SUMMARY
The Funding Round Will Enable Pepperfry To Expand Its Experience Centers In Tier II Towns
Mumbai-based furniture and home marketplace Pepperfry has raised about $38.5 Mn (INR 250 Cr) in its fifth round of funding from State Street Global Advisors, the asset management business of State Street Corporation.
As part of the round, Anandh Hari, Managing Director Private Equity, State Street Global Advisors, will join the board of advisors.
The fresh funds will be deployed to expand Pepperfry’s Experience Centers in Tier II Towns, invest behind developing AR/VR technology for virtual touch and feel, and enhance the Private Brand franchise in preparation for its next financial milestone of an IPO.
Ambareesh Murty, Founder and CEO of Pepperfry said, “We have been fortunate to have partners who believe in our business, are aligned with our strategy and value our execution capabilities. I welcome a marquee investor like State Street Global Advisors to Pepperfry and look forward to their partnership in this new phase of our journey.”
A Quick Look At Pepperfry And Online Furniture In India
Pepperfry was founded by Ambareesh Murty and Ashish Shah in January 2012. With this round, Pepperfry has raised over $184 Mn (INR 1,200 Cr) of capital since it began operations six years ago. State Street Global Advisors joins marquee names such as Norwest Venture Partners, Bertelsmann India Investments, Zodius Capital and Goldman Sachs, who have previously invested in Pepperfry.
Anandh Hari, Managing Director Private Equity, State Street Global Advisors said, “We are excited to enter the Indian e-Commerce market through our investment in Pepperfry. India’s large Furniture and Décor market is ripe for disruption and we believe that Pepperfry’s unique strategy, proven execution capabilities and passionate team are the perfect ingredients for success.”
Prior to this in 2016, the furniture marketplace had raised about $31 Mn (INR 210 Cr) in funding from Goldman Sachs, Bertelsmann India Investments (BII), Norwest Venture Partners (NVP), and Zodius Technology Fund.
In July 2015, Goldman Sachs Group Inc. led a $100 Mn investment round in Pepperfry. Before that, it had raised about $30 Mn funding from Norwest Venture Partners and Bertelsmann.
With this round, Pepperfry earns the distinction of raising the highest amount of capital ever as far as an ecommerce furniture and home products company in India is concerned.
Speaking to Inc42, Ashish Shah, Co-founder of Pepperfry stated that the funds will help the marketplace to reach profitability in the next 18-20 months, thus putting it on its path for an IPO at some point of time.
The startup claims that its revenue has grown at a CAGR of over 83% in the last 5 years and with this fresh round of investment, it has enough dry-powder available to accelerate past the break-even point and become a profitable business over the next 12-18 months.
Ashish said, “As far as strategy is concerned, the furniture marketplace will continue to pursue its omni-channel strategy. A lot of the investment will also make its way into the AR/ VR space to enhance the customer experience through augmented reality and virtual reality.”
Ashish mentioned that currently, the startup is executing eight more studios in Vizag, Siliguri, Trivandrum to name a few and tying up with 17 franchises. So in the next 15 months, 17 more Pepperfry studios are expected to come up. Currently this number stands at 26, which will rise to 41 and by the end of the next FY, the startup aims to open 90-100 studios.
While the startup chases profitability in the next 20 months, its goal is to service 20 Mn customers by 2020. As per Aashish, currently, that number stands at around 5.5 Mn customers. Thus the startup aims to double its business every year from now on.
Pepperfry boasts of over 3000+ merchants and last mile deliveries to 500 cities in India. Over 65% of traffic on the website is driven by non-furniture items, which also help the etailer get more lifetime value from the customer. The repeat customer rate on the website stands at a significant 58%, with furniture being the largest category, followed by lamps and lighting. For the financial year 2016-17, Pepperfry posted revenues of $15.19 Mn (INR 98 Cr), almost three times that of the previous year.
As per estimates, the overall furniture market is between $15 Bn to $24 Bn annually. The organised segment is around 8%-10% and of this, only 15% is online. According to consulting firm RedSeer Management Consulting Pvt. Ltd, furniture comprised only 1%-1.5% of the total online retail sales in 2016. The home furniture and décor is expected to reach $54 Bn (INR 350,000 Cr) in market size by 2020.
In this market Pepperfry not only competes with players like UrbanLadder, LivSpace, Godrej Interio, but also rental players like Furlenco and RentoMojo and international players like Ikea which is making its way in the country. Just last week, online furniture retailer Urban Ladder has raised $12 Mn in a fresh round of funding led by the existing investors.
With this new funding round, Peppperfry will further intensify its efforts to become a leading furniture marketplace amidst rising competition in the furniture space and organise and expand the unorganised market which currently forms 91% of the category.
