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    PGPBL - Iimk - Retail Maagement - Pepperfry

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    karthikawarrier
    Pepperfry faced challenges as the first online furniture retailer in India due to consumers' distrust of online shopping for large, emotional purchases and an unorganized supplier market. It created a marketplace to connect suppliers and consumers, carefully selecting products and providing suppliers internet training. To drive conversion, Pepperfry leveraged customer purchase insights and focused on variety. It has made strategic bets in omnichannel through offline studios, house brands with higher margins, and furniture rental targeting young professionals. To achieve profitability, Pepperfry can expand into B2B, improve warehousing, grow house brand sales, increase promotions, and provide customer financing.

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    PGPBL - Iimk - Retail Maagement - Pepperfry

    Uploaded by

    karthikawarrier
    389 views3 pages
    Pepperfry faced challenges as the first online furniture retailer in India due to consumers' distrust of online shopping for large, emotional purchases and an unorganized supplier market. It created a marketplace to connect suppliers and consumers, carefully selecting products and providing suppliers internet training. To drive conversion, Pepperfry leveraged customer purchase insights and focused on variety. It has made strategic bets in omnichannel through offline studios, house brands with higher margins, and furniture rental targeting young professionals. To achieve profitability, Pepperfry can expand into B2B, improve warehousing, grow house brand sales, increase promotions, and provide customer financing.

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    PGPBL0147_ Karthika_RM_pepperfry

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    Pepperfry faced challenges as the first online furniture retailer in India due to consumers' distrust of online shopping for large, emotional purchases and an unorganized supplier market. It created a marketplace to connect suppliers and consumers, carefully selecting products and providing suppliers internet training. To drive conversion, Pepperfry leveraged customer purchase insights and focused on variety. It has made strategic bets in omnichannel through offline studios, house brands with higher margins, and furniture rental targeting young professionals. To achieve profitability, Pepperfry can expand into B2B, improve warehousing, grow house brand sales, increase promotions, and provide customer financing.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    389 views3 pages

    PGPBL - Iimk - Retail Maagement - Pepperfry

    Uploaded by

    karthikawarrier
    Pepperfry faced challenges as the first online furniture retailer in India due to consumers' distrust of online shopping for large, emotional purchases and an unorganized supplier market. It created a marketplace to connect suppliers and consumers, carefully selecting products and providing suppliers internet training. To drive conversion, Pepperfry leveraged customer purchase insights and focused on variety. It has made strategic bets in omnichannel through offline studios, house brands with higher margins, and furniture rental targeting young professionals. To achieve profitability, Pepperfry can expand into B2B, improve warehousing, grow house brand sales, increase promotions, and provide customer financing.

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    Pepperfry faced challenges in changing consumer habits towards online furniture shopping and connecting with unorganized suppliers. However, it created a curated marketplace and used purchase behavior insights and variety to drive conversions.

    Pepperfry faced challenges like changing consumer habits towards furniture, distrust in online shopping for this category, and connecting with unorganized suppliers.

    Pepperfry created a marketplace for unorganized suppliers by providing internet education and carefully selecting products. It also offered related home categories to test the online concept before furniture.

    PGPBL | IIMK | RETAIL MAAGEMENT | PEPPERFRY

    PEPPERFRY DISCUSSION QUESTIONS

    1. What were the challenges in creating a new online vertical in furniture?

    Ans: Pepperfry is the first retailer to do e-tailing of furniture. Given the current market is small and
    largely part of unorganised market, they will face a lot of challenges:

    - Changing consumer habits – Indian families consider furniture as high involvement, high
    value category and has emotional connect to furniture that stays for generations
    - Facing issues/distrust about quality, delivery and assembly
    - 90-100 million people shopped online, among them pepperfry target was only 25-20 million.
    It’s a narrow niche segment (5%) as compared to offline competition
    - suppliers are generally part of unorganised sector and alien territory for them. Have to sell
    them the value proposition first

    2. How did Pepperfry create a platform to connect supply and demand?

    Ans: When they started venture, , Indian retail furniture industry was 90% unorganized, fragmented
    and largely non-branded. Of the rest 10% organized, only 1% had online platform. Consequently,
    there was no business model they could replicate. They decided to create a marketplace for the
    unorganized suppliers, typically SMEs and provided them with internet education to take their
    business online.

    - Building product portfolio: They started with selling home, lifestyle, jewellery and fashion
    categories along with furniture. But later they dropped all the products except furniture and
    home décor, to stick to their core offering.
    - Furniture accounted for 80% of the revenue and home décor and utilities accounted for only
    20%. But the later were significant as they allowed the customers to test the online concept
    and the products. Customers purchasing this category were 50% more likely to buy furniture
    from the platform in next 12 months.
    - Curating the platform by offering the concept of variety. They built a ‘curated’ marketplace
    by carefully selecting 80000 products from specialist merchants. In first level, customer
    behaviour drove curation and Pepperfry used to discard products that failed to perform on
    their platform. In second level, interested suppliers reached out to Pepperfry and a
    dedicated product team decided whether to list the products based on pre-set factors.
    - Making money by connecting suppliers and demand by offering benefits to either side

    3. In a market where customers were not comfortable with buying online, how did Pepperfry drive
    the conversion?

    Although loss making company, they have successfully established themselves as the largest
    furniture e-tailer in India.

    To drive conversion, they have followed 2 tactics mainly:

    1. Used customer purchase behaviour insight:


    Start by trying smaller lower-priced items like bedside/ coffee tables then moved to big
    items like sofas, dining tables etc.
    PGPBL | IIMK | RETAIL MAAGEMENT | PEPPERFRY

    2. Used variety as the key metrics for conversion:


    This was taken care by creating a curated marketplace thus standing apart from competors
    like Horizontal websites ( amazon/flipkart) and marketplace operations that only matched
    supply and demand

    4. Discuss the strategic bets made by Pepperfry in the following areas: a. Omnichannel b. House
    brands c. Furniture rental?

    a) Omni channel

    - The total size of the order was 80-100% higher than online orders.
    - Pepperfry spent 0.8bn to 1bn annually in marketing in 50-50 spilt b/w digital and offline
    television
    - Pepperfry, to expand its reach via the offline channel, opened 34 studios, with a franchisee
    model as well which has 7 stores.
    - Around 20% of the overall market was made available in the studios in 2018. As a result,
    Pepperfry expected to raise the number of franchises to 70 by 2019, which would double.
    The aim was to raise sales in studios by about 35-40 percent.
    - Pepperfry was deciding to get his foot on non-metro tracks to tap into the next client surge.

    b) House brands

    - In the furniture, modular and mattress market, Pepperfry introduced 10 specialist housing
    brands.
    - The overall home brand margin of roughly 50% of total GMV was 10% higher than consumer
    brands.

    c) Furniture rental

    - Rental furniture services in cities with immigrants were becoming common as the economic
    sharing expanded.
    - In 2018 Pepperfry soft launched its furniture rental business. It collected data on demanded
    items, time frame and payment methods. Based on the data it started developing special
    lines for rentals.
    - Pepperfry attempted to hit the 22-29-year-old by rental. Although this segment was not
    their key customers, they wanted to begin talking early with this segment through this rental
    service, that would eventually transfer to the core segment in the future.
    -

    5. How can Pepperfry respond to competitive threats from international entrants like IKEA and
    domestic platforms like Flip kart? Or will the disruptor be disrupted?

    Ans: Based on SWAT analysis done as shown below:

    Strengths Weaknesses
    • Stable logistic network + last mile • Not profitable
    • Curation experience • Challenges to Innovate
    • Tech: Analytics & digital marketing • Lack of international product and its
    • Omnichannel customer experience sourcing
    PGPBL | IIMK | RETAIL MAAGEMENT | PEPPERFRY

    • Huge online customer base (5.5mn)


    • Quality control is good
    Opportunities Threats
    • Rising internet & mobile penetration • Growing competition – domestic and
    • Tech advancements in furniture space international - who have deep pockets
    like VR/AR • Rapid change in customer mindsets &
    • International brands like IKEA trends
    accelerates interest in home décor and
    furnishing
    • Increasing globalization will open up
    new markets

    Pepperfry can make counter moves to respond to competition as below:

    - Increase offline experience centres all over India:


    § Footfall will increase awareness
    § Increases average order value
    § 3D experience centres within the experience stores
    - Increase social media marketing
    § Focus more on tech savvy metro and mini-metro population
    § Create more engagements on social media platforms
    § Will increase top of the mind recall for this speciality category over
    horizontal competiton
    - Increase rental furniture revenues
    § Space where big players like IKEA/Amazon/Flipkart don’t exist
    § Growing market of est &3 billion
    § Specific niche target group – young professional, floating population
    - Home solution provider

    Pepperfry was able to capture their expected market and grow pretty well, expect for delivering
    profits. Customer experience for their target is what sets them apart from competition. They will not
    be disrupted in the face of competition, as they know how to manage changing trends.

    6. What strategic drivers do you recommend for Pepperfry to achieve profitability ?

    Ans: Recommended strategic drivers:

    - Enter B2B space to leverage the competitive advantage in suppliers and logistics area
    - Better warehouse management – outsource warehousing space to other retailers and earn
    new streams of revenue from it. Allow suppliers to use warehousing facilities at extra fees.
    - Grow GMV through house brand sales – since recognition of pepper fry is high, leverage it to
    create niche pepperfry home branding on furniture
    - Use channels of promotions like digital marketing, TV advertising and experience studios
    - Provide financing to customers by partnering with banks – will increase the purchase
    capabilities of target audience and will help boost sales.

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