 "Ajith Karimpana")
When Ajith Karimpana quit his job at Goldman Sachs in the US to move back to India in late 2011, he had a choice: Ship his belongings home or sell them. He chose the latter and to his dismay the $5,000 he had invested in buying all his furniture yielded him only $300.
Back in Bengaluru, when Karimpana was setting up a new home, he was fully aware of the troubles he had faced back in the US. Despite this, he was forced to buy more furniture for the lack of any other option. A year later, when he found most of the new furniture in tatters, he decided to take things into his own hand.
He founded Rent Ur Duniya, a furniture rental company, in October 2011, with the aim of taking out the complexity in buying furniture in India. His first target was expatriates who were in the country for a few months and unwilling to go through the hassle of buying and selling furniture. Soon, he realised there was a huge market in serving Indians living away from home.
The beginning
Karimpana began thinking of ways to prove his model of renting furniture not just to a small group of people but everyone across India. He rebranded Rent Ur Duniya as Furlenco, a catchy name that would appeal to young urban dwellers.
But changing the customer mindset about owning furniture has been an uphill task. Everyone grows up seeing furniture being bought at home, says Karimpana, and this is what we needed to change. He thought the best way to do this was to offer designed furniture for rent that no one could buy.
“We are actually creating furniture from scratch. The market does not understand renting of furniture and so we need to create a differentiator, which is our designs. The only other company that has done this is IKEA, and they have done it beautifully, but their business model is obviously different,” said Karimpana.
Subscription economy is here
India has an estimated 35 start-ups in the furniture and home appliance rental space, fuelled by the idea that millennials who are deciding against owning a car in favour of services such as Uber will do the same with expensive purchases such as furniture. They range from tiny to small, such as Furlenco, which serves close to 15,000 households in Bengaluru, Mumbai and Pune.
Good quality furniture is expensive and with a relatively small credit industry in India, sales are quite low. But Furlenco claims it has proved the alternate subscription model works, making an average of $500 per customer every year.
“The average Indian is much more transient than he was 10 years ago, mainly because of urbanisation and services sector jobs. We are going after these people, which is why the industry is significantly smaller than most other verticals of retailing in our country,” said Siddharth Talwar, partner at Lightbox Ventures.
Going forward
Furlenco wants to double its user base in the next 18 months, for which it will continually need to rack up debt to pay for its growing inventory. Karimpana says the firm is in its growth phase and while the unit economics of the monthly subscription model are extremely strong, profitability is not on the near-term horizon.
“The assets will be fully funded by debt, which was not the case before. The equity portion, like in a typical startup, is going to be used for growth and getting into new categories,” adds Karimpana. “We are a design-oriented company so we are going to spend on designing new furniture. Also, we will invest in going into new cities and marketing.”
Furlenco might be bullish about the perceived $20 billion furniture rental opportunity it sees in India, but Karimpana is wary of competition, not just from local players but from global ones. “IKEA would be competition for sure from a design perspective because they do have some mass premium products out there. My answer to them is the business model we have,” he says.
With IKEA and other rivals such as Urban Ladder, Rentomojo and Pepperfry being around, Karimpana’s pipe dream of renting furniture to every Indian household might be just that, but he says there is enough to go around for everyone.
Fact Box
Inception: October 2011 (rebranded to Furlenco on October 2012)
Area of business: Furniture rental
Founder: Ajith Karimpana
Funding: $21 million in equity from Lightbox Ventures and Axis Capital, and $15 million in debt from banks, NBFCs and HNIs.
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Expert Take: Yogi Vashishta With increasing mobility of the workforce, 'furniture on rent' seems like addressing an important customer need. The burgeoning young workforce that is quite footloose would also be happy being hands-free at the same time. The debt-financed business model of Furlenco, too, seems to be an interesting enabler for something like this to take off. |
It is a classic ‘yield’ business, and the competitive intensity could increase with low entry barriers, putting significant pressure on margins. The sector will also be dependent on how the customer behaviour shapes around the practice of renting furniture. At present, it clearly seems most suited for young, mobile population. Ultimately, people grow in their relationship with various assets, including things like furniture. The need to own the 'good things' of life as markers of one's success is a very powerful
human behaviour.
Furlenco would do well to stay focused on what segment of customers they serve and what specific problem of that customer they are solving. If it is seen solving a financial issue, it might run into a scenario where a possible lower or near equal EMI could tilt the customer decision to owning the furniture. On the other hand, if it sees itself addressing the needs like hassle of buying, moving, disposing etc, the industry will be addressing a sustainable need and will also stay focused on excelling on solving this need.
Also, the practice of apartments being pre-fitted with hard furnishing could be either a challenge or an opportunity, depending how the rental players see it. While the pivotal business imperative will be operational excellence, the sector’s ability to differentiate various possibilities as worthwhile opportunities or distractions will be the key.
Yogi Vashishta, chief executive officer, Minority Brand Management
and Creation LLP
