Pepperfry to Double Offline Studios by 2019
The company’s offline stores, Studio Pepperfry, have emerged as key touchpoints for consumer engagement. The increase in popularity led the company to adopt a franchise model in 2017 with an aim to expand its reach in line with its strategy to build the l
Pepperfry, the brainchild of Ambareesh Murty and Ashish Shah, is aiming to be the country’s largest Omnichannel furniture retailer. In 2014, the brand pioneered the Omnichannel home and furniture business by establishing its first Studio in Mumbai. Currently, with its large product portfolio and the largest big-box supply chain, the brand caters to 500+ cities across India. Studio Pepperfry are one-of-its-kind concept stores that showcase a curated range of furniture from its online portfolio and serve as a design inspiration. Here, one can experience cutting-edge design furniture, look at diverse wood finishes used by the brand, while getting an idea of the overall furniture quality. Interior design consultants assist in browsing the entire range and also offer free in-store design consultancy that are both aspirational and reflect the latest and best in home design trends.
According to Hussaine Kesury, Chief Category Officer, Pepperfry, “Currently, we have 32 Studios (owned and franchise) across 16 cities and aim to raise this number to 70 by April 2019. The average size of our studios ranges from 2,500 to 3,000 sq. ft., which is typically 1/10th of a normal offline furniture store.”
“We don’t sell products from the Studio because the idea is to showcase the large variety of – more than 1,00,000 – products from our online catalogue to customers. The Studio helps in building our specialist credentials with customers through relevant and specific advisory, while driving our Channel Partner Programs, involving architects and designers. This in turn helps us benefit from network effects, while not having to deal with the issues that conventional retail businesses face
like high inventory and high related capex,” he adds.
Since these Studios have emerged as key touchpoints for consumer engagement the brand adopted the franchise model in 2017 to expand its reach in line with its strategy to build the largest Omnichannel network in the country.
“Customers who visit our Studios have a 150 percent higher average order value and buy 80 percent more times on Pepperfry. To enhance customer experience further, we have plans to introduce highly engaging VR experiences in the next few months,” adds Kesury. Operating Model
The company’s franchise model is an opportunity for the brand to expand its reach by aligning with entrepreneurs across India.
“Our franchise model offers the advantages of low capex and zero inventory investments and focuses the energies of the franchisee entrepreneurs towards market expansion. It’s a win-win for all involved,” says Kesury.
“The Studios turn profitable in about 10-12 months’ time, depending on the location, size and market rentals. Those located on high streets and in prime spots typically turn profitable earlier (in 8-12 months) while locations in malls and airports typically take 12-14 months. A happy consequence of our Omnichannel approach is that all Studios are marketing beacons that eventually pay for themselves,” he explains.
A point to note is that online drives network effect for Pepperfry and provides the brand with the ability to achieve centralised distribution with an assetlight model at scale. It also lowers customer acquisition costs. Courtesy these benefits, the brand’s online business has grown faster than others.
“The combined effect of all these approaches is that we expand reach, gain from network effects, and benefit from partnering with the entrepreneurial ecosystem while continuing to leverage the benefits of a low-cost online business,” says Kesury, adding that Pepperfry has grown 116 percent CAGR over the last four years.
The company presently caters to 500+ cities across India with an aim to double its footprint by entering Tier III and IV markets.
Managing Different Categories
Pepperfry offers a highly differentiated portfolio of more than 1.2 lakh products across categories like furniture, home décor, lamps and lighting, furnishing, kitchen and dining, housekeeping, and hardware and electricals.
In the furniture segment, bed, coffee table and shoe racks are a popular choice and in the non-furniture segment, lamps and lighting is the largest category followed by mattresses, dining and baking, and hardware and electricals. The average ticket size for furniture is between ₹17,000 - ₹20,000 and for other home products, it is ₹4,000.
The brand’s furniture sales currently contributes 80 percent of the total revenue while the décor and utility business contributes about 20 percent of the sale and 70 percent of the transactions.
“We work with more than 200 furniture merchants and 10,000 merchants overall across various sourcing hubs. Having recognised the varied requirements and design needs of our customers, we have established 10 house brands that cater to a wide range of style specifications of consumers. We are aiming to invest behind expanding our house brands thereby in turn expanding our product portfolio,” says Kesury.
Enhancing Customer Experience
According to Kesury,
“We believe that AR/ VR technology is a game changer in the online furniture segment. Customers shopping online face issues like how the product will look or fit in their space, both physically and aesthetically. We address this specific customer need through an enhanced Augmented Reality feature on our app, which allows them to zoom into products, drag and place them against their room setup, or their walls giving them a choice to easily mix and match the products with their home interiors. With high definition imagery, clutterfree layout and user-friendly options, the feature simplifies the process of buying furniture online.”
The brand is currently focusing on developing innovative and cuttingedge technology, which will provide the best in class online furniture shopping experience to the customers.
To add to the overall consumer experience, Pepperfry, through its own last mile delivery, ensures products reach a customer’s doorstep damage-free. It also provides free assembly for further convenience.
Pepperfry has set out a mission to be in 20 million beautiful homes by 2020 and hence is building multiple engagement touch-points for consumers.
“We will extend our Studio coverage into Tier II and III towns, and in keeping with Pepperfry’s sharp focus on customer experience, significant investments will be made in areas like supply chain automation and expanding the big box logistics network to 1,000+ cities,” says Kesury.
Some of the new cities the brand is looking to enter through its offline network include Lucknow, Siliguri, Hubli, Vizag, Imphal, Mysore, Coimbatore, Vijayawada, Nagpur, Guwahati and Jaipur. The investments in Studios vary depending on the location, size of the Studio and market rentals.
“The average initial investment made on each Studio is between ₹40 to 60 lakhs, with Studios contributing 20 percent to the overall business. Our top 15 cities account for almost 90 percent of our business and our eight metros contribute to almost 80 percent of the business,” says Kesury.
The brand is growing at a CAGR of 83 percent courtesy
a robust financial architecture and the efficient business processes deployed during the last 6.5 years.
“We make 45 percent gross margin and are already profitable at the pre-marketing level with the goal of turning profitable in the next 12-18 months,” concludes Kesury.
In furniture, Pepperfry has the largest collection of designs sourced from 150+ national brands including Hometown, Spacewood and Evok, and it has organised the non-branded furniture under its very own inhouse brands. Inhouse brands also cater to a wide range of design and style specifications of consumers and contribute to 50 percent of the overall business.
Woodsworth is characterized by a timeless, classic range of furniture. Reflecting designs that are sleek, contemporary and functional. It aims to deliver a blend of style and value, aesthetics and functionality as well as comfort and uncompromised quality.
MINTWUD: Mintwud is conceptualized for modern and compact homes - a rare combination of style and functionality. It follows a very minimalistic design language optimizing the material and cutting down excess to make sure the furniture is pleasing to the eye and easy on the pocket.
CASACRAFT: The modern designs in the Casacraft range represent the ideals of practicality, cutting excess and absence of decoration. This brand reflects the design philosophy of ‘form follows function’ prevalent in modernism. Replete in unique finishes and minimalist yet striking accents the unique range of furniture adapts perfectly to modern living.
AMBERVILLE: Amberville is synonymous to a stately and gracious living. Taking inspiration from the classic colonial style of furniture prevalent during the
1,800’s, the Amberville Colonial product line reflects a design sensibility determined by the very genteel and cultivated European Queen Anne and Georgian style epitomising the deep dark woods and warm spice colour polishes. BOHEMIANA:
Bohemiana is a range of furniture that blends the free spirit of the eclectic with the rigid frame of the industrial pieces. They complement each other to have the right balance to add to home interiors. These ‘one of a kind’ quirky accent pieces add a splash of colour in dull spaces.
MUDRAMARK: Mudramark is carefully crafted furniture which is influenced by ethnic Indian art, architecture and culture. The Mudramark range of products are inspired from organic and ornate Indian forms; intricate paintings and distinctive motifs. The beautiful craftsmanship and details makes the house become a home with furniture that transcends generations.
MOLLYCODDLE: This brand aims to turn the four walls in the child’s room into their dreamland/ fantasy land. Mollycoddle is a versatile range of modern children’s furniture with a punch of vibrant and cheerful colours. Each piece by Mollycoddle is child safe, carefully designed, constructed and curated.
CLOUDDIO: Clouddio has quality mattresses and offers pillows, mattress protectors at competitive price-points for consumers. Stratus, Cumulus, Nimbus, Altus and Cirrus are the sub brand.
PRIMORATI: These are modular wardrobes that are functional and unique with a sleek factory finish. With best quality raw material, this brand offers a wide variety of finishes and colours. One can select shutter styles, internal configurations and fittings to create the ultimate coordinated look.
MANGIAMO: Mangiamo is a modular kitchen brand that is customised, ergonomically designed with high quality finish. It is a fusion of functionality and aesthetics that lends an international look.