The Furniture Business is Largely Unorganized, and Logistics Make it a Complicated and Expensive Proposition, but it’s Exactly these Challenges that Have Worked to the Advantage of the First Movers
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More than 85% of the Furniture Market is Unorganized, and the Challenges that are there in the Market Kept too Many Players from Crowding it and Worked to the Advantage of the First Movers. It’s Not Just a Technology Game, the Devil is in the Detail of Packaging, Shipping and Making Sure that a Teak Table Reaches the Customer Without a Single Scratch. In Other Segments, Such as Hyperlocal Delivery for Instance, Copy Cat Startups are Popping Every Month.
Experts Say the High Margins and Larger Ticket Sizes, Each Sale is in the Range of 14,000 to 20,000 INR, Make These Businesses Good Investments for VCs. It’s Also the Reason the Startups are Able to Invest So Much in the Business. For Customers, Having a Range of Designs to Choose from Online and Having Trained Staff Deliver the Goods Removes a Lot of the Stress of Furnishing An Entire House.
“Shipping Constitutes Only 12% of Our Sales, the Margins Are at 40%,”
– Pepperfry’s Ambareesh Murty
Co-founder and CEO of Pepperfry Ambareesh Murty is Trekking Along the Frozen Zanskar River in Ladakh, Doing One of the Most Challenging Winter Trails in the World, the Chadar Trek. “The Business is Stable Now and I Can Afford Holidays,” says Murty.
4 Years Since He and his Friend Ashish Shah Set Up the Online Furniture Retail Marketplace, they’ve Shipped More than 1 Lakh Units of Furniture, Signed Up More than 1,000 Merchants and Raised $128 Million in 4 Rounds of Funding. “Our Momentum has Only Increased With the Sales Tripling Every Year,” says Murty. “Since the Competition is Not Intense as in Some Other Online Segments, Our Unit Economics are Solid. We Hope to be Profitable in the Next 12 to 18 Months.”
“Furniture is a Non-Standard Product and therefore a Trickier Business. A Traditional Marketplace Sells Standardized Goods like Books and Phones which are Easier to Market, Package, Transport and Deliver,” Explains Rajiv Srivastav, COO of Urban Ladder, Pepperfry’s Main Competitor. Srivastav Set Up the Venture in 2012 with his Friend Ashish Goel After they Had Trouble Finding Furniture when they Moved to Bengaluru.
“Design Options for Furniture are Limited in India. You have to Invest in the Product, Logistics, Installation, and Marketing. Even Visualisation is Harder Because you have to Re-create the Look and Feel of the Product. It’s Not an Easy Model to Replicate, and that Does Keep Out People,” he says.
In Segments like Fashion and Electronics, Entry Barriers are Low, Vendors are Easy to Find and Customers are Many. “For Furniture, Quality and Design are Critical. It’s Hard to Replicate, So We Don’t See Dozens of Startups Asking Us to Help them Set Up in this Space,” says Murali Balan, CEO of Tenovia Solutions, an E-commerce Consultancy.
“The Market is Huge with Lot of New Houses Coming Up. A Full Home Furnishing Could be a Potential INR 3 Lakh and Above Expenditure,” says Mohan Kumar, Partner at Norwest Venture Partners, Which has Invested in Pepperfry. “Higher Margins and Less Competition Means they Have a Better Chance at Profitability than Other E-commerce Firms,” he explains.
The Rental Market is Still Small, It is Growing. “We’re Catering to Millennials Who Move 5 or 6 Times in a Decade, and Don’t Want to Lose Money with Every Move,” says Ajith Karimpana, CEO of Furlenco, a Furniture Rental Company with 3,500 Customers, Which Promises to Set Up a Home in 72 Hours. “It’s a Niche Segment Now But Will Grow in the Next 5 Years. Furniture Rental is a Bit like Flipkart Offering Smartphone Buybacks in 12 Months. It Creates Churn in the Market Because People Can Change the Way their House Looks Every Year.”
Every Idea Has Its Pros & Cons & This Idea is No Different
Lakshmi Ram, Who has Both Bought and Rented Furniture Online in Mumbai, says the Experience isn’t as Effortless as the Ads Make Them Out to Be. “Renting was a Nightmare. They Delivered a Bed that Didn’t Fit the Dimensions of the Mattress We had, and What Started as a Request for a Change Descended into an Ugly Fight with the Founder of the Company,” she says. Getting Damaged Goods is a Regular Affair, she says, Adding that She has to Photograph the Trouble Spots and Initiate Long Discussions with Customer Support to Get It Fixed. “If the Delivery is Outsourced, You Can’t Send Back Damaged Furniture Immediately But Will Have to Wait for the Company Officials to Pick It Up.”
These are Problems the Companies say they are Working On, But Point Out that their Return Rates are No More than 2% to 3%. The Other Big Player is Rocket Internet Backed FabFurnish, which Expanded Aggressively but has Found Itself in Trouble Over the Last Few Months with Reports of Downsizing. Furniture has also Caught the Eye of Marketplaces like Flipkart and Amazon, which have Tied Up with Offline Retailers.
Furniture In India Is Not A Tech Game, It’s An Execution Game
Woodpecker, a 12 Year Old Furniture Chain with 8 Stores Across Tamil Nadu, Tied Up with Flipkart and In 3 Months has Seen “Great Conversion, Far Beyond Our Expectations,” Says Founder S Swaminathan. He Tried Setting Up his Own Website But Found the Cost of Driving Traffic to it Too High. “We Had Plans to Go Pan India, but Selling Online through Flipkart has Accelerated it,” He says.
Over The Next 5 Years, The Furniture Business Will Be A Mix Of Offline And Online
Recreating the Look and Feel of the Furniture is Another Challenge, and Both Pepperfry and Urban Ladder have Set Up Offline Spaces where Customers can take a Look at the Furniture Before Placing Orders Online. Swaminathan Points to this and Says Over the Next 5 Years, The Furniture Business Will be a Mix of Offline and Online. “I See a Merger of the 2 Because Furniture is an Expensive and Emotional Buy and Customers are Finicky About it,” he says.
Home Décor Providers Who Fit Out Modular Kitchens and Wardrobes are Also Going Online in a Bid to Bring Order to a Fairly Obscure Market. “You Might End Up Paying 2 lakh or 20 lakh INR for the Same Piece. We’re trying to Make Furniture Pricing More Transparent,” says Jawad Ayaz, Founder of CapriCoast, An Online Marketplace for Modular Furnishing.
Product, Service, Technology, Marketing & Branding Are The 4 Main Aspects Of The Furniture Business That Online Players Have To Get Right
“Whether You Design and Develop Your Own Products like Us, Sign On Merchants, Rent, or Do Home Décor, the Challenges are Similar,” says Srivastav. “Anyone who Can Control the Problems will Last Decades.”
He Expected tech to be the Biggest Challenge when they Started. “But Soon We Realized it was Sourcing,” Srivastav says. “In India, No One has Knowledge of Product or Design, then there’s Logistics, Bad Roads, Staff Training… Really, Tech is the Easiest Part.”