Solution to Assignment #1 Case Study #3
Submitted by: Group Number: R17
(Tarun Mishra, Raju Neyyan, Mukesh Singh, Sreedhar Nimmagadda, Chinmoy Nagarkar, Praneet Kumar)
Assignment: Identify the reasons that led Pepperfry to shut down 40% of their revenues.
References from given excel sheet and Market Research PDF file.
Our Findings after going through the sessions:
Since Ambareesh and Ashish were in the market and working for Ebay, they could see the market trend and future opportunities. They predicted that wave of purchasing non-standard products like Furniture would soon hit the market. With this thought, and the thought of starting up their own venture, they started Pepperfry. However, to be on the safer side, apart from Furniture vertical, they added Fashion & Jewellery vertical. During the first year of operations, it was pretty clear to them that Furniture was their Preferred Category. They also did fair amount of research and data analysis to support their gut feeling. Following were some of the findings from three perspectives:
- Internal Company data:
i) Annual GMVs for the year 2012–13 of Pepperfry for Furniture and home decor increased significantly as compared to other verticals.
ii) Quarterly Revenue for Furniture and Home Decor verticals were on the rise and much higher than other verticals.
iii) Product Margins of Furniture Vertical was also higher and pretty stable as compared to other verticals.
2. External market data:
i) From Indian Retail market distribution by verticals, Overall Vs Organized of 2013, it was pretty evident that Organized Furniture market was small. Means there was a huge potential to cater to this market. Both in terms of negotiating better with the vendors, creating specialization in the niche, and give personal branding.
ii) Trends suggested that there is a steady retail market growth in Furniture vertical. (Reference — Exhibit 1.2)
iii) The furniture e-retail market was also steadily increasing suggesting that an e-Commerce wave in the Furnishing & Home segment was starting (Reference — Exhibit 1.3)
iv) The competition in the Furniture e-retail vertical was lower as compared to others. Data from the major e-Commerce companies and their product portfolio shows that out of the 17 largest eCommerce companies in India, including Pepperfry, 11 were selling products in multiple verticals, while only 6 were focused on one vertical. Out of 6, only 2 were focusing on furniture. This also shows that the competitors (Urban Ladder & FabFurnish) were focused on just one vertical (Reference — Exhibit 2.1)
3. Qualitative Consumer data:
i. The Customer behavior from the survey showed that main reasons people were purchasing online were: a) Lower prices. b) Easy comparisons on pricing/features. c) Better design/product quality. People were not purchasing Furniture online because of “Touch and Feel Need” & Perceived Higher Prices.
ii. The major pain-points for furniture buyers were inability to compare products for quality & material at various stores. Also the market was unorganized, where prices varied significantly. Travelling to the furniture store was also a problem faced by consumers mainly from the Tier-1 and Tier-2 cities.
iii. Majority (42%) of the past buyers of carpenter made furniture were seeking to shift to ready-made furniture in their next purchase.
iv. Consumer behavior showed a positive trend towards online shopping as only 15% denied shopping furniture online, which indicates that rest 85% were potential buyers.
v. People were getting comfortable with buying small furniture items like side-tables & chairs online.
vi. Though consumers were reluctant to shop costlier items online, trends showed that the buying capacity was improving which was a positive sign for the online furniture market.
After reviewing all these research data and their own understanding, they concluded that if they resolve some of main pain points for customer like Lower Pricing, Quality Products, Comparison between products, Feel and Touch need, and able to implement a seamless, standard, and happy customer experience, they could really take their company to new heights and make their Business hugely successful without much threat from the competition.
So that’s why, they shut down there 40% of the revenue stream and focused on Furniture and Home segment.
