Pepperfry-Group Case Study-Assignment # 1

Submitted by:Sharan Karnani

Group Number #N16

Group member names
Pravin Dey
Rakesh Gupta
Ritwick Chandel
Vivek Agarwal

Solution:

As per analysis of INDUSTRY DATA in the year 2013 we can analyze the below:

1. Organized Furniture Retail market was only 6% ( as per exhibit 1.1)of overall organised retail market making it a HIGH GROWTH market in the coming years owing to the the following factors:
   -Huge growth in developed real estate
   -Rise of Middle Class Population
   -Migration of large chunk of population from villages/rural areas & Tier4 cities to Tier 3,Tier 2,Tier 1 Cities and Metros
   -Growth of New Home buyers & Increase of Second Home Purchasers owing to 65% of population being under the age of 35 years
2. Percentage growth of Indian Furniture Retail Market year over year was far better in comparison than the other retail verticals like Fashion apparel & accessories,Jewellery,Personal Care & health Care products( as per exhibit 1.2):
   Especially in year 2014 to 2015 — Furniture as a vertical saw a 41% growth in it’s Retail market size owing to points discussed above in point 1.
3. Indian furniture E-retail market was growing at a constant pace of 10% year over year over the last 5 years ,i.e.- 2011 to 2015 ( as per vertical 1.3)
   which shows :
   -that there were not many players in E-retail of furniture
   -higher growth prospects as lesser competition
   -better chance to gain market share in the Indian E-retail furniture market if focus is shifted only to that vertical.
4. INDIAN ECOMMERCE COMPANIES WERE GROWING AT AN EXTREMELY FAST PACE BASED ON THEIR GROSS MERCHANDISE VOLUME FIGURES over the last 3 years , 2013 to 2015 ( as per exhibit 2.1). Amongst the various E-retailers it is clearly seen that Ecommerce companies that were solely into the Sale of Online Furniture & other householf products saw excellent GMV increase for eg:
   -Urban Ladder saw growth of 500% between 2014 & 2015
   -FabFurnish saw growth of 300% between 2013 and 2014

which solidified the fact that there is growing customer demand for furniture sold thru an online platform.

5. Also apart Pepperfry there were only 2 other major players Urbanladder,Fabfurnish who were selling furniture online.

Also other verticals like fashion, electronics,books etc were already being sold by too many websites and competition was immense in these verticals.

6. ANNUAL GMV OF PEPPERFRY IN EACH VERTICAL between the year 2012 and 2013 showed that GMV was going down in the Apparel & Accessories vertical ( Fashion/ Mom & Baby ) as well as the Bath & Body vertical , on the other hand there was a huge increase in the GMV in the following verticals :

• Furniture ( 523%)
• Home decor ( 13.4%)
• Kitchen & Dining (223.3%)
• Home appliances ( 68.8%)
• Housekeeping (1633.7%)
• Pets (975%)
• Hobbies & Leisure (68.8%)
• Home Office (56.7%)

All the above verticals vould be categorised into the Home/Office Furniture category of products.

Percentage growth & revenue growth in Furniture & Home products based verticals can be seen below (in exhibit 3.1) :

% Growth of Pepperfry GMV by vertical between 2012 and 2013

7. Amongs all verticals that Pepperfry was selling online — Furniture has the Highest margins ( as per exhibit 3.3) and was also constant between the perion of 2012 & 2013.
- Margins on revenue generated of sale of furniture has increased from 26% in March 2012 to 42% in December 2013. Which showed that majority of the profits were being earned via the sale of Furniture.

To summarize the above analysis :
-Furniture vertical in Online Retail was growing with 10% year on year growth over the last 5 years

-Furniture Industry as a whole was less organized and less competitive.Therefore more chance of growth as Pepperfry would have a first mover advantage of being a pioneer in the Furniture E-retail space.

-Compare to furniture other product verticals like Fashion / electronics etc were already being sold in large no.s by marketplaces like Flipkart/Snapdeal/ Amazon/Myntra who had captured huge market share for a number of verticals.

-Pepperfry ws earning it’s highest margins via Online Sale of furniture and it made sense to focus on building this vertical along with subsidiary verticals in the Furniture category to create a one stop shop for your Home Furniture requirements. This would mean gaining maximum market share and also increasing profits.

Consumer behaviour data shows that offline furniture buying was painful
-as they had to travel different stores to compare products. It also shows that people liked to buy online as they were getting more choices, was easy to compare and can order from the convenience of their home.
-also avoids the headache of carpenters and labour occupying your home for days at end to complete the production and assembling work of putting together furniture ,which also required monitoring from the customers side or the hiring of an architect or interior designer ,which wasted time, energy and money.

Owing to the above analysis & data — it was safe to say that the Founders/Co-founder of Pepperfry were taking the right decision to focus on Furniture and the only vertical and hive off all the other verticals which were not contributing to the business and only blocking capital,occupying inventory space & bringing down profits.