Home is where you hang your hat or so goes the song. But walk into any modern home in a city – an apartment, duplex or row house – and the first thing to notice will be the interiors. Comfy couches, a swanky entertainment unit to display mammoth flatscreens, modular kitchens built to coordinated colour schemes and wardrobes that are functional and sleek. Design is paramount when it comes to making a home.
So is budget.
With real estate prices shooting up through the sky and the bubble not bursting anytime soon, hefty mortgage rates stare new homeowners in the face even before they plan their housewarming party. In such a situation, planning to furnish a new apartment is oftentimes an extravagant and exorbitant affair.
Bengaluru-based home interior aggregator startup CapriCoast may just be the answer to the new apartment owner’s prayers. It is an aggregator which helps their users furnish their homes by putting them in touch with brands and craftsmen who are equipped and specialised to do the same.
“Our main target audience is the new apartment owner who has just bought an apartment in the range of INR 40 Lakhs – INR 1.5 Cr. Not huge mansions but homeowners in cities like Bengaluru, Mumbai and other major cities,” begins Jidesh Haridas, COO, CapriCoast.
The real estate market in India is expected to touch $180 Bn by 2020 and that the housing sector contributes 5%-6% of the country’s GDP and here is how CapriCoast is planning on biting its share of this billion-dollar pie.
CapriCoast: Coasting Through The Interior Design Business
CapriCoast began operations in January 2015. It was founded by serial entrepreneur Jawad Ayaz, and a team of professionals who were previously involved with a startup called Zansaar.com. In Jidesh’s words, “You could call Zansaar.com a startup that operated in the home products space. Something like Pepperfry or Urban Ladder.”
But it quickly changed direction when the CapriCoast team figured out that their biggest customer had a smaller house with bigger mortgages, and they needed to provide the fundamentals on a tighter budget.
“We have been operational for around a year and have been fiddling around with attaining PMF, but we very quickly realised that our highest value customer are the mid-range homeowners who have a decorating budget of INR 15 Lakh. They are looking for the very basics – an entertainment unit, a couple of wardrobes in the bedroom and modular kitchens along with a shoe rack or a crockery rack. We call this our ‘Essential Interiors’ package,” he adds.
CapriCoast Home Solutions claims to provide ‘snapfit kitchens’ and a 3D online catalogue for furnishing and refurbishing well within the budget of a homeowner looking to add some style and class to their new abode. All done without the hassle of going from store to store and haggling over price.
Jidesh is upfront in clarifying that their platform provides fixed furniture solutions, which can be customised and personalised, unlike furniture products that are sold on “click & buy” ecommerce platforms like Urban Ladder & Pepperfry.
Partnerships With SMBs: The Business Model That Works
“We experimented with a couple of business models till we got it right,” says Jidesh. “We were very clear about not being a click-n-buy platform from the beginning but aggregating small businesses and ensuring they were working well and within the given timeframe was a challenge in and of itself.”
This was the reason why CapriCoast first branched out into partnering with bigger, reputed brands becoming India’s first online-to-offline furniture marketplace. As per Jidesh, these brands are specialised in a certain product or skillset and tying up with them made the most sense in terms of attaining and retaining market share.
“The interior design market in India is largely unorganised,” shares Jidesh. “Only 15% firms are those that we may call organised, or specialists in their particular niche,” he adds.
CapriCoast tied up with Space Wood and Sleek International in August 2015 to bring the umbrella of services offered by those brands to its users. “There was a point in time when we were focussed solely on these brands and wanted to scale exclusively by partnering with them. But, that was not where we struck gold.”
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Bengaluru has a robust offering of interior design firms, smaller furnishing shops and brick and mortar stores all looking for an online presence in order to stay connected in the digital world.
“We also have 3,000+ registered interior design firms in Bengaluru itself who are looking for a way to connect with the customers,” he says. “It is for these niche businesses that we have started the CapriCoastPartners programme. The programme looks to standardise the process of interior design right from when the customer decides on a particular design and the budget for the same,” he adds.
The CapriCoastPartners programme has been rolled out majorly so far in Bengaluru and boasts of about 150 partners in 10 cities, who are now connected to the CapriCoast network, catering to its users.
“It’s all about the right combination,” says Jidesh. “We figured out our product offering and even with the advent of large horizontals such as Amazon and Flipkart coming into the interior design business, there is defensibility in our business model.”
The Other Players
Competition is rife in the furniture marketplace model and Jidesh readily acknowledges that. “Yes, all of us are targeting the same customer – the homeowner. Whether it is Urban Ladder, Pepperfry, Livspace or us. We all approach our users hoping to acquire and retain them.”
Urban Ladder, one of the most reputed furniture etailers, is looking to open physical stores in the near future. LivSpace has dominated headlines with both funding and acquisitions (Dwell.in). The other competitors include Pepperfry and Future Group-backed Fab Furnish who have all raised massive amounts of funding in the last two years. Bengaluru-based Furlenco, too raised $6 Mn in a Series A funding round led by LightBox VC.
“These companies approach the market from a different perspective. They are after the ‘own-brand’ approach while we are more of a curated marketplace. I believe this is one of the key factors that makes us stand out from the crowd,” shares Jidesh. “At the same time, the market is large. Certainly large enough that there need not be one winner takes all.”
In Search Of The Small ‘Wow’
“You have to understand that interior design is not a repeat ticket business. It’s not like buying a pair of shoes, or books or a new outfit. It’s extremely high in ticket size, with an average of about INR 5 Lakhs,” says Jidesh. “Let’s face it. They are not going to come back again unless they buy a new house or are looking to refurnish the old one.”
CapriCoast charges a commission to the brands it has partnered with, to the tune of 15%-25% per transaction. The commission claims to cover customer acquisition costs (which are not as high in comparison to ecommerce). And at the same time, the transaction value per customer is high too.
The average design project takes about three months, start to finish and CapriCoast claims to have finished 500 projects so far.
Jidesh says, “In our business, it totally depends on word-of-mouth. Opinions, testimonials are the things that matter. And we believe that the small ‘wows’ – right from ease of choosing the right design, to paying for it, to having it delivered on time and under budget – these small touch points will lead to a superior customer experience and have them recommending us over and over again.”
Perhaps, that is why CapriCoast is more interested in scale than in unit economics. “We aren’t profitable at the moment,” confesses Jidesh. “But we have finally hit the sweet spot from a growth and scale perspective and that is why profits don’t matter right now.”
Nevertheless, Jidesh claims that the M-o-M growth in the last quarter has been 50%, especially as it has ramped up scaling on CapriCoastPartners.
But as all operations require capital, so too did CapriCoast. They raised $3.5Mn in Series A round of funding from Accel Partners and RB Investments in December 2015. Before that, they had raised Seed funding from Accel Partners to the tune of $1.5 Mn.
“When you think about it, $4.5 Mn is enough to keep us going for a little while now. We have not spent so much on technology or human resources. Our headcount has risen by just about 10% since raising Series A, so we are very conservative about hiring as well as product development,” says Jidesh. CapriCoast now has a team of 70 working in Bengaluru.
“The whole idea is to roll out CapriCoastPartners in a phased manner in 2017 and develop product and team around it,” says Jidesh. “We currently have about 50 partners in total in Hyderabad, Chennai and Mumbai put together. That number has to increase significantly.”
Delhi-NCR is another region, CapriCoast is highly interested in. “50% of all India’s real estate market rests in Delhi,” says Jidesh. “So we need to focus on getting at least double the number of partners there as we have in Bengaluru at the moment.”
CapriCoast may be looking at raising further funding sometime next year, but one thing is for sure: “It’s all about the wow. We make one customer happy and they go and tell ten other people and so on and so forth and that’s how we’d like to be remembered as,” concludes Jidesh.
In an emerging economy like India, real estate plays a vital role in ensuring urbanization and progress. According to an IBEF report, the CAGR in the sector is expected to grow 11.2% from 2008-2020. With so much potential, furniture etailers are looking to leverage the homeowner’s purchasing capacity by turning interior design into a fully-automated process.
Where CapriCoast differentiates itself is the way in which it has integrated offline capabilities with its online presence, offering the best of both worlds to its users. But it does need to watch out for replication of process and smooth integration of SMBs as it scales up. The execution in providing high customer satisfaction will be the key to its success as it will contribute towards generating higher referral rates and in turn drive revenue and profitability. Whether it is able to do so, in a climate filled with me-too startups with faster, own-brand offerings remains to be seen.