Couch Startup Burrow Reaches $7 Million Annual Run RateBy Kyle Robertson
Couch Startup Burrow Reaches $7 M Annual Run Rate
Burrow sells and delivers high quality, affordable couches.
Earlier this month, the team made some significant changes — expanding its showrooms, introducing new products, and bringing manufacturing back to the good old United States. I sat down with co-founders Stephen Kuhl and Kabeer Chopra, both 2017 Wharton MBA grads, to discuss Burrow’s growth and its plans for the future.
Buying furniture is a pain.
Burrow co-founders Stephen Kuhl and Kabeer Chopra got a personal taste of that pain when they moved to Philadelphia to start their MBAs in August 2015.
After several bad experiences with Ikea couches, Chopra wanted to buy a high quality couch. But when he initially found the couch he wanted at West Elm, the retailer told him it would take 12 weeks to deliver — far too long given that his lease was for less than a year.
He then bought a couch on sale at the West Elm store. Instead of paying hundreds of dollars for shipping, he wheeled the couch home and spent hours trying to get it up to his apartment.
When Chopra shared this experience with his friend and classmate, Stephen Kuhl, they knew that there had to be a better way to buy a couch. That’s when Burrow was born.
How It Works
You can think of Burrow for couches as you think of Casper for mattresses. You buy a Burrow couch online for $1095. It is delivered in compact boxes in less than 7 days, takes just 10 minutes to assemble without tools, and you have 30 days to try it — risk free.
As Chopra describes it, when it comes to couches, “no one had thought about redefining the experience. We’ve completely redefined the shipping and delivery experience and disrupted what a ‘move’ consists of.”
However, unlike mattresses, couches are fundamentally important to the aesthetics of a living room. As such, there may be an additional hurdle customers have to get over
While companies like Casper have successfully done that by ,
Manufacturing: Mexico or Mississippi?
A couch that comes in a box?
“When we first brought this idea to American manufacturers, they laughed,” says Kuhl.
To be sure, customers wouldn’t pay more than a hundred bucks for a couch in a box. If it came in a box, the manufacturers assured, customers would assume it was low quality.
But the Burrow team didn’t give up. That’s when they set up manufacturing in Mexico for their April 2017 launch.
Yet, earlier this month, Burrow moved its manufacturing from Mexico to Mississippi. Did President Trump use his master negotiating skills to bring manufacturing jobs back to the US?
I don’t think so…
“Relocating manufacturing in the United States was always the goal. With the scale we had reached by November, it became feasible as US manufacturers were ready to come on board,” says Kuhl.
New Products & Showrooms
Having launched with just a sofa product last April, the team introduced a Sectional Sofa and an Ottoman in November.
Burrow’s 2-seater couch and ottoman
Burrow has also opted to open showrooms, primarily located at coffee shops and co-working spaces throughout the country. While ecommerce is Burrow’s primary sales channel, the Burrow founders believe that these showrooms optimize the end-to-end customer journey.
Specifically, they wanted to give customers the chance to see and feel its furniture firsthand. That way, customers know if they like the sofa before they buy it.
Even though Burrow offers customers 30 days for a full refund return of its products, the team knows that no one wants to deal with the hassle of returning a sofa.
I also suspect that Burrow opted to move into showrooms because, unlike Casper’s play in mattresses, couches hold an incredible amount of aesthetic value for the living room. As such, there may be a greater propensity to experience the look and feel of the couch before purchasing it.
Will Burrow launch brick and mortar stores? Eventually, it plans to. But its goal is to create Experience Stores, not traditional brick and mortar retail stores.
What’s the Opportunity?
According to Forrester, US furniture is a $92 billion market — however, only $7 billion of that is purchased through a digital channel today. But that $7 billion is expected to grow to $13 billion by 2022.
There’s a sizable opportunity here.
Still, it’s a busy space. While Wayfair is currently the market leader in selling furniture online, Amazon is increasing its focus on the furniture market. Ikea is also a major player.
However, Burrow doesn’t see itself competing against these retailers — at least for now. It is building a brand focused on high-quality furniture.
Customers Aren’t Rational
In tandem with increased costs due to manufacturing the products in the US, Burrow’s focus on quality motivated a recent increase in prices for a 3-seater couch from $950 to $1,095. “Sales saw a noticeable increase after the price hike,” says Kuhl.
“Sales saw a noticeable increase after the price hike.”
Stephen Kuhl, Co-Founder of Burrow
It’s a classic lesson in consumer psychology. Of course, if we were all rational decision makers, increased prices should result in reduced sales.
However, whereas customers were previously comparing Burrow to Ikea, customers are now comparing the brand to West Elm and Crate & Barrel. Kuhl believes that “the price change corrected customer perceptions since our couches are made from the same high-quality materials as those higher end brands.”
Burrow hopes to build on this brand perception as it delivers a top notch customer experience. Because – as the Burrow founders put it – buying a sofa shouldn’t be such a pain.