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212Concept (212concept.com) is an online furniture retailer that features a curated collection of affordable modern designer furniture. With initial success and over $900K in first year revenue, 212Concept is expanding its products and services in becomin

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Short Description

212Concept (212concept.com) is an online furniture retailer that features a curated collection of affordable modern designer furniture. With initial success and over $900K in first year revenue, 212Concept is expanding its products and services in becoming a contract dealer, an expansion that will increase revenue, margins and open up new European markets to the Company. 212Concept is raising a $300K angel round in order to support this expansion.

Executive Summary

EXECUTIVE SUMMARY:

212Concept is an online furniture retailer that features a curated collection of affordable modern designer furniture. While the company has seen initial success, with over $900K in first year revenue, the company is raising an additional $300K to expand its operations to become a contract dealer, which will allow the company to address commercial accounts, expand its inventory and increase both revenue and margins.

OVERVIEW:

Despite the existing competition and early start up challenges, 212Concept has leveraged its existing relationships with both furniture manufacturers and accounts in the commercial hospitality market and to achieve initial success as an online furniture retailer, realizing over $900K in revenue and $150K in EBITDA in its first year of operations. 212Concept will be able to substantially increase both revenue and margins by making some key changes to the business made possible with $300K in seed funding.

INITIAL COMPANY AND OPERATIONS:

212Concept was founded by Efe Oztas in December 2012. The 212Concept model is to offer a curated collection of modern furniture via an online retailing model. Furniture is chosen for inclusion based on a combination of high functionality, practicality and aesthetics, with a focus on affordability. The key underlying principal is to make the luxury of fine modern designer furniture affordable to the masses.

Efe spent the previous three years in marketing and sales for modern furniture manufacturing companies. As a result, Efe brings substantial domain expertise and existing relationships that have allowed the Company a great initial advantage in the startup phase.
The Company was launched publicly in May 2013. Leveraging existing relationships with both suppliers and customers in the industry, the Company was able to achieve $900K of revenue in the first 13 months of operations. Relationships with suppliers led to competitive advantages on pricing, warehousing, stock products and custom orders. Relationships with customers led to initial sales accounts with customers such as Wyndham Hotels, Hilton Hotels and MetLife Insurance.

Even before being able to realize the financial advantages of scale, the Company achieved over $150K in EBITDA with a gross margin of 53.6%.

GROWTH OPPORTUNITY:

Despite 212Concept?s initial success, the company will be able to leverage a number of additional competitive advantages by offering contract dealer services, a la Herman Miller (http://www.hermanmiller.com/). 212Concept will continue to grow its online retail presence at 212concept.com, as well as set up a different Web presence for its wholesale dealer operation. Adding contract dealer capabilities will substantially increase the addressable market, provide an immediate boost to revenue as well as enable higher margins on the increased revenue.

212Concept founders hail from Turkey and have extensive relationships with furniture manufacturers and designers in European markets. By becoming a full contract dealer, 212Concept will be able to identify new designers with products that fit the 212Concept model and bring them to the North American market to sell via commercial accounts. High quality existing industry relationships throughout Europe allow the Company to bring new products from the European markets at the lowest possible prices and North American distributors will make product decisions based on 212Concept recommendations, as the Company proved with the some of its initial product lines.

A byproduct of becoming a contract dealer will be the ability to physically warehouse and stock inventory. Most of 212Concept existing suppliers offer a large selection of products, but warehousing limitations lead to frequent inventory turnover and shortages. The resulting delay results in a number of lost sales.

With the ability to commit to small-scale initial purchases from suppliers, additional suppliers will have the incentive to work with 212Concept, adding to the product catalog as well as increasing product availability.

Another byproduct of becoming a contract dealer will be to offer additional services to commercial accounts. Additional services offered include space planning, interior design, project management, installation and after-market backup.

Being able to offer more products and services, support larger purchase orders and ensure more consistent product availability are all key elements to triggering the improved unit economics in online furniture and It is expected that, based on existing demand, increased availability of stock items alone will increase revenues by 30% and the average purchase order should increase by 3X.

While 2014 revenue is on track to grow 97% year-over-year from 2013, with expanded operations 2015 revenues are projected to grow 368% year-over-year from 2014 and gross margins are expected to rise to 73.2%.

Contract Dealer Services:

As a contract dealer, 212Concept will be able to offer a range of new professional services, leading to additional revenue and larger average contract sizes. Among the new professional services offered, 212Concept will offer:

? Space planning
? Interior Design
? Project Management
? Architectural Planning
? Installation
? After-market backup

212Concepts will begin generating the additional services revenue in Q4 2014 and forecasts that services revenue will remain at 15% of product revenue through 2016.
Expansion into European Markets.

While 212Concept has leveraged its existing relationships with European designers and manufacturer, there is significant additional value that can be leveraged.

212Concept will set up a European presence, based in Turkey, which will allow the Company to sell into European regional markets. Because many of 212Concept?s existing relationships are based out of Turkey and the European region, 212Concept would be able to improve on its existing margins with close physical proximity.

As a contract dealer, 212Concept will leverage its skill as tastemaker, committing small-scale initial purchases to stock items from new and emerging designers. This will enable 212Concepts to be the exclusive distributor for emerging designers in the North American markets as well as increase margins on sales.

Necessary Infrastructure:

212Concept will create a separate and newly named Website to target manufacturers and commercial accounts. 212Concept will also secure a warehouse to stock the necessary inventory. 212Concept estimates a one-time cost of $30K for the new Website and $3K per month in additional lease expenses for the warehouse.

Expanded and Targeted Advertising Campaign:

212Concept spent $64K in advertising expenses in its initial year of operations, targeting consumers for the 212Concept retail business. With continued revenue growth and the seed capital raised, 212Concept will spend an additional 100% year-over-year to increase awareness among not only consumers, but also the educated class of customers including architects and interior designers. Architects and interior designers have a better understanding of product design and quality, and thus will have the most affinity for the 212Concept model.

Improved Operating Metrics:

As a result of the new and expanded operations, the Company will enjoy a number of improved financial metrics. While revenue will grow substantially by selling a broader range of products to a broader range of potential customers, the average purchase size will increase as well. As a result of a greater percentage of orders including contract dealer services, the average discount rate per order will drop from 15% to 7% and cost of goods sold as a percentage of revenue will decline from 39% to 30% in 2015 and beyond.

COMPETITION:

As noted, the online furniture industry is highly fragmented.
Most of the larger players, like YLiving (http://www.yliving.com/) and AllModern (http://www.allmodern.com/), are mere e-commerce properties, with no curation or unique perspective on design. Only a few companies have achieved any scale with this model, including HiveModern (http://hivemodern.com/), Herman Miller (http://www.hermanmiller.com/) and Design Within Reach (http://www.dwr.com/).

212Concept?s unique model involves bringing unique products to market, curating as a tastemaker and leveraging geographic relationships to improve margins. While there is no company using an identical model, 212Concept will compete with all of the online furniture retailers.


FOUNDER/TEAM:

The founder of 212Concept, Efe Oztas has worked for several contract furniture-manufacturing companies mostly located in United States. As the director of marketing/sales, he had operated and managed all commercial and retail sales in North America. During his first two years in the industry, Efe worked as an independent sales rep for some European furniture brands and improved their market share and gross sales by large margins.

The loyalty and trust of his A&D (Architects & Interiors) clients has allowed Efe to build 212Concept and helped him earn various large-scale projects in and out of the country.

FINANCING:

212Concept is raising $300K to support these expansion initiatives. The $300K in capital will provide the company the capital runway to expand its operations and include key foreign markets. This capital will be the only outside capital required to get the company to profitability, with the Company projected to be cash-flow positive in May of 2016.