FY17 is reflective of these efforts as both Urban Ladder and Pepperfry have managed to trim losses while growing revenues weeding out unnecessary capital exercises — a mandate also driven by, and backed in some cases by investors to capture sizeable market share.
“We significantly increased our investments in product and product designs in FY16, results of which have shown in our FY17 financials,” said Ashish Goel, CEO of Urban Ladder, which has seen a 22% increase in revenues in FY17. “Our product range was more differentiated — which led to lower marketing costs, little discounting and improved margin structures.”
For Pepperfry, which saw a well-thought-out offline strategy reflect on the books with a 26% growth in revenues and a 17% dip in losses, a large part of the growth is expected to come from offline studios currently driving about 20% of the overall business.
The company expects the offline model, which has an 80% higher average order value than online-only orders, to drive about 35-40% of the sales over the long term.
With a strong presence in metros, Pepperfry is now setting sights on non-metros to ensure that the offline model taps the next wave of customers and is using its franchise model to make the expansion cost effective. “We have got a lot of interest for franchise models even in non-metro towns,” said CEO Ambareesh Murty. “Our reach of experience centres in non-metro towns is going to increase significantly over the next few years.”
For Urban Ladder, which acquired a single brand retail trade licence in September, the focus is on design-led growth and discoverability as this year will see it finally expand on its long-awaited offline strategy beyond Bengaluru. With its recent capital infusion of $12 million, the firm is targeting a market share of 10-20% in other cities where it intends to roll out offline stores.
Another player in this sector LivSpace, which targets niche customers to provide home-design services, plans to roll out its offline stores only in the top 10 metro cities as the company eyes international markets. Other avenues to acquire customers include offerings like rentals and assured buyback.
For Pepperfry, offering a rentals initiative that also uses non-defective products from the returns portfolio, which currently stands at about 2.5%, means operational efficiencies increase. And Urban Ladder, which recently launched assured buyback hopes to scale it up in the coming months while also launching newer categories by partnering with designers across the country and world.
Pepperfry is also using the Pepperfry Privilege program that covers about 1,400 architects and interior designers as a hook to widen its customer reach. The program, which the firm expects will give it a shot in the arm in terms of new customer growth and higher order values, is expected to host 10,000 partners by the end of 2018.
Analysts believe the limited size of the online home and furniture market in India, pegged at about $1 billion in 2017, would mean that some of these firms make attractive acquisition targets or strategic partners for horizontal e-commerce players looking to build this category. This would also automatically open up a wave of new customers for the vertical players while giving the horizontals entry into the high margin category.
That would explain e-commerce leader Flipkart’s interest in partnering with Pepperfry or Urban ladder for potential investments, as ET had reported in November.