Brought to you by Retailinsider.com and PCMS
The Name: made.com
The Place: Headquartered in London, but basically an online business
The Story: Founder of made.com Mr Ning Li was just about to buy a very designer sofa from a brand that shall remain nameless and pay lots and lots of money - £3,500 in fact. He didn’t mind though because it was a designer sofa and obviously you have to pay through the nose for that. He mentioned the purchase to a Chinese friend in the furniture industry who said ‘Whoa there Ning. We make those sofas and sell them for $300 to your retailer. Come and buy one direct from us instead.’ And unsurprisingly he did.
Ning Li: founder and CEO
Great. I love it when people save money. And then he thought: ‘But wait, surely other people might like the same access to this stuff without the crazy mark-up.’ And there you have it – a business is born, launched in 2010 with £2.5 million of funding from Brent Hoberman among others. Li was brought up in France and he started a French version first called Myfab.com but this is the original UK site.
OK, everyone has their special tag line these days – what’s theirs? They want to be ‘the Zara of furniture’. Well, we need one of course.
How does it work? They do without the multitude of middle men, traders, importers and retailers etcetera. Using the power of the internet they aggregate demand and pass this demand straight to the manufacturer. There are 50 manufacturers onboard around the world – mainly in China – and 20 designers. The majority of pieces are original to made.com and most are subject to exclusivity agreements too.
Can I get something made just for me? Nope, that’s not the model. The whole point is this group buying thing which forces down the cost. Made.com use 40 feet long shipping containers – and until that shipping container is filled it is going nowhere. So it can hold 500 lamps for example – that order will be fulfilled relatively quickly as lighting is a big seller. But if you are buying an armchair – the container holds 100 of those - you are going to have to wait longer till the contents are sold.
Sounds high risk for the retailer? Li admits that the retailer takes the risk here. Containers do leave foreign shores with the contents half sold but he is adamant that when his containers hit the UK the contents are sold in the vast majority of cases. You just need special customers ‘who will play the game’.
Ah yes. Errr, what game? Customers who get the idea, basically. They are paying a lot less than they would do from a traditional retailer who keeps all the unsold stuff in a shop. Li describes made.com as a pioneer in inventory which is usually such a headache. They operate such low margins that they cannot just lower the price en route from China to make sure everything is sold. They manage demand super carefully and the customer buys into the idea of a potentially long lead time.
RRP £1,499, yours for £499 from made.com
And how would we describe these special people? Very internet-savvy, high-end, urban, London-centric, too busy to shop, and in the high-income bracket. They are used to having their deliveries within 24 hours but made.com would usually specify 7-10 days to collect orders, pass orders to the factory and co-ordinate shipping and delivery.
I think it’s time to mention the IKEA word. Go right ahead, Li has another line for you. Made.com is the Conran shop for IKEA prices. Li says made.com is more aspirational, but he sees the competition as being from IKEA to Conran and everything in between.
But the Swedish model is similar right? Yup. They are both vertically integrated businesses. Unlike other online retailers who buy stock from other brands and sell them on, they both manufacture themselves and sell their own products. Where made.com is really unique is the group buying mechanism. It’s the bulk demand which lets them cut out all the middlemen and buy direct.
How is the business doing? No comment on figures. But a growth rate of 450% from 2011 to 2012 and from starting out with three staff in 2010 Li now employs 80 people. Sixty are in London and 20 in Shanghai. They also picked up a clutch of awards at the Online Retail Awards last year.
So no clouds on the made.com horizon then? Well, there were some negative comments on social media about the customer service side of things, especially that there was no phone number. But now there is a number and things seem to have quietened down again. Li thinks that mistakes are the best way to learn, as long as you don’t make the same one twice obviously.
And they absolutely will have the shipping container sold out by the time it gets to the UK? Well, I’m whispering now… they operate a loading platform with a third-party which gives them 24-hours breathing space when the container is opened. And if any contents are unsold there is some leeway for storage for a short while but truly it hardly ever happens.