Brazil’s SoftBank-backed unicorn MadeiraMadeira announced on Thursday that it will open a technology center for furniture development in Brazil. In partnership with the Federation of Industries of the State of Paraná (Fiep) and the National Service for Industrial Learning (SENAI), the new space in Curitiba, where the startup is headquartered, will extend across more than 5000m², and where the furniture and homeware sales marketplace will research and develop prototypes of new products.
According to Daniel Scandian, CEO, and co-founder of the company, the technology center will be able to reduce the time from creation to commercialization of a piece of furniture from six months to one month.
“The industry in Brazil does not have a standard. We have a few things that are controlled by Inmetro (the National Institute of Metrology, Quality, and Technology), which is more related to the safety part. We have a very big problem in the quality level of suppliers,” he said.
With distinct poles of sophistication throughout Brazil, MadeiraMadeira wants to ensure better quality products for customers at an affordable price. Inspired by Ikea and WayFair, a company owned by Niraj Shah, the startup’s investor since 2012, Scandian thought of a technology center to control the stages of the product development process. The company aims to launch 200 new pieces of furniture a month in 2022.
“We will have co-creation studios along with customers and suppliers. We can make prototypes of upholstery, joinery, locksmithing,” explains the CEO. MadeiraMadeira intends to have up to 45 people working in the new tech center. Today, in total, the unicorn has 2,560 employees and by the end of the year it hopes to have 3,200.
Around two million products are traded on the startup’s marketplace, which until now outsourced the development of the furniture. “Sometimes we had to have an adaptation that was not planned and our staff traveled four, five times to be able to reach a conclusion and guarantee the quality of the product. Now this will be done in-house, from development and design to prototyping.”
The area will work only for product development. Manufacturing will continue to be done by third-party suppliers.
The center will have a space for assembling furniture prototypes and three photography studios to show product details, as well as a testing lab that follows US and European quality standards.
“We use a lot of consumer data for our customers. We do home testing, which is a methodology Nike uses, in which we send it to customers and employees to be able to test the product, give feedback. It is a process that we believe will raise the standard level of the furniture and decoration category”.
According to Scandian, the startup’s differential is in the products with “democratic” prices. As a technology company, data is “the new oil” to find out what consumers seek.
He says the company was able to map the difference in consumer behavior in the pandemic: people moving to other cities and changing the size of their house or flat.
“We were able to follow this with speed, bringing innovation [to the products], mixing technologies of MDF, paint, solid wood, fabric. Things that in Brazil only the upper class had access to, we are developing and democratizing”.
With the new center, the idea is to make the operation more efficient in terms of the quality of development and manufacturing, logistics, and how the products are sold. The strategy for 2022 also includes 112 physical shops of the startup’s brand, CabeCasa.
MadeiraMadeira shops have been set up since last year in 12 of Brazil’s 27 federal states: São Paulo (58), Minas Gerais (10), Rio Grande do Sul (11), Paraná (8), Goiás (5), Santa Catarina (5), Espiríto Santo (4), Pernambuco (2), Rio de Janeiro (2), Bahia (1), Rio Grande do Norte (1) and Distrito Federal (5).
The shops operate in a showroom model integrated with the MadeiraMadeira platform so that the client can visit the shop, talk to the salesperson and then complete the sale online.
Altogether, the new investments (technology center and shops) exceed 100 million reais ($18.2 million). The funds for all this come from a $190 million round from SoftBank and Dynamo that the company received in 2021.
MadeiraMadeira Looking to Go Shopping in 2022
With just over 15 distribution centers in Brazil, MadeiraMadeira’s fastest deliveries are made within two days, which Scandian considers a sufficient timeframe for the furniture category. “We continue to increase our proprietary logistics,” the CEO said. Last year, the company bought iTrack Brasil, which operates with cargo tracking.
The startup now has an internal area dedicated to looking at strategic M&As for this year. According to the CEO, companies that operate with technology for retail and logistics are in the startup’s sights.
IPO Readiness, But No Rush to Capital Markets Yet
With a valuation of over $1 billion, MadeiraMadeira is now looking at an IPO in the United States. But before that, the company needs to have the relevant revenues in dollars. “We have to row a lot more because the dollar ends up with the real, which is depreciating, but for sure we expect to do an IPO,” said Scandian.
In Brazil, MadeiraMadeira says it has about 20% market share in the online category and Scandian hopes to grow this percentage to 45% before going public.
For Scandian, while there are companies that are hampered by the need for the exit to generate liquidity for investors, MadeiraMadeira is in no hurry. “It depends a lot on the window [for the IPO] and the size of the company. It is difficult to say when, but the most important thing is that we are ready. We have the quarterly numbers revised, everything complies. But, logically, we see a very complicated window in the short term. We want to wait and see what will happen. We have a group of investors who are in no hurry to exit. This favors us and gives us the patience to choose the best date”.
In 2020, MadeiraMadeira doubled its 2019 sales. “You can’t compare it to the increased penetration in 2020. [In 2021] we had a ‘hangover’ of category consumption, but we are still maintaining our 70% annual average growth rate,” the CEO said.
Scandian sees 2022 as a challenging year, but with plenty of opportunity for e-commerce as, in a crisis year, internet sales have better consumer price appeal. “This is a positive feature for our sales channel, despite the general scenario [of high-interest rates and low consumer confidence].”
Room to Grow
Even with more people migrating from offline to digital shopping, Brazil “is still in the early days of e-commerce,” according to Scandian, who says the pandemic has accelerated this process, but that for the furniture and decoration category, only 10% of Brazilians shop online.
“We now see normal growth in e-commerce penetration, between 1 to 1.5% a year. In 2021 reached about 10-11% and this year maybe we will reach 12%,” he said. “We intend to be a regional company, we believe in the opportunity in countries like Mexico and Colombia, even using Brazil as an exporter of the category to the region.”