Pepperfry Growth Strategy Analysis and Recommendations

Asper Consulting Group presents a strategic analysis of Pepperfry's market position, challenges, objectives, competition, supply chain, and financial situation. Key issues like online competition perception and profitability are addressed, with a recommendation to enhance the brick-and-click model. Strategic objectives aim at financial value, shareholder satisfaction, brand excitement, and omnichannel growth to solidify Pepperfry's presence in the Indian market. The report emphasizes on the need for sustainable growth and competitive advantage in the evolving e-commerce landscape.

• Pepperfry
• Growth strategy
• Market analysis
• Recommendation
• E-commerce

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1. Asper Consulting Group PEPPERFRY.COM Emily Sanders Matt Borgford Tanis Brako Carlos Kan Presenting to: Mr. Ambareesh Shah and Mr. Ashish Shah, Co-founders

2. KEY ISSUE How does Pepperfry retain leading market position and grow in future? Introduction Analysis Alternatives Implementation Risks Conclusion

3. KEY CHALLENGES Perception of Online Competition Revenue Niche competition Global brands Consumer Merchants Profitability Negative EBITDA Introduction Analysis Alternatives Implementation Risks Conclusion

4. RECOMMENDATION Build on Brick & Click model to better address customer needs Introduction Analysis Alternatives Implementation Risks Conclusion

5. STRATEGIC OBJECTIVES Unlock Financial Value Positive EBITDA/Profitability Shareholder satisfaction Create Brand Excitement Solidify Pepperfry in Indian market Drive Operating Growth Become omnichannel powerhouse Satisfy investors Introduction Analysis Alternatives Implementation Risks Conclusion

6. COMPETITION Specialist Online Retailers UrbanLadder, FabFurnish and Livspace Horizontal Marketplaces Flipkart and Amazon IKEA Swedish furniture giant Pepperfry still has a competitive advantage amongst increasing competition Introduction Analysis Alternatives Implementation Risks Conclusion

7. SUPPLY CHAIN Customer Sourcing Hub Distribution Centre Supplier 3 17 Fulfillment Centres 3. Feedback seller To be profitable the company must achieve economies of scale Introduction Analysis Alternatives Implementation Risks Conclusion

8. CURRENT FINANCIAL SITUATION Revenue Margin % 3,000 0% -20% 2,500 -40% 2,000 -60% -82% -80% -96% 1,500 -100% -127% 1,000 -120% -150% -140% -159% 500 -160% 341 439 992 2,001 2,580 0 -180% 2013 2014 2015 2016 2017 Introduction Analysis Alternatives Implementation Risks Conclusion

9. REVENUE SEGMENT AND PRODUCT COMPOSITION Furniture Decoration and Utilities 18% Furniture = 10,000 products Decoration and Utl. 70,000 products 82% Introduction Analysis Alternatives Implementation Risks Conclusion

10. MARKET OPPORTUNITY Untapped Current Demographic 30% 70% Introduction Analysis Alternatives Implementation Risks Conclusion

11. PEPPERFRY STAKEHOLDERS Franchisees Entrepreneurs Deep local knowledge Only 7 franchised stores Merchants Artisans and passionate about pieces Hesitant to move online Value relationships Proud to create high quality products Relationships with merchants is integral to Pepperfry success Introduction Analysis Alternatives Implementation Risks Conclusion

12. PEPPERFRY STAKEHOLDERS Indian End Consumer Increasing style savvy Tech savvy/mobile use Price sensitive (use public transport) Value convenience (ie: deliver to doorstep) Increasing millennial consumer base in India Need experiences Consumers still crave both online and physical presence for shopping experience Introduction Analysis Alternatives Implementation Risks Conclusion

13. CUSTOMER JOURNEY Awareness Consideration Purchase Research online to achieve desired style High organic search Compare on price Value locally made products Convenience of delivery and assembly Consider purchase for 40 days Journey ends when carpenter comes at convenient time to assemble Pepperfly must consider the needs of the end consumer and make purchasing convenient Introduction Analysis Alternatives Implementation Risks Conclusion

14. THE SWEET SPOT The Sweet Spot Customer Preferences PepperFry.com Moving into the Sweet Spot will ensure Pepperfry s continued success Introduction Analysis Alternatives Implementation Risks Conclusion

15. ENVIRONMENTAL ANALYSIS Profitability Perception of online purchasing High Fixed Costs Supply chain execution First mover advantage Tailored offerings Strength Challenge Growing middle class Style savvy trends Young demographic in India Increasing competition Demo. loyal to small businesses (brick) Adoption of online shopping Opportunity Threat Introduction Analysis Alternatives Implementation Risks Conclusion

16. ALTERNATIVES Differentiate into Related Services Expand into Additional Product Categories Brick & Click Model Introduction Analysis Alternatives Implementation Risks Conclusion

17. ALTERNATIVE 1 Pro Con Differentiate into Related Services Differentiate by entering and leading in related services such as furniture rental. Ex: Amazon with AWS Introduction Analysis Alternatives Implementation Risks Conclusion

18. ALTERNATIVE 2 Pro Con Expand into Additional Product Categories Leverage platform to expand into additional product. Ex: Alibaba of India Introduction Analysis Alternatives Implementation Risks Conclusion

19. ALTERNATIVE 3 Pro Con Brick & Click Model Build on Brick and Click model to better address customer needs. Ex: Omnichannel Introduction Analysis Alternatives Implementation Risks Conclusion

20. DECISION CRITERIA Increase GMV to 50,000 by 2020 Growth Achieve profitability within the business Maintain and build relationships with suppliers and customers Profitability Relationships Brand Create brand excitement with Indian market Introduction Analysis Alternatives Implementation Risks Conclusion

21. DECISION CRITERIA Differentiate into Related Services ie: Retail service Expand into Additional Product categories ie: Consumer Goods Brick & Click ie: Omni-channel Growth GMV to 50,000 by 2020 Brand Create Brand excitement Profitability Achieve profitability Relationships Build supplier & customer relationships Introduction Analysis Alternatives Implementation Risks Conclusion

22. FUTURE FORWARD Leading furniture supplier in India Build on Brick & Click model to better address customer needs Unlock financial value Drive Growth Omnichannel powerhouse Introduction Analysis Alternatives Implementation Risks Conclusion

23. IMPLEMENTATION Innovation Marketing Relationships Physical International Consumer Supply Chain Strengthen Brand Awareness Expansion Introduction Analysis Alternatives Implementation Risks Conclusion

24. PEPPERFRY BRICK & CLICK STRATEGY Brick Physical Offline Stores Click Online Presence Offer both offline and online options to more consumers Introduction Analysis Alternatives Implementation Risks Conclusion

25. PEPPERFRY Offerings: Furniture D cor and utilities House brands Brick White floors, walls Red accents Gold light fixtures Highly technology driven Click Easy to use Website Application Enhance the Brick and Click experience to cater to the consumer Introduction Analysis Alternatives Implementation Risks Conclusion

26. PEPPERFRY FOR YOU, BY YOU Appeal Authentic Indian merchants Feature merchants on WhatsApp and Viber Awareness Coupons on train tickets WhatsApp and Viber advertisements Promotion Ghandi s Celebration 150th Anniversary of birth Pop-up Installation Differentiate Pepperfry from competitors by appealing to the Indian consumer Introduction Analysis Alternatives Implementation Risks Conclusion

27. RELATIONSHIPS Continue building relationships Ensure financial sustainability Training in e-commerce Relationship Managers to onboard new merchants 375 new in 5 years Merchants Relationship building Testimonials from previous merchants From 7 to 93 Franchisees Differentiate Pepperfry from competitors by appealing to the Indian consumer Introduction Analysis Alternatives Implementation Risks Conclusion

28. EXPANSION Pepperfry Owned Expand in India Increase from 27 to 142 stores in 5 years Chennai, Cochin, Combature Cities with min. population of approximately 100,000 Franchise Owned Increase from 7 to 93 franchise owned Chennai, Cochin, Combature Cities with min. population of approximately 100,000 International expansion in year 4 Pepperfry owned initially to prove concept 5 stores in year 4, 10 additional in year 5 Bangladesh Expand the brick footprint to connect to more consumers Introduction Analysis Alternatives Implementation Risks Conclusion

29. INNOVATION Mobile Application Build New app Third party Easy to use Access to more consumers Push Notifications Website Google AdWords Google Adsense Consumer Experience Visualize furniture in your own space For you, By you Shipping Costs based on proximity Use consumer data to drive this offering Enhance technology offerings to drive more interest Introduction Analysis Alternatives Implementation Risks Conclusion

30. INNOVATION Supply Chain Use Machine Learning to enhance scheduling and order fulfillment Consumer Behaviour Machine Learning to tailor offerings How Research Scientist to develop algorithms Continue to innovate to reduce manual tasks for Pepperfry Introduction Analysis Alternatives Implementation Risks Conclusion

31. IMPLEMENTATION TIMELINE 2018 2019 2020 2021 2022 Marketing Develop Launch Marketing expenditure App and digital platform Operations Sourcing Merchants Software and AI Develoment Staff and Development Relationship building Expansion Brick Stores International Expansion Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Introduction Analysis Alternatives Implementation Risks Conclusion

32. SOURCE AND FUNDING Series F funding of USD 37 million From US- Street Global Advisors FX Rate of USD 1.00 to INR 80.00 Total Funding available is INR 2.9 BN Introduction Analysis Alternatives Implementation Risks Conclusion

33. COST OF IMPLEMENTATION Investment in INR MM Cost Breakdown Marketing Advertisements Promotions Relationship building App and Digital Platform Marketing for Franchisee Social Listening Operations Sourcing Merchants Relationship building Software and AI Develoment Staff and Development Expansion India International Expansion Total 2018 2019 2020 2021 2022 Trend 50 40 10 35 10 3 30 24 12 40 15 8 31 25 14 45 20 13 40 32 16 50 25 18 45 36 18 55 30 23 196 157 70 225 100 65 5 10 50 50 8 12 60 65 11 14 70 100 14 16 80 150 17 18 90 250 55 70 350 614 35 0 298 189 0 463 105 0 448 315 35 791 280 70 932 924 105 2,931 Introduction Analysis Alternatives Implementation Risks Conclusion

34. ASSUMPTIONS Assumptions # of products advertised Furniture Decoration Conversion Rate % # of products sold (in MM) Growth Rate % Average Price per customer # of brick stores Privately Owned Franchisee Employees 2018 80,000 10,000 70,000 90% 172 20% 19,080 35 28 7 28 2019 85,300 10,300 75,000 92% 215 25% 20,225 70 55 15 55 2020 90,600 10,600 80,000 94% 280 30% 21,438 120 70 50 70 2021 95,900 10,900 85,000 96% 307 10% 22,725 195 120 75 120 2022 101,200 11,200 90,000 98% 338 10% 24,088 270 170 100 170 Introduction Analysis Alternatives Implementation Risks Conclusion

35. REVENUE BY SEGMENT Revenue by segment Furniture Decoration and Utilities 2018 82% 18% 2019 75% 25% 2020 65% 35% 2021 55% 45% 2022 50% 50% Revenue by platform Online Brick Stores 2018 90% 10% 2019 85% 15% 2020 75% 25% 2021 65% 35% 2022 55% 45% Introduction Analysis Alternatives Implementation Risks Conclusion

36. REVENUE AND PROFITABILITY PROJECTIONS Revenue Profitability margin % 40,000 20% 10% 35,000 10% 5% 3% 30,000 0% -5% 25,000 -10% 20,000 -20% 15,000 -30% 10,000 -40% -40% 5,000 4,102 7,392 15,671 23,256 34,512 0 -50% 2018 2019 2020 2021 2022 Introduction Analysis Alternatives Implementation Risks Conclusion

37. SENSITIVITY ANALYSIS Conservative Expected Optimistic 2018 2019 2020 2021 2022 Introduction Analysis Alternatives Implementation Risks Conclusion

38. KPIS AND CONTROLS Indicator How to measure? 2018 2019 2020 2021 2022 Profitability Net profit margin % -40% -5% 3% 5% 10% Physical Footprint Number of offline stores 35 70 120 195 270 Social Listening (raing max of 5) Brand Awareness 3.0 3.3 3.5 4.0 4.5 Measured through GMV (in MM) Growth $10 $18 $39 $58 $86 Introduction Analysis Alternatives Implementation Risks Conclusion

39. RISKS AND MITIGATION 1. Lack of Customer Adoption Probability 1 Increase investment in advertising and promotion 2. Capacity of Merchants 2 Invest in relationships 3 3. Impact to Internal Culture Increase internal communication and engagement Impact Introduction Analysis Alternatives Implementation Risks Conclusion

40. CONCLUSION Build on Brick & Click model to better address customer needs Create Brand Excitement Unlock Financial Value Drive Operating Growth Introduction Analysis Alternatives Implementation Risks Conclusion

41. Appendices

42. APPENDIX Cost per year in 5th 5.71 10.71 314.29 Staff & Recruitment Research analyst (data) Relationship Managers Interior Designers Number 1-2 20-25 30 - 440 Number $$ in K 2 200 50 50 15 440 Introduction Analysis Alternatives Implementation Risks Conclusion