Indian Institute of Management, Kozhikode

Retail Management | Section B | Group 2

STYLE SPA FURNITURE RETAIL OF INDIA1

1. Introduction

Headquartered in Chennai, India - Style Spa Furniture Limited, a company promoted by the Zuari-
Chambal group of the K K Birla conglomerate was established in India in 1997 to manufacture and
retail furniture. Style Spa is the largest furniture retailer in India with over 90 exclusive showrooms
spanning the length and breadth of the country with an approximate business of 100 crore rupees.

Style Spa’s competitive edge lies in its elegant range of products which are difficult to replicate, its
State of the Art manufacturing facility that ensures consistent quality, a large retail network,
experienced, and qualified personnel that make up the Style Spa team and not to mention the tens
and thousands of homes that revel in the Style Spa brand of Good Living.

The outline of this study is as follows. The next section will discuss the background of the furniture
retail in India. The evolution and a general overview of Style Spa furniture would be discussed next.
This will include a detailed analysis of various retail facets of Style Spa as merchandising,
promotions, store design, pricing, human resources, etc. for this organization. This would be
followed by a conclusion, references and various annexures.

1
This document was developed by Vijyendra S Niranjan (FX/12/002), Siddharth Jain (PGP/12/134), Vaibhav
Kapur (PGP/12/143), Budhaditya Choudhary (PGP/12/214), Gaurav Bhatia (PGP/12/215), and Vishal Anand
(PGP/12/243), all students of Indian Institute of Management, Kozhikode, India under the guidance of
Professor Anirban Sengupta of the Academic Staff College of India at Hyderabad.

The authors would like to place on record their gratitude to Mr. Clifi Phillip, Senior Branch Manager, Style Spa,
Calicut for his time and precious comments, many of which form the basis for this report.

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2. Background – Furniture Retail in India

The Indian furniture market is estimated to be worth Rs 350,000 million. Within this, the wooden
furniture accounts for Rs 60,000 million. Of this the imported furniture market is currently worth Rs
6000 million and is growing at 50 - 60% each year. The furniture sector in India only makes a
marginal contribution to the GDP, representing about 0.5 per cent of the total GDP.

The interiors industry is currently riding on the boom of the real estate industry which is the second
largest employer in India after agriculture. The retailing space in this sector has historically been
dominated by the unorganised sector largely by small-sized shops clustered together in a market.
Even the consumers have been historically dependent upon traditional shops for all their home
decor/furniture needs. The most important change in the retailing pattern that led to the boom in
consumer spending has been the rise of organised retailing.

According to one market survey home improvements (38%) and leisure holidays (37%) as the two
pursuits Indian consumers are willing to indulge in. Many of the world's leading home fashion brands
are available in India through domestic retail outlets. The market for home decor, including
accessories, hardware, furniture and furnishings is estimated at USD 14.4 billion. Total home
furniture market is expected to be about 200 million rupees, of which 15% is in the organized retail
sector (Sivakumar 2009).

Indian consumers are dispersed. Generally, Indian manufacturers use a three-tier selling and
distribution structure, namely, distributor, wholesaler and retailer. The gross percentage margin for
a retailer is 10 to 15 per cent, followed by distributor (4 to 5 per cent) and wholesaler (3-4 per cent).
Indian companies sell furniture through distributors as well as sell directly to the consumers. The
larger companies have their own commercial offices and showrooms in all the large cities in India.

Logistics play an important role in distributing products to all corners of the country. Due to its vast
territory challenges in implementing a smooth supply chain model is really challenging and hence
outsourcing to third parties is very common and an useful and effective strategy to reach market
place just in time, which is the practice followed by many retailers.

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By large estimates, an organized retailer like Style Spa, which manufactures in bulk, can only hope to
meet about 10 – 15% of the total furniture market demand. The bulk of the market goes to the
unorganized sector, who can generally make customised products (generally of teak or other hard
wood) that can last very long compared to processed wood that Style Spa uses.

The existing industry structure can be excellently analysed using Porters 5 Forces framework and a
diagrammatic representation is given below:

Fig. 1: Adapted from: Porter (2008)

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3. Style Spa Furniture

The Gautier brand was launched across the country during 1998 through a network of exclusive
outlets and became the first national player in the organized retailing of home furniture. The tie-up
between the KK Birla group company Gautier India Ltd and Groupe Seribo expired in September
2003 . The brand was then renamed Style Spa World Furniture.

Style Spa Furniture Ltd managing director Arun Mahajan said: “This is an opportunity for us, since we
no longer want to restrict ourselves to French furniture but have incorporated global concepts. We
plan to imbibe world trends and create world-class designs and styles to suit the taste of the
discerning customer. With this new initiative, we expect 25 per cent compounded year-on-year
growth.”

All the ninety plus exclusive showrooms of the company will support the Style Spa brand. The
company also plans to open style Spa Boutique Stores in metros. It also has plans to enhance its
product portfolio by including furnishing and accessories related to furniture.

A perceptual map of various furniture retailers in India comparing their positions with respect to
quality and price can be shown as below. In this, the value proposition of Style Spa has been much
better in the organized furniture segment.

Fig. 2: A perceptual map of various furniture retailers in India

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3.1 Visual Merchandising and Store Layout

An average store size for Style Spa can be about 1500 sq. ft. whereas major stores can be often more
than 3000 sq. ft., especially in metros and larger cities. Going by the store in Calicut, the brisk
business can be seen by the store brimming with products, and very little space left for customers to
walk around.

The arrangement of most of the products was in a typical room setting, where the sofas, bed’s and
other merchandise are displayed in a natural layout to ease customer visualization and aid in faster
product purchase.

Fig. 3: A sample Store Layout of Style Spa, Calicut

The Various kinds of furniture sections on display at a STYLE SPA retail outlet are:
• Bedroom
• Living Room
• Dining Room
• Study Furniture
• Miscellaneous
• Office layout

The overall store layout is divided into different sections with each sections having furniture’s
arranged according to its functions. One section has dining room furniture while the other section

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showcases bedroom furniture selections. This actually helps a shopper to visualize how every piece
of furniture might fit into their homes.

3.2 Store Location and Expansion

Each store has generally a small warehouse attached where it keeps its regular inventory. Each state
may have one or two master warehouses where a bigger quantity of products is stored and from
these the stores are serviced regularly. Thus, the Hub and Spoke model is followed for Store
replenishments to economise on the transportation costs.

The whole state of Kerala has only eight stores and seeing the sales of a store like Calicut outpace
that of Cochin, it can only be wondered how many more stores that company can still open in the
future times.

The location of stores for the company is varied. In small towns as Calicut, the store is located in a
place where the economics are cheaper. However, for some cities, it has its showroom in very
exclusive locations as in the case of Delhi (Lajpat Nagar) or in Jaipur, where it is located in the
famous Apex Mall. However, as a general trend, the company has chosen to set up stores where it is
cheaper to do so. While this may be beneficial in the economic sense, the target market may be
more than willing to associate with more exclusive shopping complexes than with individual standing
stores may hurt the company in the longer run.

Generally for a store, there is a fixed rent for a certain amount of time (say 3 – 4 years) and an
annual increment for the rent decided. If there is a change in location, the new agreement can add
to the cost structure and the outlet may be paying a high amount as rent only, especially if it has to
set up in new upcoming malls and other markets.

From a corporate perspective, the company has been opening stores in multiple locations in the last
many years. This has served the purpose of popularising the brand name as well as increasing sales
in diverse part of the country. This strategy can be close to being a category killer in the furniture
market, where Style Spa aims to provide all types of modular furniture throughout the country.

From a city perspective, once established, it is very difficult to relocate a store. There are multiple
reasons for this, some being, that customers already are well aware of the store and its location.

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Changing the location may require extra investment in the form of advertising to inform current and
potential customers of the new location, apart from the transaction costs involved in moving to the
new location.

Taking the example of Calicut, the current location of the store is strategically located in the centre
of what one can call a furniture market, with more than ten furniture stores nearby. This ensures
that the competitors can benefit from the higher footfall that the place generates. Some other
factors for being in the current location is because of the lower rent due to the agreement signed
years ago.

3.3 Product Assortments

The products are made from processed wood or laminate and it comes with a one year replacement
warranty and a 15 year support, any calls to which are charged nominally after the one year period
comes to an end. For some high end imported products (as leather sofas), the products will come
with a one year service warranty.

The general product assortment is decided at the corporate level, but the Store Managers have full
freedom to choose from these assortments that they will be willing to carry in their stores. The
company gives full freedom to the Store Managers to sell any product in the company’s range and to
prepare their own plans, as long as they are in sync with the financial targets set. Depending on
these plans, the company sets up its production scheduling at Chennai and makes the goods
available to the stores.

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 Fig: 4: A sample of various furniture available with Style Spa

Generally there is very little customization that the company or the store does for orders. However,
if the order is above 20 million rupees, as in the case of educational institutions, the company also
does customised orders.

3.4 Pricing

Pricing is an important differentiating factor for Style Spa . It was seen that prices are set according
to quality and match competition (which is not yet so great for the company). It was also seen that
price saving and profits are reflected across the supply chain . Major factors taken in account while
deciding on prices are:

• Type of furniture: The type of furniture includes if the furniture is a bed (with or without
mattress), table , chair etc.
• Quality of wood: The quality of wood may range from teak to mahogany .Every kind of wood
has a finish and life which gives them a competitive price in the market.
• Service: Types of services range from a limited guarantee to extended warranty.
• Styling: Styling mainly refers to the designs used in different furnishings.

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 • Level of Customization: Style Spa produces about 500 to 600 furniture items a day, so for a
customized order the number of articles offered must match the range.
• Finish /Texture: Mainly refers to the kind of polish and finishing.

The general considerations on setting retail prices and its implication for Style Spa is given
below:

Fig 6: Adapted from: Levy et al (2008)

Shankar and Bolton (2004) have identified the six determinants of retail pricing strategies viz.
Competitor factors, storability and necessity, chain positioning and size, store size and assortment,
brand preference and advertising, customer factors.

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Generally for an established chain as Style Spa, the pricing strategy is directed from the corporate,
except in cases involving bulk deals where the Store Manager has a discretion to offer discounts
based on the contract value and other considerations as establishing relations (with educational
institutions for example) or targeting a new segment of customers (as Hotel businesses targeted by
the company recently). The effects on pricing of the various factors are given below:

No Factor Consideration for Style Spa

1 Competitor factors Very little direct competition. Generally little consideration.
One of the first companies dealing in modular furniture. Has experience
2 Category factors
and expertise in dealing with them.
Stores and generally in vicinity of other furniture stores to take
3 Store factors
advantage of agglomeration economies.
4 Brand factors Style Spa is a well recognised brand for modular furniture.
Chain positioning has been in the major towns and cities of India, where
5 Chain factors
the spending capacity is high.
Generally non institutional customers are upper middle class buyers, for
6 Customer factors whom quality price value is a consideration, thus price alone does not
act as a determinant of purchasing behaviour.
Table 1: Pricing Considerations for Style Spa

Thus, as of yet, Style Spa has wide amount of leeway in setting up prices of its products. Even though
being in a monopolistic situation, the price range for a typical store can run from a few thousand
rupees (for a small table) to a few lakh rupees (for a complete home set). Promotions are generally
distributed throughout the year and typically give very heavy discounts (upto 60 – 70%) for high
ticket items. However, as competition starts intensifying, Style Spa may need to change its pricing
strategy for various products to keep them in line with current market practices.

3.5 Customer Management

A simply Style Spa store gets an average 60 to 70 walk ins from a potential customer with the
intention to buy and typically the store has anywhere from 45 to 55% conversion rate.

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A typical customer is a next generation customer, well aware of the western ways of living and
recognising established brands and favourably communicating with them. Such customers,
especially in the Kerala market are those who are working abroad. The newer generation prefers the
fast pace of life and is more comfortable buying readymade furniture for their new and modular
luxury apartments or first homes. These would include IT and management professionals, many of
whom have worked or have contacts with abroad, including the Middle East and the western nations
as US and UK.

These customers are also active influencers to their parents and relatives and by their rhetoric
convince them to go for the faster mode of buying things as furniture in a non-customised fashion,
which their parents would never do.

Of all the age groups, a customer less than 40 years old is very easy conversion, and convincing
above 60 years currently is pretty difficult, as they have been through their own established way of
life, and would prefer furniture that can literally last for generations and would thus get it made at
some old and reliable traditional shop, whose ancestors may have done deals with their ancestors.

Style Spa, apart from individual customers, also caters to institutions, but the percentage is very low.
For institutions, a very large order is required to fulfil their needs of customisation and service levels
required by these institutions in contracts necessitate these large orders. However, they are slowly
moving into newer territory as hotels.

Of all the customers, about 30% could be said to be repeat customers. These customers who have
already experienced Style Spa have a very focussed brand awareness and need not be convinced
about the product and product quality again.

However, for new customers, the convincing takes a lot of time and effort as the awareness of the
customer is low and they have lots of other options to look out for. They are thus given more
attention by the Store team as one conversion pays off during the entire customer lifecycle.

3.6 Marketing Communications

In the monthly and quarterly meetings, the marketing department reviews and authorises the
promotional activities which generally include advertisements in local Cable Television channels,

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newspapers and signboards. These activities are increased during special seasons as Onam, a very
important festival in Kerala and for the New Year.

The demand is generally less in seasons, especially celebrations, especially for heavier and costly
products as bedroom furniture. The demand increases during the House Warming season in Kerala,
when there is a rush to buy bulkier products as bed-sets and cupboards.

During promotion season (approx end of calendar year), existing customers are also offered
additional discounts, the details of which are sent to them through direct mailers, emails.

An exmaple of a promotional communication is shown below, while more examples are attached
with Annexure 2.

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 Fig 7: A typical promotional communication [Source: http://saleraja.com/bangalore/stylespa-bedroom-packages-for-as-low-as-rs-29200]

3.7 Logistics and Supply Chain

The logistics of Style Spa follows a more Centralised form of delivery with a decentralised form of
order processing. The orders are processed based on the requirements of the Store, complete
freedom of which exists with the Store Manager. However, this planning needs to be done in
advance.

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A typical hierarchy is depicted as follows:

Fig. 8: Logistics Organization for Style Spa

The products thus flow from the centralised manufacturing facility (which does a master production
schedule once a month) to the stores via some centralised warehouses, and the orders and
information flow in the reverse direction. All these intermediaries are company owned.

Currently the supply chain is based on simple movements of products from the factory downstream
to the warehouses and to the stores. Latest innovations as Radio Frequency ID (RFID) are not
employed, and this may be because of cost considerations and practical implementation
perspective. The company however uses computer and software for conduction its transactions and
there is a regular interchange of information between various locations especially between the
stores and the Head Office / factory in Chennai.

3.8 Human Resources

All the employees in any Style Spa store are company appointed. For example, in the Calicut store,
there were two Sales executives apart from the Store Manager. A partial hierarchy could be depicted
as follows:

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 Fig. 9: Partial organizational hierarchy for Style Spa

Sales executives are responsible for customer acquisition and conversion once a potential customer
lands into the showroom. A Store manager is responsible for the overall performance of a store and
directs the work of the sales executives.

There are two reporting authorities for the store managers. On the financial side, they would report
to the Vice President for Finance. This report would be on a monthly basis. For Marketing activities,
the reports would go to the Regional / Area managers and through them to the VP (Sales) via DGM /
GM responsible for sales.

Apart from the regular compensation, the store personnel have a percentage commission scheme
on a sales band basis. On meeting the monthly sales target, there commission is a regular
percentage. Anything higher is compensated on a higher band, meaning more rewards for them.
Apart from this, many incentive scheme including quarterly and annual trips to exotic locations in
India (ex. Goa, Kodaikanal) and abroad (Thailand, Dubai, Mauritius) are organized for personnel
meeting the required sales quota.

On the training front, there is an annual refresher course organized for all personnel involved in
selling to identify various products and in general to improve the sales skills. Technicians are trained
in-house at company’s facilities so they can be very well aware of the furniture pieces and how to
install them in the least possible amount of time.

There are company trained technicians at all store locations that address to customers’ needs and
can generally install any product in the customers place, as well as provide service as and when
required.

3.8 Financials

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Monthly, quarterly and yearly targets are set up store wise for each store, these targets are mainly
revenue based. These are generally raised in a progressive way every year, with the average increase
being in the range of 20% – 25%. The Store Manager for Calicut was confident of meeting the
increased sales targets every month.

Generally if a monthly target it not met, it can be carried over till the quarter and the quarterly
targets would have to be met to qualify for the quarterly incentive.

Given a jealously guarded private company, the accounts for Style Spa are not open to the public,
even though various estimates are floating in the market.

4 Competition

A view of the local market at Calicut show about ten to fifteen smaller retailers in the vicinity of the
Style Spa, almost all selling furniture products. A few blocks down is a Godrej Interio showroom that
has recently moved into the home and home office furniture market and

Of the major stores located nearby, Godrej does not seem to worry this store as the image of Godrej
is of typical government office product, generally not associated with high end home furniture. The
manager however jokes as having one Godrej furniture in the form of his cash box.

Damlo and Suari are other competitors who are very near to Style Spa in location as well in
competition. However, these are owned by same parent company as Style Spa and are sold through
independent distributors. The products are a lot (upto 55%) cheaper than Style Spa, however these
are not of the same quality and these furniture shops provide lesser service than Style Spa.

A few traditional furniture merchants are also to be considered in competition with Style Spa.
Generally these traditional merchants own just a shop or two, but delivery very high quality of
craftsmanship catered to individual requirement, and at prices and margins far above the ‘cookie-
cutter’ approach of a brand as Style Spa. Some other traditional showrooms exist in Calicut, which
the company may want to consider in its competitor analysis.

Style Spa would also have to be aware of its previous partner Gautier, which is planning to launch
new furniture stores in India from 2012 onwards, which on an average would be more than 5 times

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an average Style Spa store and the entire product range would be imported from France (Sivakumar
2009).

5 Conclusion

Style Spa – as a modern organized retailer in the market of interiors – is brand which charges a
premium for its products as compared to other generic furniture manufacturers. The general
company strategy involves scouting for low to medium priced properties to set up stores and
normally enters into long lease contracts at low prices in order to bring down the operation costs. A
typical store measures nearly 1500 sq. ft., while larger stores may be more than 3000 sq. ft. in terms
of the area. Most stores are generally located in the hub of the furniture street in any city. The store
enjoys autonomy in the sense that the inventory and range of products to be carried can be decided
by the store manager as long as it fulfills the sales targets. The orders are processed centrally and
dispatched to the state warehouse from where they are shipped to the respective stores, each of
which has a warehouse to store the excess inventory and stock. The amount of sales varies
depending upon the marketing efforts. The marketing efforts are mainly carried on through local
channels such as cable television, newspapers and hoardings in a given area. The sales volumes
increase significantly during the period when any promotional sales offers are introduces. The
general customer walk-ins are usually around 60-70 per month, but increase exponentially during
such offers. The typical conversion rate is somewhere in the region of 45-55%.

The company has a reward system in place which aims at boosting employee morale and aims to
enhance productivity in terms of sales revenue generated. Each store has its monthly, quarterly and
annual targets clearly defined. Any deficit in meeting the target can be carried forward to the next
month. Upon successful completion the company offers tours across India and abroad to location
such as Goa, Dubai and Thailand. These targets are also revised every year by nearly 20-25%.

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References

• Levy M., Weitz B. A., Pandit A. (2008) Retailing Management 6th edition Tata McGraw Hill,
Delhi
• Porter M. E. (2008) The Five Competitive Forces that Shape Strategy Harvard Business
Review Jan 2008 pp. 79-93
• Shankar V., Bolton R. N. (2004) An Empirical Analysis of Determinants of Retailer Pricing
Strategy Marketing Science Vol. 23 No. 1, Winter 2004 pp. 28-49
• Sivakumar N. (2009) Ebony Gautier to invest 120 cr to set up 20 stores The Economic Times
Jun-29,2009
• www.stylespafurniture.com
• Interview with Mr Philip at Style Spa Calicut.

Annexure 1 – Some organized retail players in the Furniture industry

No. Brand Owner

1 Home Town Future Group
2 Home Bazaar Future Group
3 @ Home Nilkamal
4 Lifespace Godrej
5 Home Stop Shoppers Stop
6 Style Spa KK Birla

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Annexure 2 – Sample advertising and Promotions

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Annexure 3 – Some competitors in Calicut city
Source: http://yellowpages.webindia123.com/dpy/Calicut,+Kerala/Kozhikode/Furniture+Shops/1/

Woodcraft Industries

36/1341A, Vengeri, Kozhikode - 673010

Surabhi Wood Industries

Nallur, Feroke, Kozhikode - 673631

White Line Furniture Showroom

Kallai Road, Chalappuram, Kozhikode - 673002

Vikrasankadi Furniture

Pallikandyc, Westhill, Kozhikode - 673005

Tip Top Furniture

No.1/862, Westhill, Kozhikode - 673005

Thomarakattil Furnitures

No.III/1092-A, Thiruvambady, Kozhikode - 673603

Style Spa World Furniture

Sowbhagya Shopping Complex, Mavoor Road, Kozhikode - 673004

Standard Wood Crafts

Feroke, Kolathara, Kozhikode - 673655

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