Accenture B-School Challenge | Season 7

Case Study: E-commerce

Beyond the showroom: Expanding a furniture company’s online portfolio

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 urbanization 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,
exhibiting a CAGR of 11.20%. This growth is primarily fueled by the escalating demand for
home furniture, driven by a growing population and urbanization. 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 shifted 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 penetration and mobile commerce across India, accelerating 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 platforms are offering a near-perfect and immersive
buying experience by using emerging technologies like artificial 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 portfolio of its own brands, offering various furniture
categories, including seating, storage, tables, decorative, 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 constitutes only 3% of its total sales, with a major
share driven by one platform (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 opportunities in the e-commerce space. Despite the potential for
growth in the e-commerce sector, ABC faces challenges in enhancing its online
presence. The company heavily relies on sales promotions and discount coupons on e-
commerce platforms, resulting in a lower EBITDA profitability (3%) compared to its
competitors (10–12%). Marketplaces like Amazon and Flipkart are expected to dominate
the branded market share, posing additional competition (Exhibit 2). However, there are
untapped opportunities 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 effectively, leveraging its
diverse product portfolio and meeting 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 often 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 times: Furniture and home decor products are often bulky and
heavy, resulting in long delivery times. This can be a major inconvenience for
customers as they may have to wait weeks for their products to arrive.
• Logistical challenges: While the furniture and home goods market have
significant potential, there are unique logistical 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 formulating the solution:

• Identify the addressable e-commerce market for ABC based on the categories
they play in.
• Identify the competitive 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 differentiated play for ABC?
• Which consumer segments should they focus on based on their portfolio?
• 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 continue focusing
on Flipkart or expand its focus to D2C platform or other omni-
channel/marketplace platforms? What should be ABC’s portfolio strategy across
different channels?
 • ABC currently runs on-platform marketing campaigns on Flipkart to drive e-
commerce sales. What should ABC’s marketing strategy be to widen its funnel
across awareness, consideration and purchase? Help define an effective digital
marketing 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 platforms. 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 assumptions made while answering the above questions should be
listed clearly.

Appendix

Exhibit 1: % contribution of different channels to ABC’s e-commerce sales

Urban Ladder 14%

Exhibit 2: Platform category growth: Category CAGR map FY23–FY28 across Amazon and
Flipkart (others include sleeping and outdoor furniture)

Platform Seating Storage Tables Decorative Office Others

Exhibit 3: ABC’s product portfolio (storage) across different price segments on three
major marketplace platforms (Amazon, Flipkart and Urban Ladder)

Channel Category INR INR (5000– INR (10,000– INR (15,000– INR
(<=5000) 10,000) 15,000) 25,000) (25,000+)
Amazon Wardrobe 5% 15% 25% 25% 30%
Flipkart Wardrobe 5% 10% 20% 30% 35%
Urban Wardrobe - - 20% 30% 50%
Ladder
Evaluation criteria

• Quality of presentation.
• Analytical Thinking.
• Creative thinking (Creating a novel idea for disruption).
• Big picture thinking (Ability to understand the dynamics of an industry).
• Feasibility of implementation/scale-up.
• Usage of new-age technologies.
• Creativity in delivery.