Exclusive Q&A: Lovesac explains strong e-commerce performance

Modular furniture retailer The Lovesac Company is putting a spotlight on the customer experience and supply chain to ensure success.

Shawn Nelson, founder and CEO of the omnichannel direct-to-consumer retailer, recently sat down with Chain Store Age to discuss how Lovesac has been maintaining strong sales growth throughout the COVID-19 pandemic, including net sales of $129.4 million, up 56% from the prior year, in its most recent quarter. In addition to a thriving e-commerce business, Lovesac operates over 120 showrooms across the U.S. and partners with several other retailers.

What do you attribute your e-commerce success to in the most recent quarter?
As our latest financial results illustrate, Lovesac was innovating and rapidly growing prior to the COVID-19 pandemic, throughout the pandemic, and continues to grow today.

That said, it is the nimbleness and dedication of a savvy e-commerce team that drive our consistent results in that realm. E-commerce and online marketing rules, norms, and practices are constantly changing and evolving. A relentless test-and-learn mentality drives all that we do. We don’t always seek to be a first-mover to e-commerce practices. We are innovators at our core so we don’t need to prove our ‘innovativeness’ in this way; instead seeking to adopt new tactics, programs and skills after they have proven to achieve real and sustainable success over time.

Our momentum within e-commerce was never just category-tailwind driven. It is the result of continued execution of our differentiated customer-centric strategy built around proprietary products. As a result, Lovesac has built strong customer loyalty – an essential component to any company’s growth that generates customer acquisition through word-of-mouth, which makes up almost one-third of our current sales.

The ability to increase Lovesac’s profits is supported by our omnichannel business model, which allows us to gain share and keep our operations lean, while also enabling us to scale strategically.

[Read more: Lovesac scales to $1 billion with optimized core business processes]

How do you maintain supply chain consistency in the face of widespread disruption?
The nature of our products’ core, SKU-limited design allows for redundant production from various manufacturers. In the case of Sactionals (modular furniture), the ‘fashion’ component, the covers inventory, is disaggregated from the core seat and side inventory that are ubiquitous and uniform from all suppliers.

There is little to no risk in our inventory carry, even when it swells quite large. These items don’t go bad, and the bulk of their dollar value is carried by the core pieces—that all ship to the consumer un-upholstered in gray. We’re also able to maintain consistency as we’re able to adapt and move our outflows based on supply chain and shipments.

We work closely with our suppliers and third-party logistics providers, who allow us to ship products just days after an order. A key approach that’s worked for Lovesac during turbulent markets is reducing our discounts and promotional cadence to maintain and protect those sales margins that allow us to pay the suppliers and shipping companies that we partner with, ensuring product flow stays consistent.

What are some unique challenges of being a direct-to-consumer (DTC) retailer?
Most DTC brands are really just e-commerce brands. The two phrases have become almost synonymous in business circles. We view our wholly-owned omnichannel approach simply as a more fulsome and resilient DTC model.

Any customer buying a Lovesac product does it directly from us, and we have created a system where we can be totally agnostic to how they’re buying the product, be it in-store, online, or perhaps within one of our shop-in-shop locations within a Best Buy or Costco. Regardless, that customer is purchasing directly from Lovesac on our POS.

We are capturing all of their contact information and data directly, and we are of course able to remarket to all of them at any time going forward with offers or new product news.

Customer education has always been a huge part of customer acquisition for any business, but this is especially true for DTC brands. When consumers are unable to experience a product first-hand, education through marketing and owned channels becomes key. From there, once early adopters become loyal customers, the opportunity to unlock word of mouth, a key sales driver for many brands, becomes available.

Consumers see or experience our products at a friend’s house and the seed is planted. This shows that people want to experience our products before making the purchase, which encourages us to expand our brick-and-mortar footprint.

Still, we also have to meet customers where they already are, which is why we have launched a partnership with BestBuy. The partnership is in its second round of testing, through which we have Lovesac products available to demo and order in 20 various BestBuy locations. We have also continued to open pop-up shops at Costco stores around the country. Both of these physical retail partnerships allow us to cast a wider net to acquire new customers.

In sum, our omnichannel approach has really become key to overcoming the challenges that come with being a DTC brand.

Can you describe your mobile showroom program?
Last fall, we launched our ‘mobile concierge’ program in Seattle and Washington, D.C. as another way to meet our customers where they are, while also offering a personalized and curated shopping experience that brought our product directly to customers' homes.

Local consumers were able to book an appointment online for one of our mobile showrooms to arrive curbside. A Lovesac associate would provide an interactive demo, allowing consumers to engage with the product and receive a design consultation to create and customize their product.

[Read more: Lovesac brings stores to customers with mobile showrooms]

This has been a very successful and profitable program for Lovesac, and we believe is uniquely suited for our business model due to how we are able to offer a huge assortment of solutions afforded us by just a few key SKUs. By utilizing visuals and props, while only showing a limited number of configurations, we are able to garner very high ticket transactions as we continue to grow rapidly and keep costs down.

Are there any future e-commerce plans you can discuss?
Our outlook has always been long-term. We create products that are ‘built to last and designed to evolve,’ because we want to build long-term relationships with our customers whom we know and love.  We’ve always been thoughtful in our approach to category expansion, ensuring it makes sense for Lovesac and its customers.

Looking ahead, we continue to prioritize product innovation, efficient and targeted marketing and campaigns, channel expansion with new and existing partners, and a focus on operational excellence.