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

2. Agenda Situation Challenge Recommendation Analysis Implementation
Risks
Finances
Summary

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

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

5. 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

6. Pepperfry: Turning growth into gains
Become EBITDA positive in 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

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

8. 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

9. 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

10. 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

11. 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

12. 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

13. 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

14. Financial Implications
Expansion to rural markets with cost ~200 million INR in 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%

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

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

17. 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