Final Project Report in Marketing Management on

Pepperfry

Submitted in partial fulfillment for the award of

Post Graduate Diploma in Management

Submitted by: Group B1

Abhijeet Mohandas (1701061)

Abhilash Kaushik (1701063)

Abhishek Agarwal (1701064)

Abhishek Mishra (1701065)

Adarsh Kurian (1701066)

Contents:
1. Introduction – Page 3
2. Scope – Page 3
3. The Market – Page 3
4. The Competition – Page 4
5. Industry Analysis – Porter’s Five Forces – Page 4
6. Key Issues and Trends – Page 5
7. SWOT Analysis – Page 6
8. Segmentation, Targeting, and Positioning – Page 7
9. Value Proposition – Page 7
10. Marketing Mix
 Product – Page 8
 Price – Page 9
 Place – Page 9
 Promotion – Page 10
11. Perceptual Mapping – Page 11
12. Customer Pain Points – Page 11
13. Recommendations – Page 12
14. Appendix – Page 13
15. References – Page 14

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Introduction
Pepperfry.com, operated by Mumbai-based Trendsutra Platform Services Limited, was founded in
January 2012 by Ambareesh Murty and Ashish Shah, today the CEO and COO respectively. Initially
offering products across lifestyle categories, the company later discontinued its fashion segment to
focus solely on furniture and home furnishings. The company has so far raised over $160 million in
funds over the course of several funding rounds. As per a report in mid-2016, Pepperfry accounted for
nearly half of the $300 million online furniture and home decor market. The site partners with over
10,000 merchants and has 3.5 million registered users.

Scope

This project is being done with a focus on Pepperfry’s furniture offerings, specifically its private label
brands in the space. The company overall has nine private labels, of which eight centre on furniture,
and one – Mangiamo – on modular kitchens. The company earns its revenues through commissions on
the sales seen by merchants (averaging about 35%) as well as through the sales of their own private
labels. It caters to both retail customers as well as to businesses, with bulk buying and Pepperfry
Bespoke being plus points for the latter.

The Market

According to an ASSOCHAM-Forrester study, India's e-commerce industry is expected to grow from $26
billion in 2016 to a whopping $103 billion in 2020. The country’s annual growth rate of 51% in e-
commerce, with an internet user base of 450 million, provides an opportunity for online players. This
growth coincides with that of the $20-billion furniture market in India, a segment that industry experts
are highly optimistic about, especially with venture capitalists investing heavily in startups in the space.
Pepperfry itself, in Series E funding, raised Rs 210 crore from existing investors Goldman Sachs,
Norwest Venture Partners, Bertelsmann India Investments and Zodius Technology Fund to fuel its
expansion.

The furniture industry in India is dominated by unorganised players, with the organised segment
accounting for about 11% of the market. Within this segment, online furniture is quickly making
strides, accounting for a tenth of the organised market today. The growing penetration of smartphones

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and the increasing comfort customers have with the online shopping experience, coupled with the
drawbacks in the offline experience, have given this segment a boost.

The Competition

Pepperfry competes with a wide range of entities – there are those retailers such as Urban Ladder
which have followed the company in adopting the omnichannel route; there are pure play online
sellers such as Stitchwood and Zefo, the latter of which sells second hand furniture as well; there are
traditional, organised brick and mortar retailers such as Shopper’s Stop; there is the massive
unorganised segment of the furniture market; and then there are those platforms that also offer
interior design advice, such as LivSpace.

A dark cloud on the horizon is the impending entry of Swedish furniture brand IKEA. Preparations are
well under way for IKEA’s 2018 launch of a 400,000 square foot store in Hyderabad, and indications are
that the retailer is already preparing itself to adapt to the Indian context, with chicken and vegetarian
fare replacing beef and pork in their in-store restaurants and extra staff actually being taken on for
delivery and assembly of furniture.

Horizontal e-commerce majors Flipkart and Amazon are also eager to have a piece of the pie, with
Nandita Sinha, Senior Director, Home & Furniture at Flipkart, stating, “Furniture is now the priority
category for Flipkart to drive growth.” Amazon even sells Pepperfry and Urban Ladder’s private labels.

The attraction of the space is easy to see: the furniture segment sees margins in excess of 40%,
dwarfing those of electronics and fashion (10-20%). These three segments are the three largest
segments of e-commerce in India.

Industry Analysis – Porter’s Five Forces

For the purpose of this analysis, we have considered the industry in question to be made up of those
ventures selling new furniture, regardless of whether they do so online or offline.

Buyer Power: Buyer power in the furniture segment is moderate. While customers have low switching
costs, given the large variety of options in the furniture market, they also have low ability to influence
prices. It should also be noted that there exists differentiation between the players in the market, with
quality and style varying considerably.
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Supplier Power: Suppliers have limited bargaining power. Given that the inputs for the production
process are commodities, such as wood and textile, there is a limit to how high they can push prices.
However, some models also involve sourcing ready furniture from external parties; in this case,
supplier power could be higher.

Threat of New Entrants: The threat of new entrants coming into the market is high here. In the online
space, easy access to funding has enabled several competitors to enter the space. According to startup
tracking firm Tracxn.com, there were 200 startups in the furniture and home decor market in India as
of March 2016, of which 22 had raised a total funding of $252.4 million.

Substitutes: Substitutes have been on the rise of late. Players like Furlenco and Rentomojo now allow
those not eager to be weighed down to rent furniture. Another online player, Zefo, enables individuals
to both buy and sell second hand furniture online.

Competitors: As cited earlier, competition in the segment is fierce, with high margins attracting more
and more deep-pocketed players.

Key Issues and Trends

All of Pepperfry’s marketing hinges on one point – how to market high-priced, high-involvement, often
bulky goods to the relatively digitally-averse Indian consumer through the internet.

Pepperfry and its competitors have been struggling to adequately convey what their products look and
feel like. High returns are the bane of e-commerce, and for bulky items like furniture, reverse logistics
can be an unimaginable pain point. Thus, companies like Pepperfry are eager to communicate to
potential buyers the look and feel of the product as far as possible before a purchase is made via the
app, with the aim of cutting down on potential returns from dissatisfied customers. Urban Ladder
started things off by illustrating a human silhouette in their display, allowing those browsing through
their collections to get an idea of the measurements of furniture items. This was soon adopted by
other furniture e-tailers too.

Pepperfry has also turned to Augmented Reality (AR) to arm users with an idea of the styles they see
on their app. The company has even taken to the omnichannel route with gusto, having opened as
many as 20 “experience centres” in metros across the country over the past few years. We have

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witnessed this trend of online players taking the omnichannel route before, especially with regard to
high involvement products, with Lenskart and FirstCry being among the prominent examples.

One interesting feature in the segment is live chats, specifically that of Wooden Street, which opens up
the second you start browsing through the site. Shoppers are thus able to have any queries they have
answered almost instantly by readily available “Furniture Experts”, who guide them through the site’s
collection and make suggestions. This human touch could go a long way in bridging the gaps in selling
high involvement goods online.

SWOT Analysis

OPPORTUNITIES
• Growing internet and smartphone
penetration in the country. Increasing
acceptance of e-commerce.
• Potential of omnichannel approach.
THREATS
E-commerce giants such as Amazon and
Flipkart have started to penetrate into the
home decor business.
*Offline mode is still preferred in this
segment.

STRENGTHS
*Good distribution network and logistics
facilities. WEAKNESSES
"Studio Pepperfry" is providing customers the *Poor after sales services.
familiarity of the offline approach. *Grievance Redressal System is weak.
*Extensive product range of over one lakh *The lack of assembly services in many
products. cities.
Strong relations with merchant base of 10,000
sellers.

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Segmentation, Targeting and Positioning

Pepperfry target customers are in the age group of 25 to 40. These are often young professionals and
newlyweds who are comfortable with purchasing items online and are stretched for time. As per the
company’s research, around 68% of their customers are women who shop after 8pm.

The average customer visits the Pepperfry site or app between 15 and 20 times before making the
purchase of a high ticket item. This is largely representative of how the purchase of furniture works
offline as well, with customers eager to explore as many options as possible and be sure of their choice
before buying. It is thus no wonder that an internet-savvy millennial looking to buy furniture would
prefer to browse through tens of thousands of options in the comfort of their living room rather than
trudge through several offline stores with their limited range. Purchase decisions are taken after
consultations with several influencers within the customer’s social circle, such as friends and family,
with the bulk of orders placed on weekends.

Pepperfry focuses on urban centres, delivering to about 500 cities across India. The company’s
assembly services, however, are restricted to some pin codes, with its roughly 250 carpenters/
assembly personnel catering primarily to metropolitan and semi-metropolitan areas.

In a survey we conducted among 68 internet shoppers (see Appendix), price was the most important
factor while considering the purchase of furniture, with quality a close second. With regard to the
online purchase of furniture in particular, customer reviews were cited as the most important metric
for a decision. In both cases, potential resale value of the furniture was adjudged the least important. A
considerable 72% of the respondents said that the touch and feel experience was of high importance
when purchasing furniture, while only 4.4% said that it was of low importance, providing us with an
indication of just how much even those comfortable with online buying value the tangible aspect when
it comes to something like furniture.

Value Proposition

Pepperfry’s value proposition hinges on “Great Variety and Great Prices”. The company offers buyers a
range of over one lakh items to choose from, with discounts often exceeding 30%. A significant reason
for them being able to offer the kind of prices that they do is their in-house logistics. The company has
been able to bring down logistics costs per delivery from Rs 3,000 to a mere Rs 450 today, and one of
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their key advantages over powerful horizontal competitors like Amazon and Flipkart is the unique
nature of furniture logistics, which require a set of skills these broader players may be unaware of.
Pepperfry’s variety, meanwhile, is the result of well-established relationships with as many as 10,000
merchant partners.

Marketing Mix

Product

The company has a range of over one lakh products, with furniture making up the backbone of their
operations. Apart from hosting offerings from over 10,000 merchants, Pepperfry also sells its own
products under eight different furniture private labels, each one in its own way distinct – Mintwud
(modern furniture designed for the compact home); Casacraft (a range of sofas, recliners, wing chairs,
beds and sofa-cum-beds); Ambervile (furniture that provides a seamless blend of classic and colonial
styles with a sense of sophistication); Bohemiana (furniture inspired by the spirit of freedom and
adventure); Mudramark (furniture inspired by Indian tradition); Mollycoddle (delightful and vibrant
furniture for tots-to-tweens); Primorati (customisable, durable and functional wardrobes); and
Woodsworth (contemporary and classic range of furniture).

Pepperfry Bespoke: A big value addition

Pepperfry Bespoke, through a team of certified interior design specialists, provides customers with free
design content and consultancy services, guiding them through Pepperfry’s extensive product
catalogue and helping them choose the style that suits them best. The logic behind this offering is fairly
straightforward – while the service may be free, it is more than made up for by the increase in average
order value seen when customers consult the design team; customers very often go from merely
purchasing a piece of furniture or two to furnishing an entire room or their whole home. The numbers
speak for themselves – in March 2016, Pepperfry Bespoke was estimated to have an average order
value of Rs 4 lakh, compared to an overall average order value of Rs 16,500 for the furniture seller.

Bespoke has gone beyond merely retail customers, creating cool corporate workspaces for the likes of
Uber as well as fashionable interiors for the likes of Barista Café and Isparva Villas, while also catering
to the design needs of Tier II and Tier III schools. Bespoke contributes to 10% of the company’s
revenues. While face-to-face interactions with designers are restricted to a handful of metros,
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customers anywhere in India can easily get in touch with virtual design consultants for advice on how
to create a stylish home.

Price

Pepperfry largely relies on a discount pricing strategy to attract its customers, and often highlights its
low prices relative to its competitors. It is the high margins in the furniture space – above 40% – which
allow the company to pursue such strategies. The company occasionally brings out limited window
period discount sales in order to boost sales and create buzz. Pepperfry also offers referral bonuses,
first-time registration coupons of up to Rs 10,000, and discounted coupons for certain categories to
remain competitive with the unorganised market. Collaboration with various credit and debit card
companies helps Pepperfry offer special discounts for the users of these cards.

Although Pepperfry operates both online and offline (through their studios), there is no pricing
inconsistency, as customers at their offline locations are directed to the website for purchases.

Place

Pepperfry has adopted an omnichannel approach to its sale of furniture. The company interacts and
transacts with its customers through three primary platforms – the website, the Pepperfry mobile app,
and their experience stores. The 20 existing experience centres are Pepperfry’s way of answering to
customers’ need for a touch and feel experience. Customers can visit the store and go through the
limited collection available there. They are catered to by well-informed staff and are directed to the
website when they have decided on a final purchase. Furniture is not purchased in the store. The
company now plans to open 50 more such centres going forward, and is looking at the franchisee
model for expansion. These experience centres today account for 10% of Pepperfry’s overall sales.

The web and app, meanwhile, offer the retailer opportunities that offline retailers miss out on.
Pepperfry can employ retargeting to pursue users who have visited its site but not made a purchase.
This has been a huge plus point for e-commerce companies in the past, and with the average customer
making several visits to the site before settling on a purchase, the online medium allows companies
like Pepperfry to maintain that connection.

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Image credits: https://www.pepperfry.com/studio-pepperfry-products-chennai.html

Promotion

The Promotion aspect for the company has transformed over time. In the early days, promotion was
focused on educating the customer on the possibilities of buying furniture online. Now, they have
moved towards persuading the customer of Pepperfry’s superiority in the segment, highlighting
aspects such as design and variety. Two key points emphasised in their advertisements have been the
hassles one faces when building customised furniture at home, and the great prices they have on offer,
all the time, best epitomised by the line “Don’t wait for Diwali”. The company has also utilised the
power of YouTube, teaming up with Asian Paints for a short series called the Great Indian Home
Makeover. The series, hosted by celebrity Soha Ali Khan, shows Pepperfry pieces being used to spruce
up rooms and homes badly in need of a makeover, and features design advice that those looking to
pilot a makeover for themselves may find useful.

The company has divided its budget between offline and online promotion. Seventy percent of the
offline budget is channeled towards search and the remaining 30% towards social media. Television
has seen the investment of 70% of the company’s offline budget, with the remaining 30% going
towards OOH (Out-of-Home) advertising.

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Image credits: https://www.icicibank.com/offers/pepperfry-discount-offer.page

Perceptual Mapping
Functional

Pepperfry

Low Cost High Cost

Stitchwood
Urban Ladder

Livspace
Luxury

Customer pain points

Through the analysis of buyer complaints and reviews on social media and Google Play, we discovered
that Pepperfry’s customers often experience the following pain points:

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  Assembly Hassles: The lack of assembly services in several pin codes leaves customers
inconvenienced and with a bad taste in their mouth.
 Late Deliveries: A frequent complaint is that Pepperfry very often overshoots their estimated
delivery times. In an e-commerce industry usually regarded as punctual, this is a huge no-no.
 Poor Customer Service: Pepperfry’s customer service seems to be a major weak point, with
several buyers complaining of incompetent, ill-mannered service reps.
 Difficulty in Returns: Pepperfry’s rigid 7-day return policy, coupled with late deliveries and poor
customer service, usually lead to customers having trouble returning items they dislike.

Recommendations

 While Pepperfry having its own logistics operations has been a great strength, the frequency
with which complaints about delayed orders are received points to the need for an expansion
of the fleet. Four hundred trucks catering to 500 cities is simply not feasible.
 The company should ideally expand its team for the assembly of delivered products.
 Customer service has to be improved upon.
 It could be worth exploring the feasibility of live chats on the website. This could provide a key
point of contact and influence for the company in the buying process for the consumer,
provided that the sheer volume of orders placed via the site doesn’t make such personal
attention unfeasible.
 Pepperfry cannot forever sustain the low prices it offers now. Despite furniture being a high
margin business, discounts amounting to 30% are simply not prudent in the long term. Now
that Indian consumers have been educated about the perks of buying furniture online, and
Pepperfry has established a reasonable offline presence as well, with quality private labels, it
may well be time to hike prices and lay emphasis on quality and range rather than price and
range.

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 APPENDIX

Survey results showing ranking of factors affecting buying behaviour for furniture

Survey results showing how consumers value “Touch & Feel”

Survey results showing ranking of factors affecting buying behaviour online

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References

https://www.pepperfry.com/

http://www.financialexpress.com/industry/online-furniture-retailers-announce-free-interior-design-
services/263951/

http://economictimes.indiatimes.com/small-biz/startups/furniture-marketplace-pepperfrys-bespoke-
division-branching-out-to-b2b-bespoke-services/articleshow/53017394.cms

http://economictimes.indiatimes.com/small-biz/startups/pepperfry-and-urban-ladders-offline-idea-to-
ward-off-global-brands/articleshow/59196066.cms

http://www.adageindia.in/interviews/cmo-interviews/how-pepperfry-makes-maximum-business-on-
weekends/articleshow/52457757.cms

https://www.youtube.com/watch?v=2zagFYvHydI

http://economictimes.indiatimes.com/magazines/panache/fabfurnish-pepperfry-urban-ladder-how-
online-furniture-selling-ventures-are-flourishing/articleshow/42397569.cms

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