Apt2B, founded by Alex Back, grew to about $40m in revenue before a Midwest brick-and-mortar chain of roughly 30 stores acquired it in 2018.
Back says Apt2B's consistent revenue came from a promotional calendar repeating every six to eight weeks and a direct link between discount depth and sales.
Back says Apt2B should have invested early in SEO and content marketing, even without immediate cash, and he now studies those for couch.com.
Apt2B sold couches online before big retailers and exited
Apt2B shows how a small, cash-positive retailer can win a category before the giants arrive. Back sold curated couches online around 2010, when almost no big-ticket furniture sold that way, funded growth with customer deposits, and built steady revenue on repeating promotions. A brick-and-mortar chain bought it in 2018.
Takeaways
Online big-ticket furniture was wide open in 2010. Around 2010 almost no big-ticket furniture sold online, independent brands were scarce, and IKEA offered only a store finder and catalog. CSN Stores, later Wayfair, had begun ordering single pieces.
Curation at the right price won early fit. Apt2B targeted people in their twenties who saw IKEA as low end and Crate & Barrel as high end. Back says fit came from curating the right products at the right price points.
Deposits kept the business cash positive. Apt2B took a 100 percent deposit on every order and used a 100 percent keystone markup. It raised only $125,000 from friends and family, never needed more, and paid founders after a couple of years.
Groupon and Costco drove early revenue. Groupon shoppers were set to spend $750 to $1,000, and a $1,000 couch carried almost a 22 percent discount. Costco events took 14 percent of sales, and Costco approves vendor products and pricing.
A repeating promotional calendar made revenue consistent. Promotions repeat every six to eight weeks, and Back sees a direct link between discount depth and sales. The first Black Friday offered 30 percent off. Furniture sells steadily through the year, unlike toys.
National shipping in 2013 unlocked scale. Revenue was about $300,000 to $500,000 in year two and $750,000 in year three. After nationwide shipping began in 2013, revenue passed $1m in 2014. The first out-of-area order came from Florida.
Early SEO and content marketing was the missed move. Back says Apt2B should have invested early in SEO and content marketing even without immediate cash, and the business would be about five times its size. He has spent the past year studying both for couch.com.
From business plan to 2018 exit
Back, an actor in Hollywood who sold furniture on the side, wrote the plan while singing on cruise ships and started Apartment 2B in a friend's apartment.
The first Magento site cost about $30,000 to $40,000, and a package builder let shoppers bundle a living room set.
A San Fernando Valley warehouse served only Los Angeles for two or three years, while Back and his wife drew on wedding savings.
A Midwest chain with about 30 stores approached the company, and talks began in 2017.
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On this episode 2
Show 1
Diligence needed a third party, and Back prepared financial statements in the buyer's format.
A cash versus accrual snag delayed closing by a month while his partner considered shutting down. The deal closed in 2018.