Temple & Webster set for ASX debut
Members-only homewares retailer, Temple & Webster, is leading a consolidation of online retailers in the furniture and homewares market in a bid to cement its position as category leader.
The four-year-old Australian company has had a busy year. It acquired Wayfair Australia in July and relaunched it as Zizo in September. Now it plans to acquire Milan Direct for around $20 million as part of the company’s upcoming IPO.
Temple & Webster is set to list on the ASX on December 10 with a market capitalisation of around $116 million under the ticker code TPW.
That means Temple & Webster co-founder and group CEO, Brian Shanahan, has recently spent a lot of time talking to investors about the virtues of round beach towels.
The retailer was able to take a punt on circular Turkish beach towels, one of Temple & Webster’s most popular products coming into summer, thanks to the structure of its members-only buying club which doesn’t rely on holding inventory.
“We have the ability to measure the demand for a product before it’s sold, it gives the wholesaler or the buyer confidence to go and buy a certain quantity knowing if it sells on Temple & Webster, it’s going to sell in other stores,” Shanahan told Internet Retailing.
“That’s the benefit of the members-only shopping model.”
Temple & Webster was founded in 2011 as a ‘homewares magazine with a buy now button’ by former eBay Australia exec, Brian Shanahan, and members of News Corp Australia’s digital division Adam McWhinney, Conrad Yiu and Mark Coulter.
While Temple & Webster’s model has its advantages, the business learnt that not everybody wants to become a member to shop. So the company developed a roadmap to build an open e-commerce experience when an opportunity to acquire Wayfair Australia arose.
Wayfair Inc, the world’s largest online-only homewares and furniture retailer with a US$3.2 billion market cap, which has operated in Australia for seven years, opted to focus on its US and European operations and sell its Australian business to Temple & Webster. The site was rebranded as Zizo in September and designed to appeal more to the local consumer.
Last week, Temple & Webster announced it would also acquire online furniture retailer, Milan Direct, which has grown organically for nine years and operates as a private label and marketplace model.
Understanding that furniture and homewares is largely an unbranded category, the Milan Direct acquisition complements Temple & Webster’s intention to range more private label products.
“They are very good at sourcing furniture product and we are very good at the homewares side of things and beautiful presentation and inspiration, so there’s lots of opportunities for us to cross pollinate and provide more furniture to the Temple & Webster member or more homewares to the Milan Direct customer. Which is just going to increase basket sizes and average order values,” Shanahan said.
As part of the deal, Dean Ramler will remain as CEO of Milan Direct while Ruslan Kogan, who is a shareholder in the business, will cash out.
Other online-only competitors in the market include The Home, which is owned by AussieCommerce, Rocket Internet-backed Zanui and, Kitchenware Direct.
With a portfolio of three online brands, Temple & Webster’s key growth opportunity is online. Sales in the Australian furniture and homewares segment were estimated by Euromonitor to be approximately $12.1 billion, just 3.8 per cent of this spend is online.
Online penetration in the Australian furniture and homewares segment lags behind international markets such as the US, which Euromonitor estimated to be 9.5 per cent and the UK, which is estimated at 12.8 per cent.
“Australia will follow those other markets, there is going to be natural migration from offline to online,” Shanahan said.
Temple & Webster is confident that natural migration will result in more than 10 per cent of spend in the category moving online, which will be a major driver of growth.
To win online, Temple & Webster plans to continue to invest more on marketing to grow brand awareness and to develop better customer experiences delivered through mobile and personalisation.
Branching out into offline is also on the table, with plans to open showrooms which are “low on inventory and high on experience.”
“We have a great starting position, we are the largest from an online-only perspective today. We have an opportunity to really accelerate and win online only and then to extend into multichannel retailing,” Shanahan said.
Temple & Webster has also highlighted potential for offshore expansion and select acquisitions.
“To me it’s more about long-term market leadership over short-term profitability. So we are not profitable this year, we don’t expect to be profitable for a few years but it’s about investing to win the market now.”
Temple & Webster is yet to make a profit, recording $11.4 million loss last financial year, which is forecast to narrow to $9.5 million this financial year on a pro-forma basis.
“This is our time to really accelerate brand awareness, win the consumer’s hearts and minds. And then look to profitability later on,” Shanahan said.