Online Furniture Company - A business plan

tropicfurniture.com

A BUSINESS PLAN

Presented by:Group - 10

AGENDA

Market Scanning

SWOT Roadmap Strategies Conclusions

• Increased internet penetration1

•Growth in smart phone usage2

•Growing number of urban households3

•Willingness to indulge in home improvements (38%)4

What will drive such growth?

53%27%

20%

Market Share (in %)

Pepperfry

FabFurnish

UrbanLadder

Furniture Market and Growth Rates

Competition

Indian Furniture Market = Rs. 1400

billion

Plastic Molded Furniture=Rs. 240

billion

Online Market = Rs. 750 crore

• Growing @ 12-13 % on an average

• Expected to be worth Rs. 150 billion in the next three years

Supply Chain and Inventory Management

Demand Forecasting

Consumers still refrain from buying furniture online as they want to have a touch and feel factor

Challenges Scope

Profitable category in eCommerce market

Average ticket size is larger (margins upto

30-40%)

Leverage the reach component.

AGENDA

Market Scanning


STRENGTHS

• Brand image and market presence• Strong distribution and retail network• Low cost of customer acquisition• Good quality of employees

WEAKNESSES

• Dipping margins• Inventory management

OPPORTUNITIES

• Increase presence in tier II and III cities• Plugged in customers• Nascent segment• High growth, lower reach (98% and 2% respectively)

THREATS

• Intensifying Competition• Substitute products• Channel conflicts

AGENDA

Market Scanning


ROADMAP

• Financials• Technological• Marketing• Partner Relationship Management

General Assumptions:Discount Rate (WACC) = 12%Tax Rate = 35%Customers in Year 0 = 1700Transactions in Year 1 = 140,000Average order size = Rs. 20,000 (Urban Ladder data)COGS as a % of sale = 70%Average order size growth rate = 20% (Urban Ladder data)

Base Case (No web Portal)Number of transactions annual growth rate = 3%Average processing cost per order = Rs. 140

….Contd

ROADMAP

With the Web PortalInitial Implementation Cost TCO

Hardware, software License Fees Hosting Fees Project Management Rs. 4,00,00,000

Maintenance and Marketing Ongoing Maintenance Advertising Sales Team After Sales (Call centers, etc) Rs. 1,00,00,000

Jump in total transactions = 20,000 Number of transaction growth rate 10% Average Processing Cost of a web

Transaction Rs. 150 Average processing cost per order Rs. 60 % of total transaction through web

Portal 50%


ROADMAP

Year 0 Year 1 Year 2 Year 3Customers 1700 1751 1804 1858Number of transactions 1,40,000 144200 148526Average order size 20,000 24000 28800Baseline Revenue (in Rs. Lacs) 28,000.00 34,608.00 42,775.49

COGS 19,600.00 24,225.60 29,942.84 Order Processing Cost 196 201.88 207.9364

Net Income 8,204.00 10,180.52 12,624.71

NI (after tax) 5,332.60 6,617.34 8,206.06

Base Case Scenario (No Web Portal)


ROADMAP

Year 0 Year 1 Year 2 Year 3

Customers 1700 2081 2289.1 2518.01

Number of transactions 161000 177100 194810

Average order size 20000 24000 28800

Baseline Revenue (in Rs. Lacs) 32200 42504 56105.28

COGS (70%) 22540 29752.8 39273.696

Order Processing Cost 60.375 66.4125 73.05375

Gross Profit 9599.625 12684.788 16758.53025

Costs of Web Portal Initiative

Upfront Cost 400

Ongoing Maintenance & Marketing 100 100 100

Net Income -400 9499.625 12584.788 16658.53025

NI (after tax) 6174.75625 8180.1119 10828.04466

Incremental Cash Flows

Year 0 Year 1 Year 2 Year 3Net Incremental Cash Flows -500 842.16 1,562.77 2,621.98

NPV 3,364.03

With Web Portal


ROADMAP

Payback Period Calculation

Year 0 Year 1 Year 2 Year 3Net Incremental Cash Flows -500.00 818.61 1536.873 2593.4922Cumulative Cash Flows 318.61 2355.483 3892.356

Payback Period 2 years 1.21 months

ANALYSIS :

• Positive NPV• Payback period = 2 years 1.21

months (25 months)


ROADMAP

• Financials

• Technological• Marketing• Partner Relationship Management

• Introduction of integrated Inventory management systems.(Salesforce.com)• Including every partner in to the system from suppliers to retailers . • Providing them with applications which support most platforms.• Synchronization of GIS with inventory and order processing systems for faster processing

ROADMAP

• Financials

• Technological• Marketing• Partner Relationship Management

• Hire Amazon Web Services for server hosting • Google inc. for back up on cloud, in addition to cloud space provided by Salesforce.com• Zepo.com can be hire for hosting website payment terminal.

ROADMAP

• Financials• Technological

• Marketing• Partner Relationship Management

While marketing our products online, we would like to address a few issues, the Marketing Objectives:

1. Trust and Safety

2. Demystifying Products

3. Value Proposition

4. Added Convenience

ROADMAP



• Introduce Design Your Own Design (DYOD)

DYOD benefits:

1. Increases number of conversions

2. Engage with more number of people

3. Compliment our offline channel

4. It creates a buzz around the brand which is required to make people familiarto our online channel

5. Leverage Market intelligence

ROADMAP



• Engage with customers through social media

• Locate the nearest store online to compensate

for the “Touch ‘n Feel” aspect

• Provide coupons and gift vouchers for online channel against offline sales.

• Plan to go mobile to tap m-commerce market

ROADMAP

• Financials• Technological• Marketing

• Partner Relationship Management

To do away with Channel Conflict

• Increase Margin of our offline retailers

• Keep a minimum level of margin beyond which we would refrain from providing discounts on our online channel

AGENDA

Market Scanning


STRATEGIES

• New Customer Acquisition Strategy• Customer Retention Strategy• Mobile Strategy• Security Strategy• Supply Chain Strategy• Payment Strategy• Social Media Strategy

•Gamization is one of the “must do” trends in internet & apps market – add a “social gaming UI” to entice users to use your app, entertain them as you address them.

•This would help us to get data about the people who could be our new customers. From this data we could give send personalized mails to people who have never bought anything from our website offering them discount coupons.

STRATEGIES

• New Customer Acquisition Strategy• Customer Retention Strategy• Mobile Strategy• Security Strategy• Supply Chain Strategy• Payment Strategy• Social Media Strategy

• Discount coupons offered would be on the product which that customer might have searched on our website but didn’t make a purchase so that our discount coupons are relevant to that customer.

• We would try and keep few exclusive products which are not available on any of our other competitor .This would help to attract new customers.

STRATEGIES

• New Customer Acquisition Strategy

• Customer Retention Strategy• Mobile Strategy• Security Strategy• Supply Chain Strategy• Payment Strategy• Social Media Strategy

• We will be using a Sales Force Automation(SFA) CRM so as to move closer to our customers. This CRM would help us to analyze the buying behavior of our customer and based on which we could formulate strategies to build even a stronger bond with our customers.

• Based on the products bought recently by our customers we would be sending them mail and offering complimentary products

• Besides this we can have a loyalty system where a customer gets a point based on the purchase he made and the customer can redeem those points and discount on his next purchase.

STRATEGIES

• New Customer Acquisition Strategy• Customer Retention Strategy

• Mobile Strategy• Security Strategy• Supply Chain Strategy• Payment Strategy• Social Media Strategy

• We will use a Mobile CRM as it is an integral part of a well-thought out ecommerce customer relationship management system.

• For android and other operating system we would develop an application which would be same as our website .Many companies create their application which are somewhat different in user interface and thus confuses the customers

STRATEGIES

• New Customer Acquisition Strategy• Customer Retention Strategy• Mobile Strategy

• Security Strategy• Supply Chain Strategy• Payment Strategy• Social Media Strategy

• Maximum Security to be deployed in the first and second year.

• Secure form of http i.e. https used for the website.

• Firewalls and anti-virus to be installed.

• The mobile app to be developed for different platforms and payment gateway for direct purchases.

• Different levels of data view for different levels of employee.

• 128 bits of encryption for payment gateway.

• An SMS sent to the registered mobile number whenever a login is made at the client side.

STRATEGIES

• New Customer Acquisition Strategy• Customer Retention Strategy• Mobile Strategy• Security Strategy

• Supply Chain Strategy• Payment Strategy• Social Media Strategy

• Build-to-Stock (Push) and Build-to-Order (Pull).

• Just in Time to maintain minimum inventory.

• Demand Forecasting .

• Package tracking for regular update on the location of the item.

• Use of 3PL for downstream supply chain.

STRATEGIES

• New Customer Acquisition Strategy• Customer Retention Strategy• Mobile Strategy• Security Strategy

• Supply Chain Strategy• Payment Strategy• Social Media Strategy

Supplier

Supplier

Supplier

Our Comapny

Customer

STRATEGIES

• New Customer Acquisition Strategy• Customer Retention Strategy• Mobile Strategy• Security Strategy• Supply Chain Strategy

• Payment Strategy• Social Media Strategy

• Flexibility of payment:

Cash on Delivery

Net banking

Credit Card

• Creation of a free business Paypal account

for payments as it ensures security againstfraud.

• An optional minimum payment of 10%through online coins to ensure long termassociation. Special discounts on the same.

STRATEGIES

• New Customer Acquisition Strategy• Customer Retention Strategy• Mobile Strategy• Security Strategy• Supply Chain Strategy• Payment Strategy

• Social Media Strategy

Association with e-newspapers

Pay-per-click(PPC)

Banners on related

ecommerce websites and

blogs

Social networking websites like

Facebook, twitter etc.

Almost 90% of our sales come through Facebook: Urban Ladder’s COO Rajiv Srivatsa

STRATEGIES

• New Customer Acquisition Strategy• Customer Retention Strategy• Mobile Strategy• Security Strategy• Supply Chain Strategy• Payment Strategy

• Social Media Strategy

Facebook business page to accept

orders.

URLs on existing business cards and

pamphlets.

Information to existing customers

through emails, messages etc.

Addition of website to Google places and other online

directories.

Availability through search engine optimization

AGENDA

Market Scanning


CONCLUSIONS

• Online furniture is a niche segment characterizedby high growth.

– Profitable to enter the market and get additionalsales.

• Channel conflicts to be handled by maintainingthe discounts offered to offline and onlinepartners and cross channel collaboration.

• High reliance on social media to tap the fullpotential of the market.

THANK YOU

Internet

Online Furniture Company - A business plan