MUMBAI, India — The Indian urban furnishing retail market is estimated to reach $4 to 5 billion by 2012 and is growing at 18 to 20 percent, according to industry sources. Home decoration constitutes a major share and demand is driven by the refurbishing of corporate offices, hotels and hospitals. India now has 110,000 hotels in the organized sector, which is half of its current need and more than 120,000 rooms are planned to provide a big boost to the demand for furnishings according to predictions from Edelweiss Corporate, a financial services company with headquarters here and around the globe.

Predictions state that the current urban population of 230 million will reach 590 million by 2030 and 68 cities with populations of more than one million each, 13 cities with more than four million each and six megacities with populations of 10 million or more.

While India has evolved into a promising emerging economy in the retail furnishing segment, it was in its infancy a decade ago and is passing through an important phase. In 2008 at an industry summit, IKEA India Property and Establishment Manager, Staf Lenders, said, “India is not ready for big retailers yet...maybe we can talk about it in 2015/16. I am not impressed by the big investments happening in this market today and I want to see return on investment, which is not happening.”

But things are happening quicker than expected and the Indian furnishing retail industry has come a long way fairly quickly.

“The change is happening but India has only a few full-fledged retailers,” said Mandeep Wadhwa, Managing Director, Seasons Furnishings Ltd., New Delhi. “Profit-making by retailing will only accrue by offering services where the customer can visualize décor aspects…but un-zipping the Indian fat wallets will always be challenging. Branding is yet to take hold since housewives and their chosen upholstery makers have major influences too. Importantly, we have
very qualified architects in India but real interior designers with aesthetic and product knowledge and the ability to provide complete solutions
are in short supply.”

India, which treaded with careful socialist policies for four decades, changed to a market-oriented economy in 1991. Since then, the economy is growing at eight percent plus a year and has escaped the shadows of a global meltdown due to a strong manufacturing base and regulated financial discipline. Many global automotive companies have made India a production hub for exports and to cater to robust domestic demand. The growing middle class has more disposable income due to new reduced personal tax slabs and the ripple effect of rapid urbanization which will likely push the organized retailing sector further. Edelweiss predicts that the sector will record a growth of 18 percent annually until the year 2020.

“In decoration fabrics, we were an early entrant (since 1994) and are well-established in supplying to the retail market,” said Gurvinder Singh, Managing Director, GM Fabrics Pvt. Ltd. “The market growing at 20 percent a year has been a blessing as Indian exporters have taken a beating and capacity utilization has suffered due to weak global markets. Also the input costs are rising and over-supply is evident but in order to sustain, many have reduced the prices despite input costs of all types of yarns being up 40 percent from five months ago.”

“The distribution method has changed in the last four years since most producers prefer distributors to reach retailers and roll stocking by retailers has been done away with in preference of cut lengths,” said Karan Sehgal, Beekalene Fabrics Private Limited. Few European brands surveyed confirm that opportunity in Indian markets runs in miles and miles but can be easily copied with lower weight and repeat orders can be insignificant. “Reasonable quantities of fabrics are imported in India from low to high end and even Indian fabrics that get exported to Gulf countries are reimported to overcome any restrictions on design exclusivity offered to overseas markets,” said Sharan Parekh, Director at Splendour, a 55-year-old retail furnishings company.

“Currently imported fabrics are from Europe, Turkey and the Gulf region and are retailed between $50 to $250 a meter. Surplus/stock lots also make their entry and import duties. Plus, taxes are harsh — up to 40 percent — thus limiting the opportunities for overseas exporters.” According to retail sources, currently more than 80 to 100 retailers well-established stock imported fabrics to cater to corporate, hotel and rich Indian consumers.