Stack and deliver
ASHISH GOEL, a founder of Urban Ladder, an online furniture retailer, is fond of the story of Rose Blumkin, who in 1983 sold a big stake in her furniture store to Warren Buffett, a fellow resident of Omaha, Nebraska. Mr Buffett’s deal with “Mrs B” was set out on a single piece of paper, notes Mr Goel with admiration. The term-sheets of the four rounds of capital-raising Urban Ladder has been through in its short life were probably not so simple. Mr Goel is struck by another contrast. The Omaha Furniture Mart that Mrs B started has more floorspace than all of India’s registered furniture retailers combined.
Retailing of the bricks-and-mortar sort is a highly fragmented business in India. Only around 2% of the grocery trade, for instance, is carried out in supermarkets with wide aisles and tiled floors. Grocery shopping is mostly done at small family-owned kiosks, known as kiranas, or at kerbside stalls. Small sellers similarly prevail in furniture retailing. Mr Goel reckons the largest supplier accounts for just 0.3-0.4% of the $25 billion-a-year home-decor market, a category that includes furniture, curtains, rugs and the like. Plots of land for big showrooms are hard to come by in congested India. Furnishing a home is thus an ordeal requiring multiple trips on gridlocked roads to various small retailers.
When Mr Goel bought a home in Bangalore (Bengaluru) he struggled to furnish it. So with Ravi Srivatsa, he founded Urban Ladder for “people like us” who will pay 40,000 rupees ($600) for a good-quality three-seater sofa or 13,000 rupees for a teak-finish television unit, but who cannot find such products.
Urban Ladder began in July 2012 with 35 products. Initially it pledged to supply all over India, by using third-party logistics firms to deliver beyond Bangalore. But after just 40 days it had to backtrack. It had created a good buzz around its local market, where it made its own deliveries, but received complaints elsewhere. The founders realised that they needed to control the quality of the delivery service if their firm was to become a trusted brand. They withdrew delivery from everywhere but Bangalore and, two weeks later, opened satellite depots in Mumbai and Delhi.
These days, Urban Ladder offers 3,500 products, mostly own-brand goods made by others. It delivers to 18 cities, a figure that will soon rise to 30. Ensuring there are enough goods in stock is a headache. Furniture is bulky and comes in odd shapes, so it needs a lot more storage space than the smartphones and T-shirts that are the stock-in-trade of many other e-tailers. Sales are growing so quickly that it is hard to forecast how much space is needed, says Kaustabh Chakraborty, head of operations. Last September the firm took out a year-long lease on a bigger warehouse on the outskirts of Bangalore. At first it required only 60% of the floorspace but soon filled all of it. In February it annexed a nearby warehouse.
In the centre of the main building, a 30-strong team checks outgoing goods, touching up paintwork or filling gaps in the woodwork. The firm has a second main depot close to Jodhpur, a furniture-making hub in India’s north. Mr Chakraborty aims to hold an average of three months’ sales in stock and trucks goods between depots to balance the inventory. He is scoping out new premises. “It takes two months to find space and four months to fill it,” he says.
India’s furniture market itself is becoming more crowded. IKEA of Sweden recently acquired land in Hyderabad for a bricks-and-mortar store, its first in the country. Urban Ladder’s close online rival is Pepperfry, founded in 2012 by two former eBay executives, which recently raised $100m of fresh capital. There are some smaller online specialists, such as Iqrup + Ritz, an outfit near Delhi that sells high-end furniture with an average price of 100,000 rupees. It has a “studio” showroom, with a limited range on display, to give customers a feel for the quality of its wares. Urban Ladder also lets customers see before they buy: more than half of its shipments are paid for on delivery; customers can inspect them first, and turn them away if dissatisfied.
Old-timers sniff at the hype around e-commerce in India. There are pots of venture-capital cash chasing deals. The rivalry between Flipkart and Snapdeal, the two best-known general e-tailers, is daily fodder for the business press. Yet the hoopla is in part justified. Half of India is aged 27 or less. Such consumers should take to shopping by smartphone more readily than in most places. And India’s bitty retail industry starves shoppers of recognised names they can trust. Selling online is a way to build a retail brand quickly in a place where there are still far too few of them. That goes for furniture as much as anything else.
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