Pepperfry: Battling on many fronts and growing phenomenally
This Case has been prepared by Prof. Surya Mishra, KIIT School of Management, KIIT University from publicly available data. This is intended as a basis for discussion by students in the classroom and not to demonstrate right or wrong business approaches. Nothing written hereunder can be construed as an endorsement or commentary on business practices. This case has not been prepared with any inside information or primary research and is not authorized or sponsored by any of the business entities mentioned hereunder.
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A new front opens up No matter what business you are in, there is change, and it's happening pretty quickly.
- Jim Pattison, Canadian Entrepreneur
On 6th August 2015, Flipkart, the largest Indian e-retaileri, announced the opening of its furniture division.ii In a press release Ankit Nagori, Chief Business Officer, Flipkart said that product costs will range between ₹ 2000 - ₹ 1.5 lakh. The company has tied up with HomeTown, Durian, @Home and HomeStop and regional sellers across the country to sell furniture. Large furniture will be available for customers in Delhi, Mumbai and Bangalore currently. Other cities will be added shortly, Flipkart said in a statement.
This news item was the latest in a series of activity in the Furniture and Furnishings industry in India. The industry has seen a lot of activity in the last 3 years with the advent of focused players in the segment starting e-retailing. The news of the largest e-retailing player in the country getting into this category means a lot to the players who are focused on the category. The category is dominated by three major players – Pepperfry.com, Fabfurnish.com and UrbanLadder.com in that order. Pepperfry is the largest furniture and furnishing focused online player in the country.
In an August 6, 2015 interviewiii to e27, Ambareesh Murty, co-Founder, Pepperfry.com said, “If you see, furniture as a segment worldwide is normally dominated by specialist players. The reason is that (a) lot of things are different in this business. For example, the ability to transport large items weighing hundreds of kilograms to hundreds of kilometers is not that easy.
“Secondly, the quality of the products the end consumer is looking for in furniture is very different from branded items such as mobile phone or fashion apparel.
“Thirdly, it is about the discovery process. When it comes to furniture, you never know what furniture you want to buy until you see it. So, the entire process that a furniture is merchandised on the site has to aid the discovery process of the end consumer. These three things are very different for furniture and home specialist companies. Specialists like us have put all our resources into building these capabilities as opposed to horizontal players. They will have to overcome all these challenges because the nature of the business is different,” Murthy said.
His partner and co-Founder Ashish Shah says, “At this point of time, there is no thought about market share. The more number of players get in, the better it is for the industry.” In a separate interview he said, “Over the last two years, the growth in the e-commerce has happened because large players have spent huge money. If players such as Snapdeal, Flipkart, Myntra or Amazon had not spent huge money, we would not have been able to sell furniture as well.”iv
Pepperfry is a managed marketplace that helps merchants and craftsmen sell to millions of customers across India and the world. The company not only markets furniture and home decor products through its site, but also employs carpenters and operates a fleet of over 350 delivery vehicles. In the last three years, Pepperfry has served over two million customers across more than 300 cities.
Phenomenal Growth Growth is never by mere chance; it is the result of forces working together.
- James Cash Penney, Founder of JCPenney
The home and furnishing industry in India is estimated at ₹ 1,40,000 Crores ($22 Billion) of which online sales are about ₹750 Crores (0.5%). v This is expected to go up to ₹ 1,80,000 Crores ($28 Billion)
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by 2018 and online sales are expected to go up to ₹ 8,000 Crores in the same time. The industry is growing at a phenomenal rate but the rate of growth in online is simply amazing. All the e-Commerce players in the industry are experiencing huge demand and growth. The amount of interest being shown by consumers, traders and investors has rarely been seen in any other industry.
Pepperfry.com itself experienced huge growth in the last two years. In 2013 it grew more than 1000 percent because the base was extremely small in 2012 when they started. In 2014 they still grew by more than 350%. In 2015 they are expected to grow by another 300%. A company in e-Commerce talking about breaking even within 3 years of operations is unprecedented anywhere in the world. But that’s exactly what Pepperfry.com has been trying to do.
Kashyap Vadapalli, Chief Marketing Officer of Mumbai-based Pepperfry.com, said the home furniture segment has picked up pace in the last six months. “There has been a 40 per cent jump in our traffic in the third quarter this year.” vi The growth in traffic might look small but the conversion rates and return customers has been ever increasing for Pepperfry.com at a rate which is difficult for the company to keep up to. At times the company has to
The Beginning You read a book from beginning to end. You run a business the opposite way. You start with the end, and then you do everything you must to reach it.
- Jessamyn West, Writer
Pepperfry is India’s No. 1 Online Furniture, Home and Living Marketplace with over a million customers! Pepperfry.com opened for business on 3rd January 2012 to give customers a wide selection of amazingly priced Furniture and Home merchandize with a consistently great shopping experience. It was started by Amabareesh Murty and Ashish Shah.
Ambaressh Murtyvii Ambareesh is the CEO and co-Founder of Pepperyfry.com. He is a Civil Engineer from Delhi College of Engineering and completed his MBA from IIM Calcutta in 1996. Ambareesh has over 14 years of general management experience in the FMCG, financial services & Internet industries. He started his career with Cadbury in Sales and Marketing. It was followed by a stint with Prudential ICICI AMC (now ICICI Prudential) as VP Marketing & Customer Service. He then went on what he describes as “personal career adventure from 2003-2005, when I ran a financial training & business consulting firm in Bangalore.” In 2005 he joined eBay and was with eBay till June 2011. He headed eBay India, Philippines and Malaysia from 2008 till December 2011 when left to start Pepperfry.com with Ashish Shah.
On starting Pepperfry.com he said in an interview in December 2011, before Pepperfry.com went live, “… while technology products, books and media dominate Indian e-commerce today, I believe the opportunity going forward will be in lifestyle products and we hope to cater to this customer need through Pepperfry.com.”viii
Ashish Shahix Ashish is a chemical engineering graduate from University of Pune and subsequently did his MBA from IMT Ghaziabad in 2004. He joined eBay after MBA and remained there till he left eBay to start Pepperfry with Ambareesh. In eBay he was the head eBay Motors and Social shopping and reported in to Ambareesh. Ashish is the co-Founder and COO of Pepperfry.com.
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In a May 2015 interview to Business Today, Ashish said, “We started in January 2012. We were the first entrants. Everybody started around same time. Our sales grew 350 per cent in 2014 over the previous year. My current run rate is Rs 400 crore.”x
Pepperfry.com With their experience in handling online marketplaces and logistics for e-Commerce in India Ashish and Amabareesh left eBay and within 7 months started Pepperfry.com. Pepperfry.om is one of those rare Indian e-Commerce start-ups who were funded by VCs before even starting operations or having a web presence.
On the odd sounding name for a business for furnishings and furniture, Ambareesh says, “When we were hunting for a good name, we asked ourselves what’s truly Indian? We came up with spices. Hence pepper. It’s truly Indian! We added fry to bring fun element.”xi
According to Forbes.com Pepperfry is one of the top 10 sharply focussed companies in e-Commerce in India.xii The USP of Pepperfry, according to Forbes, are “reach and range. It delivers to customers’ doorsteps in 150 cities. It plans to have 380 trucks by year-end, becoming one of the largest logistics companies. Its overall catalogue size is 80,000 listings (of which 10 percent are furniture), which is eight times the size of the next player.
“It will remain loyal to its niche of furniture and furnishings, though it plans to go deeper into these segments by increasing product categories. About 55 percent of its business comes from repeat customers.
“Pepperfry’s current USP is reach, says Srikanth Iyer, founder and chief executive, Homelane. “They are in more locations than any competitor. They are far quicker than others in terms of delivery to remote locations. Pepperfry also stands out because it is the only one that is trying a mix of marketing: Not only online but also brick-and-mortar in airports etc. They are trying to build a brand which has the touch-and-feel element.”
Online furniture and home products marketplace Pepperfry is eyeing a positive bottom line in the next 18-24 months. Ambareesh Murty, Pepperfry's chief executive officer and founder, said over the next two years transaction volumes would be large enough for the company to reach the breakeven point."Net of all direct costs and expenses, I make money today. For every rupee that is bought, I make at least four to five paise at the net level. At the gross level, I have a margin structure of 35-40 per cent," Murty told Business Standard.xiii
"As long as I maintain the financial architecture or improve it slightly, the volume will be such that I will turn profitable. If we wanted to, we could reach breakeven in six months, but there is a balance we need to have between growth and profitability. Since growth is important to us right now, we will hit profitability in one-and-a-half to two years,"
Oddities of Consumer Behavior in Furniture “Because you believed I was capable of behaving decently, I did.”
- Paulo Coelho, Writer We are witnessing a seismic change in consumer behavior. That change is being brought about by technology and the access people have to information.
- Howard Schultz, CEO of Starbucks
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The furniture and furnishing industry is different from the rest of the ecommerce industry in its consumer behavior. The behavior displayed by the Indian consumer while shopping for this category is very different from the rest of the world also. In the Indian context, the consumer spending on this category is growing at a very fast rate. In fact, the share of wallet of lifestyle spends and also furniture spends is increasing every year. Lifestyle spends today hover around 35% share of wallet and of this furniture and furnishings comprise around 20%.
This makes this category a high involvement category. The consumer does a lot of research before any purchases in the category, is typically very cautious and wouldn’t make an impulse purchase, and would like to test, touch and feel the product before making a purchase. Hence the category becomes difficult to be sold on the online medium.
However the online medium has done relatively well at selling furniture and furnishings. This apparent dichotomy is resolved when you look at how the consumer finalizes what they want to buy. They go through as many options as are available and choose the most suitable one to them. What E-Commerce does is that it scales up the availability for everyone. People buy furniture from online businesses primarily because they have more number of options to choose from. While an offline vendor might give them 2 – 20 options depending upon its size, online vendors can give hundreds of options. This variety seeking behavior of the consumer can be satisfied only through the online mode.
Variety Ashish Shah, COO, Pepperfry, says, “The home and furnishing business is not about a particular bed or a sofa. It is about variety. When you are buying a mobile phone, you already have an iPhone 6 or a Samsung Galaxy S6 in mind. But when you buy a bed, if I show you 100 beds, you would want to see 100 more because you are not fixed into your mind on the design you want to buy.
“In the electronics business, 90 per cent of the sales come from 20 per cent of SKUs (stock keeping units). In fashion, 60 per cent sales from 40 per cent SKUs. Home furnishings is a long-tail business where 100 per cent of the sales come from 80 per cent SKUs. For instance, in a building, if there are 50 flats, each home would most likely have a different bed. If you want to win the home space, you need to be a variety player.
“On Pepperfry, I can show you 400 beds. To have 400 beds, I need to be a marketplace player because I cannot have 400 beds in inventory. I have about 9,000 unique pieces of furniture, and 70,000 in non-furniture category.
“Talking about variety, I have wardrobe starting from Rs 3,999 to Rs 1.5 lakh. I can cater to a BPO employee who has moved from Bhopal to Mumbai for his first job. I also have a wardrobe for Shah Rukh Khan. Anyone who is between 25 and 45 years of age, and is in the home-making stage, would buy on Pepperfry.”
Trust However in spite of the variety seeking behavior e-Commerce can still be hindered by lack of trust in the retailer. Since it takes considerable money, energy and effort on the consumer’s part, the consumer has to trust the retailer completely.
Ashish Shah says, “Furniture players have to do a lot more to build trust. We know that trust building in very important in this business. For instance, I have a 30-day, no-questions-asked money-back guarantee. We refund the money in the same instrument. Secondly, I am opening studios-experience zones-across the country. These studios are 2,500-3,000 square feet store where people can see every
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material of furniture sold on Pepperfry. We have already opened one in Mumbai in December. By the end of this year, we will have 20 studios across the country. These studios are not for sales. We don't sell anything there; we help them to make purchase online. People who man these studios will be interior designers and architects. People can check about prices, finish and the quality of the furniture.” This helps creates trust in the consumer for buying the products listed on Pepperfry.com. Also a brick and mortar presence signals stability to the consumer and the consumer is assured this is not some fly-by-night operator who might shutdown one fine day.
Models of E-Retail Amazon.com strives to be the e-commerce destination where consumers can find and discover anything they want to buy online.
- Jeff Bezos, Founder, Amazon
There are primarily four models of e-Retailing prevalent in the country.
Marketplace The Marketplace model was popularized by eBay, where eBay itself doesn’t manage retailing operation but just mediates and handles the payment and takes care of buyer and seller protection and complaints. In this model the retailers sign up on the marketplace and manage their own operations while leveraging the platform’s network of buyers. Buyers pay, through the platform, to the retailer. Today most other players, apart from eBay have moved away from this model.
Information Exchange These are the Quikrs and OLXs of the world where retailing is done by the seller to the buyer directly leveraging the common platform for information exchange. Payments and operations all handled directly between the buyer and seller. The revenue model for the platform is based on advertisements and certification. Sellers can have premium listings for their advertisements on payment and can also get certifications done by the platform to enhance trust and hence salability.
Managed Marketplace This seems to be the model of choice for e-Commerce companies in India. It helps them adhere to the Foreign Direct Investment norms in retail in the country while also enjoying significant control over operations. Most e-retailers today, like, Flipkart, Amazon, Pepperfry and Fabfurnish follow this model.
In this model, the manufacturing and listing of products is done by the vendor on the platform. The platform helps the buyer and seller get together and also handles the logistics. The platform, most of the time, arranges for pickup of packages from the seller location and handles shipping, usually through third party providers. The payment is handled entirely by the Marketplace and the vendors are paid by the marketplace while pricing also remains mostly in the hands of the marketplace.
End-to-End Retailing This model is being used by a few retailers who don’t sell branded content but manufacture their own products or outsource the manufacturing and brand it by themselves. The production, marketing, shipping, customer care all is managed by the Retailer. In the online furniture business UrbanLadder
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follows this model. So while FabFurnish and Pepperfry can boast of thousands plus suppliers, UrbanLadder talks about a handful of supplier who it closely supervise. UrbanLadder claim it helps them have better quality than their competitors through three-level and five-level quality checks on a limited number of suppliers only.
Pepperfry model Ashish Shah, says, “My marketplace is a managed marketplace. Every item that is sent to the customers first comes to my warehouse. I am the only player right now who has a distribution network. I distribute to 150 cities using my vehicles. I have carpenter services in 34 cities which are available within six hours. My business is about reaching out to more customers across the country. As a marketplace, I am in full control of experience. We work with around close to 1,000 merchants. Over 95 per cent are Indians. In spite of being on a marketplace model, I ship out 70 per cent of my furniture items in one day. I don't keep inventory but my sellers do.”xiv
Logistics Issues "You will not find it difficult to prove that battles, campaigns, and even wars have been won or lost primarily because of logistics."
- General Dwight D. Eisenhower, American President and General
“The line between disorder and order lies in logistics…” - Sun Tzu, Ancient Chinese General
The importance of logistics management is not lost on any of the E-commerce players in India. While each of them has been trying to acquire new consumers daily, they have also been relentlessly trying to reduce costs and errors. Higher costs either eat into operational profits or drive away customers in the extremely price sensitive Indian market. Higher error rates reduce trust in the platforms and affect all e-Commerce players.
Information Exchange
Market Place
Managed Marketplace
End-to-End Retailing
Shipping Handled by Vendor Shipping Handled by Platform
Vendor Control Platform Control
Quikr, OLX eBay Pepperfry, Flipkart, Fabfurnish
UrbanLadder
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Primarily these issues can be categorized as
• Shipping related o Shipping Cost o Errors in Shipping o Pilferage and leakages o Delays in delivery o Loss of shipment
• Customer Related o Customer complaints o Customer Unavailability o Returns o Refusals to collect cash-on-delivery, COD, deliveries
“Mobile penetration has ensured demand from most regions, but servicing this demand is not easy," said Abhishek Chakraborty, executive director at DTDC Courier & Cargo. "A number of issues like lack of physical infrastructure, security concerns and local tax laws prevent complete coverage."xv
Currently estimated at USD 3 billion (₹ 20,000 crore), online retail is expected to gallop to almost USD 38 billion (Rs 2,50,000 lakh crore) in the next five years, according to a report by retail advisory firm Technopak.
But almost all states in the country have regions that are not serviced by ecommerce companies. Uttar Pradesh, Bihar, Jharkhand, Punjab, Madhya Pradesh, Himachal Pradesh and West Bengal are among those that have least coverage despite having highly populated towns with high demand. For online retailers this is a huge lost opportunity.
"Ecommerce growth could’ve been much more," said Praveen Sinha, MD, Jabong. "In these locations people demand the product but are not able to get it."
This lack of reach becomes critical when E-Commerce companies are looking to smaller cities and towns for growth. A study by Technopak last year showed about 50% of online sales are from consumers outside the top eight cities in India.
"Almost 30% of our sales come from mobile-based shoppers and a lot of this is from tier-II and tier-III cities and towns," said Ganesh Subramanian, chief operating officer at Myntra.
Managed marketplaces like Snapdeal that only work with third-party logistics firms are dependent on the network of these firms. Through these logistics companies Snapdeal provides pick up service to sellers in 200 locations and delivery to over 4,000 cities.
Those like Flipkart, which has its own logistics subsidiary, decide on the pin codes they service on their own. However, Flipkart's logistics subsidiary ekart has a reach of 200 cities. Beyond this, Flipkart too works with third-party delivery companies.
Even many suburbs of big cities are not serviced. Parts of Greater Noida and Faridabad in Delhi-NCR are not covered, as delivering to these parts is not cost-effective, said the head of an online portal who did not want to be named.
The non-standardization of postal addresses is also a major problem. "There are heavily populated parts in large cities where even having door numbers is not good enough," said Ashish Jhalani, head
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of advisory firm e-retailing India. Slums in Dharavi and Antop Hill in Maharashtra are areas where order volume is large but finding the right house is next to impossible, said DTDC's Chakraborty.
"We have issues around pin codes not being defined and customers not knowing the right pin code," said Rahul Chari, vice-president of engineering at Flipkart, who focuses on supply chain. Flipkart, which crossed $1 billion (Rs 5,990 crore) in sales last fiscal, takes feedback from its logistics partners on the correctness of the address and pin code after delivery.
Last year, Flipkart had stopped deliveries over Rs 10,000 in Uttar Pradesh. The company, however, refused to specify the locations where such restrictions are still imposed. "These are purely business decisions and change from time to time depending on circumstances," said a Flipkart spokesman.
Pepperfry which used to sell to a lot of locations seems to have curtailed their reach by around 60% in the last few months alone. While there is no confirmation from the company, it is speculated that this could be due to
a) Lack of proper distribution network b) Earlier bad experience c) COD realization issues d) Cost of servicing is affecting operational profitability
Local tax rules also lead to restrictions. In states like Kerala, cash-on-delivery is considered a sale, resulting in state taxes being levied. "Many ecommerce companies do not touch Kerala or restrict cash-on-delivery because of this," said the ecommerce company head.
"West Bengal and Haryana are states that have entry restrictions over a certain amount. In states like Chattisgarh, beyond Raipur our logistics partners do not offer cashon-delivery," said Saurabh Goyal, vice-president of supply chain operations at Snapdeal that is targeting $1 billion (Rs 5,990 crore) in sales this fiscal.
Myntra's Subramanian said the company built up its own network in parts of the North East.
Ashish says, “We are a supply chain driven company. Our core strength is providing variety and value to our customers. We also want to double our product range. Today, we have 11,000 furniture items on our site. We want to increase it to 50,000, thus increasing our supply chain 8 to 10 times. We will be expanding our supply chain and logistics to service all corners of the country.”xvi
"Our investments will go into building a stronger supply chain. Today we are in 200 towns, we expect to be in around 400 towns by March 2016," Murty said. "We also plan to invest heavily in technology and our headcount in those teams will go up significantly. We will invest in marketing through television and open more studios," he added.
In God we trust, all others pay cash Number one, cash is king... number two, communicate... number three, buy or bury the competition.
- Jack Welch
The acceptability and consumer willingness for online payments is far greater a problem than penetration of internet banking in the Indian e-Commerce landscape. The customer is much more comfortable to pay in cash than to pay in advance. There is a lot of skepticism around not only using electronic cash / credit but also in paying in advance for large-ticket items.
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This has led to the e-Commerce players offering Cash on delivery as a payment method. However this has its own associated challenges. Handling of huge amount cash through delivery boys whose salary and background both are questionable, presents difficulties. Any discrepancy in cash collection becomes a direct hit to the bottom-line. In large-ticket item sales, like furniture, this becomes a larger problem as the amount of cash handled by a delivery boy might sometimes run into lakhs in a single day. The amount being handled by the guy in a day might be a few times his annual salary.
The Indian government’s ambitious Digital India project and the modernization of India Post will also affect the e-Commerce sector. The Digital India project aims to offer a one-stop shop for government services that will have the mobile phone as the backbone of its delivery mechanism. The program will give a strong boost to the e-Commerce market as bringing the internet and broadband to remote corners of the country will give rise to an increase in trade and efficient warehousing and will also present a potentially huge market for goods to be sold.
For India Post, the government is keen to develop its distribution channel and other e-Commerce related services as a major revenue model going ahead, especially when India Post transacted business worth 280 crore INR in the cash-on-delivery (CoD) segment for firms such as Flipkart, Snapdeal and Amazon. Both these projects will have significant impact on increasing the reach of e-Commerce players to generally non-serviceable areas, thereby boosting growth.
The removal of COD option immediately decreases reach as some consumers don’t consider or cannot adopt any other mode of payment. Sometimes this also affects consumer experience adversely as consumers end up getting disappointed at the last step, payment step, of the purchase process. E-retailers have to maintain a balance between the logistical trade-offs and the customer experience trade-offs.
Offline to Online to Offline While all these ecommerce players endeavor to take the customer, who is habituated buying the product after testing it physically in a showroom, to a website or application and make them buy the product without physically having tried, they are also trying to attract the customer through regular brick and mortar stores.
Pepperfry recently inaugurated a studio in Gurgaon, it’s third one after the ones in Mumbai and Bengaluru. The studio is an experience zone where consumers can touch and feel the products sold on its website.
These studios do not sell anything, however, purchases can be made on the website through devices available there. Pepperfry plans 20 such studios by March 2016. These Studio’s have been conceived as experience zone to showcase a curated range of furniture from Pepperfry’s online portfolio and provide design consultancy. At these Studio’s Pepperfry offers complimentary consulting services on various aspects of design, specifically related to furniture.
Pepperfry has tied-up with HomeStop to launch the first Shop-in-Shop concept store in the category called “Pepperfry Live” at their Ahmedabad, Chennai and Mumbai outlets with similar store openings at various other HomeStop outlets. It also has pop-up stores at Mumbai, Delhi and Bengaluru airports.
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Everyone wants a piece of the furniture pie! Competition is the keen cutting edge of business, always shaving away at costs.
- Henry Ford I've always believed that competition is good for consumers and good for businesses.
- Jim Pattison The Swedish furniture major IKEA is all set to roll out its maiden store in India. Online retailers are also becoming increasingly active in this category. The organized sector is also seeing increased activity with Durian, Featherlite, Godrej Interio, Stylespa etc. stepping up marketing spends.
Specialist startups like FabFurnish, Pepperfry, and Urban Ladder are leading the push, while big multi-category marketplaces are also betting big on this segment's promise.
Snapdeal and Amazon have already launched a furniture category. Flipkart has recently joined the league. Customers can now buy over 10,000 small and large furniture products, including beds, sofas, recliners and tables on Flipkart, the company said in a statement.
The company has tied up with HomeTown, Durian, @Home and HomeStop and regional sellers across the country to sell furniture. Large furniture will be available for customers in Delhi, Mumbai and Bangalore currently.
The ₹ 1,40,000-crore Indian furniture market is largely fragmented and unorganised. Within it, the online market accounts for a mere Rs 750 crore. But it is growing rapidly and expected to be worth ₹ 15,000 crore by 2017, according to a report in The Hindu.
Pepperfry.com unveiled a mobile app in July that had an augmented reality feature to provide seamless shopping experiences to customers. “Our app boasts industry-first features like augmented reality and an open design platform. It is aimed towards simplifying the furniture and home shopping experiences through innovative product discovery and easy payment options. Additionally, with mobile phones increasingly becoming the preferred medium to shop online, the launch of Pepperfry app will further complement user experiences providing for seamless shopping experiences,” explained Sanjay Netrabile, CTO Pepperfry during the launch of the app.
Joining the league is the Bangalore-based online furniture retailer, Urban Ladder, which has recently launched 'Living Spaces', a mobile application that helps consumers visualize furniture of their choice in their living rooms with the help of a few taps.
Just like Pepperfry's app, the Living Spaces app let users virtually place multiple life-size models of Urban Ladder sofas to visualize their entire living room and select multiple color and seating options without having to involve any physical furniture. The app aims at making the interactions natural and the sofa design takes into account imperfections of the real world like wrinkled cushions and fabric folding at the edges making the user experience realistic.
"We believe that furniture buyers have multiple items on their checklist ranging from fabric to colour to how separate pieces of a furniture set blend into various rooms in the house. Of course, nobody has the time to go to physical stores anymore. The app allows you to choose different variants of the same furniture and compare easily," Rajiv Srivatsa, COO & co-founder, Urban Ladder, was quoted as saying.
With competition heating up in the segment between vertical and horizontal players, the home improvement category is expected to become the third largest online vertical after apparel and consumer electronics in India.
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Exhibit 1: Economic Times Article on 28th July 2015xvii
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Jul 28 2015: The Economic Times (Delhi) GOLDMAN SACHS LEADS FUNDING - $100 million to Spice up Pepperfry Mumbai: Our Bureau Round also saw participation from new investor Zodius Capital Wall Street investment bank Goldman Sachs is making its first bet in the Indian e-tailing space by leading a ₹640-crore ($100million) round in online furniture retailer Pepperfry along with participation from new investor Zodius Capital besides existing backers Norwest Venture Partners and Bertelsmann India Investments.
Goldman has joined the growing list of world's most sophisticated investors, from Morgan Stanley to DST Global betting on the market expected to grow to $50 billion by 2020. “We have a strong conviction for the theme of domestic consumption growth in India. Through this most recent partnership in Pepperfry.com, we intend to leverage our global expertise in the sector to help create a large, differentiated leader in India's rapidly-growing ecommerce industry,” said Ankur Sahu, co-head of Private Equity at Goldman Sachs Asia in a statement. The PE firm recently invested ₹64 crore in Azure Hospitality, which runs a pan-Asian casual dining chain under the Mamagoto brand.
The new round of funding will help Pepperfry ramp up investments in infrastructure and technology, as it looks to compete with Ratan Tata-backed UrbanLadder and Rocket Internet-owned Fabfurnish. “Over the next 2-3 years, we will cross $1 billion in GMV and we want to be the place where India shops for home and furniture,” said Ambareesh Murty, founder & CEO of Pepperfry.
Murty declined to disclose the value of his company in this latest round of funding. Pepperfry sees its topline doubling every 6-8 months, growing at over 300% as compared to last year. Manipal Group scion Ranjan Pai and former Infosys director Mohandas Pai have also invested in Pepperfry's new round. Avendus Capital advised Pepperfry on the new round of funding.
Pepperfry, which reaches over 300 cities in India, plans to expand its logistics footprint to tier-34 towns in India. It also plans to double logistics fleet from 300 vehicles right now and increase distribution centres from 15 to 20 towns. Pepperfry will also quadruple its technology and engineering team.
“There is a large opportunity in the augmented reality space on the mobile and further enriching buyer experience on the web,” said Murty, former eBay India head who started the company in 2011 as a fashion and lifestyle-focused portal. Before this round, Pepperfry had raised $28 million and will become one of the most-heavily capitalised vertical e-tailers.
Exhibit 2: Screenshots of leading online players in Home and Furnishing
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Figure 2: Pepperfry website Screenshot
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Figure 3: Room Attire Screenshot
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Figure 4: Urban Ladder Screenshot
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Figure 5: Flipkart Furniture Section Screenshot
Exhibit 3 – The Leadership Team of Pepperfry.comxviii
Exhibit 4 – Investors of Pepperfry.com
Norwest Venture Partners (NVP) is a global, multi-stage venture and growth equity investment firm that has partnered with entrepreneurs to build great businesses for more than 50 years. The firm manages approximately $5 billion in capital and has funded more than 550 companies since inception. Headquartered in Palo Alto, Calif., NVP has subsidiaries in Mumbai and Bengaluru, India, and Herzelia, Israel. NVP makes early to late-stage venture and growth equity investments across a wide range of sectors including: technology, information services, business services, financial services,
consumer products/services and healthcare. For more information visit: www.nvp.com. Follow NVP on Twitter @NorwestVP
Bertelsmann is an international media company whose core divisions encompass television (RTL Group), book publishing (Penguin Random House), magazine publishing (Gruner + Jahr), services (Arvato), and printing (Be Printers) in some 50
countries. In 2013, the company’s businesses, with their more than 110,000 employees, generated revenues of €16.4 billion. Bertelsmann stands for a combination of creativity and entrepreneurship that empowers the creation of first-rate media, communications, and service offerings to inspire people around the world and to provide innovative solutions for customers.
KSOM KIIT University
Pepperfry: Battling on many fronts and growing phenomenally Page 20
References
i Flipkart has biggest piece of Indian e-tail pie | Business Standard News. (n.d.). Retrieved August 19, 2015, from http://www.business-standard.com/article/companies/flipkart-has-biggest-piece-of-indian-e-tail-pie-115032100041_1.html ii Online retailer Flipkart starts selling furniture - timesofindia-economictimes. (n.d.). Retrieved August 19, 2015, from http://articles.economictimes.indiatimes.com/2015-08-06/news/65281075_1_ankit-nagori-flipkart-furniture iii Flipkart adds furniture; should FabFurnish, Pepperfry worry? (n.d.). Retrieved August 20, 2015, from http://e27.co/flipkart-adds-furniture-fabfurnish-pepperfry-worry-20150806/ iv To win the home space, you need to be a variety player: Ashish Shah of Pepperfry - Business Today. (n.d.). Retrieved August 20, 2015, from http://www.businesstoday.in/opinion/interviews/pepperfry-ashish-shah-says-to-win-home-space-you-need-to-be-variety-player/story/219052.html v M Gomathi Imaya, & K Padmanabhan. (2013). Furniture Market in India – an Overview. INDIAN JOURNAL OF APPLIED RESEARCH, 3(9), 110,111. vi Turning the tables: the online furniture market is growing | Business Line. (n.d.). Retrieved August 19, 2015, from http://www.thehindubusinessline.com/features/smartbuy/turning-the-tables-the-online-furniture-market-is-growing/article6633544.ece vii Ambareesh Murty | LinkedIn. (n.d.). Retrieved August 20, 2015, from https://www.linkedin.com/profile/view?id=1997465 viii Ambareesh Murty, Founder, Pepperfry on his new Ecommerce Startup and raising funding before the launch. (n.d.). Retrieved August 20, 2015, from http://yourstory.com/2011/12/ambareesh-murty-founder-pepperfry-on-his-new-ecommerce-startup-and-raising-funding-before-the-launch/ ix Ashish Shah | LinkedIn. (n.d.). Retrieved August 20, 2015, from https://www.linkedin.com/in/asshah76 x To win the home space, you need to be a variety player: Ashish Shah of Pepperfry - Business Today. (n.d.). Retrieved August 20, 2015, from http://www.businesstoday.in/opinion/interviews/pepperfry-ashish-shah-says-to-win-home-space-you-need-to-be-variety-player/story/219052.html xi NextBigWhat. (n.d.). QnA: Ambareesh Murty & Ashish Shah of Pepperfry (“Why sell non-standard products?”). Retrieved August 20, 2015, from http://www.nextbigwhat.com/pepperfry-founder-interview-297/ xii Forbes India Magazine - 10 sharply focussed ecommerce players in India. (n.d.). Retrieved August 20, 2015, from http://forbesindia.com/article/ecommerce-in-india/10-sharply-focussed-ecommerce-players-in-india/39827/0 xiii Pepperfry eyes profits in two years | Business Standard News. (n.d.). Retrieved August 13, 2015, from http://www.business-standard.com/article/companies/pepperfry-eyes-profits-in-two-years-115051600042_1.html xiv To win the home space, you need to be a variety player: Ashish Shah of Pepperfry - Business Today. (n.d.). Retrieved August 20, 2015, from http://www.businesstoday.in/opinion/interviews/pepperfry-ashish-shah-says-to-win-home-space-you-need-to-be-variety-player/story/219052.html xv E-retailers like Flipkart, Snapdeal, Amazon India and others find it difficult to reach small towns - timesofindia-economictimes. (n.d.). Retrieved August 20, 2015, from http://articles.economictimes.indiatimes.com/2014-05-15/news/49873465_1_ashish-jhalani-flipkart-logistics-companies xvi Pepperfry completes three years of online furniture sales, to expand to 400 cities. (n.d.). Retrieved August 20, 2015, from http://yourstory.com/2015/01/pepperfry-growth/ xvii GOLDMAN SACHS LEADS FUNDING - $100 million to Spice up Pepperfry (n.d.). Retrieved August 19, 2015, from http://epaperbeta.timesofindia.com//index.aspx?eid=31816&dt=20150728&Ar=1# xviii About Us. (n.d.). Retrieved August 20, 2015, from http://www.pepperfry.com/about.html
Prof. Surya Mishra, 2015. All rights reserved. You may not reproduce any part of this document without express permission of the author. You can quote parts of the document with proper citation. For further authorization, you may write to [email protected].
