Home furniture retailer Article, one of Canada’s most successful e-commerce merchants, is preparing to go public in the new year in what would be a rare U.S.-only listing by a domestic technology company.
The Vancouver company, legally known as TradeMango Solutions Inc., has engaged underwriters JPMorgan Chase & Co., Goldman Sachs and BMO Capital Markets to explore listing on the Nasdaq Stock Market, two sources familiar with the situation said. The company is considering launching the initial public offering process as early as January, depending on the state of markets, which have been choppy in recent weeks.
If it does proceed, Article would be the latest in a string of well-known North American online merchants to go public recently, including Allbirds Inc. and Warby Parker Inc. Article’s current plan is to raise about US$200-million, mostly as a secondary offering in which existing investors and option holders – it has more than 1,100 employees – would sell parts of their stakes, the sources said. Article would issue little or no equity itself as part of the offering; it is profitable and doesn’t need to raise any cash.
Article still has not completed an informal pre-IPO process of meeting prospective investors known as “testing the waters” and is also looking to expand its board, now composed of three of its co-founders, before formally kicking off the IPO process. The Globe and Mail is withholding the identities of the sources as they are not authorized to speak on Article’s plans.
Article spokesman Jordan Bantista said in an e-mail, “We have no comment at this time.” Fraser Hall, whose Vancouver venture capital firm Rhino Ventures has also invested in Article, also declined to comment when reached by phone.
Article chief executive officer Aamir Baig shed some light on the company’s thoughts about going public during an interview with The Globe in September, 2020. “Going public is a consideration that gets thrown around in our circles,” he said then, adding: “The only primary driver [of an IPO] will not be raising capital to finance our strategic road map, it’s purely to create a liquidity platform for our shareholders and stock option holders.”
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Article is one of Canada’s largest pure-play e-commerce merchants, with annual revenue running at about US$500-million. It was founded in 2011 by four engineers: Mr. Baig, twin brothers Samuel and Andy Prochazka, and Mr. Hall. Mr. Baig had recently sold his previous startup Etilize Inc., a provider of digital tools to e-commerce merchants and marketplaces and got to know Mr. Hall after investing in his previous startup, smart-glasses maker Recon Instruments. Mr. Baig looped in the twins, whom he had met while attending University of Alberta.
The group decided to start a company together, eventually landing on the idea of disrupting the upscale furniture business, where commissioned salespeople, showrooms full of expensive, high-margin items and long delivery times were the norm. Their idea was to target digitally savvy millennials, enabling them to furnish their homes with well-built but reasonably priced mid-century and Scandinavian-styled furniture with a few clicks.
They set out to build a vertically integrated business where they would design products, source materials and work with Asian manufacturers to assemble products and then distribute them from their own warehouses (it now has distribution centres in Seattle, Los Angeles, Florida, New Jersey and Toronto). With no showrooms or salespeople and end-to-end control over their business, they could keep costs tight and sell at lower prices than physical rivals, limiting their catalogue to a select set of products. Like many direct-to-consumer brands, Article stayed off marketplaces such as Amazon so it wouldn’t have to share control of its customer relationships, data or revenue.
Article was one of the earlier movers into online furniture selling; the category lagged others in shifting to digital channels because the products are heavy to ship, and tended to be the kind of big-ticket purchase that shoppers were trained to check out in person before buying. But category sales continued to grow, led by furniture marketplace Wayfair and Amazon, and accelerated because of the pandemic.
Furniture is the second-fastest growing online retail category in the United States – Article’s largest market – behind only apparel and accessories, according to research firm eMarketer. The firm predicted in May that sales in the category would grow 11.4 per cent this year. In April, eMarketer estimated online sales of furniture and other home furnishings would reach nearly US$106-billion this year, making it the third-largest e-commerce category overall.
Unlike many digital upstarts, Article was determined to grow by raising little outside money and reaching profitability as soon as possible. By 2015, Article was profitable before interest, taxes, depreciation and amortization, and has stayed that way; it has raised less than US$10-million in outside equity capital to drive its growth.
“Our driving force was to build something that matters, build something that will last, and you can’t do that without a strong profit formula underneath everything else that you’re doing,” Mr. Baig told Forbes this year. “We allocated more time toward margin correction than fundraising.”
Part of Article’s success has come from the company’s data-driven, engineering approach to tackle problems. For example, after it experienced high return rates for its Chanel dining chairs, Article mined customer feedback to determine the problem: The seat was too narrow. So it redesigned the chair, made it wider, and returns fell.
Article is one of two Vancouver-area furniture sellers considering going public. Online furniture marketplace provider Cymax Group Technologies Inc. last year engaged Bay Street banks to explore an IPO, but the company has since delayed those plans.
Cymax is set to announce a new chief financial officer in the coming weeks and “keeping our head down focused on our customers but watching market conditions closely,” CEO Rizwan Somji said in an e-mail. “The company and board is focused on performance at this time and will revisit a potential offering when the timing is appropriate.”
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Sean Silcoff
Susan Krashinsky Robertson