1. Ajay Arora Managing Director – D’ Decor
Strategies of Business Growth & New Opportunities in Indian Domestic Market for Furnishing Fabrics
Ajay Arora Managing Director – D’ Decor

2. 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 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
Source: Travel & Tourism Competitiveness Report 2009
MGI – India’s urban awakening. A T Kearney

3. 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

4. Urban India will drive a near fourfold increase in average National Income
Source: MGI – India’s urban awakening

5. More than 100 million households will join the Indian middle class
Source: MGI – India’s urban awakening

6. All large states will have more than 50% of GDP coming from cities
Source: MGI – India’s urban awakening

7. Some of India’s largest metro regions would become the size of many countries today
Source: MGI – India’s urban awakening

8. Lets look at challenges in Indian market for furnishing fabrics

9. 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

10. 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 cost
Imports come at lower prices
Mass manufacturing of ready made’s thus not possible
Lack of Standardization in construction
88% furniture market is made to order from unorganized sector
Small market of furniture manufactures

11. 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 equation
Cost 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

12. 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

13. 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

14. Evaluate current strengths
Strategic thinking
Product
capacity
People capability
Finance
Evaluate current strengths
Select
Prioritize
Focus on Few
Organic
Inorganic – Strategic partnerships, JV’s etc
Expand

15. Need a multidimensional strategic approach
Value Chain

16. 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

17. Need a multidimensional strategic approach - Product
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 (
Source: Datamonitor, A.T. Kearney estimates, SBI – US, International Furniture Association, Ministry of Textiles (India) 1

18. Need a multidimensional strategic approach – Value Chain
Evaluate portion of value captured at each level in the Value Chain, as Return on Capital varies significantly
Manufacturing
Distribution
Brand
Retail
Product Value - Illustration
Value Rs
Operating Margin
Manufacturing
100
15%
Distribution
120
10%
Retail
180

19. Thank You