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
• ...............
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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. ........................
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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
