Online furniture retailer Milan Direct on track to reach $15m revenue as it eyes Asia for growth

Nassim Khadem Reporter

Milan Direct on track to reach $15m revenue as it eyes Asia for growth

Published 20 August 2013 11:45, Updated 21 August 2013 06:54

3fa270ee-093a-11e3-b098-c5e82a044e6f_640934690--646x363

“The bricks and mortar retailers don’t really understand online,” says Dean Ramler. Photo: Arsineh Houspian

Australia’s leading online furniture retailer Milan Direct is considering launching into Asia for its next phase of growth. Milan Direct, which in 2007 was co-founded by high school friends Dean Ramler and BRW Young Rich lister Ruslan Kogan, has sold more than 700,000 pieces to customers in more than 40 countries. Chief executive Ramler says the company is on track to reach $15 million in revenue this financial year, slightly lower than that predicted in a recent report by IBISWorld (the research house had tipped Milan Direct’s revenue would hit $18.5 million). But it’s still a remarkable growth rate – in the financial year 2012, the business achieved revenue of $12.6million, about double its financial year 2011 revenue of $6.7 million.Milan Direct, with a small team of 20 staff, is the number one online furniture retailer in Australia. It is far ahead of major bricks and mortar retailers selling online such as Harvey Norman, IKEA and Freedom. Milan Direct also has operations in the United Kingdom and sells across Europe.

A 60-year passion for furniture

Ramler’s family has been in the furniture market for more than 60 years. His late grandfather, Harry Lolek Ramler, started the family furniture business, Ramler Furniture, when he arrived in Australia in the 1950s.

Dean used to work at the store, which still exists in Melbourne, and learnt how to make furniture by hand.

He came up with the concept of Milan Direct while travelling in Italy. He realised that by bypassing the middleman, he could deliver high-quality designer furniture to consumers direct from manufacturing sites.

“I am continuing the family tradition of furniture making but have evolved the business model online to suit today’s educated consumer,” he says.

Ramler says Milan Direct’s products are typically 50 per cent cheaper than those sold in bricks and mortar stores, and in some cases 30 per cent cheaper than other online retailers.

In 2007 he and Kogan went 50/50 and started the company. Kogan, who had already been selling televisions and other electronics online through his own business, Kogan Enterprises, was convinced they could do the same thing with furniture.

Each of them put in just $10,000 of their pocket money. They immediately purchased a manufacturing plant in China, and Ramler says they have grown the company organically ever since, reinvesting all profits back into the business.

It’s been a good news story for Kogan, following his ambitious venture into Australia’s mobile telecommunications sector yesterday coming to an abrupt end. Kogan Mobile has been getting its services through Telstra wholesale reseller, ispONE. But ispONE has gone into voluntary administration with about $30 million in debt. This has left Kogan Mobile unable to continue servicing about 120,000 customers.

Asia up for grabs

Ramler says one of the main reasons the company is growing so quickly is that it has a high number of repeat customers – about 40 per cent of Milan Direct customers have bought before.

“IBISWorld has confirmed that we are the number one online furniture retailer and we want to stay that way,” Ramler says. “We still want to grow the business and our product range. We now have home, office and outdoor furniture and in the past 12 months we’ve added homeware.”

This homeware range is rapidly expanding, with well-known brands including Alessi, Karlsson Clocks and Royal Doulton.

Ramler says the company is now focusing on attracting Australian designers. “We will be announcing some talented Australian designers over the next six to 12 months,” he explains. “We are launching new brands on our site weekly.”

Asia and the United States is the next big opportunity. They have been toying with the idea of setting up an office-only furniture store in the United States (American consumers are apparently the biggest buyers of office chairs while Australians mainly opt for outdoor products).

But it’s really Asia that could prove most lucrative. “Asia is a very exciting market,” he says. “Asian consumers are starting to gear up for e-commerce and that means there will be demand, but in a region where there is no competition in this space.”

He says while their manufacturing plant is based in China, “the Chinese are experts at making furniture, but not great at selling it domestically”.

“We are looking at China, Korea and Singapore,” he says. “There’s a lot of traffic [to our website] from consumers in those countries.”

He says since they have a manufacturing plant, it’s relatively quick and easy to set up in a new country. “All we need to do is set up a warehouse in the country we’re going into,” he says.

A pure-play online operator

Ramler is certain the company will never open a bricks and mortar store. The Milan Direct model is based on being a pure-play operator. While there is a “virtual showroom” Ramler says that adding a physical showroom would be too costly.

“If we add a showroom, we will have to bump up our prices by 50 to 60 per cent. To ensure we maintain the best prices, we will never consider a retail store.”

A recent IBISWorld report noted that industry players operating exclusively online have seen “a dramatic increase” in competition over the past five years, as more bricks and mortar retailers have launched e-commerce websites. As a result, the industry is increasingly competing on price, it says.

Ramler isn’t too worried about the competition catching up. “They [bricks and mortar retailers] don’t really understand online,” he says. “They don’t have a strong online market. They are bricks and mortar stores moving into online.”

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: