Designing a home is a nerve-wracking process. From deciding the style to picking the furniture—the journey can be exhausting and often frustrating. Now imagine that, after you pick just one piece of furniture, in a matter of minutes, someone generates a list of everything you will need to realise your Pinterest interior design board. Artificial intelligence (AI) can be that someone and online furniture and homeware retailer Temple & Webster (ASX: TPW) is bringing that tech to you.
That said, the Company’s intention for bringing AI, including ChatGPT, into its functioning is two-fold. One, it will help boost conversion as consumers work less and get more of what they want. Two, it will help reduce the cost of doing business—an integrality as Temple & Webster’s sales remain low.
Trading in the first half of the year showed improvement with a 5% sales decline compared to the previous corresponding period. This marks an improvement from the 7% drop witnessed in the initial five weeks of H2 FY23. However, the Company’s profit took a substantial hit, declining by 46.7% to $3.8 million in the first half of FY23 compared to H1 FY22.
CEO, Mark Coulter, commented, “The Australian furniture & homewares category remains highly under-penetrated in terms of its shift to online compared to other leading markets such as the US and UK. As the pure-play online market leader, we believe this period will allow us to aggressively grow market share as we leverage our data capabilities, asset light model and strong balance sheet.”
To capitalise on this accelerating technology, Temple & Webster increased its investment in Renovai, an Israeli AI startup offering visual AI shopping assistance. By incorporating Renovai’s AI-powered product recommendation mood boards on their website, Temple & Webster has observed a significant rise in conversion rates for customers who engage with this tool. The Company is set to turbocharge its customer shopping experience by deepening its collaboration with Renovai and bolstering AI tools.
What’s more, it is also utilising ChatGPT to make work more efficient. ChatGPT now powers all pre-sale product enquiry live chats, addressing 25% of customer inquiries. This implementation has led to increased customer satisfaction, higher product additions to carts, and improved conversion rates. Additionally, AI-generated enhanced product descriptions have been applied to over 200,000 products, resulting in boosted conversion rates, add-to-cart rates, and revenue per visit.
Coulter noted, “For an online-only business without physical stores or in-person sales staff, the potential for AI to significantly lower our CODB %, drive conversion and customer benefits is going to be material. We believe this will further drive our competitive advantages and allow us to win market share.”
“We recognised early that in this inflationary environment, customers would be looking for choice and value and we have successfully adjusted our range, promotional activity, pricing and on-site merchandising to reflect these changing customer needs.”
The Company reaffirmed its full-year guidance range for EBITDA, which stands at 3-5%. Maintaining a robust balance sheet, the business currently holds approximately $100 million in cash with no debt. Leveraging this financial strength, Temple & Webster also recently commenced an on-market share buy-back program, with a total value of up to $30 million in TPW shares. As of the latest update, the Company has successfully repurchased $4.1 million worth of TPW shares.
Alinda is a Business Reporter for The Sentiment
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