As Susan Feldman waited outside the Southwest Airlines arrivals terminal at Los Angeles International Airport in October 2008, she had a nervous feeling in her stomach, which she compares to blind date jitters.
Except this wasn’t your traditional blind date. Feldman was meeting Ali Pincus, her soon-to-be co-founder, for the first time. They had spoken over the phone after a mutual friend set them up to discuss the overlap of e-commerce and home goods, but they hadnâ€™t met face-to-face. Feldman and Pincus both recall feeling a combination of nervousness and excitement.
This wasnâ€™t your typical founder story, but four years later, their brainchild, One Kings Lane, would become a business with over 4 million members, with expectations of over $200 million in revenue for this year.
Feldman first started exploring the idea of applying flash sales to the home retail space in 2007. As a merchandiser, she was working in retail and observing the emergence of a flash-sale distribution model, pioneered by Vente Privee, and adopted by others, including Gilt. At the time, the model was mainly a vertical play in apparel, but she saw an opportunity to bring this to home goods.
This impetus was partially born out of personal frustration. She had recently moved to LA from New York and was in the process of decorating her home. Being a New Yorker, she was unaccustomed to the idea of driving from store to store to find individual pieces for her house. And she hated paying regular price for anything. During that experience, Feldman realized that in the home decor space there was no place to get deep discounts on designer goods.
As Feldman further explored the idea of flash-sale meets home decor, she realized the need for a more tech-savvy co-founder. Linda Stone, founder of BlogHer, set her up with Pincus in 2008, which brings us back to Feldman waiting at Arrivals outside of LAX.
From Strangers To Founders
Pincus says she couldn’t stop talking in their initial conversations about the possibility of starting the company because she saw how disruptive a company like One Kings Lane could be. And Feldman’s background in merchandising and creative seemed like the perfect complement to her business development and digital media skills.
The pair quickly found a good attorney, wrote a business plan, figured out who would host the website, hired designers to actually build the site, and then started taking meetings with vendors. Pincus and Feldman started pitching them in December 2008, and found that these companies were eager for ways to distribute inventory.
As the economy continued to implode, consumers tucked away their wallets, leaving retailers and brands with massive amounts of excess inventory. OKL was pitched as a channel where they could possibly sell these goods, but also maintain a luxury brand value.
This wasn’t going to be an Overstock or Walmart. Feldman realized that these brands wanted to move inventory quickly and discreetly, so that a brand wasn’t going to be featured on the website for weeks and months at a discounted price. That’s one of the reasons the site launched as a members-only platform initially. As Pincus tells me, it was about being at the right place at the right time.
From the start, OKL operated at warp speed for a startup. Pincus says her husband, Zynga founder Mark Pincus, gave her and Feldman advice that is still part of the OKL product culture. Mark advised his wife and her co-founder to be quick and nimble in seizing the opportunity. Feldman recalls that Pincus told her the first to market will win, the second will do well, and it will be tough for anyone after that. In other words, they needed to move fast.
They took Markâ€™s advice to heart. The fledgling startup outsourced all design, and web management so if it didn’t work they could just walk away. In 2008, funding wasn’t easy to raise, so they negotiated deals with partners. For example, the photographer who initially took photos of products for the site was paid with office space. They put thought into each meeting with vendors, bringing gifts like candles and always sending handwritten thank you notes afterwards.
Then there was the matter of naming the business.
Pincus tells me that she and Feldman wanted to use a street address for the site’s name. One Hawthorne Lane was one of Pincus’ favorite streets in San Francisco, but an advisor said that Hawthorne was a bit long for a natural Internet brand. Kings Road is one of Feldman and Pincus’ favorite roads in LA, and exactly five months after the two met face-to-face at LAX, One Kings Lane was launched in private beta to select friends.
Similar to other flash sales sites, the starting point for the sale was the email. Via an “ambassador program,” Feldman and Pincus reached out to friends and asked them to invite their friends, and their friends’ friends. They even incentivized sharing with gifts (i.e. an Hermes throw blanket) to help.
At launch in April 2009, OKL had exactly 5,000 members. The startup was then featured in email newsletter Daily Candy and went up to 25,000 members in a day. At the time, I sent the URL to my mom, an interior design junkie, who immediately called me with excitement about how she’d never seen Ralph Lauren candles and accessories with such deep discounts. My mom wasn’t alone in her enthusiasm. OKL immediately scaled a loyal user base and now has over 4 million members.
Curating Commerce And Attracting Investment
Along the way, Feldman and Pincus’ baby began to catch the eye of investors looking to get in on the flash sales e-commerce model. But as Pincus explains, pitching VCs on a niche e-commerce site was sometimes challenging, especially when it came to selling the Silicon Valley elite on the power of a site that sold candles, rugs, furniture and more. And it was powerful. “If investors didn’t get it, their wives definitely did,” Pincus recalls. In fact, Greylock partner James Slavet, who lead the firm’s investment in OKL in 2011, says he found out about the site through his wife.
The company originally caught the eye of Kleiner Perkins partners Bing Gordon and Aileen Lee in late 2009, and that year, One Kings Lane raised a round from Kleiner, First Round Capital and angel investor Reid Hoffman.
Lee said one of the things that attracted her initially was One Kings Lane’s design aesthetic. Between the logo, the look and feel of the site, and the communication they had with customers, One Kings Lane had a distinct vision, and more importantly, a soul, which is rare for an early stage company, she explains.
Lee also liked how the curation aspect of the site helps keep the merchant at the heart of the company. Hoffman agreed and explained that the siteâ€™s curated commerce strategy was what made OKL distinct when he was considering investing. â€œThe physical world is made a lot more efficient by the electronic world but there is tons of noise, and startups have to figure out how to make peopleâ€™s lives better. One Kings Lane uses curated commerce in a category that is fundamental to people,â€ he told me.
Hoffman views OKL as more than just a flash sales site, and believes the site is playing a role in making women’s lives easier by culling these home and lifestyle items. He believes that OKL is providing its demographic with a go-to site they will continue to need as long as they have a home and want to make it a more beautiful place.
One of the key parts to One Kings Lane’s curation strategy is Tastemaker Tag Sales, which allows well-known interior designers and celebrities to select sales of home decor items from around the world. As Pincus and Feldman explain, people don’t typically have access to an interior designer and this sale helps bring themed, styled collections to the masses.
Nathan Turner, a well-known, celebrity interior designer, has curated several Tastemaker Tag Sales and traveled with Feldman to India and other areas to help find items for these sales. Turner himself didn’t really understand how powerful the sale could be at first, as he admits he didn’t buy much home decor inventory online for his clients. But when the sale went live, and everything he curated and picked was sold out within a few hours, he quickly realized the power of OKL.
“It’s about taking brands in interior design and making them accessible to people. Not everyone lives in an area where they have access to these items, and OKL opens the door to this world,” Turner says. Now Turner says he uses the site to shop all the time for clients.
“When we launched no one was talking about curation but it is part of who we are and what we do,” says Feldman. Now One Kings Lane is seeing potential in adding editorial content alongside curated items to help members understand how to use or place an object in their home. The site has started featuring videos and pieces on how to fold a fitted sheet, or how to put a perfect bookcase together and more, contextualizing sales. Pincus explains that One Kings Lane wants to make members feel like they are on a treasure hunt every day.
Finding Focus Beyond Minimum Viable Product
One of the strengths of OKL is its niche focus and brand. Feldman explains that the site’s target is a woman, who loves her home, loves decorating and entertaining and tends to be in her early thirties to late fifties. Think of Feldman and Pincus as the bookends for their customer base.
For Feldman, merchandising was her bread and butter and while the site launched with decorative objects at first (i.e. candles); OKL quickly expanded to rugs, furniture, and other home decor after seeing the positive response from customers. At the start of the site, Feldman would actually print out pictures of each item to be sold on a given day and cut them up into grids to match the layout on the web page.
“From the very beginning, OKL has been about product and merchandising. We don’t just take anything that comes our way. We vet out every product, and vendor personally,” says Feldman. To date, the site has worked with a total of 2,000 vendors, says Feldman.
Tourance, a merchant that creates luxury throws, blankets, pillows and more, has been a vendor of One Kings Lance since 2010. Founder Phuong Thanh says that she didn’t know what One Kings Lane was when she came across the company at a gift show, but thought it was an interesting idea after explanation. In the past two years, Tourance has held over 10 events on the site. In fact, Thanh says that besides sales from the site, she’s received a significant amount of incoming inquiries from interested designers and stores who saw the items on OKL. And Tourance was able to triple revenue in 2011 thanks to One Kings Lane’s sales.
Even niche businesses draw competitors, especially when theyâ€™re on to something. And challenges have come in many forms for One Kings Lane. In the site’s early days, Feldman and Pincus outsourced web management, fulfillment and more. Then two years ago, they realized that it made more sense to create and manage these operations in-house. The company had to migrate from its vendors onto the newly-built platform, and create the infrastructure to support operations and the web platform in-house. When the company eventually switched over to the new platform a few years ago, they braced themselves for a drop in sales, downtime and more. But OKL managed to plug along as usual.
Gilt has been aggressively expanding into home; recently revamping the vertical with an acquisition as well as a complete redesign focused also on curated content and commerce. Fab, a flash sales site focused on design, is exploding and RueLaLa, HauteLook, Beyond The Rack and many others feature daily sales on home items as well.
Feldman is focused on the OKL vision, rather than the competition. She says the introduction of Gilt Home has not had an influence on One Kings Lane’s traffic or sales. She also sees Gilt, which also offers full-price items, as entering into a different market by moving away from discounted items. And while she says Fab is doing some interesting things in terms of e-commerce and content, she feels that its audience skews younger, and more male.
Feldman can focus on OKLâ€™s merchandising and creative future, in part because of her strong, complementary partnership with Pincus, who is focused on business development and deals.
The team scored a huge development and marketing deal when it found itself as a significant part of the interior design reality show, “Million Dollar Decorators”. One Kings Lane also partnered up with actress Gwyneth Paltrow to promote her new cookbook and held an event in New York in her honor.
Feldman and Pincus have the freedom to focus on their passions, mainly because of CEO Doug Mack, who joined the company in 2010 and has been leading the company into triple digit sales growth ever since. Mack co-founded Scene7, a rich media platform provider for the e-commerce industry, which was eventually sold to Adobe.
Lee says that the secret of One Kings Lane is that it has one of the best teams in consumer Internet ecosystem. In addition to Mack, the site has also hired longtime eBay execs Dinesh Lathi as CFO, and Yulie Kim as head of Product.
Personalization, Mobile And The Future
The number of products offered on the site has grown 300 percent in the past year and Mack is looking for other high-leverage ways to grow the business, focusing on expanding talent and operations in two main areasâ€”merchandising and technology. International expansion is also a potential huge growth area for the company and One Kings Lane is actively looking to build a global brand, but wants to turn this on in a meaningful way, he explains.
One Kings Lane also wants to expand its own channels for distributing products to its members. One recently launched feature is an eBay-like marketplace, which allows vendors and designers to post pre-vetted antique and vintage products on the site. However, there is no auction component, and all items have a fixed price. This, of course, expands the number and diversity of products on the site.
One untapped area for the business is personalization. Itâ€™s not easy for users to filter out items that arenâ€™t interesting, or to search specifically for items that are. Over coffee with Pincus, Feldman, and Mack, I confided in them my weird, unnatural love for elephants. To my husbandâ€™s chagrin, I litter our apartment with books, figurines, art and even candles shaped like elephants. I would totally love to be alerted (by email or even a push notification) when an elephant-related good is featured on the site.
They all agree that personalization is inseparable from the future of curated commerce. Turning purchase data and other forms of intent into a personalized experience would provide more value for members so long as the team can preserve the serendipity that customers have grown to love.
Like any fast-growing startup, the question is where to focus a fixed amount of bandwidth and talent.
Mack says that personalization is on the list, but it will take time to build a much deeper infrastructure to store and retrieve the right data. Mobile commerce is another interesting opportunity, especially when you consider the opportunity to buy local goods from local designers. OKL has an iPhone app, but considering the loyal community of shoppers, and the personalization element; there is much more that can be done in this area as well.
While thinking deeply about the productâ€™s future, Mack has been able to quietly scale the fundamentals. The startup, which Mack says is on track to be profitable in the next year or two, saw $100 million in sales last year and expects to more than double that number this year. More than 75 percent of sales come from repeat customers, which speaks to the loyalty and engagement of their customer base. Investors are looking carefully at these numbers.
And liking what they see. In the fall on 2011, One Kings Lane raised $40 million in new funding from Tiger Global Management, Institutional Venture Partners, Kleiner and Greylock, bringing the total amount raised to over $65 million. The site was valued at $440 million post-investment. Greylock’s Slavet brings the startup’s success back to Pincus and Feldman. “In this generation of e-commerce companies, the ones that have been successful have been those where the product sensibility emanates from the founders.â€ Pincus and Feldman are these founders.
But beyond their product and merchandising instincts, they have an enviable founder relationship that they describe as sisterly, more than collegial.
Since the day Feldman waited anxiously outside of LAX for her future business-partner, she and Pincus have not only been able to convert their passion into a highly-successful business, but also build a team that shares their love for merchandising and curation. Future entrepreneurs will learn from OKLâ€™s product, but moreover, theyâ€™ll learn from its story.