Pepperfry pioneered the omni-channel model in the home and furniture industry in 2014 through the launch of its first Studio in Mumbai
Online furniture market place Pepperfry is banking on an omni-channel strategy to achieve the target of gross merchandise value (GMV) of $1 billion (Rs 6,845 crore) by 2021, says Ashish Shah, Founder and Chief Operating Officer, Pepperfry. To put that number in perspective, the startup had ended FY18 with a GMV of Rs 1,500 crore.
As part of it, the company intends to launch small format stores of less than 1500 sq ft, which will be 3D technology-enabled. This is in addition to the larger stores, named Studios, that the company operates.
In an interview to Moneycontrol, Shah said, “Pepperfry has entrenched its position as a leader in the home and furniture segment, with an online traffic market share of over 60 percent.” It have evolved into a full-stack provider in the home and furniture segment. Urban Ladder is its nearest competitor.
Pepperfry was founded by former e-Bay executives Ambareesh Murty and Ashish Shah in 2011. Since then, it has been growing at a compounded annual growth rate of 83 percent, with a 20 percent year-on-year growth. The company clocked a revenue of Rs 308.47 crore in FY18.
So far, it has raised around $200 million in six rounds of funding.
Currently, Pepperfry has a portfolio of over one lakh products that range from furniture, décor, and kitchenware to bed & bath, lights and cleaning supplies.
While 80 percent of the company’s current revenue is generated from furniture, 70 percent volume of transactions is recorded in the décor and utility segment.Studio strategy
The Mumbai-based firm pioneered the omni-channel model in the home and furniture industry through the launch of its first Studio in Mumbai in 2014. At present, Pepperfry has 43 Studios in 18 Indian cities. Of these, 12 are franchises. Each of its stores are located in key catchment areas.
Studios are essentially offline experiential centres for discerning Pepperfry customers, who are seeking design inspiration through touch and feel of the products, Shah said.
For a big-ticket category such as furniture, he feels it is essential to engage the consumer through multiple touchpoints, especially in niche markets.
“Consumers from these markets have a high purchasing power and aspire to acquire branded, design-forward furniture. However, their access to it is limited in Tier II markets,” he stated.
Its Studios business currently contributes 30 percent revenue and Shah expects it to contribute 45 percent sales by 2021.
Though Pepperfry's consumer base is rapidly evolving and is embracing the online buying trend, customers still prefer to ‘touch and feel’ in the pre-purchase process, especially before ordering big-ticket products such as furniture. This has prompted Pepperfry to expand its Studios’ footprint through the franchise network, across niche markets such as Indore, Goa, Thiruvananthapuram and Imphal.
“Our franchise model is a truly unique business model, with immense potential to scale, thus making it lucrative for potential partners. Unlike any franchise business in the country, it does not require the partner to hold product inventory and is based on 100 percent price parity,” Shah said.
Change in consumer behaviour
Shah said there has been a notable shift in consumer buying behaviour from brick-and-mortar outlets to online channels.
He pointed out that while this is predominant in certain categories like gadgets and fashion, there is a surge in online demand for non-standardised categories as well, aided by availability of a wide variety of products at compelling prices at the convenience of a click.
“Consumers seek a seamless purchasing process, right from an easy site-navigation to varied payment mechanisms, last mile delivery and after-sales service. Personalised marketing and addressing specific needs further aids the process,” Shah explained.Pros & cons of online-offline tradeIn a dynamic industry like furniture, Shah feels having a mono-channel model may have its limitations.
He said a slew of consumers are choosing to purchase online due to the availability of an array of products that meet their specifications.
However, he was quick to add that an online-only model may often leave potential consumers apprehensive of the quality and finished form of products due to the lack of touch and feel, especially when it comes to non-standardised commodities or large ticket products.
On the other hand, physical stores offer customers the luxury of touch and feel and the ability to seek real-time inter-personal information on the product or service from the brand’s personnel.
But a brick-and-mortar model is limiting both geographically and in terms of the SKUs (stock-keeping units) the store can hold, therefore restricting the company’s reach and the consumers' options.Shah recognised the need to have multiple touchpoints and provide consumers a hassle-free and convenient shopping experience and that is when Pepperfry pioneered the omni-channel approach.