Outdoor sofa priced at $6,000, targeting the top 2% income earners in the United States | Going Global New Land

Written by Hu Yiting

Edited by Yuan Silai

Introduction: The global business is in a state of turbulence and upheaval, and going global has become an unavoidable proposition for many Chinese companies. The 6.5 billion people in the world are scattered in nearly 200 countries and regions with extremely unbalanced development. The difficulty of entering this complex market may far exceed the entrepreneurs' predictions or imaginations.

Hardcore Kr has been paying long-term attention to and observing the overseas market and going-global enterprises. Based on this, Hardcore Kr has launched a new column: "Going Global New Land". We will cover developed countries and regions such as Europe, the United States, Japan, and Australia, as well as emerging markets such as Southeast Asia, Latin America, the Middle East, and Africa.

The column will focus on companies and products, disassemble the practical operation process of successful going-global companies from a professional perspective, and analyze the causes and consequences of popular products in a country or region. Our higher expectation is to gain insight into and convey the glimmer of new trends.

The following is the tenth article in this column.

Hundreds of years ago, Europeans landed on the North American continent, bringing viruses, guns, and the European lifestyle. The lawn culture and grass seeds of Nordic immigrants took root in the United States, and having a green lawn became a symbol of the wealthy in the American countryside. Even during President Wilson's time, the White House would specially keep a group of sheep to graze and maintain the height of the lawn.

When the American law stipulated a 40-hour workweek in the 1940s, the American middle class finally had time to focus on taking care of their yards.

They carefully arranged the space for socializing and relaxation. More than half a century has passed, and a small lawn, a hard surface, outdoor furniture, a barbecue grill, and a swimming pool have become the symbols of the middle-class yards in the American suburbs. They constitute a prosperous and peaceful picture of the American community and are also part of family life.

During the epidemic period, people's desire for sunlight and fresh air led to an explosion in the demand for outdoor products. Unable to go out for activities, Americans turned their attention to their own yards. They began to choose and purchase outdoor sofas, dining chairs, sunshades, lounge chairs and other facilities that they had not had the energy to pay attention to before. The younger generation of Americans have been influenced by their parents in the selection of home furnishings. When a new outdoor trend emerges, they develop the habit of moving the activity area from the indoor living room to the outdoor earlier.

At the same time, the intergenerational transfer of wealth has become a hot topic in many American media. It is observed that the Millennial generation in the United States has become the main force in buying houses, outnumbering the Baby Boomer generation in terms of quantity; more than $80 trillion in wealth will also be transferred to the hands of young people. With the improvement of economic capacity, they have greater autonomy in the choice of home furnishings and need products and brands that meet their aesthetic and functional needs.

Based on this phenomenon, entrepreneur Liu Jiake chose to launch the high-end outdoor home furnishing DTC brand Outer in 2018, targeting young high-consumption groups in the United States with an annual income of more than $400,000 and around 35 years old.

The first outdoor sofa launched by Outer in 2019 was initially priced at $5,000, meeting the needs of the local American target consumers for simple aesthetics, durability, and easy cleaning.

Due to the high unit price, Outer did not choose e-commerce platforms such as Amazon to start sales in the early stage. Instead, it spent a higher cost to build an independent website and promote it. To match the high unit price positioning and reach high-income groups, Liu Jiake told Hardcore Kr that in the early stage of the brand's establishment, 50% of its sales revenue was used for independent website traffic.

After the establishment of Outer, the global outdoor home furnishing track has experienced rapid growth, and this category has gradually come into the view of more consumers. The Mordor Intelligence report shows that the global outdoor furniture market size reached $47.8 billion in 2021, an increase of 179.53% compared to 2020. Among them, the sales in the United States reached $16.4 billion, firmly ranking first in the global outdoor furniture market.

And Outer seized this growth opportunity. The first outdoor sofa has accumulated sales of more than $100 million so far, and the unit price has also increased to $6,000.

Expanding Categories and Targeting High-Income Customer Groups

For the American outdoor courtyard scene, Outer first launched the large single-item outdoor sofa, making consumers have a deeper memory of its products in this category.

The outdoor sofa is not a new product, but in actual use, the morning dew and the bird droppings that fall from time to time often damage it, becoming a pain point in the arrangement of the American courtyard.

Based on this, in the first product, Outer used a 100% recyclable fabric that took 14 months to develop independently. While achieving lower costs and in line with the environmental protection concept, the sofa surface also has the functions of waterproof, anti-fouling, dustproof, moldproof, and UV resistance. For easy installation and storage, Outer's outdoor sofa also adopts a simple modular splicing design, with a fabric cover that can pack the sofa cushion and backrest together.

The Outer outdoor sofa after being packed up, courtesy of the enterprise

This product is priced at $5,000. After its launch, it sold $2 million within one month, and the cumulative sales currently exceed $100 million.

The rapid sales feedback enabled Outer to establish a vertical high-end outdoor home furnishing brand positioning. Then, it continued to launch products such as outdoor sunshades, stoves, and mosquito repellent blankets with the idea of developing products rather than finding supply chain OEMs.

In the past two years, Outer has increased the number of products launched on the independent website to more than 30 around the courtyard scene, and the unit price of the core product, the outdoor sofa, has also reached $6,000.

The high pricing is targeted at the high-end customer groups in the United States. Liu Jiake summarizes it as the top 2% in the United States, young people with an annual income of more than $400,000. The Millennial generation will enter the consumption golden period of house decoration due to the accelerated accumulation of wealth and the demand for house upgrading brought about by entering marriage and having children.

In addition, the intergenerational transfer of wealth may also occur in the future. The Cerulli Associates in the United States once estimated that by about 2045, $84.4 trillion will be transferred from the Baby Boomer generation and the older generation to the Millennial generation. This generation will have a higher consumption capacity and is the potential user that Outer expects.

High-income people are often associated with labels such as highly educated and picky. To meet their aesthetic and shopping experience concerns, Outer matches them in product design and customer service communication.

Outer's CDO (Chief Design Officer) Terry Lin used to be the chief home designer of Pottery Barn, the second-largest furniture brand in the United States. Currently, its outdoor sofas are mainly in colors such as gray, light gray, and beige, with rattan weaving or high-priced teak from Myanmar and Indonesia as the base. The overall style is modern and simple, suitable for American family courtyards.

Outer outdoor sofa products, courtesy of the enterprise

In the early stage, in order to approach this group, Outer invested heavily in marketing. Liu Jiake told Hardcore Kr that when the company started, it proposed to be a high-end brand. Even if it only raised several hundred thousand yuan in the first round of financing, it was willing to spend a quarter to build content and the brand, including hiring the best photographers or producers to shoot product pictures, and finding service providers that can undertake high-end brands to design websites that match the tone.

At the same time, to fit the daily life of high-income users, Outer's customer service team is composed of flight attendants who used to work for local airlines in the United States, and they are more experienced in serving this group of people. Someone once asked Liu Jiake: Why not hire people with cheaper hourly wages in the Philippines? He believes: "This kind of high-income group generally receives the kind of white-glove service at the level of a five-star hotel. The customer service for them needs to be more sincere and of high quality, which requires a greater investment."

While striving for high-end customer groups, Liu Jiake said that Outer will also launch the large single-item Outer Spaces suitable for the backyard to further increase the unit price. At the end of this year, this product will be tested in Los Angeles and will be widely promoted next year. After that, the unit price will be raised from $6,000 to about $50,000.

Entering the Community and Getting Close to the Local

After entering the market with the large outdoor sofa as the first product, Outer concentrates more than 90% of its sales on the independent website. Currently, after users purchase the sofa, they still prefer to repurchase Outer's accessories, resulting in a repurchase rate of nearly 35%.

The high repurchase rate may be due to Outer bringing product displays into the community neighborhoods and using more real usage scenarios to promote purchases. This is quite different from the strategies of most home furnishing brands to open offline stores or enter collection stores. It can save start-up funds while being closer to the customer groups.

This is also in line with the living habits of American community residents. The United States has a strong tradition of community self-government. It can be said that a community is a well-functioning organism. Since 1972, the United States has launched the Neighborhood Watch program to prevent aggressive and nighttime theft incidents and maintain community security. This program was initially initiated by residents and then supported by the National Sheriffs' Association of the United States and promoted nationwide in communities.

In more daily life, even though the culture is diverse, in the United States, people are accustomed to maintaining a rather friendly relationship with their neighbors. It is a more common phenomenon in the local area to visit new neighbors with gifts, participate in community activities or important festivals together. The biggest characteristic of community interpersonal relationships is a 熟人社会 (shúrén shèhuì).

Especially the young group is more active in entertaining, resting, and entertaining relatives and friends in outdoor spaces.

Liu Jiake has lived in the United States for many years and is quite familiar with the customs of neighborhood acceptance. Therefore, he has developed the Neighborhood Experience Home model.

Whenever a user shows an intention to purchase Outer products, they will receive an email inviting them to become an experience home and open their own courtyard to the neighbors for a visit. If interested, users can apply on the independent website. After the Outer team examines factors such as the geographical location and backyard layout, it can be opened to the neighbors. The early experience homes can get up to a 20% discount when purchasing products; in the later stage of recruitment, the Outer team observed that American consumers are quite interested in this. Even if the discount is cancelled, there are still people signing up.

After the experience homes are set up, potential users who need offline experience can choose the courtyard to visit and experience on the independent website based on the nearest geographical location and uploaded pictures, and have face-to-face communication with the real experience homeowners to discuss the functions and deficiencies of the products. Liu Jiake told Hardcore Kr that half of the people who visit will make a purchase after the experience and communication. The near-offline conversion rate brought by this model can be maintained at about 50%.

The entrance of the experience home on the independent website, courtesy of the enterprise

Thus, Outer has completed the laying of the offline channel for its high-unit-price products. Up to now, it maintains about 1,000 experience backyards in the United States, which can cover small and medium-sized towns in the second and third-tier areas.

Liu Jiake told Hardcore Kr: "1,000 experience homes are enough to cover almost all states in the United States. Currently, the distribution according to the population density is also relatively reasonable. For example, there are dozens of options in a big city like Los Angeles, and there are also openings in remote towns. The total number will be more widely distributed than the offline physical stores of competing products."

High-premium products often require more sufficient emotional value. The Neighborhood Experience Home model allows users to have real offline communication and social interaction. After users place an order, they can receive an email from Liu Jiake himself, including contact information such as email address and mobile phone number, to directly communicate with the founder about after-sales issues.

While the founder personally takes on customer service, the Outer team remains in a relatively compact state. Only 30 to 40 people are in the United States after the establishment of 6 years. In recent years, Liu Jiake has returned to China many times. While paying attention to the dynamics of e-commerce, he has built an operation team in Shenzhen to match the local business model.

At present, even though the cloud of economic downturn has not yet dissipated, the United States is still the country with the highest consumption power in the world, and sellers or brands are flocking to it. After years of development, the local market will also put forward higher requirements for the localization experience and ability of the entrants.

When traditional home furnishing brands are competing and striving to survive, the United States is no longer short of indoor home furnishings. Based on this, Liu Jiake made up his mind at the beginning of his entrepreneurship: "The declaration of not touching indoor products is in our brand (Outer), that is, we will never touch any indoor products in our lifetime."

And the success of Outer also proves that even in the mature American market, high-unit-price products can carve out a path if they have a sufficient understanding and respect for the local culture.