Solution to Case Study 3 : Pepperfry-Assignment 1
Reasons that led Pepperfry to shut down 40% of their revenues
- Based on Internal Company Data
We can see that GMV for Furniture has shot up about 6 times (600%+) from Rs 350 lakhs to Rs 2179 lakhs. Whereas, Fashion GMV has dropped significantly from Rs 561 lakhs to Rs 271 lakhs, about 2 times (200%)
During the same period, Revenues from Furniture has spiked from Rs 143 lakhs in 2012 to Rs 897 lakhs in 2013, an increase of 600%. However, during the same period Fashion dropped from Rs 166 lakhs to Rs 68 lakhs, a fall of 200%.
Profit Margins from Furniture were steady at about 40% average, whereas in Fashion profit margins were lower at 25% and finally NO margins in the last 3 quarters of 2013.
2. Based on External Market Data
The Furniture Retail market in India has grown from $ 13 bill in 2011 to $ 27.3 billion in 2015. An annualised growth of 40% per annum. During the same period the e retail market has grown from $ 135 mill in 2011 to $ 200 mill in 2015. An annualised growth of 30% per annum.
Other segments like Fashion, Apparel, Mobile Telecom, Personal Care were already crowded with multiple players. Whereas in eFurniture there were two other players (UrbanLadder and Fabfurnish) apart from Pepperfry. So there was a massive market with virtually no competition.
3.Qualitative Consumer Data
The major pain points which an online furniture sale platform would solve are the hassle of travelling to a store and comparing products and prices. Apart from this 57% responded that prices were lower. 54% said it was easy to compare prices. Others responded that design and quality were better, convenient to order from home, wider selection of products and higher accessibility to branded products.
The study also showed that 42% of respondents wanted to shift to readymade furniture from carpenter made. 53% of respondents were sure of buying furniture online and about 30% were highly likely to shop online.
Within the Company, Pepperfry was experiencing exponential growth in the Furniture and Furnishings category whereas losing revenue in Fashion and Apparel. Profit margins in Furniture was much higher than margins in Fashion.
At the same time the overall retail market in Furniture in India was experiencing explosive growth. Whereas there were only 3 players, including Pepperfry.
Consumer sentiments were undergoing major change too. More than 50% of respondents in a survey wanted to shift to online furniture purchase.
Due to these reasons Pepperfry decided to focus only on Furniture and Furniture related products and drop all other product lines.