Aiming to be Netflix for furniture, Furlenco to turn profitable this year

It has taken the online furniture rental platform more than six years to lure customers with innovative concepts in furniture 

Online furniture rental startup Furlenco is ready to hit pay dirt. It's expecting to break even in a few months and be profitable by March 2018, according to its founder, Ajith Karimpana, who even has an IPO on his mind.

While that's a mouthful of good news from Ajith, it has taken somewhat long in coming. Bangalore-based Furlenco has been trying to create a market for furniture rentals since 2011.

But that has not been easy considering the emotional attachment Indians have for their furniture. So Furlenco had to turn its attention to the new generation—youngsters who do not want to own.

The startup's aim has been to ensure that instead of buying expensive furniture, youngsters—moving around in metro cities—can rent premium furniture designed to fit their needs.

Although it was a ‘mad’ idea, Furlenco has had a great ride. Today, it promises delivery within 72 hours, and free deep-cleaning during the tenure of their service. It also provides free re-location service within and to any of the cities they operate in.

It has paved the way for its success with the $36 million it raised in debt and funding from Lightbox Ventures. 

YourStory caught up with Ajith at Furlenco’s office in Bengaluru's HSR Layout to relive the startup's journey over the past six years.

The idea for renting furniture came to Ajith when he was returning from the US after selling off his furniture for almost nothing. Prior to starting out, Ajith worked with Infosys, Morgan Stanley, and Goldman Sachs after completing his engineering from NIT Jalandhar and getting a master's in IT from Temple University in Philadelphia.

The beginning

Ajith invested Rs 50 lakh from his savings, and pulled in another Rs 2 crore from his friends and family. VCs hadn't begun pouring millions and billions into Indian startups then. So Furlenco kept raising debt from HNIs and angels, till 2015.

From 2011 to 2014, Furlenco was Rent Your Duniya. So, what prompted the shift? Says Ajith with a smile: “Rent Your Duniya just doesn’t sound like a unicorn. It was a branding exercise to call it Furlenco—short for furniture rental company.”

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Furlenco’s biggest challenge was to change the mindset of the conventional furniture-buying Indian. Ajith says,

“You cannot make anyone buy furniture unless they want to; it’s not a need like food!”

He adds that even their marketing was done with this in mind, and there was no splurging in the first few years.

According to Ajith, it is the reluctance to buy furniture—which not only costs more but is also a long-term commitment—that builds the demand for rental services among youngsters.

Reimagining furniture

Differentiation is key in online retail. What is it that you are offering your customer which nobody else is? There is a greater probability of existing products/models being purchased than rented. So, your product should not be available anywhere else. Says Ajith,

“If Netflix had only been about existing movies, it would not have been a success. But they have their own series. Very few furniture rental services have their own designs and manufacturing units. Netflix originals have no competitors. We want to be the Netflix for furniture.”

Design is usually expected to improve aesthetics. But Furlenco is using it to redefine furniture.

Ajith says, “Giving just another bed or sofa will not convince the customer to rent from us. We are reimagining furniture for them. While one may buy a queen size bed if given a decent deal; for a product like the Pod, one will be more than happy to rent.”

Furlenco targets mostly bachelors/youngsters. “They are perfectly fine sleeping on the floor even if their annual salary is Rs 20 lakh. They have minimal furniture. We mix up products instead of giving them just another bed,” Ajith says.

The pod and the bounce are two items with which Furlenco is luring customers. “Exciting the customer demands innovations in design. There is more work in progress as we want constant innovations,” Ajith adds.

No strings attached

Furlenco’s customers are not necessarily people who cannot afford to buy furniture. It is a choice they make for other reasons, the most prominent of which is the zero-commitment clause. Since the average Furlenco customer rents its furniture for 18 to 20 months, it is possible for the customer to change/swap the models at least once. In short, new looks are possible for your house with new furniture even if you are not moving.

This is exactly what drew Ajith Chandran, a 30-year-old techie, to Furlenco. He has rented beds, cupboard, sofa set which he swapped twice, and a pod. Now he pays a rent of Rs 5,000 per month and has been a customer for more than a year. Since he shares a 3BHK apartment with two friends, to buy furniture, everyone will have to chip in and if they move out separately, there will be confusion on who should take each item.

“If we are buying individually, it costs too much and we may not have that amount in one go. EMIs are for assets—but these items undergo depreciation in no time. In case the cot breaks, your money is gone. But Furlenco does maintenance, swap, clean up, everything very professionally,” Chandran says.

Furlenco also provides large electronic appliances for rent. Among their most popular categories are beds, signature products like the Pod and Bounce, living room sofa, and dining table (in that order).

The freedom which Furlenco offers to the customer—choice of design and tenure period—is one reason why Ajith is not worried about furniture sellers, whether they are offline players or online ones like Urban Ladder and Pepperfry, or even the Swedish giant IKEA. “Indians are too lazy for DIY. So, there is no billion-dollar market for IKEA here,” Ajith says. However, Furlenco’s model can work only in cities where people are moving all the time, which restricts the company’s growth. Satish Meena, forecast analyst at Forrester Research, says, “Outside metro cities, families are still higher in number than bachelors sharing a house. So Furlenco should grow deeper than vaster; 90 percent of their revenue will be from metro cities.” If this holds true, even a lot of marketing may not bring ROI for Furlenco.

Financial efficiency

Ajith lets YourStory in on a little secret: Furlenco gives no discounts—even for its employees. “We should not undermine our own product. Even my wife does not get discounts,” he says.

Furniture manufacturing and logistics are very expensive. “We focus on how much we can push without losing sales. There are some products for which if the price is increased by Rs 50, sales will drop by 20 percent. If you decrease it by Rs 200, sales will go up by 50 percent. You push the boundary according to research,” says Ajith.

Furlenco already has positive cash flow and unit economics. The Flipkart/Ola model will not work in this business model, as incentives to sell furniture will result in higher customer acquisition costs. On the other hand, not being a marketplace gives better margins.

“Even BigBasket and Flipkart make money with their own brands. You can’t survive without margins; only private label can give that,” says Ajith.

Their warehouses are 100,000 sqft each (one per city). Furlenco rents its fulfilment centres but owns the manufacturing process.

“Even if we do not get any new customers for a month, we can still survive because of the income from the rest. But we hope to expand to Noida, Ghaziabad, and Hyderabad by the end of this year; average ticket need not be higher,” Ajith says while speaking of the advantage of subscription model.

Longevity of customers

Lifecycle of customers is short when you are targeting young bachelors, because furniture is not like fashion which you buy often.

“A customer who is 23 today may not continue to be one at 29. Once they get married and settle down, they will prefer buying furniture. So, every four years or so, you have to target a new generation of customers,” says Satish of Forrester Research.

Additionally, Satish adds, for a normal bed or sofa, if you pay Rs 1,000 in rent for a month, within two years you will end up paying about 70 percent of the selling price. Then you might as well have bought this item from an online marketplace. (Most e-commerce companies provide EMI options.)

On the other hand, companies like GoZefo—which sell refurbished goods including furniture and large appliances—have buyback guarantee as well. If you are unhappy with furniture, you can easily sell it off online, on platforms like Quikr and Olx.

Although Furlenco does not have many competitors, its growth depends on the number of empty houses (which are not fully furnished). This demands absolute hold over potential customers—which means Furlenco cannot afford to let horizontal rental platform Rentomojo take anyone away by offering cheaper prices.

This was the motivation behind the launch of Essentials range which caters to price-conscious customers. “They don’t want the pod; just a bed would suffice,” Ajith says.

No valuation dreams

Furlenco has furnished more than 20,000 homes so far—quite a feat from March 2015 when the number was 200. According to Ajith, before receiving funding in 2015, Furlenco's revenue was Rs 4-5 lakh per month; it has grown 37-fold since then by catering mostly to premium customers with an annual household income of Rs 10 lakh.

Furlenco launched in Delhi and Noida in March 2017. “This is growth for efficiency. In hindsight, we could have been profitable earlier if we had managed growth with efficiency. We paid Rs 35,000 to acquire one customer through android app. But we are all learning from mistakes,” Ajith says.

He has no fuss about valuation. “We will be profitable in March 2018. Our average ticket size is Rs 3,000. We can push it up in the next six to eight months once we get 30,000 houses.”

Satish of Forrester Research is sceptical though. “You are not going to rent furniture for two years; you will buy it instead. There should be an option to own after renting for a definite period,” he says, warning that discontented customers will definitely prefer buying furniture.

“Customer base should increase, but it is not easy to scale in the current environment. Everyone is cutting down on growth plans now,” Satish adds.

But Ajith is an eternal optimist. Furlenco started with a six-member team; today they are 300. Ajith believes that the team has a lot to do with how the company has developed.

Ashwin Venkataraman, who joined Furlenco in 2015 after more than four years in Inmobi is their COO. Furlenco’s VP of design and new initiatives Kranti M was earlier a mentor with Google and Microsoft.

Ex-Unilever executive Aishvarya Chanakya heads marketing while Pankaj Baruah—who was earlier with Infosys and Godrej—is the head of supply chain.

Now that profitability is just a few steps away, what is Furlenco’s next plan?

Surely there is more geography to cover, and innovations in design are a constant. But cash burn is not Furlenco’s cup of tea. “I tell my team often—we can have as many espresso machines and luxuries as we want. But let’s earn it; not do it with VC money,” Ajith says with a smile.

Startup world seems to be hitting puberty, if not maturity.