How would you categorise the product range that Pepperfry sells? What's the biggest seller? Which are the fastest growing?
Pepperfry is into the home products segment. Our goal is to be the place where all Indians shop for their homes. Therefore all home products starting with furniture and then going on to décor, furnishing, lamps and lighting, kitchen appliances, dining, housekeeping and bath equipment, come under our offerings.
The biggest seller in terms of revenue, by far, is furniture. It accounts for almost three-fourths of our business. It’s also our fastest growing segment. We are the market leaders in this segment. We have everything that’s needed to win the furniture segment in India in terms of range, brands, price points and services. Having the service to back our product offering is of utmost importance. One needs to have delivery prowess too, and we have the right infrastructure in place.
From a volume perspective, the décor, kitchen equipment etc. sell more.
The average price point for furniture is almost Rs 15,000. If you look at the other items the average price is around Rs 1,500.
Who would you describe your TG? How is this expanding in terms of socio-economic strata?
So our core advertising TG is people who are from SEC A, urban and big city or metro consumers. These people have already transacted online in other categories like electronics, fashion etc. So they’re already confident about shopping online and are now venturing into buying home products whether it is décor, lamps or furniture. That’s the basic profile. People are between the age group of 18 and 45 years. Almost 80 to 85 per cent of our transactions are from people in that age group.
Our top 15 cities account for almost 90 per cent of our business and our eight metros contribute to almost 80 per cent of the business.
They are progressive customers, who are confident in their outlook and are able to take informed decisions after looking at information available on the website. They are progressive and sophisticated shoppers.
What is the average ticket size? How is this growing?
The average ticket size is around Rs 4,000. Last year this may have been around Rs 3,500. The average selling price has gone up and is primarily driven by furniture. What we are seeing is that people are getting more comfortable purchasing more expensive furniture pieces online and the average sales price for that has gone up from around Rs 9,000 last year to around Rs 14,000 to 15,000 this year. So that has led the overall average selling price to increase.
How would you describe the year 2015 for the company? What were the objectives and have you met them? What's in store for 2016?
We started large scale advertising only towards the end of last year (2014). We are celebrating our fourth anniversary soon, but our big marketing push in terms of expanding our reach and getting out to many more consumers began only 15 to 16 months ago. I’ll describe these months for Pepperfry as a period where the business has changed rapidly. If you look at our current position, we have almost grown three and a half times compared to last year. If we go back a few more months, we’ve almost grown five or six times in the last year and a half. We are now confidently the largest furniture company (offline or online) in India in terms of our scale.
So, this year has been about achieving scale and growth.
The brand sells online as well as through in-store or experiential – what's the sales percentage of these zones versus online sales?
We do have stores, but they are studios. Our studios are primarily present for providing design inspiration for our customers. They are not sales points. So, consumers come and interact with our products here, but have to make the purchase online.
Our stores are manned by designers, and consumers can speak with them to get an understanding about products. Physical stores aren’t a separate sales channel for us.
Within online what's the app/desktop split?
We have both an app and a mobile site, which are pretty similar in terms of their functionality. Today, the contribution to sales from here (mobile) is about 20 per cent.
What's the role of advertising in this segment? How was the recent Diwali campaign received?
The Diwali campaign was our biggest campaign so far. The Diwali season is a very important season for home purchases in India. A lot of consumers use the occasion to purchase furniture and other home products. Therefore we ran a campaign at that point of time.
Are advertising media spends growing? What’s the biggest chunk and how large is digital?
Yes, they’ll be growing. But our campaigns won’t be as large as the Diwali campaign till the season again. Television is the biggest chunk in terms of spends.
Digital is an always-on strategy for us. Digital contributes around 40 per cent through the year. This includes social media and search.
You also have OOH installations. How big are your spends on OOH? How much of it also allows users to experience the product/s?
Yes, we have installations at airports and the likes. OOH is also quite substantial at around 10 to 15 per cent.
In a category like furniture, are factors like returns more of a worry, given logistics? What is the rate of return/exchange for Pepperfry?
When we started our operations, almost four years ago, we used third party teams for pick-ups and drops. But over the last three years we’ve been using our own team.
We figured that third party offered us no expertise. The supply chain is now controlled by us. So we can organise and schedule pick-ups and drops. So, if we see an unhappy consumer, we are in a position to pick it up.
The rate of return is low. Since furniture is a category of purchase where people do their research before buying, our rate of return is as low as 2 per cent.
Also, we have COD only on only some items we sell (it’s not offered for furniture at all). So, returns only happen if there is a damage in transit or if an oversized or undersized item has been ordered. We take it back in both the cases because we understand that people can miscalculate sizes.
Is furniture as a category is largely replacement-driven? If yes, would it help to expand into buying/exchanging used furniture?
There are three or four key reasons for purchases actually.
Most of it is for the need of extra furniture. People don’t tend to furnish their whole house in one shot.
Second is the need for replacements. We do these replacements too, but that’s only in three cities currently. It’s not really a revenue generation thing for us, it’s only CSR-driven as the furniture we pick up isn’t resold but just given to places that require it. Users can click a picture and upload it on the site and we offer points which can be redeemed on a new purchase.
The third reason for purchase could be renovations or moving into a new house.
Would you label the e-commerce market in India as mature now? If not, how long do you think this will take? How about furniture within e-commerce?
The e-commerce market in India has barely scratched the surface. The total number of people to have purchased online is 50 million. The potential is immense. As economic development happens there’s a huge scope for growth. Let’s narrow this down to furniture – only five lakh people have bought this online. So there’s an opportunity to grow 10 to 20x in the next five years.
How many players do you think can play in the furniture e-com space? Do you foresee some of them becoming part of a larger e-com play?
Like other retail this is highly localised and specialised. There is place for multiple players as the market is large. The entire furniture market is around 25 billion dollars in India, of which only 5 to 10 per cent is organised. So, there’s space for many players in it.
(This article first appeared in the 25 December 2015 issue of Campaign India)