Monday, March 20, 2006

Furniture shops

Furniture shops are a dime a dozen in India. Much more than any other set of shops, except perhaps grocery, there are furniture shops. Some of them belong to the organized sector like Godrej, Style Spa, but far more than the organized sector are the unorganized sector shops. These shops have fancy names but little beyond that. They have a bunch of carpenters and some rudimentary machines to work wood. If one is not careful, you can be taken for a ride in terms of price, quality, dates and everything else. Why is this business so big?

My guess is there are a few driving factors that make every Ramu set up a furniture shop.

1) It is a high margin business. Between the money paid to carpenters to the end product sold as a single piece, the margins are huge. While carpenters charge about 500 per sq ft on an average including labour costs for woodwork (varying upto 1000 per sq ft, depending on which wood is used) the lower end carpenters come for much cheaper. Like the Indian IT model, a whole host of carpenters work under an umbrella brand- only unlike IT, profits are not shared with these carpenters who are from the hinterland and who are paid peanuts.

2) Some of these furniture shops are family/extended family run outlets. That allows them to cut costs and make more money.

3) Furniture making is a low skill job that, with a few skilled persons and lots of unskilled persons can be a money spinner.

4) No IP on designs. The typical modus operandi of these shops is to pick up a catalogue of one of the designer brand. How to pick up a famous furniture catalogue? Go to any raddi (junk newspaper) shop and you are sure to find a furniture design catalog for a few bucks. Show it to a carpenter and he can crank a replica for a fraction of the price.

5) The amount of leakages of wood from Indian forests is high. Since there is nobody who tracks where these shops buy wood from, my guess is many of these are fronts for the forest and timber mafia. This is also reflected in the amount of counterfeit brands available. These operate as "Number 2" (a parlance for tax evasion in localese) businesses.

In most new areas where there are new apartments being set up, the number of these furniture shops is huge. Similarly in places where there are new, unauthorized constructions coming up, on is sure to see a furniture shop or two. I have not been able to establish the connection between unauthorized construction/shops and furniture shops, yet, but I guess there is something there also.

Anything else?


Prasanth said...

7) They make to order which none of the organized sector players do. Give them a design and they will make it for you.

Pawan said...

Oh how I wish IKEA would set up shop in India.

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