What made you venture into the ready-made furniture business?
, with a turnover of Rs 1,700 crore, has been into the business of wood, plywood, laminates and veneers for the past 25 years. We wanted to explore new areas and a logical step for us was to enter the furniture segment, something that is allied to our existing business. That’s how from being a raw material supplier, we went into forward integration by getting into brands.
In the last three years, at Century Plyboards, we have been going to Milan every year to experiment with different designers. Each year, we bring two or three best international young designers, chosen from the Milan furniture fair, to India. We request them to make designs for us and have them manufactured at our factories, and then we display them at our annual “Aces of Spaces” design awards. Some of these designs are now available at the Nesta store.
Around two and a half years ago, our company management thought we should expand into new areas. Nesta was one of the ideas which ultimately got accepted, and I was made to head this business.
How big is the market for furniture in India and what is the growth rate?
Our knowledge about the overall furniture market is that it is worth around Rs 50,000 crore, out of which the home furniture segment is around Rs 8,000–10,000 crore. The ready-made furniture business has been growing at an average CAGR of 20-percent-plus over the last six to seven years.
The market is driven by the fact that people nowadays are short of time and not many of them can visualise how their furniture would like after they have got it made from a carpenter. So they prefer designer furniture that is available readymade. It is far easier to go to a good furniture store, select the colour and design and buy items off-the-shelf, rather than get them made on order from a shop and monitor the production closely.
What new trends have you been witnessing in furniture retailing in India?
In India, contemporary furniture has a lot of scope. People have aspirations for designer stuff in all categories. It is the same with furniture, as it is with products like apparel and footwear. The only reason why they cannot buy designer items is either because they do not have the reach or the products are not affordable. Nesta is trying to address both issues. We are offering affordable luxury which is obviously of very good quality as it comes from the house of Century Plyboards. We also have a good reach across India with a huge network of people and the desired resources to invest in this business.
Are there any interesting concepts you have introduced at the nesta stores?
We have a lot of spacing concepts. One thing we have understood about the Indian market is that while aesthetics is important, a lot of people want functional benefits too. So we have merged aesthetics with functionality, such as beds with cupboards and a table that is a study-cum-work-cum-centre table.
What is the price range at your stores?
Price ranges are all perceptive but it is all value for money. The bedroom set, which includes a bed with night stands, wardrobes and dressers, starts from Rs 6,000 and goes up to Rs 1.5 lakh. So we have a variety of products across all categories.Usually, a bachelor who does not earn much would want to shell out not more than Rs 60,000 for the whole house, so we have a positioning for such people. We also have something for those who can afford good luxury and are willing to spend a lakh and a half for a bedroom set.
We are purely into home furniture, so prime categories are living, bedroom and dining. For the kind of quality we offer, we may not be cheap compared to some of the big retailers, but in terms of value perception, we have a very good value for money.
The Indian furniture market is dominated by unorganised players. What kind of future do you see for modern retail in furniture?
The organised sector in furniture retail is growing at a healthy CAGR of 25 to 28 percent. The competition to us comes not only from other furniture chains but also from the unorganised sector. However, discerning consumers want a good brand and Century Plyboards has a solid pedigree.
Our challenges are more to do with how to consistently maintain good quality and service. Customer service is going to be a big challenge. Obviously, there will also be a lot of manpower turnover at the front-end stores. These are the two biggest challenges we foresee.
What is Nesta’s market positioning? What is your typical customer profile?
Our market positioning is “affordable luxury with the best quality from the house of Century Plyboards.” The fundamental customer profile is of people who don’t have time and others who are extremely migratory in nature and need furniture in a much larger quantity compared to those who don’t shift houses often. That is the reason why we have opened our first store in Koramangala in Bangalore.We are targeting people who belong to the age group of 25-40 because they have usually travelled across the world, are value conscious and expect good designs. They are also bargain hunters. They will go to three to four places to check out stuff and make decisions as a couple.
Do you import your products?
We have Indian as well as imported furniture. We import from Malaysia, Vietnam and China. Some items are manufactured by us while some are only designed inhouse. The quality of Nesta furniture is handled by our own people, whether in India, Malaysia or Vietnam. Our manufacturing unit is coming up in Andhra Pradesh in another two years.
What is the location strategy for your stores?
We plan to have a mix of all formats, from small to medium, but we are very clear that we will not go into a very large-format store. We do not plan to exceed 10,000 sq.ft. area.
What is your average store size and How much investment goes into setting up each store?
Out average store size is 6,000 sq.ft. In terms of carpet area and external signages, investments will be around `2,000–3,000 per square feet of carpet area. In the retail industry, we can only think about the operational profitability in less than a year’s time. In terms of ROI, when we are looking at a large investment, we expect returns in three to four years.
What is your marketing strategy?
We are targeting people who are well read, Net and tech savvy, and are well travelled. So we are going through almost all the media which includes print to ambient media, coupled with online media. We do not plan to get into TV but radio is one media that we are starting with.
What is your expansion strategy in India?
After launching Nesta in Bangalore, we have launched another store in Kolkata. We plan to open 111 stores in the next 5 years. With a minimum retail area of 3,500 to 4,000 sq.ft., we are targeting a revenue of at least Rs 500 crore from this business, with an investment ranging from a minimum of Rs 100 crore. We want a mix of company owned and company operated stores as well as a good mix of franchisees.