The Sleep Company Eyes Profitability and IPO

Mumbai-based sleep solutions startup, The Sleep Company (TSC), is focusing on achieving profitability and preparing for a potential IPO while expanding its physical presence in India. The company, which recently opened its 100th company-owned, company-operated (COCO) store within two years of entering offline retail, aims to be profitable by the end of FY25 and go public in the next 2-3 years.

Salot outlined the company's long-term vision, aiming for ₹1,000 crore in revenues and substantial profitability before going public. This drive towards profitability and an IPO comes as TSC reached ₹500 crore in annual recurring revenue (ARR) since its launch.

TSC’s operating revenue soared to over ₹127 crore in FY23, a significant jump from ₹74 lakh in FY20. This growth comes amidst a transformation in the $2.5 billion Indian sleep-solutions-and-mattress market, which has seen a shift towards smart, feature-rich mattresses driven by changing consumer preferences during the pandemic. Brands like TSC and Wakefit capitalized on this trend with their strong online presence.

Traditional brands have had to adapt swiftly. For example, Duroflex, a 60-year-old company, launched Sleepyhead in 2017 to meet the growing online demand for mattresses among first-time buyers.

TSC’s recent growth leverages its omni-channel presence, with about 85% of its business from retail stores and online channels. The company benefits from the "research online, purchase offline" (ROPO) trend, according to Salot. He explained: “We have internally coined ‘ROPO’ after analyzing consumer behavior.”

Currently operating in around 30 cities, primarily in metro and tier-1 locations, TSC plans to expand to 50 cities by the end of 2024, adding another 50 stores while maintaining its COCO model. Salot is confident that consumers will prefer their premium-looking stores over traditional distributor outlets, even in smaller cities.

TSC's direct-to-consumer model allows for better pricing and customer experience control compared to traditional market leaders, who often sell through many counters, resulting in higher end product prices due to dealer incentives.

TSC offers a range of products including mattresses priced between ₹20,000-70,000 and chairs from ₹10,000-40,000, as well as sofas, pillows, cushions, bedding, and smart recliner beds. The company claims the largest market share for office chairs in India, with a tenfold growth in that category and aims to double its market share in the next 24 months with the new ‘ErgoSmart’ brand.

Industry experts highlight that differentiation will be crucial as the market grows, given the similar specifications and price points of competing products.

TSC plans to increase its workforce to 1,300-1,400 employees by the end of 2024, up from the current 1,000. The company operates two manufacturing sites in Mumbai and Bengaluru and has been opening a new store every 4-5 days since December 2022. All TSC stores have been Ebitda positive since their inception.

TSC aims to leverage the growing investor interest in the omni-channel mattress industry. It raised approximately $22 million in a Series C funding round from Premji Invest and Fireside Ventures in December 2023, while competitors like Wakefit and Sleepycat have also secured significant funding.vvvvvvvvv

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