Chaitanya Ramalingegowda has a calm appearance. The composed co-founder and chief operating officer of Bengaluru-based Wakefit, with not a hair out of place, resembles the archetypal silent, successful engineer-MBA. I said to a colleague, “I hope this session doesn’t end up with me talking to myself,” as I followed him onto the stage for a 30-minute one-on-one conversation at the recent Startup Brands conference, which was organized by afaqs!
How mistaken I was.
In 2016, Wakefit was founded in Bengaluru by Ankit Garg, the CEO and co-founder of Chaitanya. Making mattresses and selling them online was the first goal. After that, it entered the furniture industry and has already raised Rs 450 crore. In the last fundraising round, a press source from the previous year stated that its valuation was Rs 2,800 crore.
Continue reading to learn more about the amazing journey of Ankit and Chaitanya:
The idea
The trip was sparked by a personal event, as is sometimes the case with startups.Ankit (Garg, currently the CEO and co-founder), who was well-versed in the foam mattress industry, was getting married. He discovered when searching for one that the price at which a mattress was being marketed had nothing to do with its actual cost.
Nevertheless, I discovered that several of these mattress makers weren’t particularly profitable when I looked at their balance sheets. This is a result of the distribution channels consuming the majority of the funds.
The partnership
Ankit had experimented with one startup, while Chaitanya had attempted two. “We always joked that the difference between us was that while I lost all my money in two startups, he managed to lose his in just one venture,” they said when they coworked at a sponsored startup.
“We discovered that businesses are raising and expending a great deal of resources in an attempt to meet a milestone that is required by business fundamentals rather than one that is set by the next round of funding.
Many businesses were also functioning as though they were in a market where the winner takes all. In that kind of industry, you are in a land-grab period where you can lose money gaining customers, but if you have enough, you can start making money. However, business owners were haphazardly using this reasoning in a variety of marketplaces.
We therefore promised ourselves that, should we seek funds, we would use them genuinely as growth capital, for projects that are outside the scope of our current cash flow and internal accruals.
Regarding establishing credibility for a product—mattresses—that consumers find difficult to choose, even in a store
Following its 2016 debut, Wakefit primarily relied on word-of-mouth marketing. The business didn’t even have a Google or Facebook ad account for the first 1.5 years. “We had no money at all. Prior to and following the transaction, we were solely concerned with the consumer experience. Among the first businesses, we conducted three to four post-sale calls. We gave our consumers advice on how to maintain their mattresses and other items. We didn’t try to upsell or cross-sell anything. Clients were astounded and began sharing their thoughts on open forums, chronicling this encounter.
“Many predicted our demise when we instituted a mattress trial policy of 100 days. Nothing similar occurred. Returns never increased above 3%.”
In 2017, the team realized from customer interviews that customers can only be assured they have purchased the correct mattress after sleeping on it for a couple of weeks. Wakefit implemented a 100-day trial program in order to attract customers to test the device in the comfort of their own homes.
Remembers Chaitanya: “We were bootstrapped and were concerned that we would get screwed if the returns were the same as for clothing, which is 20–25 percent.” The 100-day trial has become the norm in the industry today.
Some cautioned us against misusing it, saying that people may order beds for weddings and then return them. However, the return rate has remained constant at 3%.”
“What this experiment taught us is that 99 percent of the rules are made for 1 percent of bad actors,” remarks Chaitanya in retrospect. Most people merely wish to purchase the ideal mattress. They don’t want their money returned.
The expansion beyond mattresses
From 2016 to 2018, Wakefit concentrated on selling mattresses alone. By then, the business was comfortable enough to provide bedding, comforters, and pillows in the bedroom without being too intrusive.
As Wakefit’s customer base grew, folks who had purchased mattresses elsewhere started enquiring about the best mattress kind and size. “As this type of feedback increased, we reasoned that because we are experienced in distribution and manufacturing, what if we began producing bed frames? We had strong D2C channels previously. Could we use it to meet a more significant need for our customer?
Wakefit just established a massive factory in Hosur, TN, spanning 14 acres or 600,000 acres. Every day, it can produce over 2,000 couches, 3,000 dining tables, and 5,000 beds.
The cofounders approached the furniture business in a similar manner to how they approached mattresses. “We established a tiny production facility with a single SKU (stock keeping unit) in a single design and size. We didn’t know anything about wood, so we ran it that way for ten months. We continuously asked for input from customers to find out what they liked and didn’t like. The cofounders learned the ropes of the furniture industry in this way.
Wakefit declared earlier this year that it has established a massive furniture production facility in Hosur, which is around an hour’s drive from Bengaluru. Take your pick: 600,000 square feet, 14 acres, or about ten football fields! It can make roughly 2,000 couches, 3,000 dinner tables, and 5,000 beds per day. (Wakefit also has locations in Jodhpur, Delhi, and Bengaluru.)
Why no one before has invested in such a big way in manufacturing
Production work is not glamourous. Dealing with the heat, dust, and labor issues is necessary. You’ll be approached by some obscure government agency that will either fine you or demand a bribe. Businesses that came before us attempted to create this category, thinking they could accomplish so while lounging in a comfortable Bangalore or Mumbai air conditioning office. That is not how it operates.
We currently generate three times as much income as the most well-known furniture manufacturer. However, fewer people know us.
The furniture market’s idiosyncrasies
Customers do not view this as a single market, despite the fact that everyone else does. Their perspective is shaped by their life stage. They will eventually desire a dining table, a mattress, and a bedframe, among other things. It is therefore primarily need-based. For this reason, we made the decision to divide the market into its component parts, approach each one as a distinct market, and aim for leadership in each. Right now, we lead the country in mattresses, bed frames, sofa recliners, and all other sleep accessories.
“Those who have previously purchased a sleep product from us account for 45 percent of our furniture sales. People make up about 50% of our mattress sales.
Mattresses vs Furniture and sales by region
This year, mattresses will account for roughly 70% of sales, with furniture accounting for the remaining 20%. About 500 SKUs are available in Wakefit’s 15–20 subcategories.
Approximately 50–55 percent of sales are contributed by Tamil Nadu, Karnataka, and Andhra Pradesh. Delhi NCR and Maharashtra are the two largest marketplaces outside of the South.
We take great pride in the fact that roughly 50–55 percent of our revenue comes from Tier II markets. Why should a lovely home be reserved for those making more than, let’s say, Rs 1 lakh a month? Additionally, it ought to be available to those making between Rs 25,000 and Rs 30,000 a month. That is our objective.
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