Asked to sum up the last eight months, Temple & Webster’s chief executive Mark Coulter laughs and delivers the understatement of the century. “It’s been busy,” he says.
His digital furniture and homewares retailer has been at the forefront of the upheaval inflicted upon Australia’s retail sector by the COVID-19 pandemic, benefiting not only from a boom in online shopping but also from more people buying home office furniture than ever before.
At the end of 2019, Coulter was congratulating himself and his team for posting the business’ first-ever full-year profit figure of just $1.1 million. Last week, he announced earnings for the first quarter of 2021 were $8.6 million, over seven times that figure and more than what the company made for all of fiscal 2020.
Its a whirlwind experience for a company once dubbed the worst float of 2016, and one that Coulter admits he found at times hard to keep under control.
“Within a week, the business started doubling, and in the first few months we were scrambling, really,” he says. “We even artificially slowed our growth in the first couple of months to make sure the customers who were shopping with us for the first time would have a good experience.”
Sales were doubling, sometimes near tripling, month on month, and so too were Temple & Webster’s shares. In March, the retailer’s stock price hit a low of $1.52. It closed the session on Wednesday at $10.65 a share, growth of over 500 per cent.
The bump has placed the retailer firmly into the ‘market darling’ category and enter the club of a select few e-commerce superstars such as Kogan (up 400 per cent) and Redbubble (up more than 950 per cent).
Like many chief executives, Coulter claims he’s not one to watch the company’s share price, however, he does admit that with greater size comes more pressure, along with a greater duty to investors.
He’s also dismissive of the concept of there being a ‘bubble’ in the e-commerce market currently, even as investors have flocked to smaller online retail stocks such as MyDeal and Adore Beauty, buoyed by the performance of other retailers during the COVID period.
“None of these companies are just overnight successes, they’ve been around for a very long time,” he says. “What is happening is that there’s an acceleration of trends that have already been going on.”
You can’t put the genie back in the bottle.Temple & Webster CEO Mark Coulter.
“These companies have listed and taken advantage of good market conditions, but this is the next generation of retail. It was always going to happen eventually, coronavirus has just accelerated it.”
Coulter does admit that there will come a time where the heady growth figures seen by e-commerce retailers over the past 12 months will slow, but he still expects digital retailers to maintain solid growth rates for a significant time yet, arguing that the adoption rate for online shopping has been vastly, and irreversibly, accelerated.
“We’ve had a bunch of customers, who would have eventually discovered online one day, suddenly experiencing it very quickly. And once that happens, you can’t put the genie back in the bottle,” he says.
He points to US online furniture company Wayfair, which continued to grow at 40-50 per cent year-on-year even after the initial boom of online shopping adoption in the country, as an example of where e-commerce retailers might sit following COVID-19.
While Coulter is confident about the continued growth prospects for his company and its e-commerce peers, the former McKinsey analyst is far less sanguine about the prospects for traditional retailers such as Myer and David Jones.
Myer has been quick to tout its online division as not only growing quickly but bigger than some of its close competitors, including Temple & Webster. At $422 million, this is factually accurate, but ignores the “albatross around the neck” of traditional retailer’s expensive leases and sizable store footprints, Coulter says.
Successful omnichannel retailing, which the likes of Myer, JB Hi-Fi and Adairs aspire to requires a thriving store network, Coulter says, something which department stores are especially struggling with.
“The key is that you have to do both. If your store network isn’t performing and no ones going into the stores to buy … you’re left with all those costs. And no matter how many online sales you do, you’ve still got all these costs,” he says.
“In some categories, that’s easy to do, because there are reasons why people want to go into a store. For department stores its harder, because a lot of their categories online retailers already do very well.”
“So they really have to reinvent what their stores are for, and if they can’t do that then it doesn’t really matter what they do online.”
Coulter believes this will mean online-only retailers could start to have small bricks and mortar presences as traditional retailers thin out in shopping centres, bringing up companies such as Apple as examples of well-executed omnichannel stores.
However, customers won’t be seeing Temple & Webster rolling out a flagship location anytime soon, Coulter says.
“We need to stick to our knitting, and our knitting is being an online retailer.”
Source: Thanks smh.com