As they look to solidify their reputation in the home category, DTC brands are looking to gain the favor of trade professionals.
To do so, some direct-to-consumer startups have established trade programs that come with perks for interior designers, architects and other professionals in the industry. Home brandParachute said it began investing more resources in its trade program by hiring trade specialists in different markets and recently opening a Trade Design Studio. Meanwhile, furniture company Lovesac’s trade program offers 20% discounts, design consultants and new catalogs that feature an exclusive first look at its new products.
With home prices and inflation outpacing wage increases, a large chunk of millennials is putting off major milestones like home ownership. This poses a financial risk for DTC home brands that typically benefit from millennials and other consumers buying new houses. By growing their trade customers, experts said brands are more insulated from consumer trends and can gain a more stable stream of income.
“The interior designer is the most valuable customer you can have because of the long-term potential of that customer,” said Polly Wong, president of marketing firm Belardi Wong. “If a designer trusts you then it makes consumers more likely to trust you.”
These trade programs aren’t exactly new. But as the growth in the home category continues to come down from its pandemic high, professionals are becoming a more valuable group of customers as they purchase furniture more often than regular customers and they provide some marketing benefits as well.
Appealing to the pros
This channel, if leveraged well, can yield financial benefits. For example, Parachute’s trade business has become its fastest-growing channel, with a sales increase of 112% year-over-year from trade customers. Parachute employs trade professionals who not only assist interior designers with projects but also reach out to interior design firms and individual designers to tell them about the program.
“We started out as really focused on direct-to-consumer and we saw this organic interest from interior designers who wanted a program specific to their needs,” Ariel Kaye, CEO and founder of Parachute, previously told Modern Retail. “We really want to be there for them, and we want to provide the best possible experience.” The company, which had a revenue of $150 million in 2021, said its trade business accounts for a quarter of its furniture revenue.
Heidi Csencsits, senior manager at consultancy firm The Parker Avery Group said that trade professionals have recurring projects that would push them to purchase items like furniture or bedding more often than regular shoppers who only shop for home products every once in a while.
Because of the value these groups of customers bring, retailers have pulled various tactics to win trade professionals over. Lovesac’s trade program also offers tax exemptions when utilizing discounts and the ability to place special orders for members, while Joybird’s program features trade-only products and unlimited use of its 3D Space Planner.
“It’s how you want to manage a revenue stream if you want to keep it constant,” said Csencsits. “You need the trade people because individuals and homeowners or apartment dwellers are not going to be back in your store over and over and over again.”
Most of these trade programs does involve a verification process that requires applicants to file some documentation proving their profession in the home industry. For example, Lovesac requires people to provide either a valid membership to professional organizations, a resale certificate or some sort of professional license.
Even larger retailers recognize the repeat business that these professional customers can give them. In its second-quarter earnings call in 2021, Wayfair executives said that 80% of Wayfair Professional orders within a span of 12 months were done by shoppers who’ve already had four or more lifetime orders. Wayfair Professional, at that time, brought in more than $1.5 billion in annual net revenue and had a compound annual growth rate of over 30%.
Suzy Davidkhanian, principal analyst at Insider Intelligence, said that trade professionals are likely to have a larger basket size and are less likely to return products because they are less likely to make impulse purchases than regular shoppers.
“People are also tightening their belts,” as inflation forces consumers to hold off buying high-ticket items like furniture, Davidkhanian said. “I’m not surprised that the B2B market is growing faster than the B2C market for some of these home goods stores.”
Big-box home improvement retailers like Lowe’s and Home Depot also began trying to court trade professionals when sales from DIY customers began slowing down. Sales from Home Depot’s pro customers have now outpaced its DIY customers during its second quarter earnings report. Lowe’s sales in the second quarter, on the other hand, were impacted by slower demand in DIY sales. Other trendy brands like West Elm also offer trade programs touting benefits like private shopping and installation support.
What makes pro customers different
Having a strong network of trade shoppers may be appealing, but it’s not that easy to develop, experts said. Experts said these professionals have high standards for what products they want to buy for their clients. Because of their expertise in home products, winning their business might be a challenge for retailers.
Although appealing to both professional and regular consumers gives retailers a more diversified revenue stream, attempting to cater to both markets can be risky, said Carrie Habel, senior manager at the Parker Avery Group.
“We emphasize having a target market,” Habel said. “Often, if you start to reach for too many different audiences, you lose who you are and you kind of lose the direction.”
Still, gaining the approval of professionals offers more than just financial benefits. Wong said that trade professionals like interior designers are in some ways influencers as well. Some designers have a robust following as they often post photos, write articles about their favorite products and produce other content about their work. They might also end up introducing their clients and other trade professionals to the brand.
“Every single interior designer is their own influencer in their own right, Wong said.
Experts said they expect retailers to try to dedicate more resources toward winning over trade professionals.