1. University of Rochester
PEPPERFRY
University of Rochester
Simon Business School
Haotian Gong
Gengfei Li
William Trigg
Minjia Zhan

2. GOAL
Profitability: Increase overall gross merchandise value over seven-fold; be EBITA positive in 12 – 18 months
Dominate market: Retain its leading position in the fierce competition
Innovation: Strength its position as an omnichannel powerhouse that appeals to young and tech-savvy consumers

3. ISSUES
Incoming competition: Domestic vs. International; Online vs. Offline
High cost and poor scalability: Earning less revenue per item sold over time

4. SITUATION ANALYSIS - SWOT
Strength:
Largest furniture e-retailer
A curated marketplace: offer carefully selected products
Offline experience
Strong supplier and logistics ecosystem
Broad reach to customers
Weakness:
Most popular items are low margin
Opportunities:
Brand recognition: House brands
Furniture rental business
Threats:
Competition:
Domestic vs. International
Online vs. Offline

5. SITUATION ANALYSIS – Porter’s Five Forces
Suppliers:
Local businesses
Unorganized SMEs (over 250) which have manufacturing mindsets
New to online retail
Supported by Pepperfry
Buyers:
B2C
Target customer: Tech-savvy young professionals who need self-expression
Market size: 25 – 30 million
Competition:
Growing online retail: Urban Ladder, Livspace
Offline: Ikea and domestic retailers
Substitutes:
Rentals
Physical stores
Carpenters (made to order)
Used furniture
Threat of Entry: Medium
Easy to enter market
Hard to manufacture
Quality and distribution channel are the key differentiators

6. Analysis I: Revenue per Sale

7. Analysis II: Pepperfry Customer Analysis

8. POTENTIAL SOLUTIONS NO.1
M&A
Livspace: expand Pepperfry’s clients base to interior designers
Market of 1400 architects and designers
Potential of partners in 2018
Challenges:
Large investment
Unclear scalability

9. POTENTIAL SOLUTIONS NO.2
Furniture Rental
Launch a furniture rental business
Target younger demographic
Market is estimated to be worth $3 billion
Challenges:
Will need a larger distribution network – delivery & pickup
Invest in repair & maintenance services

10. POTENTIAL SOLUTIONS NO.3
House Brand Stores
Transform offline studios into a selling point
Exclusively sell in-house brands
Improve margins, sales volume, and brand recognition
Challenges:
Redesign stores to hold inventory
Potentially upset suppliers whose inventory is removed

11. SOLUTION: House Brand Stores
Benefits:
Improved point of sale
Brand loyalty exposure
10% higher margins on goods sold
More competitive against growing offline competition
$9.3 billion growth in sales expected offline ($700 million online)

12. Analysis III: Cost Breakdown 2017

13. Analysis IV: Financial Projection 1
2013
2014
2015
2016
2017
2018
2019
2020
Revenue
341
439
992
2001
2580
6272.5
15054
34000
Cost
-883
-801
-2247
-4993
-5066
-11854
-30000
Profit
-542
-362
-1255
-2992
-2486
2500
3200
4000

14. Analysis V: Financial Projection 2

15. RISK MANAGEMENT: House Brand Stores
Risks
Change in store offering may lower demand
Other brand partners may lose visibility, online traffic
Cost may increase by holding inventory locally
Mitigation:
Introductory discounts and advertise original product availability online
Offer “featured” promotions in-store for brand partners
Delivery will be localized, reducing time and mileage

16. IMPLEMENTATION PLAN Short-term: 12 – 18 months
Transform stores to brand-exclusive
Open 35 new stores to increase revenue by 15% - 20%
Long-term: 5 years
Expand in-house brands to décor and utilities
Design and develop more house brands to improve variety and accommodate more styles

17. Maintain Customer Loyalty
MARKETING STRATEGY
Earlier access to new release product
Maintain Customer Loyalty
Referral discount
Open day experiences
Rent Apps
Social Media
TV Commercials
Marketing Channels

18. Cost Introduce 7091 Shelves in 2018 and label systematic methods
Strategic alliance with other furniture companies to help delivery
Promote recycling boxes plans to get discounts
Change portfolios of marketing to 20:80

19. Conclusion In-house brands increase margins
Stores will help earn more of expected $9.3 billion industry growth
Grow customer loyalty through exclusive brands
Compete more effectively against incoming competitors (i.e IKEA)
Reduce costs in supply chain and marketing

20. Thank you!