India: Online furniture retailer Pepperfry to file for IPO in 12-18 mths

As discretionary spending took a hit during the lockdown, online furniture retail was impacted. Pepperfry, which has omnichannel presence, said it has grown stronger post the pandemic, and is on the cusp of turning profitable. Data by RedSeer Consulting shows the online furniture market in India grew at an annual average pace of approximately 80-85% to touch $700 million in 2019-20. But online has less than 3% share in the overall furniture market pegged at $17 billion. In an interview, Ambareesh Murty, co-founder and CEO, Pepperfry spoke about plans to go public, growth and profitability and the importance of omnichannel retail. Edited excerpts:

How badly were furniture retailers impacted due to covid?

In March, there was an overall slowdown and footfall in stores had reduced till mid-May. But when lockdown restrictions were lifted, including for e-commerce, our business has grown sharply with every week. We do more business today than we did in January-February. That was made possible because we own our supply chain. The rest of the furniture industry went through a tight period and it remains tough even today because retail remains suppressed. Many online furniture retailers also don’t own supply chains which was an issue given the supply chain issue. It’s easier for us, because we could control customer experience and delivery process. We have come back and more.

Staying at home has made people more conscious of the furniture they use. Pre-covid, people spent most time out of home. There is heightened consumer interest in furniture. Work-from-home furniture has picked up quite well. But it’s still about 20% of our business compared to sub-10% pre-covid. Discretionary spends remain an issue but people are buying regular furniture because they are spending more time at home.

What’s your outlook on the furniture retail business?

What’s peculiar about India’s furniture market is close to 85-90% is in the unorganized segment. After the last six months and going forward, that will change. It will get more organized.

We want Pepperfry to be the starting point for all furniture purchases online or offline and have invested heavily on the brand. Building an omnichannel busimess and a supply chain which connects buyers and sellers in a cost-efficient and robust way have differentiated us.

Why haven’t we seen more furniture startups gaining scale?

Furniture retail is a tough category. You aren’t selling a standard product so you can’t copy a product. There is no playbook and local conditions are very important. So when we started, we had to do everything for the first time, made mistakes and learnt on our own. Many startups found it tough in the furniture sector. It’s a sector where money doesn’t decide whether you succeed or not but the processes and operations do. Few understood the significance of having one’s own supply chain or the importance of being omnichannel. We did that fairly well.

We are gunning to file for an IPO hopefully within 12-18 months. We are turning profitable and this would be the right thing to do next. Profitability is important because it means your business model is capable of making money. To do an IPO, a track record of at least 6-9 months of profitability is very important.

In the case of IPOs, the proof of the pudding is in the eating. What is most important is if one is hitting all the milestones that one has set before itself, and the first milestone is profitability. There are few consumer internet businesses in India that are profitable. While I would like to see greater representation of startups on the stock exchanges, there is a big difference between a public market and private company. For a public market firm, everything you say needs to be done and that needs a certain level-headedness and maturity that we startups need to acquire.

We had set a goal of profitability for early next year. In August, we almost broke even and became close to profitable. All the things we did through the lockdown brought us close to profitability. Profitability is an important milestone for us. But we always balanced profitability with growth. So over the next 6-12 months, we will be focused on not only profitability but also using that opportunity to strengthen our brand and grow the business. As a CEO, I think there is no scope for complacency and we need to execute the way we have all this while.

The focus is on how we can use that cash to execute really well. Many startups don’t see profitability or reach that stage. We are at the cusp of profitability and still want to grow.

If one was to list in U.S, an Indian company would be perceived as an emerging market business. Then, potentially the only thing what would matter is the rate of growth of the business and the degree of profitability. However, if listing in India, then you would be looked at as a consumer brand. A consumer brand in India gets remarkable premium and this is based on the brand being known, differentiated and that it makes money. Indian investors have learnt it early that the differentiation that counts is better margins, which results in better profits. The way investors look at a business in India is different from investors in US. Depending on the path that a startup has adopted, be it rapid growth or profitability, will decide the market you want to list in. If I am on a balancing path, of growth and profitability, (listing in) India makes a lot more sense for me.

This article was first published on livemint.com.

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.

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.