ECLIPSE

Case Study: E-commerce

Beyond the showroom: Expanding a furniture company’s online por:olio

Background

The furniture industry in India is witnessing rapid growth due to various factors such as the increasing
demand for modern and modular furniture in urban areas, along with the rise of urbaniza;on across
the country. The market size for furniture in India was valued at around US$23.12 billion in 2022 and
is projected to reach US$26.85 billion by 2028, exhibi;ng a CAGR of 11.20%. This growth is primarily
fueled by the escala;ng demand for home furniture, driven by a growing popula;on and urbaniza;on.
Furthermore, the organized segment of the furniture market in India, valued at Rs. 50,000 crores in
2019, is expected to expand to Rs. 1,95,200 crores by 2035.
However, the global COVID-19 crisis has impacted the furniture industry, and the focus has shiVed
toward customer-friendly customized furniture, where customers seek pieces that reflect their
personal style and preferences. It has also led to a significant increase in internet penetra;on and
mobile commerce across India, accelera;ng growth of the e-commerce market across all industries.
Driven by pent-up and deferred demand, India’s online furniture and home market is expected to
reach US$40 billion by 2026. Over the next five years, online furniture and home sales are expected
to grow at a strong 39% CAGR. The online furniture category foresees shoppers will grow by 3x in the
next five years with a 1.8x jump in annual spending per shopper. E-commerce pla\orms are offering
a near-perfect and immersive buying experience by using emerging technologies like ar;ficial
intelligence and augmented reality.

Problem statement

ABC, one of India's leading furniture manufacturers and retailers, has a strong presence in metros and
operates a diverse por\olio of its own brands, offering various furniture categories, including sea;ng,
storage, tables, decora;ve, office, sleeping and outdoor furniture. With the rise of online purchasing
due to the impact of COVID-19 and the entry of new global players in the Indian market, the company
has experienced a decline in sales. Currently, ABC's online business cons;tutes only 3% of its total
sales, with a major share driven by one pla\orm (Flipkart – 51%) and one category (Storage – 48%).
While Amazon contributes to 27% of e-commerce sales, Pepperfry (8%) and Urban Ladder (14%) also
play a role (Exhibit 1). To regain its lost market share and improve profitability, ABC is exploring
expansion opportuni;es in the e-commerce space. Despite the poten;al for growth in the e-
commerce sector, ABC faces challenges in enhancing its online presence. The company heavily relies
on sales promo;ons and discount coupons on e-commerce pla\orms, resul;ng in a lower EBITDA
profitability (3%) compared to its compe;tors (10–12%). Marketplaces like Amazon and Flipkart are
expected to dominate the branded market share, posing addi;onal compe;;on (Exhibit 2). However,
there are untapped opportuni;es for ABC's brands in various categories and price segments within
the addressable market. To address these challenges and thrive in the digital landscape, ABC needs to
strategize its e-commerce expansion effec;vely, leveraging its diverse product por\olio and mee;ng
evolving consumer demands. The company is also looking to start its own website to directly reach
customers and improve profitability, but currently faces the following challenges:
• High return rates: Furniture and home decor products are oVen returned by customers as
they are difficult to visualize and evaluate online. This can lead to high costs for e-commerce
players, as they have to pay for return shipping and processing.
 • Long delivery @mes: Furniture and home decor products are oVen bulky and heavy, resul;ng
in long delivery ;mes. This can be a major inconvenience for customers as they may have to
wait weeks for their products to arrive.
• Logis@cal challenges: While the furniture and home goods market have significant poten;al,
there are unique logis;cal challenges in the era of one-click shopping that require strategic
planning to ensure the unit economics will work for the business.

Impact

Where do you come in? The management wants to address these challenges and has approached you
to formulate an e-commerce expansion strategy for ABC. Consider these guidelines in formula;ng the
solu;on:

• Iden;fy the addressable e-commerce market for ABC based on the categories they play in.
• Iden;fy the compe;;ve landscape for the Indian furniture market. Who are the top brands?
Which category, price segment and consumer needs are they addressing? What could be a
differen;ated play for ABC?
• Which consumer segments should they focus on based on their por\olio?
• ABC is currently over-indexed on Flipkart majorly on the storage category. What channel
strategy should it follow to win in the market? Should it con;nue focusing on Flipkart or
expand its focus to D2C pla\orm or other omni-channel/marketplace pla\orms? What should
be ABC’s por\olio strategy across different channels?

• ABC currently runs on-pla\orm marke;ng campaigns on Flipkart to drive e-commerce sales.
What should ABC’s marke;ng strategy be to widen its funnel across awareness,
considera;on and purchase? Help define an effec;ve digital marke;ng mix for ABC.
• What would be a comprehensive set of e-commerce KPIs the brand should track to achieve
its business growth outcomes?
• ABC wants to venture into AR space to enhance its user experience on e-commerce
pla\orms. Evaluate the feasibility of the idea and suggest if ABC should go ahead with it or
not. If yes? Suggest a strategy for entering the AR space.

Note: Necessary assump;ons made while answering the above ques;ons should be listed clearly.

Appendix

Exhibit 1: % contribu;on of different channels to ABC’s e-commerce sales

Exhibit 2: Pla\orm category growth: Category CAGR map FY23–FY28 across Amazon and Flipkart
(others include sleeping and outdoor furniture)
Exhibit 3: ABC’s product por\olio (storage) across different price segments on three major
marketplace pla\orms (Amazon, Flipkart and Urban Ladder)

Evalua@on criteria

• Quality of presenta;on.
• Analy;cal Thinking.
• Crea;ve thinking (Crea;ng a novel idea for disrup;on).
• Big picture thinking (Ability to understand the dynamics of an industry).
• Feasibility of implementa;on/scale-up.
• Usage of new-age technologies.
• Crea;vity in delivery.