Primary Research

In an effort to understand the Indian furniture industry we went across the streets of Shillong and contacted both organized and unorganized furniture stores. This allowed us to understand the current working of the Indian furniture industry and the problems that are currently persistent in the furniture industry. Let us have a look at the few stores that we visited and the interview that we conducted.

Unorganized Retail
Megha Furniture and Exotic Furniture: This is a store in Shillong in Police Bazaar that sells furniture. Most of the goods sold here are TV trolleys, center tables and chairs. The store acts both as a retailer and a distributor. However the store does not produce any goods of its own. Rather all the products are brought from companies. The plastic furniture that the store deals in is brought from Nilkamal. The purchasing is done from Delhi and it is transported all the way to Shillong. The various parties involved in the process are the manufacturer, the purchase office and the transporters. Transportation is done mainly via road transport and is done through trucks. The other store of the retailer is Exotic furniture which deals in wooden furniture. The wooden furniture is bought from Supreme manufacturers and they also are transported from Delhi. From our interview we found out that the primary problem in their supply chain is due to the damage that is cause during transportation of the goods from Delhi to Shillong. This results in damage to the furniture and the loss is borne by the retailer. However they also added saying that the furniture which is broken in thrown away instead of being sold at a discount rate. As far as the inventory modelling is concerned being a part of the unorganized retail they do not have a fixed forecasting measure to estimate the demand of the furniture. Instead what the shop does is that it orders roughly 5-10% extra goods every time it orders from Delhi to account for the loss due to damage. They have a warehouse of their own in Shillong where they stock all the goods and the goods in the shop are replenished with the products from the warehouse/godown. Once the products are received the retailer tests them for the quality. Though there are no concrete ways to test for quality the only possible way the retailer does it is by testing for broken pieces. It was found that the damage for wooden furniture was more as compared to the damage to the plastic furniture. According to the retailer at Megha furniture the primary issue with them was that damage was a major concern for unorganized retailers in the country and especially in place like Shillong. When asked about the entry of IKEA into the Indian market he told that he was unaware of IKEA. The concept of IKEA was explained to him and he said that the unorganized sector would be unaffected by it.

M.B. Furniture This is another retailer in Shillong which deals in furniture. The types of goods involved is both wooden and plastic. This retailer get all its products from Alpha manufacturer which is primarily based out of Kolkata. The products are shipped from Kolkata, Delhi, Madras and Guwahati. In this case also the transport is via road and the products are store in a warehouse in Shillong. The retailer keeps stock for furniture in its warehouse amounting to roughly 10% of its sales. The replenishment or orders is done once every 2 months or when the stock is over whichever is earlier. In this case also the primary concern for the retailer was the damaged goods during transportation. Transportation is done primarily through trucks from all the cities mentioned above. Though the stock depends on sale stocking of good is primarily done for materials which get exhausted quickly. These include center tables and chairs. Primarily chairs which are made of plastic are sold fast and hence the retailer keeps a good quantity of stock of this product. Mahalaxmi Furniture The store deals primarily in sofa sets and it imports the clothing for the sofas from Panipat. The retailer is a local manufacturer and has his own factory in Shillong. Considering the goods that are transported via road there is no damage whatsoever in this case. On the other hand since the wooden furniture is manufactured in Shillong itself in that case the damage is very minimal as transportation is only from Polo to the shop in Police Bazaar. Moreover this store owner does not have any policy of stocking the material. All his designs are of a standard design and they are available only on ordering the product. Hence the costs involved in holding up of inventory is zero in this case. However he explains to us that the downside of this is that the time taken to fulfill an order at times is pretty long and this forces the customer to go away. But due to scarcity of space in his shop and factory he does not stock up goods and only produces them on receiving an order. Every time a product gets sold he replenishes the product with another piece from the factory. Discussion about unorganized furniture retail in Shillong: From our discussions with the furniture stores in Shillong we came to the following conclusions: Most of the retailers prefer not to stock up material as it adds up to their costs. They prefer to order buffer products from the manufacturer primarily to account for the loss in products due to damage during transportation. The furniture variants is very limited and there are not many designs available. There are very few middlemen involved in the process as they directly deal with the manufacturers as compared to other industries.

Organized Retail
For information about the organized retail we interview people from Godrej Interio that is present in Shillong near the fire station. Godrej Interio near the fire station is a dealer and they provide products to both retailers and offices and institutions. Godrej Interio has a warehouse in Guwahati from where the goods are transported to Shillong. However in case the product is not available in Guwahati it is ordered from Mumbai. The manufacturing unit of Godrej is in Mumbai and the products are shipped from Mumbai to Guwahati. However there are a few downsides to Godrej Interio which the Godrej Shillong head told us in the interview. The designs of Godrej Interio are fixed and although there are a number of designs the consumers want to have a design of their own and this is something that Godrej has not yet implemented. The head said that at times people visit the shops and get ideas about designs later on shifting to the local furniture shops. The problems that Godrej in Shillong faces is the problem of damage due to transportation. Since the products are shipped from Guwahati to Shillong a few of the products are subject to minor damage due to transportation. The same also applies to the goods that are shipped from Mumbai to Guwahati. The dealer mentioned that the products are transported both via wagon (rail) and road. Most of the products coming from Mumbai to Guwahati are transported via rail whereas the transportation from Guwahati to Shillong is done via road. Adding to the same he mentioned that the damaged goods which can be repaired are repaired and those which cannot be repaired are sold a discounted rate. As far as stocking is concerned they do stock products that are fast moving in nature. These include products like office chairs and sofa sets. Moreover stocking for fast moving low cost products is more as compared to slow moving high cost products. They mentioned that the considering the possibility of termite problems they do not stock many of wooden furniture products and prefer stocking plastic furniture only. Also the packaging of the products is done from Mumbai. Major concerns with Godrej Interio are the late coming due to unavailability of stock and the lack in service quality. According to them many a times the products that are required by a customer are not available with the dealer and the same takes time to be manufacture in Mumbai and to be transported to Shillong. This results in a lot of lead time resulting in dissatisfaction among customers. Moreover he also added that the service quality was less in areas which were far from the manufacturing units. In cases of repair or servicing the response time from Godrej was less and so was the case when the dealer tries to place an order with the manufacturing unit in Mumbai. Forecasting by Godrej is very interesting as mentioned by the dealer. According the dealer Godrej has an inbuilt tracking and forecasting system in place which allows them to track the

shipment of products as well as predict the surge and change in demand. Godrej dealers generally follow the policy of ordering the next years forecast + 20%. According to the dealer no one can predict a sudden spike in the demand and hence they keep a buffer of 20% while ordering the goods. The steel used in the furniture is ordered from Tata Steel. However Godrej has started to use its own wood in the furniture instead of getting it from locals. This helps to cut down extra costs and get more value for their money. On asking the dealer about the entry of IKEA in the Indian markets he gave us his views regarding the same. According to him following are some of the ways that IKEA will impact the Indian furniture industry. Indians are pampered customers and hence the model of self-assembling will take time to sink into the customers It will take IKEA time to penetrate the major markets as the urban markets have a population which does not want to take the pain of assembling the furniture on its own. IKEA will do away with the unorganized furniture retail sector as it will bring in a variety of products, designs and quality as compared to the local players. IKEA will have to set up a strong dealer base who are ready to assemble the furniture for the customers.

Discussions from Godrej Interio Late delivery of goods due to unavailable stock is a big problem. Service quality needs to be a bit more prompt. Damage done to the goods has to be sold at a discounted price resulting in loss for the dealer. Some furniture products cannot be assembled and are transported as a single piece from Mumbai/Guwahati which exposes them to damage. Instead of focusing on flat packed products the company focuses on using material to prevent damage which becomes ineffective longer distances.