Staying in the Lead: Pepperfry Kyle Packer, Philip LaMaster, John Jenkins Jr. and Shuyuan Chen The University of Arizona: Eller College of Management

Agenda Situation Challenge Recommendation Analysis Implementation Risks Finances Summary

The Pepperfry Model Pepperfry More consumers = More value for manufacturers Consumers Pepperfry Manufacturers More products = more variety for consumers

The Pepperfry Model Pepperfry Pepperfry provides consumer intel Consumers Pepperfry Manufacturers Pepperfry curates collections

The Industry Is At An Inflection Point Online retail of furniture and home décor. Internal Competition Availability of substitutes Availability of complements Buyer Power Supplier Power Pepperfry advantage dependent on size of platform High barriers to entry: Distribution centers, warehouses, contractor networks Pepperfry model controls these forces

Pepperfry: Turning growth into gains Become EBITDA positive in 12-18 months Maintain lead position in industry Goal Rising competition in industry pressures Pepperfry Challenge Large Competitors have equal network benefits Small competitors have more distinct collections Complications

Competitive Landscape Big Box Furniture Big Online Retailer Small Online Pepperfry Buyer Network Supplier Network Customer Experience Delivery network

Allow Pepperfry to be delivered anywhere in India Building a strong moat Be Everywhere Allow Pepperfry to be delivered anywhere in India Grow Franchisees Grow Delivery Network

Offline retailers can’t reach more extended areas. Be Everywhere Less than 10% of projected furniture market will be online Only 17 delivery centers and 400 delivery vehicles: to service over 30 million consumers. Only 34 studios, 7 franchise owned. Offline retailers can’t reach more extended areas. Online retailers don’t have access to majority of market that’s offline

Grow Franchisees Lower set-up costs and inventory for smaller franchises Expand customer layaway plans (from max 12 To 24 mn.) Supplement with operations expertise

Grow Our Delivery Network Prior, contract delivery suffered quality problems Now, technology allows better validation of quality Pepperfry Contract Delivery Warehouse Distribution Contract Customer At each point – package is scanned for damage and uploaded to internal blockchain network to ensure quality

Implementation plan 2019 2020 2021 2022 2023 Phase 1 Phase 2 Phase 3 Pilot Non-urban Franchise Stores Develop proprietary POS for all stores and studios. Develop blockchain delivery system Go live with first 100 non-urban franchise Develop initial delivery contractors Go live with initial blockchain validation system Location specific collections Monetize data and other non-urban position Phase 1 Phase 2 Phase 3

Risk and Mitigation Risk Probability Impact Mitigation Slow growth in franchises Medium High Ease barriers to franchisee entry Lower than expected profits in non-urban studios Continue supply-chain optimization Poor quality non-urban delivery system Implement stricter delivery and logistic quality assurances

Financial Implications Expansion to rural markets with cost ~200 million INR in 2019-2020 and yield significant profit. Assumptions (Million INR) Non urban set up cost 0.2 Engineer Annual Cost 1.04 Engineers 20 NU Delivery cost 15% CGS 50%

Store Growth Projections Non Urban Stores are major source of revenue growth

Allow Pepperfry to be delivered anywhere in India Summary Be Everywhere Allow Pepperfry to be delivered anywhere in India Grow Franchisees Grow Delivery Network

Back-Up: Financial Projections 2019 2020 2021 2022 2023 number of Non-urban stores 50 100 180 324 518 revenue of non-urban 450 900 1,620 2,916 4,666 CGS 225.0 450.0 810.0 1,458.0 2,332.8 Gross Margin Project costs Franchise Setup Costs 10 16 29 39 IT Costs 20.80 6.24 Non IT Costs 68 135 243 437 700 Total Cost 98.30 165.80 265.24 472.44 744.96 NonUrban Profit Margin 127 284 545 986 1,588