Pepperfry’s recipe for success

In June 2011, a lunch meeting gave birth to the idea of Pepperfry, the online furniture and home décor marketplace which today by far is India’s largest online furniture retailer, with 50% of the market share. 
  • After receiving their first round of funding from Norwest, they made an audacious bid to sponsor the Rajasthan Royals franchise during the Indian Premier League in 2015. This earned them about 1.2% of their revenue in that year.
  • The company faced the difficult task of creating a market by building awareness of the category—for example, consumers were not very sure of the difference between a coffee table and a side table. As an online retailer, it had to make absolutely sure that consumers were ordering furniture that matched their specifications. This could mean asking the customer to take on tasks they weren’t accustomed to: measuring the doorway prior to ordering a sofa, being clear about sizing charts. By this it risked losing consumers who found the process too complicated, or too different from how they were already used to buying their furniture.
  • Pepperfry is focused on growth, but has been careful to keep an eye on profitability, doing so by never selling at less than cost price.
  • The company is particularly proud of its omni-channel capabilities, allowing the consumer to order anytime, anywhere, from any channel or device. A unique idea pioneered by them is the opening of offline experience centres, which allow consumers to physically interact with its products. Consumers however cannot buy from these centres, they exist primarily for the touch and feel factor. The company owns 23 of these centres and plans to have 48 operational by April 2018.
  • Analysts say the company will face difficulties when catering to semi-urban markets, after the demand in tier-1 cities tapers off because those markets are price sensitive and do not value design as much and will require a change in the company’s offerings.
It is said that they make 45% gross margin and are profitable at the pre-marketing level, claiming that the only thing that they lose money on is marketing. Pepperfry is hopeful of turning profitable in the next 12-18 months, following which it will consider an initial public offering.

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