Formats of furniture stores:

As we know, there are various retail formats exists in modern retail such as super market,
hypermarket, department stores, specialty shop, mom-n-pop, shop in shop, franchising etc.

Similarly, furniture retail stores are of various kinds which are listed below.

 Lifestyle stores: - These types of stores carry all the items required to furnish a home.
These stores not only include furniture but also home décor items such as rugs,
tableware etc. But they do not offer high varieties of furniture compare to other
formats.
As the customers get many necessary things at a same place, they prefer to shop in
these kinds of stores. It is easy to coordinate the requirements for the shoppers if
availability is at a single place. So, we can say that lifestyle stores are similar as a
supermarket of modern retail. Ikea and Pottery Barn are some of the examples of this
format.
 Traditional stores: - These stores offer high variety of furniture. Due to this, these
are able to provide various styles of various price points. Most of these shops buy
their product locally and hence able to gain loyalty of local customers too. These
factors help traditional stores in becoming favorites of furniture shoppers.
 Manufacture-branded furniture stores: - Many manufacturers after supplying their
products to established brands gain knowledge of that particular demography and
move ahead to open their own furniture stores. They do not carry wide variety and
styles but trust and strong pull of customers help them in being successful. American
brand Thomasville is an excellent example of manufacture-branded furniture stores.
 Specialty stores: - These stores operate on particular kind of style and design. For
example one specialty store will sell only office-décor furniture whereas other would
sell only contemporary furniture. Every specialty store has its own look and feel.
These stores operate among high-end customers.
 Used-Furniture stores: - These stores are, as the name suggest, operate in used
furniture. They buy used furniture at low price and then sell them to customers with a
little margin. Their customers are mostly students and first-apartment user.

The format we have chosen for our assignment is Traditional Furniture Store.
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Global Trends in Furniture Industry:

During the economic recession, the furniture retail industry was negatively impacted as
consumers cut back on non-essential spending, but now there is an uptick in demand. In fact,
the U.S. furniture industry has outpaced the U.S. economy in recent years. While the housing
market improves and discretionary spending increases, we will see this growth continue. By
2019, the global market for furniture and floor coverings is forecast to reach $695 billion.

Luxury Furniture Market is expected to garner $27.01 billion by 2020, registering a CAGR
of 4.1% during the forecast period 2015-2020. Major factors owing to progress in this sector
include rise in disposable income that leads to the rise in demand for luxury living thus
influencing sector growth. The major industry trends are as follows-

1. The rise of telecommuting is driving the demand for home office furniture.
The need for home offices increased during the financial crisis in 2008-2009 and the
European debt crisis in 2011-2012, driving increased demand for computers, desks, office
chairs, and filing cabinets. Consumers quickly found that their home offices had multiple uses,
and they often preferred to buy versatile furniture that could cover up office equipment when
not in use. As a whole, the market for global home office furniture is forecast to grow at a
compound annual growth rate (CAGR) of 5.58 percent between 2014-2019.

2. Multi-functional, versatile furniture is gaining popularity.

The number of single- and two-person households has been increasing, resulting in the demand
for small and portable furniture. Consumers have also been looking for furniture that is multi-
purpose, foldable, and technology-driven, especially when it comes to living in smaller spaces.

3. Online is the fastest-growing channel in developing markets.

The U.S. home furnishings store industry includes about 15,000 stores with combined annual
revenue of about $27 billion. The industry is extremely concentrated, with 50 of the largest
U.S. stores accounting for 75 percent of the industry revenue. But, the competition is rising.
Online stores are becoming the fastest-growing channel at a CAGR of 16.6 percent. Many
companies are putting more efforts towards their online retail stores, by adding benefits for
consumers who shop online such as free delivery and installation and even same-day pick up.

4. The demand for luxury furniture is increasing.

As the economy has grown, more consumers are willing to buy luxury items for their living
and work environments. The global luxury furniture market is expected to grow at a CAGR of
over 4 percent between 2015-2019. In terms of location, Europe has the largest market for
luxury furniture, but developing countries such as China and India are not far behind.

5. More furniture vendors are choosing to go green.

With luxury comes the expanding trend to go green. Many vendors are developing eco-friendly
furniture. This trend is driven by environmental concerns, such as the problem of deforestation.
Although eco-friendly furniture is more expensive, the demand is on the rise, making it
worthwhile for manufacturers and companies to offer these products.
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Trends of Furniture Retail Industry in India:

The market size of the Indian Retail Furniture Industry is 17.13 billion (Rs 102,750 crore).
Nineteen percent is estimated to be the modern retail with a CAGR of 24-27 percent. (Retail
Hub, 2017). The major consumer segments identified by IBEF report is as follows:

(IBEF, Furniture industry, 2017)

The furniture industry itself can be classified into three categories namely furniture, décor and
furnishing. The furniture segment has the highest contribution due to the high frequency of
purchase of small furniture items like desks, chair, stools, tables, etc. These are responsible for
generating volumetric value for the business. Larger furniture requires higher investment
hence their market share in this segment is 25 percent. Hence before investing in a furniture
item, a consumer requires the need to touch and feel the item.

There has been a slight shift from furniture to décor as consumers due to increased propensity
to spend are investing in upgrading their home and office interiors and décors. The real estate’s
high level of activity has propelled the demand for furniture even higher in India. The economic
growth, increasing per capita income and GDP has been a significant boost for the real estate.

Attractive, fancy and luxurious furniture showrooms have been mushrooming across urban
areas in India to catch the eyes of the young and prosperous professionals. These professional
aren’t hesitant to splurge on luxurious furniture and stylish kitchen. Mass media is further
fuelling the aspiration of the young Indians for a better life style. Affluent segment pays
immense attention to intricate details and looks disregarding the price. Hence larger range and
assortment is catered to them by the international and top domestic furniture makers like
Haworth, Featherlite, BP Ergo, Durian. Godrej, Millenium Lifestyle etc. who have set up their
retail stores in India. (IBEF, Furniture Trends, 2017)
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Challenges and Opportunities:

A major challenge to an organised furniture retail store will be the availability of store space.
Since product display will be a crucial part of the store design, the space required for the same
will also be huge. Availability of such space at reasonable costs in locations with at least
moderate population density shall be a challenge.

Given the operational costs involved with the size of such an organised retail store, pricing the
products competitively shall be a challenge given the availability of local unbranded home
décor products.

The home maintenance expenditure in the Indian market, on average, is more an occasional
affair with most items being under the one-time expenditure bracket. Offering products for all
kinds of customers shall be a challenge.

Indians are used to moving furniture frequently for daily cleaning and mopping. An organised
furniture retail store also having modular home décor items as an offering under its cartel will
need to ensure that the products have the required endurance against the Indian consumers’
handling of the products given that most of these purchases are considered a one-time
investment by the buyer.

The young and urban population of India is gradually shifting towards organised retail. If we
talk about the furniture market, though local stores exist in India with backyard-designed
furniture wares and fittings, the purchase point for consumers is likely to change. Also, the
population is expected to shift to buying DIY furniture.

The Indian home décor market is fragmented with only a handful of stores offering everything
under a single roof. This could work to the advantage of an organised retail furniture store
which will aim to offer convenience to the consumer through the sheer width of product
categories.

Though the Indian consumer is accustomed to the heavy teakwood and intricate designs, with
modular fittings becoming a part of most modern constructions and delayed cleaning habits of
the working Indian class, this trend is likely to change. The consumer is also attracted to the
“modern architecture” as seen in most western countries. This will be an opportunity to provide
domestically designed modern home décor items to the local consumer.

Since the change of investment by-lines to allow 100% foreign ownership in single-brand retail
ventures in 2011, international giants are looking to enter multiple Indian markets including
the home décor market. This indicates more entrants into the market and hence more
competition. This will be a boon as it will help in maturing the market early on with regards to
a concept which is fairly new to the Indian consumer. Also, the “Make in India” initiative will
only help the cause enabling more support to a domestic chain as compared to foreign investors.

India is abundant with resources when it comes to furniture manufacturing. Skilled artisans and
carpenters are too easily available at reasonable costs. An organised retailer will be able
capitalise by utilising this abundance better due to economies of scale.
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Key competencies required:

With various competitors coming up in both offline and online formats, it is very challenging
for the traditional retail stores to sell furniture. Moreover, each unit of furniture occupy a lot of
space which is a major constraint for hyper-markets. With Ikea eyeing aggressive expansion in
the Indian market, given the poor performance in the other global markets and advent of new
online players like Urban Clap and Pepperfry, the erstwhile fragmented industry is expected to
shift towards an organized set up.

Lower Logistics Cost

The furniture business currently being a commodity business, price is the important aspect
considered while buying. The distribution costs of the furniture will be relatively higher for
hyper market stores. The costs incurred will be passed on to the customer thereby increasing
the price of furniture pieces. In order to overcome this supply chain problem and also in a bid
to reduce the distribution costs, Ikea sells furniture pieces that can be self-assembled by the
buyer. But the hyper markets being a conventional store, spends heavily on last mile delivery.
Hence there is a need in cost-effective delivery solution in this format of furniture selling.

Customization & Delivery Time

One of the key competency required for the traditional retail stores is the ability to provide new
trendy designs in furniture. A major disadvantage of retail stores is its inability to customize
furniture based on the customer’s request. It takes a lot of time to place an order with the shop
and deliver to the client. On the other hand, the online market place provides a lot of scope to
customize the furniture based on customer’s choice. When competing with the likes of Ikea,
the latter has a quick delivery mechanism which on the other hand is lacking for hyper markets.

Allied Services

The furniture industry is becoming more and more competitive. It therefore becomes an
important for the players to provide not just product but services. With increasing income of
the Indian youth, spend on the home décor has significantly increased and the furniture is just
a small portion of it. The consumers tend to purchase furniture mainly when shifting into a new
house or refurnishing it. When all the other players are selling only the furniture as a
commodity, the retail stores can provide service of interior designing as well. It will also
provide the stores an increased avenue to generate revenues. The key competencies required
for shifting from commodity to a service is good knowledge about the home décor industry and
the changing trends.

Returns Policy

Warranties, guarantees and replacement policies are another area of concern in the furniture
industry. The local furniture shops do not provide them. But in order to be a key market player,
it is important to provide those add-ons with the product.