In a candid conversation with Sourcing Hardware, Duravit India managing director Asutosh Shah shares insights about the Indian economy, emerging trends, and how the company aims to dominate the Indian bathroom fittings market
State of Economy
Most business and political leaders are acknowledging that the economy is slowing down. I believe it’s a state of demand slowdown, particularly of discretionary buying. This is the combined effect of global trade hurdles and major reforms in India. While the long term impact of reforms such as GST is expected to be positive, global trade issues may take time to resolve. India will have to find opportunities among trade conflicts, especially between the US and China. The lack of interest of private enterprise to invest and reduced appetite of the financial sector are the key concerns.
Building material suppliers cannot escape from the impact of the economic slowdown. The realty sector is reeling under the pressure of disruptive reforms like RERA, GST and demonetisation. The builders are faced with more compliances, and their ability to execute timely is being challenged. This is a complete reversal of the past, and their operating model has been turned upside down. Besides, the demand for premium housing is also facing a downturn, given that the buyers (small and medium businessmen) are facing challenges in their businesses. Investment in realty is a thing of past, and the current demand is essentially from real users.
Among all these challenges, an opportunity has emerged in the sub-segment of affordable housing. Due to concessions and thrust from the government, this segment has thrown up a great business opportunity. Clean India is another such initiative that’s leading to a high demand for products like tiles and sanitaryware. Further, the demand for commercial space has also done well in the recent past, due to investment interest from private equity and the development of REIT.
On the whole, realty is a sunrise sector with a lot of unfulfilled demand. It has a promising future in the long term. We are therefore not perturbed by the short term cyclical changes. With a strong foothold on the ground, Duravit is well poised for becoming a key player in the market.
I believe that the era of bathtub-based wellness is all but over, and the future belongs to the shower cubicle. As living units become costlier and consequently smaller, the bathrooms of the future will not be able to accommodate bathtubs any more. Besides, the modern-day shower system offers much more functionality and more luxurious spa-like experience than the bathtub. Given the fast-changing lifestyle, where consumers are always on the go, the shower is going to become the central fixture in bathrooms.
In the not-so-distant future, the bathroom fittings market in the metros will be dominated by global brands. With rising spending power, as well as awareness about international brands due to overseas travel and media, consumer preference will shift towards the globally dominant brands. These brands make their play on specifications and performance, besides award-winning and proprietary designs. On the other hand, the Indian brands, which have traditionally driven the markets, will find future growth only in the smaller cities and towns. This is already happening. Many of the large real estate developers are using only international brands, as they feel that these brands align with their positioning in the realty market. This trend is getting stronger since these brands have set up manufacturing facilities in India.
We are exploring the possibility of entering into strategic partnerships with small but respected bathroom fitting brands in various regions of the country. There are several SMEs that have been operating in the bathroom segment for several decades. They have well-established brands and are respected for their quality and business practices. However, in the present economic scenario where competition from large Indian and global brands is increasing steadily, we believe that such small players will eventually find the going tough. We are keen to tie up with SMEs on a selective basis and can offer them distributorship status for Duravit products. Through such tie-ups, they will be able to complement their product range with Duravit sanitaryware and service their channel partners better. We believe that this would be a win-win situation for both of us. Duravit will gain access to the dealer networks of these regional brands, and they, in turn, will get to market a global brand along with their own.
We are expanding our retail network aggressively, and are interested to partner with dealers and distributors from non-related sectors as well. We offer handsome returns on investment (RoI) by virtue of our trade margins, smart logistics, and brand pull. Besides, we feel that dealers from non-related categories would be open to our best practices for retail and business management, unlike the regular dealers who are accustomed to traditional practices of the market.
While the ongoing economic slowdown is likely to be short-lived, we are looking at the long term and preparing accordingly. So, in the case of Delhi NCR where we currently have about 30 channel partners, we aim to have at least 100 within the next two years.
We have similar aggressive goals for
other cities as well.
We offer two types of partnerships – premium partnership, for the complete global portfolio of Duravit; and business partnership, for the ranges manufactured in India.