“When we started out in 2012, we used to rely on third party logistics for delivery, however, they lacked the brand ethos that Pepperfry stands for. Therefore, we built our own big-box distribution logistics model. Today, we have derived efficiencies of scale through supply chain automation, 95%+ vehicle utilization, improved delivery success rates and staff productivity,” highlights Vikas Sharma, AVP Supply Chain, Pepperfry, during an exclusive interview.
In a short span of 7 years, Pepperfry has been able to successfully entrench its position as a leader in the home and furniture segment with an online traffic market share of 60% plus. Growing at a CAGR of 83%, their mission is to be in 20 million homes by 2020. Since inception, the brand has meticulously worked towards strengthening various elements of the business that has not only helped them in attaining market leadership but also streamline the unorganized furniture sector in India to a great extent. In an industry that largely depends on external service providers, Pepperfry is associated with 10,000 sellers and is able to impact more than 25,000+ livelihoods. Pepperfry constructed a proprietary hub & spoke large item distribution model that significantly reduced per unit shipping costs, increased scale and operating efficiencies and achieved unprecedented service levels at negligible damage rates.
Currently, Pepperfry has three warehouses across the country, with the Mumbai warehouse being the largest at 285,000 square feet, and 21 distribution centres. Today Pepperfry has more than 6 Mn registered users and 58% plus of Pepperfry transactions come from repeat buyers. The marketplace gets 12 Mn monthly visits. Wherein the average ticket size for furniture is Rs. 17,000- 20,000 and the average ticket size for other home products is Rs. 4,000. Through its own last mile delivery of a network of 350+ delivery trucks and a team of 250+ carpenters, Pepperfry reaches 500+ cities. It aims to expand to the Tier III and IV cities, thereby doubling its footprint via its’ omni-channel model.
Pepperfry’s omni-channel model is incomplete without “Studio Pepperfry”, a one of its kind concept store from Pepperfry that showcases a curated range of furniture from the online portfolio. At the Studio, one can experience the cutting edge design, various types of furniture with different wood finishes and get an idea of the overall quality of the furniture from Pepperfry. Here interior design consultants offer free in-store design consultancy on furniture products ensemble to furnish homes that that are aspirational while reflecting the latest and best in contemporary home design.
Its growing expanse
In the last few years, the Studios have emerged as key touch points for consumer engagement and a great marketing channel. Hence, in 2017, Pepperfry rolled out the franchise model for our offline expansion and to promote new-age entrepreneurs across the country. Pepperfry’s franchise model is a truly unique business model that does not require partner to hold product inventory and is based on 100% price parity. This exceptional model has immense potential to scale thereby making it a gainful proposition for interested partners. The marketplace currently has 59 (owned and franchise) studios across 24 cities.
Pepperfry was not just a pioneer of the omni-channel model but, also quickly recognized that every consumer has a distinct requirement in terms of need. The organization has more than 1 lakh plus items and operates in categories across furniture, décor, wall art, curios and showpieces, lamps & lightings, mattresses & bedding, carpets & furnishing, cookware & bakeware, kitchen, dining & bar, bath & laundry, housekeeping & organizers, hardware & electrical. In 2014, Pepperfry launched its house brands. Each house brand is differentiated by design ethos and every furniture piece has to fulfill specific design requirements and quality standards. Today, Pepperfry has 10 distinct house brands that contribute to 50%+ of their overall business, these include Woodsworth, Mintwud, Casacraft, Amberville, Bohemiana, Mudramark, Mollycoddle, Clouddio, Primorati and Mangiamo.
In December 2018, the company announced the launch of Pepperfry Bespoke – a one-stop-shop for end to end design solutions, through which the marketplace will expand into home interior projects. The services will include space design and planning, material selection, on-site execution, delivery and project management. With interior design consultancy, vast product portfolio and execution expertise to help make Indian consumers’ dream homes a reality, Pepperfry Bespoke offers full stack home interior solutions. They have partnered with top brands like Faber, Bosch, Ebco, Hindware, JSW, Kaff, Kajaria, Merino, Picostone, Siemens, Kohler, among others across verticals, for these services. The service is replete with personal designers who provide tailored expert advice.
With a view to get the supply chain enhancement that the company has achieved over a period of time, we got an opportunity to interact with Vikas Sharma, AVP Supply Chain, Pepperfry. Here are some interesting excerpts of the interview…
Managing so many SKUs and merchants is quite a task. How do you manage the complexity it entails?
Pepperfry offers a varied and distinctive portfolio of over 1 lakh products across segments like furniture, home décor, furnishings, lamps and lighting kitchen and dining, housekeeping, and hardware and electrical. To ensure that we deliver the finest quality product to our consumers we work with more than 200 furniture merchants and 10,000 merchants overall across various sourcing hubs.
In order to manage this vast network and portfolio, Pepperfry built a proprietary large item distribution logistics model. We commenced the origin to hub shipment process through contracted trucking arrangements in April 2013 and since then, we have significantly reduced per unit costs with increasing scale and operating efficiencies. Today, we have built India's largest big box supply chain in the country. Pepperfry’s specialized large item delivery fleet of more than 350 vehicles operating from 19 hubs across India today serves customers in 500+ cities. Pepperfry also provides assembly and installation support to customers through a team of more than 250+ carpenters across major towns and cities.
What are the unique aspects of the fulfillment centre?
Pepperfry’s market leading position is a combination of innovation and rapid expansion of logistics infrastructure, packaging, fulfilment & transportation capabilities to meet the growing business demands. Currently, among the 3 warehouses the one in Mumbai is the largest at 285,000 square feet. The space is stacked with G+7 stacking for stocking furniture.
Why did you select Mumbai as the central location? What’s your strategy to serve all cities with least time to market?
Mumbai is a leading demand centre, contributing over 20-22% of our overall business. Since it is equidistant from both northern and southern hubs, the location has aided us in accruing tonnes of benefits of scale. We have also successfully enabled the reduction of delivery time from 25 days to almost 11 days now as a large percentage of our sellers are based in Mumbai.
What made you take that step and how profitable is it going to be for your growth?
The logistics infrastructure in India for large item shipping is significantly under-developed. Shipping bulky but delicate items such as furniture is either prohibitively expensive or takes too much time. When we started out in 2012, we used to rely on third party logistics for delivery, however, they lacked the brand ethos that Pepperfry stands for. Therefore, we built our own big-box distribution logistics model. Launching our own independent logistics arm-Pepcart has allowed us to do away with the additional costs of integrating with a third-party logistics entity. Today, we have derived efficiencies of scale through supply chain automation, 95%+ vehicle utilization, improved delivery success rates and staff productivity.
Kindly enlighten us about Pepcart.
Pepperfry is as much a home and furniture products’ company as it is a logistics expert. In an industry that largely depends on external service providers, we are the first online furniture marketplace to build our own logistics network - Pepcart, which has helped in not only rationalizing time and costs but also overcome sectoral challenges that existed erstwhile. This effort stemmed from our vision of changing the furniture landscape in India and making it accessible to consumers in a manner that was unheard of, quick and hassle-free.
What’s the forecasting model you rely on?
Furniture as a business is different from the traditional FMCG, or FMCD ones in which 20% of the products derives 80% of the sales, however in furniture business, pareto’s 80-20 doesn’t fit well, as unique SKU which contributes towards sales lies in the range of 35%- 45%. Considering the uniqueness of our business problem, we have developed our own unique demand forecasting model which incorporates historic demand variations, sales trend (of weekdays, and weekends), and future marketing campaigns to help us ensure we have the right quantity available at the right time.
What kind of challenges do you face in moving bulky items? Also, how do you tackle return logistics challenges?
Damages and reverse logistics are the biggest challenges for any business. To ensure we tackle this challenges in most optimum way, we have invested in our three important product touch points: Loading, Handling, and Packaging. We have developed in-house training modules on how to load/handle the material inside the container for dispatch of goods we have considered parameters such as product weight, and fragileness while defining the loading norms for the product. Additionally, we have also, developed our inhouse packaging team which investigates the damage/return rates of the products, and take appropriate action in defining the new packaging norm for the product.
We use our in-house vehicles for doing the return pick ups from customers’ place. We optimize the routes of our vehicles in such a way that after completing regular deliveries, same vehicle can be utilized to do the return pick up as well.
What tools are helping you manage the entire task seamlessly?
The furniture items are bulky and heavy, requiring specialized delivery mechanism. Pepperfry has established and deployed various innovative techniques like introducing blanket deliveries that ensure zero damages and is environment friendly as these blankets can be re-used saving carbon footprints. Specialized product handling techniques are used like staircase trolleys for delivery of products to high-rise apartment, shoulder dolly’s to lift products easily and tool boxes to enable open packaging.
We have replaced wooden crates with honeycomb boxes and corrugated boxes with higher specifications, which has helped to reduce delivery timelines, save cost and improve customer experience. At the same time, it has resulted into adopting the green environment movement in Pepperfry supply chain. In addition, Pepperfry has introduced angle board framing, styrene fitments for fragile glassware, and Pizza box packs for furnishings.
Tell us about your recent ISO certification
We recently received the receipt of International Organization for Standardization (ISO) certification for our Mumbai Fulfilment Centre. This makes it the first warehouse to be ISO certified with three critical certifications in the country and the only one in the furniture and home segment in the country to attain this accreditation. The certification was bestowed upon us by Bureau Veritas, one of the best internationally acclaimed agency.
The company’s Padgha [Bhiwandi] warehouse spanning across 2,85,000 sq. ft received certification for ISO 9001:2015 (QMS- Quality Management System), ISO 14001:2015 (EMS-Environment Management System) and ISO 45001:2015 (OHSAS- Occupation Health Safety and Assessment Series). The ISO 9001:2015 certifies the high emphasis on quality and operating efficiency of Pepperfry Fulfilment Centre.
The ISO certification reiterates the company's passion and commitment to deliver the best customer experience through rigorous focus on supply chain process efficiencies, prevention of environmental pollution and occupational accidents. The Pepperfry Fulfilment Centre at Padgha is one of the India's Largest Furniture Warehouses built with state-of-the-art automation and material handling capabilities including G+7 racking systems, battery operated trucks and multistory fetching reach trucks.
What’s going to be your supply chain strategy going forward?
Our robust supply chain management along with our best-in-class practices in the service ecosystem across logistics and post-sales support have ensured 50%+ repeat business, with one of the highest average order values in Indian ecommerce. We expect to double our logistics footprint from existing 500+ cities to establish robust delivery network in Tier III and Tier IV cities. By the end of the fiscal year, we have plans to increase our fulfillment and distribution centers across the country.
Where do you see Pepperfry growing from here on?
Over the years, Pepperfry has been able to successfully establish its position as a leader in the home and furniture segment with an online traffic market share of 60% plus. We have been focused on strong unit economics and curating a business model that benefits from economies of scale.
With an aim to spark a feeling called home across the nation, we plan to increase our omni-channel footprint with a key focus on tier 2 and tier 3 markets while also expanding our house brands portfolio. We also aim to provide superior consumer experiences through investment in new age technology and automation. With this strong foundation in place, we are now all set to extend our brand into new growth opportunities in the home interiors and furniture space. We aim to touch a GMV (gross merchandise value) of USD 1 billion by 2021.