Transcript Value Chain - Home Fashion India Week

Ajay Arora
Managing Director – D’ Decor
Home Fashion India Week - 2010
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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 2030
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
2030.
Home Fashion India Week - 2010
Source: Travel & Tourism Competitiveness Report 2009
MGI – India’s urban awakening. A T Kearney
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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
Home Fashion India Week - 2010
Source: MGI – India’s urban awakening
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Urban India will drive a near fourfold increase in
average National Income
Home Fashion India Week - 2010
Source: MGI – India’s urban awakening
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More than 100 million households will join the Indian middle class
Home Fashion India Week - 2010
Source: MGI – India’s urban awakening
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All large states will have more than 50% of GDP coming from cities
Home Fashion India Week - 2010
Source: MGI – India’s urban awakening
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Some of India’s largest metro regions would become the size of many
countries today
Home Fashion India Week - 2010
Source: MGI – India’s urban awakening
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Lets look at challenges in Indian market for
furnishing fabrics
Home Fashion India Week - 2010
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Key challenges - Industry
Disorganized sector
• Only 6% of the home furnishing market is
currently organized.
• Low entry barriers
• Lack of regulations
• TUF supports disorganized sectors
Domestic market – price
and value sensitive
• Mass market and bottom of pyramid customer
segments expect high value at low price points,
however all segments are growing
Require very high
innovation and product
development
• Customer taste and preferences vary from north
to south and east to west which calls for high
innovation and product development. This
increase complexity
Home Fashion India Week - 2010
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Key challenges – Industry (contd..)
Need global scale to be
strong locally
Imports come at lower
prices
Lack of Standardization in
construction
Small market of furniture
manufactures
Home Fashion India Week - 2010
• Market still developing and value conscious
• Economies of scale required in value products
• Sub standard material and stock lot imports
• Under invoicing reduces import cost
• Mass manufacturing of ready made’s thus not
possible
• 88% furniture market is made to order from
unorganized sector
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Key challenges – Macro Economic Factors
Difficult to create effective
distribution network in large
country
• Underdeveloped infrastructure
• Low investment in technology
Intellectual property law not
being enforced
• High imitation in design by unorganized sector
• IP and copy right laws not enforced
Cost of Real estate is high
• Real estate cost is a key element of cost and can
change profitability equation
Cost of making a brand is
very high
• Company needs to spend about 10% of sales for
first five years and between 5% to 7% thereafter
Home Fashion India Week - 2010
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Strategic Positioning
Operational
effectiveness
Can bring enormous
benefits, however from
competitive standpoint
the best practices are
easily emulated
VS
Strategic
Positioning
Strategic positioning
attempts to achieve
sustainable competitive
advantage by preserving
what is distinctive about
the company
Competition produces
absolute improvement in
operational effectiveness,
but relative improvement
for no one
Home Fashion India Week - 2010
Source: What is strategy – M. Porter
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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
Home Fashion India Week - 2010
Source: What is strategy – M. Porter
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Strategic thinking
•
•
•
•
Product
capacity
People capability
Finance
Evaluate current
strengths
Home Fashion India Week - 2010
Focus on Few
• Select
• Prioritize
• Organic
• Inorganic –
Strategic
partnerships, JV’s
etc
Expand
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Need a multidimensional strategic approach
Geography
Markets/ Geography
Value Chain
Product
Value Chain
Products
Home Fashion India Week - 2010
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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
Home Fashion India Week - 2010
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Need a multidimensional strategic approach - Product
Product Options in furnishing
Curtains & Upholstery Fabric
Curtains & Upholstery Non-fabric
Contract
Segment
Raw Materials
Product Spec
Cotton
Rolls
Office
MMF
Cut-lengths
Hospitality
Yarn / Piece
Jacquard
Fire retardant
Hardware /
Fittings
Silk
Ready-mades
Healthcare
Printing
Dobby
Stain protective
Blinds
Jute
Wool
Home Fashion India Week - 2010
Others
Technology
Dyeing
Weaving
Curtains
Processing /
Finishing
Trimming
Antimicrobial
Thermally
adaptive
(
Source: Datamonitor, A.T. Kearney estimates, SBI – US, International Furniture Association, Ministry of Textiles (India)
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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
Manufacturing
Distribution
Retail
Home Fashion India Week - 2010
Distribution
Brand
Retail
Product Value - Illustration
Value Rs
Operating Margin
100
15%
120
10%
180
10%
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Thank You
Home Fashion India Week - 2010
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