Despite the various challenges and inherent complexities, online furniture market is proving to be a very profitable ecommerce segment. Over the past 3-4 years, all the players like FabFurnish, Pepperfry, LivSpace and Urban Ladder have worked hard to overcome the roadblocks and stabilize the highly unorganized furniture industry.
One of the first entrants in the online furniture industry, Pepperfry appears to be doing really well. It has replaced the previous market leader FabFurnish, which is struggling as of now. Pepperfry founders recently shared how their sales, number of sellers, product portfolio and units sold has only increased with time.
“The business is stable now and I can afford holidays. Our momentum has only increased with the sales tripling every year. Since the competition is not intense as in some other online segments, our unit economics are solid. We hope to be profitable in the next 12 to 18 months,” said Ambareesh Murty, founder of Pepperfry.
Two primary reasons that have contributed to this industry’s growth are high-margin products and less competition due to high entry barriers.
Furniture and home décor items are expensive products and the profit margins can be as high as 40%! Therefore, companies earn great revenue even after deducting shipping and other costs.
While the margins are high, it is not an easy model to replicate because of the huge initial investment and emphasis on good quality & design. This is why the space is still not crowded unlike other ecommerce categories.
Mohan Kumar, Executive Director, Norwest Venture Partner explained, “The market is huge with lot of new houses coming up. A full home furnishing could be a potential 3 lakh and above expenditure. Higher margins and less competition means they have a better chance at profitability than other e-commerce firms.”
Since this ecommerce category is extremely profitable, investors are more than happy about backing such ventures. Pepperfry that plans to turn profitable by 2017, received a staggering Rs 640 crore from Goldman Sachs in mid last year. Investors have been generous with Urban Ladder as well.
Will FabFurnish pack up? Will Pepperfry stay at top? Will Flipkart and Amazon’s entry affect exclusive online furniture marketplaces’ growth? Or the new start-ups such as MebelKart and CustomFurnish will take-over? We’ll find out soon.