Strategies for Indian Furniture Market Success
In this analysis, explore key insights to maintain a leading position in the Indian furniture retail market. Discover ways to optimize revenue streams, implement disruptive strategies, and become a market leader. Uncover the external and internal factors influencing success, strategic alternatives, financial implications, and risk analysis to drive growth and competitiveness.
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Presentation Transcript
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
How to maintain your 1st place in Indian furniture retail market? Optimize Current Revenue Streams & Implement New Disruptive Ones Focus on Growth & Not Profitability Specialize by Leverage Key Competencies Become the Spiciest Pepper in India!
Content External & Internal Analysis Strategic Alternatives Strategy Implementation Financials & Risk Analysis 3
Content External & Internal Analysis Strategic Alternatives Strategy Implementation Financials & Risk Analysis 4
External Analysis Retail Trends in India Strong GDP Growth of 7.5% (2017) Generally Unorganized (90%) Currently Low Fraction of Online-Sales (1%) Customers Rely on Word of Mouth and Trust Comfort and Convenience are Appreciated Trends indicate a Great Future in India 5
External Analysis Customer Identification Young Professionals Tech-Savy Upwardly Mobile Desires Self-Expression Decor-Conscious Focus on Rapidly Growing Middle-Class 6
Internal Analysis Strengths & Weaknesses Hot Stuff Pepperfry s Competencies Needs more Pepper Pepperfry s Improvement Areas Innovative, fast & reliable Supply Chain Efficient utilization of data & customer preferences Good relationship with Suppliers 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 7
Content External & Internal Analysis Strategic Alternatives Strategy Implementation Financials & Risk Analysis 8
Strategic Alternatives Decision Criteria Boost Growth to Unprecedented Spheres Ensure Sustainable Growth with Sufficient Funding Enhance Competitive Advantage Maximize Customer Satisfaction Utilize Unique Supply Chain & Partnerships 9
Strategic Alternatives 1.) Growth vs. Profitability Growth Primary Focus on Boosting Growth & Becoming Biggest Online-Platform Profitability Break-Even as soon as Possible to Increase Company Value vs. Increase Product Offerings Increase Service Acquire & Retain more Customers Cut Costs Increase Commissions Increase Franchising Fees 10
Strategic Alternatives 1.) Growth vs. Profitability Growth Primary Focus on Boosting Growth & Becoming Biggest Online-Platform Profitability Break-Even as soon as Possible to Increase Company Value vs. Increase Product Offerings Increase Service Acquire & Retain more Customers Cut Costs Increase Commissions Increase Franchising Fees 11
Strategic Alternatives 2.) Positioning in Competitive Landscape It s Hot Enough Keep Status Quo Add some Salt Expand Offering Spice it Up Differentiate 12
Strategic Alternatives 2.) Positioning in Competitive Landscape Vertical IKEA-Concept Interior Design-Solutions Livspace HomeLane Pepperfry Omni-Channel Offline Online E-Commerce Portals Amazon India Flipkart Horizontal 13
Strategic Alternatives 2.) Positioning in Competitive Landscape Vertical IKEA-Concept It s Hot Enough Keep Status Quo Interior Design-Solutions Livspace HomeLane Boost Growth Pepperfry Ensure Funding Omni-Channel Offline Online Competitive Advantage Customer Satisfaction E-Commerce Portals Amazon India Flipkart Supply Chain Horizontal 14
Strategic Alternatives 2.) Positioning in Competitive Landscape Vertical IKEA-Concept Add some Salt Expand Offering Interior Design-Solutions Livspace HomeLane Boost Growth Pepperfry Ensure Funding Omni-Channel Offline Online Competitive Advantage Pepperfry Customer Satisfaction E-Commerce Portals Amazon India Flipkart Supply Chain Horizontal 15
Strategic Alternatives 2.) Positioning in Competitive Landscape Vertical IKEA-Concept Pepperfry Spice it Up Differentiate Interior Design-Solutions Livspace HomeLane Boost Growth Pepperfry Ensure Funding Omni-Channel Offline Online Competitive Advantage Customer Satisfaction E-Commerce Portals Amazon India Flipkart Supply Chain Horizontal 16
Content External & Internal Analysis Strategic Alternatives Strategy Implementation Financials & Risk Analysis 17
Implementation Current Revenue Streams Add more Pepper: Focus on Less Pepper, please: Focus not on D cor & Utilities (35-50% Growth) Furniture (80& of Revenue) Leverage house Brands (10% better margins) Offline Studios & Experience Centers Partnerships with interior designer Furniture Rental (we do not have the warehousing resources) 18
Implementation Current Revenue Streams 1 No item was sold at a loss Leverage Experience Centers through Franchising 2 19
Implementation New Revenue Stream - Personalize Augmented Reality App Interior Designer as Premium Service Clients can see how their furniture looks at home through the App 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 20
Implementation New Revenue Stream Advertising Revenue Suppliers pay for Exposure Improve the Online Listing-Order of their Products Demonstration of Products in Offline- Studios Digital Advertisement on Pepperfry.com 21
Implementation Marketing 75% of their GMV came from organic or unpaid traffic sources 22
Implementation Marketing Google Marketing Social Media Marketing TV Marketing SEA Search Engine Advertising SEO Search Engine Optimizing Influencer Marketing focusing on Young Professionals Optimization Utilize their knowledge gained from past experiences Primary Focus on Digital Marketing: 70% 23
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 24
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! 25
Content External & Internal Analysis Strategic Alternatives Strategy Implementation Financials & Risk Analysis 26
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% 27
Revenue Growth $160.0M $143.7M $140.0M $120.0M CAGR 30% $110.5M $100.0M $85.0M $80.0M $65.4M $60.0M $50.3M $40.0M $20.0M $0.0M 2018 2019 2020 2021 2022 28
Operating Margin 0.00% -10.00% -20.00% -25.97% -30.00% -37.25% -40.00% -50.00% -54.74% -60.00% -68.73% -70.00% -80.00% -84.57% -90.00% 2018 2019 2020 2021 2022 29
Product Portfolio 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 30
Funding needed VC Funding As soon as possible IPO 2021 $200 Million $90 Million 31
Revenues & Costs 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 (% of revenues) 19.6% 17.0% 14.4% 11.9% 9.4% Premium Service $0.5M $1.0M $1.7M $2.8M $4.3M (% of revenues) 1% 1.50% 2% 2.50% 3% Advertising $0.5M $1.0M $1.7M $2.8M $4.3M (% of revenues) 1% 1.50% 2% 2.50% 3% 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 $27.6M $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% 32
Risks & Mitigation Risk Probability Impact Mitigation Monitor franchising data- handling and invest in breach prevention Cybersecurity Med Med Seek other kinds of funding besides VC equity Funding difficulities Med Med Focus on core competencies and tailor Pepperfry s offering to appeal to target market Losing market share to international mega- corporations Low High 33
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? 34
How to maintain your 1st place in Indian furniture retail market? Optimize Current Revenue Streams & Implement New Disruptive Ones Focus on Growth & Not Profitability Specialize by Leverage Key Competencies Become the Spiciest Pepper in India!
