Home and furnishing Market• India expected size of home and furnishing market : $ 20 billion.• Furnishing sector is 50% of this : $ 10 billion• Currently, 90+% of market is unorganized.

Major favorable points:Nascent stage, huge growth potentialLess competitionMargin rates are high

Major challenges:Supply chain and logistics as products are big in size.Ensuring products aren’t damaged.Building customer trust

Major Players: Fabfurnish,Urbanladder, Pepperfry

Fabfurnish.com• Started in Feb 2012• Owned by German giant Rocket internet• Hybrid model- online as well as offline stores• Home decor, furnishing, kitchen items: A complete home

solution.• Inventory as well as marketplace model• Has global brands products available on portal.• Offline stores are major target to display products and create

brand awareness among people.• Revenue around Rs 50 crore in 2013. Expect to have 200 crore

revenue in 2014.• Plan is to open more offline stores and increase the products

on online portal.

Urbanladder.com• Founded in July 2012, Bangalore based.• Funding by kalaari capital, SAIF partners, steadview capital.• Funding- $1m in 2012, $5m in 2013, recently in July 2014- $21m.• Sales: Around Rs 6 crore per month in march 2014.• Selling ‘furniture products’ only. No kitchen or curtains.• USP: Customer engagement, better User experience, quality, good

visual identity.• No offline store, only online.

• More focus on technologyBuilding itself as a ‘home furniture solution’ provider.Focus on quality everywhere- product design> user experience on

website> Smooth delivery> Installation> More interaction with customer at every point.

In-house team for quality checks, delivery, installation.

UrbanLadder Focus• Reinventing furniture retail:o “Wardrobe configurator” app: User can Customize the wardrobe

completely. User can choose the size, color, and what they need inside the wardrobe like racks, shelves, hangers’ space etc.

o Focus is to provide “complete room solution” according to one’s preference and taste.

o Aim to provide design theme for room in future according to user’s preference.

• Building up a brand in ‘urban middle’ class.• Not focusing on small cities and towns.• Pitching up as a style+ affordable concept that UL has unique designs.• Targeting urban areas only. Operating in 7-8 cities now.

Fab v/s UL Category Page….1Fab has more products in every category , have refine by

options according to color, price, category etc.UL has limited product range. No filter by option. User can’t

filter out the products. Fab Category Page view:

Fab v/s UL Category Page….2

• UL Category Page View.:• There are no filter by option on UL:

• Fab has a better rating system for each product:Fab rating:

Fab v/s UL Product Details Page….1

• Fab Product Details Page:

Fab v/s UL Product Details Page….2UL Product Details Page. On UL:

On Urbanladder:• The product images are great, big and more clear. • A clear white background compliments the products • Global furniture websites- Made.com , Thefutureperfect.com also has such big

images.• UL has Video demonstration for most of the products, fab has videos for less

products.

UL Product Specification & customization

• Urban Ladder provides detailed specifications and measurements, for every item:

• Focus on showing dimensions, every minute dimension , videos, big images- as much detail as possible. On UL we have Customization options :

- Same sofa design ,we can select multiple size options: 3+2, 2+1+1, 3+2+2.-Same wardrobe design, we can select multiple size options.

- This is user friendly as Customization is not easily available in mkt.- Fab doesn’t have such customization facilities.

UrbanLadder Procurement Process

• Procurement of products:

UL has a fixed set of manufacturers from whom they procure the products.

Take active role in product design, closely work with small manufacturers and keep a view on product design, quality, material

They also provide support to manufacturers also in scaling up their operations.

• UL Plans to expand to 30 cities. With expansion, working closely with manufacturers will be difficult..

UrbanLadder Delivery Process• Zero friction delivery:All the products are transported and delivered using the Urban

Ladder delivery network. They take care of the supply chain end to end.

Have in-house trained delivery teams: takes care of delivery, installation, clearing away packaging of products.

Free delivery and no installation charges.Customer can schedule a delivery time.As they will grow to more cities, logistics building will be a difficult

and money-burning task.UL had launched delivery options to many more cities but they had

to rollback delivery in all cities due to logistics management and quality issue.

Pepperfry: In the top seven cities from where they get about 70 per cent of orders, they have their own branded trucks. They send orders to these cities through a network of local suppliers and transporters."

UrbanLadder Features• UL pointing towards customer satisfaction- “we care for you”.• Testimonials and "Like"s are prominent on Urban Ladder’s own

home page.• UL- 100s of customer stories on website.• Trial + consultancy services for wardrobes- they do have designers

working with manufacturers.• UL: Made for urban customers.• UL Pre order facility- Creates a mindset about the product that it is

in demand.• UL presenting itself as a stylish brand like “limeroad.com”• Let me know feature:

UrbanLadder NPS• UL claims their Net Promote score is 85%. Most of the

ecommerce companies NPS is around 50%.• This is very good because of customer engagement and good

web experience at every step.• UL’s trial facility will help in long run- as return orders will be

reduced.• UL has limited products but good atleast in visual.

What Fab should do?• Should launch a like button for the product. To create a like

database for each product. Will help in getting customers review about the products.

• Expand to sanitary, hardware in future and focus on covering more towns and cities as tier 2,3 cities has purchasing powers, we just need to create awareness.

• Fab should launch option of : Share your purchase with friends on facebook, will do marketing of web & product to direct customers.

• COD orders, website has to pay 1% extra charges to courier companies. We can launch: Pay by credit/debit card and we will give 1% to any NGO on your behalf. It’s a charity in the name of customer. Customers will pay through cards as they don’t have to pay anything extra and they are doing charity also.

• Fab should provide free shipping and product assembly services-this will help in customer satisfaction and less damage to products.

• Focus on covering more pin codes so as to create a nationwide brand.

Lead Time• Lead time- Preprocessing + processing + postprocessing• First, products are brought from vendors to the warehouse;

subsequently, they are transported to consumers( often through third party suppliers or through in house logistics- only in major cities).

• Fab has partnered with top logistics providers in India as well as manage it in-house in leading Metro cities.

Product Inventory option1. Make to stock, MTS- We have to keep stock in advance,

forecasting is done earlier, high risk but less lead time.2. Make to order- Products are ordered from vendors based on

customer’s order. Less risk but long lead time.MTO strategy should be applied for high value low sales products whose demand forecasting is not easy.

Effect of Lead Time• UL has high lead time than fab. UL might be having MTO, as they have

cutsomizable products. Also, UL has limited set of manufacturers.• For big products: UL generally has delivery time of 15-20 days. Fab has 10-15

days. So Fab is already doing better than UL in delivery time.• E-commerce has trained consumers to expect fast delivery, but for furniture

this is a challenge, we can’t expect furniture delivery to be as fast as apparels/books.

• Ramping up inventory and optimization of supply chain are the methods to reduce delivery time but too much inventory can not be kept as waste inventory will cause higher loss to the retailer.

• But, Furniture is also about liking a product, not only about delivery time. If customer likes a product , they will wait for it even if it has high delivery time.

• If some products are very common, then for them lead time will matter. Customer will purchase from other portals if they find high lead time

• But we should not cross the promised delivery time. Then it causes dissatisfaction among customer.

• UL is creating a mindset -they are building products acc to customer’s need, hence it will take some more delivery time. Customer is ready to wait for this.

Product Packaging• Product order could travel hundreds or even thousands of

kilometre, there are some important packaging rules to be followed to ensure the shipment arrives in one piece

• The shipment should be in a very strong or reinforced container• Avoid unnecessarily large containers as they increase shipping

expenses• Place heavy objects on the bottom, light objects on top• Product should be braced and weight evenly distributed• Include moisture resistant fillers.• Properly label which end is up.

IKEA• Leader in furniture – started in sweden in 1943, has online as

well as offline stores. Around 300 offline stores worldwide.• IKEA designs its own furniture, which is made by about 1,220

suppliers in more than 55 countries.• IKEA work with a set of suppliers-gives guidance to them.• IKEA is always close to its suppliers. Its employees can make

frequent visits to suppliers and follow the production process closely, enabling new ideas to be tested and to made regular quality controls.

• IKEA’s main marketing channel in Europe is its catalogue that is distributed world-wide . In china, social media is main marketing tool.

IKEA’s strategy• IKEA supply chain is mainly make-to-stock (MTS) as they have he

operations and fix catalogue.• IKEA also support suppliers by providing financial assistance.• IKEA uses clever packaging and design means so that more items can

fit into a crate, which means fewer delivery journeys. • To cut transportation costs, Ikea uses flat packaging, assemble at home.

Most of their products are assembled by customers on their own.From supplier to store: IKEA products are manufactured by suppliers

and transported to IKEA stores around the world, via one of the company’s central warehouses and distribution centre.

Large volumes + flat packs = low costs• IKEA products are sold packed flat means that they can be transported

with greater efficiency.• IKEA minimize “wasted space” so that it is possible to transport and

store more packages at a time. • Less packaging material means less distribution costs.

Made.Com• Made.com- UK based online furniture company.Acc to made.com, To reduce lead time :o Design the Delivery Centre’s according to product types.o Open more delivery centres.o Better categorization.o Improve supply chain

• Integration between product design and supply chain will lead to cheaper and better products.

• Gartner has ranked Apple’s supply chain as best supply chain in the world for 3 years in a row. But apple has only 1 global warehouse and only 200 suppliers.

Wayfair.com Case Study• Wayfair Sells Nearly $1 Billion Worth Of Sofas, Patio Chairs And Cat

Playgrounds.• They manage 7,000 vendors and the drop-ship process so the vendors go

directly to the consumer.• Wayfair has minimal facilities and doesn’t touch most products.Working of wayfair shipping method:1. Suppliers upload data on current stock to Wayfair servers. The

algorithm sifts through the data and stores info on what’s in stock and where it is. Every time a customer browses a page, the algorithm checks to see whether an item is still available and how long shipping might take.

2. Once an order is placed, software sends notification to the supplier. The system then decides how to ship the item–if it is a a small package via FedEx; a large package requires a delivery company Wayfair contracts with. Once the item is en route, the platform pulls in updates from the delivery team and update the customer “Track my order” page.

Flipkart Strategy• Now flipkart is moving to marketplace also, but still most of the

products are sold through WS Retail, their own company.• Directly procure from companies, store in warehouse, deliver to

customers. Keeps inventory for regular and low risk items.• Just In time procurement for high value, low sales items.• Flipkart manages self delivery in major cities(eKart, their own

logistics) Use 3rd party logistics for remote locations and villages.• Flipkart’s Warehouse Management System (WMS):There are three major segments in WMS : 1. Inward Processing,2. Storage Management 3. Outward Processing.• Snapdeal has opened 40 fulfillment centers across 15 cities in the

country. The service allows sellers to stock their inventory at the nearest Snapdeal Fulfillment Centre where the orders, once placed by customers, will be shipped on same day.

Expert Views• Technopak Advisors: By 2023, E-commerce shall be the dominant

“organized” retail channel in the top-75 Indian cities (cities with population of 1 million or more), with 30-35% share of total merchandise sale by value in these cities and about 20% of total merchandise sales in the rest of urban India.

Mehul aggarwal, MD Fabfurnish.com on CNBC tv18 in a budget discussion show : -Infrastructure creation , investment in infra by govt –rail, highway, transportation is necessary so as to get things delivered in time & in good condition.-This is the biggest challenge being faced by ecomm companies, -Tier 2,3 cities are placing lots of orders but delivering products there is a big challenge and its costly too.

Acc to supplychainbrain.com: E-commerce fulfillment facilities typically need to be located closer to population centers than traditional DCs, The reason is to reduce transit time, and also to have access to a larger labor pool, he says

Dunnhumby report:• Since the launch of Amazon Prime’s free 2-day shipping, there has been

an uptick in the demand for delivery services.• Uber has transformed the expectations of consumers in regards to user

experience and real time tracking.• These services together have shaped new expectations in the way in

which products are delivered.• Consumers expect product availability to be immediate and to come to

them, wherever they are.• For long haul delivery of goods this is not an easy option, the logistics

are too cumbersome. • But for short haul logistics, retailers have an ability to manage this

process.• Jabong has been able to deliver orders the same day in NCR region

because of its own courier service “JaVAS”.• A recent study by Econsultancy found that 79% of consumers have used

click-and-collect in 2013 and that 50% of respondents had abandoned a purchase online due to unsatisfactory delivery options.

Quintiq.com research paper• In July 2014: Quintiq won 'Best Supply Chain Management

Technology Award‘.• Quintiq paper on SAME DAY DELIVERY Methods:1. Static round assignment (traditional approach by post offices etc):

Customers have no choice over delivery times. Customer X who lives at an address that gets deliveries on or around 9:40am cannot request an 11:30 delivery.

2. Progressive slot re-optimization:• This is a more dynamic approach with real-time re-optimization. After the

deliveries for the first slot have been determined, a real-time optimizer calculates the optimal route for the second slot. When the second slot has been optimized, the process is repeated for the third slot, the fourth and so on.Limitations

• Routes are created acc to time slot rather than by geography, this method can be is more customer friendly than static route slot assignment, but it results in frustrated drivers and unnecessarily high costs and mileage for retailers.

Order Fulfillment Process

Smart Supply Network 3.0: The Next Big Thing?

• Most people see eCommerce Company as just an E-retailer but in reality it is a lot more than that:1) A Supply Chain Company 2) A Technology Company3) Production/Branding Company

• Instead of a linear supply chain where things don’t work together, people are now working on “creating an optimally performing network that they call the smart supply network “ 3.0.

• Procter & Gamble is talking about updating sales & operations on a daily basis, and they are using real-time data and business intelligence to take corrective actions twice daily for some high- volume products. This takes lot of the cost and uncertainty out of the supply network.

• IBM is using the cognitive and decision support capability to develop predictive analytics that determine what is likely to happen and then optimize the supply chain based on that likely scenario.

Flipkart’s supply chain Technology• Flipkart do not use any proprietary ERP solutions (a > 20 Billion $

industry), as flipkart is not confident if they can evolve to match the scale and service innovation that Flipkart would offer in the future.

• Flipkart has an in house supply chain platform (SCP) built from scratch. The SCP is seen as a differentiator and provides many value added customer offerings including the awesome delivery experience, tiered shipping etc, apart from powering operations, finance and business in their day to day activities.

• It is divided along Order Management, Fulfillment, Warehousing, Delivery and Pick up Logistics, Returns-Refunds-Replacements .

Logistics & Supply Chain problem in India• A large part of the ecommerce success in the developed nations

was because they already had rock-solid logistics in place. In the US fedex, and ups were already around nationwide and goods could be moved within 24 hours between 5000 miles.

• In India trying to find an address or a location is a nightmare. • Courier company ask for directions from consumers by calling

them ,even if the consumer lives in a very prominent address in the city.

• Companies like Flipkart having huge cash-burning capacity are working around the issues in the logistics industry by setting up their own logistics, but for small ecomm companies creating their own logistics is really tough.

Delivery Mechanism options• The e - commerce companies have three options :

1. To have company’s own delivery mechanism :This mechanism is feasible if the company has huge capital and is ready to invest in warehouses, software, transportation vehicles, hiring field people, training them and managing all operations on their own.

2. To outsource the delivery to a third party completely: If volumes are small then the retailer can go with one of the trusted courier companies. Retailer can have tighter control on the organization for the service quality but they need to test it out in all the cities they are planning to service. 3. To jointly work with a third party:This works more like a part of the courier company's staff and resources are on loan to retailer . So retailer doesn’t invest in them but share revenues or pay per package and work acc to a mutually agreeable deal. Retailer can choose this if they are low on capital and don’t have the bandwidth to setup facilities and recruit people and run the operations. Retailer can also benefit by having some branding done too. But effectively the courier company gives its expertise to your company.

Example• Tying up with right courier services, depends on:

1. Volume of business2. Cities in which the retailer serve in

• If you have high volumes of orders to serve in a day and in various cities, then you can select your courier services based on the areas/cities. For example: If the retailer total of 1000 orders to be delivered in a day, out of which 200 orders are local orders and 800 as outstation orders, then retailer can select local couriers or have its own fleet to serve the local 200 orders. This will help to serve the customer at a faster rate thus increasing the customer retention and also retailer’s own fleet would increase the awareness of brand.

• For rest of the 800 outstation orders retailer can select any bigger courier services like Bluedart,DTDC etc. Again retailer can further divide those 800 orders into different couriers based on who charges less for COD order delivery.

Tax issue• At present, the country’s multiple tax structure (national as well

as state) has encouraged decentralized warehouse networks with relatively small state-based facilities, rather than larger facilities.

• In India, online retail currently accounts for less than 1% of total retail spending. E-commerce-related warehousing is designed to service the Tier 1 cities.

• The implementation of a Goods and Services Tax (GST), expected shortly, will change this by encouraging the consolidation of distribution networks, which will grow the demand for larger distribution centers.

Thank You

-Gaurav Goel