From being valued at £775 million to being bought for £3 million: The Made.com Case Study.
This week’s newsletter will explore how Next acquired made.com for £3 million when it was valued at £775 million last year...
Happy new week,
Last week multinational clothing, footwear, and home products retailer Next bought online furniture retailer Made.com for £3.4million. Just last year Made.com was valued at £775 million when the company went public on the London Stock Exchange. This week’s newsletter will explore how this happened and also the opportunity Next have now that they own Made.com branding and digital IP.
Made.com was founded in 2010 and emerged as one of the U.K.’s most promising startups, raising $137 million in investment. They managed to optimise the entire furniture design, manufacturing, and sales processes by forging close partnerships with partner companies.
The business boomed during the pandemic, the lockdown restrictions meant people spent more time at home and ended up spending on furniture and household goods. However, with the current cost of living crisis, people aren’t purchasing big-ticket items like before. Although furniture is a necessity, buying new furniture, especially from high-end retailers such as Made.com is a luxury. So unfortunately when consumers have to cut down on their expenditures, buying high-end luxury household items slips down their priority list.
Made.com had a few flaws in its business model which contributed to its downfall. Instead of working with a handful of suppliers, they worked with over 200 factories, which meant that manufacturers didn’t prioritise Made.com when the pandemic hit. As a result, the company left customers waiting months to receive their orders. Consumers can be a bit impatient so I can imagine this might have led to some cancellations or refund requests.
Made.com had to stop accepting new orders recently, they are still intending to fulfill some previous orders but they’re currently not offering refunds or accepting returns from customers. Customers may now have to get refunds from their credit card companies or banks.
Made.com struggled to find a buyer to save and take over the whole company and eventually had to enter into administration. The business was short of £70m it needed to survive the next 18 months and, as a result, the share price plummeted by 93% to 1/2p. CEO and co-founder Ning Li said he had attempted to buy his company back to secure 100 jobs and honour all undelivered but it was rejected. Next stepped in to acquire Made.com’s domain names, intellectual property, and brand for a ridiculously cheap amount. I mean £3 million from £775 million within a year! You might be thinking, why will Next buy a failing business even if it’s at a huge discount?
With a business like Made.com, much of the value lies in its intellectual property, technology, and branding. Next, have an opportunity here to grow the home furniture side of their business. This acquisition helps Next increase the market reach of the purchasing company and increase its customer base, which can also lead to an increase in revenue. Made.com may have distribution channels and systems that Next can use for their own offers.
In this day and age, online data is very important and worth a lot. Next acquiring Made.com gives them access to their name, trademarks, digital IP and data. They are able to collect data about consumers' shopping habits. They are also able to utilise the digital marketing processes Made.com have built over the years and target their customers. With online marketing and eCommerce becoming more saturated and competitive, this helps Next grow its digital marketing strength.
It’s also expected that Next will host Made.com on their total Platform which means Next can cut down on distribution centres and manage the brand directly from Next HQ.
All in all, this increases Next’s competitiveness, the larger the company, in theory, the more competitive it becomes. Rather than developing their own competitive edge, they can just buy out their competition and integrate their competitive edge into their own, this may even be cheaper or more efficient than developing their own. This increases Next’s market power as they have a more significant market share and more domination over the supply chain.
It is not clear what exactly Next has planned with Made.com but it’ll be interesting to see their next moves (pun intended). They can either continue Made.com as a sub-brand and rebuild the business or they can integrate it as one of their brands.
“Next moves” 😂 Great read!