We need to achieve certain milestones before we go for an IPO, says Pepperfry CEO Ashish Shah

We are continuing to execute the strategy we defined way back in 2015-16. Being a marketplace instead of being a brand, has been the first part of the strategy. The second part has been taking an omnichannel approach and we have been the first ones to establish an offline presence in this space. We now have a massive retail footprint in the country. The third part has been ensuring we own our supply chain, which gives us full control of costs, delivery timelines and consumer experience. The fourth is the fact that we have our own in-house brands. Nearly 50 per cent of the business of Pepperfry comes from our own private labels. We have six private labels in the furniture space and they help us make higher margins and create a differentiator. We are a technologically-first company and the first ones to invest in the omnichannel integration and augmented reality on the website. We also have a new app now that offers seamless online to offline experiences to our consumers.

I believe that in terms of evolution, online buying of furniture is still far behind other categories such as fashion. Therefore, our customers need a lot of assistance when they make a purchase. Over the next six months, we will strongly focus on sharpening our assisted buying proposition. In terms of traffic, we are far ahead of competition. Our goal is now to focus on conversions. We will assist consumer through multiple tools leveraging AR and VR tech, advice from our experts and home visits among others.

 The other key focus is on profitability. Over the last 12 months, we have spent a lot of time in reducing costs significantly across the entire value chain. We are now making higher margins than last year and have made significant improvements from the cost standpoint.

We are into a business that will see consistent growth of 15-25 per cent year-on-year for the next 20 years. The public market likes companies that have a long term vision and can grow steadily. So an IPO is the way forward to take this business ahead. Having said that, there are certain milestones that we need to achieve before we go for an IPO. The first one is profitability. The second will be to consistently grow our business month-on-month. This category has infact gone through some challenges over the past one and half years because discretionary spending was subdued. We are seeing some green shoots now as real estate has been booming. As these buyers move into their new homes over the next 8-9 months, the category is expected to see strong tailwinds. So as our profitability rises and we see steady growth, we will decide the timeframe to go for an IPO.

Once we came out of the pandemic, we saw a significant increase in demand for three to four quarters. All the discretionary categories did quite well. However, in the last 9-12 months, we saw demand for discretionary categories becoming subdued. I think people were buying either only entry-level or basic products or ultra-luxury products, But mass prestige and premium categories had been witnessing subdued demand. Budgets of consumers who work in IT or the consumer tech space have been under stress with curbs in bonuses and increments. The consumer cohorts that use to buy online most aggressively have been most impacted. In addition, there have been inflationary pressures.

But we are now really hoping to see a turnaround in demand trends during the festival season. Close to 65 per cent of our business happens in the second half of the year. We are looking at growth rates of 25-30 per cent in the festival season. Consumer financing will be key for higher ticket purchases during this season. We have tie-ups with nearly all banks who are offering high-value discounts on Pepperfry.com today. Nearly 18-20 per cent of the purchases happen through financing schemes.

We currently have around 183 stores across 110 cities. As a strategy, we had decided to slow down offline expansion over the past 6-9 months in terms of franchise stores. However, we began ramping up offline expansion again. Last month, we launched three new franchise stores. Over the next two months, around six additional stores will come up. We would continue to expand into tier-2 and tier-3 towns through the FOFO model (franchise owned and franchise operated stores). Our stores are modelled on the omni-channel strategy. We are a marketplace and so when we open a new store they do not just offer Pepperfry products, we also offer products of nearly 1,500 other national and regional brands. So we serve as a one-stop shop for all furniture products in the country. We have also seen a very high conversion rate at our stores. If we have 100 walk-ins, we can convert 80 per cent of them.

We already have a presence in Nepal and Bhutan and we would look at opportunities to expand into other neighbouring countries. Our teams are looking at other markets such as Sri Lanka, GCC markets and Australia among others.