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Though he had exported beds and other home furnishings to international markets for long, for 42-year-old Sanjay Bhansali, managing director of Jodhpur-based Suncity Handicrafts, a company seeking inner bed linen finishing was a first.
The company seeking the finishing was Mumbai-based Pepperfry.com, an online venture focusing on home decor and furniture retailing.
"Our managerial and manufacturing teams learnt a great deal about quality products from Pepperfry," says Bhansali, who has been engaged in business with them for eight months. He adds Pepperfry accounts for 30 per cent of his business or Rs 20-25 lakh a month. "Whatever rates we ask, they give. That's why vendors never think of cheating them or delaying orders," Bhansali says.
Pepperfry has grown from 100-odd transactions a day during its initial months to about 1,000 transactions a day. Business has grown 40 times since the venture was launched, says founder and chief executive Ambareesh Murty. From selling low-ticket items or products available on almost all e-commerce portals, Pepperfry soon found its niche in furniture, home furnishings and decor, primarily high-value items.
The company competes with portals such as Fabfurnish, Zansaar and Urbanladder; Thetreeoflife, Homeshop18 and Craftsvilla also offer home decor products.
To aid growth, last month, Pepperfry raised $8 million of additional funding from existing investor Norwest Venture Partners.
Early years
Founders Ambareesh Murty and Ashish Shah had experience in e-commerce - both had worked at online marketplace eBay. While Murty was the country manager, Shah was head of eBay Motors. "The online market had just arrived. We felt as more and more millennium Indians had households and started investing in their houses, demand would increase," says Murty, in his modest office in the Kurla area of Mumbai. The office is replete with Bollywood film posters.
In September 2011, bitten by the entrepreneurial bug, Murty and Shah gave up their jobs at eBay and set up Pepperfry; the site was launched in January 2012. The company, started with a leadership team of 12, has a staff of 150 today. Murty recalls how Shah and he ran out of personal savings before the last leg of the launch; they discussed various plans and strategies to go about things. Just before the launch, the portal received $5 million in funding from Norwest Venture Partners.
"We are a frugal company and we made that money last long," Murty says. The duo didn't want to spend too much on office interiors; Murty says the film posters in his office are from his personal collection.
To cultivate a sense of collective ownership, they started employee stock options for the staff.
Business model
Pepperfry follows the 'managed market place' model, roughly a middle path between the marketplace models of eBay (essentially a facilitator between sellers and buyers), and Myntra.com and Zovi.com, which manage the inventory and logistics of retailing business. Through this model, the portal controls various aspects such as quality, packaging logistics, listing, etc. Though the portal started selling many goods online, it soon found its niche in retailing furniture, home furnishings and decor. "Not many home-related items were available online. We wanted to be a one-stop shop for all home-related needs of customers," Murty says.
For its products, Pepperfry has set up a network of merchants and artisans in Jaipur, Jodhpur, Delhi, etc; it has also set up its own fulfilment centres or packaging centres that check quality and package goods. On its site, the portal lists the products of its merchants. Once an order is placed, the merchant is intimated. He then sends the product to Pepperfry's fulfilment centres. The products are checked for quality, packages and sent to courier companies for delivery.
"Small artisans have great knowledge of products. We take care of listing, photography and shipping, while they focus on production," says Shah. While most products are delivered within three to four days, a few categories such as furniture and jewellery might take a fortnight, in case merchants do not have the required stock.
The portal gets about 1,00,000 hits a day. It ships its products to 1,000 cities and towns across the country. It also supplies products to countries, including Israel, Australia and Germany. "We sell an item every minute," says Murty. Pepperfry hopes to break even by mid-2014.
E-commerce entrepreneurs such as Kavindra Mishra hold Pepperfry in high regard. "Their range is good and products are competitively priced. What you see is what you get. More important, their focus on a few categories has paid rich dividends for them," Mishra says.
What next?
The portal is planning a fresh round of funds from Norwest to widen its reach among merchants, set up new fulfilment centres and invest in the brand. After covering the northern and western regions, Pepperfry now wants to set up fulfilment centres in the south and east - in cities such as Bangalore, Madurai and Kolkata, to tap the sourcing base in these regions.
The portal's business grew three times last year. Murty says the company would increase its size by three to four times by the end of 2014. "If we do things right, the sky is the limit. Our aim is to become a one-stop shop for all home-related needs," he says.
Challenges
Consultants, as well as Pepperfry's peers, say though the managed marketplace model is easy to scale up, managing customer experience is difficult. "Maintaining quality and branding is a big challenge in retailing furniture online, especially for unbranded products," says Prashant Agarwal, joint managing director at retail consultancy Wazir Advisors. He adds if the cash-on-delivery option, followed by most portals, isn't available in Pepperfry's categories such as furniture, customers might be disappointed.
"It (home) is a good segment to be in but controlling quality is a difficult task, as you deal with multiple vendors in a managed marketplace. Verifying vendors, managing them and controlling quality are tough," says the managing director of an e-commerce portal that runs on an inventory-based model. He adds since back-end investments are few in the managed marketplace model, the margins are also less in this segment.
Others say constant availability of items is another challenge for portals.
However, Murty says the company's fulfilment centres check every item before it is shipped; if an item doesn't meet the quality standard, it is returned. "In a normal marketplace, merchants ship to customers. Here, the merchant ships to us and we ship to the customer," he says.
FACT BOX
Area of business: Online retail
Founders: Ambareesh Murty and Ashish Shah, ex-eBay hands
Investor: Norwest Venture Partners
Turnover (2012-13): Rs 50 crore
Target (by 2013-14): Rs 200 crore
Employees: 150
JOURNEY OF A HOME-FURNISHING RETAILER
- Founded in September 2011, Pepperfry.com is an online venture which focuses on furniture, home decor and furniture retailing
- Launched in January 2012, it started by selling many goods but soon found its niche in furniture and home furnishings retail
- Got $5 million from Norwest Venture Partners, just before its launch
- Set up a network of merchants and artisans in Jaipur, Jodhpur, Delhi and others, and set up fulfilment centres
- Pepperfry's model is called 'managed market place,' roughly a middle path between the marketplace model of eBays of the world, and Myntra.com and Zovi.com, which manage the inventory and logistics of the retailing business
- The portal gets 100,000 hits a day and ships to 1,000 cities and towns in the country
- In April 2013, Pepperfry raised another $8 million from Norwest Venture Partners
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EXPERT TAKE The company has an exceptional team, with strong knowledge and learning. Many in the top management came from eBay. So, they had deep knowledge of the marketplace. We invested in the team. I feel the company has done a couple of things very well-they found the best people and invested a lot in the top management. They have utilised business capital effectively. Though started as a small unit, today, they are carrying out thousands of transactions. They have more than 100 employees and a lot of variety - 40,000-50,000 products. This makes them the largest home store in India. It is a big vertical space, a $20-billion category. In a managed marketplace, they get the furniture to their warehouse, where quality is checked and goods are shipped out. I think it is a good model. The company has a clear focus on quality, a strong supply chain and strong customer connect. They are capital-efficient and growing fast. I do not think there are many issues in this space. They can scale up as they are, by far, the largest online furniture retailer. You have to continue to give wide variety and great customer experience. Niren Shah, managing director, Norwest Venture Partners, an investor in Pepperfry |
