Pepperfry Aspires to be a Billion Dollar Company by March 2021

• 90% of the furniture market is unorganized and a lot of organized brands who dared to venture in this category, frizzled out eventually
• However, Pepperfry has maintained a consistent growth ever since its launch. It has achieved a CAGR of more than 80%
• Despite the poor economic conditions, Pepperfry aims to break even under 6-9 months and aspires to be a billion dollar company by March 2021

Pepperfry, an eight-year-old furniture and decor company, has managed to succeed in a complex category like furniture where close to 90% of the sector is unorganized. While many other platforms entered the category and fizzled out with time, Pepperfry continues to hold its own.

In the e-commerce adoption cycle, furniture comes in at a later stage (compared to books, electronics, fashion, grocery etc.) but Pepperfry now stands at 65 stores across 24 cities and aims to launch 100 Pepperfry Studios by next year.

In the first four years since its inception, Pepperfry’s marketing budget ranged between Rs 25-40 crore annually. However, there has been a 70% jump in advertising and marketing budget in FY19 and their total spends stand at Rs 135 crore now. According to Kashyap Vadapalli, CMO, Pepperfry, 60% of the marketing budget is invested in digital mediums, about 45% on performance channels and 15% on brand or content initiatives.

In an interview with Business Insider India, Vadapalli further tells us how Pepperfry helps give local artisans a boost, its content marketing journey, and how with all of this, it has managed to achieve a CAGR of over 80%.

Excerpts:

Q. How has Pepperfry's journey been so far in India? Tell us a little about your financial trajectory?

Over the past 7.5 years, Pepperfry has increasingly built special competencies to serve the Indian market and bridge the existing gaps in the market. We have elevated consumer experience manifold by building a curated marketplace, ensuring the highest levels of quality control and providing a robust post-transaction experience of delivery and installation.

On the back of our understanding of Indian consumers in the furniture segment, we introduced ten dynamic House Brands to democratize the market by addressing unique design philosophy and price points. We pioneered the omni-channel strategy in India by creating multiple touchpoints for consumers across the length and breadth of the country. We launched our first experiential Studio in 2014 and today we operate 65 of them across 24 cities in India, which are built on a solid bedrock of an unparalleled supply chain infrastructure.

Each of these offerings are built on the premise of creating superior consumer experiences, which is the cornerstone of our brand motto- happy furniture to you. Thus, building a strong brand that makes it to the consideration set each time.

We have had strong and consistent growth ever since launch, in the last 4 years we’ve achieved a CAGR of more than 80%, we are likely to breakeven in under 6-9 months and aspire to be a billion dollar company by March 2021.

Q. What do you think sets Pepperfry apart in the category? What are the challenges faced by the company?

Pepperfry is the dominant player in the category, as it is the only truly omni-channel player in the segment while most other brands are multi-channel. Pepperfry is also the only curated home and furniture marketplace, which offers a wide portfolio of products for consumers to choose from while also helping them filter choices based on quality, price and preferences.

In the e-commerce adoption cycle, furniture comes in at a later stage (compared to books, electronics, fashion, grocery etc.) so we have to work extra hard at acquiring customers. Furniture is also a high-ticket, high-involvement, low-frequency, non-standard item – coupled with the fact that consumers are less-savvy about the technical and quality aspects of furniture – these are the key challenges to online conversion and scaling. We have tried to overcome these challenges by bringing in customer education, through quality listings and content, bringing in AR capabilities on the mobile, having 3D visualisations on the website and also opening up Studios in 65 places across the country. We have seen that each of these features, touchpoints gives us an additional lever to acquire customers and scale. We have also focussed on building a well-recognised brand and have established best in class service capability.

Q. What's the ‘360-degree-marketing’ strategy at Pepperfry?

The furniture market in India is largely fragmented, with over 90 percent occupied by the unorganized sector. At Pepperfry, it is our aim to change the buyer’s behavior to move from traditional methods (custom furniture, small unorganized players etc.) to organized platforms that offer better value, variety and service.

As a marketer, it is essential to view one’s brand from a funnel perspective right from awareness and acquisition to engagement and loyalty via conversion or activation. Over the years, we have created strong brand equity through a mix of both digital and non-digital mediums.

At the acquisition stage, we run strong performance marketing campaigns targeting the potential consumers through varied mediums. For conversion, we utilize various tools such as cash-backs and coupons, which aid in pushing the consumer towards the transaction. We also ensure high engagement with our customers through multiple touch points which results in a high repeat rate. This is achieved through push notifications, emailers and traditional campaigns and also by keeping consumers engaged through content led pieces which integrate our brand into a plotline.

Therefore, we engage with consumers through varied mediums activating a combination of myriad channels at different points of time.

Q. Since its inception, Pepperfry has chosen to use content marketing. (With Miss Malini, Girlyapa, TVF, Dice Media) Can you tell us what influenced your decision to take that route?

In today’s dynamic and competitive market ecosystem, it is essential that brands seek clarity on what they offer to a consumer, what pertinent problem is being solved through this offering and who their target demographic is. When we launched Pepperfry, we decided to create a brand that offers great variety at a great price alongside seamless consumer services, thereby filling several existing gaps in the market. Our key target demographic therefore became the urban millennial i.e., individuals in their late 20’s and early 30’s from metro and tier 1 cities who were early adopters of the internet and online shopping.

We leveraged this by ensuring that each of the platforms we chose had a significant overlap with our target demographic thereby helping us create brand awareness and high top of mind recall among these individuals. While co-curating content for these partnerships we refrained from forcibly integrating our products and offerings into the sketches, a blunder brands often make.

Today, our presence on digital platforms has grown significantly higher – 50% of the marketing budget is invested in digital media - to ensure we are constantly engaging with our customers.

Q. What is the marketing budget set aside this year? How has your marketing budget evolved over the years? By what percentage?

Pepperfry was launched in 2011 and for the first 3-4 years, our marketing budget ranged between 25 to 40 crores annually. Over the last 4 years, our marketing budget has ranged from 60-90 crores, with this year being in the higher end of the above range. While we continue to grow business at high double digits even at scale we have managed to stabilize our marketing budget because as a brand gets stronger and our marketing channels get more efficient the same investment yields better results, both qualitatively and quantitatively.

Q. What is your media mix? Which medium gets the lion's share and why?

Our media mix is evenly distributed with our marketing budget being split equally between both digital and traditional mediums. Within digital, performance marketing occupies a key position with 70 - 80% of the digital budget being allocated to it while 20 - 30% is allocated to brand and engagement enhancing digital mediums. We focus on performance marketing channels as they help drive consumer acquisition.

Traditional mediums, too, play an essential role in our marketing mix wherein, 70-80 percent of the total spends of the traditional bucket are allocated to television as it as it allows us to scale both reach and impact quickly, especially for seasonal promotions, such as Diwali and Independence Day, etc. The remnant 20-30 percent is allocated to radio and outdoor advertising, which play the role of support mediums in large campaigns.

Q. There was a top of mind recall survey, according to which Pepperfry ranks 1st in the category. Can you tell me a little bit more about it?

For more than a year, we are running a continuous brand track, which has covered more than 20,000 respondents across the top 8 cities. This Brand Track is executed by our partner research firm who are part of GroupM. Pepperfry scores the highest rank across all key parameters such as – TOM (top of mind), preference and intent and usage. Consistently we have seen that we have a TOM score which is more than 100% higher than the 2nd nearest brand. This shows that we have the most recalled brand name in the segment and we have built it basis a very clear and sharp proposition of “Happy Furniture to You” that we have been taking to the media over the last 5 years.

Q. Many platforms had entered the category but have slowly fizzled out. What has helped Pepperfry tackle difficult market situations?

This is a complex category given the unorganised market ecosystem and multitudes of variables when it comes to purchase decisions. Most other platforms that have not succeeded to scaling in this market had not been able to manage the complexity. They typically would focus on technology and marketing while the key factors are operational execution at a category management level and at logistics.

At Pepperfry, we decided to build all the aspects of customer value delivery ground-up and in-house, right from merchant capability development to catalogue building to merchandising to quality control to first-mile and last-mile logistics and also installation support. In a nutshell, an integrated, full-stack, product and service offering that was designed around the consumer. The ownership, control that this approach gives, coupled with strong data led process improvement practises helped us to scale and tackle the disorganised nature of the market.

Q. How are you making sure that your organization is environment friendly, considering you use a lot of wood in your furniture?

As a business, we encourage and enable the manufacturers we partner with to procure raw materials only from authorized and certified markets which follow proper practices when it comes to acquiring wood and other components.

As an organization, Pepperfry has planted over 1-lac trees in areas across the Rajasthan belt and will continue to do so, by partnering with organisations involved in afforestation efforts.

Q. How have you been making sure that local artisans get a boost?

We believe in providing a platform for small businesses to showcase their products to the pan-India market, consequently more than 80% of the merchants on Pepperfry are small and medium business who are based in traditional wood-working hubs across the country. When we first collaborated with these SMEs, they were largely traditional in their approach with little to no access to larger markets. We took it upon us to build their capabilities by enabling their technological infrastructure, aiding them with raw material procurement and standardization of the products. Today, each of these businesses have received a remarkable boost in their overall business practices with a significant increase in revenues.

Q. What is your expansion plan? Where do you see Pepperfry in next three years?

A large part of our current focus is to simplify the furniture segment to enable larger chunks of consumers to shift from traditional to online purchasing. This effort is being supplemented by the rapid expansion of our omni-channel model which will further aid in building not just brand awareness but also consumer trust and affinity due to the availability of the ‘touch and feel’ aspect of purchasing. Today, we stand at 65 stores across 24 cities with an aim to have 100 Pepperfry Studios by next year.

We are also focused on scaling our modular furniture capabilities in urban markets to provide consumers with bespoke solutions that are tailor-made to suit their budget and preferences.