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Inside The Furniture Startup Beloved By Instagram, Pinterest, Casper, And Everlane

The small Swedish brand Hem has become a cult favorite among the designorati. Now founder Petrus Palmér wants to make it a $1 billion company.

Five years ago, Petrus Palmér was well on his way to a comfortable life as an industrial designer. In 2005, he’d cofounded the studio Form Us With Love straight out of design school in Sweden. By 2012, FUWL’s clients already included Ikea, Cappellini, and Muuto. It was hard to imagine how things could go better. Unless, of course, you were Petrus Palmér. He felt a nagging discontent in what he was doing: either designing for the biggest mass market imaginable, or for the 1% who could afford a $10,000 couch.

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It was obvious that the market was missing out on a swath of demand somewhere in between. “Because of how production has evolved in the last few decades, it’s a race to the bottom to reduce quality, price, and sophistication,” explains Palmér. And so, in 2012, Palmér set out to create an online-only furniture brand called Hem. “I had seen so much that I wanted to change,” he says. “Instead of being a designer making things, I wanted to be a designer making things happen.”

Five years later, Hem is both profitable and growing–despite a tumultuous, short-lived acquisition by the e-commerce site Fab.com, which had intended to turn Hem into its in-house furniture brand. But while Fab shared a vision of democratizing design, it never could build a sustainable business model selling. Against all odds, Hem has done so, with only a few dozen staff members, no sales staff other than Palmér, and just a few million in seed capital, as compared to Fab’s $150 million. But it’s still not the mass-market brand that Palmér envisioned. That’s why 2018 seems likely to be a decisive one for Hem.

[Photo: Hem]
The logic behind Hem’s business is the same as that behind Everlane or Casper. To reach consumers, traditional furniture brands must deal with middle men in the form of retailers or wholesalers. Each one takes a cut, so that by the time a piece of furniture reaches the market its retail price is upwards of 500% of wholesale. Most manufacturers respond by cutting costs as low as possible to preserve at least some margin. The result is a $4,000 couch that might have cost $500 to make. Hem–as well as Everlane and Casper–cut all those middle men out by selling online and handling distribution from their factories. As a result, they can produce nicer goods by increasing costs and, at the same time, lower prices to consumers. A massive corner sectional from Hem costs $3,200, while a similar couch from Muuto or Hay–two relatively new Scandinavian houseware brands–goes for $6,000.

But the challenge that online brands face is consumer awareness. It’s not easy to build a brand if people can’t experience your wares in person; the problem goes double for furniture, which so often looks different in person than in pictures. Everlane solved this problem with frequent product roll-outs that keep their customers hooked. Casper does it with niche marketing via ads in big cities, and voluminous spots on podcasts. Hem is taking a different approach: good old-fashioned influencer marketing.

[Photo: Hem]
They don’t place ads. Instead, Palmér constantly appears at furniture fairs, throwing dinners with architects and interior designers. Hem also does pop-up events with other startups such as Artsy and WeWork. “We’ve focused on PR and brand ambassadors and building real relationships,” he explains. “We keep the community close.” It’s not a coincidence that you can find Hem’s products in the offices of Instagram, Uber, Pinterest, Casper, and Everlane. Not only does the company’s ethos fits those companies: Hem is also highly plugged-in with the interior designers who outfit their offices.

Palmér concedes that all these efforts don’t differ so much from the marketing approach of companies such as Muuto or Cappelini. High-end housewares brands usually make the rounds at the design fairs in Paris, London, Milan, and New York. What is different is that while those brands only sell made-to-order furniture, Hem’s wares are all in stock and ready to ship from two warehouses, one in Poland and one in New Jersey, arriving with blazing speed. (This is not unlike the original vision for Design Within Reach, though the company has since scaled back its ready-to-ship offerings.)

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Having set up the brand, Palmér now has to try and realize his dream of making Hem a well-known brand. For now, Hem is staying the course. Having opened one profitable pop-up in New York last fall, he plans on doing two more in other cities. Palmér thinks that to appreciate Hem’s design, they have to see how good it is in person–and that once they do, the word will spread.

[Photo: Hem]
The next big choices will be around product and funding. Palmér doesn’t want to bloat the Hem line with more products to suit more and more tastes. But they do need more products, simply because newness still drives sales among a hyper design-conscious audience. Next year, Hem will release a new modular sectional couch that ships in pieces light enough to be carried upstairs by a single person.

Perhaps more important, they plan on deciding whether to take on traditional venture capital in order to fund more marketing and product development. The goal, according to Palmér, is to be a company that aims for a tightly curated segment of the market rather than the mass–say, the 5% who know the difference between Arne Jacobsen and Charles Eames. That way, the company’s design ethos can stay fresh and inspiring to its most important customers: themselves. “The vision of owning 5% of the market gives us a lot of creative space. What we need to do is identify where the people are who are friends with the people already buying from us, whether that’s Austin or Chicago,” Palmér explains. As he points out, the furniture market is one of the biggest in the world, and owning even a sliver of it implies a massive reach. “I’m sure Hem will be a multibillion dollar brand,” says Palmér, with a dash of confidence that seems deeply un-Swedish.

Of course, the question is whether the market does in fact exist. Certainly, consumers who trawl Pinterest are seeing a sophistication of design that was wholly unaccessible a few years ago. They are being educated in a way that simply wasn’t possible before social media. But Hem still has a ways to go.

[Photo: Hem]
Allow me to step outside of my role here as a reporter and reveal myself as a consummate furniture nerd–in other words, Hem’s ideal customer. I’ve owned two Blu Dot couches that I loved, and admired a couple of Blu Dot pieces here and there–but I cringe at most of their design choices and shoddy craftsmanship. CB2 and West Elm I regard as utter trash–lifeless knockoffs whose sources are painfully obvious and that seem on the verge of falling apart at the seams. Which isn’t to say that Hem has perfected things. Many of the pieces are lovely, stunningly well-priced, and surprisingly well-made. Others lack the gotta-have-it design polish to be found in their pricier competitors. Top to bottom, they are closer to Hay than Blu Dot, and that’s a good place to be after only five years in business. Yet to continue attracting furniture nerds like myself, the design still needs to push forward. Can Hem do so while attracting more mass-market clients?

That’s the challenge that so many companies have failed to meet. Today, Design Within Reach skews heavily toward midcentury designs that make design snobs such as myself yawn with boredom. For that group, owning an Eames chair is perhaps more cliche than owning an Ikea dining table. But DWR didn’t start off that way. They used to sell more contemporary designers, ranging from Ilse Crawford to Andersen and Voll. Inevitably, it was the tastes of the market that dragged DWR back to the boring confines of midcentury modern. The point is: It’s hard to stay fresh while aiming to be mass.

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Palmér, for his part, is optimistic. “If you look at the players on the furniture market, it’s extraordinarily fragmented,” says Palmér. “That tells me that the furniture industry has not been good at building brands.” He insists that doing so will be about leaving behind the market-driven approach that has produced so much terrible design on the American market. “We’re using a creative strategy rather than a market strategy. We decide what to do next by finding an interesting designer or new material,” Palmér explains. “Some VCs are uncomfortable with that. But brands still need to be built on intuition rather than data.”

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About the author

Cliff was director of product innovation at Fast Company, founding editor of Co.Design, and former design editor at both Fast Company and Wired.

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