Faced with mounting losses, online furniture company Urban Ladder has decided to foray into offline retail as a separate vertical.

It has opened the first of its four offline retail formats planned in 2017, while it awaits approval from the Department of Industrial Policy and Promotion for a single-brand retail licence.

The company introduced its first shop-in-shop store in Bengaluru on Thursday. The store is set within sofa retailer Balini’s store.

Urban Ladder has inked a one-year agreement with Balini to work on a commission-based revenue model, where it will pay around 10 per cent commission on products sold.

“This first offline format is an integral part of our distribution strategy as we transition from an e-commerce store to a consumer brand. We will display 15-16 products in Balini, where customers can experience the product before buying it. A sales consultant will assist customers to browse, choose and order products that are not showcased in the store, from a digital catalogue,” Sanjay Gupta, Chief Marketing Officer, Urban Ladder, told BusinessLine . He said sales from the four new formats will contribute 10 per cent of the company’s revenues in 12 months.

Urban Ladder’s losses for FY16 was ₹175 crore in FY 2016 ended March, while revenue for the same period a year ago was ₹56 crore. The company has created a leaner organisation over the past 16 months by laying off employees across mid-to-senior levels who were paid ₹70-90 lakh per annum, and by selling dead inventory of ₹200 crore at discounted prices via flash sales, said company insiders.

Fund-raising

After unsuccessfully trying to raise funds from new investors over the past 18 months, Urban Ladder recently raised ₹102 crore from existing investors, which sources said was a ploy to attract a much bigger round from new investors. “The money will be used to put up Proof-of-Concept of offline retail stores that will be showcased as the new engine for growing its revenues to woo new investors,” revealed the same sources.

Urban Ladder has allocated ₹30 crore to open four different offline retail formats in 2017: 10 brand-experience stores in the top three metros, beginning with Bengaluru in the April-June quarter; sofa lounges, with the first one opening in March in Bengaluru; fully designed interiors of 2/3bhk flats in partnership with builders such as TATA Housing at their near-completion projects in Mumbai; and shop-in-shops within speciality stores with a complementary product offering.

Rajiv Srivatsa, founder and COO, Urban Ladder, in an interaction last month had revealed that the past 12 months was spent removing all inefficiencies from the system, putting a freeze on recruitment, cutting wasteful spend on TV advertising and reducing product range from 4,000 to 1,500 stock keeping units.

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