‘We need more Ikeas to help organise the market’
The going is getting increasingly tough for Pepperfry and reports suggest the omnichannel furniture retailer might be looking for a potential buyer or even a strategic investor after attempts at an initial public offering failed. In this interview, CEO and co-founder Ashish Shah talks to Pallabi Dey Purkayastha about the rapid changes taking place in the furniture market in the country and how the arrival of global players like Ikea is a boon in disguise. Edited excerpts:
Q: Pepperfry recently put its IPO plans on hold. So what next for Pepperfry?
A: Back in November 2021, we were ready to launch our IPO, but market conditions changed, especially after some major IPOs performed poorly. From November 2021 to July 2022, the market downturn led us to put our IPO plans on hold. We decided to focus on profitability and self-sustainability. In the past year, I’ve concentrated on improving unit economics and reducing costs. For example, in the last nine months, we’ve halved our spending while maintaining a stable top line. This involved cutting non-profitable areas, including certain supply chain pin codes, merchants, categories, and business segments. With these cuts, we’ve managed to maintain healthy growth. We’re now only 10-15% away from profitability. Once we’re profitable and growing, Pepperfry will do well in the public markets, so we’re patiently waiting for the right time to go public.
Q: How has competition from global players like Ikea changed the playing field for home-grown players like Pepperfry?
A: From day one, Pepperfry has focused on offering a wide variety of home and furniture products at great prices. Our core proposition is providing customers with the largest range of curated products. We’re constantly launching new products, merchants, and collections under our house brands to ensure variety. On Pepperfry, you’ll find everything from a ₹4,000 wardrobe to a ₹1.5 lakh one. Regarding competition, particularly with Ikea, it’s important to note that 85% of the Indian furniture and home decor market remains unorganised, dominated by local carpenters and small shops. The entry of players like Ikea helps create awareness of branded products, which benefits the entire industry. I believe the market is large enough—$32 billion—to support multiple billion-dollar businesses.
Pepperfry distinguishes itself by offering a diverse range of products from various brands, unlike Ikea, which focuses on a specific style and mostly engineered wood furniture. While Ikea is more known for home goods, 80% of our sales are in furniture and mattresses, making us fundamentally different. We need more companies like Ikea to help organise the market, enabling all of us to thrive in India’s growing home and furniture sector.
Q: The global players have deep pockets and are working to expand quickly. How do you plan to hold up?
A: About 40% of our business now comes from Tier 1 and Tier 2 cities. For example, in the North East, we have 14 stores, allowing customers in Imphal to access products from over 200 brands without needing to travel to larger cities. Our proprietary supply chain serves 300-plus cities with 400 trucks and 250 carpenters handling daily deliveries and assemblies. We receive around 2 lakh visitors everyday. A recent key initiative is our assisted buying service, where customers can call, chat, or book home visits to get help with their purchases, boosting our conversion rates. Moving forward, my focus is on expanding our catalogue, growing our offline presence by launching new franchise stores every month, and enhancing assisted buying. We’ve optimised costs and are now well-positioned to drive significant growth over the next 6-9 months.
Q: Logistics and customer satisfaction have been two major pain points in your industry. How is Pepperfry addressing these issues?
A: Furniture is a complex category and traditionally, a hyper-local business. You’d buy furniture from a nearby shop, often involving a local carpenter. Pepperfry revolutionised this by solving the logistics challenges and building a large-scale furniture and supply chain business called Pepcart. Pepcart operates around 400 trucks and employs 250 carpenters, handling every step from production to delivery without third-party involvement. We even have repair shops in our warehouses for touch-ups if needed. Furniture delivery doesn’t end at the doorstep; it includes assembly, which we manage efficiently using technology like FarEye for scheduling and logistics. Our 94% of assemblies happen within 24 hours, with same-day assemblies at 34%. Our damage rate is just 1.5%, an industry-leading figure. We’ve built the largest large-item B2C logistics operation in the country, unmatched by any other.
Q: What role do sustainability and personalisation play in your offerings?
A: One of the things we do is ensure that we use the best of materials that are also environment friendly; the water that we use is world-class. We work with around 25 factories in the Jodhpur-Ratangarh-Churu belt. All of them use environment-friendly pigments and dyes and produce furniture that are lead-free. We have been running an initiative called Grow Trees — for every transaction that happens on Pepperfry, customers can choose to plant a tree. They pay Rs 30 and we add a matching amount. For every such transaction, we plant a tree in the Rajasthan belt. We have planted around 2 lakh trees already.
Q: How is Pepperfry deploying new technologies such as AR, VR and AI to ensure that online shopping meets global standards?
A: Augmented reality has always been a major focus area for Pepperfry, allowing customers to view furniture in their rooms via our app. We’re now investing heavily in virtual reality, aiming to create a 100-square-foot store experience where customers can use Google Glasses to turn 2D layouts into 3D, virtually touch-and-feel products, and add them to their cart for checkout. To enable this, we’re converting our catalogue into 3D models, with 30% of the work done already. While it’s an expensive and time-consuming process, we expect this game-changing experience to be available in two years.
Q: What trends do you see shaping the future of the furniture industry, not just in India but also internationally?
A: Over the last two/two-and-a-half years, this category has grown significantly. The largest team at Pepperfry is the category management team, focused on identifying furniture trends that will sell well. My team travels to global trade fairs and Indian roadshows to spot emerging trends. For instance, fabric sofas, particularly large ones from places like Turkey and Bali, are becoming popular and are now produced in India. Post-COVID, the demand for living room furniture, especially sofas, has surged as people entertain more at home.