How Westwing beat the odds with the right yin and yang
Two weeks ago, Westwing went public on the Frankfurt Stock Exchange. If you’re from the US, like many readers of my blog and Point Nine’s Medium channel, you might be wondering W̶T̶F̶ what I’m talking about. If you are from Europe, you will most likely know that I am neither referring to a part of the White House nor a TV series but to the leading European eCommerce platform in the “home and living” segment.
As you may or may not know, I was fortunate enough to have been involved with Westwing as an angel investor from day one. Well actually, before day one. In the years leading to Westwing, Stefan and I frequently bounced startup ideas off each other. The problem was that none of them was compelling enough for Stefan to give up his career at Bain & Co., the consulting firm he joined when Friendity, the social networking site we started together, was over. None of them until Stefan and Delia had the idea for an eCommerce business focused on beautiful, curated furniture and home accessories, that is.
The recent IPO is a great occasion to look back and reflect on the early days of the journey. First I’ll talk about what I think are the key factors behind Westwing’s success. Afterwards, I’ll share a few random anecdotes and fun facts.
What made Westwing win?
Getting to an IPO is something that only very, very few founders ever achieve. Most startups fail. Some become small, profitable businesses or are acquired for a small amount. Few have a massive exit, and even fewer go public¹. The fact that Westwing was able to beat the odds is a testament to the outstanding performance of Stefan, Delia, their co-founders, and the entire Westwing team. 🙇
eCommerce is particularly hard. In addition to the “online” part of the business — running an online shop, doing online marketing and CRM, building a brand, you name it — you have to maintain supplier relationships, work with shipping companies, operate warehouses, take care of inbound and outbound logistics, and deal with all kinds of other complexities that purely digital businesses are spared from. Put differently: If you run a photo-sharing app, when was the last time you had to deal with inventory leakage, international VAT calculations, multiple warehouses across Europe and cross-warehouse processes? :)
Unfortunately, eCommerce founders aren’t always rewarded for taking on these additional complexities and risks. Because of intense competition, price transparency, low customer loyalty, and the Amazon-Google-duopoly on consumer mindshare, most online shops run on low margins. If you will, Westwing is one of the few exceptions that prove the rule that most eCommerce companies aren’t great businesses.²
Strategy + Execution
So what was it that made Westwing succeed where most others failed? Trying to explain the success (or failure) of a company by one or a few factors always runs the risk of gross oversimplification, and I’m sure many factors have contributed to Westwing’s success. However, compared to other cases I think I have a pretty good sense for the critical success factors of Westwing.
One big pillar of Westwing’s success was a crystal-clear strategy which Stefan and Delia formulated before the first line of code was written, before the first sale was done, and before the first Euro was raised. In a nutshell, the idea was to offer a carefully curated selection of beautiful, high-quality home decoration products to a well-defined target group ( women between 25 and 55 who regularly buy decoration items). In contrast to most other eCommerce businesses, Westwing wasn’t going to lure customers primarily by offering steep discounts. Instead, the goal was to drive sales and loyalty by offering customers inspiration and advice on home decoration through high-quality editorial content, much like a (shoppable) glossy magazine with interesting stories and beautiful imagery. As we build up a larger customer base and start to create a brand over time, we would expand from daily mailings with a particular theme to adding a “permanent assortment” and would eventually be able to also sell Westwing-branded “private label” items.
As it happens, this strategy turned out to be spot-on. Many if not most startups redefine their strategy significantly once they’ve launched and start to learn more about their market; some pivot and end up doing something else than they did in the beginning. Not Westwing. I just dug out the original deck from early 2011. It looks surprisingly little outdated. Almost all of our key hypotheses turned out to be true, which is testament to Delia’s deep industry expertise and all the research Stefan did before starting the company.
Yin and yang
The other big pillar is the quality of the founder team and what I would describe as perfect founder/market fit. I’ve touched on the operational challenges of running an online shop further above. Add the specific complexities of the multi-step business model and a rapid expansion into multiple countries, and it becomes clear that it takes a world-class operator (plus some rocket fuel³) like Stefan to pull this off. Equally critical to the company’s success were Delia’s exceptional insights into Westwing’s target demographic, her unique ability to understand and ultimately drive consumer taste, and her scrupulous attention to detail with regard to customer experience and Westwing’s brand.
As you can imagine, there can be clashes between an extremely numbers-driven manager like Stefan and a creative mind like Delia, but like yin and yang, Stefan and Delia seem to be complementing each other perfectly. Westwing is probably the most as well as the least data-driven company that I know. When it comes to logistics, allocation of resources and overall business performance, the company is extremely numbers-driven. But as soon as you enter product selection, design, and customer experience, the opinions of the creative people in the company are sacrosanct.
26 fun facts
In the intro, I promised some fun facts. Here goes, in no particular order:
1.) One of Stefan’s very first jobs was an internship at DealPilot.com, the comparison shopping engine I co-founded back in 1997.
2.) Westwing is the third company started by Stefan. The first one was an import business for US sports memorabilia that he started at age 18 (small success). The second one was a social networking site that we started together (failure).
3.) Westwing’s original working title was “Portobello House”.
4.) The two finalist names were Westwing and “Deconi”.
5.) I voted for Deconi, because I was concerned that Westwing could invoke associations of chicken wings.
6.) I was wrong.
7.) I’m bad at naming.
8.) Westwing was founded when Barack Obama lived in the White House.
9.) I believe that had Trump been POTUS at the time, Westwing would have a different name.
10.) Westwing has 907,000 active customers.
11.) 90% of them are women. Exactly nine zero percent. Not a typo.
12.) My mother-in-law is one of them.
13.) 60% of the employees at Westwing’s HQ are female. Diversity is not an issue for sure. (Unless you’re starting to get concerned about the underrepresentation of white guys in the tech industry. ;-) )
14.) Westwing does 85% of its sales with customers who on average visit the site and the app two times. Two times per week, that is.
15.) This amazing metric is driven by what you might want to call the eCommerce equivalent of content marketing in SaaS: Daily newsletters with super high production value, centered around a new theme every day, offering inspiration and showcasing a selection of beautiful products that were hand-picked by Westwing’s creative team (and sometimes external experts, occasionally celebrities).
16.) Westwing had only two angel investors. Stefan’s former boss at Bain and me.
17.) Westwing had two seed VCs: Holtzbrinck Ventures and Point Nine.
18.) In the early days, some investors scratched their heads when they saw products like these on Westwing:
Pillows with dog portraits? OK, maybe. But pillows with dogs who wear a uniform?! You gotta be kidding.
19.) These pillows have been selling quite well. Investors usually don’t argue with Delia about the offering anymore.
21.) Westwing has already sold more than 200,000 scented candles just from their bestselling brand. That’s a hellovalot of scented candles.
22.) Westwing’s IPO was code-named “project pineapple”. Delia chose the name because the pineapple is a significant trend fruit used in all kinds of interior pieces.
23.) I’ve just learned that a “trend fruit” is a thing.
24.) Delia has more than 76,000 followers on Instagram and was named as one of the 75 most influential women of the German economy by Manager Magazin, a German monthly business magazine.
25.) When Stefan decided to leave Bain, they gave him a return ticket.
26.) He never used it.
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¹ Some data on startup success rates:
Here’s how likely your startup is to get acquired at any stage
Dissecting startup failure rates by stage
² Writing these lines, I realize how silly it is to assume that the presence of an exception proves the existence of a rule, although there are examples for when it makes sense!
³ Rocket Internet became a major investor in Westwing within the first year after launch.