How to Build India's Fastest Growing Lifestyle e-Retailer

Retailer met up with Pepperfry.com founders - Ambareesh Murty and Ashish Shah, and their team at its Mumbai office. Pepperfry.com, the fastest growing eRetail marketplace has just completed one year of operations, an opportune moment  to find out how they did it.

In the eRetail scene in 2012 one name that stood out for its sheer energy and enthusiasm from the word ‘go’ was Pepperfry, the e-Retailer that serves customers with thousands of pocket friendly lifestyle products.

The name combines two aspects of a simple philosophy - “Honest and Indian like Pepper with the Sizzle and Fun of Fry.” The first anniversary of the launch of their operations is an opportune moment to learn more about this exciting company.

A YEAR OF EXCITING GROWTH

It all started with the vision of serving customers with a wide range of fantastic products and a consistently great shopping experience, while benefitting all stakeholders including employees, communities, craftsmen and the businesses that they work with.

Just nine months into operations Pepperfry was awarded the prestigious Red Herring Top 100 Asia Award.

Turnover has crossed the `100 crore mark in January 2013, less than 12 months from starting operations! A journey that began with a portfolio of 25,000 products now has more than 70,000 products on any given day. And this is a dynamic mix where every month 6,000-7,000 new products are added. Pepperfry has also increased the product categories at regular intervals. It started with 300 different categories of products and has today more than 700 categories of products for the Indian customer.

In all of this, Pepperfry has retained its focus on lifestyle products and has further expanded its lifestyle product portfolio into categories like Pet Supplies, Baby Products, Leisure and Car Accessories.

This growth does not show any signs of plateauing and remarkably, they have achieved all this in one of the more challenging years of e-retail in India!

GETTING THE BUSINESS MODEL RIGHT

At a time when most eRetail players had an inventory-based eRetail business model, Pepperfry decided to create a managed marketplace of small and medium businesses. Pepperfry manages the entire e-commerce process for merchants to deliver a superior customer experience.

This starts with working with merchants to select items with high sales potential, arranging for products to be photographed, creating high quality item descriptions, marketing the merchandise and finally enabling post sale processes like QC, packing, shipping and Customer Support.

This business model helps Pepperfry enable a wide network of merchant partners offer a wide variety of products to customers. “Our managed marketplace model helps us control all moments of truth related to a customer’s experience on Pepperfry,” says Ashish Shah.

Rather than investing in typical inventory-based models, Pepperfry invested in ensuring customers had a superior eRetailing experience and providing a wide selection of products to customers. Pepperfry today has expanded its logistics operations to serve thousands of merchants across Delhi, Haryana, Rajasthan and Maharashtra.

RESPONDING TO CUSTOMER DEMAND FOR LIFESTYLE PRODUCTS

The Indian eRetail boom was initially led by standard products in electronics and books. The first wave in lifestyle products was driven by shoes and clothing. Pepperfry has leveraged and is riding high on growth across hitherto unexplored lifestyle categories (which include furniture, home and jewellery) apart from a wide range of fashion merchandise.

Pepperfry’s selection and category choices reflect offline consumption patterns where a large share of the Indian customer wallet is spent towards products for their home and jewellery.

Pepperfry has emerged as the market leader in furniture and home. Sales in these categories on Pepperfry are expected to exceed `150 crore in 2013. Already, a home and furniture item sells once every 2 minutes on Pepperfry.

“We have great leadership in the home and jewellery segments and these categories enable us to engage deeply with our customers and give them several reasons to keep shopping on Pepperfry. We’ll look to keep the momentum in these categories going in years to come,” says Hussaine Kesury, AVP Categories at Pepperfry.

Responding to customer feedback, Pepperfry has also evolved to offer customization options in some of its categories. For example, the furniture customization feature allows customers to personalize their furniture by sharing designs which can then be crafted by merchants as per the modifications (like dimensions, type of wood polish etc.) sought by customers.

The Indian customer is fairly value conscious and Pepperfry is able to pass the benefits of low costs to customers through low overhead costs and working directly with craftsmen, jeweller’s and entrepreneurs.

WOOING THE WOMAN SHOPPER AND MILLENIALS

Till recently, male shoppers have dominated Indian online retail with women constituting less than 25 per cent of Indian e-customers. But this trend is changing in line with more women surfing online and seeking products for their home, family and themselves.

About 50 per cent of Pepperfry’s customers are women and its home and jewellery business reflects this demographic strength.

“Women e-shoppers are a high potential demographic segment and this is great news for Indian eRetail. Pepperfry is fortunate to be ahead on this curve,” says Rajesh Iyer, CMO Pepperfry.

Both Ambareesh Murty and Ashish Shah feel that the millennial generation (those born in the 1980s and beyond) are early adopters of technology and are symptomatic of a rapidly evolving India and its lifestyle patterns. These millennial’s are future confident and have a progressive approach to shopping online.

GIVING SMALL BUSINESSES GLOBAL REACH

Pepperfry’s vision of working with small businesses has driven it towards building an extensive network of merchants which include craftsmen, artisans, small businesses, early stage entrepreneurs, and SOHO businesses.

Currently, Pepperfry works with over 1000 merchant partners and is looking to expand this network rapidly in the coming years. The managed marketplace model ensures that merchants are able to reap the benefits of customer demand across India and the world without needing to invest large amounts of time or money into setting up an online presence.

The site home page invites merchants who are interested in selling on Pepperfry to provide their contact details and then the Pepperfry team reaches out to get these merchants on board. A merchant can expect to achieve incremental business of `15-25 lakh in a year by selling on Pepperfry.

The vision is clear; Pepperfry believes it cannot grow without the support and growth of their merchant partners, and the extensive category management team at Pepperfry looks to work closely with merchants to ensure their success.

AND THE PACE WILL ONLY GET FASTER

With Indian eRetail moving to a marketplace model and players taking on the Omnichannel approach how would Pepperfry maintain its pace of growth?

Pepperfry recognizes the dynamic nature of eRetail and so keeps an eye open on all developments. They feel confident of the strength in their business model and believe that their team has the right balance of technology and domain expertise to enable them to take on future challenges.

While the managed marketplace model may look simple to grasp, it demands operational intensity and excellence and Pepperfry feels that its first mover advantage and track record of building collaborative businesses will give it an edge.

There are ambitious plans to increase lifestyle product categories, expand the merchant network and invest in more fulfillment centers (in 2013, at least three new hubs in South and East India will start operations). 

Pepperfry’s vision is to establish itself as India’s top lifestyle eRetail marketplace by offering a wide lifestyle selection through a profitable business model.