Furniture startup Article, which designs and manufactures modern furniture and sells it direct to consumers, expects to double its sales this year, to $200 million, cofounder and CEO Aamir Baig told Forbes. If it succeeds, that would put it in the same league as successful direct-to-consumer mattress makers Casper, Purple and Leesa, and prove wrong those who’ve questioned the ability of startups to manufacture and sell bulky items where design is critical direct to consumers over the Internet sight unseen.
Baig, 38, and his cofounders – Fraser Hall and twins Sam and Andy Prochazka – launched the Vancouver-based company in May 2013. They grew Article rapidly by taking control of the supply chain and selling direct at far lower prices than retailers could. Like many direct-to-consumer businesses, they promoted the aspirational brand on Instagram, where it now has more than 200,000 followers, and they used data to test their products with small production runs, refining their plans based on what sold and what didn’t.
The strategy worked: Article’s revenue neared $50 million in 2016, then doubled to $100 million in 2017. It is profitable, and, unlike the typical Silicon Valley-based startup of this size, Article has taken only minimal outside financing. “We have been disciplined operators,” Baig says.
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The brainstorm for Article (which was originally called Bryght) dates back to 2011, when Baig and the Prochazka brothers were brainstorming over pancakes and coffee at their local IHOP. Andy Prochazka, who had previously worked in consumer electronics, had taken a sabbatical in China, to learn Mandarin. “It always frustrated me going into meetings in China, and not being able to speak directly to the engineers,” he says. While in Asia, “he was exposed to the world of manufacturing and retail,” Baig says. “It was a big surprise to see how production costs translate to retail pricing costs in North America. We started chatting and looking at this industry. We asked, ‘What can be done to make the whole process more efficient?’”
Over that breakfast at IHOP, they hatched the plan for what became Article. Not long after, Baig got in touch with Fraser Hall, who he knew through a company that Hall had founded, and Hall, frustrated by his own experience buying furniture, joined them. “We had been engineering new solutions to problems for a decade in our other endeavors, and we immediately got into the engineering of it,” recalls Andy Prochazka, the company’s chief marketing officer. “We’re all computer engineers, so we’re all super nerds,” adds Hall.
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None of them knew much about design (their early efforts at designing the company's collections helped convince them to hire an in-house design team), but they believed they could fix the supply chain problems that had added massive costs to consumers who just wanted to buy a couch or some chairs. A typical retail markup, Andy Prochazka says, is 400% over the factory cost, meaning a sofa that sells for $2,000 costs just $500 to make. “It’s staggering,” he says. “Factories are incredibly efficient and they have spent a lot of time becoming efficient. The real inefficiency is getting the product from the factory to your house.”
Modern design, no retail markups: Article's cofounders built the business off products like the Sven... [+]
COURTESY OF ARTICLE
Article’s furniture is mid-range to high-end modern. Its Sven sofa, in blue velvet, with crisp lines and a tufted seat, sells for $1,299 (which it claims compares to a retail value of $2,500), while its Mara round marble table goes for $299 (which it says is less than half the $700 it would go for in a store).
The founders bootstrapped the business, able to invest themselves from having founded other companies previously. Of a total $5 million invested in the early years, they took on $2.8 million from Vancouver Founder Fund, whose managing partner is Fraser Hall and whose investors include Aamir Baig. “There are no new voices at the table,” Hall says. “We like the idea that the business should be self-sustaining. That’s always been in our DNA.”
In its early days, the company said on its website that its sofas were produced at the same factory that made furniture for brands like B&B Italia and Knoll, but it pulled the information down at the request of the factory’s owners, according to the New York Times. “The factories that run our production are also running production for some of the who’s who of the designer furniture industry,” Baig says today. “Of course, our designs are exclusive to us.” The materials in its products come from all over the world with leather from cows in South America that’s processed in tanneries in Italy, and marble from Europe. The factories it works with are all overseas – in Vietnam, China, Indonesia and India – where costs are lower than in North America.
As a manufacturer and retailer, Article has access to voluminous data about what’s selling and what isn’t, allowing it to test its products with small production volumes, and then move quickly to produce more of what's selling or to kill off or change what isn't. “You know what's in demand and what's not in demand," Baig says. "You don't end up with mountains of product that you are trying to push through to the consumer." The company's most popular item has been its Sven sofa, in Italian charme tan leather. "As soon as we put it up, we could tell we had something there,” he says. “So we promoted it more, and that amplified its popularity.”
The U.S. furniture market is gigantic, with sales of more than $100 billion in the U.S., but it’s a fragmented market, and even big furniture retailers, like West Elm (part of Williams-Sonoma), Crate & Barrel (owned by Germany's Otto Group) and RH (formerly known as Restoration Hardware), have relatively small slices of the market. While Article isn't the only furniture startup trying to reengineer the furniture business for Millennial consumers – others include Burrow and Floyd (which manufactures in the United States) – it may be the largest so far.
As it expands, Baig plans to introduce 1,000 new items, especially in bedroom furniture and tables and chairs. Future product offerings could range from rugs to lamps to home decor. While the company was launched with a modern aesthetic designed to appeal to urban Millennials, its goal is bigger. "The ambition of the company," Baig says, "is to grow beyond that."
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