We have created a new market for MSMEs: Ashish Shah, COO and founder, Pepperfry.com

March 13, 2015 12:06 AM

Online furniture retailer Pepperfry.com aims to become a $2-billion company by 2020...

Online furniture retailer Pepperfry.com aims to become a $2-billion company by 2020. To that end, the company intents to raise about $80 million by May. The online marketplace, started by eBay buddies Ambareesh Murty and Ashish Shah three years ago, today boasts of some 40 lakh visitors to its website a month and annual sales of R350 crore-plus. Ashish Shah, chief operating officer and founder, spoke to FE’s Verghis Chandy about Pepperfry’s business model and its ambitions. Excerpts:

Pepperfry has grown pretty fast. How far has this benefitted the MSMEs on your platform?

See, we operate on a ‘managed marketplace’ model, which is the best platform for MSMEs, artisans and merchants to sell their merchandise to customers across India. We are working with 150-plus SMEs, all of them have benefitted from our platform, some hugely. Many have scaled up to cope with the sudden jump in demand. We have also created livelihood opportunities for about 3,000-plus carpenters, artisans and craftsmen. Today, 70% plus of Pepperfry’s sales relate to SME suppliers and artisans. That means we have created a market for them which was not there before.

What kind of investment has gone into the company?

We have done three rounds of funding in the last three years since we started out in January 2012. We have raised around $28 million, until now, mainly from Norwest Venture Partners. Now we’re again in the market looking for $70-80m, which will kind of see us through the breakeven. In e-commerce, breakeven comes only with scale. The next round of funding will help us to acquire more customers and scale up further. Luckily we’re in a high-margin business, so we should be breaking even towards 2017-end or 2018.

Will not raising more money leave you with less equity stake in the business?

We want to ensure that we’ve capital on our side to execute our vision. Most of the time a business fails because it is not able to raise money in time. I don’t mind being a minority shareholder, if that helps me grow my business. The questions is, whether you want to be a large shareholder in a small company or a small shareholder in a large company. When we–me and my partner Ambareesh Murty—left a lucrative job in eBay to start out on our own, our ambition was to build a large business. That requires constant investment.

What is the size of the business?

In three years, we’re a R350-crore-plus company in terms of gross merchandise value. By end March we should be at R500 crore. Next year we should hit R1,000 crore.

What are the reasons for such rapid growth?

The furniture business is highly disorganised. Because of  this, a buyer has very limited choices on design, quality and price. We saw an opportunity here, pioneered a new business model. Today, we offer a customer virtually unlimited choices in designs and price points. We have some 75,000 items on display. Our one web page has some 80 items. A buyer on an average browses through 17 such pages before placing an order. That’s the kind of choices a customer always wanted and what we are giving today. Moreover, we ensure product quality by working with the suppliers, and do the packaging and shipping ourselves. All this has worked in our favour.

But why do everything yourself when you can outsource?

We outsource some functions, but not packaging, quality control, shipping and customer service. We cannot outsource these functions to third parties. Again, when you outsource everything, your margins become wafer thin. That’s an issue with most e-tailers.

Why packaging and shipping?

These are important. Many businesses cannot scale up because they do not know how to package and ship an item. Otherwise, thousands of retailers would have sold their goods all over India.

Are you planning to scale up via a brick-and-mortar model?

Not at all. We opened a showroom in Powai, near Mumbai, and two more ‘Studio Pepperfry’ would come up very soon, in Gurgaon and Bengaluru. In all, we will have 20 studios in different cities. I don’t expect any serious business to come from these studios. These are only to give the customers more comfort and win their trust. When they see a shop in their city, they will feel more confident about buying online from us.

Are you worried about competition catching up with you?

Competition is not an issue. It is not easy for another player to get into this line. Again, don’t look at the market from the supply side. Look at the demand side. Demand is what an e-commerce company generates. In furniture, the entire buying behaviour is browse-based.  My job is to ensure I give the best browse experience to a customer.

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