Do a web search for outdoor furniture and you may doubt the entire outdoors could hold such a record array of patio furnishings to help you make the most of your self-extended lockdown.
Amid the expected search results from Amazon to Wayfair, try adding “teak” to your search and chances are you’ll find Neighbor, the Phoenix-based startup on a sustainable nesting mission.
An alumni of mattress and bedding firm Tuft & Needle, Nicholas Arambula, co-founder and CEO at Neighbor, told PYMNTS that the outdoor furniture market is “kind of a barbell market where at one end you have really low cost, low quality stuff. At the other end, there’s incredibly high quality, really expensive stuff. Those materials we believe should still be accessible to a consumer that doesn’t necessarily want to spend $3,500 for an occasional chair outside.”
The company launched in 2020, and that was a year that hurt and closed many businesses. But Year One of the pandemic turned out to be good timing for direct-to-consumer outdoor furniture.
“There was a big run on home-related products and many people were investing in their outdoor space,” he said. “We had a budget for January, and we hit that on the fifth day of the month.”
Having completed its Series A funding in March, Neighbor is primed to move on three initiatives that will bring the fast-growing company to scale and get its signature looks on more patios. Saying he hopes the Series A is the last capital Neighbor wants to raise, Arambula noted that the company is profitable and intends to stay that way — and that it intends to use the cash infusion to build its team “at a little bit of a faster clip than we thought we would and help expedite growth of the company.”
Marketing is number two on his list — with a priority on diversifying its channel mix.
And last, but not least, comes an expansion of what Arambula admits is a fairly focused product offering right now.
“If you go to our site, it’s the Haven collection plus a couple of accessory pieces,” he said. “We’re planning to launch ideally three to four more collections over the course of the next 18 to 24 months.”
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The Price of Nesting
But not everything is coming up roses. Inflation is hitting durable goods like everything else, and patio furniture is taking its knocks.
Arambula understands how materials costs are impacting pricing. The first container of teak the company shipped from Vietnam cost $4,000, and the last one cost nearly six times that — $22,000.
“Ocean freight has just skyrocketed in terms of the cost relative to what we’re trying to do,” he said.
Neighbor raised prices in 2021 to cover the soaring costs and stay profitable, but prevailing winds say remote work isn’t going away, which means demand for patio goods should hold. Noting that average order value for a Neighbor purchase hovers around $4,500, Arambula said the rapid growth the company saw in 2020 and 2021 seems to be tapering off a bit — though not at an alarming level.
While direct-to-consumer is their sweet spot, the company is developing other channels including retail partnerships with Crate & Barrel, Huckberry, Houzz and AllModern.
“We have quite a big subset of trade customers that purchase from us on behalf of someone that they may be designing a space for,” Arambula said. “While it is predominantly our site selling to someone, we have drummed up quite a bit of a rapport with this kind of trade demo that represents a pretty good portion of our customer base.”
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A Sustainable Trend
Partnering with Crate & Barrel just months after its founding paid off for Neighbor two years ago, and that’s continuing as this D2C brand reflects on its good neighbor.
“For us as a brand being four or five months old, consumers seeing on an Instagram ad that we’re carried at Crate & Barrel gives a lot of credibility to a brand that otherwise wouldn’t necessarily be as trusted because it’s so early on,” Arambula said.
Though the company isn’t seeing the “anomalistic” ROI of social media ads it ran January through April of 2021, word is spreading of the outdoor furniture brand with the sustainable ethos and stunning teak chairs.
The original idea of using exceptional materials — high-end solution-died acrylic fabrics, teak wood, powder-coated stainless steel — and delivering them “at a more palatable price point” remains the marching orders for the platform, which is being expanded on.
Saying, “our goal as a business is to over time navigate all the way to using only recycled fabrics or at least a component of recycled fabrics in all of the stuff that we sell,” Neighbor is collaborating with a company called Polywood “that’s using recycled milk jugs to build plastic-based kind of lumber material, and then make a modern take on an Adirondack chair” with it.
For Arumbula, it’s all about the new homeowner — with a highly personalized personal vision of what that home looks like.
Noting that millennials and “folks that are buying houses at that age bracket are buying significantly smaller homes than their parents,” he said, “people are recognizing they have to make the most of the space that they do have.”
Smaller home, smaller outdoor space, “but they’re going to want to try to have as much usable square footage in their abode as they can. The idea of investing in your home, in a place where you can nest and feel comfortable and create a haven, isn’t going away.”
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