial team is Mr. Vikas Chaudaha

(Sr. Vice president)

Godrej Interio 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




Recommendations




Recommendations

• 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

Godrej Interio employees.

• Pull Strategy by providing better

“product display” is used to meet their

sales target.

RETAIL SHOWROOM (COMPANY OWNED)

• Godrej Interio 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

According to the primary research, presently there are three different distribution channels of Godrej Interio




Recommendations

• Godrej Interio 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

• 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.




Recommendations

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%

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.

• Tracking and inventory management: Restocking occurs

when the inventory reaches reorder point. Godrej Interio

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.

DEALER




Recommendations

• Annual promotional budget:

• It is allocated by the headquarters and they fund up to50% for all local level promotions since it is a win-win forboth parties. However, national level promotion is funded100% by the company.

• After-sales service:

• Claims, Warranties is provided for 1 year, etc. Dealersprovide it and the same is claimed for by them from thecompany. The processing time for the same is rather slowand blocks working capital.

• Company initiatives: To improve the sales figures,company trains the sales force once or twice a year fornearly three days each. The training covers issues likenegotiation, after-sales services, technical know-how,sales leads generation, conversion etc.

• Incentives -

• 90-100% sales target: ~6-8%

• 100%: ~10%

• Dealer meetings are a recent phenomenon to engage ontargets/problems/updates where dealers 500+ dealersengage with the company to solve issues that are beingfaced by the dealers. This meeting typically occurs once ayear and is looked forward to by all the dealers.

• Delivery Time: Typically, an order placed at Indore, goesto the Bhopal Warehouse, if there is a stock out, theorder is delivered from headquarters at Mumbai.

• On an average, order takes 25-30 days for fulfillment.Modular Kitchens, which can be customized, can takeapproximately a month and a half to be delivered.

• For ensuring logistical support, dealers tie-up with locallogistic providers on a contractual basis.

• The logistics expense nearly accounts for 2-4% marginerosion.

• A similar expense is the trade discounts, which furthereat up into the profitability of the venture, leaving nospace for a price war.

DEALER




Recommendations

The showrooms are companyowned, therefore, are directlycontrolled by the headquarters.• Showrooms offer better display

and are associated with betterquality services and customerexperience.

• Delivery from the warehouse isdone to both Showrooms andDealers & takes 5-7 days, whilefrom the headquarters toshowroom, deliveries take 22-25days. The General Lead time 4-6weeks

The prices tend to be similar acrossShowrooms and dealers, however,dealers can offer higher discountsby reducing their margins.

Promotion activities:The Company has a database of

7-8 years of customers, who aretargeted by the stores duringpromotions.• Just dial inquiries are directly

sourced to showrooms.• Promotions are normally done

through newspaperadvertisements through thecompany.

• All expenses are borne by thecompany.

Targets and evaluation: Targets aregiven to stores, on a quarterly basisand based on the branch size bythe company. Evaluation of thesales team in the showrooms isdone of target achievement,feedback from seniors, andbehavior with customers andcolleagues.• The performance is measured,

as bands O, A, B. Salespeoplewithin the showroom aremotivated time and again, aquote mentioned in theshowroom: ‘Two things defineyou, your patience when younothing and your attitude whenyou have everything.’SHOWROOMS

HIERARCHY

FOR

SHOWROOM OUTLETS




Recommendations




Recommendations

SALE & MANAGEMENT SYSTEM FUNCTIONING B2B

• 60-70% of the sales come from dealers at

Godrej Interio 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.

• 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 2-2.5 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.




Recommendations

FUNCTION OF KEY ACCOUNT MANAGERS

Competitors

• 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

• 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

Stellar




Recommendations

Competitors

• 24 stores (19 company owned)

• Focus on imported furniture serving premium

customers

• 2 Mother warehouses (Bhiwandi (S&W) &

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

eVok




Recommendations

• Two stores in Indore

• In operations since 1885

• Strong local presence

• Being considered as one of the biggest

competitor in Indore

• Focused in B2C segment

Mehidpurwala

Competitors




Recommendations




Recommendations

• 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




Recommendations

• 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

INDIAN FURNITURE INDUSTRY Analysis Godrej Interio Distribution Channel Sale Management Competitors...

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