CHAPTER 2

2. LITERATURE REVIEW

2.1 Omni-Channel

It is personalisation and customisation options online as well as exciting loyalty

programs. Take for example the Starbucks' app, which has combined loyalty and value
add options for consumers in one fell swoop and has managed to garner almost 19
million active monthly users globally, accounting for nearly 30 % of total rush hour sales.

2.1.2 The Future = Omnichannel & Consumer Experience

Eventually, the route to success for both offline and online companies is customer
experience. Shoppers will shape the path brands take in the coming future-offline or
online. A returning consumer spells victory for a brand and this is possible only through
creation and implementation of experiences, as well as a seamless connection between
all channels of trade traditional or e-commerce.

2.1.3 From Clicks to Bricks

Why Luxury E-Commerce Brands Are Opening Physical Stores

 brick-and-mortar retail is shifting to cater to evolving preferences, expectations,

and shopping behaviours of modern consumers.
 Physical high-end stores help build legitimacy and brand awareness.
 Digital-first luxury brands leverage online data to offer a personalised experience
offline.
 Successful luxury e-tailers are re-imagining the purpose of physical stores by
taking cues from digital shopping experiences. They are using the opportunity to
offer a compelling high-end experience that complements the digital one.
 No inventory: Digital-first luxury brands can use stores as pure showrooms.
Globally, the O2O trends as witnessed many more cases in comparison to India. Pure
play e-commerce retailers are driving incremental sales by allowing multi-channel
shopping, in the hope that shoppers using more than one channel will spend more on

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their brand. The other upsides are repeat Purchases, increased average order value
and interacting with the brand in person. Some brands which have successfully
included traditional retail in their repertoire of sale channel are: Amazon Go ,
Alibaba.com, Bonobos , Boll&Branch.

2.1.4 Omnichannel Experience:

Omnichannel experience is no longer just a buzz word. It is the need of the hour, the
one thing which will pretty much ensure success for a retailer. Consumer demands are
very specific these days and to fulfill them a brand has to be Omnichannel in its
approach. It has become critical for retailers to build a seamless and an easy shopping
experience , not just to acquire, but to retain customers as well. Around 45 % of
Millennials make purchases through e-commerce platforms like Amazon and Flipkart

2.1.5 Omni-channel Retailing :

Rina Hansen (2015) in the research thesis titled- Towards a digital strategy for
Omnichannel retailing- has argued that, the emergence of web technologies, mobile
devices and social media networking channels has revolutionized the retail customer
experience. The researchers found that customers are increasingly using multiple
channels to maximise their shopping experience. The researcher here illustrates the
Hummel’s case study and examined the transition of a B2B company to becoming a
multi-channel retailer (B2C E-commerce) by re-aligning its inherent digital technologies
for developing the Omnichannel retailing model. This study concluded that, after the
proliferation of these technologies consumer expectation has increased, categorically in
the category of fashion retailing. In this thesis, the researcher has suggested the fashion
brands to reconfigure their existing business and information technology (IT) resources.
The researcher recommends aligning these resources with a new digital strategy in
order to deliver an integrated and coherent shopping experience across channels and
markets. The researcher refers this approach as the Omnichannel way of retailing. Here
the researcher has summarised that, with the advancement of digital channels, the
consumer expectations has also increased to a new level. In this kind of scenario,
businesses need to engage with the customers whenever, wherever and however. So

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the motivation for strategically executed Omnichannel strategy will be become ever
more compelling. However this study is limited by featuring a single case that is
pertaining to fashion retailer Hummel’s. Hence it can be argued that, one cannot
generalise from a single case. The second major limitation of this study is its focus on e-
commerce only and inclination towards the technicalities of the Omnichannel
transformation process. However, it is observed that, digital marketing and social media
marketing are the inevitable components of Omnichannel retailing at Hummel and in
general as well. A study undertaken by Deloitte delves into the new system of retailing
connecting the various channels like offline stores, Web based stores, mobile apps and
social media networks is referred to as the Omnichannel retailing. By virtue of
integration all these channels, Omnichannel retailing offers a flexible and seamless
shopping experience to consumers, regardless of whether the customer walks into a
store, browses on a website or orders via mobile devices. So by being broadly present
across channels and enabling each channel to serve the customer at any point through
the purchase journey, retailers can increase the brand awareness, enhance loyalty and
ultimately drive the value. It is also observed that, by integrating store and non-store
presence leading retailers have been able to lure new customers and also to appeal to
distinct markets. In doing so they not only increase their level of non-store sales, but
they achieve this at very low cost of their existing sales. (Deloitte, 2014) Hence
Omnichannel retailing is basically the model of retailing that offers a seamless shopping
experience to consumers across all possible mediums/channels. It involves engaging
consumers with the right message at the right time on the right channel.

2.1.6 Omni-channel Loyalty :

Michael Hemsey (2012) in the whitepaper titled- Omni channel Loyalty- Designing the
Ultimate Customer Experience- stated that, the term Omni channel is an outgrowth of
multi-channel and cross-channel retailing. Omni channel system when implemented
with proper management expertise and technology solutions can be upgraded to offer
an Omni channel experience. The researcher further argued that, marketers want to sell
products to consumers while loyalty experts strive to engage, retain and grow these

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new customers and drive them to advocacy. However, the only way to accomplish both
effectively is by offering channel-optimized loyalty programs “right timed” to deliver
engagement at each and every touch-point that meet the expectations of each
customer.
Mark Glazer (2012) VP of Brand Loyalty at Kobie Marketing Inc said that, successful
Omni channel loyalty is about delivering loyalty from the very beginning of the customer
lifecycle, across all channels in seamless manner. True connection begins even before
consideration; I'm talking about that inkling that makes someone engage in the first
place and say “yes please” or “more please,” sparking an instant got-to-have-it moment.

2.2 PepperFry

PepperFry started operations in January 2012 as an online retail portal e-tailing various
product categories such as apparel, jewellery , perfumes and cosmetics and furniture
and home décor. However, it took just a little over a year of operations to realize the
enormous promise that the furniture business held. This product category contributed to
approximately 80% of the company’s top line then and had no competition in the online
space at that time besides Urban Ladder. Realizing the sizeable opportunity and the
significantly higher margins in the furniture business, PepperFry shelved other product
lines and positioned itself as an online marketplace specializing in furniture and home
products in March 2013.

2.2.1 PepperFry's USP

In a short span of 6.5 years, PepperFry has entrenched its position as a market leader
in the online home and furniture segment courtesy the robust financial architecture and
the efficient business process deployed. Its effective business model stands on the
following differentiators/Pillars:

 Omnichannel Network
In 2014, PepperFry pioneered the Omnichannel approach by launching its first
experience centre, studio PepperFry in Mumbai, that enables consumers to experience

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the material, quality and make of the product and interact with design experts who offer
free in-store design consultancy on furniture products ensemble in studios.

 Differentiated Catalogue
It offers a wide range of 1.2 lakh products, including top brands and house brands,
which cater to specific product requirement of the customers. Having recognised that
every customer has a distinct requirement, the company has developed a robust
portfolio of 10 inhouse brands as well as that cater to a wide range of design and style
specifications of consumers and contribute to 50 % of the overall business.

 Managed Marketplace Model

PepperFry has more than 10,000 merchants registered on the online platform who can
sell the products to customers in more than 500 cities. In the highly unorganized
segement, the brand operates through a managed marketplace model where it
manages all aspects of customer experience starting from pre-sale merchant listings to
post-sale logistics and customer service. This enables the brand to provide a
standardized and superior buying experience to Indian consumers. The business
model acts as an ideal platform for small and medium business artisans and merchants,
who wish to sell merchandise. It also has over 1,000 merchant partners who showcase
their design skills, craftsmanship and service orientation to customers across India and
the world. For many merchants, it has become the primary source of their income.

 Largest Big-Box Logistics Infrastructure

In an industry that largely depends on external service providers, PepperFry was the
first online furniture marketplace to build its own logistics network that has helped in not
only rationing time and costs but also helped in overcoming sectoral challenges that
existed before. It constructed a proprietary hub-and-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. The
company also developed specialized packaging and delivery capabilities for
differentiated furniture products and used ingenious technologies and instruments to
deliver despite arduous situations. Today, PepperFry has built India's largest big-box
supply chain network with 18 distribution centres and 3 warehouses across the country.

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It owns its last mile delivery with over 400 trucks and a team of 250 carpenters. with the
capability of delivering more 1,00,000 large items per month, it caters to 500+ towns
and cities in India.

2.2.2 Marketing Mix

Product

PepperFry is an ecommerce platform in India which focuses on selling furniture and

other household accessories. PepperFry identified that there is unfulfilled consumer
requirement of logistic support for movement of furniture from one city to another and
there is a business potential for a pan India furniture portal. PepperFry offers a highly
differentiated portfolio of more than 1.2 lakh products across categories like furniture ,
home decor , lamps and lighting , furnishing, kitchen and dining , housekeeping , and
hardware and electricals.

In the furniture segment, bed, coffee table and shoe racks are a popular choice and in
the non-furniture segment, lamps and lighting is the largest category followed by
mattresses, dining and baking, and hardware and electricals. PepperFry began as an
online marketplace platform where merchants can list their furniture products for sales
and PepperFry would additionally provide logistic support in order fulfilment. The
company later moved into providing its expertise in packaging and photography. The
company offers more than 1 million furniture products ranging from furnishing to kitchen
and dining as a part of its product offerings in its marketing mix. Coffee table is the most
sold furniture item through its platform. The company ventured into home décor
business with the launch of Studio PepperFry in December 2014. Studio PepperFry
provide services ranging from space planning and conceptualization to selection of
furniture and guide for material specification. The company has launched its mobile app
to enhance its engagement with the customers.

Price:

PepperFry does base its pricing strategy on discounted price but on customized offering
and comparison across assorted products in the process obtaining 40-45% margin.

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The average ticket size for furniture is between Rs. 17,000 - Rs. 20,000 and for other
home products, it is Rs.4000.

Company believes unlike other e-commerce platform, furniture e-tail is fragmented and
PepperFry has to target a market which is largely unorganised and hence discount
pricing may not work. However, PepperFry prices its offering at competitive and
affordable prices as a pricing strategy in its marketing mix. The company also brings in
sales discount for limited windows to boost up sales and create buzz. PepperFry uses
periodic referral and discounted coupon codes for certain categories of product. It has
also collaborated with other credit and debit cards companies and offers special
discount to the partner credit card company’s card holders.

Place:

PepperFry has covered more than 500 cities under its service offerings. Currently
PepperFry studios(Owned and Franchise) across 16 cities and aim raise this number to
70 by April 2019. The average size of the studios ranges from 2,500 to 3,000 sq.ft.,
Which is typically 1/10th of a normal offline furniture store. It has sold furniture
assembled in Jodhpur in Rajasthan to a customer in Mizoram covering 2664 km for
fulfilment in process. PepperFry owns 400 vehicles for the fulfilment of orders. The
company has built the Padgha Warehouse, the largest furniture warehouse in India.
Most of the company’s warehouses are present in Western and Southern parts of India.
The company has opened 20 Studio PepperFry across the country to enhance the
customer experience and create a pull for purchase from its online marketplace. The
psyche of consumers in India is to have physical look at the furniture before buying,
these experience centres helps PepperFry in building confidence towards its product
among consumers. Experience centres also bring in customers for its home décor
business. PepperFry mobile app is designed with augmented reality features for
increasing customers experience.

Promotion:

PepperFry invests heavily on advertisement as it tries to increase the brand awareness

level. Their marketing strategy is built around helping people to make purchase
decision. The company mostly advertises on TV. PepperFry also advertises through

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paid print media and radio. In first few years its ad campaigns were focused on building
the trust around the brand and online purchase of furniture. Once they have reached
optimal awareness among the consumers later ad campaigns are more focused on
providing specific benefits like looks and design of product. PepperFry is also utilizing
digital media platform for promoting its brand and business. As a part of the promotion
strategy the company ensures it presence for the people who actively researching on
the Internet to buy furniture and these target groups are approached via performance
marketing channels such as search engines and Social Media. To create good
impression only high definition images of products are posted on the webpage. As per
company’s research their 65% of the customers are women who shop after 8 P.M on
weekdays and on weekends and accordingly company designs its promotional
campaigns

People:

PepperFry works with 10,000 suppliers, 3,000 artisans and over 3,000 active suppliers,
from whom it sources its products outside of their job responsibility. It values creativity
more than skill in its employee. PepperFry has 250 carpenters on call so that customers
need not have to wait for more than 6 hours for the set-up of furniture. It invests in
improving its logistic services as furniture is a segment which needs exceptional care
while fulfilment. Logistics is the area where company loses its most of the margin but it’s
the quality of fulfilment service which is the key differentiator for company. PepperFry
has launched Bespoke services, a forum through which customers express their
opinions to the designers for upping the design quotient of their respective homes.

Physical Evidence:

PepperFry sells some products which are made from technologies having ISO:9001,
18001 and 14001 certifications, which signals the quality of product it has on its online
marketplace. PepperFry had a sales of INR 1000 crore which accounts to 50% of total
e-tail furniture sales. The company is market leader in online furniture sales. PepperFry
sells an item every 25 second, has over 5 lakh monthly visit on its webpage and has
more than 5 lakh likes to its Facebook page. By February 2017 it has served 4 million

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customer orders. PepperFry has won numerous awards like Red Herring Asia Top 100
which is given to most promising private technology ventures in Asia and Pure-Play e-
retailer of the year at Indian e-retail congress 2014.

Process:

PepperFry deploys stringent quality check to provide quality products to the customers
at durable prices. IT is the key to PepperFry’s business it invests in building state of IT
infrastructure. It makes extensive use of data analytics to know about the consumer
preferences and shopping habit to provide customised offerings. The company values
its merchant and artisans, currently it has over 100 merchant partners who use this
platform to display their design and craftmanship. PepperFry has announced the launch
of innovation hub in Bengaluru in 2016. This will be the R&D centre with 30-40
developers responsible for developing solutions to enhance customer experience.
Hence this gives an overview of PepperFry marketing mix.

2.2.3 Marketing Strategy

‘Content, Consult, Commerce’

The PepperFry strategy is built along the three pillars of ‘Content, Consulting and
Commerce’ that are typically the three phases that the quintessential buyer goes
through during the process of shopping for furniture.

The first step involves researching what options are available in the market for the item
he is looking for. This is the ‘content’ phase that PepperFry aids the customer by
providing a class-leading online catalogue of over 1.2 lakh products across categories
like furniture, décor, lamps, bed and bath, furnishings, kitchen, dining, bar,
housekeeping, hardware and electronics, garden and kids.

Once the customer has a reasonable idea of what he is interested in, he consults
professionals such as interior designers and architects or trusted acquaintances to help
him narrow down his choices and decide what to finally buy. This is the most difficult
part of the buying process as it more often than not involves a significant cost of
consulting a professional and finally closing down on a deal. While PepperFry’s

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exhaustive and highly user-friendly online interface plays a significant part in consulting
the customer, the lack of a human element had always limited the consulting process.
The online interface characteristically restricts an element of customer engagement that
can only be bridged by a brick-and-mortar establishment. This had been addressed to a
great extent by the launching of the first of thirteen PepperFry studios in December
2014.

The commerce stage refers to the conclusion of the deal where the consumer goes to
the online portal and places the order for the product he has decided to buy. While most
businesses focus almost entirely on this, PepperFry has taken necessary steps in this
direction to engage the customer in his decision making process by setting industry
benchmarks during the content and consulting stage.

Logistics is key’

PepperFry has built a robust logistics and supply chain to ensure a smooth delivery
process. Their heavy item shipment network ensures quick and damage-free door-step
delivery of bulky furniture covering over 98% of furniture orders placed by customers. It
offers free shipping and installation on all items and has shipped products to more than
2,700 towns in the country through reliable logistic partners and its own last mile
delivery infrastructure.

‘Leverage vendor resources’

Since PepperFry is primarily a marketplace, commission earned from other vendors is a

fundamental part of its revenue strategy. It also leverages vendor resources freely
during the content and consulting stages to generate sales for the merchant while
creating the best possible environment for the customer.

2.2.4 Challenges and the way forward

The five-year-old company has not had to face many challenges in terms of
competition. Negotiating an essentially 92% unorganised market and building the
logistics infrastructure in addition to influencing customers to shop online for furniture
were its trickiest challenges.

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PepperFry believes that it is firmly poised for growth and aims to be a USD1 bn
company in the near future, since it has successfully created a class-leading home and
furniture products catalogue and a robust supply chain in its first five years of operation.
To achieve this target, it plans to further enhance its customer engagement during the
consulting stage by nearly tripling the number of PepperFry studios in the country to 36
by the end of 2017 and expand last mile connectivity to 1,000 cities from the current 500
in the next one year. Plans are also on the anvil to better imbibe augmented reality and
virtual reality platforms in the PepperFry studios that will usher in the next stage of
product visualisation for the customer and substantially differentiate PepperFry’s
offering from the competition.

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