Americans spend tens of billions of dollars per year on sofas, more than they spend on mattresses. The market is tremendously big and there seems to be a gap between Ikea and $2k West Elm sofas. That's what Burrow is going after.
So they have taken both the capital costs of manufacture as well as delivery. And they have a product near the grand price point in a market saturated by Target, Amazon, Walmart, IKEA, and who knows who else.
To get a billion dollars of that market, they need to move 1e6 of their sofas--and that's assuming pure profit. How many sofas can they make a day?
I've seen several small businesses whose only function is to pick things up from Ikea and deliver. If people are comfortable buying sofas online, it will apply to a range of home furnishing items. Furniture stores have been selling "rooms" for years for this very reason.
Aside from brand and customer relationships, if the delivery infrastructure for furniture is different than other items, that will provide a moat.
Everyone in this thread is referencing Dollar Shave Club.
Can someone give a good summary of why that company made it to a big exit? What strategic moves did they make that made them succeed where countless others fail? Software doesn't automatically eat the world, after all. Why now? Why these companies? What specifically is the right plan?
Thanks for probably the most interesting business article I have seen on HN in a while!
That said, the market between sofas and razor blades is very different. I don't buy a new sofa every month. Companies don't leverage R&D and advertising the way that Proctor and Gamble did to move sofas.
The Dollar Shave Club Explanation here is optimistic at best.
At list if we look at IKEA(maybe the closest to compare to P&G) - they do have R&D(every year a new lineup, optimizing manufacturing and supply chain), and at least when they grew they did alot of advertising - and they still do some, but maybe they need less because of their strong brand an that they are considered monopolistic locally in places they reach.
But don't take the Dollar Shave Club literally, the point is more the lack of capability of companies(and their ecosystem) to move ahead, because they are deeply integrated/dependent in the past with it's old assumptions.
But now a lot of the old assumptions might be broken : no local monopolies(and monopolies over large areas are much much harder to create), no limit to product variety, much more customization becomes possible, targeting highly focused niches becomes possible, software may enable AI interior designer service for free, the supply chain looks very different for that, etc.
Burrow could get a billion dollar exit through an acquisition but its hardly going to become a sustainable concern. It's designed to sell, basically, and the idea is no more mysterious than building a furniture company that is digital first, which would be attractive to existing companies because they cannot simple change their processes over night.
