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Cloudion Homes: Revolutionizing Furniture ‘Business’ in India

CASE FRAME, E-COMMERCE
ET Cases, 5 Pages
AUTHOR(S) : R. Muthukumar and Dr. Nagendra V. Chowdary

Case Preview

Cloudion Homes: Revolutionizing Furniture ‘Business’ in India

 

With 78% of Indian furniture retailing under unorganized sector, organized furniture (22%)retailing consists of offline furniture retailers – like Godrej, Wipro, Damro, @ Home, Homeshop, etc., – and online furniture retailers – like Urban Ladder, FabFurnish, Pepperfry, MebelKart, etc. With the increasing penetration of online furniture retailing in India, how would unorganized furniture retailing in India be affected? Cloudion Home’s (along with eDIY) new business model seems quite riveting and disrupting. How would Cloudion Home’s furniture retailing model affect the Indian furniture retailing? .......................

I. Indian Furniture Market: The Business Landscape

1. What is the structure of Indian furniture market/industry and what are its characteristics?

2. What is the size of Indian furniture market? How much of it constitutes online furniture retail market?

3. Contrast the value chain processes of offline furniture retailers (within organized sector) with that of online furniture retailers sector.

4. .............

II. Online Furniture Retailers in India: Models and Competition

1. What do you understand by horizontal and vertical segments of online furniture retailing and who are the players in each of these two segments?

2. Who are the major online furniture retailers (vertical players) in India and what is your analysis of them?

3. How do you think customer mix would alter the online product mix and how does it affect a firm’s competitive advantage?

4. ................

III. Cloudion Homes: Business Model and Challenges

1. What according to you is the operating model of Cloudion’s business?

2. Do you think Cloudion can disrupt Indian furniture industry?

3. How can furniture improve people’s life at home?

4. ...................

Teaching Note Preview

Cloudion Homes: Revolutionizing Furniture ‘Business’ in India

 

Synopsis

Indian furniture market, with a value of INR140,000 crore, is dominated by unorganized sector with 80% of total Indian furniture market. The organized furniture market consists of both offline and online retailers. The offline furniture retailers include Godrej Interio, Durian, Hometown, eHome, Damro, Wipro, Homeshop, Usha Lexus, etc. With the advent of internet and increasing penetration of e-commerce, online furniture retailing – both from horizontal players like Flipkart, Amazon, Shopclues, eBay, Snapdeal, etc. and from vertical players like Urban Ladder, FabFurnish, Pepperfry, Housefull, MebelKart, etc. – has been witnessing considerable growth rates and is expected to grow at a CAGR of 75% and reach $700 million by 2020. There is an immense competition amongst online furniture retailers and between offline and online furniture retailers. This Case Frame provides scope to understand and analyze the Indian furniture retail market.

Amidst such competition, Cloudion Homes (through its retail venture EDIY) enters Indian furniture market with seemingly disruptive customer-business proposition. What is Cloudion Homes’ (Cloudion) Business Model? What are the distinguishing features of this model? Does it have the power to disrupt Indian furniture market? What are the challenges to this model? This Case Frame also provides scope to analyze if Cloudion’s business model can revolutionize Indian furniture market.

Prerequisite Conceptual Understanding

Mandatory Exercise

As a part of this Case Frame’s classroom analysis, the following exercise is suggested to enable an effective discussion and analysis of this Case Frame:

  • • Students/participants must visit www.cloudionhomes.com and www.ediy.in to understand the unique customer value proposition, its operating, business and revenue models, and how customer has been collaborated with to create value
  • • Visit any of the online furniture retailers’ sites – Urban Ladder, Pepperfry, FabFurnish, etc. – to have an overview of product profile, delivery models, etc.

 

Case Positioning and Setting

This Case Frame can be used for either of the following Programs/Courses/Modules:

  • • MBA Program – eCommerce Course – Online Furniture Retailing Formats – To understand the two different online furniture retail formats (Horizontal vs Vertical), the value chain implications thereof and the challenges in each of these two models
  • • MBA Program – eCommerce Course – Business Models – To examine and discuss the prevalent business models in Indian online furniture retailing – The Marketplace Model vs In-House Model, and debate on the organizational implications of these two models and also to understand Cloudion’s business model
  • • MBA Program – Strategy Course – Business Models – To analyze Cloudion’s business model and examine its ability to disrupt the Indian furniture market’s retailing landscape

 

Preamble to this Case Frame’s classroom analysis

This Case Frame is meant to analyze the business landscape of Indian furniture retail market, offline vs online furniture retailers, and Cloudion’s business and revenue model. The sequencing of questions – organized through the three sections given in the Case Frame – is meant for this purpose. However, as can be seen, the questions related to the advertisement appear in the last section as a sufficient understanding of the basics of Indian furniture retail market (both online and offline) is necessary to address the questions related to the advertisement given in the last section. Accordingly, the Case Frame was orchestrated [Exhibit (TN)-I]....................

I. Indian Furniture Market: The Business Landscape

The purpose of this section was to encourage the students/participants to understand the nature, business landscape and characteristics of Indian furniture market.

Before getting into the discussion on the Indian furniture market, the idea of furniture was highlighted with a brief discussion.

Furniture, made out of (a variety of ) log of wood/trees, comprises of the following:

• The movable objects, which may support the human body (seating furniture and beds), provide storage or hold objects on horizontal surfaces above the ground, are called furniture
• Storage furniture is used to hold or contain smaller goods like clothes, tools, books and household goods
• Furniture can be a product of artistic design and is considered a form of decorative art
• ...............

......................................

What is the structure of Indian furniture market/Industry and what are its characteristics?

The furniture and furnishing market in India is fifth largest market in the world with a value of $20 billion. Indian furniture market with a value of INR140,000 crore is largely fragmented and unorganized. Around 85% of the market consists of unorganized players. The organized furniture retailing consists of offline furniture retailers – like Godrej, Wipro, Damro, @ Home, Homeshop, etc., – and online furniture retailers – like Urban Ladder, FabFurnish, Pepperfry, MebelKart, etc. Exhibit (TN)-III captures the structure of Indian furniture retailing market.

Characteristics of Indian furniture market:

a. Highly regulated (not whole industry) – only the source and transportation of raw material (wood) is regulated. Wood being a reserved category product, the
cultivation, cutting (timber and saw mills) and transportation/shipment of furniture is highly regulated. It is governed by respective state governments’ laws/acts
b. As most of the Indian furniture market is unorganized, it is labor intensive generating employment for lakh of workers/carpenters (utilization of skilled and
unskilled workers)
c. ........................

............................

Exhibits

Exhibit (TN)-I: Classroom Discussion Dashboard

Exhibit (TN)-II (a): Stakeholders in Furniture Business

Exhibit (TN)-II (b): Customers’ Buying Furniture – The Value Chain

Exhibit (TN)-III: Indian Furniture Retailing Market

Exhibit (TN)-IV (a): Offline Furniture Retailing – The Value Chain

Exhibit (TN)-IV (b): Online Furniture Retailing – The Value Chain

Exhibit (TN)-V: Michael E. Porter’s 5 Forces Model to Assess the Intensity/Nature of Competition in Furniture Industry

Exhibit (TN)-VI: Business Segments of Furniture and Furnishing Business

Exhibit (TN)-VII: Major Offline Furniture Retailers in India

Exhibit (TN)-VIII: Online vs Offline Furniture Stores

Exhibit (TN)-IX: Major Online Furniture Retailers

Exhibit (TN)-XI: Market Place vs In-house Model

Exhibit (TN)-XII: Cloudion’s Operating Model

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Abstract

This Case Frame, based on Cloudion Homes' (Cloudion) advertisement (in The Economic Times, December 3rd 2015), is an attempt to analyze if Cloudion's business model can revolutionize Indian furniture market. Having co-opted customers as a part of the furniture retailing business value chain, how would customers and company be benefited? Indian furniture market, estimated to be INR140,000 crore, is dominated by the unorganized sector with 78% of total Indian furniture market. The organized furniture market, with 22% of the total Indian furniture market, consists of both offline and online retailers. The offline furniture retailers include Godrej Interio, Durian, Hometown, @Home, Damro, Wipro, Homeshop, Usha Lexus, etc. With the advent of internet and increasing penetration of e-commerce, online furniture retailing - both from horizontal players like Flipkart, Amazon, Shopclues, eBay, Snapdeal, etc., and from vertical players like Urban Ladder, FabFurnish, Pepperfry, Housefull, MebelKart, etc., - has been witnessing considerable growth rates and is expected to grow at a CAGR of 75% and reach $700 million by 2020. The competition amongst online furniture retailers and between offline and online furniture retailers is not only bringing new dimensions to customer value propositions but also putting pressure on the margins. Amidst such competition, Cloudion (through its retail venture EDIY) enters Indian furniture market with seemingly disruptive customer-business proposition. What is Cloudion's Business Model? What are the distinguishing features of this model? Does it have the power to disrupt Indian furniture market? What are the challenges to this model?



Pedagogical Objectives

  • To understand the nature and business landscape of Indian furniture market from the stand point of view of size, segments, players, market shares, the value chain, etc.
  • To discuss and debate on online furniture retail formats (Horizontal vs Vertical formats of online furniture retailing), the value chain implications thereof, the business models of online furniture retailers (Marketplace Model vs In-House Model) and examine the critical success factors for the same
  • To analyze Cloudion’s business model and discuss the impending challenges and debate on its ability to “disrupt” Indian furniture market

Case Positioning and Setting
This Case Frame can be used for either of the following Programs Courses/Modules:

  • MBA Program – eCommerce Course – Online Furniture Retailing Formats – To understand the two different online furniture retail formats (Horizontal vs Vertical), the value chain implications thereof and the challenges in each of these two models
  • MBA Program – eCommerce Course – Business Models – To examine and discuss the prevalent business models in Indian online furniture retailing – The Marketplace Model vs In-House Model, and debate on the organizational implications of these two models and also to understand Cloudion’s business model
  • MBA Program – Strategy Course – Business Models – To analyze Cloudion’s business model and examine its ability to disrupt the Indian furniture market’s retailing landscape



This Case Pack Includes:
- Abstract
- Case Frame
- Teaching Note (**ONLY for Academicians)
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