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INTERVIEW-Germany's Westwing tempts online shoppers with glossy magazine style
March 10, 2014 / 4:00 PM / in 4 years

INTERVIEW-Germany's Westwing tempts online shoppers with glossy magazine style

* Up to 20 pct of homeware market could go online

* Westwing nearly tripled revenue in 2013

* Consumers demand more sophistication from e-commerce

* Mobile traffic to accelerate

By Emma Thomasson

BERLIN, March 10 (Reuters) - German retailer Westwing predicts designer furniture and home accessories will be the next big thing in online sales, betting that shoppers will be attracted by photos, articles and style tips like those found in glossy magazines.

Founded in Munich in 2011, shopping club Westwing offers thousands of furniture and homeware products online daily from pillows to lamps and sofas at discounts of up to 70 percent in “flash sales” that last four days. Operating in Europe and Brazil, it doubled members in 2013 to 12 million.

Online flash sales, pioneered by France’s Vente Privee in 2001, involves negotiating big discounts with brands carrying excess stock. Initially employed for fashion, the concept has spread to other sectors like homeware, sparking a plethora of start-ups like Fab in the United States and Monoqi in Germany.

Only about 3-4 percent of homeware sales are currently made online, but research firm Euromonitor predicts global e-commerce sales of home furnishings will grow almost 10 percent a year to $24 billion by 2015 from $20 billion in 2013.

Westwing almost tripled net revenue in 2013 to 110 million euros ($152 million) and expects to keep growing fast, estimating the total size of the home furnishing market in the 10 countries it covers at 150 billion euros.

“The market is huge ... the online shift is very much ongoing. If you talk about even only 15-20 percent of the market going online in the next five to 10 years there is no limit that the market sets for us,” co-founder Stefan Smalla told Reuters.

Smalla, a 37-year-old German business graduate, said the homewares market is still very fragmented with few players operating internationally apart from IKEA, the world’s biggest furniture retailer whose biggest market is Germany.

“Our brand partners, for example a French bed linen manufacturer, love being featured in Germany, in Italy and Russia because they are markets they would never have access to otherwise,” he said. “The industry in an offline world is very, very national, very local.”

The IKEA Group, which owns most of the 345 IKEA stores worldwide, has been slow to embrace e-commerce given its focus on a shopping experience combining showrooms, cafes and play areas that drive incidental purchases. IKEA is now focusing more online and eventually expects 10 percent of sales to come from its website in Germany, up from 2 percent in 2013.

SHOPPERS SEEK INSPIRATION

Smalla, who used to work at consultants Bain & Company and previously co-founded a German social network that failed, believes online shoppers will increasingly be tempted by online content like the daily home and living magazine that Westwing provides its members.

“Consumers are getting more sophisticated as they shop. They expect a bit more, they expect context and great imagery, they want to be inspired,” he said.

To that end, Westwing has hired style directors from glossy magazines like Cosmopolitan and Marie-Claire and set up more than 10 photo studios to shoot its products.

Smalla said the magazine format also promotes customer loyalty, with 75 percent of Westwing sales coming from repeat customers and members visiting the site an average of five times a month even if they do not always shop.

Active in Germany, Italy, Russia, France, Spain, Poland, Switzerland, Austria, Brazil and the Netherlands, Westwing expects ever more traffic from mobile devices, which already account for 34 percent of sales. “The lean-back shopping experience is made for content and commerce,” Smalla said.

Westwing has raised more than $100 million from investors including Swedish investment firm Kinnevik, U.S. private equity fund Summit Partners and Rocket Internet, the German venture capital group behind many e-commerce start-ups including online furniture retailer Home24.

$1 = 0.7214 euros Editing by Jane Merriman

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