Home Improvement Store: Growth Lies Ahead
Opportunity India Desk
Jul 19, 2019 -
4 min read
The home improvement market revenue in India is poised to rise from USD 800 million in 2018 to around USD 1,120 million by 2025, according to a 2019 Global Market Insights, Inc. report. The trend towards improving energy efficiency owing to favourable government policies and the necessity to reduce electricity costs is driving the home improvement market growth. India now offers tax credits as part of its green building regulations that have also added to this growth rate in the home improvement market. Similarly, lower lending rates coupled with increasing land costs are surging the home improvement market development. The other key aspects contributing to a rise in demand include rapid urbanisation, internal & external migration, increasing employment, and economic growth in the country.
System upgrades hold a substantial share in the global home improvement market. High demand is expected majorly due to technological advancements and an increase in remodelling services owing to old house structures. The segment includes spending on replacement or addition of products such as AC, heaters, lightings, wiring, plumbing fixtures, water heaters, and others. Also, the development of new security systems has surged market expansion.
The home improvement market is further categorised into different segments that, with the turn of the decade, are growing in a continuum with the surging consumer demands. Companies in ‘home improvement' products have shifted their operating models from being building material companies to becoming consumer durables companies. Home improvement products comprise goods such as tiles, laminates, sanitary ware, paints, furniture and furnishings, etc. Today's consumers yearn for a unique experience and are getting vocal about brands and the designs that don their houses. Real estate developers have realised this trend and are aggressively highlighting the quality of marble flooring and luxury, branded sanitary-ware in their marketing material to the customers. Due to the growing disposable incomes of individuals across the country, there is more money at hand, which people want to use for better home interiors. This trend is prominent in tier-2 cities as well.
Over the last few years the variety of products in this category has grown exponentially and the number of designs, styles, colours and specifications is higher than ever. Demand surge is mainly due to government programs: In addition to rising income levels, Government programs such as “Swaccha Bharat” and "Gramin Awas Yojana" are also anticipated to generate rural demand for sanitary- ware and plumbing equipment.
Consumer durables’ companies with the model of franchisees now boast of strong capabilities in areas like supply chain management, sales and distribution, brand building and product development. Home improvement products are organized in various catalogues and targeted at different customer segments, regions and price points. Local franchisee models that understand and can cater to local consumer requirements has further helped with the growth of this industry, specific to regional demands. This complexity in the supply chain makes availability of the right style at the right place and time easier for home improvement brands like Hindware, Jaguar and Chhabra Marbles.
Franchises have reduced to situations of lost sales as well as non-moving inventory impacting the sales and profitability of companies, as consumers have a chance to view the products they are investing in their local franchise of a renowned brand. Home improvement brands with the help of franchisees can increase their physical reach, and launch product at varied price points to sell to geographically diverse consumers. Word of mouth is a big part of gaining loyal consumers of any brands: they reach out to influencers such as architects, interior designers, plumbers and carpenters to get a greater knowledge of what works best, and hence, local franchise owners can gain the best traction with consumers through good quality product as well as local connections.
The investment for a home improvement franchisee would be Rs. 50-60 lakhs and the area required for said stores could exceed 1200-1500 sq ft. The inventory for a home improvement store would amount to Rs. 20-25 lakhs, which could be higher depending on the segment of the home industry you franchise in. The interiors would amount to an additional 10 lakhs. The store would also require a 4+1 staff requisite whose salaries would also amount to the same Rs. 80,000-1 lakhs. The miscellaneous expenses would be higher in range amounting to another Rs. 80,000-1 lakhs. However, a store of this category could earn monthly revenue of Rs. 12-15 lakhs, placing its breakeven between 8 months-1 year depending on location/city of the store as well as the popularity of its inventory to the local tastes.
