“We’re different by design. Our story started with a problem (the best ideas usually do). Some ten years ago, our founder was furnishing his flat. Frustrated at the lack of well-designed, good-quality and affordable sofas, he set about redefining the process. The concept was clear: collaborate with independent designers and makers to create pieces you’ll love, minus the markup. And so MADE.COM was born. The destination for creating your dream home.”

 

In October 2022 the meteoric fall of the furniture empire MADE.COM was documented in news media as a tragedy born from economic recession. The post-COVID trading landscape and looming market downturn were implicated as reasons behind the fall, leaving consumers and employees alike in its wake. November 2022 marked the business’s sale deadline, with administration looming if this fails to be secured. For shareholders, the valuation of £2m was far from the £775.3m valuation in MADE.COM’s initial public offering only a year prior. But it would seem there was more to this downfall than the impacts of a finicky economy.

An unexpected surge in sales during the course of the pandemic seemed to be a blessing, but paired with a breakdown in the supply chain, it became an unmitigated disaster. Loyal customers became disgruntled as items arrived late, were poorly constructed, or failed to arrive at all. Over-diversification took the business further away from its initial focus and mission to provide quality design pieces of furniture for affordable prices, direct to everyday people.  Furniture pieces became less affordable, and quality became overlooked. Third-party delivery providers added further tensions to the already changing mood, with long lead times for customers becoming more regularly reported on public review sites, some waiting over 12 months for a furniture delivery with no explanations or apologies. The customer support crumbled.

British-based multinational retailer Next acquired the brand and intellectual property of MADE.COM for £3.4m in November 2022. Refunds, exchanges and unfulfilled orders were given only days to be appealed before the surplus stock was to be sold at auction, in an attempt to clear remaining debts.

So what went wrong? Could this collapse have been prevented? In this report, the decision points leading to the demise of MADE.COM are investigated, analysed and discussed to understand and learn from a very real, albeit very avoidable downfall.

 

Background

In March 2010 MADE.COM was launched in the UK (with £2.5m in series A funding and £6m in series B funding) by Ning Li, Brent Hoberman, Julien Callède and Chloe Macintosh.

Ning said “a friend in China who was a furniture manufacturer told me he would sell a sofa for £400 to agents, who would then re-sell it to a wholesaler in Europe, but when it eventually came to the store the price tag was outrageous. The same sofa was selling for £3,000. I saw the opportunity of using the internet to disrupt the supply chain.” From there the fledgling business began, starting in Notting Hill, with the idea of making high-end design accessible to the masses. Their vision of a furniture revolution was a dream to rival that of furniture super retailer IKEA – one of the world’s largest retailers and leading furniture vendors. But only 12 years after inception, as an emerging brand that showed such promise in investment, growth and market opportunity, the MADE.COM dream faces imminent collapse. This collapse also draws in the numerous customers with unfulfilled orders, and the almost 800 employees facing unemployment in one of the most difficult financial times in recent history.

 

An Over-Emphasis on Growth?

Over the course of the first 5 years of trading, MADE.COM expanded into France, Italy, the Netherlands and Germany. Over the following years, this expansion into Europe moved further and further, including Switzerland, Ireland, Austria, Sweden, Denmark and Belgium. But did this focus on market expansion and fast growth contribute to the loss of focus on quality and delivery for the customer? Reflecting on this period of growth, Callède said “MADE.COM gathered momentum very quickly, but because we didn’t anticipate such rapid growth, we made mistakes. Mainly, we faced logistical challenges that came with growing the business so quickly” he told Bayes Business School in London in 2017.

 

Breakdown in Supply Chain

The logistical challenges referenced by Callède refer to two main issues. The first was the over-reliance of MADE.COM on designers, collaborators and manufacturers as a result of the company not actually owning any of its own factories. Their goal to ‘cut out the middle man was beginning to backfire. Though this approach was cost-efficient for the business, effectively removing factory costs altogether, control over processing times and delivery was out of MADE.COM’s hands. As the pandemic struck, MADE.COM saw massive growth as customers were placing orders on a scale never seen before. Though this should have been an opportunity for the business, designers and manufacturers were inundated with orders and unable to fulfil them effectively, often with shipments stalling until entire containers were filled and ready for transportation. Lead times on orders became unreasonably long for customers. Sentiment started to change, and loyalties were tested. To exacerbate this situation further, the third-party delivery services engaged by MADE.COM were often sourced from the lower-cost, lower-quality end of the spectrum. Again, though deliveries were not controlled by MADE.COM, they were a reflection of their performance in the eyes of the customer. In an effort to deliver profits for stakeholders, cost-cutting exercises that impacted the customer experience were adopted, significantly accelerating their demise.

 

Over-Diversification

Simultaneously, MADE.COM expanded their partnerships and product range. This only served to further impede efficiency, by attempting to do too much, too soon. The emphasis clearly moved from quality to quantity. When speaking of the change, MADE.COM customer Nicola Gibb said “I’ve had to return the last two items I ordered from MADE.COM as the quality was so poor – visible wood glue filling gaps and holding things together. I was offered tiny discounts and very little sympathy. I loved the ethos of the brand when it started, but it seems to have lost its way.”

 

Loss of Focus on the Customer

Lizz Marshall, a long-time customer of MADE.COM said “I loved MADE.COM for a few years. And when I bought a house I ordered a lot of furniture from them and the experience was amazing. The furniture was unique, and good quality and the customer service was great. Something went wrong over about 12 months. I ordered an expensive wardrobe, there were huge supply problems and I waited 10 months for it to be delivered. No apologies just a bunch of excuses. I was eventually given a small amount of money in compensation when I wrote to them and pointed out they were in breach of contract. Still no actual apology. It shouldn’t have been that hard. It’s sad and it feels like they lost their way at some point. Perhaps compromising values for rapid growth was a mistake. They lost their unique place in the market, their values and their heart.”

Historically, MADE.COM had a long list of happy customers. But over the course of 2020 – 2022, a swathe of poor reviews began to emerge. Though totalling less than 10% overall over the course of MADE.COM’s trading history, the majority of unsatisfactory reviews (1 to 3 stars) were received from 2020 onwards.

 

(Source: Trustpilot).

 

eCommerce

In terms of their website, MADE.COM have a compelling story, a strong product offering and a web experience that appears to adhere to current best practice. So if their website functions well, it is a simple and enjoyable experience for customers, and the demand is there in terms of market opportunity, then why did it fail? The eCommerce experience and other customer touchpoints simply did not align. Customer support was lacking, as was the in-store experience for the few showrooms that MADE.COM did open. As customer Lloyd Birch put it “I recently visited a MADE.COM store in Dewsbury with the intention of buying a sofa I’d seen online. It was so difficult to find out anything about it that I became frustrated and ended up leaving and buying somewhere else. They didn’t know if they had it in stock anywhere else when it would be available, what the delivery fee would be, or how returns worked because they didn’t have any information that wasn’t already available (on the) website. Buying expensive things online has always been a high risk for the consumer, and physical stores need to alleviate those concerns. The MADE.COM store only compounded them. The two need to work together.”

The value created by their well-functioning website was let down entirely by the additional segments of the overall experience. In a multi-faceted business with a variety of potential customer touchpoints, one cannot succeed without the other. The customer experience is holistic and integrated. One section of the process functioning successfully does not balance out another aspect that is unsatisfactory.

 

The Result

A focus away from the founding principles resulted in firstly, a sudden surge of sales, followed by a resultant spike in logistical errors. This was then followed by a lack of sufficient customer support and a sequence of poor decisions by stakeholders to put cost-cutting ahead of delivery. Li, still a member of the Board said “the mantra was simplicity because it meant value for our customers and cost efficiencies for the business. From where I am sitting today I think the brand has lost sight of that focus in recent years, and as a result, lost its strength.”

After a request by the board, the firm’s shares were suspended from trading on the London Stock Exchange. The shares, which floated on the stock exchange in June 2021, last traded at 0.52p, having lost 99.7% of their value in the past year. The firm’s market value has plummeted from £775m to £2m.

 

(Source: Google)

 

This is in stark contrast to the last reporting period still advertised on the MADE.COM website.

 

(Source: MADE.COM)

 

Discussion

In November 2022, multinational retailer Next announced their purchase of the brand and intellectual property of MADE.COM for £3.4m. Strategically, they avoided the debt implications of taking on MADE.COM’s surplus warehoused stock. The administrators of the pre-pack deal,  Price Waterhouse Coopers (PwC), will manage the insolvency of the remainder of the business, including auctioning the remaining stock to offset some of the outstanding debts of the company.

According to The Daily Mail, thousands of MADE.COM customers will not only fail to receive their goods, but they will also fail to secure refunds. Over 12,000 orders will never reach the UK as they were cancelled mid-production in the Far East. Administrators PwC has confirmed that any orders that do not arrive by the 25th of November 2022 will go unfulfilled. They have also warned that returns and faulty goods will also not be honoured.

One customer, Nathan Lee described his difficulties “I haven’t received my bed or a refund now, I’ve spoken multiple times to customer service and they’re not processing the order. So I’m £1,500 down and without a bed.” Those customers without the security of credit card protections will fare even more harshly.

Customers attempting to secure compensation had limited time and means in which to do it. PwC advised that they must register as unsecured creditors, although as the name suggests, does not carry any guarantee of success. For customers who paid by credit card, under Section 75 of the Consumer Credit Act, if they paid for something costing between £100 and £30,000, the card firm is equally liable if something goes wrong. However for customers who paid by debit card, under chargeback (which isn’t a legal requirement, just a customer service promise) the customer’s bank will try to get your money back from the bank of the firm you purchased from. There is typically a limit of 120 days from purchase to submit a claim to achieve this.

Unprecedented growth, market expansion, and a shift in focus away from the consumer and toward cost reduction spelt disaster for MADE.COM. Stakeholder returns were prioritised over long-term strategic and stable growth. Third-party partnerships were downgraded to minimise costs and maximise profits, impacting negatively on customer experience and massively extending lead times. An over-diversification of products and suppliers further exacerbated issues with quality, lead times and shipping. Communication with customers and employees has been also reported as ambiguous and unhelpful during the process of suspending orders and entering into administration.

Ultimately, MADE.COM attempted too much, too soon. This was at the expense of quality and the customer experience. This was driven by a desire for greater profit, at any cost, with a short-term focus on return. Despite a significant investment into well-functioning digital assets, the remainder of the customer experience fell apart when it came to interactions with the MADE.COM brand. This spectacular fall from grace was tragic but avoidable. Customers, employees and unsecured investors naturally take the biggest hit in the wide-reaching impacts of its downfall. The partial acquisition by Next does offer some hope for employees and the revival of the once much-loved MADE.COM brand.

 

Does This Affect You?

PwC creditors can be contacted by anyone affected, via the email address uk_madedesign_creditors@pwc.com

 

Timeline

March, 2010               MADE.COM was launched (with £2.5m in series A funding and £6m in series B funding) by Ning Li, Brent Hoberman, Julien Callède and Chloe Macintosh.

January, 2013             Launched in France

September, 2013        Launched in Italy

December, 2013         Co-Founder Ning Li accompanies Prime Minister David Cameron to China as a delegate on a business trade trip

September, 2014        Launched in the Netherlands

March, 2015                Launched in Germany; Chloe Macintosh steps down as Creative Director.

July, 2015                   Raised £38 in growth capital from Partech and Eight Roads Ventures

January, 2017             £100m in sales reached. Ning Li announces move to step down as CEO, but remain as Vice Chairman of the Board.

March, 2018               40% YoY growth was reported. Raised £40m further equity for greater expansion in Europe. Launches in Spain.

May, 2021                   Announces plans to list on London Stock Exchange (LSE). Raises £100m in new share sales.

June, 2021                  Completed Initial Public Offering (IPO) on LSE with a market capitalisation of £775m.

February, 2022           Philippe Chainieux stepped down from their role as CEO with immediate effect due to family reasons.

March, 2022               Nicola Thompson announced as the new permanent CEO

October, 2022            Ceasing further orders. Announcement of intent to sell or enter into administration

[2020 – 2022]            Rise in sales from 2020, but a significant drop in sales in 2022. Supply chain, cost of living, and incoming recession were cited as key reasons.