Wakefit Eyes Rs 1000 Crore Revenue In FY24, Up From Rs 825 Crore The Previous Year

Solve one problem, then the next. If you solve enough problems, you get to come home—that is what Matt Damon’s character Mark Whatney says in the movie ‘The Martian’. It was a quote that hit home for Chaitanya Ramalingegowda. Two of his ventures—a matrimonial and content-to-commerce app had failed within a year and three years, respectively.

When he, along with Ankit Garg, decided to set up Wakefit in 2016 he knew at the back of his mind that he had to make this direct-to-consumer mattress- platform a success, considering the odds that were stacked against him. That is when he decided to introduce a strategy that he had seen during his stay in the US—offering a no-questions-asked trial and return policy.

Such experimentation could help a digital-first brand make its mark, especially when it is debuting a novel concept in a fragmented industry, where few legacy players rule the roost. But he was also mindful that if the returns breached the 25% to 30% mark, he knew that Wakefit would also be doomed.

“We launched the 30-day trial with the clear mindset that Wakefit is funded from our own savings and that we are failed entrepreneurs,” he laughingly stated, recalling that they decided to close it within two months, in the worst-case scenario.

However, a year later, the company expanded the trial period from 30 to 100 days on customer demand. That is Garg and Ramalingegowda realised that more than a promotional tactic, this initiative had become core table-stakes for the online startup. Especially since the returns were just under 3.5% with replacement standing at a mere 4%.

The reason for this low percentage lies in the very nature of the product— mattresses are experiential-based purchases, unlike electronics. Once customers get used to it, they are unlikely to change it. Likewise with furniture, a category that Wakefit entered in 2020.

The Personal Touch

According to a Research and Markets report, India’s overall mattress market saw an 11% CAGR between 2017 to 2022 with the organised sector growing at 17%. Ramalingegowda pegs the market size to be around $2 billion, of which the organised sector accounts for a mere Rs 7000 crore and online players factor for just Rs 1900 crore.

While the D2C sector business has seen an upswing Ramalingegowda feels that startups like Wakefit have barely scratched the surface in this sector, because there is a large demographic who are still uncomfortable buying this product online.

Till a decade ago, most mattress companies had seasonal sales or exchange offers at their outlets. However, since their products were typically distributed through a multi-brand outlet, they lacked direct contact with the buyers. D2C companies bridged this gap by communicating directly with the buyers—taking feedback, escalations, complaints and compliments.

Wakefit’s team makes around 4500 outbound customer calls daily asking for feedback about the product, the comfort it offers, or lack of it, the packaging, etc. It uses this wealth of information for product development and improvement.

Ramalingegowda cites an example, where the company produced around 60 mattresses a few years ago that turned out a little softer than usual. It learnt about the faulty batch within two days of delivery because of the daily calls and immediately replaced all mattresses for free.

Wake-Up Call

Realising the value of going D2C, legacy players too have started distributing their mattresses on online marketplaces or their websites. However, Ramalingegowda is unperturbed by this growing competition due to the pole position Wakefit has achieved in the past eight years.

“We are by far the largest in the online space, with nearly one-third market share,” he said, though he conceded that the online is still a small sandbox and he is waiting to see where everyone lands five years from now.

He is confident that Wakefit will continue to hold its lead because its growth is not a zero-sum game of edging into the areas of traditional incumbents selling overpriced products due to high dealer margins. Instead, it is tapping another category—consumers who bought unbranded mattresses from local neighbourhood stores for reasons of economy. By offering them superior products at marginally high prices, with the assurance of a 100-day trial and 10-year warranty, Wakefit can convert the majority into regular customers and prospective brand ambassadors.

Moreover, Ramalingegowda has realised that customer stickiness can be increased by getting into the home furnishing business, especially since the company successfully dabbled in products like pillows, bed sheets and comforters in the past. In 2020, it dipped its feet in these waters by setting up a 3500-square-foot facility and brought a Jodhpur-based family that specialised in woodwork to get things going.

That’s when he realised that the furniture category is removed from the mattress one—buyers sought durability, quality, aesthetics and customisation. After experimenting for a year and a half, the company invested over Rs 100 crore to launch its factory in Hosur in March 2022. Today its seven manufacturing units in Karnataka, Tamil Nadu, Rajasthan and Delhi manufacture an assortment of mattresses, furniture, furnishings and bedroom accessories.

“We currently have about 5000 SKUs across mattress, furniture and furnishing,” Ramalingegowda proudly stated. “Broadly, two-thirds of our revenue comes from the sale of mattresses, around 25% from furniture and the remainder from accessories and furnishings.”

While one might deduce that the company is scaling back on its mattress business, which used to contribute over 93% to the revenue in 2017 and currently chips in 60%, Ramalingegowda believes this is business evolution and not because of degrowth.

Wakefit’s furniture category is growing at 50% to 60% year-on-year given its small base of around Rs 350 crore. “Over the next six years, the contribution from mattresses and furniture will be 40% to 45%, respectively, while accessories will be about 10%,” he elaborated.

The company’s revenue in its debut year was a meagre Rs 6 crore, which rose to Rs 27 crore in FY2018 and tripled to Rs 81 crore the year after. Doubling its revenue year-on-year, it stood at Rs 636 crore in FY22 and Rs 825 crore in FY23, hoping to close FY24 at Rs 975 crore to Rs 1000 crore. “We will be EBITDA positive and cash generating in FY24,” Ramalingegowda emphasised.

The company had raised Rs 810 crore in several rounds of funding—Rs 65 crore in 2018, Rs 185 crore in 2020, Rs 200 crore in 2021 and Rs 360 crore in 2023 in a Series D round. Having utilised it for all its capital expenditure, it does not plan to raise capital for another two years.

For now, the company wants to go deeper in its omnichannel journey by adding doubling its current store count, which stands at 50 currently, in the coming 18 to 24 months. Additionally, it will focus on augmenting its existing categories. That is more than enough to keep Ramalingegowda and the team of Wakefiters busy, selling sleep and home solutions to Indians.