In the past two years, several online startups, in multiple categories, have warmed up to the unique advantage of delivering products from a neighbourhood store, thereby making asset-light businesses that deliver goods instantly to consumers. While some categories have had less-than-optimal growth (read: Hyperlocal Grocery delivery), hyperlocal formats in furniture retailing seem to be positive about growth prospects, even as experts warn about inherent weaknesses in the model.
The Rs 1,40,000-crore Indian furniture market is highly fragmented and unorganised. Within it, the online market accounts for a mere Rs 750 crore, according to a report in The Hindu Business Line. But it is growing rapidly and with more people buying furniture via PCs and mobiles, this market is set to grow to Rs 15,000 crore by 2017, the report states.
“On the one hand, we talk about 90 per cent of the furniture market being unorganised and on the other hand, we neglect the local players, who are the backbone of the furniture retail industry in India,” Founder & CEO of furniture hyperlocal e-commerce platform FurnitureDekho.com, Ujjwal Trikha says.
Launched in March last year, Mumbai-based FurnitureDekho.com is looking to tap into this very segment. “These outfits have expertise and knowledge, are much more aware of consumers’ choices and preferences, but have no platform to showcase their products. We are bringing them online and getting them organised,” Trikha adds.
“Currently, most online furniture retailers are selling products sourced from modern retailers — HomeTown or Godrej Interio– and charging 30-40 per cent average commissions from them. This is hardly delivering any benefits to the traditional sector, which is huge and has a lot of potential,” he points out.
On FurnitureDekho.com, consumers can look, compare price and buy furniture online (from the platform) or offline from the neighbourhood retailers. The company charges no commission from the retailers to register on its platform but takes an annual fee if a retailer wishes to promote or advertise its products on the platform. Since launch, the company claims to have more than 5000 local retailers on its platform and currently operates in 20 cities.
“Furniture is not easy to master; it is a high capex category. Furniture customers typically look for a touch-and-feel experience before buying, which the online players cannot provide,” Trikha says.
Local stores, on the other hand, provide a six-sense experience in addition to other benefits, he argues. “Trust is a big factor in this category. Additionally, after sales services such as installation, local warranty and billing, local deals, and a shorter delivery time also factor in.”
But integrating the pluses of local brick-and-mortar suppliers into an online platform may be not as uncomplicated, analysts say. While the hyperlocal model works better for delivery and add-on services such as installation and returns, quality control and consumers’ preference are the biggest challenges, they note.
“In this model, quality control depends entirely on the partners, which could be one of the biggest challenges for the success,” says Vice President (Retail & Consumer Products), Technopak, Saloni Nangia, .
Marketplace VS Hyperlocal
In the past three years, specialist online furniture retailers have mushroomed, led by market leader Pepperfry (set up in January 2012), Urban Ladder (launched in July 2012), Future Group’s recent acquisition FabFurnish (launched in March 2012), and Mebelkart (November 2012), among others. In fact, e-commerce heavyweights, including Flipkart, Snapdeal and Amazon have all expanded their offer to include furniture, home decor, and kitchenware. But timely delivery of orders with minimal or no in-transit damage has remained a key challenge for most of them.
Consider Mumbai-based Pepperfry and Mebelkart, who works as marketplaces aggregating sellers. Pepperfry sources products from 3,000 artisans and over 3,000 active suppliers, from whom it sources its products. Similarly, Mebelkart claims to have 2,500 sellers, from different cities, on its platform. While Pepperfry has set up an in-house logistics firm and controls the entire value chain, MebelKart relies on third-party logistics support.
“In brick-and-mortar stores, you can walk in and have the furniture delivered to you within a couple of days or even a few hours. The turnaround time for online vendors goes up to one to three weeks,”
Trikha says. “Also, there are in-transit damages that are beyond their control. In our model, the products are delivered from a nearby store; thus, the damages, if any, are minimal.”
But do the numbers add up in the long run? Is there a sustainable future for the furniture hyperlocal format? Pointing at typical purchase behaviour in the category, experts lay stress on the need for value addition and quality control.
“Just providing a platform is not enough; you have to add an additional value as an in- between company,” Nangia asserts.
“Furniture is a low frequency and a high ticket investment category; consumers anyway typically check out multiple stores before finalising a purchase. Thus, having a robust ecosystem of sellers that can provide a range of solutions to the buyers is imperative for the success of the furniture hyperlocal model.”