Date post: | 15-Jul-2015 |
Category: |
Internet |
Upload: | aparana-mittal |
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• Increased internet penetration1
•Growth in smart phone usage2
•Growing number of urban households3
•Willingness to indulge in home improvements (38%)4
What will drive such growth?
53%27%
20%
Market Share (in %)
Pepperfry
FabFurnish
UrbanLadder
Furniture Market and Growth Rates
Competition
Indian Furniture Market = Rs. 1400
billion
Plastic Molded Furniture=Rs. 240
billion
Online Market = Rs. 750 crore
• Growing @ 12-13 % on an average
• Expected to be worth Rs. 150 billion in the next three years
Supply Chain and Inventory Management
Demand Forecasting
Consumers still refrain from buying furniture online as they want to have a touch and feel factor
Challenges Scope
Profitable category in eCommerce market
Average ticket size is larger (margins upto
30-40%)
Leverage the reach component.
STRENGTHS
• Brand image and market presence• Strong distribution and retail network• Low cost of customer acquisition• Good quality of employees
WEAKNESSES
• Dipping margins• Inventory management
OPPORTUNITIES
• Increase presence in tier II and III cities• Plugged in customers• Nascent segment• High growth, lower reach (98% and 2% respectively)
THREATS
• Intensifying Competition• Substitute products• Channel conflicts
ROADMAP
• Financials• Technological• Marketing• Partner Relationship Management
General Assumptions:Discount Rate (WACC) = 12%Tax Rate = 35%Customers in Year 0 = 1700Transactions in Year 1 = 140,000Average order size = Rs. 20,000 (Urban Ladder data)COGS as a % of sale = 70%Average order size growth rate = 20% (Urban Ladder data)
Base Case (No web Portal)Number of transactions annual growth rate = 3%Average processing cost per order = Rs. 140
….Contd
ROADMAP
With the Web PortalInitial Implementation Cost TCO
Hardware, software License Fees Hosting Fees Project Management Rs. 4,00,00,000
Maintenance and Marketing Ongoing Maintenance Advertising Sales Team After Sales (Call centers, etc) Rs. 1,00,00,000
Jump in total transactions = 20,000 Number of transaction growth rate 10% Average Processing Cost of a web
Transaction Rs. 150 Average processing cost per order Rs. 60 % of total transaction through web
Portal 50%
• Financials• Technological• Marketing• Partner Relationship Management
ROADMAP
Year 0 Year 1 Year 2 Year 3Customers 1700 1751 1804 1858Number of transactions 1,40,000 144200 148526Average order size 20,000 24000 28800Baseline Revenue (in Rs. Lacs) 28,000.00 34,608.00 42,775.49
COGS 19,600.00 24,225.60 29,942.84 Order Processing Cost 196 201.88 207.9364
Net Income 8,204.00 10,180.52 12,624.71
NI (after tax) 5,332.60 6,617.34 8,206.06
Base Case Scenario (No Web Portal)
• Financials• Technological• Marketing• Partner Relationship Management
ROADMAP
Year 0 Year 1 Year 2 Year 3
Customers 1700 2081 2289.1 2518.01
Number of transactions 161000 177100 194810
Average order size 20000 24000 28800
Baseline Revenue (in Rs. Lacs) 32200 42504 56105.28
COGS (70%) 22540 29752.8 39273.696
Order Processing Cost 60.375 66.4125 73.05375
Gross Profit 9599.625 12684.788 16758.53025
Costs of Web Portal Initiative
Upfront Cost 400
Ongoing Maintenance & Marketing 100 100 100
Net Income -400 9499.625 12584.788 16658.53025
NI (after tax) 6174.75625 8180.1119 10828.04466
Incremental Cash Flows
Year 0 Year 1 Year 2 Year 3Net Incremental Cash Flows -500 842.16 1,562.77 2,621.98
NPV 3,364.03
With Web Portal
• Financials• Technological• Marketing• Partner Relationship Management
ROADMAP
Payback Period Calculation
Year 0 Year 1 Year 2 Year 3Net Incremental Cash Flows -500.00 818.61 1536.873 2593.4922Cumulative Cash Flows 318.61 2355.483 3892.356
Payback Period 2 years 1.21 months
ANALYSIS :
• Positive NPV• Payback period = 2 years 1.21
months (25 months)
• Financials• Technological• Marketing• Partner Relationship Management
ROADMAP
• Financials
• Technological• Marketing• Partner Relationship Management
• Introduction of integrated Inventory management systems.(Salesforce.com)• Including every partner in to the system from suppliers to retailers . • Providing them with applications which support most platforms.• Synchronization of GIS with inventory and order processing systems for faster processing
ROADMAP
• Financials
• Technological• Marketing• Partner Relationship Management
• Hire Amazon Web Services for server hosting • Google inc. for back up on cloud, in addition to cloud space provided by Salesforce.com• Zepo.com can be hire for hosting website payment terminal.
ROADMAP
• Financials• Technological
• Marketing• Partner Relationship Management
While marketing our products online, we would like to address a few issues, the Marketing Objectives:
1. Trust and Safety
2. Demystifying Products
3. Value Proposition
4. Added Convenience
ROADMAP
• Financials• Technological
• Marketing• Partner Relationship Management
• Introduce Design Your Own Design (DYOD)
DYOD benefits:
1. Increases number of conversions
2. Engage with more number of people
3. Compliment our offline channel
4. It creates a buzz around the brand which is required to make people familiarto our online channel
5. Leverage Market intelligence
ROADMAP
• Financials• Technological
• Marketing• Partner Relationship Management
• Engage with customers through social media
• Locate the nearest store online to compensate
for the “Touch ‘n Feel” aspect
• Provide coupons and gift vouchers for online channel against offline sales.
• Plan to go mobile to tap m-commerce market
ROADMAP
• Financials• Technological• Marketing
• Partner Relationship Management
To do away with Channel Conflict
• Increase Margin of our offline retailers
• Keep a minimum level of margin beyond which we would refrain from providing discounts on our online channel
STRATEGIES
• New Customer Acquisition Strategy• Customer Retention Strategy• Mobile Strategy• Security Strategy• Supply Chain Strategy• Payment Strategy• Social Media Strategy
•Gamization is one of the “must do” trends in internet & apps market – add a “social gaming UI” to entice users to use your app, entertain them as you address them.
•This would help us to get data about the people who could be our new customers. From this data we could give send personalized mails to people who have never bought anything from our website offering them discount coupons.
STRATEGIES
• New Customer Acquisition Strategy• Customer Retention Strategy• Mobile Strategy• Security Strategy• Supply Chain Strategy• Payment Strategy• Social Media Strategy
• Discount coupons offered would be on the product which that customer might have searched on our website but didn’t make a purchase so that our discount coupons are relevant to that customer.
• We would try and keep few exclusive products which are not available on any of our other competitor .This would help to attract new customers.
STRATEGIES
• New Customer Acquisition Strategy
• Customer Retention Strategy• Mobile Strategy• Security Strategy• Supply Chain Strategy• Payment Strategy• Social Media Strategy
• We will be using a Sales Force Automation(SFA) CRM so as to move closer to our customers. This CRM would help us to analyze the buying behavior of our customer and based on which we could formulate strategies to build even a stronger bond with our customers.
• Based on the products bought recently by our customers we would be sending them mail and offering complimentary products
• Besides this we can have a loyalty system where a customer gets a point based on the purchase he made and the customer can redeem those points and discount on his next purchase.
STRATEGIES
• New Customer Acquisition Strategy• Customer Retention Strategy
• Mobile Strategy• Security Strategy• Supply Chain Strategy• Payment Strategy• Social Media Strategy
• We will use a Mobile CRM as it is an integral part of a well-thought out ecommerce customer relationship management system.
• For android and other operating system we would develop an application which would be same as our website .Many companies create their application which are somewhat different in user interface and thus confuses the customers
STRATEGIES
• New Customer Acquisition Strategy• Customer Retention Strategy• Mobile Strategy
• Security Strategy• Supply Chain Strategy• Payment Strategy• Social Media Strategy
• Maximum Security to be deployed in the first and second year.
• Secure form of http i.e. https used for the website.
• Firewalls and anti-virus to be installed.
• The mobile app to be developed for different platforms and payment gateway for direct purchases.
• Different levels of data view for different levels of employee.
• 128 bits of encryption for payment gateway.
• An SMS sent to the registered mobile number whenever a login is made at the client side.
STRATEGIES
• New Customer Acquisition Strategy• Customer Retention Strategy• Mobile Strategy• Security Strategy
• Supply Chain Strategy• Payment Strategy• Social Media Strategy
• Build-to-Stock (Push) and Build-to-Order (Pull).
• Just in Time to maintain minimum inventory.
• Demand Forecasting .
• Package tracking for regular update on the location of the item.
• Use of 3PL for downstream supply chain.
STRATEGIES
• New Customer Acquisition Strategy• Customer Retention Strategy• Mobile Strategy• Security Strategy
• Supply Chain Strategy• Payment Strategy• Social Media Strategy
Supplier
Supplier
Supplier
Our Comapny
Customer
STRATEGIES
• New Customer Acquisition Strategy• Customer Retention Strategy• Mobile Strategy• Security Strategy• Supply Chain Strategy
• Payment Strategy• Social Media Strategy
• Flexibility of payment:
Cash on Delivery
Net banking
Credit Card
• Creation of a free business Paypal account
for payments as it ensures security againstfraud.
• An optional minimum payment of 10%through online coins to ensure long termassociation. Special discounts on the same.
STRATEGIES
• New Customer Acquisition Strategy• Customer Retention Strategy• Mobile Strategy• Security Strategy• Supply Chain Strategy• Payment Strategy
• Social Media Strategy
Association with e-newspapers
Pay-per-click(PPC)
Banners on related
ecommerce websites and
blogs
Social networking websites like
Facebook, twitter etc.
Almost 90% of our sales come through Facebook: Urban Ladder’s COO Rajiv Srivatsa
STRATEGIES
• New Customer Acquisition Strategy• Customer Retention Strategy• Mobile Strategy• Security Strategy• Supply Chain Strategy• Payment Strategy
• Social Media Strategy
Facebook business page to accept
orders.
URLs on existing business cards and
pamphlets.
Information to existing customers
through emails, messages etc.
Addition of website to Google places and other online
directories.
Availability through search engine optimization
CONCLUSIONS
• Online furniture is a niche segment characterizedby high growth.
– Profitable to enter the market and get additionalsales.
• Channel conflicts to be handled by maintainingthe discounts offered to offline and onlinepartners and cross channel collaboration.
• High reliance on social media to tap the fullpotential of the market.