DTS was founded in August of 2015 by a team who collectively had over 100 years of experience working with major furniture manufacturers and interior designers in a brick-and-mortar environment. The team was intimately familiar with the inefficiencies in the channel of distribution between interior designer and major furniture manufacturers. Roughly 4 years ago, DTS shifted focus and laid the foundation for a technological eCommerce platform that addresses all those inefficiencies and allows interior designers to instantly access products made by major furniture manufacturers.
The online platform that DTS has created is private, password protected, and exclusively for qualified interior designers. Designers can log on to the proprietary portal 24/7 and view “designer net price” with shipping, which is almost always the lowest price available to them from any other source. They can then place an order for multiple products from multiple manufacturers, pay for them up front and let DTS manage all subsequent details.
In the model they have created, DTS orders products from manufacturers and pays for the products either before or at the time of shipment, eliminating any ongoing payable/receivable on the company’s books. DTS arranges shipping to the Designer, keeping all parties electronically updated. DTS does not take returns unless authorized and paid for by the manufacturer.
Interior Design Industry
Interior designers craft spaces that are functional and appeal to emotion. Designers use a variety of tools and resources to create this vision for a given space and are ultimately responsible for sourcing materials for their projects. This responsibility affects how designers manage their time, handle their books, and manage costs. Time management, accounting, and managing margin are some of the top challenges faced by interior designers today. In the industry status quo, interior designers commonly use brick and mortar furniture retailers to source their furniture and material as well as a myriad of other sources to procure product for their clients. Brick and mortar retailers buy directly from furniture manufacturers at low cost because they meet the minimum purchase order set by the manufacturers. Retailers then mark-up furniture prices when selling to their customers including interior designers. However, brick and mortar retailers are also accessible by the interior designer’s client, and it is not uncommon for clients to go straight to the retailer as a way to undercut interior designers after initial consulting sessions. Only large or established Interior Design firms can source furniture directly from manufacturers at the lowest price available, known in the industry as “Designer Net Price.” This industry wide reality has given interior designer’s very little purchasing power. There is not and never has been any organization to collectively represent the thousands of interior designers. Ecommerce has now made it possible to do so and both manufacturers and designers are now recognizing the efficiency inherent in doing business in this manner.
The Status Quo
According to the American Society for Interior Design, Design firms should maintain a gross margin percentage around 35-40% to keep their finances “solvent.” Firms struggle to meet this number year over year due to the challenges discussed above. Design firms implement a combination of pricing methods when implementing their services, including flat fees, cost-plus markups, and hourly charges. But firms are best positioned for success when they can buy at the lowest available prices which gives them more control over their margins. The DTS business model was created to give interior designers this advantage and disrupt the status quo.
Design Trade Service Website
DTS accomplishes this disruption through their online eCommerce marketplace which instantly provides interior designers access to a large selection of products made by small and large major furniture manufacturers.
DTS has established relationships with top furniture manufacturers such as Hooker Furniture, Gabby Home and Four Hands, and lists their products online at “Designer Net Price”. However, prices are not available to interior designers until after they register on the DTS platform. By not posting prices publicly, DTS does not risk the relationship manufacturers have established with retailers and does not disadvantage interior designers by giving their clients the ability to see pricing. To register, interior designers sign up on the DTS website and are subjected to a qualification procedure.
Advantage Over Brick and Mortar
Once registered, interior designers are considered “Members” and can view and purchase from 50 different furniture manufacturers simultaneously. By purchasing on the DTS platform, designers do not have to worry about establishing accounts with manufacturers, invoicing, managing shipment/delivery processes, or minimum purchase orders. They are also not subject to the mark-ups used by retailers. On the DTS website, interior designers can purchase from multiple manufacturers simultaneously at Designer Net Prices and thereafter have only one point of contact to track all of their orders.
Customers and Clients
The Client - Manufacturers
DTS currently offers furniture from 50 furniture manufacturers with plans to add hundreds more after funding. DTS’s manufacturers include Caracole, Hooker, Universal, Bernhardt, and John Richard. These manufacturers benefit from the DTS business model in a number of ways. DTS does not require catalogs, swatches, finish samples or credit terms or cooperative advertising. And because DTS is an entirely online platform, there is no need for manufacturers to provide floor samples or balance their inventory as often. Furthermore, manufacturers will not have cooperative advertising campaigns on the DTS platform.
The Customer – Interior Designers
There are estimated to be over 74,000 interior designers currently operating in the United States. They are distributed throughout the country, but in general are more populous in larger metropolitan areas. California, New York, Texas, Florida, and Colorado combined host nearly half of the entire population of Designers. Since their inception in 2015, DTS has grown their interior designer membership base to 2,400 Designers.
The growth they have experienced so far is largely because of the benefits the platform offers, and the problems their business solves for designers ubiquitously. The benefits Designers experience on the DTS platform include:
1. Instant access to manufacturers without time spent setting up individual accounts
2. Ability to order from multiple manufacturers simultaneously
3. Order updates provided through one point of contact
4. Assistance with shipment and damage issues
5. No competition with terminal consumer
“The process with DTS was easy, seamless, and an absolute pleasure. Every time I had either a question, concern, or just an update inquiry, [they] answered my phone calls and emails within minutes. I couldn’t ask for better customer service. Thank you for taking the stress out of my project”
- Sonya Capasso from
Capasso Interior Design
“I am overwhelmed! This has totally caught me by surprise. Thanks so much for going to bat for me with Caracole and negotiating a credit. You are one in a million. This blows me away. Thank you.”
- Lisa Ellis, from
Lisa Ellis Designs
“You helped me with the order for the semi-custom Caracole chair. Oh, my word. It looks fantastic. Thank you so much for your help.”
- Lin Moty, from
Lin Moty Interiors
“Thanks again for the quick service today. You guys are great to work with.”
- Amy Muetterties, from
“Thank you. Very impressed with the turnaround. I look forward to doing business with you on future endeavors.”
- April Cosby, from AC Design Company
Sales and Marketing
Historically, DTS has relied on organic growth and word-of-mouth referrals for marketing their business. Through that, they have experienced rapid growth, made successful conversions, grown their membership base, and have grown their average monthly order size by nearly 50% in 5 years, and averaged yearly revenue growth of 73%. The graph below depicts the monthly membership growth over the last 6 months, and revenue trends for the last 12 months.
The COVID-19 pandemic has had very little financial impact on DTS. In fact, when compared to the same period in years prior, the company has performed higher in 2020. The graph below compares March through September of 2016 through 2020 to highlight this trend. DTS improved their average monthly purchase during this period by 12% from 2019 to 2020.
The Company has teamed up with A Design Partnership, LLC (ADP) to create 12-month marketing plan that aims to introduce DTS to the bulk of the interior design firms in the US. ADP has numerous marketing channels that it works through, including magazines, social media, and news outlets. Below is a list of channels they have used in the past:
ADP is expected to be a strong partner of DTS because they only market for companies within the interior design industry. The marketing plan can be found in Carofin Diligence Folder (C) Market Overview and describes both early and long-term strategies for marketing DTS.
While the ADP marketing campaign is targeted at interior designers, DTS anticipates that it will yield increased interest from major furniture manufacturers who share the same advertising and marketing space. However, a portion of the proceeds in this offering will go towards many new key personnel including a Vice President of Vendor Development. As DTS grows, so will the number of manufacturers being offered on the platform. The Company has already begun scouting for individuals for this position.
About the Furniture Manufacturer Industry
Furniture manufacturers craft furnishings for homes, offices, and institutions. The furniture manufacturing industry is vast and highly fragmented. Typical products include beds, chairs, desks, wardrobes, etc. In the US, there are an estimated 14,500 establishments selling furniture and furnishings in some capacity. It is also estimated that the largest 50 companies in the space only account for 40% of the total revenue. In general, the state of the furniture manufacturing market is highly dependent on the state of the housing market and the health of the US economy. Furniture manufacturers generate revenue through wholesale to brick-and-mortar retailers, or through online sales. In an article on trends and challenges facing furniture manufacturers, researchers wrote:
“For manufacturers, the increase in online shopping means an opportunity to sell to online retailers that are not limited to a physical geographic area.”
This increased reach that manufacturers can obtain is helping to increase the overall size and success of the industry. Though, it is projected that manufacturers unable or unwilling to adopt eCommerce practice will not survive.
- Hooker Furniture Corporation
- Butler Specialty Company
- A.R.T. Furniture
Primary Activities, Products, and Services
Furniture is produced for indoor and outdoor spaces, for a variety of sectors. The most common sectors that utilize furniture are residential, commercial, and hospitality sectors.
The furniture manufacturing supply chain can be generally thought of in three pieces: Provider, Producer, and Customer. The Provider is responsible for the creation of raw materials that will ultimately be used to make furniture. Materials include wood, leather, upholstery, metal, foam, and more. The Producer is the furniture manufacturer. They use the materials procured to create a finished piece of furniture. The customer is any purchaser of the furniture, consumers, or for DTS, interior designers. The furniture supply chain comes with its own unique set of challenges. Because of the high quality-craftsmanship of the pieces, there is a heavy emphasis on de-risking the transportation of pieces from their point of manufacturing to their destination. To de-risk transportation, furniture manufacturers employ specific furniture transportation specialists to manually move pieces and protect them as they are transported domestically or otherwise.
Industry Size and Growth Projections
The global furniture manufacturing market is expected to exceed $650 billion by 2027. In the US, the total revenue generated in the furniture manufacturing market was estimated to be just under $75 billion. The US furniture manufacturing market is projected to grow by 4% CAGR each year to reach $80 billion.
State of the Interior Design Industry
The Interior Design industry is experiencing growth in a variety of different ways. In the past decade, the total number of interior designers has increased by 18,000, the salary and wages of interior designers has grown 13.5%, and the number of industries employing interior designers has expanded. These trends are expected to continue and are being propelled by external advancements in technology, textiles, and psychology.
Only very large firms (>500 employees) are considered “Major Players” in this industry. Because these firms represent only 0.1% of the total number of firms in the interior design space, they are not initial targets for DTS’s business. These firms are more likely to have distribution channels established with furniture manufacturers. However, they are still unable to establish nearly as many as DTS offers. DTS has built a successful business by providing their services and collating design firms in the other 99.9% of the industry and plans to add the largest firms as the size of their buying group increases.
Primary Activities, Products, and Services
Interior designers craft indoor and outdoor spaces across a variety of industries in the commercial and residential sectors. Their designs appeal to emotion, base senses, the conscious, and the subconscious, while also being functional.
Individuals and families hire designers to furnish their rooms and homes in the residential sector, and interior designers are either hired by firms or are a makeup a division within a firm in the commercial sector. In 2015, a survey found that 17% of homeowners employed interior designers to furnish their homes. In the commercial sector, “the number of industries employing interior designers continues to be vast.” Interior designers source furniture from a variety of furniture manufacturers, retail superstores, design marts and boutique manufacturers.
Industry Size and Growth Projections
Between 2012 and 2018, the US Interior Design Market grew an average of 10% yearly. In 2019, the market was estimated to be $14.7 Billion, with projected growth to $16.0 Billion by the end of 2020, and $17 Billion in 2021. Because DTS is accessible to the entirety of the interior design industry, the true market size of the opportunity is assumed to be $17 Billion as well.
Implications for DTS
The short and long-term goal of DTS is to collate the collective purchasing power of interior designers to form the most powerful buying group in the furniture industry. Establishing this buying group will benefit both designers and furniture manufacturers because it will address the historical “pain points” and inefficiencies in that channel of distribution. Such a group is now possible because of the growth of eCommerce. DTS’s success in achieving their goal of increasing the purchasing power of interior designers is directly related to the success and growth of both the Interior Design Industry, the Furniture Manufacturing Industry, and the adoption of eCommerce. The nature and timing of the service DTS is providing coincides with the growth in both industries. The number of Interior Design firms in the US continues to grow, which implies that the total customer base of DTS is growing as well.
With the onset of COVID-19, people across the country and globe have been encouraged to spend more time at home. Furthermore, because of the increasingly virtual nature of business practices, more and more people have adopted a “work from home” lifestyle. The increased time spent in the home and the shift in the use of individual interiors has given interior design a new focus in the US. Interior designers are finding that they have increased demand and more projects than ever before. With “in-person shopping” becoming less desirable than online alternatives, interior designers have voiced their need for strong online shopping platforms for purchasing furniture and accessories to meet their growing number of projects. Interestingly, the COVID-19 pandemic has heightened the desire for the DTS business solution.
Advantage over Competition
After years of struggling with technical challenges and with the advantage of great relationships with manufacturers, DTS has developed the process for converting highly dissimilar digital assets from manufacturers to an effective eCommerce platform exclusively for interior designers. Furthermore, interior designers and furniture manufacturers have specific needs and processes understood by the DTS team who have over 100 years of experience working with these groups on a national level. They also have decades of relationships with the leaders of the largest manufacturers and an acute understanding of their needs and business model. Such experience and relationships are not easily duplicated by most potential competitors; particularly those whose background is primarily retail and/or technical expertise.
First to Market
The essence of the DTS business model is to rapidly scale the company and sign up the great majority of designers as members to effectively preclude potential competitors from trying to duplicate the DTS program.
Competitor Barriers to Entry
Experience, knowledge and relationships
The DTS niche is highly specialized consisting of interior designers and their unique challenges and needs. Typical ecommerce companies have limited understanding of the niche or the ability to serve it.
Companies in the furniture industry which may understand the niche do not have the technical ability to work with the highly fragmented and dissimilar data utilized by the various manufacturers. DTS has been working on that single challenge for several years.
Furniture manufacturers are very guarded with how they distribute their products and who they trust with that. DTS has extensive personal relationships with the leaders of the largest furniture manufacturers.
DTS provides designers one point of contact for sourcing, delivery tracking and troubleshooting delivery issues. DTS has no selling expense, and no obligation to take returns or pay for service-related issues. DTS does assist the designer with delivery and product issues and because DTS has extensive relationships with the delivery carriers and the manufacturers, DTS has far more influence and ability to quickly resolve issues in the designer’s favor. This service also directly benefits the manufactures as who can reach virtually all designers with no marketing, sales or service expense. Once thoroughly established, there is no advantage to manufacturers or designers to have another such group.