Pepperfry eyes profit for the first time amid GST rates reduction

The reduction of goods and services tax (GST) on furniture and home decor items to 18 per cent has boosted the sales of the country’s major furniture and home products marketplace Pepperfry and it is now hoping to become profitable next year, a senior company official said on Wednesday.

While before the rollout of the GST, various states had low level of VAT on furniture, from July 1, the new taxation regime increased the levy to 28 per cent which had impacted the volume on Pepperfry to some extent.

But since November last, when GST on a wide range of items, including furniture and home decor, were lowered to 18 per cent, the volume has bounced back, the company said without quantifying the same though.

After the reduction in the GST from 28 per cent to 18 per cent in November, the sales have improved and the same is expected to continue, helping the company to attain the topline target by 2019, chief category officer at Pepperfry Hussaine Kesury told PTI.

The six-year-old marketplace, which also sells other brands like Hometown, Godrej and Neelkamal among others, apart from its own private labels, has set a target of Rs 14 billion of gross merchandise value (GMV) this year.

“We hope to become profitable in 2019 as we already are in cash profit and hope to touch a GMV of Rs 20 billion as we expect sales to improve under the GST regime,” he said.
 

The city-based company is backed by big-ticket investors namely Goldman Sachs and Zodius Technology Find (a cumulative $100 million in series D funding since 2015), Norwest Venture Partners ($43 million since 2011 in three installments), and Bertelsmann India Investments ($5 million since 2014).
 

The company nets a little over 50 per cent of its volumes from home brands, and around 30 per cent of total sales happen through Studios, the retail stores where no actual sales happen, he said, adding 75 per cent of the volume comes from furniture.

On expansion of its physical stores, he said, they already have 25 and will add 10 more by April.

"Studios get us good traction as conversion rate is over 65 per cent. We feel physical presence as one of the most effective way for brand building and most of the new stores will come in small towns like Indore where we just opened a Studio," Kesury said.

According to him, the next level of Studio expansion will mostly be through the franchisee route, after its success in Bengaluru.

Talking about house brand expansion, he said early this week they launched Clouddio, offering mattresses, pillows and mattress protectors.

The organized mattress market is worth around Rs 60 billion and is growing at 38 per cent, according to Kesury.

The company's house brands portfolio consists of nine brands in the furniture and modular segments and the entry into the mattress segment is in line with its strategy of expanding its own brand portfolio as this segment has higher margins, he said, adding he expects this portfolio to account for 15 per cent of the revenue in the first year.

Pepperfry is present in 500 cities with delivery services to 5,000 locations and has 0.5 million registered customers of which over 60 per cent are repeat customers.