Success Quotient is a weekly feature on Firstpost, which looks at the pains and joys en route to success for a head honcho - whether a CEO, MD or an entrepreneur. The column looks at the ideas that helped launch a company, its highs and lows.
Pepperfry, the name of a furniture brand and not those famous Chettinad dishes which go by that name, has taken a new arc by raising Rs 210 crore in a fresh round of funding from current investors Goldman Sachs, Bertelsmann India Investments (BII), Norwest Venture Partners (NVP) and Zodius Technology Fund. Incidentally, in a time of fund crunch and a large number of startups in various sectors being shut down in the sector in India, Pepperfry has managed to snag the largest investment this year.
Ambareesh Murty, co-founder and CEO, along with Ashish Shah, co-founder and COO, set up Pepperfry with an aim to be distinct in the market and set up a legacy. Happy at the way the company has progressed making that dream closer to fruition, Murty talks about entrepreneurship, its challenges and the success formula that worked for the online furniture marketplace.
Excerpts from the interview:
Your thoughts on snagging the largest investment in a pure-play e-commerce space in India this year
We have made a few good decisions in the last few years. We had a strategy in place and did not change tracks or look at expansion. We have no core competitors in the space. We had money in the bank with Goldman Sachs on board and we needed additional money to carry out long-term plans. Also we had a bit of luck. We are in a category where there are no brands. Shoes or mobile phones as a category have the top 5 players who own 60 percent of the market share, for instance. In home furniture, top players own only 4 percent of the market share.
We will use this latest round of funding for increasing our supply chain, the brands we have built, expand the number of experience centres from 17 as of now and make investments in technology.
What are your margins?
We are a high margin business and make a lot of money on the products we sell. We are not in a situation where we make a lot of money on every transaction but most of our overheads are covered and investments are made in technology.
Our margins in topline is 40 percent and above. The average furniture ticket size is Rs 18,000. We sell decor and furnishing, too. If we were to take both this and furniture, then the average ticket size would come to Rs 11,000. We have bespoke design service centres in Mumbai, Delhi, Bangalore called Pepperfry Bespoke. We plan to extend these centres to all places where we have an experience centre. We have 17 experience centres so far where anyone can drop in and get advice on how to furnish their room or house. This service is free.
The bespoke services does the full function – entire rooms, homes, flooring, painting, etc. We have tie-ups with other players and these are managed projects. These constitute less than 10 percent of the business. We expect it to grow with real estate increasing in India and the construction of new homes.
What is the most bought items of furniture?
Youngsters in the 22-30 age group, who are not yet married, buy low value products like shoe racks, coffee tables and comprise a large number of our transactions. These could be in the range of Rs 5,000 – Rs 9,000 for shoe racks and coffee tables could go up to Rs 12,000 a piece depending on the material – wood or engineered wood. These customers are basically checking out our products on our marketplace and later will go in for high-priced items. Our GMV and sales come from sale of sofas, dining tables and beds.
What was your intention and dream when you set out to startup PepperFry?
Ashish and I are ex-eBay guys where we worked in senior positions for around six years. We got along well and were friends. We decided to chuck our jobs somewhere in mid-2011 and launch a startup. I was 38 then and Ashish 34. When we decided to startup, we were not interested in electronics and wanted to do a business that would be differentiated in the marketplace. As we put our plans together, we had a clear blueprint on how the business would be, whichever we chose. The firm had to stand for everything that is Indian; it had to be honest in its dealings with customers and dealers and wanted to have fun while running it together.
When we started off, we also added fashion as a category, but soon discontinued it. That was a wise thing to do, on hindsight. Neither Ashish and I are passionate about fashion.
What are you passionate about?
Besides our startup, I love to read sitting in a quiet corner. My house is the best place for it. Why Ashish and I click is because we have diametrically different tastes. I am highly introverted and he is extroverted. On a Saturday night he will be in a restaurant or at a party while I will be at home reading or watching TV. We are a great team and have good communication. We are direct people and won’t hesitate to say what we have to say to each other.
What are your plans for PepperFry?
We want to grow the company to 3x by 2017.