Arash Fasihi and his wife wanted a TV stand. The couple had just bought a condo, but the particular piece of furniture they needed to bring the place together wasn’t available in Vancouver. So Fasihi turned to the Internet, only to find that the one U.S. retailer that had the item in stock wouldn’t ship it across the border.
So Fasihi registered audio-videofurniture.com, loaded the site with an array of TV stands and other electronic fittings, and left it out there to test if other consumers had similar needs. Six months later, in December 2004, the site made its first sale.
Fast-forward a decade, and Fasihi is CEO of Cymax Stores Inc., an e-commerce furniture retailer on track to earn $180 million this year. The company, based in Burnaby, B.C., grew 71% over the past five years and is now a multi-brand retailer showcasing the products of more than 200 North American manufacturers, and handling shipping and delivery operations on their behalf.
What makes Fasihi’s accomplishment all the more impressive is that he’s done it without bringing in substantial outside investment or the kinds of specialized employees usually required to scale to that size. It’s only recently that Cymax caught the attention of a significant B.C. backer, who’s lending a chunk of cash and his considerable expertise to help grow the business even further.
Cymax also stands out because of the market it’s pursuing. While e-commerce has disrupted many traditional sectors within the retail industry (when was the last time you bought a novel at a bookstore?), furniture has remained decidedly old-fashioned. By Fasihi’s reckoning, only 6% of the purchases in the $250-billion global home furnishing and decor category happen online. “The in-store experience is so important to the buying and selling of furniture,” says John Torella, senior adviser for marketing at the J.C. Williams Group, a retail consultancy. “You want to see it, feel it, touch it, sit on it.” That’s difficult to do when the object in question is a two-dimensional image on a smartphone screen.
But consumers will eventually get comfortable with the idea of buying furniture online, just as they did with eyewear, clothing and even groceries. Capitalizing on its first-mover advantage, Cymax is leading a network of traditional retailers into the digital selling space and establishing an unassailable position in tomorrow’s e-commerce market. Once shoppers have become accustomed to purchasing beds, chairs, even entire kitchens online, digital sales will soar, Fasihi says. “We could be a billion-dollar business within the next few years.”
You’ve probably never heard of Cymax, and neither had Markus Frind when he sat down next to Fasihi at a dinner for Vancouver tech CEOs. Cymax does 97% of its business in the United States and focuses most of its marketing spending on online advertising. It’s not a blueprint for brand recognition—as with that first sale back in 2004, most buyers find Cymax because its product category pages rank near the top of U.S. search engine results.
At the dinner, Fasihi mentioned to Frind—founder of the online dating service PlentyofFish Media Inc., recently acquired by Match Group for US$575 million—that he was looking to bring some investors on board. “I said, ‘Oh, send me the pitch deck, and I’ll see what you guys have,’” remembers Frind. The results impressed him, especially the scale Cymax had managed to achieve while flying under the radar. According to Frind, most companies that pitch to Canadian financiers operate in markets with total revenues of perhaps a few hundred million dollars. Not Cymax. “They’re in furniture, a $200-billion industry; they’re also in logistics and shipping, which is also tens of billions,” he says. “It’s not something you see every day in Canada.”
Frind put $18 million of his own money into Cymax this February and took a seat on the company’s board. It’s a hefty sum to hand over, but Frind sees it as a smart stake. “Relative to my net worth, it’s not that big of an investment,” he says, more matter-of-fact than boastful. “But at the end of the day, this is a business I feel like I can make a ton of money off.” He cites publicly traded U.S. online home store Wayfair, which has a market cap of over $3 billion, as a good example of what Cymax could someday become. Potential aside, furniture e-tailing might seem an odd fit for a dating entrepreneur, but Cymax and PlentyofFish have one very important thing in common: data. “We’re more a technology company than a furniture company,” emphasizes Fasihi.
Cymax uses data analytics to optimize its delivery network and determine what styles and brands consumers are most interested in. “There’s been a lot of discussion about data, how important it is, and what it can fuel,” says Susan Doniz, a former chief information officer at both Montreal-based loyalty consultancy Aimia and global consumer packaged goods giant Procter & Gamble, who now sits on Cymax’s board. “But to be honest, I’ve seen it work that way in reality in only a few companies,” says Doniz, “and Cymax is one of them.”
Managing inventory and delivering packages quickly and cheaply are major challenges for e-commerce companies, particularly in a big-item sector like furniture. Cymax solves the inventory problem by not holding any—it’s essentially a platform that connects vendors to consumers. Manufacturers ship their wares to Cymax’s logistics partners, who deliver them to buyers. Data from customer purchases allows Cymax to predict consumer trends and behaviour, so the company has a good sense of what it’s going to be moving where and when. The company can plot the best path for an object to take from manufacturer to vendor and pick the carrier best suited to transport it. That translates into cost savings which add up quickly—Cymax moves some 1.4 million boxes a year.
“In the world of small parcels, the difference between one carrier and another could be two or three dollars,” says Fasihi. “On the large goods, the difference could be two or three hundred dollars.” Delivery optimization has also reduced the number of damaged or incomplete packages, ensuring Cymax’s seller approval ratings remain high (although you can still find the occasional negative review online). Data-enabled scaling is Cymax’s killer competitive advantage, and the company is doing something seemingly counterintuitive to maintain it: helping the competition. Constant Retail, a subsidiary spun out earlier this year, sets up bricks-and-mortar furniture retailers with the same e-platform Cymax uses to sell to consumers.
In effect, Constant Retail allows retailers to take advantage of their own showrooming, a phenomenon in which consumers look at and test a product in-store and then buy it online, usually at a lower price. “If these retailers have access to an e-commerce platform at an affordable cost, then consumers who go to that retail store don’t need to drive back to make a purchase—they can just buy it from [the same retailer’s] online store,” says Fasihi. It’s less selling trade secrets, more co-opting assets. “We can build this network across North America by helping these retailers, and we all benefit from the scale,” explains Fasihi.
The more retailers sign up with Constant Retail, the more opportunities there will be to convert skeptical consumers into online furniture shoppers. Cymax can, in effect, train consumer behaviour, guiding customers up the product ladder, beginning with relatively generic items and moving them on to more personal big-ticket purchases, like dressers and beds. “They buy a flat-pack item, like a TV stand or nightstand,” explains Fasihi. “Then they start building trust and buying other things they want.” To capture a bigger share of those consumers, Doniz believes Cymax will have to become better known. “It’s a bit of a hidden gem,” she says. “Imagine if as many people knew about Cymax as know about Amazon?”
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