Pepperfry

About the Company

Pepperfry is India’s No. 1 Online Furniture selling company. It is an online marketplace that partners with
furniture merchants and connects them with the customers by listing products on its website. Pepperfry
opened for business on 3rd January 2012. The company was founded by former eBay executives
Ambareesh Murty and Ashish Shah in 2011.

Pepperfry follows a “Managed Marketplace Model”. In this model, the orders are dispatched directly from
the vendor to the customer. The site provides a platform for many sellers to showcase their products. It
works in close association with more then 1000 merchant partner to offer a huge range. They also give
the customers a vast product assortment, with number of offerings more than 1.2 lakh products from
over 200 brands.

The company has 60 lakh registered users across the country, who visit the page more than 120 lakh times
in a month, leading to a sale of a product every 15 seconds. The company serves more than 500 cities
across the country, with over 40 Pepperfry Experience Centers and 17 Fulfillment Hubs spread out across
these cities. It has setup the largest furniture warehouse in the country at Bhiwandi near Mumbai, with a
capacity to fit about “3 airbuses” inside the warehouse. This is one of the multiple warehouse setups by
the company, from whence the products are distributed to their respective delivery centers, following a
hub-and-spoke model. Hence, the warehouses are strategically located and have a large size to
accommodate the huge number of products. They also do not rely on the furniture producers or dealers
to deliver the products to their centers.

Its major competitors are the Indian players like Urban Ladder, Fab Furnish and International players like
Ikea. It has the highest share of voice among all the players, which is close to 81%, which means it is the
most well-known brand among all its competitors and it is the most talked about brand in the market.
Though it has problems in Customer Service and issues related to delay in delivery, it commands the
primary position on the social media platform named Twitter and has a high engagement on Facebook.

They believe in the core values of demonstrating resourcefulness in the face of scarcity, pioneering in the
formation of ground-breaking ideas and a unique business model, and to employ the spirit of frugality,
flexibility and simplicity. They also take up many initiatives to give back to the society, for instance, they
have decided to enable a positive carbon footprint by tying up with an NGO named Grow-Trees. They
changed their company logo in November 2017, owing to a shift in their values to imbibe the cultural
values of intensity and inclusiveness, that has helped them to develop the market and customer solutions
that has led to their success and the market leader position that they are currently sporting.

Pepperfry won the Red Herring Top 100 Asia Award 2012. The company’s name comes from the words
“Pepper”, which means honest and a spice that is proudly Indian, and the fry stands for “Fun”.
Timeline of the Events
Year Event associated with the company
Nov 2011 Received Series A funding from Norwest Venture Partners, with an amount of
US $ 5 Million
January 2012 Launch of the website Pepperfry.com
April 2013 Received Series B funding from Norwest Venture Partners, with an amount of
US $ 8 Million
May 2014 Received Series C funding from Bertelsmann India Investments and Norwest
Venture Partners, with an amount of US $ 15 Million
December 2014 Opened their first studio at Kanjurmarg in Mumbai
July 2015 Received Series D funding from Goldman Sachs, Bertelsmann India Investments
and Norwest Venture Partners, with an amount of US $ 100 Million
March 2016 Launched the largest furniture warehouse in the country at Padgha
September 2016 Received Series E funding from Goldman Sachs, Bertelsmann India Investments
and Norwest Venture Partners, with an amount of US $ 30 Million
March 2018 Received Series E1 funding from State Street Global Advisors, with an amount
of US $ 31.5 Million
January 2019 Has reached a milestone of serving 6 Million customer orders

Business models for Pepperfry.com

Customer value proposition Go-to market plan

 To be the place where the modern Indians shop for
their homes
 It focusses on differentiation in pricing, variety,
servicing and delivery, network and infrastructure.
 It is the major player in online segment
 Target customers are already online shoppers, with
80-85% business coming from this segment.
 Generally progressive and sophisticated shoppers.
Technology and operations management
 Channels: majorly online, studios all over India
to visit and select the pieces. No purchase can
be made through the stores though.
 Studios are located at high visibility areas to
serve a dual purpose: as a strong marketing
channel to establish high brand recall and as a
great customer engagement point.
Profit formula

 The average size of any studio is almost 2,500-3,000
sq. ft.
 40+ experience centres
 Sells an item every 15 seconds
 17 fulfilment hubs across the country
 120 lakh+ monthly visits
 Pepperfry does base its pricing strategy on
discounted price but on customized offering
and comparison across assorted products in the
process obtaining 40-45% margin.
 Uses periodic referral and discounted coupon
codes for certain categories of product. It has
also collaborated with other credit and debit
cards companies and offers special discount to
the partner credit card company’s card holders.
VARIM Framework

ADAPTABILITY
Experience stores,
highest market
share in online
furniture

MONETIZATION
Customers are willing to pay RARENESS
VALUE
because of new, fresh and Differentiation
Classic, simple and classic designs. with respect to
niche furniture
Also, shopping for furniture is pricing, variety,
products sold much easier. servicing and
through online
Physical stores are not the delivery, network
commerce.
points of sale, which might and infrastructure.
be a negative impact.

IMMITABILITY
Immitable model,
major assets are
the designs and
the customer
base.
Competitive Dynamics
More than 85% of the furniture market is unorganized and of the organized, only one percent is online.
Various challenges have worked as first movers’ advantage to Pepperfry. One of the main aspects of the
online furniture business, which Pepperfry got right at the beginning itself, is logistics and supply chain.
Instead of the routine of outsourcing it from third-party logistics players, Pepperfry built a hub and spoke
large item distribution model and now has more than 400 trucks. It claims to have the capability to deliver
more than 100,000 large items per month.

As omnichannel is becoming the norm among online retailers, Pepperfry has opened offline experience
centers, which allow consumers to physically interact with its products. The company owns 23 of these
centers and plans to have 48 operational by April 2018.According to an October 2017 report by Morgan
Stanley Asia Ltd, India’s e-commerce market will grow at a 30% compound annual growth rate for gross
merchandise value and this growth will benefit Pepperfry, which has made inroads into the urban Indian
market. Unlike many peers in the start-up sector, which focused on topline growth and expansion on the
back of investor money, Pepperfry has sharp focus on the bottom-line. Keeping costs low is an essential
part of the plan. In July 2018, Pepperfry tied up with online marketplace for pre-owned furniture Zefo to
provide customers with an opportunity to sell their old furniture to Zefo in exchange for Pepperfry gift
cards through the ‘Exchange Your Furniture’ service. These gift cards are redeemable against purchases
made on Pepperfry.

Two strong online channel-based players Pepperfry and Urban ladder are growing aggressively through
Omni-channel offerings. The Livspace solution-based model with its full stack of service offerings for home
design and furnishing make it an attractive option for consumers. IKEA has entered Indian with aggressive
expansion plans. Another major competition is from mega e-commerce players Amazon India and Flipkart,
who have ramped up their home and furniture offerings.

References
1. http://bonhomie.pepperfry.com/say-hello-to-the-new-us/
2. https://www.pepperfry.com/about.html
3. https://en.everybodywiki.com/Pepperfry
Profitability Potential
What is profit potential?
The capacity for making more money in the future transactions in business and trading. Profit potential
is an important factor in any business or investment plan, and it is often a key element in the
assessment of high percentage trades in the various asset markets.

Profit potential of Pepperfry in the FY 2016-2017

Net income of Pepperfry in the FY 2016-17 = -263 crore (INR)

Net Revenue of Pepperfry in the FY 2016-17 = 257 crore (INR)

Profit Potential = (Net Income/Net Revenue) *100

= 102% on the negative side

Profit potential of Pepperfry in the FY 2018

Net income of Pepperfry in the FY 2018 = -144 crore (INR)

Net Revenue of Pepperfry in the FY 2018 = 308 crore (INR)

Profit Potential = (Net Income/Net Revenue) *100

= 46.7% on the negative side

It can be clearly seen that the company has improved on profitability in relevance to the previous
financial Year. The profits potential of Pepperfry has taken a jump of more than 50% since the last year,
showing huge reduction in losses and increase in the revenue as well. The company’s products therefore
can be said to be highly profitable if looking at the revenue generation capability of the products. The
next year to follow i.e., FY 2019-20, could be the first year when the company soars to profit making,
and vice-versa on the losses part. But the profit potential of the company does not only come from its
financials but also through the integration of the various departments of the company and through
proper strategy execution.
Pepperfry has also grown in the market and in profitability due to the other factors too which are: -

 Deep Market Penetration:

 Accelerated Omnichannel Execution
 Smart Technology Investments
 Significant Operating Leverage