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A major thrust for imported Chinese furniture is it comes at a fraction of the price of locally available options. Import of furniture from China is on the rise and it is going to stay for some time due to favourable market conditions.
Three years ago Swedish furniture retail major IKEA’s decision to invest in India, roughly $100 million for setting up of each retail store is an indication of the potential and size of the furniture market in the country. In recent years, the furniture market has attained a sizeable number to attract organized players, and more importantly there has been a steady growth in the imported furniture segment. The size of imported segment can be gauged from the fact that furniture and home furnishing items worth about $1,493.27 million were shipped into India in FY2015-16 whereas the figures stood at $1,217.87 million till January of FY2016-17.
Favourable market conditions
Largest volume of furniture and home furnishing product (HS Code 9403) import comes from China, which stood at 75,930 tonne in 2016, followed by Malaysia which ships furniture goods of about 13,004 tonne and Italy is the third largest exporter with 9,441 tonnes. And the import segment is growing at about 10 per cent. One of the major factors contributing to growth of furniture import is government currently allows duty free import of furniture for all the SEZs and STPIs. A sales tax of 14.5 per cent is being imposed for transactions with local players. The demand for branded furniture has increased in India due to the emerging upper and middle class urban population. Although demand for local artisan furniture still exists, but the growth is in imports as consumers seek contemporary designs. All these have made India a net importer of furniture and furnishing products.
In 2000, the India government had allowed foreigners to invest 100 per cent in local furniture manufacturing. This policy enticed companies such as Sauder and Herman Miller (US), Lista (Switzerland), and Gautier (France) to enter the India market. For the period 2008-13, furniture imports grew at a CAGR of 17 per cent. The share of total furniture and furnishings import in total Indian imports was 0.2 per cent in 2012.
A majority of furniture movement takes place through sea route and JNPT accounts for about 39 per cent of import followed by ICD Tughlakabad which account for 18 per cent and about 11 per cent of imports come through ICD Whitefield. Few years ago the furniture market was largely controlled by unorganized operators but as the segment grew, some home grown organized payers such as Godrej Interio, BP Ergo, Featherlite, Haworth, Style Spa, Yantra Furniture, Millenium Lifestyles, Durian, Kian, Tangent, Furniture Concepts, Furniturewala, Zuari, V3 Engineers and PSL Modular Furniture, have expanded in this segment.
Giving details on the favourable market conditions for imported furniture, Neha Gill of Indian Importers Chambers of Commerce and Industry said, “The market outlook for imported furniture is on the rise. India majorly imports from China, Vietnam, Indonesia, Italy and Thailand, and most of the imports takes place in CKD form. Total import is $320 million and all furniture is imported by sea and main ports are Nhava Sheva and ICD Tughlakabad.”
Lack of benchmark pricing There is no price benchmark in the segment and so, importers quote many times higher retail sale price as compared to actual purchase rate. The declared value of imports from China and South East Asia are significantly lower than the declared values of imports from European countries such as Italy and France which mostly sell branded products. Hence, the declared values of unbranded furniture are found to be significantly lower than the declared values of branded furniture, as a result the prices of established brands are higher than the lesser known ones.
The Customs broadly categorizes imported furniture into four segments such as 1) Office Furniture 2) Home Furniture 3) Furniture of Special Solutions like Marine Solutions; and 4) Laboratory Furniture.
The major anomaly in the present valuation practices is that irrespective of the design, quality, brand, usage or material composition of the furniture, the valuation is mainly on weight basis. This leads to a situation where high end products made of solid wood or other expensive materials and those exquisitely or ergonomically designed are being valued on par with ordinary furniture made of pressed wood
Import boom here to stay
Revival in real estate and hospitality sectors in India is expected to help push the furniture industry’s growth. India’s furniture imports are growing mainly because of lack of modernization and innovative design, dearth of skilled labour, limited market access and lack of quality control in the domestic furniture industry. These are also the reasons behind non-operation of furniture factories in India. Around 262 or 19 per cent of the total 1,419 registered furniture factories in India were non-operational as of 2011-12, according to an ASSOCHAM report. Some of the major furniture supply regions are Shunde district, Langfang, Suzhou and Chengdu. The advent of e-commerce platforms in the B2B space have further facilitated placing overseas orders. A cubic feet of high quality teak costs more than `2,500 per cubic feet while Chinese furniture come at a fraction of its price. Chinese furniture is also becoming the trend due to increasing cost of good quality local timber which is in short supply. According to industry estimates there are about 10,000 dealers who import furniture.
The office furniture segment appears the most attractive, as it is growing rapidly and also offers large volumes. MNCs like Teknion have appointed sub-contractors for installation of its furniture solutions as the company imports furniture from its plants in Malaysia. Similarly, in the branded segment Durian sells imported furniture through 40-odd outlets. Even international express company has also entered into the segment of shipping furniture in containerized form to India. Chinese furniture manufacturers especially the high-end rosewood furniture manufacturers are mainly concentrated around the Pearl River Delta, Yangtze River Delta, Bohai Bay Area and Fujian province. Major distribution channels for high-end furniture are done through directly operated flagship stores, and multi-brand furniture retail chains. Many furniture makers have also launched e-commerce platforms and also sell through third-party online marketplaces like Tmall. But still sourcing and supply chain management is critical for furniture importers for catering to both, the home and commercial segments.
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