Instead of being a competitor for Indian furniture brands, Swedish giant Ikea will end up increasing the organised market of the largely unorganised furniture segment, which is currently pegged at Rs 1.5 lakh crore in terms of size, feels Kashyap Vadapalli, Chief Marketing Officer, Pepperfry.
“Our sales picked up ever since Ikea started operations in Hyderabad. The entry of Ikea has helped to shift the consumer interest from unorganised to organised market, Vadapalli said in an interview with BestMediaInfo.com.
Pepperfry has seen a double growth rate this year as compared to last year. Vadapalli believes that reduction in GST on branded furniture has led to this growth. The company is now focusing on increasing its offline footprint and expanding the bespoke service division. The brand currently gets 70% of all furniture related services made in India.
The company intends to spend a lot more on digital marketing next year as it expands its footprint. Vadapalli said that the company would be big on brand integration on OTT platforms. Talking about the marketing trends for next year, he said that influential marketing will be big but brands needed to use it the right way.
How has 2018 been for the brand in terms of revenue growth?
It has been a great year for Pepperfry as compared to last year, which was hit by the implementation of GST and demonetisation. Furniture was initially placed in the higher GST slab so it took the prices up and depressed the consumer sentiments.
But in November last year, the GST on furniture was reduced as a result of which sales started picking up. So this entire year, we have seen a fantastic growth. The overall growth in terms of goods sold on the site has been almost doubled as against 2017.
What is the outlook for 2019?
We’ll continue with our good run in 2019. We have done a bunch of things to expand the reach in the market. We are an omni-channel player. We have both online and offline footprint. If you think of the online footprint, a good indication of the consumer interest is the traffic that the site generates. Pepperfry today gets almost 65-70% of the share of the entire category. So all other players put together are less than half of us.
What were the major marketing trends that you saw in 2018? What do you predict for next year?
Whole build-up around influencer marketing that has happened is one big trend. There are two sides to the coin. It is definitely a powerful medium, but I don’t think that marketers are using it right. They are picking up any influencer and are not looking at the fitment to the brand, or fitment to the message. It is just not the old celebrity endorsement. People are using influencers and bloggers for small campaigns and launches.
In 2019, this area will become finer. Marketers will get smarter about it in choosing who to pick and will make better choice with the kind of message that they want to give.
How has marketing to consumers evolved over the years and what challenges do you face?
Our fundamental approach initially was to be the combination of top-of-the-funnel brand building work which was done through mass media campaign across TV, radio, cinema, outdoor and then we would have highly performance-oriented digital campaigns which will capture that interest and actually convert it.
The things that have changed significantly is the amount of content marketing we are doing and the amount of presence we have built on the various OTT platforms and various streaming platforms that have developed videos and web series.
Today we have sponsored and partnered with niche platforms like Miss Malini, TVF, The filter copy and Dice Media. We are also working with Better India. We try to tell the stories that engage the customers with the values of the brand and proving a very important third leg to our entire approach, in terms of keeping the customers engaged throughout the year.
Across the industry, the things are changing primarily because the customers today are changing. Internet has democratised information. You can’t really go out there with a smart slogan and run a campaign. You have to educate and entertain the customers. You have to use high-quality content and organisations have realised that the customers are more powerful. You have to appeal to their values, and relate to them with shared values. It is just not shouting from the rooftop. Millennial customers are today far more conscious about values that an organisation displays in terms of whether they are working or not towards social good, etc.
What’s your likely marketing spend for next year and how is it going to be allocated?
It is likely to be around Rs 150 crore and we would be focusing on scaling up both top of the funnel and performance aspects of lead generation for bespoke business.
About 20% of the spend goes directly into sales promotion in terms of various consumer promotion initiatives.
The remaining 80% is roughly evenly split between traditional, performance and digital media. And within digital, 70% on performance and 30% on brand building.
Did Ikea’s entry into the furniture market impact Pepperfry’s sales?
Today, 90% plus of India’s furniture market is still unorganised. Most of the spend is either going into the carpenters or smaller unbranded stores. The market is extremely large with a size of around Rs 150,000 crore.
The entrance of Ikea or anybody will influence a trend that will shift the interest from unorganised to more into organised. In our case, growth has actually picked up over the last two months in Hyderabad. As more and more organised players enter the marketer, consumers start considering more and more organised players for their needs and the rate of growth of Pepperfry will increase. We gain more from that.
What part of the revenue was added by the brand’s offline stores and what are your expansion plans regarding the same?
Our offline footprint is across 15 cities with 41 stores. We are looking to have more than 70 stores soon by the end of the FY. All of these offline channels contribute 25-30% to our GMV.
What are the plans to promote Pepperfry bespoke? How different would it be from the rest in the interior and home-building category?
It is a business which is fundamentally very high value order, ranging between Rs five and Rs10 lakh. Our entire focus and target is those people who are typically buying new houses or are going for renovation. And we have a digital-led generation programme that we are putting into play. On digital, we see a lot of people spending time. These people are either buying a new house or bought a new house or people who are looking for interior services or modular furniture. We are using various digital platforms to actually target users to generate leads. We have 40 studios for people to check out. The differentiating factor between us and interior designers are that we use a lot of technology.
What would be the brand’s focus in 2019? Any further expansion plans?
We will be adding another 100 stores in 2019. Our core focus next year is expanding our omni-channel footprint. We will continue to maintain and strengthen our online share.
If you look at expenditure people do with regard to home and furniture, roughly 50% of it goes into fixed expenses—on fixed items such as kitchen, wardrobes, modular furniture; basically and civil work associated with it like painting work, electric work, etc. So if you look at a consumer’s wallet share, almost 50% of the spend is actually on the bespoke, which is a complete end-to-end interior design and implementation and build service. So offline expansion and expanding the bespoke service are going to be the two big pillars as we go into the next year.