Indonesian home decor marketplace Dekoruma eyes regional expansion

Dimas Harry Priawan, Founder and CEO of Dekoruma

Fuelled by its Series B funding raised in October last year, Indonesia’s home and living startup Dekoruma is doubling down on the country’s multi-billion dollar industry, driven by its rising middle class.

However, while Indonesia remains its main focus, for now, the company has already started looking at regional expansion, which is likely to take place next year at the earliest, according to its founder and CEO Dimas Harry Priawan.

“Once we have finished integrating Indonesia, we will bring the technology to other countries,” he said.

This regional expansion, he added, is likely to be financed by the company’s next funding round, set to be secured before the end of this year.

Until then, the company says its main concern remains the home and living industry in Indonesia, which serves a huge market with typically huge margins but has long been devoid of any meaningful tech investments.

Dekoruma started out as an online marketplace for furniture and household appliances in 2016 but has since expanded its service to become an end-to-end home & living platform in Indonesia that provides B2C/B2B retail and services to both end-customers and property developers.

Dekoruma has AddVentures, the corporate venture arm of Thailand’s Siam Cement Group, and GDP Venture, the VC arm of Indonesian conglomerate Djarum, sitting on its cap table.

Edited Excerpts:

Give us an idea of the home and living market in Indonesia?

According to multiple data, for the home and living category, including retail and services, the size of the market is around $8-10 billion a year.

For us, we look at the middle class which is growing right now, as well as the rising income.

Then there is also the role of the internet, which influences behavior.  People are looking at Pinterest and Instagram for references. So people’s interest in good designs and interiors is rising.

Thirdly, we are also seeing the trend of houses becoming smaller, around 30-40 sqm. So people buying small homes are more interested to make sure that they are still comfortable. Space has become a luxury, so people want to maximize their space.

Given the size of the market, would you agree that there are very tech few players trying to disrupt it?

Yes very few. Take e-commerce data for example. E-commerce sales contribute to only 3% of total retail, according to some stats. Our assumption is that only 0.5% of the market is going online for home and living products and services, whether it’s from specialists like us or generalists like e-commerce. We don’t deny that the share is still small but that means there’s good potential.

Why is it complicated? Maybe because when we’re talking about home, they don’t only need goods but also a solution, which is interior design. When we are renovating a house or kitchen set, there will be someone to design the kitchen set, then when the products are ordered and delivered, someone needs to install it.

It’s a two-sided business model, and of course, two sides are harder than one. If we are only asking people to shop online, it would be easier. But from our supply side, we need to think about how to educate designers to change their way of working, as well as educating civil contractors to use seamless technology. So I think that’s why there are not many players around, because it’s not easy. We need to enter the supply chain, work the people, while also piggyback the technology industry as a whole, in payment, logistics, and the others.

It’s the same in other markets. In India, home and living come last, after electronics and fashion which tend to come earlier. Even in the US and Europe, home and living is usually the last portion of e-commerce [to pick up].

But do you see the space growing faster in the next few years?

Yes, it will definitely grow faster. We have been around for three and a half years. In our first six months, nobody bought a sofa. This is because we didn’t focus on that. We knew that we shouldn’t sell sofas first, but sell smaller items. But now our sofa sale is dozens per day. More people are now spending more money on bigger items, so the cost of acquisition is much less than three years ago. So that’s just an indication.

How did you pivot from being a commerce company to an interior design company?

There are players that focus only on commerce. For us, when we started Dekoruma, our vision has always been to make your dream home become a reality. From the beginning, we knew there will always be people and product. These two have to be in the plan.

So it was not a pivot, but an expansion. We started with products but our aim is to become a platform that connects different vendors for home and living starting from flooring, furniture, wallpaper to lighting. So that’s the idea.

Recently we saw home and living giant IKEA investing in India’s Livspace. What does this deal signify?

Speaking about a big player entering the technology space, I think it just says one thing: Digital works. Everyone in the industry has to embrace digital transformation in whatever definition it may be. So the deal is a stamp of approval that the big players will still embrace technological advancement, one way or another.

You recently opened an Experience Center. How important is an offline presence for the business?

For us, the offline channel is basically to support the online business. We use it to accelerate or multiply the transformation from offline purchases to online purchases. So the whole idea of our experience center is to change the behavior. At our place, you cannot buy and carry the products. People can come and see the products or meet with our interior designers and discuss, feel and touch.

Is offline important? Well before we opened our experience center, we already existed for two years. By December last year, we had done over 1,000 big projects. And that was without any offline presence. So we were able to convince the customers even without a physical presence. So without offline, it still works, but with the offline center, it gives us a place to meet the customers instead of meeting at cafes or other places.

You had said that your business is a complex one. Does that make it a bit harder to attract investors?

It’s about how are we able to find investors that understand or have time to deeper understand the industry. And to be honest, there are not many around, especially in the early stages. In the later stage, their research and understanding are much more in-depth. But in Series A, not many actually do research and try to understand the business. Every investor would nod their head and agree that the market is huge. Not all are interested, but those that invested in us generally understand that its complex but it’s not impossible.

We have been oversubscribed, but we are selective in working with the investors because we don’t aim for a very quick exit. We basically just want to stay on and fix the industry, by bringing technological advancement to the industry, because construction, interior, furniture in the last 20 years have not changed much. The software used is still Autocad. Most of the production is still by hand. They are not even using small machines, let alone big ones. This industry has been underinvested for many, many years. So if it is not us, there is bound to be another player, because it’s a huge market which typically has a huge margin.

One of your investors in the latest round is AddVentures by SCG. With them on board, is an expansion to Thailand on cards?

We don’t know whether it’s going to be through them or not. But, are we going to Southeast Asia? Yes, but maybe not this year. Perhaps next year, at the soonest. I think it’s just a matter of time that, once we have finished integrating Indonesia, we will bring the technology to other countries.

At the moment, there are not many interior design startups in the region…

There are some companies that do listing, but we go deeper. Instead of only connecting the designers with homeowners, we also help the designers to design better, faster and more transparently.

If I’m not mistaken, across the region, there are a few players providing listings, which is a more straight forward product.

Will the proceeds from the last funding round be used to finance this expansion?

That was more for Indonesia. We are still focusing on Indonesia for now. Indonesia is huge, we are still very small.  So if we want to expand, I think that would be financed by the next funding round, when it comes.

When will it be?

Should be by the end of this year.

Would you be considering IPO as a fundraising option?

Not yet, because we are still zero point something percent of the commerce share. So to be honest we still have plenty of funds to not only to expand the market, but also to solve the problems in the industry.

Who do you consider as your competitors?

For a business model like ours, I don’t think there is any. At least not in tech. There are some offline companies but we don’t see them as competition. Some of them target different segments like the high-end market, whereas we focus on the middle segment.

Where does Dekoruma currently stand in terms of profitability?

We are still focusing on growth. But if we just want profit, we are able to have it in around three months, but growth will be sacrificed. We are able to run profitably, but it would just need some time to switch the business, but that will be at the expense of growth and investments.

In the current position, we are learning from the earlier batch of internet companies that focus on growing, growing and growing and not really care about the bottom line. We are different. We take serious consideration on profitability, bottom line, the efficiency of operation and all that. So I that sense, I feel we are more prudent.

Our core is efficiency, so we have to be efficient in spending our investment money as well. That has become our DNA. If you come to my office, it is not like a home and living office, it is more like a warehouse.

Do you have plans to expand to property verticals? Maybe house sale, house flipping or house rental?

For the rental, we are working with industry players because we can help them in many ways. Recently we completed one 80-room hotel within three weeks. Usually, these kinds of projects take three months, so I think that’s how we work with them.

We also work with a couple of property developers. Do we help them with their sales? Indirectly yes. They usually sell houses with an interiors package.

Would you consider actually becoming a player in those verticals?

I am not saying we never will, because our vision is to make a dream home a reality. We believe that when we go into a home, we can always go deeper and deeper, so there is always a potential of us being able to sell houses, provide financing for the houses, but so far that is just potential.

 

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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.