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Emerging Business

Pick, click and rent
Can’t afford that plush sofa set? Now rent it for as long as you wish

Avantika Seth

When Gurgaon-based Divya Sen received an appointment letter from an IT firm in Mumbai, she was elated at the prospect of securing the job and shifting base. Little did the 23-year-old software professional know about the hassles of settling down in the Maximum City. She recalls her quest to find a comfortable home: “It was only after coming to Mumbai that I realised the difficulty in finding a home.” Though she finally managed to zero in on an apartment located at a comfortable distance from her workplace, she faced one more challenge. “No matter what you do, there is always some or the other thing missing. The issue with my flat was that it was unfurnished.”

That’s a dilemma that even the Pune-based Rahul Manerikar faced as a professional as he switched jobs between Kolkata, Mumbai and Bengaluru. While Manerikar purchased his own furniture wherever he moved, disposing it off at the end of his stay was quite a task. “Each time I sold the furnishings for a loss. It was then that my colleagues introduced me to various furniture rental platforms,” he says. 

ajith karimpana  Founder, FurlencoA relatively nascent business, with currently just two online start-ups RentoMojo and Furlenco are offering furniture on rent. For a monthly subscription ranging from 999-2,999, one can choose from a wide range of furniture and home appliances. And one can now relocate with ease as they have someone come over to collect the furniture at the end of one’s tenure.

Furlenco founder Ajith Karimpana discovered the potential of rental furniture when he relocated from the US to India in 2012. The former vice-president at Goldman Sachs says, “I was looking for good quality furniture and was forced to buy most of it as I did not know where to rent it from.” That’s when Karimpana realised that there was a latent demand for rented furniture and appliances from professionals in metros. Thus, he set up Furlenco in April 2012 in Bengaluru with an initial investment of 50 lakh. 

RentoMojo is another rental home products player set up in November 2014 by Geetansh Bamania, who previously worked at Flipkart and Pepperfry, and Ajay Nain. RentoMojo sells packages worth 1,500-2,500 per month and requires a client to subscribe for at least three months. With currently 101 employees, the portal has 3,500 subscribers and is operational in Mumbai, Pune, Bengaluru and Gurgaon. 

Both the companies offer various other ranges based on partial and full home packages. Furlenco’s living room package; which consists of a couch, centre table, floor lamp, tealight holder and soft furnishings starts from 2,000. Similarly a bedroom package, which includes a queen size bed and mattress, single bedside table, table lamp and photo frame and soft furnishings are offered at 1,500 a month. RentoMojo’s 1BHK luxury package, which includes a three-seater fabric sofa, two one-seater fabric sofas, a centre table, a shoe rack, a drawer with a bed, mattress and wardrobe comes at a monthly rental of 8,600 a month (for a minimum of three months). According to estimates, there are around 80,000 professionals who graduate from 90 universities in over 50 cities and relocate to one of the top five cities in the country.

The two start-ups believe their USP is offering good looking furniture off the shelf and at an economical price. RentoMojo and Furlenco are trying to ease out the hassle of buying and selling furniture. “Because furniture is a highly depreciating item and at the same time very expensive, people don’t realise that it is actually cheaper (by up to 25%) to rent all along,” points out Karimpana.

Different strokes for...
While both the start-ups are in the same business, each follows a different business model. Furlenco has a team of in-house designers and tie-ups with vendors across India. Furlenco customises designs and gets the furnishings and furniture produced by contract manufacturers who transport it to the company’s warehouses in Pune and Mumbai. Karimpana says, “We try to do the production in packages such as beds with mattresses or soft furnished pillows. The model is more or less like renting our own assets.” He adds that the life of most of the furniture on sale is a minimum of 10 years. This further helps Furlenco determine the pricing, “We generally use solid wood for products such as table tops, which last for long and, hence they are priced aggressively as compared with sofas which have a shorter life cycle. However, products such as sofas have a shorter life.” So far, customers have rented the items for around 12 months and in some cases the contract has been extended to three years. Karimpana expands further on the potential to make money with this model, “Once we recover the money, the product becomes free. That’s where the potential to make money lies.” He further explains that keeping in mind the average life of the furniture to be around 10 years, usually the company takes about two to four years to recover the cost. “With a refurbishment cost of 5% on every product, the asset is serviced and let out further.”Currently, Furlenco is using most of its capital to build assets which are stored at its warehouse of around 10,000 sq ft spread across Bengaluru and Mumbai.

Furlenco’s production is primarily dependent on the demand for the asset. Whatever product is in high demand is continuously produced with more add-ons or slight variations. Although according to Karimpana, the model is pretty efficient, the only thing that is tough is to manage the assets that are coming back. “We need to plan what is coming back but since we are aggressively expanding, most of assets are always in use,” he says agreeing that there is always a behavioral change in customers and, we need to be smart in planning what designs will be rented again and what will not be. The company is managing logistics on its own and transports furniture from various vendors present pan India to Mumbai and Bengaluru.

Geetansh bamania (L)  Founder, RentoMojoOn the other hand, RentoMojo operates as a marketplace that connects buyers to vendors. The company and manufacturers mutually decide on the rental terms before the vendors are listed online. Bamania explains the motive behind following an asset-light model, “Owning assets makes it difficult to manage the books. We have a couple of partners who help us manufacture products. We don’t own any of the assets and are primarily just a marketplace. We aim to be a technology and data company to minimise inherent risks in our business.” While vendors manage the minor wear and tear costs, in case the product is damaged beyond repair, the portal deducts the amount from the customer’s deposit. 

The company works on commission basis with its current rates ranging between 20% and 60% of the entire rental income. Around 50% of RentoMojo’s customers subscribe for a minimum of 12 months, while the rest comprise customers who have opted for subscription packages of three, six and nine months. 

Sizing up the opportunity
In line with the funding spree seen of late, both start-ups have found investors. While RentoMojo received $2 million (13 crore) from IDG Ventures and Accel Partners in a pre series A round of funding in November 2015, Lightbox Ventures pumped in around $6 million (38 crore) in Furlenco in February 2015. Earlier, Furlenco raised a crore from angel investors. Venkatesh Peddi, executive director, IDG Ventures estimates that the overall retail furniture market stands at $12 billion-$15 billion, of which rental furniture occupies a chunk worth $1.5 billion-$2 billion. “And if we include office rental too in this category, it is bound to be a significantly larger market,” adds Peddi.

The investment is helping these start-ups to grow faster. “After the funding in March 2015, over the subsequent nine months, we enlisted 180 homes in Bengaluru. Currently, we cater to over 2,500 homes, recording almost 15x growth since the time we started out,” adds Karimpana. 

Furlenco expanded to Mumbai in October last year and is currently focusing on only home décor. “We will add horizontals that strictly come under the lifestyle and home décor category. We have started adding appliances recently to our packages.” On the other hand, RentoMojo doesn’t want to stick to the label of being just a furniture rental, it also offers bikes on rent and plans to add apparel as well. Bamania adds, “We want to be the sole rental destination for people whose lifestyle includes shifting homes.” 

While furniture rentals may be seeing increasing investor interest, it’s still an evolving market. “Given that there is a young workforce out there in big cities that tends to relocate often, they may not invest in buying and transporting too many household products,” points out Pragya Singh, vice-president, retail, Technopak. “But companies must have a good monetisation model in place to sustain in the long term.” 

While Peddi of IDG Ventures and Siddharth Talwar of Lightbox are sure of their bets on the respective teams, they continue to be optimistic about the power of the emerging rental sector. “RentoMojo has expanded at a rapid speed and we are very confident of its future. We are just expecting the company to integrate supply with efficient technology,” says Peddi. Talwar of Lightbox adds, “We don’t have any valuation in mind. Furlenco is creating a market, which hasn’t really existed.”  

 Talking about the growth opportunities, Bamania says his company is aiming for more than one lakh active subscribers by the end of two years. In fact, the company is already in talks with investors for closing its series B round by the end of this quarter.  

Just like RentoMojo, Karimpana believes sky is the limit as Furlenco looks to scale up its presence in all Tier-I cities across India in three years. “The rent economy is here to stay,” sums up Karimpana.

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