INSIDE THE FURNITURE STARTUP BELOVED BY INSTAGRAM, PINTEREST, CASPER, AND EVERLANE
In 2005 Petrus Palmér co-founded the studio Form Us With Love straight out of design school in Sweden. By 2012, FUWL’s clients already included Ikea, Cappellini, and Muuto. It was hard to imagine how things could go better, but Palmér felt a nagging discontent in what he was doing. He was stuck between designing for the biggest mass market imaginable or for the 1% who could afford a USD 10.000 couch.
It was obvious that the market was missing out on a product somewhere in between. “Because of how production has evolved in the last few decades, it’s a race to the bottom to reduce quality, price, and sophistication,” explains Palmér. And so, in 2012, Palmér set out to create an online-only furniture brand called Hem. “I had seen so much that I wanted to change,” he says. “Instead of being a designer making things, I wanted to be a designer making things happen.”
Five years later, Hem is both profitable and growing–despite a tumultuous, short-lived acquisition by the e-commerce site Fab.com, which had intended to turn Hem into its in-house furniture brand. But while Fab shared a vision of democratizing design, it never could build a sustainable business model selling. Against all odds, Hem has done so, with only a few dozen staff members, no sales staff other than Palmér, and just a few million in seed capital, as compared to Fab’s USD 150 million. But it’s still not the mass-market brand that Palmér envisioned. That’s why 2018 seems likely to be a decisive one for Hem.
The logic behind Hem’s business is the same as that behind Everlane or Casper. To reach consumers, traditional furniture brands must deal with middle men in the form of retailers or wholesalers. Each one takes a cut, so that by the time a piece of furniture reaches the market its retail price is upwards of 500% of wholesale. Most manufacturers respond by cutting costs as low as possible to preserve at least some margin. The result is a USD 4.000 couch that might have cost USD 500 to make. Similar to the likes of Everlane and Casper, Hem cut all those middle men out by selling online and handling distribution from their factories. As a result, they can produce nicer goods by increasing costs and, at the same time, lower prices to consumers.
But the challenge that online brands face is consumer awareness. It’s not easy to build a brand if people can’t experience your wares in person; the problem goes double for furniture, which so often looks different in person than in pictures. Everlane solved this problem with frequent product roll-outs that keep their customers hooked. Casper does it with niche marketing via ads in big cities, and voluminous spots on podcasts. Hem is taking a different approach: good old-fashioned influencer marketing.
They don’t place ads. Instead, Palmér constantly appears at furniture fairs, throwing dinners with architects and interior designers. Hem also does pop-up events with other startups such as Artsy and WeWork. “We’ve focused on PR and brand ambassadors and building real relationships,” he explains. “We keep the community close.” It’s not a coincidence that you can find Hem’s products in the offices of Instagram, Uber, Pinterest, Casper, and Everlane. Not only does the company’s ethos fits those companies: Hem is also highly plugged-in with the interior designers who outfit their offices.
Having set up the brand, Palmér now has to try and realize his dream of making Hem a well-known brand. For now, Hem is staying the course. Having opened one profitable pop-up in New York last fall, he plans on doing two more in other cities. Palmér thinks that to appreciate Hem’s design, they have to see how good it is in person–and that once they do, the word will spread.
The next big choices will be around product and funding. Palmér doesn’t want to bloat the Hem line with more products to suit more and more tastes. But they do need more products, simply because newness still drives sales among a hyper design-conscious audience. Furthermore, the company needs to decide whether to take on traditional venture capital in order to fund more marketing and product development. The goal, according to Palmér, is to be a company that aims for a tightly curated segment of the market rather than the mass–say, the 5% who know the difference between Arne Jacobsen and Charles Eames. “The vision of owning 5% of the market gives us a lot of creative space,“ yet it will challenge them as it is hard to stay fresh while aiming to be mass.