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BENGALURU: Furniture marketplace Pepperfry, which is gearing up for a public listing, is deepening its offline presence in both large cities and smaller towns in an attempt to be closer to consumers. In 2021-22, the company plans to expand its franchisee store network, invest in technology for the online business and enhance supply chain capabilities. In an interview, Ashish Shah, co-founder and chief operating officer, Pepperfry spoke about expansion plans, the impact of the pandemic and the proposed initial public offering (IPO). Edited excerpts:
What are some of the trends in furniture retail that emerged from the pandemic?
AS: Due to the pandemic, people’s appreciation of their homes and home décor went up significantly. People have been spending a lot of money in upgrading their interiors, furniture etc. In some ways, furniture and home décor became a category like fashion. Demand related to work-from-home furniture was robust and continues to do so. Earlier, people would call a carpenter and get them to make the furniture from their homes, for 1-5 months. A lot of that has moved online, especially demand for loose furniture, that can be replaced easily. We were never a custom furniture business, so this has helped our business significantly.
From August-September 2021 till now, we have seen robust demand. Mostly living room furniture – seating and bar units, sofas – is where people are indulging in now. Work-from-home furniture, which grew three-fold during the pandemic, is still a top category. That earlier pace of growth may have slowed down a bit but demand is still high.
How has the omnichannel approach played out for Pepperfry?
AS: Furniture as a category has been quite late in the evolution of the e-commerce business. We opened our first store in December 2014, when not many spoke about omnichannel business in India. Today, we have customers, who come directly to our website and buy. About 70% of our business comes from organic traffic. There is a second set of customers, who for larger purchases with a ₹1.5-2 lakh budget, wants to visit a shop first before they buy furniture online. This segment will continue to be big. Our Pepperfry studios are focused on these customers. Omnichannel will be very big in our strategy.
We have 175 studios in 91 cities, which include Franchisee Owned Franchisee Operated and Company Owned Company Operated stores, and added 100 studios in the last 10-11 months.
We need to get into neighbourhoods and be closer to customers. When we opened our first store, the goal was to show customers all the materials and fabrics we use, and then take them online to show them the full catalogue. My catalogue is in a 3D model, which is even better than offline cataloguing. This is the only way to buy furniture going forward.
Pure online sales is 60% of our overall sales, and the remaining is from offline, omnichannel business.
How important is it to be present beyond the metros?
Beyond the metros, we are also present in smaller cities and towns, and this model has worked well for us. We need local expertise and execution. As you move on to cities where you haven’t worked in, then local partners are important. One of the key criterion when we sign a franchisee store is we don’t want investors. We want people, entrepreneurs to sit in the store and run them. The franchisee model was the only way to expand. When we open a store in a new, small city, it is like activating an entire location or geography, and a new customer base. While large cities will continue to be important, future growth, say 5-7 years from now, will be prompted by smaller cities and towns. Also, my customer segment doesn’t change when we are entering a new geography. Even when we are in Raipur, we are still catering to the masstige segment (mass prestige).
What is Pepperfry’s expansion plan in 2022-23?
AS: We are bullish about omichannel play, which helps us with deeper penetration into large metros and grow our footprint in smaller towns. We will continue to invest in technology, particularly in AR (augmented reality) and VR (virtual reality), for the online business. This is because product variety can be shown online, not offline. We believe in the next few years customers would want to virtually touch and feel products, and turn, rotate, place the furniture in their rooms. Purchase decisions will be driven by variety, and that can happen only through technology.
We are expanding our catalogue and entering into new home-related categories. We would also need to expand our supply chain capabilities. From 26 distribution centres last year, we have 32 now and will continue to grow. We will keep opening franchise stores (typically 700-2000 sq ft). We have moved on from just being on high streets to being neighbourhood stores. If we see 2000 apartments at a particular location, we can open a store there.
What’s the status of your IPO plan?
AS: We are in the process of filing our DRHP (draft red herring prospectus). Bankers and lawyers have been appointed. We have reduced our losses by 50% and we are excited about the IPO. We are on a good path.
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