The Next Big Thing: Furniture?

by Tom Taulli | September 20, 2011 12:13 pm

So far this year, we’ve seen a variety of cutting-edge companies hit the IPO market.  Zillow (Nasdaq:Z[1]) and HomeAway (Nasdaq:AWAY[2]), for example, are transforming the real estate industry.  Then there is LinkedIn (NYSE:LNKD[3]), which is redefining the concept of the traditional resume.

What are some of the other industries drawing Silicon Valley innovators?  What might be the next big IPOs?

Funny enough, one popular category is the furniture industry – especially on the high end.  As proof, just look at One Kings Lane.  This week the company raised $40 million from Tiger Global Management, Institutional Venture Partners, Kleiner Perkins and Greylock Partners.

Started just two years ago, One Kings Lane is one of the top online e-commerce operators for designer home furnishings.  It has an interesting take on things, however — it uses “flash sales,” emailing its customers daily with offers to buy items – at a deep discount – for 72 hours.

And it’s far from a niche play.  So far, there are over 2 million registered users on the company’s website.  Last year, revenue came to $30 million and are expected to exceed $100 million in 2011.

How can this happen in a slow-growth economy?  Furniture is a huge market, and people still want quality.  Interestingly enough, One Kings Lane gets over three-quarters of its business from repeat customers.

Now the company must deal with intense competition from rivals including and Gilt Groupe, which will re-launch its home furnishing segment within the next few months.  But there appears to be lots of room for more growth.

So might we see an IPO from One Kings Lane?  It’s a good bet, but probably not for a few years.  The company has enough capital to build its infrastructure and grow its brand.

Yet there is still a way for investors to play the furniture trend.  Keep in mind that Restoration Hardware recently filed for a public offering.  While it is a brick-and-mortar operator, the company is still growing [4]at a hefty rate.

Over the past 12 months, Restoration increased revenue by 26% to $862.3 million and pretax earnings soared by 90% to $59.9 million.  Comparable-store sales were up by 17%.

This is more evidence that the affluent segment of the U.S. population is doing just fine – and wants to spend money on high-end offerings.

Restoration Hardware may not be as cool as One Kings Lane, it may still be a way to play an interesting growth trend, which has so far been under the radar.

Tom Taulli is the author of “All About Short Selling[5]” and “All About Commodities[6].”  You can also find him at Twitter account @ttaulli.  He does not own a position in any of the stocks named here.

  1. Z:
  2. AWAY:
  3. LNKD:
  4. still growing :
  5. All About Short Selling:
  6. All About Commodities:

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