Pepperfrys current Managed Market

Place model

No
ow ned
In v e n t o
ry

S e ll o n ly
3 rd p a rty
p ro d u c ts

No
used
Good
s

P r ic e s
a re
F ix e d

Pepperfrys Strength
1. Only player with
distribution network
2. 1000 merchants and
carpenter service in 34
cities
3. FDIs - $100 million
investment by Goldman
Sachs

C o n tro l
F u l fi l l m e n t
& R e tu rn s

Pepperfry follows the typical managed market place model similar to

e-commerce giants like Flipkart. The only difference in Pepperfrys model is that
they own the entire distribution network. This strength turns out to support one of
its USP Reach. The advantages and disadvantages of following a managed
market place model is depicted in fig.1
Lo
w

Hig
h

Usage of
Capital
Extensible
Control on
Operations
User
Experience
Reliability

The capital usage is high. Inefficiency comes

when we have a lot of inventory in warehouse to
manage. Opportunity for scalability/Extensibility
is high and this provides an avenue to invest
money. Control on operations is a little low
because we are dependent on many 3rd party
sellers and establishing a control on them can be
difficult. But this is a important factor as it is
directly linked to User experience and reliability.

Fig.1

Proposed Model to increase Profitability and Growth

Low

High

Usage of
Capital
Extensible
Control on
Operations
User
Experience
Reliability

Hybrid Model + Brick &

Mortar
1. Sell owned Inventory
2. Sell only 3rd party
products
3. No used Goods
4. Prices are Fixed
5. Control Fulfilment &

Fig.2
FDIs are flowing into Pepperfry. These can be invested in areas which will allow us
to gain control over operations. The first step towards that is setting up Brick &
Mortar stores in metro cities. These store will act as a warehouse were inventory
can be kept and will also help in building the Brand Pepperfry. And then we can

negotiate with the large pool of merchants to build private label brands under
Pepperfry. Pepperfry is synonymous to selling furniture among Indian population and
to leverage that we need to build a brand through both backward and forward
integration. The main idea here is to convert Pepperfry from a furniture seller to a
furniture solution destination. As one can see from Fig.2 the advantage of having
good control over operations is increased levels of User experience and Reliability.
The problem of people being sceptical about online furniture buying can be
eliminated when we incorporate the factor called trust through our brand building
and user experience.
Why Cash On Delivery in E-commerce

The major reasons why COD

became an attractive option
for e-commerce giants is listed
in the adjacent figure. The
leading factor is to gain a
competitive edge in the
industry. Indian way of buying
a product is to touch and feel
it before buying and COD
facilitates being Indian. It also
helps in building new brands.
But its an angel in disguise as
companies face problems like
fear of return, fear of theft and
time taking.

L o w c r e d it - c a r d p e n e t r a t io n in In d ia

D e s ir e t o t o u c h a n d fe e l a p r o d u c t b e f o r e p a y in g fo r it
Suggestions for Pepperfry
Is it possible to operate without
COD ?

435.6 million are in the age group 20-45

years
350 million debit cards and 19 million
credit cards in India in age group 20-45
years
180 million in India are tech-savy who
understands the safety standards of
online transfer
Average ticket size in Pepperfry is Rs
14000
So, at least 15% of Indian customers can

Do Buyers opt for COD just because they cant

pay online?

30% value shift to cards when card on

delivery service was offered
35% of users who do Cash on delivery,
can actually pay online
75% of these users choose to do COD
because of trust factor. They want to
touch the product before they buy
25% of the users do it because of
convenience. People find it difficult to
enter lot of numbers

Use PayUPaisa Release on Delivery Model to cater to people who have

trust issues

Buyersbonliadpysthrougcedi/btar.Moneyistladoeruntilbycofirms Whenbuyrcivsthepoduanifhestfid informstelahpymnt.Terisadput olineamtdrsicepan

In one year 20% of COD transactions will become ROD. So using the
above two we can eliminate the COD option in the long run.
Furniture Business in India

Fabfurnish

Zansaar

Urbanladder

Revenue:Rs50crorein2013
USP:Acom
pletehom
esolution
StartedinFeb2012
HybridModel(online+offl
ine)
Futureplans:Toopenm
anyofflinestoresandincreaseproductsononlineportal

Other Players
1. Flipkart
2. Jabong
3. Snapdeal
4. The Label
5. Ddecor Home
Fabrics
Key Factors
1. Range and reach
2. Strong logistics
3. Hybrid model
(online + Offline)
4. Defining the
target customers

1 . R O D re d u c s o t in b y 4 % c o m p a r e d t C O D .

FundedbyKalaaricapital,SAIFpartners,Steadviewcapital
Sales:Rs6crore/m
onthin2014
USP:Betteruserexperience,qualityandgoodvisualidentity
StartedinJuly2012
Managedm
arketplacem
odel

$6m
illionfunding
FundedbyAccelpartnersandTigerGlobal
Futureplans:ToincludecategoriessuchasHom
edecor,Kitchentools,W
orldFoods,CushionCovers
Startedin2012

The key market drivers in online furniture

business is to have convenient payment
options , wide range of products , good
logistics to be operationally efficient and a
good brand to overcome the touch and
feel issue.
The Challenges: E-commerce players
foraying into the business, increase in the
number of players may result in price wars ,
FDIs funding to the competitors , the Indian
way of buying furniture touch and feel ,
COD payment option.
Opportunities: Increased demand for
online retailing in tier II and tier III cities ,
online home decor market to grow at a
CAGR of 50.42% in revenue over the period

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Strategy to Sustain

STP analysis of Pepperfry and SWOT analysis

TPS
oae
rsg

gim
ete
tin
ot
n
i
n

Strength
1. Huge
funds/investments
2. Huge product range
3. Tie up with large
number of vendors
4. Strong logistic

Weakness
1. No physical store
2. Trust factor
3. Viewed as online
market place than a
branded one stop
solution for furniture

Opportunities
1. Expected growth of 1900%
in next 3 years
2. Huge amount of FDIs
flowing into the sector
3. Changing buying behaviour
in furniture business

Threats
1. Amazon and Flipkart
fraying into the business
2. Only 0.5 % of furniture
business done online

USP : Great variety of products at amazing rates : Range

& Reach

USP of Pepperfry in 2018

$20 billion
furniture market
(online + offline)

40%
furniture

25 % - larger
furniture items such
as Sofa, Beds

15% - small
furniture items such
as linen, bar table,
chair , stools

60% Home
decor

Target market
5 years down
the line

Why to Target this market as Pepperfry grows

Cutlery, kitchen
items, fancy
lamps

There is a huge scope for this 75% of furniture market in online because
of its smaller sizes, not much needed to touch and feel and easy logistics
comparatively.
USP: You build your House , We decorate it
This USP conveys that Pepperfry is an end to end solution provider for
decorating your house rather than being perceived as a marketplace were
buyers and sellers meet. This is going to be important to tap in the
socially aspiring, young population who have a inclination towards modern
living and whose disposable income is increasing.