Challenges and Opportunities for Pepperfry in the Indian Market
Pepperfry, a leading online furniture retailer in India, faces the challenge of maintaining its market leadership and increasing profits amidst growing competition. With a focus on leveraging new revenue channels, optimizing merchandise listings, and innovating to tackle both domestic and international competitors, Pepperfry aims to capitalize on the vast potential of the Indian market and achieve robust growth. By understanding key issues, defining problems, and targeting specific customer segments, Pepperfry aims to enhance its position and customer base in the evolving e-commerce landscape.
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Pepperfry.com Camel Consulting Alon, Hagar, Osnat, Noa
Key Issues Pepperfry is a pioneering vertical online retail platform- specializing in furniture and home products India has a growing middle class as with it, the furniture industry is expecting to grow to 35B in 2020 India has a huge internet user base while only a small part of its customers shopped online Pepperfry is facing competition from Ikea, urban ladder, livespace and more.. Pepperfry is a growing market leader in the category while experiencing a decline in profit
Problem definition How can Pepperfry stay the leading player in the market and increase profit while facing competition and challenges ahead?
Challenges How can Pepperfry reach a positive balance in its profits and EBITDA in coming year? How can Pepperfry grow its gross merchandise profit with the right listings? How can Pepperfry utilize new revenue channels? What should Pepperfry do to tackle its international and domestic competitors? How can Pepperfry continue innovating with new ideas?
Indian Market 90-100 million customers shop online 450-480 million internet users Pepperfry is targeting 25-3 million customers 2018- 5.5 million registered customers 55%-60% repeat customers 1.4 Billion population Goal- Increase customers from 25 billion - 35 billion in 2020 There is place to grow
Competitive Landscape SMEs moving online: The living room, furniturewalla Vertical Online start-ups IKEA Pepperfry Interior design solutions: Livspace Homelane CustomFurnish Urban Ladder Large domestic manufacturers and retailers: Durjan, Godrej Interio, Hometown, Nikamal Online rental: Furlenco, Renticle, Rentmojo Omni- Channel Offline Online Horizontal players with limited focus on furniture: BigBazzar (Future), MORE megastore (Aditya birla), Star Hypermarket (tata&tesco) E-commerce Portals: Fliakart, Amazon India, Snapsdeal Horizontal many products Complicated market, but Pepperfry as a leader in category
Current segments Utilities + Home decor Furniture Created trust in online shopping 50% more chance to buy furniture Utlities+ d cor are a doorway to increase gross merchandise profit
Pepperfry revenues % of revenue 20% Goal- D cor- utilities- Increase 35%-50% revenues in 3 years. Today 20% only. 80% Utilities + D cor Furmiture
Number of products 10,000No. of listing 70,000 Utilities + D cor Furmiture Offering of more utilities but earning more from furniture
Product Pricing Av .selling price 1,500 2,500 18,000 Utilities D cor Furmiture
Supply Chain Supply as a major strength of company Find suppliers & check quality Store in warehouse & fulfillment center Pick up from suppliers Track Fee charge of end customer Transfer to supplier Distribution centers Feedback & seller performance Assembly Marketing Supply chain as key for furniture business
UVP Small-medium business- full support to suppliers Engaged in all supply chain process (except form manufacturing) Omni channel chain 2% of damage to deliveries only Low prices Customer Service Competitive advantage is significant
Offline Analysis 7 franchise- seller helps to sell online (gets 10% percent) 20% total of business- 34 offline stores 27 other- studio stores Goal- double to 70 stores in march 2019 Offline as an important part of business
Alternatives New Market Development Diversification Market Existing Market Penetration Product Development Existing New Product
Alternatives New Market New Product Feasibility -- - Suitability - - Low Risk -- - Profitability ++ + Time to Market -- - Need to base in India, due to huge potential & risks
Implementation Plan- Market penetaration New Online to Offline 3D feature customers Buying data on consumer behaviour to understand listings Last chance marketing
Customers segmentation Mahandra Muhamad 30+ Professional Medium-High priced products New permanent home Chic & urban trends 22-29 years old Student Low priced products No permanent home Likes trends Regular furniture Rental furniture Need to reach 22-20 population With growth of middle class, segmentation is needed
Implementation plan- Marketing 800-1000 million yearly costs over all 50%- digital marketing 50% offline (performance oriented) Sponsored marketing as a key for profits 15-20%- content marketing (video, web series)- suitable for millennials Focus on content marketing & add sponsored marketing for suppliers
Implementation Plan Students targeted audience- focusing on rental furniture Middleclass as targeted audience -Open Spaces in work places Pop-Up saloon -Sale day in campuses -Demos in dorms Online to Offline 2018- 10 new 2019- 10 new 2020- 15 new (Leading to 70) Open new studios
Implementation Plan B2B: Hotels WeWork Big offices Offer discounted prices for products New customers B2G: Offer free governmental labels Institutions & governmental agencies Promote Holiday gifts to employees (utilities & d cor) Utilize supply chain, especially deliveries & warehouse
Implementation Plan Design your own living room with computerized simulated 3D feature. Cooperation with start ups 3D feature in online app- virtual Home Cutting edge tech as the way deal with millennials
Implementation Plan Locate special d cor + utilities products next to cashier Last chance marketing Pop up banners in purchase online
Implementation plan timeline 2018 2019 2020 Pop up Department corporate with student unions Pop up salons (rental pop up) R Students and universities Popup SALON Locate potential locations Open and urban spaces corporate with municipalities online to offline design and lunch Locate potential locations Reach out to potential franchisers Studios open new studios 10 10 15
Implementation plan timeline 2018 2019 2020 Premium accounts manager Target Market strategy corporate with Gov officers big delivery packages offical labels Hotels & Big companies B2B New Customers B2G scout and partner with start-up Virtual home 3D launch free 5% comission8% comission Last chance online - setup on web and APP Offline - re-arrange cashier area sponsered marketing Decore + utilisation furniture Enreaching DATA ON customers adjust listing accordingly Marketing and Profit scout and partner with data companies Listing
Finance Pepperfry Financial Sum - Present 6500 7000 6000 5122 Revenue CAGR 65% GMV CAGR 83% 5000 4000 2580 3000 2202 2001 2000 992 642 582 1000 439 341 0 2012-2013 2013-2014 2014-2015 2015-2016 2016-2017 Revenue GMV
Finance Exhibit 1 Pepperfry Financial - Projections 2014- 2015 2016 2012- 2013 2013- 2014 2015- 2016- 2017 INR M 2018 2019 2020 Revenue 341 439 29% 992 126% 2001 102% 25803,836.5 29% 5,704.9 8,483.3 49% 49% 49% Opex -883 -801 -9% -2247 181% -4993 122% -5066(5,218.0) 1% (5,374.5)(5,535.8) 3% 3% 3% Profit -542 -362 -1255 -2992 -2486(1,381.49) 330.38 2,947.50 GMV 582 642 2202 5122 650012,831.1 25,329.0 97% 50,000 97% 97%
Finance Franchise cost Flat Setup Infrastructure Display units Total Sales Comission (10%) Peffy yearly rev # of years comission cover total invest 1 4 1 1.5 7.5 5,000,000 500,000 4,500,000 15
Finance Exhibit 1 Pepperfry Financial - Projections 2013- 2014 2015- 2016 2016- 2017 INR M 2012-2013 2014-2015 2018 2019 2020 Revenue 341 439 29% 992 126% 2001 102% 25803,836.5 29% 5,704.9 8,483.3 49% 49% 49% 20% 30% 40% 50% rev decore + utilities rev furniture 516 1,151 2,282 4,242 80% 70% 60% 50% 2,064 2,686 3,423 4,242 Opex -883 -801 -9% -2247 181% -4993 122% -5066(5,218.0) 1% (5,374.5) (5,535.8) 3% 3% 3% Profit -542 -362 -1255 -2992 -2486(1,381.49) 330.38 2,947.50 GMV 582 642 2202 5122 650012,831.1 25,329.0 50,000 97% 97% 97%
Risk Mitigation Risk: Risk: Risk: Competition from big players Not able to reach clients in B2B Not able to reach Millennialis 1. Knowing the market 2. Bring people that speak local language 1. Execute premium products 2. Big discounts for hotel 1. Hire popular presenter for marketing
Appendix Exhibit 1 INR M Pepperfry Financial Sum 2012-2013 2013-2014 2014-2015 2015-2016 2016-2017 Revenue 341 439 992 2001 2580 Profit -542 -362 -1255 -2992 -2486 GMV 582 642 2202 5122 6500
Appendix Category Utilities D cor Furmiture No. of listing 70,000 10,000 Standard Manufacturers Semi-standard, artisnanal non-standard, artisnanal Supplier base Av.selling price 1,500 2,500 18,000 % of revenue 20% 80% % of transactions 70% 30% % gross margin 5%-25% 30%-50% 45%-55% Time to purchase 2-3 days 1-2 weeks 2-6 weeks
