MADE, Westwing, & Niche vs Mass E-commerce Models

In Practise Weekly Analysis

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Our interest in the furniture industry is driven by three main factors: a high fragmentation of suppliers, selling mostly unbranded products, and a global market of over $800bn. In Europe, Ikea has ~11% market share, the next 9 retailers own ~6%, and ~83% is owned by small independent suppliers.

The large, fragmented unbranded supply base presents retailers with the chance to add value by curating the assortment and helping customers discover products. In this respect, given the infinite online shelf space, online retailers can arguably add even more value than offline retailers. While Wayfair is focused on building a brand for the global mass market, Made and Westwing are two European businesses focused on serving a niche, design-led customer.

We interviewed a Former Made.com Director, who launched the brand in Germany in competition with Westwing, to discuss how MADE curates an assortment. We've also shared thoughts on the potential limitations to growth for niche online furniture brands.

In 2010, MADE was founded with the mission to become the destination for design-led home and lifestyle products. The company is vertically integrated and has pioneered agile furniture design and production; nine new product collections are launched every week and the average concept-to-product process is 4-6 months compared to the 18-month industry standard. MADE is like an asset-light version of Inditex or a premium Boohoo for furniture.

MADE employs ~150 designers and exclusively licenses designs from third-party designers. Design is embedded in the company’s DNA and the bespoke assortment defines the company’s brand equity:

“It comes down to their DNA. Design and purchasing departments are traditionally separate in this sector. You have revered designers, similar to fashion, who make a design, then the purchasing department find the right producers to make it and look at the sell-throughs, and the following season design come up with new ideas. At made.com everyone intimately sat together. The head of purchasing was a brilliant lady, with decades of experience, and would be thinking about margins during the design process. She would get feedback from the manufacturing process to realize additional gross margin gains, without compromising on the design integrity. That agile design process is quite unique and difficult to replicate.” - Former Managing Director at made.com, DACH

Similar to online fast fashion companies like Boohoo or ASOS, MADE focuses on rapidly testing small batches of designs before committing to inventory. This leads to over 59% of products being sold in-transit, with a lower, single-digit average markdown per item relative to competitors, and all without much inventory risk. This bespoke, made-to-order model is important to free up capital to invest in marketing online.

The working capital profile helps explain the differences between MADE and a service like Wayfair.

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