Three months into its 24-hour delivery gambit in select markets, online furniture and home goods brand Pepperfry says there has been a 18-32% uptick in demand in those cities. The company is working to extend the service to markets beyond Mumbai, Delhi-NCR and Bengaluru where it piloted the programme. At the same time, with the addition of 100 more studios in the last 10 months, the brand is looking to become a “neighbourhood kind of store”. It currently has 195-plus studios across 100 cities.
From a consumer perspective, the 24-hour delivery window is a significant value-add but the challenge now is to scale up the supply chain to be able to serve the new markets on the expansion map. “This would require a quantum shift in portfolio design, standardisation, demand and supply planning, inventory norms and inter-city logistics,” says Angshuman Bhattacharya, partner and national leader, consumer products and retail, EY India. While the addition of physical stores nationally would help, the new service model would imply huge pressures on on-shelf availability and on-premise service, “which, in turn, would require disruptive supply chain thinking, translating into viable unit economics”, he adds.
EY estimates India’s furniture market at ‘1.95 trillion (in FY20), of which the residential segment comprises ‘1.3 trillion. The branded furniture segment for homes is `18,000 crore, which is around 13% of the overall residential market. While the residential furniture segment has been growing at 10%, the branded market segment has outpaced it, logging 17% growth.
Race against time
Pepperfry currently delivers to nearly 500 cities through 32 distribution centres and three fulfilment centres. Furniture contributes 80-82% of its sales turnover and around 50% of its sales volume.
Ashish Shah, co-founder and COO, Pepperfry, says in a category like furniture, a 24-hour delivery window is not something customers look forward to or demand and certainly hasn’t been a key deciding factor behind purchase. “Given that we are the largest D2C big box company in the country today, we thought we should pioneer and take this as a challenge. We are doing it only to challenge ourselves and to excite our customers,” he says.
“Clever ploy too considering it’s a difficult thing to replicate given the complexity of the logistics,” says business strategist Lloyd Mathias. Having said that, putting in place many more fulfilment centres at key locations and setting up a strong technology backbone would be key to living up to this self-challenge.
Pepperfry recently opened a large fulfilment centre in Delhi to meet this 24-hour promise. With that, it now keeps inventory in three locations including Mumbai and Bengaluru. The next stop is Kolkata. “The reason we are able to move the inventory in our warehouse so fast is that we have 11 years of experience with our marketplace partners and that gives us valuable insights on what sells well,” Shah says.
The platform extracts order-related information from the central database three times a day, and runs shifts on the same night to load its delivery vehicles. “A lot of route planning algorithms actually go into making deliveries successful. Our supply chain team is an expert in terms of planning the route map so we can make these deliveries within the promised time,” he says.
Two years back, it initiated a 24-hour assembly service and today, 92% of its furniture assemblies happen within a day. To ensure zero-defect delivery, Pepperfry is working to reduce the number of touchpoints to avoid damage. It currently has a less than 2% damage rate.
Show and sell
Pepperfry’s 195-plus studios contribute between 45% and 48% of its total business. While the franchisee-owned and franchisee-operated studios are 400 sq ft to 1,500 sq ft in size, the company-owned and company-operated ones are 1,500-3,000 sqft. To enhance customer experience in these studios, Pepperfry offers personalisation via a curated digital catalogue, enabling multi-variate, category- and style-based navigation. “We are investing in hard analytics powering browser experience, state-of-the-art site-search and interactive 3D content. We have enhanced user experience by ramping up AR and VR,” Shah adds.
About 25-30% of Pepperfry’s business comes from small towns. “Our studios in tier-II and III cities activated a completely new market for us, helping in creating brand awareness,” Shah adds. Expansion in smaller towns will be key to unlocking growth for the brand over the next two to five years.