Carpet

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The Indian Clusters: An Overview of the Carpet Industry

White Paper Series on Carpet Industry

Team D’Essence

Carpet Industry is one of the oldest industries in India. Carpet Weaving was brought to India by Moguls. Some of the majestic carpets were woven during this Mogul era. Over the period, the weaver has become an artist imbibing the magical exotic colors to the Indian carpets. Based on individualistic skill of the weaver, there is an aesthetic touch of the coloring and beauty in the carpets. Over the period, various clusters have emerged in the northern part of India. Initially, carpet weaving was done only at few centers. Due to several historical reasons and availability of resources, carpet manufacturing spread across the northern India. Major centers have been Bhadohi, Agra, Jaipur & Kashmir. During the last few decades, hand-tufted carpets have emerged as one of the major categories. Due to proximity to Home furnishing products, Panipat has emerged as another major center for carpet manufacturing.

Major Carpet Producing Centers in India
Over the years, various carpet weaving center have emerged in India. Each center has its own competitive advantage. These centers employ millions of people. Major belts are Bhadohi – Mirzapur and Agra belt in Uttar Pradesh, Jaipur-Bikaner belt in Rajasthan, Panipat belt in Haryana and Kashmir belt.

Market Size and Segmentation
The carpets manufactured in India are mainly exported. There is a very small market for carpets in India. This is mainly because of the purchasing power of local players. Also, there is no proper channel for marketing these products in India leading to lack of awareness in the Indian market. Presently, India exports carpets worth over Rs. 2600 crores. The domestic market size is about Rs. 200 crores. Many Industry players think that Indian market will expand rapidly based on current retail boom in India. Following table shows comparison of exports from India and other countries. Country-wise exports 1998 World Iran China India Pakistan Nepal Turkey 2028 547 365 378 126 203 101 1999 1926 520 346 341 122 122 97 2000 1977 647 249 351 217 140 98 2001 1760 537 227 330 211 116 98

Types of Carpets
There are various kinds of carpets available in India. These are as follows • • • • • • • Hand-knotted Woolen Carpets Tufted Woolen Carpets GABBE Woolen Carpets Handmade Woolen Dhurries Pure Silk Carpets Staple or Synthetic Carpets Chainstich Rugs

Each kind of carpets has its own tradition, design and significance catering to different needs of customers. They have developed unique competitiveness in the respective categories.

In USD Millions

The Industry has seen a decline during the late 90s. However, carpet industry has recovered over the last two years. Many players in Industry doubt whether this recovery will be sustained or not. There are two kinds of designs available in carpets: traditional & modern. Modern designs are popular among youths while traditional designs are popular among location elderly is people. The preference is not solely determined by age. Geographical also important determinant. Traditional designs are popular in southern European market while modern design in northern European countries. There is no such differentiation in US market. As said earlier, carpet industry’s major products are hand-knotted and hand tufted carpets. Hand-tufted carpet market is growing rapidly. Some of industry players believe that market is being shifted from handknotted segment to hand-tufted segment. However many players believe that both products are targeted at different markets. Additionally, hand-tufted carpets have already entered in to home-furnishing segment.

If one dissects the market, some interesting facts come to fore. The export destinations can be categorized on the basis of potential. Following chart shows some interesting facts about this.

G r o w t h

H i g h

Latin America/ South Africa

US

L o w

Japan, Australia

Europe

Low

High

Volume

Source: Discussion with Industry Experts It is clear from the chart that the traditional markets like Europe offer small potential for growth though the volumes are high. The scenario may change in future if southern European countries start driving the growth. For most of the players, USA offers a good market based on its size and growth. Also, demand for different kinds of carpets is not widely varying as in the case of other countries. Hence, USA offers an opportunity for both, traditional as well as modern designs. Similar case is for Hand knotted and hand tufted carpets.

Following chart shows the product wise market share in Indian exports.

Types of Carpets
Hand Knotted woolen Hand-tufted Woolen 67% Other handmade

11%

22%

Key Market Players
Following are the major importers in the industry • 1. Nourison 2. V. Heinrich 3. Theo Keller 4. Wissenbach 5. Abeth 6. Roubeni 7. Feizy 8. Capel 9. ABC 10. Obittee 11. Kalaty 12. Noonoo 13. Trans-Ocean 14. Beneleve 15. IKEA 16. Kibek • •

millions of people directly and indirectly. They are highly skilled in this areas Costs : India has an advantage in terms of costs. The labor costs in India are comparatively low. Also, total cost of producing a carpet is low compared to countries like Turkey, Iran with out compromising on quality fronts heavily. Innovations: Innovations is one of the major criteria for selling carpets. As carpets are considered as luxury items and consumer trends re changing continuously, innovation is a key for the success. The countries like China which produce low cost carpets lack in innovations Flexibility: Indian carpet industry can manufacture all kinds of carpets. Other countries have specialized in particular carpets. Also, the carpets of any size can be manufactured in hand knotted categories. This is not possible in machine made carpets. There are several kinds of manufacturers which can take small orders or big orders. Hence, Indian industry can offer wide options to a customer for carpet purchases. Weaknesses • Unorganized: Indian carpet industry is highly unorganized. Therefore, a lot of activities are duplicated. Hence, it increases the cost of production. Also, it increases the time of delivery of carpets. • Marketing Channels: The carpet manufacturers lack the proper marketing channels. They find it very difficult to access the customers is increase the • market. Therefore, they are heavily dependent upon the buying agents. Infrastructure: The infrastructure is very poor leading to higher time for production and costs.

SWOT Analysis of Carpet Industry
Indian Carpet industry is a unique kind of industry. It’s highly unorganized with lack of proper channels. Still, it has managed to show impressive performance in the past. What is behind this industry which drives the exports? One can not forget that it had significant share in Indian exports till early 1990s. SWOT analysis will bring forth the value drivers and stumbling blocks in this industry. Strengths • Artistic skills: Over the period, major carpet centers have built huge network of artistic weavers. The industry currently is employing

Also, buyers find it difficult to visit places like Bhadohi for looking designs. Most of the • manufacturers do not have showrooms in the cities to showcase their creations. There is only one institute which provides courses related to carpet industry. • Professional Approach: Majority of players lack professional approach for doing the business. They do not respect delivery time and quality issues. Therefore, buyers like to deal only through buying agents to control them. • Internal Competition: Many players have entered the industry increasing the competition. There is a tremendous competition among players on price front and are willing to offer very low prices even though some one has already taken order. • Intellectual Property Rights: Artistic Skills Lower costs Innovations Flexibility Many players in the industry copy designs from each others. There is a lack of respect for intellectual property rights. This demoralizes players from designing innovative products which is an expensive process. Opportunities • Globally, market is Home moving offers Hand which cheaper furnishing towards a new tufted are to • • •

attracted youth market as well. This segment can be further expanded After dealing with China for some time, many players think that India provide better option and flexibility. This kind feeling can further be tapped Carpets are generally considered to be expensive. With use of modern technology, prices can further be reduced. Also, cutting middlemen will directly benefit the consumers thereby increasing the demand. Organized operations can enhance the image of Indian Carpet industry. The companies like IKEA, Wal-Mart, etc can offer tapped. Unorganized Narrow Marketing Channels Poor Infrastructure Lack of professional Approach Unhealthy Internal Competition Intellectual Property Rights new and larger market to the manufacturers provided this market is properly

Strengths

Weaknesses

Caret industry. Hence, this movement market Carpets comparatively • for

Opportunities

Home Furnishing Market for low end carpets Youth Market Differentiation with China Demand growth through cost cutting Image enhancement through organized operations Big retailers like Wal-Mart, Ikea, etc Designing •

Threats

Rebound sustainability Unhealthy competition Backlash because of issues like child labor, etc

hand-knotted carpets Traditionally, the carpets were purchased by old people. The evolution of modern design has

Designing skills of India are being acknowledged at global level mainly in garments. Similar skill

set can be developed in the Carpet Industry and used as a marketing tool. • There is an opportunity for providing stocking and warehousing services to various players. Threats • If not handled properly, current rebound in the industry may not be sustainable. • Unhealthy competition in the industry kills each other. • Indian Carpet industry has not completely got rid off of issues like Child labor. Hence, risk of possible backlash on the industry is a going to be there for considerable time in the future although some action is being taken on this front.

New Markets Traditionally, carpets industry is dominated by buyers from USA & Germany. However, new markets are emerging for carpets and they are growing fast. These are basically developing countries or lesser developed countries like Spain, etc. Growth in income level is the major driver for this. Big Retailers Big retailers like Wal-Mart, Ikea can drive the growth in the carpet industry. These players have huge network with a large customer base. Low-end carpets can be a major product that can be targeted by these players. Cost Management In Today’s competitive market, price has become an important factor. Hence, better price can be offered through better costs management. Effective costs management will always be a competitive advantage to any player. The trend is common in every industry. Carpet industry is no exception. Better cost management will reduce the price which can lead to increase in volume sales. Business Process Up gradation As said earlier, the carpet industry is going through a major change. Timely delivery, better price and high quality products can only help carpet manufacturers for survival. Business Process Up gradation is the tool for achieving this. All these factors will definitely improve the present market as well as expand in to new markets. Otherwise, it’s going to be difficult for the carpet industry to grow.

Present & Future Growth Drivers of the Industry
Low – End Carpets Low end carpets like hand-tufted carpets are currently driving the growth of industry. These carpets have expanded the market as they are cheaper and affordable for many consumer segments. These segments are going to drive future growth for a considerable time. Modern Designs As in the case of low end carpets, modern designs are expanding the market. Modern design is attracting young consumers. Also, there are a significant number of consumers who prefer modern designs compared to traditional designs. These are prominent in countries like Germany, Scandinavia, etc.

Conclusion
It ca be said that the carpet industry is presently going through a major change. Traditional markets are saturated while new markets are officering opportunities for growth. Modern designs and low end carpets like Hand-tufted carpets are attracting new customer base. However, the total sales in the carpet industry have been stagnant in terms of value. Hence, traditional model of carpet business is no longer relevant. There is no single kind of customer. Market can easily be segmented now. Product mapping with the consumer preferences is necessary for the future growth in the industry. Indian carpet industry will find it difficult to compete with Chinese industry in terms of volumes and prices. Innovative range of products with lower volume is going to be mantra for success in Indian Carpet industry. Hence, efficient coordination and management of activities is a key for success for any Indian carpet business. This offers an opportunity for consolidation of activities for reduction in costs, improvements in quality standards, better product development and timely delivery of products thereby driving the growth.

No part of this publication may be reproduced or transmitted in any form or by any means, electronic, digital or mechanical, including scanning, photocopying, recording or any information storage and retrieval system relating to all or part of the text, photographs, logotypes without first obtaining permission in writing from the publisher. © D’Essence Consulting 2004

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