Mumbai-based sleep solutions startup The Sleep Company (TSC) is setting its sights on profitability and a potential initial public offering (IPO) as it rapidly expands its physical presence across India. The company, which recently opened its 100th company-owned, company-operated (COCO) store in just two years since venturing into offline retail, is aiming to achieve profitability by FY25-end and go public within the next 2-3 years.
Outlining the company’s long-term vision, co-founder Harshil Salot said, “In the next 2-3 years, we target `1,000 crore in revenues, become substantially profitable and hit the markets at that point.”
This push towards profitability and a potential IPO comes as TSC touched `500 crore in ARR (annual recurring revenue) since its inception.
TSC’s operating revenue surpassed `127 crore in FY23, up from just `74 lakh in FY20. The company’s growth trajectory is unfolding amid a significant transformation in the Indian sleep-solutions-and-mattress market, valued at $2.5 billion. The industry has seen a shift towards smart and feature-centric mattresses, fueled by changing consumer behaviour. This shift began during the pandemic when D2C brands like TSC and Wakefit gained a first-mover advantage due to their online presence.
Traditional players have had to adapt quickly to this changing landscape. For instance, Duroflex, a 60-year-old brand, found it necessary to launch Sleepyhead as a subsidiary as early as 2017 to cater to the growing online demand for mattresses, especially among first-time consumers.
TSC’s recent growth, however, hinges on its omni-channel presence, with about 85% of its business coming from retail stores and online channels. The company has capitalised on the “research online, purchase offline” (ROPO) trend, explained Salot. He said: “After analysing consumer behaviour, we have internally coined ‘ROPO’.”
Currently operating in about 30 cities, with a focus on metro and tier-1 locations, TSC plans to expand its footprint to 50 cities by 2024-end. While adding an additional 50 stores, the company plans to maintain its COCO store model. Salot expressed confidence that consumers would be willing to walk into their slightly more premium-looking stores compared to traditional distributor outlets, even in lower tier cities.
TSC’s approach differs from traditional players in the industry. “Typical market leaders, who do over `1,000 crore in sales, will be selling through 12,000 counters, which means that the average throughput per counter per year is only `8-9 lakh. If you want to keep a dealer or distributor at play with the `80,000 monthly throughput, you need to incentivise them with very high margins, which really led to inflation in price for the end product,” Salot said.
In contrast, TSC’s direct-to-consumer model allows for better pricing and control over the customer experience, he added.
TSC’s product portfolio includes mattresses ranging from `20,000-70,000 and chairs from `10,000-40,000. The company also offers sofas, pillows, cushions, bedding and smart recliner beds. TSC claims to have the largest market share for office chairs in India, having witnessed a remarkable 10-fold growth since entering the category. It is looking to double its market share in the next 24 months with the recent launch of its chair brand, ‘ErgoSmart’.
Industry experts note that as the industry grows, differentiation will become key, as most players now offer similar specifications at comparable price points.
TSC also plans to strengthen its workforce to 1,300-1,400 employees by 2024-end, from 1,000 now. The company has two manufacturing sites – Mumbai and Bengaluru. Since December 2022, it has opened one store every 4-5 days, and claims that all of TSC stores have been Ebitda positive since the beginning of their operations.
TSC is also seeking to capitalise on the increased investor interest in the omni-channel mattress industry. It raised around $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.
