As it prioritizes profitability, AptDeco plots its next growth phase

The online homeware space has seen a number of shake-ups recently, with M&A creating consolidation. In 2023, furniture rental services Fernish and Feather were acquired by luxury design studio Vesta for an undisclosed sum. Last year also saw the bankruptcy filings of Z Galleries and Mitchell Gold + Bob Williams. More recently, in August Kaiyo said it’s winding down its operations, but its website currently states that “the Kaiyo brand will be back soon, and under new ownership.”

All of these changes in the online furniture segment contribute to the growth opportunity AptDeco sees in the coming years. AptDeco co-founder and CEO Reham Fagiri told Modern Retail, “We’re at a really exciting inflection point and with less competition and a huge market to go after.”  

Reaching EBITDA profitability

“The last few years have been really tough for the industry as a whole,” Fagiri said. “So we’ve really been focused on profitability and the fundamentals, like the cost to acquire customers, but we’re also being opportunistic when it makes sense,” Fagiri said.

Before embarking on this next stage, Fagiri said it was important for AptDeco to become EBITDA profitable; the company hit that goal in September. To date, the company has generated $31 million in revenue on $84 million in gross merchandise value. In the last year, the company implemented several initiatives to create efficiency and help trim costs.

These included investments in AptDeco’s logistics software, which the company said significantly brought down costs. AptDeco operates its own network of trucks that transport furniture from the seller to the buyer. It recently cut delivery prices as it expands peer-to-peer selling nationally. “We’ve also negotiated contracts to have better deals with vendors,” she said. 

On the marketing side, she continued, “We don’t play the paid game of acquiring a customer at all costs.” While the company advertises on digital channels and bids on search key terms, Fagiri said the margins make customer acquisition profitable for the company. This strategy will continue as AptDeco now targets new audience segments with its kids’ marketplace.

To date, AptDeco has raised $19 million in funding. The company is currently running an equity crowdfunding campaign on Wefunder that has surpassed $2 million, having set an initial goal of $1 million. In the campaign, AptDeco also said that it’s on track to be cash flow positive in 2024, though it’s not guaranteed.

Expanding to kids’ furniture

The kids’ marketplace has been a long time coming, Fagiri said. But it wasn’t until Fagiri and co-founder Kalam Dennis became parents that they realized how cumbersome and complicated it was to sell used child-sized furniture.

While AptDeco users have sold children’s furniture on a small scale, Fagiri said the company isn’t known as a branded destination for this category. “The market opportunity is huge, and it’s surprising that there’s no one tackling the baby or kids’ furniture space today,” she said.

The company is taking the tech and logistics learnings from the last 10 years and applying them to the kids’ marketplace right away. “For example, we’re already talking to kids brands to add them to the platform immediately,” Fagiri said. Some of these in-demand brands include Pottery Barn Kids and Oeuf. 

The company is also using its existing network tools to ensure these new listings meet safety guidelines. “With kids’ furniture, there’s like a little bit of different level of inspection that may need to happen,” Fagiri said. “We’re adding these quality and safety processes now versus learning to do it in a few years time.”

Expanding into white labeling

While AptDeco primarily sells products peer-to-peer, it has been slowly working with retailers so they can sell used or returned products with the help of AptDeco.

Beginning around 2019, AptDeco began working with retailers like West Elm, Pottery Barn, Article and La-Z-Boy on listing or logistics.

“When we looked at our data, certain brands are just in high demand and sell a lot faster than others, so not all brands are created equal,” Fagiri said. “We saw about 15 or so brands accounting for almost 60% or so of our sales, and that was a big ‘aha’ moment for us.” 

To start striking up retail partnerships, the AptDeco founders tapped investor HearstLab — an arm of the Hearst media corporation — for introductions to major brands. AptDeco now has 30-plus brand partners using its logistics and software services, which also includes smaller independent brands. 

The company works with brands as a secondary resale channel, whether it’s as an outlet to sell products through AptDeco’s platform or leveraging the startup’s logistics technology. “With some brands, we work on returns or helping them find a home for products that end up in their distribution center,” Fagiri said.

Some retailers are now using one or multiple of these services. “For example, La-Z-Boy is using us as a referral method for their customers to sell their products,” Fagiri said. Through a co-branded marketing page with AptDeco, La-Z-Boy directs its customers to sell their items on AptDeco’s site.

These partnerships generate a licensing fee and other transaction fees that help AptDeco bring in additional revenue. “We think that the B-to-B side is really what’s going to help our growth as a company,” Fagiri said.

Starting in early 2025, AptDeco is expanding by offering white labeling to help retailers create their own customized resale experience. With the white labeling service, AptDeco generates revenue through a licensing fee and a transaction fee. “It varies from brand to brand, depending on the size and the volume,” Fagiri said.  

Online resale is marred with challenges that even the most well-capitalized startups weren’t able to hack. Darpan Seth, CEO of Nextuple, an omnichannel order management advisory and software firm, said the combination of high logistics costs, the complexity of handling unpackaged and used products and the cyclical nature of furniture demand create a high barrier to entry for many players.

“While the pandemic-induced furniture buying spree has cooled, the underlying dynamics of the market remain unchanged,” Seth said. “Scale and operational efficiency are paramount.” 

All in all, Fagiri said, these new sets of services are rooted in helping drive more supply to AptDeco’s marketplace and help sell the inventory quickly. “I don’t see any reason why we won’t be the next Airbnb as far as the size of the scale.”