Pepperfry is looking to expand its offline studio presence even as it charts a strategy to cut costs while spreading its wings. The Goldman Sachs and Norwest Venture Partners-backed firm has partnered with Franchise India to expand its offline studios through a franchise model this year.
The Mumbai-based firm currently has 18 studios and is looking to expand to 46 studios in 15 cities by the end of FY18 through the franchise model. While the franchisees will own and operate the studios, Pepperfry will train the staff and ensure the order completion from the booking stage onwards.
Additionally, the franchisee studios will allow customers to book and pay for an order from the studio a feature that is not available in the company-owned studios at present. The franchise studios will operate on a commission-based revenue model with margins spanning 8-13% per order.
A key driver for this initiative has been the company’s strategy to cut costs even as it maintains the pace of offline expansion, a move that saw it invest $6 million last year. Pepperfry is not the only one to scale up its offline model. Rival Urban Ladder is following a similar strategy to expand its offline presence through a host of experience centres. Pepperfry claims the offline studios contribute 22-25% of the company’s overall sales and is targeting the channel to contribute up to 35% by FY18 end through this model.
Pepperfry clocked a 4x rise in revenue growth at Rs 98 crore year on year in FY16, even as total expenses more than doubled to Rs 253 crore as per documents filed with the registrar of companies and sourced from Tofler.
In order to achieve the ambitious growth targets, the company has introduced two new services that will add to its revenue muscle. Pepperfry has tied up with interior designers and architects as channel partners for leads and order fulfilment.
For every order that is received through these partners, the company will offer a 5-10% commission. The two-week-old pilot will see a 10x jump in the number of channel partners with a target of 300 designers and architects to be on boarded by the end of the quarter.
Pepperfry is also building a community of real estate builders starting with Pune, where builders will earn a similar commission on every order they direct to the company from a home buyer. It is creating specific apartment and layout packages for its builder community.