MAKING INDIA FURNITURE-HAPPY
In a highly fragmented furniture and home-furnishing market, online furniture marketplace Pepperfry has been able to hold its own. Kashyap Vadapalli, CMO, Pepperfry talks about the strategies that he believes will help the company achieve its goal of beautifying 20 million homes by 2020 BY SAMARPITA BANERJEE Q] Pepperfry has recently refreshed its visual identity. What was the thought behind it? Q] Pepperfry recently launched its first franchise in Bengaluru as a part of its second phase expansion strategy. What more does the second phase entail? Q] Most of your recent campaigns have only been around announcements of sales during Diwali or Republic Day. Has it been a conscious decision to come out with occasion-based communication? Q] How will the coming in of global players like IKEA impact you? IKEA stands for value-for-money, engineered wood products. They have non-modern designs that are good for utility but they do not use solid wood. For us, IKEA would compete with around 10-15% of our portfolio and around 85% of our portfolio is very different from what IKEA brings in. However, that small portfolio that it does operate in is also important. A lot of new people will come into it. Many people from the unorganized, non-branded small stores will shift to IKEA soon. But since the bulk of our value comes from solid wood and the bulk of our value comes from premium, we won’t see much of a hit. Q] At a time when a lot of online marketplaces are being forced to close shop, what has helped Pepperfry thrive? Q] What is your media mix, and which platform do you use the most? Q] What are your plans for the renting-out segment that Pepperfry has recently entered? Q] Where do you want to see Pepperfry in the next couple of years? Q] There were recent talks of Pepperfry entering other segments like flooring… Q] As your business is heavily dependent on wood, are you doing anything to preserve the environment? @ FEEDBACK samarpita.banerjee@exchange4media.com
In today’s day and age, brands need to be relevant, and from a visual perspective, they need to be fresh in the consumer’s minds. This will be our third visual identity in six years. When we first started off, we offered different categories like fashion, jewellery, accessories, home products and furniture. After a year, we decided to focus on our strengths - furniture and home products. We changed our business completely in 2013, and with it, our logo. However, since then, we have evolved a lot, in terms of internal capabilities and offerings. When we first started, we relied on external parties for the service aspect of our business, like third-party logistics providers. Now, we do all that in-house. We have also launched nine private labels, and taken on an omni-channel approach by setting up Pepperfry Studios. The Pepperfry of 2017 is very different from what it was in 2013, and our visual identity needed to reflect this evolution.
When we launched our first studio, we wanted a place where people could see our design range. We had representative statement pieces in the studios where people could get a sense of our different offerings and collections. We also staffed our studios with actual designers who could have intelligent conversations with consumers. Not only did consumers love walking into our studios, but a lot of the walk-ins were turning into conversions. Currently, we have around 22 studios across 1011 cities. That was the first phase. In our second phase of expansion, we are exploring a franchiseled model for our studios as we believe the model can support the furniture marketplace ecosystem. The investments that the franchisee would need to make would pay off quickly and then they can continue to make a healthy margin. We will ensure that the standards of display and consumer experience are maintained, we will also take care of trainings. It will help us expand to the next 20 cities and will also help us increase the density in cities we already operate in. By April 2018, we plan to add another 20-25 franchisees across Tier I towns.
We follow a messaging hierarchy at Pepperfry. When you look at a new category, like online furniture, there are some triggers like value or variety that draw people. At the same time, there are some barriers like the perceived lack of trust, understanding of what the product really is, the lack of touch and feel and the kind of services the customer will receive. In our first phase, we wanted to address the barriers and tell consumers how we will tackle them. However, once we realized that the brand was well-known, we started interspersing our campaigns with value delivery communications. Of late, we are focusing more on triggers.
One of the core reasons is the people behind the organization. The founders, between the two of them, had spent about 15-20 years in the online business. I had spent around five years at eBay. Our Furniture category leader is also ex-eBay. Our Technology head has around 2025 years and so does our CFO. We are a little different from a lot of the other start-ups. While I am all for youth and energy, having a senior leadership that understands the industry and has seen tough times helps you be more resilient and go through the ups and downs more smartly. The other factors that give us an edge are actually external to us. Firstly, the furniture and home category is an extremely highmargin segment. The margin for e-tailers selling electronics could be between 5-10%, for those selling Chinese brands could be between 12%-13%. Even in fashion, if you take out the discounting, the margins are between 25-30%. In furniture and home products, we work directly with manufacturers in Jodhpur and our margins are between 40-60%. Secondly, while having a large margin, a lot of money can be lost on transportation costs, damages, etc. That’s where our experience has helped us. We also set up a packaging unit in Jodhpur in the first two years to help the manufacturers learn the art of packaging. We also focus on operational excellence, long haul and last mile shipping. The fact that we have been able to handle these challenges gives us an edge.
Over the last two years, we are roughly 50-50 between digital and non-digital. In digital, we are heavy on search and re-marketing. Out of the 50% we spend offline, close to 80% goes to television with a little support from outdoor.
While our core consumers are between 30-40 years old, there’s a segment between the age of 20-28 that are very important too. These are students or people who have just started their jobs. There is a lot of temporariness in the way this age group behaves. We wanted to tap this segment. We have launched our rentals in the top seven cities and have an eclectic range of products available. We are offering products from the value-for-money segment as well as the mass premium and premium segment. We haven’t yet launched any campaign to promote this. We plan to observe what kind of growth it sees organically and then invest on building awareness at the right time.
One of the goals that we keep talking about internally and also in the market is that we want to beautify 20 million homes by 2020. Last year we were at four million. There are around 350 million Indians in just the urban areas. We want to ensure that at least one Pepperfry item is available in each of the houses.
The area of home improvement with products like tiles and flooring, works well with our category. We are already quite strong in sanitaryware, shower and bathroom fixtures, sinks, commodes, etc. All the good Indian brands are already present on Pepperfry. We don’t indulge with the luxury segment because that would require a different level of service. However, all the premium and mass premium brands are available with us. From there, extending on to tiles, for bathrooms, floorings and kitchen is a natural extension.
We have a tie-up with an organization called ‘Grow Trees’. They are running afforestation campaigns across the country. We are associated with their campaign in Kumbhalgarh forest around Jodhpur, which is our core sourcing hub. So far, we have planted between 60,000 to 1 lakh trees.
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