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Anoop Singh

Solution to Case Study 3: Pepperfry— Assignment 1

Submitted by:

Group Number — V17

Group member names — Saurabh Goel, Anoop Singh, Aditya Kwatra, Rahul Tiwari, Ankit Kuchhal, Ravi Venkatraman

Solution :

Shutting down 40% of the revenues is the decision that would’ve been based upon the hard evidences and facts. As we’ve learned Leader shouldn’t be stubborn but should continuously analyze the market and adapt to it accordingly. This is what Ambareesh and his Co-Founder has proved here what it is to be a leader, they set out to be an e-retailer in different segments but later analyzed the market and moved to specific segment of furniture. Here’s what the reasons could’ve been that led to this decision of shutting down 40% of revenues :

Internal company data :

  1. The Annual GMV of furniture in 2012 constituted 9% approx of total GMV which increased to 33% in 2013. And evidently GMV of furniture alone grew by 500% in 1 year which is huge as compared to other verticals. Above point suggests that the market has increased significantly in 1 year with respect to buying furniture online and being in competition with other brands they managed to have GMV of 2200 lac which in fact indicates the potential of furniture alone.
  2. The revenue of furniture in 1st quarter of 2012 constituted 17% of total revenue which increased to 62% by the last quarter of 2013. This asks the question whether we should manage 10 different segments to generate 40% revenue or excel in 1 segment that alone generates 60% revenue.
  3. Product margin for furniture has been around 40% for each quarter greater than any other segment. This tells that furniture brings more profit per unit sold as compared to other segments.

External market data :

  1. The market size of furniture grew from $13000 mn to $27300 mn in 4 years, this has highest growth rate than any other segment. Furniture segment grew by 110% in 4 years as compared to fashion, jewelry, personal care which grew by 55%,65%,75% respectively.
  2. As the market size for furniture grew drastically it was highly untapped and unorganized. e-retail market size for furniture grew merely by 48% in 4 years as compared to fashion which grew by 975%. And only 6% of furniture was organized as compared to 33% in apparels. Furniture was the most enticing segment.
  3. GMV of Myntra which works in apparels segment increased by 340% in 3 years. GMV of Caretlane which works in jewelry segment increased by 350% in 3 years. GMV of Urbanladder( furniture segment) grew by 1100% in 3 years. And GMV of Fabfurnish( furniture segment) grew by 740% in 3 years. which showcases the potential of furniture market as compared to apparels and others.

Qualitative consumer data :

  1. 85% of the population wants to shop furniture online as for 50% of them it solves the pain point of travelling to different stores and comparing the products. It’s easy for them to do this online.
  2. Indian customers are getting comfortable with online shopping which shows the major shift from buying offline to buying online.
  3. There is 15% of population who will not buy furniture online in the near future because they need to touch and feel before buying and they think prices are high. This is the market where Pepperfry can make a difference and emerge as a better player.

As per the above facts and figures furniture segment looks the most thriving segment Pepperfry can focus.