Moving In, Los Angeles Business Journal

Posted on January 08, 2015 by Adam Acheson

Moving In

Retail: Niche-focused online furniture dealers work to click with Internet-cautious manufacturers.By JUSTIN YANG Monday, January 13, 2014, Los Angeles Business Journal 

 

Time spent in a furniture store – picking out a sofa and dealing with sales people – can feel like an eternity. Especially for younger people who came of age shopping online.

It’s exactly that restless market that several L.A. online furniture retailers are hoping to tame.

Promising the relaxed, low-pressure sales environment of shopping from home, office or a local coffee shop, at least three local startup e-commerce furniture stores – BachelorHaus, which went live last month; Apt2b; and Luxeyard Inc. – have entered the online furniture market, each taking a different approach toward creating a niche.

“The next generation of buyers are so used to buying anything online,” said Mat Herman, co-founder of Apt2b. “I’m 40. I’m at that cusp where I don’t buy everything online. But for people younger than me, buying online is all they know.”

These startups are engaged in a delicate dance. They aim to offer value to customers while creating and maintaining relationships with furniture manufacturers, which at the same time are inclined to protect their big brick-and-mortar retail clients wary of being undercut by online vendors.

The competitive price advantage that online furniture stores like Apt2b and BachelorHaus offer comes in part from their lack of large showrooms and the cost of staff to maintain them. Though Apt2b has a warehouse from which it ships consolidated sets of made-to-order furniture, BachelorHaus does not. It ships finished pieces to customers direct from the manufacturer’s warehouse.

This allows the companies to run on small staffs: Apt2b has five full-time employees, many of whom work from Herman’s Mid-Wilshire home; much of the logistics work is handled by a third-party contractor. BachelorHaus works with about 14 freelancers; founder and Chief Executive Adam Acheson, 34, is the company’s only full-time employee.

That cost advantage, however, created a hurdle for the upstart. Manufacturers feared they would strain longtime relationships with traditional brick-and-mortar retailers by offering their products through e-commerce businesses.

Kicked out

Acheson recalled a 2012 trip to a Las Vegas trade show in hopes of meeting manufacturers when BachelorHaus was still in the planning stages.

“I probably met with 200 showrooms,” Acheson said. “Half of them kicked me out saying, ‘E-commerce is destroying our brick-and-mortar clients. We’re not ever interested in working with you, ever.’”

Acheson said he convinced manufacturers that his company’s smaller market would not conflict with their more traditional clientele. BachelorHaus now carries product from 12 manufacturers.

Page 1 of 3

Steven Anthony, of East L.A. furniture manufacturer Steven Anthony Inc., is one of those vendors. He said that manufacturers have begun to understand that the e-commerce furniture market is not only here to stay, it’s growing.

“I don’t want to offend the people paying the rent,” Anthony said. “I try to balance it with discounting, giving traditional vendors a bit of a break. …We are staying open to the changes as e-commerce evolves.”

Apt2b’s Herman, who works with about 70 suppliers, also sees a shift in attitude among manufacturers.

“The whole industry is antiquated. They were always protecting the brick-and-mortar stores. They didn’t want some guy lowballing from out of an apartment,” he said. “Two years ago, they were pooh-poohing e-commerce, but now they’re suiting our needs. They get it, they need it and they want in.”

Part of the argument these startups made to manufacturers was that because they were chasing a narrow niche market, they would not pose an existential threat to established storefront retailers.

“One thing manufacturers we work with like is that we’re only going towards one particular market,” said BachelorHaus’ Acheson.

His company, operated from his Marina del Rey apartment, opened to the public last month and targets a small niche of single professional men who have been in the workforce for some time. Acheson was an account manager at local ad agencies before bankrolling the company with savings.

Apt2b, which launched in 2011, sells furniture designed and priced for young professionals. Herman said it reached profitability last year on revenue of about $2 million and has outgrown its Panorama City warehouse. He plans to move to a larger space in Van Nuys this year.

Herman, a former sales rep and general manager for Michael’s Furniture in Van Nuys, said that he targeted young professionals because those are the shoppers that are both price sensitive and more inclined to buy online. Among its products, Apt2b sells made-to-order sofas ranging from $325 to as high as $1,900.

“We’re not being all things to everybody,” Acheson said. “When you walk into a big-box store, they are all things to everybody.”

 

Competition persists

While the e-commerce companies try to take a small slice of the online furniture market, which Australian research company IBISWorld said had grown by 9.6 percent since 2008 to become a $9 billion industry last year, their greatest competition still comes from those retailers that do offer everything.

Page 2 of 3

Established businesses like Sweden’s Ikea, Chicago’s Crate and Barrel and San Francisco’s Williams-Sonoma Inc. and their websites are heavyweights in the arena. Boston online-only furniture retailer Wayfair is one of the biggest companies in the field, reporting a revenue of $600 million in 2012. Even many smaller players now have an online presence and understand the nature of the market.

“We have a website and we use it to increase revenue. But if I were a pure brick-and-mortar, I would be a little upset” by the advent of online-only stores, said Jeffrey Lee, president of Metropolitan Design in Long Beach. “In 1999, we took a lot of criticism from the manufacturers with our website. It interfered with other furniture stores. Since then we’ve regained those relationships with those companies, especially when the economy dropped and they were looking for anybody they could to move and sell their products.”

Such success is by no means guaranteed. The stock of Culver City flash-sale website Luxeyard Inc. at one point last year traded at about $2 on the Over the Counter market, but lately it has been trading at about a penny. Beset by turmoil among investors and management, the company hasn’t reported quarterly results in more than a year. For the period ended Sept. 30, 2012, it had an operating loss of $3.6 million on revenue of $574,000.

Despite the inherent conflict with traditional retailers, Herman and Acheson both eventually want a physical retail presence.

BachelorHaus is too young, Acheson said, to think seriously about it yet, but it remains part of the long-term plan.

The more established Apt2b has dabbled with pop-ups across Los Angeles as well as doing in-store promotions in regional Costco stores.

Herman is now searching for a small showroom, about 5,000 square feet. He hopes the move will help bolster the company’s reputation by giving customers a chance to touch some of the products.

But he also hopes having a store will attract those that still have the patience to take the time out to drive to a store and browse physical inventory.

“We still get emails everyday asking if we have a store,” Herman said. “Certainly we’re not taking care of everyone out there.”

Page 3 of 3

Posted in Brand, Furniture, Los Angeles, News, press


Basics of the Modern Bachelor Pad, For Guys Mag 12/2014

Basics of the Modern Bachelor Pad, For Guys Mag 12/2014

Recent Articles

Tags