weekly feature | Oct 2, 2019 |
How one YouTube video captures the harsh realities of e-design

At first glance, it’s a YouTube video—nothing more, nothing less. A beauty and lifestyle influencer, Brittany Vasseur, talks in front of a green-screened image of a living room, giving her 1.2 million followers a step-by-step look at how she had a few rooms of her home made over by an interior designer—a virtual one—after purchasing a design package through Havenly. She explains what it’s like to use the online design engine and offers a few tips. At the end, she prompts followers to click a few links, then signs off cheerily.

The video, posted in July, garnered 146,000 views and mostly positive feedback. A few months later, however, interior designers began sharing the video in industry Facebook groups—and they were outraged. In an email exchange, Vasseur told Business of Home she’s been getting hate mail. Yesterday, she took the video offline.

What had a lifestyle influencer done to provoke the wrath of the design community?

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E-design—interior design conducted entirely over the internet—has existed in some form since the aughts. However, it wasn’t until this decade that it became widely known to consumers, when companies like Havenly and Laurel & Wolf scaled and professionalized the concept. Their early success pointed to a then-surprising fact: The market for interior design extended far beyond the 1 percent. If it were affordable enough, a vast number of Americans would hire a professional.

From the beginning, the central challenge of the e-design model has mirrored the existential crisis every interior design firm faces: How do you charge clients, and how do you make money? Most e-design platforms have come to the same conclusion—that the real profit is to be made by marking up product.

How one YouTube video captures the harsh realities of e-design
A concept sketch made using Havenly's platform
Design is by Kylie Trunck for Keltie Knight

The economics are simple. To attract a wide range of customers, platforms like Havenly and Modsy generally charge no more than $200 for a full design package. After factoring in the cost of acquiring the client through online ads (at its peak, Laurel & Wolf was spending hundreds to acquire each customer), paying the designer a cut, and the operational cost of running a growing business, e-design platforms can’t make a bundle on design fees—some, in fact, lose money on them.

However, by going to retailers like Crate & Barrel and West Elm with a huge volume of orders, e-design platforms can negotiate steeper discounts, slightly mark up the product, and pocket the difference, while still offering customers a good deal. With enough clients buying enough product, the potential is huge—huge enough to attract the attention of Silicon Valley investors, who have pumped millions of dollars into companies like Havenly and Modsy in the hopes that they will one day be billion-dollar enterprises.

But as traditional interior designers have known for decades, relying entirely on product markups to make money carries its own risks.

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Back to Vasseur and her YouTube video. Around halfway through her review, she comes to the point in the process when she's approved the final draft of her Havenly designer’s work. A mix of traditional and glam elements, the design called for a range of purchases, from a coffee table to a rug to a glittering modern art print. All could be bought through Havenly with only a few clicks.

Taking on a jokingly conspiratorial tone, Vasseur then confides to her viewers what she did next. Rather than purchasing through Havenly, she kicked around the internet looking for better prices on the pieces her designer had recommended. Often, she found them—sometimes at a discounted rate, below what Havenly was charging. Occasionally, she found lookalikes for a radically reduced price. All in all, Vasseur finished her entire project without buying a single piece through Havenly—thereby cutting her designer out of any potential commission.

In the past, clients who shopped around could at least be counted on to feel a little bit guilty.

When designers started sharing the video on Facebook groups, it raised a furor. A good deal of the ire was focused on the fact that Vasseur had included affiliate links to the products she had purchased along with her video—in other words, she was repurposing her Havenly designer’s work to potentially make money for herself.

However, many designers were angry simply because they’ve all had one of those clients—the person who shops around behind the designer’s back. It’s a universal headache of the profession that far predates e-design.

But in the past, clients who shopped around could at least be counted on to feel a little bit guilty about it. Indeed, what’s striking about the video is not that Vasseur price-shopped her designer, but that she clearly saw nothing wrong with it—she even made a video about it for 1.2 million people.

In fact, from her perspective, Vassuer did Havenly, and her e-designer, a favor. She had paid money for a design, received it, and chosen to execute it herself to get the best deal. She was then promoting the service on YouTube, for free, to a huge audience—only to be harassed by the very people she thought she was propping up. Who was right?

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Interior designers have historically relied on three barriers to prevent clients from shopping around, one emotional and two practical. The first is the relationship between designer and client. The second is exclusive access to trade-only vendors at designer pricing. The third is simply time—clients are busy people, and would often rather pay a premium to have someone else take charge.

Conducting the design process online weakens two of these barriers.

E-design companies typically rely on large retailers for product—retailers who will gladly sell to anyone and everyone. Even if e-design platforms are able to command discounts in many situations, it’s extremely difficult for them to beat the open market on every product—it’s simply too diverse and complex.

It’s a struggle Havenly CEO Lee Mayer acknowledges: “Ultimately, we have some work to do, clearly, to ensure we are keeping up with the prices and promotions in the market,” she tells BOH. Havenly does offer price matching through partners, allowing customers to take advantage of promotions. However, it doesn't account for third-party sites—if clients go to a site like eBay, Havenly won't be able to match the price.

Of course, if clients have a close bond with their designers, they’re less likely to shop around, whatever the circumstance. (And in some cases, traditional designers explicitly add clauses to prevent this into their contracts.) But on most e-design platforms, clients have limited interaction with their designer—usually only texting via a messenger app. Clients often don’t know much about their designers beyond a first name and a brief profile, nor are many even aware that their designer makes money on commissions.

Many clients like their e-designers (Vasseur gave hers great marks), but the relationship is at a distance, and seen through a narrow window—at best, like an internet-only friend, and at worst, like a customer service rep. A good connection between client and e-designer is certainly worth something, but it’s not always enough to prevent clients from shopping around, especially if they can save hundreds or even thousands of dollars.

Bringing the design process online gives it incredible scale, but it strips the experience of much of its traditional culture—and the nuances of what has historically been an extremely personal, high-touch profession. On one side of the equation, you have designers trying to approach their craft with that unique alchemy specific to the profession—a little bit artist, a little bit businessperson, a little bit therapist. Is it any wonder they’re furious when a client undervalues their worth?

On the other side, you have a client who is seeing interior design in a similar context to the way they’d order a takeout meal or a custom T-shirt. Is it any wonder that Vasseur didn’t feel guilty about price-shopping her designer? Do most people feel guilty if they order a Lyft, then find out Uber is $8 cheaper and cancel the ride?

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There is no silver bullet for these challenges. E-design companies like Havenly and Modsy don’t want clients to shop around—in that, their interests are perfectly aligned with their designers. However, there’s only so much they can do to put a stop to the practice, so they try to embrace the challenge. “Customers are totally free to do what’s best for them—we would expect no less,” says Mayer. “Living in a competitive world is a good thing; it makes us extremely focused on creating great experiences, which ultimately, we hope, is better for the customer.”

For Havenly's competitors, nothing about the Vasseur dustup should come as a surprise (indeed, at the end of her video, she asked viewers if she should try Modsy next). Clients shopping around is a known problem, and e-design platforms have been trying various tactics to push back—better deals, in-house furniture lines, exclusive products, a smoother checkout process. They're hoping that convenience will keep customers inside the building, if prices and designer relationships can't.

In the end, however, some clients will continue shop around. While online platforms have brought interior design to an entirely new audience, that audience’s expectations are radically different than the traditional interior design customer’s. Clients who pay $200 for a design package are generally looking for a good deal—why would they stop looking once the design phase is over and purchasing begins?

For designers frustrated by the experience of being shopped through platforms, going independent and offering e-design services direct to clients may present a compelling alternative. Working one-on-one with clients can offer the chance to build a more direct bond, and therefore the opportunity to charge a premium design fee and rely less on product markups. However, going it alone presents significant challenges.

For one, the pricing of many e-design companies has conditioned the market to expect a certain price point for design fees—somewhere in the realm of $200. That fact alone can make it challenging for designers to command a higher price for e-design services.

The bigger challenge is marketing. The major players have spent millions bringing in customers. For independent designers, seeking out clients online is a full-time job in and of itself. Many are happy to take the steady flow of work from companies like Modsy or Havenly, earn a cut of the design fee, and swallow the reality that some clients will shop around.

Some, like Jenna Gaidusek, are trying to establish a new paradigm. An e-designer who has worked with several of the more prominent platforms, this spring Gaidusek created an independent network called E-Design Tribe, which she’s hoping will grow into a compelling alternative to the big platforms. Her strategy is to create a marketplace where clients can directly connect with designers, and then let designers work independently. Rather than take a cut of fees or product, Gaidusek charges designers a flat fee for being listed, along with premium packages that include education and marketing priority.

Gaidusek has been encouraged by the early response to her platform and is hopeful that it will grow in the days ahead, but she's aware she’s going up against well-funded competitors who can offer designers a steady stream of work. She also acknowledges that even if marketplaces like E-Design Tribe become the new dominant model for design online, it won’t eliminate the pressures that lead to clients shopping around. Her advice is for e-designers to accept the reality of the internet and work with it.

Gaidusek tries to preempt wandering eyes by doing the exhaustive Googling herself. She also charges a higher design fee, meaning that any money earned on commission is a bonus—a strategy platforms like Havenly and Modsy will be hard-pressed to adopt if they hope to profit on their scale.

Woven through all of Gaidusek’s best practices is a tacit acknowledgement that trying to prevent e-design clients from shopping around is a losing battle. Most clients won’t make YouTube videos about the practice, but it’s the new normal, not the exception.

It’s worth noting that when clients leave an e-design platform in search of better deals, they’re not doing so in a vacuum. They’re digging around on various search engines and social media sites, which themselves make money through advertising and affiliate links.

All of that adds up to a strange hypothesis. The company to eventually profit the most from the rise of online design might not be Havenly, Modsy, Decorist, E-Design Tribe or any of the dozens of competitors springing up. The most successful e-design platform may in fact be Google.

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