Co-founder and COO of e-commerce start-up, Pepperfry, Ashish Shah, says that the company’s focus has shifted from achieving profitability to becoming a high-growth company, as the brand has reached close to profitability last year. “We were chasing profitability for two years and we reached there in August-September 2020. Post which, we said that now the business can turn profitable anytime and therefore now our only focus is on growth. All the new initiatives that you are seeing from our side are just towards ensuring that we now become a very high growth company,” Shah told BusinessLine.
With plans to list the company on the public market by next year, Pepperfry has currently ramped up its efforts towards remodelling its mattress brand Clouddio, standardising the experience at its modular centres and building technological capabilities related to augmented reality(AR)and virtual reality (VR), among other things.
Another funding round
While the company is said to have enough funds at this point, Pepperfry would be raising another funding round in the run-up to its IPO. Commenting on whether Pepperfry will look at a unicorn valuation in this fundraise, Shah said, “We have always wanted to build a legacy company and have raised a lot of money till now. I think valuation only tells the scale of the company, it does not do anything beyond that for us. We have clearly chalked out plans for business, we are focused on them and then we'll wait for the public market to value us.”
Pepperfry is estimated to have raised about $240 million in funding across multiple funding rounds from a clutch of investors including InnoVen Capital, Norwest Venture Partners, Bertelsmann, and Goldman Sachs, among others.
Also read: Pepperfry launches first small format store in Hyderabad
On the technology front, the company has doubled its technology team since January 2021. Over 100 people are said to be working in the technology and product function at Pepperfry.
Pepperfry already has AR functionalities on its app for most of the products, this enables customers to get an idea of how a product will look in their homes.
Going forward, Pepperfry has set an internal target to do the first experiment with virtual reality in one of its Bengaluru stores by March 2022. “We will perhaps start with a few products, get customers to come and visit us, see how VR works, etc. Once we understand that customers are seeing the benefit, then we'll scale it up significantly. I think in six to seven months you will see something coming out, and then I think in a couple of years we should completely execute it.” Shah added.
Further, Pepperfry has also changed its approach to a modular business by standardising the customer experience at the new modular centres being launched in Hyderabad, Bengaluru, Mumbai and Pune.
“Our studios were primarily the place where the customers would come in to interact with the designers, but the designers would be very heavily dependent on the local modular merchant and therefore, the customer experience in each city was very different. So the process was slower in some places and faster in other locations depending on the merchant partner,” said Kashyap Vadapalli, CMO and Business head at Pepperfry.
Earlier, Pepperfry’s modular business operated on a marketplace model wherein the services were provided through the merchant partners present in various cities, which made the customer experience dependent on the respective merchant partners. In the new stores, the company has taken control of the entire front end of the business, and also aligned the merchants to work according to the processes and standards of Pepperfry.
Focus on Mattress Segment
Pepperfry has been selling mattresses on the platform in a marketplace model with the value proposition of offering a variety of mattress brands and price ranges. In 2018, the company launched its house brand Clouddio in the mattress category, powered by the learnings of the marketplace business.
In the first six months of its launch, Clouddio is said to have started contributing about 35% to Pepperfry’s overall business. Shah noted that over the past two years, the mattress category has seen the entry of many new players like Wakefit and SleepyCat etc, who have disrupted the category. In addition to the entry of new players, he noted that there has also been a lot of pressure from the raw material standpoint as costs went up by 300 per cent in the last two years because of issues in importing from China and other countries.
Which is why, Pepperfry decided to recraft Clouddio as a product and has now revamped Clouddio's value proposition as a mattress with superior health and hygiene benefits. “We realised that in the last one and a half to two years, one thing that has changed significantly is the consumer awareness on health and hygiene, and therefore we said that with Clouddio, we are going to target consumers who are very conscious about their health,” said Shah.
Talking about why D2C works in the mattress segment, SleepyCat founder Kabir Siddiq said, “This industry has been very commoditized and people have not enjoyed buying mattresses. By being commoditized, I mean, low quality material being sold at high prices, customers being confused between multiple choices, bargaining at the sales centres, and waiting for big bulky delivery among other such reasons.”
“What has to be solved is for people to enjoy purchasing mattresses, making them cheaper, faster and offering higher quality. We deliver the mattresses in small boxes and because we own the manufacturing we sell at lower prices as well since the cost of middlemen is eliminated,” he added.