The online furniture market, projected at $130 million, is expected to grow with a CAGR of 75 per cent and reach the $700 million mark by 2020 according to media reports. Credit goes to the mushrooming of online furniture companies in the last four years led by Pepperfry (set up in January 2012), Urban Ladder (established in July 2012) and FabFurnish (which started its operations in July 2012).
The competition intensified with e-commerce giants Amazon and Flipkart adding furniture as part of their product portfolios. All the top players in this space see huge growth opportunities for themselves as more of India’s $20-billion (around Rs 1.34 lakh crore), largely unorganised furniture market moves online.
This also explains the reason why an increasing number of investors are enthusiastic about this segment. Pepperfry raised $100 million in a round led by Goldman Sachs and Zodius Technology Fund last July, while Bangalore-based Urban Ladder secured $50 million from Sequoia Capital and TR Capital and others in April and was planning another round of $120 mn (Rs 750 crore).
Currently with its range of nearly 100,000 products, Pepperfry dominates the space with 22 lakh registered customers, and 50 per cent of its customers being repeat buyers. It has five lakh app downloads and 17 fulfillment centres, which also act as places to do quality checks and assembly -- catering to over 5,000 sellers on the platform.
The average selling price of furniture on the platform is Rs 14,000, but including other items it sells, the average selling price is Rs 6,000. It currently works with 600 suppliers, 3,000 artisans and over 3,000 active suppliers, from whom it sources its products. The key differentiators are its variety and reach. Its founder Ashish Shah is confident of posting a 250 per cent year-on-year jump in sales in calendar year 2016, similar to 2015.
Urban Ladder on the other hand is working relentlessly on technology aiming to change the whole experience of buying furniture online. Its app was recently upgraded with a virtual reality feature that enables users to design their homes using the app.
Expanding the footprint
Pepperfry has been robust about its expansion plans. It is looking to expand its footprint to tier III and tier IV cities in India. It was reported that the company was also working on increasing its fleet of delivery vehicles from 350 to over 1,000 in the coming 12 months and set up more experience centres in over 20 new cities, including Pune, Gurgaon, Kochi, Kolkata, Lucknow and Chandigarh.
The amount raised in the last round of funding was used to strengthen the company’s logistics, technology platform, experience centres and scaling up marketing efforts. It went the extra mile by setting up six offline stores with plans to open four more in the coming months. Almost 20 per cent of its online sales are driven by these experience stores.
FabFurnish also rolled out experience stores but now operates through vendor stores where it provides features such as ‘Available on Display’ and QR codes. ‘Available on Display’ is a tool that displays names and addresses of retailers selling a particular product in that city. Furthermore, by scanning the QR code tagged on the product in store, the customer can browse through associated looks and product reviews on the FabFurnish platform.
Urban Ladder is also taking a similar route and expanding the reach of its wardrobe service to 30 cities by the end of 2016 from 19 cities at present.
Upping its marketing game
Both Pepperfry and Urban Ladder took time to launch their respective campaigns. Pepperfry’s first 360 degree campaign came out in 2014, which included their first TVC. Soon they increased the budget for advertising and spent nearly $3 million on one of its month-long campaigns across television, outdoor, social, cinema and digital media last year. According to its Chief Marketing Officer, Kashyap Vadapalli, within 10 days of its launch, the firm’s online traffic had gone up by 50 per cent.
Also, on its fourth anniversary in 2016, it came out with a new TVC consisting of two films which communicated the key promotional message of discounts up to 55 per cent. To gain a significant lead over Urban Ladder, which is known to be conservative on discounts, Pepperfry has been spending heavily since then on discounts.
Urban Ladder took a different route by releasing a seven-minute digital film conceptualised by Boring Brands last Diwali. Prior to that, the firm saw traction from strong word-of-mouth, including social media promotion on Facebook and Twitter, according to its founder Rajiv Srivatsa. Facebook has been an integral part of their marketing strategy. With more than 500,000 likes, Urban Ladder focussed on organic growth on their Facebook page without any contest and free vouchers.
Its maiden campaign was released last May and was conceptualised by Lowe Lintas.
Survival of the fittest
Urban Ladder registered losses nearly eight times to Rs.58.51 crore in the year ending 31 March, 2015 from Rs.7.62 crore in the year-ago period, according to the Registrar of Companies. Pepperfry saw its loss widening by almost three times to Rs 88 crore in 2014-15, compared to the Rs 30 crore loss it registered in the previous fiscal.
FabFurnish is worse off than both the start-ups. It is backed by German incubator Rocket Internet which is looking to sell it off to Future Group as the startup reported loss worth Rs 4.7 crore for the year ended March 31, 2015.
Despite this grim scenario, both Pepperfry and Urban Ladder are upbeat about bouncing back with the former hoping to break even by 2016 end, while the Bangalore-based start-up expects to balance books on an operational basis when its revenue reaches $200 million, by middle of this year.