With so much time stuck inside over the past few years (!!), my apartment got quite the facelift. Where there once would have just been a simple IKEA ensemble is now a well considered symphony of Pinterest worthy elements sourced from all over. ‘Nesting’, as I like to call it, has become something of a hobby of mine which has now spread beyond my own abode, having infiltrated the lounge rooms of friends and family, making them just as beautiful as the people who live in them.
Sharing my philosophy of prettying up spaces is Temple & Webster (ASX: TPW), Australia’s largest pure play online retailer for furniture and homewares. Noticing the increasing prevalence of home renos and DIY projects, the Company is expanding into the $26 billion dollar home improvement market. Their new site, The Build by Temple & Webster is designed as a one-stop shop for all things DIY, renovation and home improvement.
The site already has an initial range of 20,000 plus products across 39 different categories such as bathroom and kitchen fittings, lighting, window treatments and wallpapers, with more still to be added. Flooring, tiling, landscaping and building equipment are just some of the categories due to come online in the next few months. The focus for the site will be “front of wall” products, leaving the less aesthetic building-esque items to the hardware stores. The business model is designed to be “asset light” with TPW holding minimal stock themselves, rather sourcing from trusted suppliers.
Noticing the highly fragmented landscape of both online and brick-and-mortar operators in the space, TPW will consolidate a vast range of products with an extensive cross category range, hopefully becoming a first-stop shop. The Company has identified a scope market opportunity of $16 billion where online penetration in Australia is low compared to overseas markets.
With over $1 billion in approved renovations occurring each month (according to council approvals) and 40-60% of home owners planning to undertake a design project each year the move seems natural for the Company who have already established themselves in the furnishings space. There will be ample cross sell opportunities between home improvement and furniture and homewares allowing the Company to capture a greater share of wallet spend across the home.
TPW is playing to their strengths here with already existing capabilities around logistics and supply chain management of bulky and fragile freight, as well as existing relationships with trade and commercial operators through their dedicated programs assisting stylists with product sourcing, bulk volume discounts and consolidated delivery and assembly.
“Australia is a country of home renovators,” said CEO, Mark Coulter. “We love our homes, and we love making them more beautiful. The Build by Temple & Webster is aimed at making home improvement jobs, big or small, easier, cheaper and better.
“The Build will stand for the same core values as Temple & Webster- an amazing and comprehensive range, paired with great customer service and a source of practical advice and inspiration. We believe our expertise in ecommerce and the home will help make The Build by Temple & Webster become Australia’s first-stop shop when it comes to renovating and redecorating.”
An initial investment of $10 million from existing reserves across FY22 and FY23 will be injected into the new site to drive its development. TPW is targeting FY26 for the site to turn EBITDA positive with a long term margin profile expected to be better than furnishing and homewares.
TPW’s core business is growing, having reached year on year revenue growth of 23% for the period 1st January to the 30th of April. Their full year FY22 EBITDA margin range is expected to be 3%, putting the Company in a good position going forward.