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High off over US$100 million in 2018 revenue, Article’s CEO is changing its business model

Aamir Baig, co-founder and CEO of Article. Article
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Aamir Baig, co-founder and CEO of Article, led his company to over US$100 million in annual revenue in 2018. Now, his Vancouver-based online furniture startup is bringing manufacturing and shipping in-house as it tries to catch up to U.S. rival Wayfair and evade Amazon’s increasingly aggressive moves in the furniture space.

In a wide-ranging interview with The Logic, Baig laid out his vision for owning the company’s supply chain—including opening a new factory in Toronto—as well as adding two C-suite executives and doubling down on online sales as his rivals switch to brick-and-mortar stores.

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Talking Point

Article, the Vancouver-based online furniture startup, is changing nearly everything about its business model. It’s bringing manufacturing and shipping in-house, aiming to compete with rival Wayfair and evade Amazon’s increasingly aggressive moves in the furniture e-commerce space.

Article, founded in 2011, sells furniture direct-to-consumer, designs products itself and uses third parties to build and ship its pieces.

The firm’s direct-to-consumer model allows it to keep prices lower than comparable products at big-box furniture retailers. Baig said bringing manufacturing and shipping in-house will widen that advantage, and allow it to control the entire customer experience. “We’re going to take control of the inputs that go into our product, further controlling the design and manufacturing process and eliminating some middle layers that are involved,” said Baig.

To lead the transition, Article is hiring its first supply-chain vice-president. The new hire will develop a manufacturing strategy and help manage its growing delivery operations. “They’re [VP of supply chain] giving us more control on the product manufacturing, which would allow us to bring high quality products to customers at reduced price points,” said Baig.

Article is also taking control of its shipping. The company is setting up a Toronto fulfillment centre with at least 250,000 square feet of space, slated to open by the end of the year. It already has warehouses in Seattle; Los Angeles; New Jersey; Jacksonville, Fla.; and Vancouver. The company strategically places its centres in areas with large populations.

It launched its own in-house shipping teams in January 2019 to do final-mile deliveries in Los Angeles and New York. A pilot project in those cities reduced customer complaints by 83 per cent and delivery time by two days, compared to using third-party delivery services. At the time, the firm also said it planned to scale delivery across Canada and the U.S. over the next 18 months.

Article furniture by a pool. Article

Though the company is doubling down on its supply chain, it’s not interested in brick-and-mortar expansion at the moment. Similar direct-to-consumer e-commerce companies have made showrooms a core part of their expansion strategy. Custom menswear line Indochino, for example, has 43 showrooms across Canada and the U.S.

“We may well explore it next year,” said Baig. “There’s some strong reasons to consider it, and the cost of doing physical has been coming down with technology and automation, so there’s some tailwinds there.”

Article also recently hired its first HR vice-president: Caroline Schein, who was previously vice-president of HR at Boston Pizza and the financial co-op Vancity. Schein is tasked with managing Article’s workforce, which is up to 300 people and growing; the firm currently has 22 open positions.

“[The company] can no longer rely on the founders touching everything that goes on,” said Baig. “To continue to scale we needed this [VP of HR] to become a dedicated function with strong leadership and experience with scaling.”

Its pivot to in-house manufacturing and delivery comes as it faces growing competition in the furniture e-commerce space.

Amazon sells both third-party and its own private-label furniture on its platform, and is investing heavily in making one-day shipping the default for its Prime users, giving customers more incentive to use the service. Wayfair, which also sells both its own brands and third-party furniture, had US$6.7 billion in sales in 2018, and repeat customers placed 18.5 million orders.

Article is small in comparison: the company made US$100 million in revenue in 2017. Baig declined to disclose the firm’s 2018 revenue, but said the number was “way higher” and that it has been profitable since 2015. In February 2018, Baig told Forbes that Article expected to make US$200 million in sales that year.

Article has not accepted much venture capital funding. The company has raised US$5 million to date led by the Vancouver Founder Fund, in which Baig is an investor. The fund’s managing partner, Fraser Hall, is an Article co-founder; his previous company, Recon Instruments, was acquired by Intel for US$175 million in 2015.  

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Baig notes that the company was in a position to bootstrap because he and his co-founders have founded their own successful tech companies. But Article has seen plenty of interest from venture capitalists, turning down US$100 million worth in 2017.

“In hindsight, obviously we made the right call, because we’ve continued to grow and didn’t end up needing that capital,” said Baig.