When it comes to furniture shopping, lots of retailers come to mind – Pottery Barn, Crate and Barrel, IKEA, Williams-Sonoma, plus a whole host of others.
In fact, the furniture industry is so highly fragmented that the top 12 retailers nationally only control a cumulative 12.6 percent of the market.
In addition, a long complicated supply chain stretching in many cases from manufacturing plants in China and elsewhere in Asia and involving multiple middlemen, helps to inflate the cost of each piece of furniture substantially by the time it reaches you, the consumer.
For example, the best available price you could have found – until today – for a Shipley Chesterfield, pictured above, would probably have been $1807 at Amazon.
That is no longer true, however, because San Francisco and Hong Kong-based Deal Décor has developed a new way to deliver you furniture direct from the factory, so that same set is now available at a price of $1077, 40-percent cheaper than Amazon.
It offers similar savings on other pieces of furniture. But how can they possibly do that?
Read on – this is one of the best examples of how an ecommerce startup is poised to disrupt an entire industry I’ve yet encountered.
Deal Décor was cofounded last year by two industry veterans, Craig Sakuma and Gregory Lok, both of whom had worked for U.S. multinationals (Home Depot and Target) active in procuring furniture from Chinese factories.
In the process, they built up a strong network of contacts inside China’s manufacturing industry – contacts they are now leveraging to cut out almost all of the inefficiencies in the traditional supply chain.
That allows them to sell the same pieces of furniture the big companies sell at significantly reduced prices (30-70 percent). Deal Décor also harnesses the power of online group buying to help achieve savings.
“There are three ways we help consumers save money,” explains Sakuma. “One, we aggregate demand using group buying. We don’t make the purchase until we fill an ocean freight container. Therefore, we buy only what we have already sold to consumers.
“Two, we cut out the middlemen, the distributors. We work with the same factories that supply the major U.S. retailers. Even though we don't buy in bulk we help extend their manufacturing runs, so they sell to us at the same price they sell to the big companies.
“Three, we optimize the transportation from factory to consumer. The standard system is to ship from Asia to LA and then overland to a distribution warehouse in Missouri. Then it has to be shipped back here for sale in the Bay Area. We can cut out $250 in shipping by eliminating the roundtrip to Missouri.”
Deal Décor’s offers are available only in California for now, but will be extended throughout the nation before long.
“The beauty of our business model is we can charge much less than Amazon and still take a higher profit margin,” says Sakuma. “Basically, we cut out the fat and inefficiencies from the system and give the majority of the savings back to the consumer.”
Delivery times for the furniture will run about 8-12 weeks, which is comparable to the industry standard, he said.
For now, Deal Décor is offering three new pieces of furniture every week, and each deal stays open for 10 days.
Last fall, in a ‘proof-of-concept’ trial, the company was able to sell 60 units of a three-piece sofa sectional to buyers in the Bay Area in just two weeks. It typically takes Amazon three months to sell that many units at a price of $706.
Deal Décor’s price was only $399, and the company says its profit margin still was 20 percent.
Deal Décor’s local office is at Dogpatch Studios. The startup is working with a few San Francisco cafes to showcase its furniture. Samples are currently sited at the original Philz on 24th Street, and Maxfield’s on Dolores.
The company has just four employees plus an engineering team in China.