THE PEPPERFRY CASE STUDY

Group 3, Section 2

Submitted By:

ARCHAK DEY - FT222003

DIPANJAN DUTTA - FT222020

JOE PIUS - FT222037

KAUSHIK KUMAR - FT222052

MANSI NIKAM- FT222067

NAYAN BIRE - FT222082

Introduction

Pepperfry, India’s first online furniture retailer had the first mover’s advantage when it started
back in 2012. It implemented a ‘managed marketplace’ model and operated in a hub and spoke
distribution model to cater to 1000 cities with just 400 vehicles. Sensing the need to go hybrid in
2014, it started operating offline studios where the customer could ‘experience’ the product. This
method provided unique value to the customer. Collaborating with Homestop was an astute
move since it could now leverage the new customer base to increase its reach. Pepperfry was
prompt in implementing VR technology to provide a unique experience to the customer. Contrary
to the obvious, technology was not the greatest challenge faced by the company. Logistics,
supply-chain management and damage free delivery of large furniture was the biggest hurdle.
Rising revenue may be a good sign but it come at the cost of rising costs. With its sights on the
future, Pepperfry has to improve its customer experience without losing market share to new
sprouting competitors.

Problem Statement
 How can Pepperfry, a customer centric company, further enhance its Customer
Experience?
 How can Pepperfry sustain its competitive advantage over its competitors?

Issues Observed
 Generate more demand from cities other than the top 10.
 Improving the last mile delivery of all the cities that Pepperfry ships to.

SWOT Analysis

Strengths
Managed marketplace model – tie up
with artisans & merchants
Wide Range of Products
Market Share of more than 50% in the
Indian Furniture sector
Highly Customer centric organization
Good reach in terms of Vehicles,
Merchant Partners and to cities
Weaknesses
Supply chain Infrastructure – missing links
in last mile connectivity
Rising Input costs.
Furniture purchase is not an impulse
decision.
 Opportunities Threats
Design a optimal website/app that
can work on lesser bandwidth
Reduce conversion time of customer –
more targeted promotions, more
accurate display of the furniture Slow Internet Connectivity across India
Target the rising urban population
who want convenient and hassle-free Rising number of copycats at the
shopping hyperlocal level.

Growing furniture market in India –

expected to reach 13 billion USD sales
by 2020 Competitive markets and offline markets
Improve customer service post sales providing furniture at lower price

P.E.S.T.E.L
Political/Legal

 Revised tax policy and raising import duty can affect the business.

 Government decisions on imposing restrictions on the import can also affect sales and
transport.

Environmental

 Using wood means cutting down trees, hence deforestation that harms the
environment.

 Upholstered furniture is hard to clean and reprocess, so waste ends up in a landfill.

Socio-Cultural

 Studio Pepperfry offers experience of the product and expert advice

 Social-cultural factors prevailing in India are in favor of the development of the furniture
industry.

 Urban, rural and suburban consumers prefer readymade brand furniture. Consumers in
urban areas have their inclination towards online shopping of furniture.

 Technology and lifestyle changes have made consumers demanding

 Only people in top tier cities contribute to maximum sales of Pepperfry

  The products are targeting to upper middle-class population

Technological

 Technology changes in India resulted in consumers becoming more demanding and

more value conscious.
 Pepperfry has introduced virtual reality tours of its studios. Leveraging technology, it
enabled potential customers to feel a real shopping experience.
 Online buying platform saves time and efforts of customers

 Rural consumers face challenges due to weak internet networks.

Economic

 Company growing very well, greater than 250 % annual growth rate since 2013.

 Furniture market of India – 6% of global market – valued at 10 billion USD (70 %

Household)

 Market expected to grow by 27% annually, reach 13 billion USD by 2020

 The online furniture sector attracts the interest of investors through heavy infusion of
capital.

Porter’s Five Forces

Fierce-4, Strong-3, Moderate-2, Weak-1

Rivalry among competitors - 3

 Moderately competitive industry with non-exclusive competitors with 10-15% market
share.
 Transitioning from highly unorganized to organized
 Fabfurnish, Urban Ladder, StitchWood, Custom Furnish & Wooden Street are all direct
competitors
 Horizontal players in the market - Amazon, Flipkart & Snapdeal retail furniture

Bargaining power of customers - 4

 Increasing demand from key user segments.
 Demand for life-style products.
 Majority of the market is still price-sensitive.
 Customers want to feel the product to make purchasing decisions.
 Many options of online & offline furniture retail stores, so bargaining power increases
Bargaining power of suppliers - 2
 Abundant supply of raw materials and labor
 Supplier base not organized
 Imports getting easier
 Since there are a lot of buyers in the market - online, offline and unorganized sectors, so
bargaining power is high

Threat of Substitutes - 1
 Rental model of leasing furniture could be a potential substitute.

Threat of new entrants - 3

 Fragmented industry
 Growing domestic market

Porter’s Five forces yield a total score of 13.

Consumer Analysis
 Furniture is not an impulse purchase.
 Consumer’s might take up to 2-4 weeks for a purchase, higher for costly ones
 Customers tend to have a deep discussion among close friends and relatives before
making a purchase
 The average amount spent by a customer on Pepperfry is Rs.12,000
 Average customers explored portfolio 15-20 times before coming to a final decision

Conclusion
How could Pepperfry leverage this improved customer experience to achieve a competitive
advantage for customers’ next decision journeys?

 Offer discounts on repeat purchase and increase customer lifetime value (CLV).
Acquiring is costlier than retaining. One-time free service
 Rental Furniture Model, with the current generation shifting bases quite often due to
the nature of the work needs shifting places and resulting not wanting to invest in
furniture.
 Use dynamic pricing to target interested buyers and increase conversion rate of
customers.
 Leverage Interior designers in the Pepperfry studio to give expert advice to customers.
They can even visit their residence.
 Provide exchange offers for old furniture.
 Explore into second hand furniture sales - by introducing a “Pepperfry Economic” sub
brand
  Developing a virtual fitting technology - whereby customers can place the furniture on
the house before actually buying it.

How to sustain competitive advantage?

 When you can’t defeat the competition, buy the competition. Identify competitors
which would improve the supply-chain and connectivity of Pepperfry.
 Use technology to target potential customers by providing relevant promotions.
 Acquire or partner with technology partners to improve software experience.
 Consider diversification to offer more home appliances.