Many have tried and failed as e-tailers of design. What makes Hem think it can be different?
E-commerce is not for the faint-hearted. Buying something after a few clicks may seem simple, but the bigger and more expensive the product, the harder online retail becomes. Yet bulk, shipping costs and human psychology alone cannot explain why the furniture industry has fared so poorly in its attempts to operate virtual shops. After branching into the digital sphere, e-tailers specializing in design and furniture are nearly always consigned to history or end up on the ‘gimmick’ pile.
Examples work as cautionary tales. Take Established & Sons, which launched a collection of products – unsigned, smaller and less expensive – to much fanfare at the 2010 Milan Salone. Available online, subsidiary brand Estd vanished almost as suddenly as it had appeared. One year earlier Skitsch, a highly imaginative contemporary design company from Italy, burst onto the scene with a two-way strategy: its traditional and digital business plan included a mix of shops, e-commerce and sales catalogues. Skitsch opened two flagship stores (in Milan and London) before it, too, admitted defeat.
Entrepreneur Renato Preti, former CEO of Skitsch and a brilliant talent-spotter, quickly moved on to new pastures. In 2012 he opened Discipline, an interiors e-store with a focus on elegantly minimalist furniture and accessories. The products were understated, sustainable and wholly desirable, but the prices were too high (safe suppliers having been favoured over competitive ones) and the distribution network and reach too limited. Even before the company was ‘restructured’ (code for ‘closed down’), Preti had been quoted in the press decrying the lack of innovation and marketing flair displayed by Italian design brands in comparison with the pizzazz of their Northern European rivals.
Perhaps the most high-profile and dramatic rise and fall was that of US brand Fab, a one-time social network for gay men that morphed into a crazily successful but ultimately overhyped, overinflated, e-commerce design portal. What remained of the company and its assets was bought last March by custom manufacturing business PCH for an undisclosed but, by all media accounts, disappointing price. For a while, though, Fab was the talk of cyberspace.
So what went wrong? Jason Goldberg, who cofounded Fab and held the position of CEO, is refreshingly honest. ‘We were selling hundreds of thousands of products from all sorts of suppliers and designers, and in terms of business maths it was very tough. When you factor in things like people’s expectations of free shipping, the cost of online operations and customer acquisition, you end up with very little profit. Besides, it was quite hard to control clarity of presentation with such a diversity of assortments.’ It’s easy to see how a business like Fab could become unmanageable.
‘The most important thing an e-commerce company needs to do is to stay cash-flow positive,’ says Sucharita Mulpuru-Kodali, senior analyst at market-research company Forrester. ‘It's very easy to overinvest in inventory, in people or in marketing and then go out of business. Too many companies place all bets on being the next huge thing, but there is no short-cut to long-term retail success.’
A wiser but visibly un-deflated Goldberg agrees. ‘You can’t just go fast; you have to go careful. And you can’t get only parts of it right. It’s not possible to maintain an e-business that sells things people don’t want. On the other hand, great products aren’t enough either; you need a good distribution network, an understanding of how e-commerce works and a commitment to building a solid relationship with your customers.’ Being true to yourself – and thus to your merchandise – is another key aspect. ‘It doesn’t matter whether you’re selling a cushion or an iPhone case; you have to love your products and really believe in them.’ He’s too tactful to admit what is clearly implied in his words: Goldberg had fallen out of love with Fab’s increasingly quirky product offering by the time that things went awry.
And that’s where Hem comes in, the online furniture retailer that grew out of Fab or that, as Goldberg – an undeniable fan of the business ‘pivot’ – likes to say, ‘represented a massive tilt to the part of the business I was most passionate about’. (He’s referring to private-label products.) Hem is a merger involving three organizations: Fab; One Nordic, a Helsinki-based start-up specializing in easy-to-ship furniture; and German retailer Massivkonzept. Hem began its journey armed with the technology and expertise – including warehouse, order management, customer acquisition and customization – that it had inherited from Fab. Only one year after its inauguration, Hem is shipping directly to no fewer than 34 countries and has 140 employees in Berlin, Helsinki, Stockholm, New York City, Pune, Toronto and Warsaw: factories in Europe and India, as well as warehouses in Poland and the USA.
With 300 products launched this autumn – pieces by a mix of well-respected, often humorous designers (such as Nendo, Luca Nichetto and Sylvain Willenz) and by several exciting emerging designers – Hem’s goal is to reach the 2,000 mark within five years. The idea is to maintain a delicate balance among a full and varied array of products (a topic of interest to investors, says Goldberg); a high level of quality (as exemplified by Max Lamb’s Last Stool, made of solid wood, solid brass and copper – since February, Hem owns the rights to this and other Discipline products); and the need to avoid overextending its resources. Most Hem products are configurable and customizable but not complicated. In Goldberg’s words: ‘It shouldn’t be harder to buy a dining-room table than it is to share a photo on Instagram or Pinterest.’ Founded in 2014, Brazilian brand Tog should take note. Despite promising affordable, mass-produced, collaborative, open-source designs by the likes of Philippe Starck, Industrial Facility and Antonio Citterio – as well as pieces that can be customized by artisanal weavers, upholsterers and artists at the touch of an app (or, rather confusingly, downloaded for 3D printing) – Tog’s products also appear in conventional furniture stores. What’s more, the process of buying and/or customizing online is opaque and mystifying.
Despite Hem’s strong design credentials (creative director Petrus Palmér was a founding member of acclaimed Swedish studio Form Us With Love), the outfit faces a significant challenge: getting people to know, to love and – above all – to trust its products. Cutting out the middleman shouldn’t mean cutting out the physical experience, warns Hannah Robinson, visual trends analyst at consumer trend and insight network LS:N Global, who stresses the fact that ‘consumers want to embrace the live elements of bricks-and-mortar stores and the convenience of online retail without a clunky division between the two’.
Accordingly, Hem opened a showroom on the ground floor of its Berlin HQ earlier this year and, in September, a temporary lifestyle concept store in London’s Covent Garden, where a selection of accessories can be purchased and larger objects ordered. ‘If a physical shop helps gain someone’s trust the first time, that person will be more confident buying from us the second or third time online,’ says Goldberg. Made.com, a successful British furniture e-tailer with a hit-and-miss collection as regards design and quality – but with a thorough understanding of direct-to-consumer distribution – has also opened various showrooms over the years, allowing customers to touch, prod and examine before buying.
A more critical take on the need for physical premises is offered by Mulpuru-Kodali. ‘It’s very hard to be a large pure-play business. There is too much competition, and there aren't enough people buying furniture online. A showroom is important, but it comes with high costs that raise questions about the long-term sustainability of the model.’
Goldberg disagrees. ‘The market is moving in this direction anyway. If you look at the size of the overall global furniture market and the size of the segment made up of people who care about design, you realize that even gaining only a couple of percentage points each year adds up to hundreds of millions of pounds’ worth of business.’
Mulpuru-Kodali raises another important point: the need for a ‘core customer that advocates for you’. Editorial content and material such as videos, attractive photos and behind-the-scenes stories about makers and designers have gone from being nice-to-have extras to absolute necessities. If you provide customers with riveting content, they will do the rest by disseminating it on social media for you.
Perhaps the main thing that sets Hem apart from other factory-direct brands (as well as from many companies selling contemporary or traditional design) is its R&D workshop. Headed by the indefatigable Stefan Mahlberg (cofounder of One Nordic), the 300-m2 Helsinki workshop is where products are brought to life with the help of a seven-strong in-house team and the latest milling and 3D-printing machinery. Activities include the development and testing of everything from prototypes and finishes to assembly and packaging.
‘If we didn’t have the workshop, we would have to send the designer’s drawings to the factory and leave all prototyping, tooling, making of moulds and sourcing of raw materials to them,’ says Goldberg. ‘We would be beholden to the factory.’ The workshop saves time and money too. ‘We can do a project in 12 months that otherwise might take two or three years from concept to product.’ The new customizable Chain Shelving system by Nendo, for instance, took a mere eight months to develop, a feat almost unheard of in the design world.
A business model that bypasses the middleman, appeals to the public at large and can trace its roots to Ikea – while aiming for something classier but still affordable – is undeniably desirable. With technology and the Web both excellent tools for direct distribution and customization, it seems inevitable that soon a company will nail the right formula and emerge as a strong e-tail-driven design player. Hem hopes to be that brand, says Goldberg, before adding that ‘whether it’s us or someone else, it will happen’. What the ‘winner’ will have to keep in mind, however, is that in a retail landscape of paralysing choice, a thoughtful and well-curated selection of products, preferably backed by story-telling content, is going to fascinate visitors more than an endless presentation of merchandise and customization options. There is no digital substitute for personality and style.
Read the extended version of this report in Frame #107. Find your copy in the online Frame store.
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