1. To the Co-Founders of Pepperfy.com
ADP!
AALTO
DISRUPTION
PARTNERS
Spice it up!
To the Co-Founders of Pepperfy.com
01/08/2019
Matti Karjalainen
Patrick Timmer
Lauri Hanninen
Tommi Bergstrom

2. How to maintain your 1st place in Indian furniture retail market?
Focus on Growth & Not Profitability
Specialize by Leverage Key Competencies
Optimize Current Revenue Streams & Implement New Disruptive Ones
Become the Spiciest Pepper in India!

3. External & Internal Analysis
Content
External & Internal Analysis
Strategic Alternatives
Strategy Implementation
Financials & Risk Analysis

4. External & Internal Analysis
Content
External & Internal Analysis
Strategic Alternatives
Strategy Implementation
Financials & Risk Analysis

5. External Analysis Retail Trends in India
Generally Unorganized (90%)
Currently Low Fraction of Online-Sales (1%)
Customers Rely on Word of Mouth and Trust
Comfort and Convenience are Appreciated
Strong GDP Growth of 7.5% (2017)
Trends indicate a Great Future in India

6. External Analysis Customer Identification
Young Professionals
Tech-Savy
Upwardly Mobile
Desires Self-Expression
Decor-Conscious
Focus on Rapidly Growing Middle-Class

7. Internal Analysis Strengths & Weaknesses
Hot Stuff
Pepperfry’s Competencies
Innovative, fast & reliable Supply Chain
Efficient utilization of data & customer preferences
Good relationship with Suppliers
Needs more Pepper
Pepperfry’s Improvement Areas
Currently Unprofitable
Increasing Competition
Slight Lack of Focus
Inefficient Marketing
Long Customer Conversion Cycle
Increasing Competition & Suboptimal Revenue Streams lead to
Lack of Capital & a Strained Profit Situation

8. External & Internal Analysis
Content
External & Internal Analysis
Strategic Alternatives
Strategy Implementation
Financials & Risk Analysis

9. Strategic Alternatives Decision Criteria
Boost Growth to Unprecedented Spheres
Ensure Sustainable Growth with Sufficient Funding
Enhance Competitive Advantage
Maximize Customer Satisfaction
If we”re large enough some players could use our platform – network effectgs
Utilize Unique Supply Chain & Partnerships

10. Strategic Alternatives 1.) Growth vs. Profitability
Primary Focus on Boosting Growth & Becoming Biggest Online-Platform
Increase Product Offerings
Increase Service
Acquire & Retain more Customers
Profitability
Break-Even as soon as Possible to Increase Company Value
Cut Costs
Increase Commissions
Increase Franchising Fees
vs.

11. Strategic Alternatives 1.) Growth vs. Profitability
Primary Focus on Boosting Growth & Becoming Biggest Online-Platform
Increase Product Offerings
Increase Service
Acquire & Retain more Customers
Profitability
Break-Even as soon as Possible to Increase Company Value
Cut Costs
Increase Commissions
Increase Franchising Fees
vs.

12. Strategic Alternatives 2.) Positioning in Competitive Landscape
“It’s Hot Enough”
Keep Status Quo
“Add some Salt”
Expand Offering
“Spice it Up”
Differentiate

13. Strategic Alternatives 2.) Positioning in Competitive Landscape
IKEA-Concept
Vertical
Interior Design-Solutions
Livspace
HomeLane
Pepperfry
Omni-Channel
Offline
Online
E-Commerce Portals
Amazon India
Flipkart
Horizontal

14. Strategic Alternatives 2.) Positioning in Competitive Landscape
IKEA-Concept
Vertical
“It’s Hot Enough”
Keep Status Quo
Interior Design-Solutions
Livspace
HomeLane
Boost Growth
Ensure Funding
Competitive Advantage
Customer Satisfaction
Supply Chain
Pepperfry
Omni-Channel
Offline
Online
E-Commerce Portals
Amazon India
Flipkart
Horizontal

15. Strategic Alternatives 2.) Positioning in Competitive Landscape
IKEA-Concept
Vertical
“Add some Salt”
Expand Offering
Interior Design-Solutions
Livspace
HomeLane
Boost Growth
Ensure Funding
Competitive Advantage
Customer Satisfaction
Supply Chain
Pepperfry
Omni-Channel
Offline
Online
Pepperfry
E-Commerce Portals
Amazon India
Flipkart
Horizontal

16. Strategic Alternatives 2.) Positioning in Competitive Landscape
IKEA-Concept
Vertical
“Spice it Up”
Differentiate
Pepperfry
Interior Design-Solutions
Livspace
HomeLane
Boost Growth
Ensure Funding
Competitive Advantage
Customer Satisfaction
Supply Chain
Pepperfry
Omni-Channel
Offline
Online
E-Commerce Portals
Amazon India
Flipkart
Horizontal

17. External & Internal Analysis
Content
External & Internal Analysis
Strategic Alternatives
Strategy Implementation
Financials & Risk Analysis

18. Implementation Current Revenue Streams
Add more Pepper:
Focus on…
Décor & Utilities (35-50% Growth)
Furniture (80& of Revenue)
Leverage house Brands (10% better margins)
Offline Studios & Experience Centers
Partnerships with interior designer
Less Pepper, please:
Focus not on…
Furniture Rental (we do not have the warehousing resources)

19. Implementation Current Revenue Streams1
“No item was sold at a loss”
Leverage Experience Centers through Franchising 2

20. Implementation New Revenue Stream - Personalize
Augmented Reality App
Clients can see how their furniture looks at home through the App
Interior Designer as Premium Service
Use a VR-Experience with Magic-Leap Glasses in collaboration with the Designer
Disrupt both the Furniture and the Interior Design Market
utilizing VR & AR – Aim for NPS 80

21. Implementation New Revenue Stream – Advertising Revenue
Suppliers pay for Exposure
Improve the Online Listing-Order of their Products
Digital Advertisement on Pepperfry.com
Demonstration of Products in Offline-Studios

22. Implementation Marketing
“75% of their GMV came from organic or unpaid traffic sources”

23. Implementation Marketing
Google Marketing
SEA – Search Engine Advertising
SEO – Search Engine Optimizing
Social Media Marketing
Influencer Marketing focusing on Young Professionals
Optimization
TV Marketing
Utilize their knowledge gained from past experiences
Primary Focus on Digital Marketing: 70%

24. Implementation Year 1 Year 2 Year 3 Optimize Current Revenue Streams
Implement New Revenue Streams
(Premium AR Services & Pay for Exposure)
New Round of Equity Funding: $90M
IPO: $200M
Reallocate Advertising Budget (70-30)
Increase Marketing Expenditures

25. After Year 3: How to Spice it Up Even More?
Implementation
After Year 3: How to Spice it Up Even More?
Expand Manufacturing Operations to Lower-Cost Countries (Bangladesh/Myanmar)
Expand Website to Promising Economies in South-East Asia (Thailand/Indonesia)
Becoming the Spiciest Pepper in India!

26. External & Internal Analysis
Content
External & Internal Analysis
Strategic Alternatives
Strategy Implementation
Financials & Risk Analysis

27. Assumptions INR/USD exchange rate 0.015
Marketing Spending: $25M in 2018 with 2.5% yearly growth
Overhead costs 80% of Revenues in 2018, decreasing 5% yearly
Revenue CAGR 30%

28. Revenue Growth

29. Operating Margin

30. Product Portfolio Utilities & Decor Furniture Avg. selling price
Utilities & Decor
Furniture
Avg. selling price
$37.50
$270.00
% of Revenue (2022)
9.5%
85%
% Gross Margin
20%
50%
Customer Conversion
1-2 Weeks
1-3 Weeks

31. Funding needed VC Funding As soon as possible IPO 2021 $200 Million

32. Revenues & Costs 2018 2019 2020 2021 2022 Revenue $50.3M $65.4M $85.0M
2018
2019
2020
2021
2022
Revenue
$50.3M
$65.4M
$85.0M
$110.5M
$143.7M
Furniture
$39.4M
$52.3M
$69.4M
$91.9M
$121.6M
(% of revenues)
78.40%
80.03%
81.60%
83.13%
84.60%
Decor & Utilities
$9.9M
$11.1M
$12.2M
$13.1M
$13.5M
19.6%
17.0%
14.4%
11.9%
9.4%
Premium Service
$0.5M
$1.0M
$1.7M
$2.8M
$4.3M 1%
1.50% 2%
2.50% 3%
Advertising
Costs
$92.9M
$110.4M
$131.6M
$151.7M
$181.0M
Marketing & R&D
$25.0M
$26.3M
$27.6M
$28.9M
$30.4M
Logistics
$35.1M
$44.5M
$56.4M
$71.6M
Overhead
$40.2M
$49.1M
$59.5M
$66.3M
$79.0M
Operating Profit
-$42.5M
-$45.0M
-$46.5M
-$41.2M
-$37.3M
Operating Margin
-84.57%
-68.73%
-54.74%
-37.25%
-25.97%

33. Risks & Mitigation Risk Probability Impact Mitigation Cybersecurity
Med
Monitor franchising data-handling and invest in breach prevention
Funding difficulities
Seek other kinds of funding besides VC equity
Losing market share to international mega-corporations
Low
High
Focus on core competencies and tailor Pepperfry’s offering to appeal to target market

34. Could the disrupter be disrupted?
You asked us…
“How could Pepperfry build and better utilize new revenue channels to pave the way to profitability and, eventually, and initial public offering?
How could it keep innovating to strengthen its position as an omnichannel powerhouse?
How could it respond to competition from international entrants like Ikea and domestic platforms like Flipkart?
Could the disrupter be disrupted?

35. How to maintain your 1st place in Indian furniture retail market?
Focus on Growth & Not Profitability
Specialize by Leverage Key Competencies
Optimize Current Revenue Streams & Implement New Disruptive Ones
Become the Spiciest Pepper in India!