100 years in business – it’s a milestone for a company. This is exactly what Hafele is celebrating in 2023. Interestingly, while the celebrations of a century in existence continue, Hafele has set the tone for the road ahead. At Interzum 2023 in Cologne, Germany, BuildingandInteriors.com met up with Gregor Riekena, CEO – Hafele Group (Right) and Frank Schlöder, Managing Director – Hafele South Asia (Left), to understand the company’s global and India perspectives in today’s complex times.
B&I: With the changing geopolitics, how do you see the supply chains change in the furniture and hardware fittings industry?
Gregor Riekena
From a global perspective, we are witnessing strong movements in various aspects such as political, economic, social, technological, and ecological. In light of this, we have undergone a comprehensive strategy process over the past year and a half to develop a compass that enables us to navigate through this uncertain market environment. We recognize that the world will remain uncertain. Therefore, we have developed a strategy that will allow us to be agile and adaptable to changes in the market.
As part of our strategy, we have identified that entrepreneurial courage and optimism are necessary qualities for success. We understand that there are numerous challenges ahead, but we take a proactive approach to addressing them. Our aim is to adapt our supply chains, offers, and value stream to changing market environments. We are confident that our strategy will enable us to remain competitive and continue to provide value to our customers.
Frank Schlöder
I am proud to state that we firmly believe in the potential of global supply chains and globalization. We recognize that sourcing products from around the world makes perfect sense for our business. We have a significant presence across the globe and strong sourcing networks. Moreover, we recognize the importance of diversification and reducing dependencies. This allows us to respond quickly and effectively to global events.
Therefore, we are focused on strategic initiatives aimed at enhancing our sourcing capabilities from different regions, with a particular emphasis on India. At Hafele, we recognize the enormous potential that India offers in terms of a reliable and cost-effective sourcing partner. While the opportunity to export may also be a possibility, our primary focus remains on sourcing from India for India. The Indian market is substantial by itself, and serving the needs of our customers in this market is our primary objective. We believe that sourcing products locally not only benefits our customers but also supports the development of the Indian economy.
B&I: Over the next 3-5 years, what role do you see the Indian market play in Hafele’s global pecking order?
Gregor Riekena
The growth potential that the Indian market presents is quite visible within the Hafele Group. While we maintain a well-diversified approach for other regions and countries, we recognize that India is a key focus for our future growth.
To achieve this, we have been exploring a new business model that blends both B2B and B2C approaches. We believe this model will not only benefit our investors. However, it will create new opportunities to engage with consumers in meaningful ways. We are excited to find innovative ways to bring this model to market and see it as a key driver of growth in India.
Frank Schlöder
India is already one of the top four or five markets within the Hafele Group. However, we also recognize that there is still tremendous potential for growth in this market, as only 20% of the furniture market is currently organized.
We are witnessing new players entering the market, including tech companies like Livspace, which are contributing to the professionalisation of the industry and helping to further develop the market. With economic reforms, tax collections, and infrastructure improvements underway, the construction market is in good shape, and we are very optimistic over the next 10 years.
Prime Minister Narendra Modi has said that this is the India moment. At Hafele India, we are committed to being a key player in this exciting period of growth and transformation.
B&I: Talking of Hafele India, would you look at exporting from India?
Frank Schlöder
There are tremendous ideas and opportunities in the Indian furniture market. I have recently read an interesting case study about the furniture market in India. This case study highlights a key challenge – the lack of competitiveness in the wood market for furniture.
India has a diverse range of materials in the furniture market, which is a unique advantage. However, the wood market is not sufficiently organised. This leads to increased costs for the manufacturers who have to import wood. This, in turn, affects the competitiveness of the Indian furniture industry. If you observe the size of the Indian market, it has all the ingredients for success. However, Vietnam has a four to five-times larger furniture manufacturing market than Hafele India. This is something difficult for me to digest.
I believe that India can unlock its potential and become a global leader in this industry. To become a major hub for furniture production, we have to look at the existing policies and make it easier for the manufacturers to come and produce in India. At Hafele India, we are committed to being part of this growth story and have a lot of ideas to contribute. However, we need the right conditions to make it attractive for manufacturers to invest in India.
B&I: What changes/trends do you foresee in your OEM business?
Gregor Riekena
Our approach is centred around co-engineering and co-creation of room concepts with our partners, who are mature and possess a wealth of experience.
As we step into a post-COVID world, the need for collaborations in space utilization has become even more evident. During the pandemic, business hotels remained empty in Germany, presenting an opportunity for investors to find new ways to generate income. We developed a concept that maximizes the return on investment per square metre, allowing investors to rent their spaces twice – both during the day and night (as hotel and office space). Hotels typically see occupancy during nighttime and are unoccupied during the day. So, this gives an opportunity for hotels to rent the same space for office activities. Hafele has developed solutions to help hotels work around this concept.
Through our new proposition “Maximizing the value of Space. Together”, our philosophy is all about creating solutions that make the most of available space, but we don’t do it alone. We collaborate with our business partners to create tailored solutions that meet their unique needs. Our partners are responsible for producing and delivering the solutions to their customers, while we provide the co-creation expertise.
Frank Schlöder
As I said earlier, the Indian furniture market is currently dominated by the unorganised sector, which accounts for 80% of the market share. However, with the entry of new players offering turnkey solutions for customers, we are witnessing a shift towards professionalisation. This provides customers with the convenience of a one-stop shop for their home interiors. This trend is driven by the changing preferences of young consumers who are increasingly unwilling to spend time and effort on the traditional process of furniture procurement. As a result, we expect this shift towards more organised ecosystems (end-to-end solutions) to be a significant growth driver for the furniture market in India.
In contrast to Europe, where there are large and very well-organised furniture manufacturers, India has a fragmented market with many small Original Equipment Manufacturers (OEMs), often with just two or three machines. However, as the market continues to evolve, we anticipate further consolidation and the emergence of larger players.
B&I: How has the COVID-19 pandemic fundamentally impacted the traditional office space and are these changes likely to be long-lasting and prevent a return to pre-pandemic norms?
Gregor Riekena
The COVID-19 pandemic has had a significant impact on the workplace and overall workforce. The concept of purpose has emerged as a critical factor in the post-pandemic workplace, with many employees reflecting on their career choices and seeking meaning in their work. This trend is not limited to the US but is prevalent globally, including in India.
Frank Schlöder
At Hafele India, we recognize the importance of purpose and are taking steps to address this trend in our strategy. We believe that purpose will play a crucial role in attracting and retaining talent and maximizing the value of physical space. We are committed to being a strong employer brand that offers meaningful work and growth opportunities to our employees.
B&I: How do you see IKEA changing the scenario in the furniture market in India?
Frank Schlöder
The entry of global brands like IKEA into the Indian market is a positive development that will help in the growth of the furniture and home decor industry. Having grown up in Europe, I have witnessed the impact that IKEA has had on the market by offering systematic furniture solutions and defining trends.
B&I: How do you see technology bringing a paradigm shift in the conventional hardware space?
Gregor Riekena
Hafele has evolved tremendously over the past 100 years. We started with furniture fittings and hardware, and have since expanded into doors, spaces, and new technology. We understand that to deliver on our customers’ needs, we need to continuously develop our competencies and offerings.
One example of this is our lighting system, which is based on 24-volt technology. With this system, even those without electrical expertise can easily connect and control the lighting in a room. This allows for access control, where the system can differentiate between guests and staff and adjust the lighting accordingly.
There are numerous initiatives that we are undertaking to leverage technology to improve the user experience in this space. A case in point is our virtual showroom Hafele Discoveries which is available online and customers can get the whole showroom experience – be able to check out all products and buy them online – sitting in the comfort of their home/ office.
We believe that there is still much potential for us to bring our competencies together and continue to innovate in the field of technology.
B&I: How do you see the traditional distribution system evolving in India in the coming years?
Frank Schlöder
The Indian market is growing rapidly and will continue to do so in the foreseeable future. While there is potential for change in the distribution landscape, I do not see the traditional network of small vendors and resellers disappearing anytime soon. It is crucial to have a physical and granular network across the country. Hence, we have built such a network with franchise partners, trade partners, and distributors. We believe in catering to both end customers & carpenters. Multi-brand outlets are also important for a wider reach. In the long term, we may see a shift towards professionalisation and space solutions. However, for now, all distribution channels coexist and are equally important.
B&I: From Hafele’s business perspective, how do you envision the integration of technology and traditional distribution systems?
Gregor Riekena
I understand the importance of offering a broad range of services and portfolios that cater to the diverse needs of our customers. It is true that some of our products, such as the Loox, are designed to be plug-and-play. However, we do not take their installation lightly. We offer value-added services under the Hafele Service + initiative. These include training and installation to ensure that our customers can make the most of our products and that they are installed in a safe and secure manner.
Moreover, we also provide training through the Hafele Academy to individuals who are interested in learning more about these products. Our focus is to ensure that our customers can easily access and integrate our innovative products into their daily lives without having to worry about technicalities.
Frank Schlöder
At Hafele India, we pride ourselves on our army of service technicians who are spread across the country to provide our customers with the best possible service experience. We understand that service is an essential part of our business. Hence, we are committed to delivering it at the highest standards.
Our focus on service is what sets us apart from our competitors. We recognize that selling hardware is not the end of the story, and our customers need support throughout the product lifecycle. Our service technicians are well-trained. They have the necessary skills and expertise to ensure that our customers’ needs are met promptly and effectively.
B&I: How do you see your e-commerce route play out versus the conventional sales channels?
Gregor Riekena
Our new digital showroom, Hafele Discoveries (https://discoveries.hafele.com/3UB8zHrUGs7jcGmQIfUnEr/start), complements our physical presence in the market. It is not just a temporary exhibit, but rather a year-round platform that offers customised content and live-streaming capabilities. It allows our customers to experience our products and services in an innovative way, from anywhere in the world.
One of the key features of our digital showroom is the Blackforest Lounge, which pays homage to our German heritage. It features live stage performances and pre-produced content, which allows us to connect with our customers and showcase our products in an engaging and interactive way. In addition, we are committed to supporting our partners by offering e-commerce support and providing them with data to help them better market their products. Every product page on our Discoveries digital showroom has a link that takes our customers to our website online shop. It offers a seamless discovering, learning, and shopping experience at any time and from anywhere!
Frank Schlöder
In today’s digital age, it is essential for businesses to be present where their customers are. We have recognized the importance of the digital channel. Hence, we established our own online presence to make our products and services accessible to our customers.
However, we also acknowledge that there are other players in the market, such as modern trade and e-commerce platforms, who are also expanding their reach. We are open to collaborating with these players to ensure that we serve our customers in the best possible way.
In addition, we understand the importance of embracing new technologies and innovations in order to stay ahead of the competition. As such, we are open to partnering with tech companies and driving certain technologies to improve our products and services.
"Hafele Discoveries" at Interzum 2023: A virtual showroom revolutionising the user experience
Hafele unveils its latest symbol of innovation - the "Hafele Discoveries" virtual showroom - at Interzum 2023. The brand is p
