mergers & acquisitions | Dec 14, 2022 |
Snowe is acquired

Snowe, the direct-to-consumer home essentials brand, has been acquired. The buyer is Interweave, a holding company that purchases and operates e-commerce businesses. The deal officially closed this October—the terms were not disclosed.

“Snowe is among the greats of the DTC bedding revolution. They have an amazing customer base that loves the product, and the product—from a technical perspective—is excellent,” says Denver Rayburn, Interweave’s founder and CEO. “[The acquisition] made all the sense in the world.”

The news follows a rough patch for the New York–based seller of textiles, decor and dinnerware. In recent months, online reviews and comments on Snowe’s social media show a swath of customers who placed orders throughout the year and had yet to receive either goods or a refund. “Still waiting for items I ordered in February,” wrote Instagram user @andybucky, in a representative example. “Haven’t received an update since July, despite many emails since then. You also disconnected your phone. How are we supposed to actually contact you?”

Snowe co-founder Andres Modak says that the company began to accumulate back orders late last year due to the unavailability of certain raw materials. Then, he says, communications with customers fell by the wayside during the handoff between Snowe and Interweave, leading to the rush of critical commentary.

Interweave’s chief of stuff John Pops says the company has been moving to clear up the confusion and has issued “tens of thousands of dollars in refunds” to the several hundred customers whose orders were in limbo. He estimates that more than 80 percent of issues have been addressed.

Modak founded Snowe in 2015 alongside his wife (and fellow Wharton MBA grad), Rachel Cohen. Riding a wave of enthusiasm for the DTC model, the two raised a round of funding to launch a brand that offered elevated basics at an affordable price. Snowe grew quickly and opened pop-up retail locations in Manhattan and the Hamptons. Then the pandemic hit.

Snowe was never profitable. During the pandemic, Modak says that the company faced severe financial difficulties and continued to lose money. “When you have things like container ships from Europe going from a couple thousand dollars to every single month increasing three- and fourfold until you’re above $20,000, your entire paradigm shifts overnight,” he says. “You’re making decisions about losing money on every order to satisfy the needs of the customer.”

After reeling from the initial confusion of COVID, Modak and Cohen planned to chart a new course for the business in 2021 that would have required taking on an additional round of funding. The move was met with resistance from some of the brand’s earliest investors. “We unfortunately had some disagreements,” says Modak. “We decided at that point an acquisition was best.”

It might strike some as odd that a home goods brand would struggle during a time that the category was red hot. In fact, Snowe’s troubles are a relatively common story, especially in the DTC world, with its thin margins and vulnerable supply chains. As the global economic system buckled, chaos theory took hold. At one point, says Modak, the shutdown of restaurants led to a decrease in the consumption of meat from birds like ducks and geese, sending the price of down feathers up, hurting Snowe’s margin. Demand was no problem—fulfilling it profitably was a huge challenge.

Those who had leverage with their banks and manufacturers—the Williams-Sonomas of the world—were able to juggle and make it work. For smaller players, the picture was very different. “[Most DTCs] are small businesses, even if they're extremely glossy from a branding perspective,” says Rayburn, Snowe’s new owner. “When they’re talking to a manufacturer, they’re among the smallest brands the manufacturer is working with—the factory is often running 100,000 sheet sets for West Elm—so the negotiating power and the margin isn’t so great.”

Once Interweave has made good with existing customers, the company’s next move is to restock the digital shelves and get Snowe fully back in business—a process that Rayburn expects to be complete early next year. “There are people who are like, ‘I’ve wanted to buy a percale sheet set for a year and a half,’” he says. “You wouldn’t believe the size of our ‘notify me when back in stock’ queue.”

Going forward, Rayburn believes that through economies of scale (Interweave owns several other brands in the space), operational efficiencies and a financing arrangement that will give the company working capital, Snowe can grow and become a steadily profitable business. Moreover, he says freeing the brand from the brutal expectations of venture capital will give it space to breathe: “We buy companies never expecting to sell them.”

After a whirlwind seven years, Modak and Cohen are ready to recharge and are contemplating their next venture—which may or may not be in the home industry. “We love the home space. We always had aspirations to build something special in it, and we’re always thinking about how design is evolving and changing,” he says. “We’re reconnecting with folks, kicking around ideas and prototypes.”

As for the future of the DTC model? “It’s not dead,” says Modak. “It’s changing—you need to have something truly valuable and meaningful for the consumer. But it’s not dead.”

Homepage image: DTC home essentials brand Snowe has been acquired by Interweave | Courtesy of Snowe

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