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. ©2015, Surya Mishra. Copying or posting of this document is prohibited and will be an infringement of copyright. This is intended for the sole purpose of administering to students only as authorized by KIIT School of Management. KSOM KIIT University 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) Pepperfry: Battling on many fronts and growing phenomenally Page 2 KSOM KIIT University 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. Pepperfry: Battling on many fronts and growing phenomenally Page 3 KSOM KIIT University 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.