URBAN LADDER
Founded by Ashish Goel and Rajiv Srivatsa in 2012, Urban Ladder sells furniture, decor, and mattresses via an inventory-led model. while it earlier also ran as a marketplace. Urban Ladder offers over 3000 products across 35 categories to more than 90 cities in India, with offline stores in Bengaluru and Delhi-NCR.
Urban Ladder has raised around INR 838.3 Crores from top venture capital funds, such as Sequoia Capital, Elevation Capital, Kalaari Capital, Ratan Tata’s VC fund, and a hedge fund called Steadview Capital since inception. The company closed its Series E round in 2017 but struggled to get funding after that. In November 2019, it managed to raise INR 15 Crores from Elevation Capital, Sequoia Capital, Steadview Capital.
Although some of its existing investors did not participate in the round. The Company had to keep raising funds to fuel their growth to compete with competitors such as Pepperfry and IKEA, who invaded the space in 2011 and 2018, respectively. Urban Ladder also started discussing the possibility of acquisition with players such as Flipkart, Fabindia, Livspace and WakeFit but none of them led to any fruition.
The furniture e-retailer went through a sticky patch throughout 2019. Several cracks started to appear in the firm’s business, including layoffs, and the exit of its co-founder, Rajiv Srivatsa. In October 2019, just months before a devastating pandemic swept the world, Srivatsa said in a press statement that his 8-year journey with Urban Ladder would come to an end. His exit came a day after Kalaari Capital’s Vani Kola resigned from the board of the company.
Urban Ladder was valued at around INR 1,200 Crores in 2018. This dropped to about INR 750 Crores in 2019. Their audited turnover was INR 434 Crores, INR 151.22 Crores and INR 50.61 Crores in FY19, FY18 and FY17, respectively.
Narrowing Down Expenses: Did Layoffs Lay the Path To Profitability?
Many reports surfaced in February’19 that Urban Ladder had laid off about 90 employees to cut back its losses. At that time, it employed 800 people. However, the company spokesperson clarified that 60 employees were laid off as the company was restructuring its business to become leaner and improve its business economics.
However, the employee benefit expenses narrowed down by merely 3% in FY19. The company spent INR 53.66 Crores on employee benefits in FY18, which came down to INR 51.98 Crores in FY19. Therefore, the real impact of these layoffs, which continued till June 2019, was seen majorly in FY20.
One of the biggest expenditures came from the purchase of inventory, which increased 1.79 times reaching INR 207.19 Crores in FY19, as against INR 74.19 Crores in the year before. Further, the depreciation costs were shown at INR 5.21 Crores for FY19, but since it is a non-cash expense, it doesn’t have much relevance for the company’s business.
One of the cut downs came into information technology. Urban Ladder had narrowed down IT expenses to INR 6.78 Crores from INR 8.97 Crores in FY18. The company’s advertising expenses also decreased by 20% reaching INR 37.65 Crores.
RELIANCE ACQUISITION
Reliance Industries’s (RIL) retail arm acquired 96% stake in online furniture retailer, Urban Ladder for over INR 182 Crores.
The deal helped Mukesh Ambani-headed RIL take on players such as Amazon, Walmart-owned Flipkart, Swedish home furnishing major Ikea, and smaller rival Pepperfry in the battle for India’s INR 2 Lakh Crore worth furniture market.
Reliance Retail Ventures (RRVL), a subsidiary of RIL, acquired equity shares of Urban Ladder Home Decor Solutions (Urban Ladder) for a cash consideration of INR 182.12 Crores. This investment represents about 96% holding in the equity share capital of Urban Ladder. RRVL has the option of acquiring the remaining stake. It has proposed to make a further investment of up to INR 75 Crores, which is expected to be completed by December 2023.
What does the deal mean for Reliance Retail?
The deal contributes to Reliance’s plans of building a stronger retail portfolio that supports its e-commerce play. An acquisition of such will enable the RIL group’s digital commerce initiatives and widen the bouquet of consumer products provided by the group while enhancing user engagement and experience across its retail offerings. With its existing portfolio of digital services including telecom, e-payments, online commerce, content streaming, etc. such acquisition will open the gates for vertical integration of services that experts believe would enable Reliance to keep a customer within its ecosystem for everything a user consumes online. The deal also gives Reliance Retail access to a growing online furniture retailer — which has seen its turnover grow by nearly 10 fold in three years to INR 434 Crores for the financial year 2018-19.
What does the deal mean for UrbanLadder?
During FY 19, UrbanLadder reported a profit of INR 49 Crores, the first since its inception in 2012. This was preceded by net losses of INR 118.66 Crores and INR 457.97 Crores in FY18 and FY 17, respectively. The acquisition means that the company can now stop worrying about funding to finance its losses.
How is the online furniture retail market shaped?
The growth in the Indian Online furniture retail was effectively a result of the work put in by two companies — Pepperfry and UrbanLadder.
Sectoral experts envisaged these companies, along with other smaller ones, to grow further as urbanisation and internet penetration in India increased. However, with the success of the omnichannel model, wherein online platforms established physical stores to tackle the ‘touch and feel’ problem in furniture e-tailing, traditional furniture are changing their approach. Nilkamal and Godrej have started consolidating their position, in terms of gross merchandise value, using the same model. Thus, establishing a scenario where online furniture platforms would look attractive to conventional companies in the furnishings segment as an add-on.