When Divya Sharma joined a startup in Mumbai, she moved to a tiny flat in the suburbs and signed up with online rental company Rentomojo for a one-room package on rent – a bed with a mattress, a bean bag, a cupboard and a side table – for a monthly fee of Rs 1100. The refundable deposit was Rs 2200. “I knew I could rent furniture for as long as I want – six months or one year – and cancel the subscription when I no longer needed it.”
For young professionals who are not sure which city their next job is going to take them to, doing up their new home with furniture brought on rent is an easy way out. And it is this emerging market that Rentomojo, run by Bangalore-based Edunetwork Pvt Ltd, is eyeing. An online rental marketplace which currently deals in furniture, furnishings, home appliances and bikes, it has 4,500 subscribers, it claims. The 16-month-old startup has now set a target of 1-1.5 lakh subscribers in the next 18 months.
“We can be a good profitable company in the next 18 months,” says Geetansh Bamania, CEO & founder, Rentomojo, adding that he is bullish on the emergence of an access economy in the country.
According to him, people today are hiring cars, furniture, home appliances, among other things, instead of outright purchases. While the furniture market in India is $16 billion, growing at 25 per cent month-on-month, the furniture and appliances rental market is $5-7 billion, he says. And with more than one crore rental properties available, the furniture rental business has immense potential, says Bamania.
Jitendra Gupta, founder, Citrus Pay, who is also an investor in rival furniture and appliance rental startup Cityfurnish, says the return on investment in this space is high as the capital invested by these startups is recovered in the span of 12-18 months. “Startups operating in this space have cash accruals right from day one. On an average, the Ebidta (earnings before interest, depreciation, tax and amortisation) margin in these businesses are 30-35 per cent,” says Gupta.
Rentomojo sees people in the 24-35 years age group with disposable income of Rs 30,000-40,000 as potential customers. The price difference between unfurnished and furnished rental properties in India is around Rs 10,000, and “this is where we come in”, says Bamania.
Fitting the pieces
“We furnish a one BHK apartment for a monthly rent of just Rs 4000. If a person buys this same furniture, he will have to shell out more than Rs 1 lakh and Rs 15,000-20,000 in terms of relocation, plus the hassles,” he say. “Rentomojo sells a convenience factor which is affordable to the pocket,” he adds.
Rentomojo, itself, works on an asset-light model. “When a consumer orders on our platform, we procure the assets from our vendors and give it to the consumers,” says Bamania. Customers need to submit identification and address proof besides a security deposit. The startup keeps 40-50 per cent of the rental fee as commission on every booking, with the remainder going to the vendor.
The asset-light business model has attracted many startups, and investors in their wake, to this space. Peer-to-peer renting marketplace Rentomo.com, received seed funding of $100,000 in January. FlatFurnish recently raised angel funding from former Jabong CEO Arun Chandra Mohan. WhatsOnRent raised angel funding from CommonFloor.com co-founder Lalit Mangal and other investors in January. RentOnGo, had earlier secured angel funding from Snapdeal’s chief product officer Anand Chandrasekaran, GSF India founder Rajesh Sawhney and other angel investors.
In March 2015, Furlenco, which has its own range of furniture, meanwhile raised $6 million (Rs 38 crore) in a Series A round of funding from LightBox Ventures.
Last year, Rentomojo raised $2 million in pre-Series A funding from Accel Partners and IDG Ventures India. Its services are available in Mumbai, Bangalore, Pune and Gurgaon, and it plans to enter the Delhi and Noida markets soon. It is also in talks with potential investors to raise Series A funding to fund its expansion plans.
Currently, nearly half of Rentomojo’s subscribers are from Mumbai. “We are growing our customer base and revenue at 30 per cent month-on-month,” he says.
Rentomojo is looking to enter the transport and clothing rental spaces in the next few months. “We are looking to cater to the entire lifestyle segment in the rental business,” said Bamania.
The car rental space already has several players such as Myles, ZoomCar and JustRide, among others, and Rentomojo would be a late entrant here. Rentomojo still remains a small player in the bike rental space. Earlier this month, JustRide raised $400,000 in angel funding. Last year, ZoomCar had raised $11 million from investors.
However, Bamania is unfazed and says that its offerings would be very different compared to the other existing players in the market. “We would launch those categories that align with the existing line of business we have,” he says.
In the clothing rental space also, there are a few startups, but most of them, such as FlyRobe, Klozee and LibeRent, rent out premium fashion wear. Recently, Klozee.com had secured an undisclosed amount in seed funding from startup incubator TracxnLabs and other unnamed angel investors.
As Sharma says, “rental costs don’t hurt much” when compared to the hassles of buying, transporting and then selling a piece of furniture or even a car.