Forbes India 15th Anniversary Special

Online furniture retailing finally comes home

Online furniture retailers, buoyed by huge growth opportunities, are investing in technologies like augmented reality and hand-holding customers to design theme-based homes

Salil Panchal
Published: Jan 6, 2016 06:06:29 AM IST
Updated: Jan 6, 2016 11:33:01 AM IST
Online furniture retailing finally comes home
Image: Mexy Xavier
Ashish Shah, co-founder and COO, Pepperfry

The year 2014 was a cherished one for 35-year-old Sweta Singh, as she and her husband moved into their own house in a gated suburb of north Bengaluru, after living in rented homes for over a decade.

She decided to deck up the house with new furniture. “I wanted a special theme and look,” says Singh, who prefers only teak wood furniture. “My initial experience with online furniture buying was nightmarish,” she recalls. An order for a sofa-cum-bed that she had placed with an online furniture retailer was not fulfilled on time. When it finally arrived, the shade was not what she had ordered and the service personnel were unable to answer her queries.

But Singh decided neither to return the sofa nor give up on buying furniture online. This time, she decided to try her luck with another Bengaluru-based player, noted for its exclusive designs and home decor. Now, almost all of her new furniture have come from the online retailer for about Rs 1.5 lakh, half of what shopping at brick-and-mortar showrooms would have cost her.  

Singh’s purchasing style is no oddity: The experience of furniture shopping is changing rapidly in India. One can decorate a dream home with just a laptop and a credit card, without having to trawl through shops and bylanes for the right sofa or recliner, or chase down a local carpenter to deal with post-delivery glitches. Moreover, an ever-increasing range of products, exclusive styles, secure payment options, warranties, after-sales service and customer-friendly return policies have made buying furniture online less strenuous. The biggest patrons of online furniture retailers are nuclear families, mostly economic migrants, who need to set up homes away from their birthplaces.

Given the patronage from shoppers like Singh, many online companies dedicated to furniture have mushroomed in the last three years, led by market leader Pepperfry (set up in January 2012), Urban Ladder (which started operations in July 2012) and Rocket Internet-backed FabFurnish (that began in March 2012). Other ecommerce heavyweights like Flipkart, Snapdeal and global giant Amazon’s India outfit have all expanded their range of products to include furniture, home decor and kitchenware, as more Indians continue to shop online.

One might argue that online stores that cater to only a specific retail segment like furniture yield lower margins, face a rocky road to profitability and can lead to eventual closure. But online furniture retailing does not involve cutthroat competition, unlike, say, cab aggregator services like Ola and Uber. The furniture industry can accommodate multiple players as it is a vast segment.

In fact, all the top players in the online furniture 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. Consider this: Of India’s total furniture market, 85-90 percent (or $17 billion) is unorganised. In the minuscule organised sector, brands like Godrej Interio dominate with a 1-2 percent market share, experts claim.

Online retailing accounts for just around one percent of overall furniture sales but is expanding rapidly. “This industry could grow ten times over the next 8-10 years,” says Vikas Nair, co-founder of Stitchwood, the latest entrant in the field, which started operations in March 2015. Stitchwood, which differentiates itself from rivals by providing customised furniture, claims to have an average revenue of Rs 40 lakh a month.

In comparison, Mumbai-based Pepperfry, founded by former eBay executives Ambareesh Murty and Ashish Shah, has posted gross merchandise value (GMV, sales value of goods sold) of Rs 700 crore so far in 2015. The retailer—whose products range from sofas, beds and wardrobes to lamps, modular kitchen products and bathroom accessories—recorded a 350 percent jump in sales in October (the peak festive season) this year from last year’s levels. It is confident of posting a 250 percent year-on-year jump in sales in calendar year 2016, similar to 2015, according to its co-founder Shah. Pepperfry is also targeting a GMV of Rs 1,000 crore by March 2016. The retailer’s highest selling products include coffee tables (in the furniture segment), wall shelves (in home decor), containers (in kitchen utensils) and tripod lamps. With variety and reach as key differentiators, Pepperfry dominates India’s online furniture space with 22 lakh registered users and over 52 lakh monthly site visitors.

To distribute its range of nearly 100,000 products, Pepperfry has set up an in-house logistics firm, where 400 owned trucks deliver to 400 cities and towns through 16 distribution centres. Pepperfry works with 600 suppliers, 3,000 artisans and over 3,000 active suppliers, from whom it sources its products.

“We know right now that we must garner more market share, more customers and build the brand. All my investments are focussed on increasing reach—whether it is towards distribution or customer acquisition,” says Shah. “Our catalogue will grow further, where the focus will be to ramp up the high-growth areas of kids’ furniture, kitchen and dining, bathroom renovation and housekeeping products,” he adds. Furniture contributes a third to Pepperfry’s business, followed by home decor and lamps and lightings.

Online furniture retailing finally comes home
Image: Bmaximage
Ashish Goel (left), founder-CEO of Urban Ladder, with Rajiv Srivatsa, co-founder and COO

Pepperfry’s rival Urban Ladder, in which Tata Group Chairman Emeritus Ratan Tata invested an undisclosed amount earlier this year, is also planning to boost its technology platform and line up a range of new products in early 2016. Urban Ladder has a huge monthly order book and aims to reach over one million homes by early 2017, from around 400,000 currently. “People are looking to live in better looking and more comfortable homes,” says co-founder Ashish Goel.

In January, Urban Ladder will launch “interesting quirky designs”, in motifs placed on bed sheets, decor, cushion covers and even furniture. This will be followed by the ‘India Modern’ range, which will give regular plantation furniture—comprising solid hard wood (a combination of Indian rosewood and mango, manufactured in India)—a modern look, says Goel.

The idea for Urban Ladder emerged when Goel (who was formerly with McKinsey & Co) struggled to furnish his home, an experience similar to that of Stitchwood’s Nair. Goel and Rajiv Srivatsa, a former Cognizant employee, founded Urban Ladder with 35 products and a promise to deliver across India. Urban Ladder now offers over 4,000 products across 35 categories. Without disclosing actual figures, Goel says Urban Ladder has seen a 400 percent jump in revenues in the past twelve months.

Urban Ladder’s fastest growing categories include mattresses and modular kitchen furniture. And with an eye on meeting future demand, the company plans to ramp up its complete home solutions services in January 2016, roping in interior designers to advise clients. By March 2016, Urban Ladder would have invested $2.5 million (around Rs 16.7 crore) towards these strategies.

It is not just exclusive furniture retailers, online marketplaces like Amazon India also tested the waters for nearly two years here, before launching its furniture store just weeks before the 2015 Diwali season. The retailer’s home and kitchen platform has products ranging from dinner tables and containers; home furnishings like bed sheets and blankets to bedroom and hall furniture.

“Ever since we launched, we have consistently received requests from Indian customers to provide quality furniture products,” says Sumit Sahay, Amazon India’s director (category management). “We are not competition-focussed but are customer-obsessed and believe in working backwards from customer needs and innovating on their behalf,” he wrote in an email response to Forbes India. “We are learning and evolving. These are still early days.”

For eight-year-old Flipkart, however, getting into furniture was a deliberated move. It launched its furniture category in August 2015 after positive response from buyers in the home category. Over the last four months, it has increased its product range from 1,500 to over 10,000 and also expanded its reach from three to 75 cities and from three sellers to 30 brands.

“We are leaders in every category we are present in—mobiles, books, fashion and home. We will be a leader in furniture, too, and for that we will bet on our range of choices, designs, price points and customer experience,” says Anil Goteti, vice president, business, Flipkart. The company’s furniture business is seeing a month-on-month growth of 60 percent.

Almost all online retailers are ramping up their product range and logistics arms and, while there are hiccups when delivering orders, they are addressing customer complaints on a war footing. Radhieka Pandya, 32, a startup employee, who has been busy setting up a rented home in Mumbai’s lively suburb of Bandra, returned a Durham coffee table bought from an online retailer in August 2015, due to defects in its legs. She filed a complaint and the retailer promptly took the table back.

Pandya further ordered a three-seater sofa, two single seaters and a coffee table from another player. The products arrived about 20 days late. “The company apologised for the delay, claiming there were stains on the sofa at the time of despatch,” says Pandya. It also provided a replacement sofa during the period of delay.

Nearly three years after starting operations, Pepperfry, in 2014, launched ‘studios’, an offline venture where products across ranges and finishes are displayed for customers. But if they like a product, it will have to be ordered online. “People want a lot more than just information available online. Some, like migrant couples, might have little access to interior designers and architects to advice on building a home. They need information and consultancy,” says Pepperfry’s Shah.

Online furniture retailing finally comes home
Image: Bmaximage
Anil Goteti, vice president, business, Flipkart, believes the company has the potential to be a market leader in retailing furniture online

Pepperfry has set up six studios across India and is set to launch four more by March next year. “We have no price labels, so the aim is not to sell products. It is to experience them and help people make great homes,” says Shah. About 10-15 percent of Pepperfry’s sales come through these studios.

“The online business is all about reach. The fundamental premise is that you cannot show that many products at a physical store, therefore one needs to come online,’’ he says. Several large furniture stores that display their products in 150,000-square-foot stores, cater to a catchment area of just about 8 km, Shah assessed. “I have an unlimited catalogue and unlimited space.”

But even while there is enough to sell to a large customer base, online furniture and home decor retailers are innovating further and exploring newer avenues to boost growth.

Pepperfry, Urban Ladder and Stitchwood are expanding their online technology platforms, so that customers can view the product from various angles, open a wardrobe virtually and tilt it top to bottom.

The retailer also provides ‘Pepperfry Bespoke’, a platform which sells specific looks and themes—contemporary, modern, ethnic and colonial—to customers. This is headed by a team of interior decorators.

Pepperfry has also started servicing pizza and coffee shops in the city. It recently did up Uber’s Bengaluru office, a resort in Kalimpong, and has partnered with the Playboy Beer Garden project in Pune.

Shah says Pepperfry is “operationally profitable” and does not lose money by offering heavy discounts to the extent of selling below product cost. “There is a path to everything. One cannot say that today I will grow and tomorrow I will make money. Both growth and making money have to happen simultaneously.” Without giving specific details, Shah says Pepperfry’s overall margins improved 10 percent over those seen last year.

Goel’s Urban Ladder, which services clients in 17 cities across India, reiterates that his biggest move will be to build on customer trust. The Bengaluru-based retailer plans to strengthen its technology and supply chain, whereby complaint redressal time could be reduced to six to eight hours from the current 24 to 48 hours.

Loyalty to the customer is top priority for Stitchwood too. It seeks to create space for itself by rivalling the local carpenter. “A carpenter will create the product you want and sell it to you. That is all. Two years later, he will not even remember what he had made for you,” says Nair from Stitchwood.

Launched with an initial capital of $100,000 (around Rs 67 lakh at current rates) from co-founders Ajit Shegaonkar and Vikas Nair and an additional Rs 2.5 crore from angel funds, Stitchwood caters to customers in 15 cities, through 250 suppliers. As part of its strategy for growth, Nair says the firm will go in for a fresh round of funding from large VC funds by March 2016 for up to $8-10 million. These funds will be used to expand their supply chain, operations, hire staff and build the brand.

As with several players, Stitchwood’s highest selling products include sofas, which contribute 60 percent to revenues. Nair earmarks kids’ furniture and modular kitchens as the rapidly expanding segments for the next five years, as nuclear families set up new homes.

Nair forecasts that the use of technology could become the disruptive factor in the segment. “People see furniture in a store, but they want to see it in their house. Augmented reality is being worked on by several players, to offer the customers the look and feel from their mobile app or desktop,” he says.

The rapidly changing online shopping experience and a young society, with aspirations to shop, build homes and attain a quality lifestyle, are making these startups super confident about one thing: There is space for everybody. As Urban Ladder’s Goel puts it: “My job is to build a multi-million dollar business. The challenge is not to figure out what somebody else is doing and try to kill them. That [competition] is irrelevant.”

(This story appears in the 08 January, 2016 issue of Forbes India. To visit our Archives, click here.)