Online furniture retailer Pepperfry said it has raised Rs250 crore in a fresh funding round from US-based investor State Street Global Advisors to consolidate its lead in furniture retail, by expanding its offline presence and logistics network.
Pepperfry chief executive Ambareesh Murty said in an interview that the company will use the funds to expand its supply chain, invest in technology and open new stores. Murty declined to comment on the company’s valuation.
The entry of a new investor into Pepperfry comes as a validation for the retailer, especially in a market where few e-commerce companies have been able to attract new investors.
Peppery raised its previous round from existing investors in 2016. Its nearest rival, Urban Ladder, announced a $12-million (Rs77 crore) round last week from Kalaari Capital, SAIF Partners and other existing investors.
State Street Global Advisors (SSGA) is the asset management arm of State Street Corporation, a New York Stock Exchange-listed investment management firm with $2.8 trillion in assets under management.
“India’s large furniture and décor market is ripe for disruption and we believe that Pepperfry’s unique strategy, proven execution capabilities and passionate team are the perfect ingredients for success,” said Anandh Hari, managing director for private equity at SSGA.
As part of the deal, Hari will join the company’s board of directors.
“SSGA is a very good fit for us for two reasons. One, because of their extensive financial markets expertise they will be very helpful to us when we go public. Also, they are patient, long-term investors,” Murty said.
With Rs1,200 crore raised to date from the likes of Norwest Venture Partners, Bertelsmann India Investments, Zodius Capital and Goldman Sachs, Pepperfry is the best funded player in the online furniture and home furnishings category.
The investment suggests investor confidence in Pepperfry, a horizontal marketplace, at a time when Amazon and Flipkart are taking the lead in almost all major retail categories, putting pressure on category-specific retailers.
To survive in a highly competitive market, specialty e-commerce ventures are innovating by opening offline stores in order to boost sales growth, as Mint reported in November.
Pepperfry said it will use the funds to expand its network of experience centres, currently numbering 25 across cities, to tier II locations, most of which will happen through the franchise route.
Pepperfry does not sell through its stores, which are meant only to get a look and feel of the furniture. It also plans investment towards adding augmented reality and virtual reality capabilities for online shoppers.
The company also launched a furniture rental service last year.
In the statement, Pepperfry said it’s revenue grew at a compound annual growth rate of over 83% in the last five years and with “this fresh round of investment, it has enough dry powder available to accelerate past the break-even point and become a profitable business over the next 12-18 months.”
Pepperfry’s total sales jumped 30% to Rs127.5 crore in 2016-17 and net losses narrowed to Rs128.8 crore, according to official documents.
In the current financial year, Murty said he expects Pepperfry to report higher sales growth than last year and cut losses by half.
Founded in 2011 ex-eBay executives Murty and Ashish Shah, Pepperfry started out as a marketplace and has lately added private label brands in various categories which now contribute 50% of total revenues. It has its own fleet of 400 trucks and operates 18 warehouses, enabling the company to deliver furniture to over 500 cities.