Increased urbanisation and finer tastes have made us more evolved. Today every home and office is sleek and comfortable with an eye for aesthetic. This has driven the demand for wooden furnishings. Gone are the days when one would call in a carpenter, take measurements and hand make them for months. Thanks to players like Spacewood, it has become as simple as click and choose.
Vivek Deshpande and Kirit Joshi were college mates doing their engineering in Nagpur. With an inclination towards business, both ventured out taking tuitions for students from UP and Bihar. “This was the late 1980s when there was a huge craze for engineering as private colleges just opened. Our business went well but we felt it was not a scalable model. We wanted to do something that could last long and be generative. While studying in college, we started to print notes for tough subjects and started to sell them. We continued it for close to 2 years and by the time we finished engineering, we had released close to 25 books from our publishing house,” passionately explained Vivek about the starting days of their journey.
Learning basics
Just like every other family, theirs too pushed them to seek a secure job. With a fire in their belly both decided to get a job to understand the nuances of business. They joined the same company, Kirit in the purchase side and Vivek in the technology side. After learning basics, both sensed an opportunity with a Canadian company making modular furniture. They felt it was their chance to expand, move out and realise their dreams. “The company was looking for a partner to supply wooden components in precise dimensions. Several manufacturers felt that the requirement of 1 mm tolerance was impossible. But we found the challenge to be an opportunity,” explained Vivek.
In 1994, at an investment of just Rs 65,000 in a small rented shop of about 15m2, started Spacewood’s journey. Business started to grow and they moved into their own premise. “We started with imported second hand machines and soon brought brand new ones. Within this time frame we learnt that we should not rely on only one customer and we started to venture out into the wider market. Soon we were supplying to major brands,” said Vivek as he traced their journey. This was the time when corporate offices started to mushroom across India. Vivek said, “we wanted to carve a niche for ourselves and that is when we introduced 3D lamination process in India. Till then no one had experienced such technology.”
Introduced 3D Lamination
In 1997, Spacewood spent close to Rs 1 crore to import machines from Germany to test the yet-to-be proven technology. Vivek thanks trusting their gut feeling, as today, after about 25 years, the technology is a huge success. This helped them move into the residential segment.
With booming economy, the residential segment also opened up. Several competitors flooded the market. Many were even based out of Nagpur. Spacewood never considered them as competition rather spotted an opportunity in this situation too. Apart from directly servicing the customer, the company went into making pre-laminated particle board which was the base for designing stunning interiors. Soon they turned their competitors itself to customers. With 30 per cent for in house consumption, rest was supplied to other companies.
During 2004-05 organised outlets like Hometown, Home Centre, Reliance Retail, started to take inroads. These players were initially importing furniture from China, Thailand, Malaysia… Soon quality issues arised and inorder to address it, these players turned inwards and requested Spacewood to manufacture products for them. “That is when we started to do entire bedroom sets and kitchen cabinets and sold them to these organised retailers,” said Vivek and continued with their journey, “This went on till 2010 and Spacewood was supplying to OEMs. We invested all our profit back to business and we owned close to 2.5 lakh sq. ft. of factory with latest machinery. That is when we decided to should start our own brand.” It was easier said than done. Godrej was one of the major OEM with which Spacewood did annual business of about Rs 40-50 crore. They were not keen to purchase raw materials if Spacewood became a brand, but Vivek and Kirit felt that it was the right step in the right direction forward and went ahead with it. “It almost took three years to gradually withdraw our services with Godrej. We still maintain a good relationship and infact have learnt a lot from them in terms of brand commitment,” said Vivek.
Collaboration with Sumitomo
With no objections from all OEM clients, Spacewood started another company to focus purely on office furniture. Nitin Sudame a veteran in the furniture industry with close to 20 years of experience came onboard and helped set up the entity Spacewood Office Solutions and in 2011, the first Spacewood branded showroom was opened and it soon expanded across India to major metros.
By 2015, Japanese conglomerate, Sumitomo group took notice of the brand, found value in the company and decided to invest. This marked the first foreign direct investment into furniture domain in India with 26 per cent equity owned by Sumitomo. It was a five-year collaboration on exchanging technical know-how. “This helped us greatly in defining our approach to design, management and R&D. We learnt the Japanese way of doing things. Rather than pushing a product to the market, we understood the need to study the market,” pointed Vivek.
A new opening…
Extensive meetings with planners, developer and architects were conducted to understand the market. That was when the Real Estate Regulation Authority (RERA) came into being. Every developer had to assure quality along with guarantees. The construction business itself was undergoing a major change. While many things changed, the major part of a house, the door, was built and fixed the same way. Still carpenters were required to take measurement of each door and hand create everything. For high rise buildings with several apartments this created a huge time lag. The Spacewood team sensed this problem and set on to solve it. “Door panels were supplied by a manufacturers and carpenters had to install them on site. Not one company came forward to produce quality door and panel as it involved high precision and the need to match the speed of construction. While everyone left it out as a pain area, we yet again sensed it as an opportunity,” proudly said Vivek. With the help of Sumitomo that had a door manufacturing facility, Spacewood entered the area of pre-hung doors which offered the door frame, panel and architraves. “There was a huge skill involved by the carpenter on site to fix doors. He had to do the hinge slotting, lock slotting, measurement and installation. We moved that skill from the site and brought it to factory. We provided all the doors completely pre-drilled,” explained Vivek. Today Spacewood is the largest manufacturers of doors in India in the pre-hung segment. “The collaboration with Sumitomo lasted for five years and we learnt a lot in terms of approach to manufacturing and the focus on quality at each step of our process,” highlighted Vivek.
A fire test
With high level of automation in factories, each product is tested rigourously so that it lasts long at the customer’s place. Post covid first wave, things started to take shape but unfortunately in the month of December a fire broke out at the factory bringing everything to dust. “We just recorded the highest sales when the fire broke out. Around 250,000 sq. ft were razed. It was a very unfortunate time and we lost close to Rs 100 crore,” remarked Vivek.
The disaster brought the good in several people. With the trust on the company and directors majority of employees stood strong with them. Clients gave additional time to complete orders and the highlight of all was when competitors gave their machinery and space to execute orders using Spacewood’s own materials and workforce. “That is how we were running our production at about 12 places for close to 6 months. We were highly touched by this goodwill and have never experienced or heard of such hospitability among competitors,” said Vivek emotionally. In about a year Spacewood was back to start from where they left everything and this year they have resumed sales close to pre covid days. “We were touched by several things during this time. Our staffs stood by us. Our clients stood by us. Our bankers stood by us and even our competitors stood by us,” remarked Vivek.
The furnishing industry faces a unique challenge in India. At one end of the spectrum multinationals like IKEA take a market share, at the other end, it is highly fragmented amongst the unorganised sector. Vivek feels that the trust in a local carpenter is something that people have had for long but times are changing where the carpenter themselves are upgrading to become owners of small facilities. He adds further saying that players like IKEA introduce new concepts to the market and increase general awareness among consumers. Organised players have the biggest responsibility to constantly innovate and bring in new products and technology.
Raw material shortage and collaborative manufacturing…
For this booming sector, raw material shortage looms them. The market is slowly shifting from plywood to HDF, MDF and particle board. As the laws for captive plantations vary from state to state, most of the materials are imported at present. Yet another concern is in terms of collaborative manufacturing. In China where volumes are large there are small specialised manufacturers who produce various parts and these are collated together as the final product. This helps in achieving economies of scale at reduced cost. Such an ecosystem does not exist in India. “It will take sometime for our market place to reach that maturity,” remarked Vivek.
With the group revenue at about Rs 500 crore the company expects to clock Rs 2000 crore in about 4 years and then go public. They plan to leverage the current four segments in the years to come. n
