Dealing with used or unwanted furniture is a huge problem, one that leads to millions of tons of … [+]
The furniture resale or “recommerce” sector is ripe for disruption at a time when sustainability and reuse have become top of mind. Over the past year and a half, as we have all been spending more time at home, Americans have been buying new furniture to provide additional function and comfort at home. The downside is furniture waste, or “f-waste” as it is referred to, has been an overlooked problem by the industry and a huge environmental headache. According to the EPA in 2018 furniture waste totaled 12 million tons, of which over 80% ended up in landfills.
The problems surrounding furniture waste is complex and have been exacerbated by the popularity of lower-quality “fast furniture” which get randomly discarded. These products are often difficult to recycle, as they contain multiple materials, requiring costly disassembly. In some cases, they contain toxic chemicals, making them impossible to recycle. More often however, the items are still useful but out of favor, so what to do?
In addressing the issue, Ikea recently brought back its “Buy Back & Resell” service to 33 U.S. stores which ran from Nov. 1 to Dec. 5. A company spokesperson said that their U.S. operations have “the ultimate goal of making Buy Back & Resell a permanent service at all Ikea stores across the U.S. in the future,”
The Listless Secondary Furniture Market
The most common method employed to rid ourselves of unwanted furniture (besides leaving them in our front yards) is to post the items online to forums like Craigslist, Facebook Marketplace, and Freecycle, but even those pose problems. Besides the time involved and the security issues, rarely do sellers derive more than pennies on the dollar of the original or even market value.
Besides our homes and cars, our furniture represents the third greatest asset class that most of us have. While our homes appreciate, our cars, in general depreciate. And yet we derive great “trade-in” value for them. The principal reason being the massive industry that exists to properly value and resell our used cars.
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In fact, the used car market is bigger in dollar value than the new car market, and it is more profitable. Witness the emergence of the massive mega-sellers like Carvana, AutoNation
The High-End Solutions
For the upper end, furniture market, there are already several players that are acting as market intermediaries, and third-party resellers. These are catering to luxury, high design brands, and vintage or collectable furnishings. Among them, resellers 1stDibs, The RealReal
Because they are higher-end resellers, they are very selective about what they sell. And because they are marketplaces they do not truly “own” the entire beginning-to-end sales process. They offer various levels of valuation, photography, pick-up and delivery, and cleaning; and they are not mass-market focused.
An Emerging Disruptor
I recently interviewed with the founder and CEO of Kaiyo, Alpay Koralturk. Kaiyo has all the earmarks of a company primed and ready to disrupt furniture resale as we have known it. Alpay is a serial entrepreneur, who attempted to furnish a New York apartment with quality, secondhand furnishings, a few years ago. He found it to be such a headache that he decided there had to be a better way. According to Alpay, that “better way” is for a company to “own the experience from beginning to end.”
In 2015 Kaiyo was launched. The root of the name (pronounced kiyo) is “kaya,” which is Turkish, and implies a resting place, a good feeling, and tied to earth. That “Zen-of-the-brand” certainly positions it well for our times.
Convenience, Value, and Trust
Alpay explains how Kaiyo takes the friction out of the furniture resale process, beginning with fast, free pickup, by trained service providers. Their inhouse-built proprietary technology also helps them predict the value of the furniture that they pick up. This intelligent pricing enables them to price items well. “These are not fire sale prices” Alpay states, “in fact some items sell for more than new.” They sell everything that they agree to pick up, and their algorithms tell them what items might get discounted, versus which will sell at full asking price.
Alpay understands that to build a sustainable brand today, one must play the long game. So, building trust in the brand is fundamental to their strategy. Beyond the world-class team that picks up the items, Kaiyo inspects and cleans everything before doing high-res photography. Everything that appears on their impressive website looks cohesive, and industry leading.
Kaiyo knows that their efforts to bring excellent quality, highly usable furniture into the circular economy will play well with todays and tomorrow’s consumers. But Kaiyo goes a step further by planting a tree for every item that they sell.
Survey Says
A recent survey showed that 68% of their customers were first time furniture sellers. They also receive consumer satisfaction scores (CSAT) in the 80’s for both buyers and sellers. And while they aspire to become a national player, they currently focus on east coast markets. Kaiyo provides “white glove” pick-up and delivery in the greater New York metro area, as well as Philadelphia, Washington D.C., and select counties in Maryland and Virginia. Pick-up of approved items is free, and they have a flat rate of $149 for delivery.
Buyers outside of their current trade area can work with third-party delivery services, but Kaiyo knows that is where their “kryptonite” hides. Alpay noted that their third-party shippers represent 10% of the business and 90% of customer complaints. Long term, they know they will need to “own their entire ecosystem.”
When asked if they were profitable yet, I received the answer I expected. Alpay said “they’re not yet focused on profitability but on growth.” But he was emphatic that they are on a clear path to profitability. They are getting strong rates of return, and have a negative working capital profile, meaning that their outlay does not occur until after an item sells. So, they generate great cashflow.
Kaiyo’s revenue share is based on the final price of each item. They have a sliding scale, ranging from 60% for the more expensive items, down to about 10% for the least expensive items. To date they have raised about $15 million from outside investors.
What is Next?
Going forward it is Kaiyo’s objective to be able to make a customer an “instant offer” on their items, which naturally would be a huge differentiator in the marketplace. Additionally, they know they must build out the “last mile” infrastructure. These two objectives will in Alpay’s opinion “will unlock a whole new segment of customers” on both the buy and sell side of their business plan. To date their website proudly states that they have kept 2,680,727 pounds of furniture out of landfills. Not bad for starters.
