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CASE STUDY ANALYSIS

PEPPERFRY.COM: MARKETING TO MANAGE CUSTOMER EXPERIENCE
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Situation Analysis
Pepperfry company is India’s pioneering furniture and lifestyle online retailer (e-tailer). Currently status
of the company has shown profitability as projected in the annual growth rate which is more than 250 percent.

As per 2015,

• Margin Improvement: 13–15 per cent

• Product Margin: 35–50 per cent
• 2015 Turnover: ₹10 billion

Being the first Mover in the Indian online furniture market Pepperfry experienced growth in a short span
of time. At the same time, they had experienced challenges of competing with the offline traditional market.
There foundational strategy while entering the market was to improve customer experiences at different stages
of the consumer’s purchase.

Pepperfry followed “Managed Market place” model.

In 2014, more than 70% of the online transactions were top 10 cities. This showed reluctance to buy
furniture and related products from an online space because the look and feel was one of the challenges.

Strategy Introduced “Studio Pepperfry” experience centres-online-to-offline hybrid business model

(customer meeting-and-learning points)

• To offer potential buyers an experience and expert advice without intending to sell the furniture
• To make understand the various ranges, designs, and textures of furniture

Pepperfry opened 14 operational studios in tier 1 cities with the intention of 35-40 footfall per day, having
30%-40% conversion rate on monthly basis which is approximately 367 customers per month.

As per the comparison done by Mr. Shah between the online and offline stores, Pepperfry invested 0.8 to
1.5million in stores and 0.5 to 1 million in large inventory, which was intended to not only sell the brand but
also to give live experience to customers.

Furniture Market Analysis

Furniture Market in India includes home accessories, such as linen and other home décor products. It
excludes consumables such as home-improvement items or bathroom and kitchen fittings. It includes
household items which comprised 70 per cent.

Market Share of Furniture and furnishing is US$10 billion each. Total residential furniture market
comprises of 6% (US$400 million) with expected CAGR of 27% to reach US$1.3 billion by 2020.

Competition Analysis
There was a surge in online furniture market in 2012 which was initiated by Pepperfry. With Pepperfry
holding 50% of India’s furniture Market share, Competitor’s share was as given below -

1. Vertical players in the market such as FabFurnish, and Urban Ladder which emerged in a months’ time.
Later, Stitch Wood, Custom Furnish, and Wooden Street joined the competition which contributed 35-
40% in market share
2. Also, e-commerce platforms like Flipkart, Amazon, and Snapdeal also “e-tailed” furniture and
furnishings had a market share of 10-15%
3. Heavy infusion of capital was done from the investor’s side. As seen in 2016 Pepperfry raised US$160
million capital which was twice of Urban Ladder.
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Customer Experience Management-

As per the past records, an average purchase takes 2 to 4 weeks to execute, and the time frame was longer
for higher-priced items. Also, the average amount spent by the customer was Rs 12000. Potential Customers
scan the Product portfolio nearly 15–20 times before purchase decision. Repetitive interactions with the
resources (in both offline and online retail channels) and poor last mile connectivity due to third party logistics
affected the customer experience.

• Customer experience can be enhanced at Interaction level- searching, buying, or consuming.

• An Introduction of Pepperfry’s studios acted as a catalyst to buy. It had advantages like-

-a direct sensory assessment

-Brand familiarity

-Subject matter expert- Interior designers

• Superior buying experience achievable: Management of customer experience at all stages of the
consumer decision process from pre-sales to post-sales, including customer service
• VR Studio (to feel the real shopping environment)
• Collaboration Initiatives “Pepperfry Live”36 with HomeStop, a complete home solution retail chain.
With a strategy to increase product awareness Pepperfry collaborated with Homestop in their stores
which had a footfall of 600-900
• Last mile delivery model for speedy and damage free home delivery was implemented

Marketing Initiatives
Following marketing initiatives were taken to attract the customers-

• Advertisement
• 360-degree marketing- A campaign was initiated to pitch Pepperfry as the simpler and easier
go to option for all the furniture needs
• Marketing at Airport Lounges- Introduced Pepperfry products in Airport lounges to give
customers a feel of its furniture quality and have them become familiarized with the brand.

Issues Identified:
• Supply Chain Issue.
• Damage Free Delivery of Expensive Products
• Combatting Copycats at hyperlocal level
• Online security and confidentiality issues during financial transactions.
• Only 18 percent of Indians have internet access and also limitation in internet speed was a barrier for
consumer to shop from image and video heavy sites.
• How could company’s service design be leveraged to further enhance the customer experience during
the purchase process?
• How could Pepperfry leverage this improved Customer Experience to achieve competitive advantage?

Solutions:
SUPPLY CHAIN

• Pepperfry faced supply chain issues for the last mile delivery due to poor connectivity. To reduce this
problem of reach, they executed the “last-mile delivery model” to 400 Indian cities.
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• Distribution of large items was another issue faced by Pepperfry. To address this issue, they invented
their own hub-and-spoke “large-item distribution model”, covering 97% of orders, and expanded its
reach by providing home delivery of bulky items.

• Since the number of orders are increasing with deliveries expanding over larger area, it’s best to have
a model with interconnected distribution centers rather than hub and spoke.

DAMAGE FREE DELIVERY OF EXPENSIVE PRODUCTS:

• Pepperfry can come up with innovative designs for furniture’s which can be disassembled &
reassembled and can be transported with ease lowering the chances of damage
• The expensive products should be delivered by Pepperfry’s own delivery network rather than
depending on third party logistics.
• Company should provide free replacements in case of any damages which should be inspected &
reported at the time of delivery.

ONLINE SECURITY AND CONFIDENTIALITY ISSUES DURING FINANCIAL TRANSACTIONS:

• 100% money return guarantee should be provided to customers in case of Transaction failures and
money being debited from the customer’s end, provided the issue is verifiable and backed up by
documents.
• Pepperfry should incorporate cash on delivery option for payment, keeping shipping charges prepaid.
• Though Pepperfry studios are not sales destinations, but they can take advance prepaid orders in the
stores, to avoid customer’s insecurity for online transactions.
• Offering multiple secure payment options and ensuring a trustworthy website are the two keys to gain
customer’s trust for online financial transactions.

CUSTOMER SERVICES:

• Pepperfry studios acted as catalyst to fortify the buying experience and instead of having sales persons,
the studios had interior designers to offer expert advices on interior design and furniture choices.
• It should invest in technology which provides high quality videos and store like experiences at a lower
bandwidth.
• It should provide round the clock customer support be it Chat box support or if needed on call support.
• Loyalty/Membership cards can be provided to buyers offering promotions like Gift with purchase or
purchase with purchase offers, Coupons or points, which will further encourage them to buy again in
future and also spread positive word of mouth about the company.
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• Pepperfry, using data analysis, should collect the customer requirements, suggesting right fit to
improve the customer experience and thereby reducing customer decision time.
• Being a customer centric company, PepperFry will sell value and product. So,post sales service is
necessary. Happy customers create more consumers.