Why online furniture companies are yet to create their own place

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Updated: February 10, 2020 7:51:51 AM

According to RedSeer Consulting, the online furniture market in India grew at a CAGR of approximately 80-85% to reach approximately $310 million in FY19

 Furniture Industry, Ikea, Flipkart, Amazon, Pepperfry, Urban LadderIKEA, best known for its large format stores, has been adopting an omnichannel approach in India.

While e-tailers may have done well for themselves in segments such as apparel and smartphones, they are yet to strike gold with the furniture category. According to RedSeer Consulting, the online furniture market in India grew at a CAGR of approximately 80-85% to reach approximately $310 million in FY19 as compared to $104 million in FY17, and is likely to touch $700 million in FY20. But despite this rapid growth, online has less than 3% share in the overall furniture market which is pegged at $17 billion.

According to experts, while horizontal marketplaces are leading in this space when it comes to the number of orders, vertical players have a higher average order value. The average order value on horizontal marketplaces is below `10,000, while on vertical marketplaces it is `15,000. But with the entry of Swedish furniture major IKEA in the space, which is eying an omnichannel strategy in India and has launched online stores in Mumbai and Pune, the segment is headed towards competitive times.

Building capabilities

The top players in this space — horizontal marketplaces Amazon and Flipkart and vertical players Pepperfry and Urban Ladder — have been sprucing up their capabilities to better tap this segment.

Flipkart is currently targetting small towns, claiming to deliver to 16,000 pin codes in the country and offers installation services, too, in about 7000 pin codes. The company has built a separate supply chain for its furniture category. Furthermore, it has also introduced its private label Flipkart Perfect Homes.

“Beyond tier I towns, customers don’t have access to quality furniture, so we built our supply chain to solve this. Today, we get about 65% of our business in the category from tier II and beyond markets,” says Adarsh Menon, head of private labels, furnishings and electronics, Flipkart.

Amazon, meanwhile, claims to have 1.8 lakh products and 7000 sellers on its platform. Some of the brands it features include Home Centre, HomeTown, Godrej Interio, Wakefit, Sleepycat and Deckup, among others. “We have added close to 60,000 products in the last one year,” shares Suchit Subhas, director, large appliances and furniture, Amazon India.

Both the marketplaces are peddling affordability, offering no-cost EMIs and debit card EMIs. Vertical players, on the other hand, focus on a higher price range, an omnichannel play and private labels, chiefly.

“We have introduced nine private brands in the furniture category and one within mattresses. These private labels now bring in about 55% of our business,” says Ashish Shah, co-founder, and COO, Pepperfry. The company has 71 stores across the country, which bring about 35-38% of its business. According to Shah, launching a store in new regions helps drive activation of customers online and plans are on to open 50 more stores by the end of the next fiscal. Urban Ladder currently has 12 stores in some metro cities, while Flipkart has piloted an experience centre in Bengaluru.

Challenges galore

IKEA, best known for its large format stores, has been adopting an omnichannel approach in India. “Our goal is to reach 100 million people in the next few years. We will keep a strong focus on developing our digital channels, different services and exploring other types of store formats,” says Per Hornell, market and expansion manager, IKEA India. The company plans to open online stores in Bengaluru and Delhi soon, in addition to offline stores. It claims to have seen a traction of four million visitors on its Mumbai website since its launch.

Experts say that while IKEA’s presence hasn’t made much of a dent yet online, it could be a potential threat once it scales up.

“While IKEA has been careful with its strategy to protect its brand, it will see bigger traction when it has opened in at least three cities. This could be a cause for concern for others,” says Satish Meena, senior forecast analyst, Forrester Research.

However, Ankur Bisen, senior vice-president – retail and consumer products, Technopak, opines that as most of the furniture market in India remains unorganised, there is enough space for all. Besides IKEA, there are other challenges. “Indian consumers tend to order products depending on their region for this category. For instance, a Mumbai customer may want more compact furniture due to space constraints, versus other cities. These companies will have to keep such things in mind while building inventories,” says Meena.

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