Flipkart eyes Pepperfry for strategic investment

(Image: www.economictimes.indiatimes.com)
Flipkart has initiated talks with India’s top online furniture marketplace Pepperfry for a strategic investment, said four people familiar with the matter, as the e-commerce giant explores ways to diversify its business through acquisitions and investments. The discussions, held last month, are preliminary and there is no guarantee a transaction will take place, these people said, declining to share more specific details or be identified.

With USD 4 billion in the bank, India’s largest online marketplace is aggressively scouting for opportunities in categories that can bring high repeat purchases or offer high prices, these people said. Flipkart soft-launched its grocery business last week and re-launched its furniture business in September, after having ventured briefly into both categories earlier.

Flipkart declined to comment on its talks with Pepperfry. A spokeswoman for the furniture marketplace did not offer a comment either, only saying: “As a practice, we do not comment on market speculation.”

For Flipkart, an investment in Pepperfry would open the doors to a category that racks up high gross margins, second only to the fashion category. Flipkart registers margins of 20-40% in its fashion business, with its own labels yielding the higher end of the range.

Pepperfry, which commands a 65% share of India’s organised furniture market, on average makes gross margins of about 45% on products that include home furnishings and appliances. Margins from its furniture category, which makes up about 80% of its offerings, hover at 55%, according to the company. Analysts peg the company’s margins at a more modest 25% after accounting for shipping costs.

(Source: www.economictimes.indiatimes.com)

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