Pepperfry is constantly on the hunt for innovative ways to boost sales. Before its plan to go offline, the online retailer launched its own brand to get a bite of the modular kitchen market. Now the etailer will take on new competitors apart from Urban Ladder in order to push its sales some more and strengthen its customer base. The online furniture platform is ready to offer its products for rent.
This service will be available only in Mumbai, Delhi, Bangalore, Pune, Gurgaon, Hyderabad, Noida, Ahmedabad and Chennai. In six months time, more cities like Cochin and Chandigarh will be included.
“Pepperfry customers typically range between the age group of 28 years and 60 years. This move (to launch rentals) will help us increase relevance in the age group of 22-28 years who we can then convert to customers on an on-going basis,” Ambareesh Murty, Pepperfry CEO said trying to explain the logic behind this move.
“We expect to rent a lot of beds, wardrobes, book cases, etc. These are more functional requirements,” he claimed.
Rental market a risky for business?
From $900 million in 2016, the value of the furniture and homeware market I expected to hit $1.1 billion in 2017, based on its 36% year on year growth, said Forrester Research. The rental market within this segment is minuscule and according to experts in the industry the rental market will take a while to grow to a substantial size.
“Furniture rentals is not a big market but it helps create volume. This is a channel for customer acquisition and enables conversion over a period of time,” senior forecast analyst at Forrester Research, Satish Meena pointed out.
He also said, “Companies are still figuring out how to optimise the (rentals) space. While it is good to have more players, it will take some more time before the pie can really increase.”
By diving into the rental furniture business, Pepperfry will have to compete with other like Furlenco, Rentomojo, CityFurnish and other businesses. Furlenco is a top player in this field. Its average ticket size is Rs. 3,000. The company is also looking to breakeven by March 2018.
In terms of sales, Pepperfry manages an approximate order value of Rs.18,000 and claims to possess a user base of around 4 million. Under its rental service section, it will offer 1,200 units out of its 14,000 SKUs. It will also offer free delivery and assembly service to patrons.
Does Pepperfry have an edge over competitors?
What the etailer has over its rental furniture competitors is its ability to provide a low-use price on its furniture pieces.
Murty stated, “Currently our returns and cancellations form 2.5% and rentals will include a portion of the returns. It will help us manage the entire supply chain including reversing cancellations and so it integrates very well into our business.”
In addition to low-rent charges, the etailer will also use slow SKUs and offline inventory as rental pieces. This will contribute to 15-20% of its rental revenue each month.
Murty mentioned, “The potential conversion to sales is high. I think we will have close to 95% conversion to our buying customers when they come of age. We will be profitable in 12-15 months, or by FY19-end if our growth trajectory continues.”