The home décor site has a strong pedigree (backing from Kleiner Perkins and a founder named Pincus). Can it become the Groupon of throw pillows and footstools?
Online retail is hot again, thanks to the growing popularity of “deal-a-day” and private sale sites. The latest obsession of tech investors? Home décor site One Kings Lane, which will announce today that it has raised a $23 million second round of funding from Kleiner Perkins Caufield and Byers, Greylock Partners, First Round Capital, TriplePoint Capital, as well as some high-profile angels: LinkedIn founder Reid Hoffman and Google VP Marissa Mayer.
Riding the same wave that’s propelling Internet sensations like Groupon and Gilt Groupe, One Kings Lane aims to do for housewares and furniture what Gilt has done for haute couture. Founded in early 2009 by Susan Feldman and Alison Pincus (whose husband, Mark, is CEO of online gamin company Zynga), the company matches undiscovered vendors who typically sell only through interior designers or specialty retailers with consumers who wouldn’t normally have access to their wares. Like Gilt, it offers discounts on the items, and sales last only a few days.
Despite its boutique-y name, San Francisco-based One Kings Lane (a made-up address meant to reflect a blend of Old and New World sensibilities) aims to be more than a quaint little online shop. The founders declined to disclose sales but say revenue grew 500% in 2010. And last June, Feldman, whose background is in fashion merchandising, and Pincus, who led digital business development at Hachette Filipacchi, publisher of Elle Décor, hired new CEO Doug Mack from Adobe, where he ran the Photoshop and Flash video businesses.
But Mack is also a startup guy: He co-founded Goodhome.com, one of the first home décor sites, and Scene7, which makes visualization software for e-commerce and was bought by Adobe (ADBE) in 2007.
Mack, whose tech expertise could have landed him a spot at any number of Silicon Valley companies, says he was drawn to the loyal customer base One Kings Lane has built—he says 80% of monthly sales come from return shoppers—which he sees as the foundation for robust growth. “What excites me is that this isn’t a hit-and-run business,” says Mack, 41.
It turns out that Feldman and Pincus picked a good sector to disrupt. Home goods, which include everything from stationery to candles to furniture, is an inefficient, fragmented business with few vendors using the web for distribution and marketing. (The margins for an aggregator such as One Kings Lane are also better than in other businesses, such as apparel.)
Manhattan-based Stark Carpet, for example, exclusively used decorators and showrooms to sell its pricey hand-knotted rugs. When the 65-year-old firm was approached by One Kings Lane in January 2010, it was skeptical but figured it might be able to unload some lingering overstock. Of the 97 rugs Stark put up for sale, 76 were scooped up, sight unseen and with a no-return policy, at prices up to $6,500. Stark says it has since held two more successful sales on the site.
One Kings Lane offers plenty of revered luxury brands, from Frette linens to J.A. Henckels knives, but it is also a platform for little-known but stylish vendors of throw pillows and footstools. During the site’s first holiday season, Feldman posted a video showing how to use silver mint julep cups as decorative accents. When the cups went on sale on the site a few days later, nearly 1,000 were snapped up, more than the seller had ever moved at one time.
Some industry watchers say the site’s focus on home is too narrow to build a meaningful business, especially given Gilt Groupe’s expansion into categories like kids, travel, and, yes, home goods. But home design is gaining popularity with consumers thanks to design reality shows, mall-based stores such as Pottery Barn, and even “class for the masses” home lines for Target (TGT). Forrester estimates that online sales of housewares are growing at a rate of 11% to 16% a year—outpacing overall online retail growth.
As the first major “flash sale” retailer in the space, One Kings Lane has an opportunity to ride the home goods wave—one mint julep cup at a time.
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