New markets: Moving out of the comfort zone

Wakefit’s expansion plan hinges on stepping out of the big cities, beefing up its offline presence and moving into adjacent categories

New markets: Moving out of the comfort zone
Although the mattress market in India is largely unorganised (almost 60%), it has seen the mushrooming of branded players of late.

Having recently opened three mega stores in Bengaluru, New Delhi and Lucknow, Wakefit — the D2C home and sleep solutions company — has outlined an aggressive expansion plan for the current fiscal. It has kept aside a budget of `6-10 crore to open a total of 25 stores across the country. Of these,15 will be mega stores or large format, multi-category stores, and at the end of the process, the Bengaluru-based company hopes that its offline stores will account for 10% of its revenue by the end of FY23.

Wakefit is not the only one. Other D2C brands including The Sleep Company, Flo Mattress and SleepyCat are setting up physical stores and finetuning their offline market operations as they eye a larger share of the market. Devangshu Dutta, chief executive, Third Eyesight, says that since most of India’s consumers still buy offline, having brand-operated offline stores is an important part of a controlled experience, even if it entails additional costs. “The new generation D2C brands can take charge of the entire process of discovery, education about the brand’s value proposition, decisions about specific products, the purchase transaction, and post-sales support if needed. Distributor and retailer margin money, that the D2C brand saves, can, to an extent, compensate for the higher customer acquisition costs and logistics,” he adds.

Although the mattress market in India is largely unorganised (almost 60%), it has seen the mushrooming of branded players of late. Globally, sleep solutions is a big market and India is also moving in that direction. A report by Marketwatch predicts the global sleep aids market will grow from $64 billion to $111.93 billion between 2020 and 2030, growing at a CAGR of 7%.

Accessibility and affordability

Ankit Garg, CEO and co-founder of Wakefit, claims that all of the company’s products are 20-25% cheaper than that of rivals of comparable quality. The Sequoia-backed company is targeting `1,050 crore revenue in FY23, while trying to break deeper into tier-II and III cities. “Earlier almost 70% of our revenue was coming from the top metros but in the past two years, this ratio has changed. Now, more than 45% of our revenue comes from tier-II and III cities and we plan to expand that base steadily,” Garg adds.

It is not going to be a cakewalk for Wakefit though. For one, competition in the category is heating up; for another, brands like Soho Mattress are luring consumers with promises like same-day delivery.

As a brand that manufactures products from scratch in India, Wakefit differentiates itself with offerings that are made keeping the Indian user in mind, with an aesthetic appeal that is aligned with the taste of that consumer. In contrast, many retailers offer imported products that are designed for an altogether different consumer cohort.

Dutta of Third Eyesight notes that D2C brands face several challenges, the most significant being the commoditisation of the product category. “In this initial stage of market development for D2C brands, the price differential itself can be a barrier to building a significant scale quickly,” he says.

For its part, Wakefit is looking at under-served pockets as its next port of call. It is also trying to increase the bouquet of offerings to include products from adjacent categories like lighting and home decor. Furniture sales which account for 20% of its total revenue, is expected to touch 25% by the end of this fiscal. It has seven manufacturing units and 23 warehouses; by next fiscal it plans to have 20 new distribution centres in smaller cities. “We are going very traditional in our approach to marketing and have allocated 50:50 share of 50:50 for traditional and digital mediums. We have been very cost efficient in terms of our spending,” says Garg.

Nisha Sampath, managing partner, Bright Angles Consulting, says while non-metro markets present a huge opportunity, it is important that brands understand the consumer psyche and the buying journey of the small-town consumer. Timely delivery in good condition, installation, servicing and repair of products, returns, and replacements are some aspects that can be logistically challenging in smaller markets.

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