MadeiraMadeira's first physical store is a "guide shop". Photo: MadeiraMadeira

From failure to the first billion: How Madeira Madeira rose to the top of Brazil’s furniture online marketplace

After the demise of a family business, it flourished in the online environment to become the leading online furniture market in Brazil

If developing a company is similar to building a house, Madeira Madeira’s story has taken all the steps in this sense, starting with a solid foundation. From the rubble of its founders’ family business, it blossomed in the online environment to become the leading furniture online marketplace in Brazil. In early 2021, it joined the billion-club of Latin American unicorns.

Surfing the e-commerce wave brought about by the COVID-19 pandemic, Madeira Madeira registered a 120% growth in sales in 2020, compared to an 80% expansion a year earlier. But the company was more than prepared for it: the rise in sales was well absorbed by a marketplace and distribution structure built throughout a decade, with 15 fulfillment centers scattered through Brazil.

READ ALSO: Madeira Madeira’s next steps: its own logistics ops to conquer Brazil’s South and Southeast regions with next-day delivery

Madeira Madeira transformed itself in many ways, but always focused on three areas: technology, logistics, and product development with a marketplace that combines third-party sales and private labeled goods. In 2021, Madeira Madeira boasts more than 10.000 sellers, 5 million customers, and around 2.5 million stock-keeping units.

When Madeira Madeira started?

MadeiraMadeira was born in 2009, by Daniel and Marcelo Scandian. A year earlier, their father’s tile manufacturing company had just expanded its production capacity, with a new factory in Curitiba, Southern Brazil, when the U.S. subprime crisis broke through, shaking the real state market in Latin America months later. Suddenly, the Scandias lost almost all demand in their primary market.

In those early years, Madeira Madeira opted to use a marketplace strategy. “We uploaded our entire catalog to our website, but we had no inventory. We’d only buy the product with the supplier after our client confirmed their purchase”, explained Daniel Scandian in an episode of Do Zero ao Topo podcast.

Between 2010 and 2019, Madeira Madeira achieved an annual average growth rate of 80%, according to PEGN magazine. In addition to selling marketplace goods, the founders also relied on their family’s business manufacturing expertise to produce their own proprietary furniture. In 2012, the company rose $8 million in its first round of investment, with venture capital funds Monashees, Kaszek Ventures, and Flybridge Capital Partners.

The turning point came in 2015, when, after risking bankruptcy, the company started selling its products in some of Brazil’s leading e-commerce marketplaces, such as Magazine Luiza, Ponto Frio, Walmart, and B2W’s Submarino and From 2015 to 2018, their average monthly product shipping rate rose from 10.000 to 85.000, according to Exame magazine. The move not only helped to restore the company’s cash flow, but also guaranteed that they would be able to use external investment exclusively to grow the company.

In a similar approach to other e-commerce giants like Amazon, MadeiraMadeira also built its own logistics from the start, which resulted in the creation of its own subsidiary logistics company, Bulky Log, founded in 2019. Relying on third-party delivery services and without its own truck fleet, Madeira Madeira promised to reduce its average shipping and delivery time by 60% – from 15 to just 5 days.

In the same year, after registering $126 million in revenue, MadeiraMadeira received a $110 million infusion, from three foreign funds, including Softbank Group’s Latin American investment fund, Light Street Capital, and Flybridge Capital Partners.

READ ALSO: From Loft to Creditas and MadeiraMadeira, Brazilian startups raised US$ 3.5 billion and hit a new record in 2020

Two years later, another round of investment led by Softbank, of $190 million, made the company a unicorn (startups valued at $1 billion or more). In this round, the Japanese group was also joined by Madeira Madeira’s early investors, such as Flybridge and Monashees. According to TechCrunch, the 2021 round is likely to be the last before a potential IPO.

Physical stores and original brands: Madeira Madeira plans for the future

After their first major round of investment, Madeira Madeira started planning a future for the company that went beyond the internet’s confines. Their inspiration, according to Daniel Scandian, is Amazon and the Chinese giant Alibaba. “Both have the same philosophy: they’re technology companies with multi-platform services, and e-commerce is only one of their business units,” said the executive in an interview with Exame. In 2016, the company started investing heavily in its development department.

In, 2018, MadeiraMadeira created Rede Home, a division that offers small business owners the same process that the company used back in 2009: an e-commerce platform where they can show and sell their products even without having them in stock. The service reached 1,000 users in just two months, with an investment of BRL 15 million.

READ ALSO: Remote work is setting new home setups in Brazil

In February 2020, the company announced an original furniture brand, headed by Santiago Antoranz, former Managing Director at Ikea. The new brand focus on the smart furniture market. “We will aim at building these specific products: practical, ergonomic, powered by technological advances, and allowing consumers to assemble the products by themselves – without needing professional help,” said Robson Privado, sales and marketing VP, during an interview with LABS.

A month later, at the beginning of the COVID-19 pandemic in Brazil, the company opened its first physical store in Curitiba. The place operates with a “guide shop” concept, where customers can look and feel the furniture before ordering it online.

The rise in online marketplace sales in Brazil due to the pandemic – from 7% e-commerce penetration to a peak of 17%, then stabilized to 12%, according to Scandian – boosted Madeira Madeira’s strategy. The company ended 2020 with nine guide shops in the Brazilian states of Paraná and São Paulo. “No consumer is or will be 100% online or 100% offline. We need to be where the customer wants to have its buying experience”, said Daniel Scandian during an interview with Link Estadão. In 2021, the company aims to open 120 new physical stores throughout Brazil’s southern and southeastern regions.