Online furniture market to triple to $3 billion by 2020

Online furniture market to triple to $3 billion by 2020
Online furniture market to triple to $3 billion by 2020

Swedish furniture retailer IKEA had announced its plans to enter the Indian market in 2012 and its first store is being launched in Hyderabad on Thursday. IKEA may have taken six years to open its first store in the country, but in these years online furniture retail has grown from zero to $1 billion category and is expected to triple to $3 billion by 2020.

In 2012, furniture e-tailers like Urban Ladder and Pepperfry were just launching their operations. In 2018, the online furniture and furnishing sales is close to $1 billion. According to RedSeer Consulting, the market is expected to touch $3 billion by 2020, mainly with horizontal players like Flipkart and Amazon getting into the vertical.

“In these six years, furniture vertical in e-commerce has grown from practically nothing to a size of $1 billion. There have been three to four key drivers that led to the growth of this market,” said Mrigank Gutgutia, engagement manager at RedSeer.

It was not easy for a touch-and-feel category like furniture and furnishing to sell online. The players realised that focusing on a single channel was not the right way to go.
They launched offline studios and stores to gain trust and provide offline experience to the customers. Once trust was built, it was easy adding newer SKUs and products to build a portfolio larger than what a customer can access in a store. They also developed a large supply chain network, reaching out to different cities.

“Setting up of offline stores have helped accelerate growth of these companies as we have seen for Pepperfry, Urban Ladder etc, as such stores helped to convert buyers who would otherwise shy away from the platform due to lack of online comfort. On the viability side, there will still be some time to go for such offline stores to break even, but right now what companies are aiming for would be to build the market and make customers familiar with multi-channel shopping,” said Gutgutia.

More recently, furniture e-tailers also realised that they need to cater to different needs of the customer. Thus they got into furniture rentals and sale of second-hand furniture. Pepperfry started furniture rentals and B2B sales in 2017 and also partnered with Zefo, a portal for pre-owned goods.  Urban Ladder too has partnered with Zefo and Quickr.

Finally, after the lull of 2016, the e-commerce sector started getting private equity funds and furniture e-tailers too became comfortable enough to provide discounts and offers, further driving growth in the category.

“In the coming years, the main trigger for the 3X growth of this online category would be entry of horizontal players. Companies like Flipkart and Amazon have already started e-tailing furniture and furnishing. Their expertise is providing better delivery experience, gained from the delivery of home appliances, and will lead to a new wave of growth. After opening its first store, IKEA too will get into the online category as it has done in several other markets. IKEA’s future expansion will be quicker,” Gutgutia added.

According to industry watchers, IKEA’s strategy looks similar to that of Decathlon, the sports goods retailer. It took six years to study the market and then opened stores in the top cities almost simultaneously and also went online. It also follows the large suburban store model.