Tapping into offline networks

Urban Ladder, Pepperfry, Livspace are stepping out of their virtual-only avatars to expand their brand footprint. But will this blunt their agility?

Furniture brands, Pepperfry, Urban Ladder and Livspace are steering away from the pure e-commerce ventures that they started out as, blurring the sharply drawn lines between online and offline brands. Quest for new consumers, a crowd of online sellers and the understanding that the majority in India are still buying offline, the brands say, have led them to realign their marketing lenses. As perhaps has the proposed entry of global brands such as Ikea into the country. Is this the way forward or have these brands lost their way?

Experts point out that the Indian market leaves brands with no option but to look at an omni-channel presence. To put things in perspective, India has nearly a billion phone connections, of which only a fifth are smartphones. From this, just half the number has potentially shopped online. Thus e-brands have to get their feet dirty to scale up, but the trick will be doing that without letting costs and overheads spiral.

Or else they could lose the advantage of being the nimblest players on the block.

Keeping the balance
Online marketplaces score for their ability to manage large inventories without running up massive real estate bills. But they lose out on providing customers with a touch-and-feel experience. Nowhere is this more acutely understood than the online furniture market. Given the nature of the product and the fact that India is still largely a made-to-order furniture market, many online brands have struggled to find the right balance.

Pepperfry, the best-funded company in the space, says it isn't looking at selling furniture through its stores. Instead the company sees its offline stores as a front for its brand while also helping customers reach experts who can guide them in their online purchases. So far Pepperfry has ten stores across major metros. "A customer can walk in and get advice and design consultation from experts at these stores," said Ambareesh Murty, founder and CEO of Pepperfry.

Urban Ladder is looking at three different offline models with three stores, one in collaboration with Prestige, a property developer; one at its office in Bengaluru and another at its warehouse in Chennai. All three models aim to minimise costs without compromising on the touch-and-feel experience customers demand.

Urban Ladder plans on rapidly opening more stores and will increasingly divert more of its marketing spend towards offline stores. "By the end of the calendar year we will have much more happening in physical stores," said Rajiv Srivatsa, co-founder and chief operating officer of Urban Ladder.

Beyond the metros
In the coming months, Pepperfry is looking to get into cities such as Chandigarh and Kochi, following which it will open stores in tier II towns. The company says this move will allow it to reach 20 million customers by 2020 and this is where much of its recently raised $31 million in venture funding will be utilised.

For Urban Ladder the offline stores are a way to enhance brand awareness and penetration. "The main thing that we are looking is building the brand Urban Ladder. While doing that we are looking at how to do it at a much lesser cost, without television advertisements etc. The physical shops are much lower in terms of cost," said Srivatsa.

The furniture industry in India is estimated to be worth $30 billion and is likely to grow to $40 billion in the next five years. Currently, only 10 per cent of the market is organised with online ventures making up just a per cent of that, at $300 million. To grow, these brands have to tap into the unconnected masses in small cities and that leaves them with little option but to step offline.

Managing costs and competitors
Online furniture retailers are up against two big challenges as they venture offline: one is managing costs and two, keeping their edge even as global retailers such as Ikea step into the same space (budget furniture for young home makers).

Going by traditional e-commerce logic in India, the entry of a large global player would lead to raising and burning large sums of money on advertising and heavy discounting. However, the online furniture players are not playing by this rule book.

Livspace, another online furniture start-up based out of Bengaluru, says it doesn't intend to advertise on television at all. Instead it will set up its offline channel soon. Pepperfry and Urban Ladder, however, seem to believe in a bit of both though they are both keeping their ad costs down.

Livspace says its new stores will serve as experience centres and will house only a fraction of the company's products. It will look at trained staff to advice buyers on what products they can buy. "It is too early for television advertisements. I will come out with this only after we have thousands of customers and have set up experience centres," said Anuj Srivastava, co-founder and CEO at Livspace.

The move by the furniture brands to set up offline stores finds support in the numbers that have been recently trotted out by a number of market surveys and white papers. These indicate that more and more customers are using the mobile to get better informed, but are keeping their transactions offline. With customers blurring the lines between the virtual and real worlds when it comes to their shopping behaviour, these brands are taking no chances and keeping their feet in both.