Strategic Management Project
HOME FURNISHING
Firm: Pepperfry
Submitted By: Group 8 - Sec B
Abhishek Bodade- 2020MBA059
Akanksha Patel-2020MBA061
Shruti Priya- 2020MBA097
Tejasv Bajpai-2020MBA105
Timmasarthi Goutam-2020MBA106
Vatsala Tyagi-2020MBA109
TABLE OF CONTENTS
Executive Summary-------------------------------------------------------------------------------- 2
Industry Analysis
1) Introduction -------------------------------------------------------------------------------- 3
2) PESTEL Analysis-------------------------------------------------------------------------- 4
Firm Analysis
1) Introduction--------------------------------------------------------------------------------- 5
2) Key Success Factors------------------------------------------------------------------------6
3) Firm Issues---------------------------------------------------------------------------------- 7
4) PORTER’s 5 Forces analysis-------------------------------------------------------------
5) Market Share decrease---------------------------------------------------------------------
Competitor Analysis
1) Major competitive companies-----------------------------------------------------------
2) VIRIO---------------------------------------------------------------------------------------
3) Why Urban Ladder fail? -----------------------------------------------------------------
Industry Prospects and Overall Attractiveness-------------------------------------------------
Factors Making the Industry Unattractive------------------------------------------------------
Profit Outlook-----------------------------------------------------------------------------
Recommendation----------------------------------------------------------------------------------
Reference-------------------------------------------------------------------------------------------
Executive Summary
Enclosed is our final report on the home furnishing industry, and the firm we took for
analysis is Pepperfry. The information includes a brief analysis of the furnishing industry and
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the organization Pepperfry. The report contains the industry frameworks and data that we
used for our study. In the analysis, we came across different company business strategies to
increase the market share. We have conducted thorough research to understand its issues the
company has been facing due to internal and external influences. The report also contains
some of the recommendations which can be used to overcome the prevailing problems. We
also assessed Pepperfry’s major competitors like Urban Ladder, how to company burnout, the
major factors that took down the company. The report will help us understand why
innovation in any industry is essential and understand the furniture e-commerce market
better.
We take this opportunity to thank and show our gratitude towards Prof. Diptiranjan
Mahapatra for guiding us. Without his assistance, the report would not have been possible. If
you have any questions or comments regarding this report, we are happy to clarify.
We thank you for this opportunity.
Sincerely,
Group 8
Section B
Introduction to the furnishing industry
The furnishing industry is about producing and selling home furnishing items. In 2019, the
industry had a market value of $616.6billion. The sector manufactures furniture such as a
table, chair, desks, couches, floor covering (like – carpets, rugs, etc.), textiles (curtains, table
centers, shades) used for household. Industry focuses mostly on homes, workplaces, inns, and
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others in the business space to sell the products. The sector is expected to reach $838.6 billion
by 2007. The demand for home furnishing is higher in developed countries like the U.S.,
Germany, compared to developing countries such as India, with a steady increase in the home
furnishing industry.
For India, the home furnishing industry is growing very fastest in the Asia-Pacific region.
The trends of personalized furniture and growth in the real estate sectors, Tourism, hospitality
sector, and MNCs expected to continue driving India’s home furnishing market. The
increasing demand for eco-friendly products is also driving the industry to grow at an
exponential rate. The growing demand for domestic products, rising government initiatives
such as Atma Nirbhar Bharat, fund Schemes, and rising FDI inflow to increase the growth of
the furnishing industry Product type available in the Indian market are- Curtain Fabric, Table
Linen, Quilts/Blankets, Upholstery, Bed Linen, Bath Linen, Blinds, Rugs, Kitchen Linen,
Wallpapers, Carpets, and Other Made-ups.
PESTEL ANALYSIS
Political and Legal - Political stability of any country affects business operations. The
political instability of a country negatively affects business and consumer perception of
the corporation. During the election, interstate transportation and delivery problems
occur, and breach of contract from merchandise leads to legal cases.
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Economical - Interstate taxes play a huge role in transportation, and GST has impacted a
lot on the verge of transport and fluctuations in overseas transactions.
Social - Social factors such as modifications in demographic variables like income,
family size, age, etc., of different countries significantly influence the business’s strategic
decisions. Social changes occur more frequently concerning trends. To walk step by step
with the trend is the most crucial task.
Technological - The increasing popularity of businesses on social media as an
an unconventional marketing channel, benefits firm by increasing awareness
and reach among the target market, develop community and relationship with customers,
and so forth.
Environmental - Factors such as ethical business operations demonstrating sensitivity
and
accountability towards carbon-emission, forestry, community development,
and supplier conduct issues are significantly crucial for business success and
sustainability.
Firm Analysis
Pepperfry is an ecommerce website which specializes in home furnishing
Pepperfry sells furniture, mattresses, furnishings and home decor products through an
omnichannel route
ü About 80-85% of Pepperfry’s business comes from furniture with solid wood furniture
category earning them a revenue of Rs 500 crore per annum
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Pepperfry was the first e-tailer company which meant that Pepperfry didn’t have any model
to follow.
The company now offers more than one million home products, ranging from coffee tables
and beds to bedsheets and lamps, and delivers to more than 500 cities in India. It has a fleet
of 400 self-owned trucks, with 18 warehouses across the country. The company says that its
Padgha warehouse, located north of Mumbai
Building a market
Pepperfry had to ask for specification to the customers to ensure that the product delivered
meant the desired specification of the customer. This was because Pepperfry had to deal with
non-standardize product.
Secret Sauce
Pepperfry became successful and was earning a good amount. Unlike many successful
companies it did not focused on building lavish offices, instead it is focused on growth but is
always aiming to make a profit.
Economies of scale
Pepperfry has benefitted from the economies of scale. In the beginning years, Pepperfry
invested heavily for the customer experience in the supply chain and logistics. But it later
found out that vendors were not able to fulfill its demand as they were not giving doorstep
deliveries and also in some cases it was found out that products were left in the building if
they were not fit in the lift. Initially the operations cost were 20-25% and now it has been
reduced to 8-10%.
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PORTER FIVE FORCES
Buyer bargaining power : High
Here customer can fulfill their need both online and offline so buyer have higher
bargaining power
Apart from this industry operates in an unorganised sector, so there are many local
players in the market place so buyers have a lot of options available.
Threat of new entrants : low - medium
Need High capital for entry
But the main resource in this business is skills and materials so low entry barriers
And also existing players in the market are looking for to expand their business and
reach in new geographic area where earlier don't have presence
Threat of substitution : medium - low
Since furniture is a very important part of life and used for sit ,sleep ,rest that's why
nothing can substitute this furniture so any other thing cannot substitute use of
furniture in day to day life but the only substitute can be the material substitute ie the
type of material we are going to use to make furniture .
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Since furniture is a very important part of life and used for sit ,sleep ,rest that's why
nothing can substitute this furniture so any other thing cannot substitute use of
furniture in day to day life but the only substitute can be the material substitute ie the
type of material we are going to use to make furniture .
Are unique but can be substituted for material used.
Suppliers bargaining power : low
As the type of plywood used for making the furniture is found a lot in India and no
one uses all kinds of wood to make furniture.
Also same as for suppliers also there are a lot of options so they can choose from
other suppliers so suppliers have very low bargaining power.
Competitive rivalry :
Highly fragmented industry with intense rivalry with the organized sector having 20-
25 %
Low switching cost
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Issues faced by Pepperfry
Pepperfry has been facing issue of logistics which leads to late deliveries and eventually
lower customer satisfaction and decrease in the profitability for the company.
Poor infrastructure has led to delivery problems for customers residing in the distant
places where supply chain is missing
Internet penetration is up to only 10% which is way below the average penetration of
countries which is 35%.
Competitors such as IKEA entering India have tried to take the market share as it is an
old company with experience. Urban Ladder being bought by RIL will pose a challenge
to Pepperfry as Urban Ladder will be backed by funds provided by Reliance.
VRIO Framework
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It is used to identify firm’s resources which can help it to attain a sustained competitive
advantage. Firms’ resources have to be:
Valuable
Rare
Inimitable
Organized to capture value
Some important resources of Pepperfry are discussed below:
Online Furniture: It was the first ecommerce retailer in India for non-standardized
products such as home décor and furniture but now due to availability of many
players in the market this resource is not rare and inimitable resulting in a competitive
parity
New, fresh and classic design: It gives a temporary competitive advantage as people
would like monetize on these designs but it can be imitated
Variety of Products: Pepperfry has a wide variety of products which ranges from
beds, lamps to bedsheets and curtains. Company claims to have India’s largest
furniture warehouse in Bhiwandi, Maharashtra
Experience Stores: These stores are meant to provide customers a wholesome
experience so that they can get assured about quality of the product and can come
across the variety of products that Pepperfry has, but these stores are not rare and
inimitable
Strong Brand Presence: It has a first mover advantage due to which it still remains a
leading player in Online furniture market with delivery service in 500 cities in India
Resource or Valuable Rare Inimitable or Organized Impact on
Capability Non- to Capture Competitive
Substitutable Value Advantage
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Online Yes No No Yes Competitive
Furniture Parity
New, fresh Yes Yes No Yes Temporary
and classic Competitive
design Advantage
Variety of Yes Yes No Yes Temporary
Products Competitive
Advantage
Experience Yes No No Yes Competitive
Stores Parity
Strong Yes Yes Yes Yes Competitive
Brand Advantage
Presence
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Competitor Analysis
Urban Ladder
Urban ladder is one of the India’s best furniture selling app and a major competitor of
Pepperfry. It is a Bangalore based startup and was co-founded by Ashish Goel (CEO)
and Rajiv Srivatsa in July 2012
It does not have a marketplace model and all the processes from selection of wood to its
designing, manufacturing, selling and delivery are controlled by Urban Ladder. From
2012 to 2019 the startup gained a total funding of $114mn
Initially it was a loss-making startup in FY 14-15 it was making a loss of INR 58.5 crores
and revenue was only INR 19 crore
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It has both online and offline business model. Customers can directly purchase furniture
from stores or can choose online mode in which the company has a website, an app and
along with-it Urban ladder furniture is also available on e-commerce giants like Amazon
and Flipkart
A startup faces a lot of ups and downs but major problems with Urban Ladder started in
2019 when its co-founder Rajiv Srivatsa took exit from the startup just a day after Vani
Kola one of the investors resigned from the board of the company. It had a major impact
on the company as its management became weak and as a result valuation of company
also decreased
Things got tougher for organized players due to the low-cost products sold by local
players in nearby markets. High customer acquisition cost (CAC) and low purchasing
frequency further posed a strategic challenge to e-retailers.
Though the company registered a profit of INR 50 crore in FY 19 but was hard hit by
Covid 19 pandemic due to which its financial problems aggravated and in 2020 Urban
Ladder was acquired by Reliance Retail Ventures for Approx. INR 182 crore
Recommendation
Customization of products as per customer requirements
Convert Experience stores into brick-and-mortar stores and expand them
Improve operations to manage logistics
Expand into the selling of second-hand market and rental market for furniture
Expand house brands strategy
Generate new streams of revenue by selling furniture to offices
References:
https://www.researchandmarkets.com/reports/3569844/india-home-furnishing-
market-by-product-type
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https://www.prnewswire.com/news-releases/global-opportunities-in-the-home-decor-
market-2020-2027-301110017.html
https://www.euromonitor.com/home-furnishings-in-india/report
https://www.anythingresearch.com/industry/Furniture-Home-Furnishing-Merchant-
Wholesalers.htm
https://inc42.com/features/urbanladder-reliance-furniture-market/
https://ajuniorvc.com/urban-ladder-reliance-acquisition-furniture-startup-pepperfry-
sold/
https://www.tofler.in/blog/indian-start-up-financials-reports-revenue-loss/urban-
ladder-fy-14-15-revenue-grew-marginally-losses-surge-7-5-times-curiosityisgood-
tofler/#:~:text=Ltd.%2C%20which%20owns%20and%20operates,crores%20in
%20the%20same%20period.
https://entrackr.com/2019/11/urban-ladder-posts-a-rs-50-crore-profit-in-fy19-but-has-
a-long-way-to-go/
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