Urban Ladder is gearing up to transform itself into a single brand retailer from being an e-tailer, once the government clears its application to this effect. The company hopes the switch will help in bringing down its losses, as it will open its own chain of stores in key markets in the country. In FY15, Urban Ladder reported losses of R58.5 crore on revenues of R192 crore. Ashish Goel, co-founder and CEO, Urban Ladder discusses with FE’s Anushree Bhattacharyya about the idea behind the switch from an e-tailer to a single brand retailer. Excerpts:

What is the idea behind the change to be a single brand retailer? Is it because as an online vertical player which sells only furniture and home décor items, the business model isn’t a sustainable one?

A brand business is a stronger and a long-term one compared to a online marketplace. And now that the government has clarified its stand towards vertical e-commerce companies, we want to build a business based on a sustainable and stronger model.

How will the business model change?

The business will have to bear some additional expenses. For example, we will now have to buy and keep the stock at our stores. For this during the initial period we will get third party to manufacture. The classic contract manufacturing process will be followed just like large companies such as HUL. We have already inked such deals with number of manufacturers who currently work with us as sellers. Also it will no longer be commission driven business. On an average on a order worth R18,000-20,000, we charge a commission of 35-40%. The commission includes the cost of other services like delivery, packaging, etc. As we change into a single brand retailer all this cost will come down and whatever we earn by selling a product, it will be our actual revenue. We are expecting that net trade off will actually be positive. And if GST is rolled out then business will become very efficient. We will be able to bring down the losses significantly.

The government had listed few norms related to areas like sourcing. Have you been able to meet all the terms?

The way we see it, that the government has put in some basic norms on topics such as domestic sourcing. We are well and above those norms. We currently source 70% of our raw material and goods locally while the government has mandated local sourcing at 30%. The rest 30% of the goods are imported across categories including furniture and home décor.

How many stores are you looking at opening? Does this mean you will be raising fresh funds?

We are not looking at opening 100 stores rather 15-20 stores over the next 2.5-3 years. The first store will be opened early next year in Bangalore, followed by Delhi, Mumbai and other cities. For us these are not stores but brand experience centres which will be 3000-5000 sq feet in size. We will try and maintain the size in every city. We are well capitalised. We raised $50 million last year and have scaled up in a fairly efficient manner. We have capital for the next one year after including our offline expansion plan.