November 10, 2015 / 9:06 AM / 4 years ago

Online furniture store Home24 buys German rival

BERLIN (Reuters) - Online furniture retailer Home24, a start-up launched by Rocket Internet (RKET.DE) that is encroaching on IKEA’s [IKEA.UL] territory, has bought German rival Fashion for Home, gaining an offline store presence for the first time.

Berlin-based Home24, launched in 2012 and now active in seven European markets as well as Brazil, is paying for Fashion for Home in its own shares, Chief Executive Domenico Cipolla told Reuters, but declined to give financial details.

Fashion for Home, launched in 2009, sells designer furniture online as well as from seven stores in German cities such as Berlin and Munich, making sales of 18.7 million euros ($20.1 million) in 2014.

The acquisition comes as many pure online retailers are recognizing the benefit of combining websites with traditional stores, with even Amazon (AMZN.O) last week opening its first physical bookstore in Seattle.

Cipolla said Fashion for Home products would be sold in future via Home24, while selected Home24 products would be available on the Fashion for Home site and in its stores. The firms will also benefit from joint marketing and sourcing.

If a store presence helps Home24, it could consider opening more stores, although its focus would stay firmly on e-commerce: “We are going to go where our customers are,” Cipolla said.

Home24 saw first-half sales almost double to 118 million euros, although its losses widened as it invested heavily in logistics and broadened its assortment to 180,000 items.

Rocket Internet said in September it expects three of its top online start-ups to break even by the end of 2017 and hopes to list at least one in the next 18 months. However, meal delivery company HelloFresh, seen as the most likely candidate, has put its planned flotation on hold.

Cipolla declined to say when Home24 should reach profitability, but noted it was one of the “least unprofitable” of Rocket Internet’s start-ups. He said Home24 had no current plans for an initial public offering.

“Our priority is to turn this company into a really long term-orientated, sustainable, profitable company... an IPO for us at this point in time is not an option,” he said.

Only a small proportion of furniture sales have moved online so far, but the market is now growing fast.

IKEA, the world’s biggest furniture retailer, has been slow to embrace e-commerce given its focus on a shopping experience that encourages impulse buys of high-margin accessories as shoppers spend hours in its showrooms, cafes and play areas.

The Swedish firm’s online sales exceeded 1 billion euros for the first time in the 2014/15 year, although they were still just a fraction of group turnover, Chief Executive Peter Agnefjall told Reuters in September.

Reporting by Emma Thomasson; editing by Susan Thomas

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