1. Furnishing India Courtney Bowles Laura Dorn Andrew Schindler
Nick Sonek
January 8, 2019
Sierra Consulting
Furnishing India

2. Who We Are
Courtney Bowles
Laura Dorn
Andrew Schindler
Nick Sonek

3. How can Pepperfry be profitable?
Executive Summary
Question
How can Pepperfry be profitable?
Goal
Profitability, growth, survival
Alternatives
Online Focus
Horizontal Expansion
Brick and Click

4. Agenda Introduction Analysis Alternatives Implementation
Risk and Mitigation
Questions and Answers

5. You Asked Us
“How can achieve growth and profitability while managing competitors?”

6. You Asked Us Reality Check
“How can achieve growth and profitability while managing competitors?”
Reality Check
We know that managing a strictly E-commerce business is rarely profitable
Amazon’s E-commerce segment profitable 2 years ago

7. Competitive Landscape
Industry Analysis (Porter’s)
Product Life Cycle Analysis
Company Analysis (SWOT)
Operating Landscape
Customer Profile
Value Proposition
Customer Overview
Customer Journey
Channel Analysis
Competitor Analysis
Competitive Landscape

8. Competitive Landscape
Operating Landscape
Customer Overview
Customer Journey
Competitive Landscape
Industry Analysis (Porter’s)
Product Life Cycle Analysis
Company Analysis (SWOT)

9. Drill Down Analysis Industry Analysis Product Analysis
Company Analysis
Porter’s Five Forces
Product Life Cycle
SWOT
High competition
Fragmented market
Low supplier power
Furniture at mature stage
Online furniture options pushing earlier into cycle
E-Commerce Platform
Logistic Excellence
Limited Financial Resources
Looming Giants
Intro
Analysis
Alternatives
Implementation
Risk and Mitigation
Questions and Answers

10. Drill Down Analysis Industry Analysis Product Analysis
Company Analysis
Porter’s Five Forces
Product Life Cycle
SWOT
High competition
Fragmented market
Low supplier power
Furniture at mature stage
Online furniture options pushing earlier into cycle
E-Commerce Platform
Logistic Excellence
Limited Financial Resources
Looming Giants
Intro
Analysis
Alternatives
Implementation
Risk and Mitigation
Questions and Answers

11. Drill Down Analysis Industry Analysis Product Analysis
Company Analysis
Porter’s Five Forces
Product Life Cycle
SWOT
High competition
Fragmented market
Low supplier power
Furniture at mature stage
Online furniture options pushing earlier into cycle
E-Commerce Platform
Logistic Excellence
Limited Financial Resources
Looming Giants
Intro
Analysis
Alternatives
Implementation
Risk and Mitigation
Questions and Answers

12. Key Takeaway: We are in an emerging yet competitive operating landscape ripe for consolidation.
Drill Down Analysis
Industry Analysis
Product Analysis
Company Analysis
Porter’s Five Forces
Product Life Cycle
SWOT
High competition
Fragmented market
Low supplier power
Furniture at mature stage
Online furniture options pushing earlier into cycle
E-Commerce Platform
Logistic Excellence
Limited Financial Resources
Looming Giants
Intro
Analysis
Alternatives
Implementation
Risk and Mitigation
Questions and Answers

13. Competitive Landscape
Operating Landscape
Customer Overview
Customer Journey
Competitive Landscape
Customer Profile
Value Proposition

14. Customer Target Customer Pipeline Customer Young Professionals
Metros & Mini Metros
Self-expression through décor
Omni-channel
30+ years old
Pipeline Customer
Furniture Rental
New to work force
Self-expression
Not ready to commit
22-29 years old
Intro
Analysis
Alternatives
Implementation
Risk and Mitigation
Questions and Answers

15. Customers
The Majority of our customers are returning. These customers are:
1. Loyal
2. Spend more on average
3. 10x cheaper to retain than to gain new customer
Intro
Analysis
Alternatives
Implementation
Risk and Mitigation
Questions and Answers

16. Value Proposition Gains -Ease of access -Design ideas
-Peer recognition of style
Job
-Stylish home that expresses individuality
Pains
-Too many options
-Inconvenient
-Damaged goods
-Price
Intro
Analysis
Alternatives
Implementation
Risk and Mitigation
Questions and Answers

17. Value Proposition Gain Creators -Omnichannel approach -Stylish options
-Delivery
-In-store experience
Gains
-Ease of access
-Design ideas
-Peer recognition of style
Job
-Stylish home that expresses individuality
Product
-Furniture & Home Décor
Pain Killers
-App, Website, Store
-Superior Logistics
-Affordability
-Curated Options
Pains
-Too many options
-Inconvenient
-Damaged goods
-Price
Intro
Analysis
Alternatives
Implementation
Risk and Mitigation
Questions and Answers

18. Competitive Landscape
Operating Landscape
Customer Overview
Customer Journey
Competitive Landscape
Customer Journey

19. Customer Journey Loyalty Use Purchase Consideration Awareness
Word of Mouth
Digital Ads
TV Ads
Consideration
Website
App
“Experience” Stores
Purchase
Online
In Store
Use
Furniture
Home Décor
“Self-Expression”
Loyalty
Stylish Products
Low damage rates
Customer Journey
Intro
Analysis
Alternatives
Implementation
Risk and Mitigation
Questions and Answers

20. Competitive Landscape
Operating Landscape
Customer Overview
Customer Journey
Competitive Landscape
Channel Analysis
Competitor Analysis

21. Our Current Stores 34 Exist and are roughly 20% of our business
INR 516 Million or 15.2 Million a store
Customers coming to our stores spend % more

22. Suppliers Small and Medium Artisans
Initial lack of experience with online platform
Supplier Ecosystem
Mobilize Small Artisans
Provide Support Functions
Data Analytics accurately forecast orders
Communication
Intro
Analysis
Alternatives
Implementation
Risk and Mitigation
Questions and Answers

23. Competitive Landscape
Large Domestic Manufacturers
Brick and Mortar – IKEA
E-Commerce – Amazon India

24. Competitive Landscape
Large Domestic Manufacturers
Brick and Mortar – IKEA
E-Commerce – Amazon India
Vertical, Slightly More Online

25. Market Size You created a new market channel, but
Online is 2% of Total Indian Furniture Market
Total Market is growing 8.2% CAGR a year

26. Profitability Trends in Revenue
Out of control Costs
Falling Revenue as percentage of GMV
Trending upwards

27. Key Performance Indicators
Profitability
Conversion Rate
Customer Retention
Order Size

28. Alternatives
Online Focus
Horizontal Expansion
Brick & Click

29. Online Focus Pros Cons Focus on our core competency
Marketing and Advertising are essential
Develop new digital features to interact with customers
Utilize our great delivery system
Pros
Core competency
Keep our brand in front of the consumer
Cons
Small part of overall furniture market
Not as sticky as physical experience

30. Horizontal Expansion Pros Cons
Follow similar model to other ecommerce players
FlipKart
Amazon India
Become less selective with suppliers
Become less involved with supplier onboarding
Pros
Decrease costs
Expansion
Cons
Questionable profitability
Lack of customer preference
Dead inventory/products
Increased competition

31. Brick & Click Pros Cons We know:
80% of volume comes from smaller items
Need to keep the customer coming back
Offer smaller items in store
Take home from gallery
Online
In store pickup
Room design feature
Pros
Increase customer retention
Promotes both online and in store sales
Sales staff can upsell
Cons
Website Modifications
Supply Chain changes

32. Analysis of Alternatives
Focus Online
Horizontal Expansion
Brick & Click
Profitability
Conversion Rate
Customer Retention
Order Size

33. Analysis of Alternatives
Focus Online
Horizontal Expansion
Brick & Click
Profitability
Conversion Rate
Customer Retention
Order Size

34. Why We Chose This Plan Reaches our customer
Promotes the omnichannel model the best
Works within financial parameters

35. We have named the Brick and Mortar alternative Furnishing India
Chosen Plan
We have named the Brick and Mortar alternative Furnishing India

36. Furnishing India Supply Chain Training/HR Marketing Expansion
Road Map to IPO
Intro
Analysis
Alternatives
Implementation
Risk and Mitigation
Questions and Answers

37. Furnishing India Supply Chain Training/HR Marketing Expansion
Road Map to IPO
Intro
Analysis
Alternatives
Implementation
Risk and Mitigation
Questions and Answers

38. Value Chain Infrastructure Technology Human Resource Management
Administrative
Inbound Logistics
Operations
Outbound Logitics
Sales and Marketing
Services

39. Supply Chain What we do well What we need to improve
Dropping margins lower
Low breakages relative to global industry
What we need to improve
Outbound logistics still expensive proposition in e-commerce
How to best improve turnover and leverage omnichannel model

40. Integrate with Brick and Click
Utilizing the Pareto Principle
80% from 20%
Décor and utilities should be pushed in stores
Predictive Analytics
Data analytics to understand consumer trends
Help suppliers understand consumer preferences

41. Furnishing India Supply Chain Training/HR Marketing Expansion
Road Map to IPO
Intro
Analysis
Alternatives
Implementation
Risk and Mitigation
Questions and Answers

42. Training & Human Resources
Hiring for new company stores
Teach employees in all store new purchase process
Train sales people to identify items that go well together
Emphasize our brands when relevant
Emphasize customer service
Intro
Analysis
Alternatives
Implementation
Risk and Mitigation
Questions and Answers

43. Furnishing India Supply Chain Training/HR Marketing Expansion
Road Map to IPO
Intro
Analysis
Alternatives
Implementation
Risk and Mitigation
Questions and Answers

44. Marketing Website / App Social Media Content Development
Brand Focus: Self-expression & lifestyle brand
Website / App
Social Media
Content Development
Integrate in-store & online experience
“Available near you” feature
Develop new “design your room” feature
Develop loyalty program on app
Spotlight Privilege Partners
Social Media Competition: Customers who are redesigning their homes submit photos
Consider partnership with a family friendly Bollywood star
Emphasize lifestyle rather than products
Continue targeted TV ads

45. Marketing Website / App Social Media Content Development
Brand Focus: Self-expression & lifestyle brand
Website / App
Social Media
Content Development
Integrate in-store & online experience
“Available near you” feature
Develop new “design your room” feature
Develop loyalty program on app
Spotlight Privilege Partners
Social Media Competition: Customers who are redesigning their homes submit photos
Consider partnership with a family friendly Bollywood star
Emphasize lifestyle rather than products
Continue targeted TV ads

46. Marketing Website / App Social Media Content Development
Brand Focus: Self-expression & lifestyle brand
Website / App
Social Media
Content Development
Integrate in-store & online experience
“Available near you” feature
Develop new “design your room” feature
Develop loyalty program on app
Spotlight Privilege Partners
Social Media Competition: Customers who are redesigning their homes submit photos
Consider partnership with a family friendly Bollywood star
Emphasize lifestyle rather than products
Continue targeted TV ads

47. Marketing Website / App Social Media Content Development
Brand Focus: Self-expression & lifestyle brand
Website / App
Social Media
Content Development
Integrate in-store & online experience
“Available near you” feature
Develop new “design your room” feature
Develop loyalty program on app
Spotlight Privilege Partners
Social Media Competition: Customers who are redesigning their homes submit photos
Consider partnership with a family friendly Bollywood star
Emphasize lifestyle rather than products
Continue targeted TV ads

48. Marketing for Stores Billboards Loyalty Program Events & Workshops
Interior Design
Flower Arranging
DIY Decor

49. Furnishing India Supply Chain Training/HR Marketing Expansion
Road Map to IPO
Intro
Analysis
Alternatives
Implementation
Risk and Mitigation
Questions and Answers

50. Moving To more Studio sales
20%
50%
Increase Stores to 150 in Total Over the Next 5 Years

51. Store Mix Makeup Metro Locations Company owned 10 per year
Mini-Metro Locations
Franchised
20 per year

52. Furnishing India Supply Chain Training/HR Marketing Expansion
Road Map to IPO
Intro
Analysis
Alternatives
Implementation
Risk and Mitigation
Questions and Answers

53. Road map to IPO Target IPO value of 500 Million Profitable in 2021
Implement Brick and Click
Profitable in 2021
Target IPO value of 500 Million

54. Revenue and profitability projections
Profitability hit in mid 2021!
Costs of opening stores keep us unprofitable in light of new revenue
Key assumption: Revenue as a ratio of GMV stays constant

55. Timeline of Implementation
Year
2018
2019
2020
2021
2022
Marketing
Social Meida contest
Update website
Dev. New App Feature
Bollywood Partnership
Dev. Loyalty Program
Dev. Content
Hiring
Training
Target locations
Source Franchises
Build Stores
Workshops and Events

56. Budget Item Amount Timing Social Meida contest 200,000 2018
Update website
50,000
Dev. New App Feature
5,000,000
Bollywood Partnership
10,000,000
Dev. Content
Hiring
2,000,000
Training
Build Stores
80,000,000
Total:
107,300,000

57. Difficulty Franchising
Risks & Mitigation
Stagnant Retail Sales
Consider changing studio retail structure
Increase marketing
Difficulty Franchising
Target strategy for development
Slower growth
IKEA threat not addressed sufficiently
Pivot - Contingency Plan
Impact
IKEA Threat
Difficulty Franchising
Stagnant Retail
Probability

58. Key Performance Indicators - Metrics
Profitability
Conversion Rate
Customer Retention
Order Size
Profitable by 2021
Maintain 65% or higher
80% of customers make a repeat purchase
Average order size increase by 30%

59. Revisit Executive Summary
Question
How can Pepperfry be profitable?
Goal
Profitability, growth, survival
Alternatives
Online Focus
Horizontal Expansion
Brick and Click

60. Appendix Furnishing India Horizontal Expansion Budget Who We Are
Brick & Click
Risks & Mitigation
Agenda
Why We Chose This Plan
Key Performance Indicators - Metrics
Drill Down Analysis
Customer
Value Chain
Customers
Supply Chain
Advertisement Example
Value Proposition
Integrate with Brick and Click
SWOT Analysis
Customer Journey
Training & Human Resources
Porter’s Five Forces
Suppliers
Marketing
Product Life Cycle
Competitive Landscape
Marketing for Stores
Hiring Process Drill Down
Market Size
Moving To more Studio sales
Contigency Plan
Profitability Trends in Revenue
Store Mix Makeup
Back up Financial Projections
Key Performance Indicators
Road map to IPO
Backup- Target Enterprise Values
Alternatives
Revenue and profitability projections
Online Focus
Timeline of Implementation

61. Value Chain Infrastructure Technology Human Resource Management
Administrative
Inbound Logistics
Operations
Outbound Logitics
Sales and Marketing
Services

62. Competitive Landscape

63. Advertisement Example

64. SWOT Analysis Strengths Weaknesses Opportunities Threats
Logistic excellence
Pioneers in the field
Online platform
Weaknesses
Not profitable
Not financially deep-pocketed
Opportunities
Huge potential market
Fragmented space not dominated by a competitor
Threats
New entrants with deep pockets (Amazon India, Flipkart)
Low threats to entry

65. Porter’s Five Forces Substitutions Threat of new entrants Buyer Power
Supplier Power
Rivalry

66. Product Life Cycle Stage Characterized by Stage Characterized by
Furniture
Online Furniture
Stage
Maturity
Characterized by
Differentiation
Cannibalization
Stage
Growth
Characterized by
Competition for market share
New products

67. Hiring Process Drill Down
Define Skills
Write Job Description
Look Internally
Hiring Process
Onboarding
Communication
Additional
Training

68. Contigency Plan Contingency A Contingency B Go to A2
Become less selective
Streamline services
Increase offerings
Contingency B
Go up value stream
Acquire some of largest supplirs
Consolidate work for them (listing, pictures, shipping)

69. Back up Financial Projections
Item
2017
2018
2019
2020
2021
20202
Revenue
2,580
Profit(Loss)
(2,486)
Gross Merchandise Value (GMV)
6,500
10000
20000
32000
40000
50,000
Costs
5,066
GMV/Revenue
252%
COST/GMV
78%

70. Backup- Target Enterprise Values
2017
2018
2019
2020
2021
20202
152
190
237.5
296.8
317.8
463.82