Furniture start-ups experience a record year

Start-ups in the furniture industry had some of the best months in their history in 2020. They hope that the business model will survive the pandemic.

When shops, schools and restaurants had to close for the first time in March and public life was almost completely shut down, form.bar in Saarbrücken registered how more and more people were calling up the young company's website. And when the economic forecasts became more and more gloomy and companies had to send their employees into short-time work, the start-up achieved a record result.

"We've benefited greatly so far in the Corona period," says Alessandro Quaranta, founder and CEO of Saarbrücken-based start-up Okinlab, a laboratory for architecture that runs the design platform form.bar. Users can design furniture to the centimeter at form.bar and view it three-dimensionally. "We don't ship furniture, we ship data," Quaranta says, explaining a core element of the business model. Form.bar works with one hundred local carpenters who mill the furniture and deliver it within four to six weeks. Meanwhile, form.bar can be used in more than 25 countries. While Quaranta won't give exact business figures, he says May and November were the best months in the company's history.

It's not just form.bar that seems to be posting record numbers, but many startups in the furniture industry. Corona was a growth engine for them, after all, many people had to or wanted to refurnish their homes. The online furniture provider home24 speaks 2020 already for the second time of the best quarter in the company's history. Home24 was able to increase its sales in the third quarter by 54 percent compared to the previous year to 118 million euros. Already in the second quarter, the furniture supplier from Berlin reported enormous growth, was profitable in the summer for the first time for a year at a stretch.

The value of the Home24 share increased sixfold

Home24 sees the reason for the good news in the expanded platform and through "the beneficial demand effects from both new and existing customers". In the past six months alone, the start-up has been able to acquire 400,000 new customers. The company's shares climbed from a low of under three euros in March to just under 18 euros, a six-fold increase in eight months. At the end of the year, Home24 will move up to the SDAX, the stock market index for small companies.

The start-up Westwing also increased its figures. The Munich-based company sells furniture as well as decor to registered users. Sales in Q3 stand at 98.6 million euros and have increased by almost 66 percent compared to the same period last year. Westwing has only been a public limited company for just under two years. A share certificate was available at the beginning of the year for under three euros, immediately before Christmas, the share was over 31 euros and thus again exceeded the issue price of 2018.

But not only furniture sellers can benefit from Corona, but also furniture leasers. For the start-up Lyght Living Furniture Leasing from Neu-Isenburg near Frankfurt, the beginning of the pandemic changed everything. "Projects for office furnishings suddenly had to get completely different floor plans than before the pandemic," says founder and CEO Daniel Ishikawa. Desks, for example, now have to be spaced farther apart and new partitions installed.

Customers were unavailable for weeks at the beginning

At the beginning, it was not at all clear whether Lyght Living Furniture Leasing would be able to profit, says Ishikawa. For example, individual customers were not reachable at all for weeks when the pandemic began - an uncertain time for the company. But then they registered increased demand in Hesse as well. Furniture for the home office was particularly popular this year. An office package with chair and table can be rented for four weeks duration from 200 euros. "The short rental period offers our customers a flexibility they would not have with a purchase," says Ishikawa. Many companies have furniture rental companies furnish their employees' home offices. That way, they only need to rent desks and chairs for as long as home offices are necessary. The startup said it expects to close quarters three and four with 30 percent more revenue than last year.

But as fast as the start-ups have grown, they are still nowhere near market leader Ikea. Ikea generated 861 million euros in e-commerce in the fiscal year to August 31. Compared to the previous fiscal year, the Swedes have thus increased by 74 percent. The furniture retailer now earns almost one in five euros online. Since this summer, the Ikea app is no longer just a product showcase, but customers can order from the app and have it delivered. The company now wants to discontinue the printed catalog, the online business goes first.

Quaranta from form.bar and Ishikawa from Lyght Living Furniture Leasing are also convinced that the digital business will continue to grow. Ishikawa believes the home office will stay around longer, even after Corona passes. What's more, his customers are already requesting furniture for rent from him more often for sustainability reasons, a trend that will become much more prominent in the coming years, the founder said.

Suppliers from the region could benefit

For the future, it depends on how loyal customers remain to online furniture retail. Claudia Loebbecke, professor of media and technology management at the University of Cologne, sees the advantage for online retail in furniture that does not have to be test-fitted, for example cabinets or tables. "True, in e-commerce the competitive pressure is also even greater, because customers can compare almost worldwide; but the logistical challenges definitely argue for advantages for suppliers in the region."

For start-ups such as form.bar, a big opportunity lies in developing software that allows for bespoke furniture or three-dimensional interior design. "However, such software providers are likely to be bought up by larger furniture chains in a timely manner, as in the medium term logistics are likely to be more demanding than the application of a software," says Loebbecke. Start-ups in the higher price segment will also grow as a result of increasing digitalisation, according to the economist.