retail | Jun 1, 2022 |
Breaking from the DTC playbook, Article puts profit over growth

The story of the direct-to-consumer furniture business is well into its middle phase after the initial hype and boom. Some DTC sellers opened stores, pursuing a model that looks a lot like the one they planned to disrupt; others have sold themselves to bigger players, and more than a few have disappeared.

Then there’s Article, the Vancouver-based startup on the verge of celebrating its tenth year in business. It continues to boom, with its founders citing sales up more than 45 percent last year over the year before, new facilities both in North America and in Vietnam and the milestone of recently delivering its one millionth order. But the marker that matters most is the fact that Article is profitable, and has been so for most of its existence.

“It pays to be obsessive about the entire customer experience,” says co-founder and CEO Aamir Baig, an engineer by training. “When we began, we saw an opportunity to start a better company.”

While the company is private and did not share financials for this article, a closer look at why Article has been profitable when so many others have not reveals a business strategy that has prioritized making money over growth almost since its founding. With just a small amount of what it calls “friends and family” investments—according to Crunchbase, a Series A round in 2016 and a Series B in 2017 from two venture capital funds—the company has largely worked within its own cash flow and kept its marketing expenses “proportionate with its revenue,” says Baig.

That slow-and-steady approach stands in stark contrast to many other DTC players—Casper and eyewear brand Warby Parker come to mind—that continue to lose money as they push to expand their businesses. By and large, DTC brands have emulated Amazon’s play in its earlier days, betting that profits would come eventually and growth was the most important thing for the time being. While it worked for Amazon (mainly because the company gets the bulk of its profits from non-retail businesses like web services and advertising) most DTC companies haven’t yet realized the same success. That makes Article’s self-professed profitability all the more unusual in this sector.

How have they done it? Article conducts its business somewhat differently than other direct sellers in several important ways.

Operations and logistics: Article makes it a point to note on its website that it was founded by engineers (Baig and three others), who brought with them a new approach to making and selling furniture—and none of the preconceived notions of those in the home furnishings industry. This includes the company’s proprietary technology for manufacturing and distribution, now manned by more than 100 technicians, who are a key part of Article’s work force of 1,300 people both at company headquarters and in Vietnam, where much of its product is made.

While Article does not own any of its manufacturing in Asia, the company opened an office in Vietnam in 2020, which allows it “to support closer manufacturing relationships,” says Baig. In the last year, Article has doubled its headcount abroad, adding team members who collaborate with its manufacturing partners “to ensure we develop high-quality products at the best value.” The ability to oversee the supply chain and logistics has been especially important amid the disruptions of the past two years, when so many companies have struggled with delivery issues for products manufactured in Asia. While Article has not been immune to those challenges, Baig says that the company is better-equipped to deal with these problems given its in-house resources.

Design: The company has also built a nimble operation that is able to respond quickly to market trends, developing proprietary products based on sales data and feedback from its customers. By tracking what designs are the most saleable through purchasing data, the company directs its product development team to continue to focus on those looks. “Our online business model also gives us an opportunity to understand our customers at scale,” says Baig. “We’re able to tap direct data sources to understand shopping preferences and customer feedback. Teams across the company use this data to inform decision making, including our product management team, which monitors and analyzes top-selling products to inform production schedules and which collections to expand.” That robust data set also helps the company price its products more competitively: “Accurate product analysis and forecasting ensures we design and stock products that will produce a return, resulting in top line growth.”

Delivery: Most furniture retailers, especially in the DTC space, use outside delivery services. Those third-party services sometimes have spotty track records when it comes to reliability and service, especially because they are not necessarily specialists in delivering large home furnishings products. In contrast to that model, Article now delivers more than half of its orders through its own in-house delivery service, which recently launched in 15 markets. In addition, it opened three new fulfillment centers—in Chicago, Houston and Vancouver—bringing the company’s total warehouse footprint to 1.86 million square feet. Ultimately, the goal is to own the entire delivery process for all orders. “Providing that excellent customer experience, at an efficient cost,” is a very important part of Article’s positioning. “It’s our obsession,” says Baig.

One piece that is not part of the Article model is stores. It does not have any, and has no plans to add them anytime soon. “We don’t rule them out,” says Baig, “but not for the foreseeable future.”

Even with the slowing down in the broader home furnishings market we’re seeing in 2022, Baig expects Article to continue to grow: “I’m confident we will continue to capitalize on the opportunity in front of us through the team’s collective determination and expertise.”

Being more than a bit obsessive doesn’t hurt either.

Homepage photo: Article’s Timber sofa in Charme Tan leather | Article


Warren Shoulberg is the former editor in chief for several leading B2B publications. He has been a guest lecturer at the Columbia University Graduate School of Business; received honors from the International Furnishings and Design Association and the Fashion Institute of Technology; and been cited by The Wall Street Journal, The New York Times, The Washington Post, CNN and other media as a leading industry expert. His Retail Watch columns offer deep industry insights on major markets and product categories.

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