The Indian Online Furniture Industry

India's furniture market is a dynamic industry that contributes significantly to both local consumption and exports. With a population of 1.4 billion people (the world's largest), India provides a large consumer base as well as a developing middle class with increasing disposable income. According to the Trade Promotion Council of India (TPCI), India was expected to be the fifth-largest manufacturer and fourth-largest consumer of furniture in the world (2022). The Indian furniture market was valued at approximately US$ 23.12 billion in 2022, and it is predicted to rise at a CAGR of 10.9% to reach US$ 32.7 billion by 2026 (according to TPCI). Major demand factors include increased urbanisation, rising house decoration and refurbishment, rising disposable incomes, changes in lifestyle and consumer tastes post-COVID, and a surge in e-commerce. India presently ranks 16th in the global market for furniture exports (according to TPCI). According to TPCI, the global furniture industry is expected to increase at a CAGR of 6% between 2021 and 2030, reaching US$ 872.5 billion by 2030. India contributes around 1.12% (2022) to global furniture exports, which are at US$ 3.5 billion (2022) and rising at a CAGR of 15% (2018-22). The contribution of India to total furniture imports in the United States, Germany, and the United Kingdom in 2022 was 2.48%, 1.99%, and 1.66%, respectively. India's wood exports are reaching new heights, increasing 2.53 times from US$ 246 million in 2013-14 to US$ 623 million in 2022-23.

According to 1Lattice, the Indian furniture market is anticipated to be worth Rs. 66,000 crore (US$ 7.92 billion) in FY23, rising to Rs. 1.20 lakh crore (US$ 14.41 billion) by FY28. It includes a diverse range of products, with wooden furniture emerging as the primary contributor to both the domestic and export markets. The commercial sector is further subdivided into non-contracting and contracting. Traditional workmanship combined with modern designs provide a varied range of alternatives that cater to changing tastes. 

Rise of the Furniture Industry in India

According to Invest India, India is the world's second-largest producer of lumber and the sixth-largest producer of natural rubber. The COVID-19 pandemic has been revolutionary, with digitalization and e-commerce becoming the sector's primary development drivers in the future. According to a blog by Invest India, D2C sales are predicted to increase at a 36% CAGR to reach US$ 17 billion by 2030. Younger purchasers with shifting preferences (modern, useful, and versatile modular designs) are driving demand for the furniture industry in India. Furthermore, the appeal of traditional handicraft-design mixed furniture with modern functionalities is producing a unique line of possibilities that preserves the Indian-ness of the domestic furniture industry.

Note: P-Provisional

Source: RedSeer Strategy Consultants

Manufacturing Steps

The wood goes through a thorough treatment (Seasoning/Chemical) before it is crafted into a piece of furniture.

• Seasoning Process

Depending on the weather, the wood is stored in a seasoning chamber. In the winter, the wood is seasoned for 13-16 days, and in summer, it is seasoned for 7-10 days. The moisture content is reduced to a level of 5–9% of an Indian solid wood furniture piece to maintain its durability and to endure most types of weather.

• Chemical Process

The chemical treatment of wood standards for manufactured furniture is highly stringent. The wood is stored in a chemical chamber for two hours, where chemicals like biflex-termiticide and wood preservative chemical (CCB) are utilised. This assures that the wood is termite-free and that the furniture made from it may be utilised in Indian weather as well as shipped to other nations around the world.

Manufacturing Steps of Indian Furniture

• Surface Planner

The piece of wood is first sliced horizontally. This measurement is approximate in order to assemble all the boards to build the piece of furniture. The lengths of wood are categorised based on whether it is dining furniture or living room furniture, as each requires a different length after the first cutting is done according to the appropriate sizes.

• Thickness Planner

The thickness may differ depending on the type of furniture being created and whether the wood is mango, teak, or Sheesham.

• Trolley cutter

The trolley cutter is used for rough cutting, which could be for smaller sections of furniture such as drawers, small doors and so on before the furniture is assembled.

• Clamping

As most furniture is built in joints, the planks must be secured before the furniture is assembled. This is where the adhesive employed comes into play to guarantee that the joints remain intact, and that movement is minimum. This is especially crucial for large surfaces like dining tabletops and living room sideboards.

• Sanding

Sanding the wood guarantees smoothness once the furniture is completed. The sanding machine is used to sand the wooden plank.

• Panel Saw

A panel saw machine cuts the furniture neatly, with even borders, clean cuts, and precise edge finishing.

Future of Online Furniture Market in India

According to a report by RedSeer Strategy Consultants, India's online furniture and home market share in India is expected to reach US$ 40 billion by 2026, fuelled by pent-up and deferred demand. The report also estimated the growth of online furniture and home market to rise at a CAGR of 39% by 2026. The online home category contains home décor, furnishings, mattresses, and lights. According to RedSeer Strategy Consultants, the online furniture sector will witness a three-fold increase in shoppers by 2026, with an expected 1.8-fold increase in yearly expenditure per customer. According to a report by 1Lattice, the online furniture business is predicted to expand at a CAGR of 27% and is estimated to reach Rs. 16,000 crore (US$ 1.92 billion) by 2025.

Note: P-Provisional

Source: RedSeer Strategy Consultants

A new group of companies is entering India's organised furniture retail industry at a time when established players are either reorganising their operations or simply scaling back their presence. For example, the Kishore-Biyani-led Future group has chosen to focus on sectors like food, fashion, and fast-moving consumer goods, while spinning off its home furnishings division into a separate firm. Furthermore, organisations such as Urban Ladder seek to reach out to more consumers at reduced costs by establishing experience zones, becoming an Amazon vendor, and pushing for higher profits.

Growth Drivers of the Online Furniture Industry

• Innovative eRetail

From well-listed and separated products based on colour, function, and area of the space to the utilisation of AR/VR, online shopping is currently providing consumers with a near-perfect and immersive purchase experience. Online shopping saves customers’ time and energy while they are relaxing at home.

• Work From Home

According to industry experts, corporates and independent consumers are employing ergonomic curated products to make working from home more productive, particularly in metro cities, resulting in a boom in furniture rentals.

• Wider reach

Online furniture retail has grown significantly as a result of effective and fast delivery, choices for tracking shipments, easy returns and exchange policy, and value-added services like furniture assembly and disassembly performed by last-mile service providers.

• Boom of social media

Customers can find various furniture brands (large and small) via smart catalogues on various social media platforms (Instagram, Facebook, etc.). Brands receiving frequent feedback through social can improve their services.

• Increased internet penetration

Access to the internet is made easier by rising smartphone usage and growing internet consumption at reasonable prices.

Government Initiatives

• To stimulate indigenous manufactures, the import duty on furniture was raised from 20% to 25%.
• BIS Standards on modular furniture were published by BIS in 2022 to improve standardisation in furniture and assure product safety.
• India recently concluded the India-Australia Economic Cooperation and Trade Agreement (ECTA) and the India-UAE Comprehensive Economic Partnership Agreement (CEPA), both of which provide zero-duty market access opportunities for furniture (made in India) in these global markets.
• PLI scheme

The government has already launched a Production Linked Incentive (PLI) program worth approximately Rs. 2 lakh crore (US$ 24.02 billion) for 14 industries (including automobiles and auto components, white goods, pharmaceuticals, textiles, advanced chemistry cells, and speciality steel). The government is exploring a Production Linked Incentive (PLI) programme for types of furniture in order to increase domestic production, exports, and job creation.

• India's National Retail Policy Draft (2021)

It focuses on developing strategies to establish a globally competitive and sustainable environment for the overall development of retail trade through targeted initiatives.

Objectives

• Ensuring rapid and simple access to borrowing at reasonable rates.
• Enabling the retail trade to become more modern and digital through the promotion of cutting-edge technologies and excellent infrastructure assistance.
• Physical infrastructure development across the distribution chain.
• Promotion of skill development and increased labour productivity.
• Providing the sector with an effective consultative and grievance redressal process.

Challenges in the furniture industry in India

• Availability of raw material

According to the Trade Promotion Council of India (TPCI) blog, the cost of raw materials (mostly particle board) is approximately 25% more in India (as compared to China), which results in a 27% higher cost of furniture production compared to Chinese imports. A few of the main obstacles that drive up the price of raw materials are the scarcity of certified wood in the country, the small scale of commercial forestry operations, and the increased expense of imports.

• Dominant Unorganized Sector

The Indian furniture market is highly fragmented, with the unorganised segment accounting for 80% of sales. The unorganized industry poses challenges such as a lack of standardization, inconsistent pricing, limited access to technology and innovation, the absence of industry regulations and limited export potential, all of which impede growth and competitiveness.

• High logistics costs

In the furniture industry, transportation and logistics costs account for around 6%-8% of total manufacturing costs, (as compared to 4% in China), making the industry prices uncompetitive.

• Ease of doing business

Although India has made tremendous progress in enabling and cultivating an environment advantageous to businesses in order to attract more foreign investment, it still lags behind China in numerous critical areas, including launching a business, enforcing contracts, and registering property.

• Cost competitiveness

In India, the high Goods and Services Tax (GST) rates on furniture (varying from 12-18%) make it costly for consumers leading to lowering demand. The requirement for phytosanitary certification and fumigation of processed wood products endangers the environment and creates hazards, adding to the regulatory burdens.

Road Ahead

The online furniture segment in India is anticipated to grow at the fastest rate due to the increasing number of furniture firms launching websites and selling their products through well-known e-commerce platforms that cater to younger and working consumers. The government must ensure that the online furniture industry is producing products that are globally competitive, competent, and compliant. Government assistance in the areas surrounding large particle board plants should be used to create furniture clusters. This will reduce the cost of transporting raw boards, which is responsible for most of the costs associated with raw materials. Lastly, the government may consider enacting export-oriented incentives, lowering GST rates to drive down costs and boost demand from consumers, modifying plant quarantine regulations to facilitate the import of processing components, and lowering import duty rates on final items. Furthermore, improving legal requirements for the efficient use of FTAs, diversification, and product development by encouraging the use of alternative sources, and supporting commercial forestation and sustainable forest management can all help enhance exports.

India has lower labour expenses, which could make the products of the furniture industry more price competitive. The expanding middle class in India represents a prospective for the online and offline furniture markets. The country has the opportunity to harness its rich cultural past and design capabilities to produce unique and appealing furniture goods in the international market. The industry can concentrate on strengthening its advantages while tackling the problems and areas that require improvement that were previously highlighted by identifying the areas where India has a competitive advantage. This strategy has the potential to help India establish itself as a strong player in the global furniture business.