Competition from IKEA, others good for building organised furniture market, says Pepperfry

As Swedish furniture giant IKEA expands aggressively in India and enters more cities, domestic online furniture player Pepperfry remains unfazed and says it is more focused on profitability and potential IPO.

Competition from IKEA and others in the space will help grow organised and branded furniture market, says Pepperfry co-founder and chief operating officer Ashish Shah.

Shah told CNBC-TV18 the company has aggressive expansion plans while staying focused on profitability, a milestone that Pepperfry expects to reach later this year despite being hit by the pandemic.

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Pepperfry was launched as a lifestyle ecommerce marketplace in 2012 by former eBay executives Ashish Shah and Ambareesh Murthy. However, in 2013, the company made a conscious decision to move out of other categories and focus solely on the home and furniture sector. Pepperfry said it has shipped more than 7 million furniture and home items, so far.

Pepperfry has had a strong focus on an omnichannel strategy. It has 70 plus experiential studios spread across four-plus cities, which contribute 30 percent+ to the overall revenue.

The stores were shut during the lockdowns, but Shah said a focus on consulting model for customers and a change in its approach to its franchisee model, it was able to open more experiential stores.

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"We changed our franchisee model from an Rs 80-90 lakh investment model to a Rs 40 lakh investment model. After the lockdowns were eased last year, we added 22 studios," he said.

"Furniture purchases are discretionary in nature, so overall sentiment-wise, the category got impacted because of COVID-19," Shah said, "However, after the country opened up, many people started buying furniture instead of making them like earlier, such as that available on PepperFry. People also wanted more furniture for working from home and other items as they were spending more time at home."

Shah said the platform is already seeing demand coming back post relaxations in many states after the second wave of COVID, "The second wave was not as harsh on supply chains, and we are already seeing demand coming back."

As IKEA expands aggressively in more markets, starting ecommerce sales in Bengaluru this week, the Pepperfry team remains unfazed, with Shah stating that competition will help in more customers buying branded furniture over unbranded, and that will expand the organised sector for the furniture business.

"PepperFry has always relied on being an omnichannel business, kept the supply chain in-house, and built our brand with great variety and great price," Shah said.

"The reason we remain strong despite the pandemic is because of this strategy. We have seen competition from different directions in the last few years, but we have been the largest in the business," he said.

"Competition is good since it will help build the organised space in the furniture sector, and more consumers will look to buy branded products," he added.

"Before the second wave, we were very close to profitability," Shah said, "We had decided a few years ago to turn profitable soon, and we focused on improving margins, negotiating costs to suppliers, etc."

"Our next goalpost is to go for an IPO in the next 12-18 months," Shah said, "We started talking about an IPO in late 2019. We were clearly on the path and were confident of the earlier timeline. The pandemic has delayed the IPO plans by six more months, and we now want to be profitable. We will be profitable as soon as lockdowns are lifted, by July or August."