In brandchannel’s new series with Yale University, a team of MBA students proposes how Hugo & Hoby can scale up sales of its affordable custom furniture. Their case study below reflects the views of the authors and not brandchannel or Interbrand.
Frustrated by limited furniture choices, two college students founded Hugo & Hoby—named after their grandfathers—to offer high-quality handcrafted and sustainably sourced wooden furniture at relatively affordable prices.
The online store features current designs available. Following just-in-time manufacturing processes, Hugo & Hoby makes only what is ordered, thereby eliminating waste and cutting down on costs associated with storing and displaying furniture pieces. Once the furniture is made, it is shipped for free directly to the customer’s home and all the furniture can be assembled within 10 minutes. As more people are becoming comfortable with buying furniture online, they aim to become as one of the leading ecommerce brands for furniture.
For Hugo & Hoby, sustainability touches on three areas: environmental, social and economic.
For environment, they use naturally available and transparently sourced materials while connecting local craftsmanship and manufacturers with the market for social aspect. They also achieve the economic profit by decreasing costs from their innovative business model, which allows them to offer high-quality and sustainable products at an affordable price.
Hugo & Hoby works with a few selected small mills that ensure wood is sourced according to the tree lifecycle and use as much scrap wood as possible. This is going beyond the industry practice of Forest Stewardship Council (FSC). It also plans to implement geotags in the furniture to allow customers to truly understand where the wood comes from and to have access to the latest forestry practices by incorporating the story of the materials into the furniture itself.
The company uses recycled metals that are processed domestically while finishes are also done by varnish oil that is nontoxic polymerized linseed oil. The brand’s social purpose is just as important as the quality and the design, which indeed resonate with consumers.
Hugo & Hoby operate through a business-to-consumer (B2C) model, mainly selling to friends, colleagues and family. Therefore, the company is currently focused on scaling the model by reinforcing its brand image and creating partnerships to exhibit its furniture and reach more customers.
Advertisements have been published in social media but haven’t resulted in any sales. With no physical showrooms, the company is trying to implement new marketing strategies to attract target customers. Consequently, Hugo & Hoby needs to strengthen its publicity channels showing potential customers how its furniture is better—beyond the fact that it is sustainable.
One of the company’s most important objectives is for people to enjoy the product and its assembly. Besides, its made to order model, makes them build up only the quantity they sell, reducing inventory costs.
Overall, Hugo & Hoby’s marketing strategy is focused on approaching potential consumers and making its business model scalable to position it in the market as a highquality and sustainable company.
Hugo & Hoby have already explored traditional online marketing channels such as Facebook and SEO, with little impact to their bottom line. Its current marketing strategy is based on word-of-mouth through friends and family. However, as the brand grows, a more structured marketing strategy is required. Through our conversation with the founders, we propose a set of untraditional and unique marketing strategies suited for the Hugo & Hoby brand.
The Coffee Shop Experience
One of the main challenges of being an online furniture retailer is that people cannot see or feel the furniture they want to buy as they do not have a showroom. One possible solution is for Hugo & Hoby to partner with coffee shops to provide free tables and chairs. In this way Hugo & Hoby can advertise on their website the coffee shops where people can go and see and feel the furniture they potentially want to buy. The coffee shops get free furniture and more customers.
Brand Image Partnerships
Another solution for increasing the visibility of the brand is partnering with businesses that share the same values and customer segmentation as the Hugo & Hoby. For example, this might be a partnership with Whole Foods, which often hosts pop-up stores from nonfood environmentally and socially minded businesses (such as Etsy). This strategy will expose the brand to Whole Foods customers and significantly increase its visibility.
The Birth of Your Furniture
A more creative approach is to produce a video showcasing: “The Birth of Your Furniture” to detail Hugo & Hoby’s unique wood and furniture journey. The video would create a sense of personal connection between the customer and the piece of furniture as well as the people who have helped craft it.
Know More, Do More
This strategy is a way for customers to get involved and gain first-hand knowledge of the crafting process. This will drive business to local craftspeople in return for brand awareness and will help people be a part of the “experience of furniture.”
LESSONS FOR LARGE COMPANIES
Hugo & Hoby’s strategy and approach presents several lessons that could be applied to large companies, both in terms of sustainability and overall strategy:
- Use of local resources: Hugo & Hoby are committed to incorporating locally sourced New England wood into their production process. This gives the products a certain identity and reduces the negative externalities associated with producing in remote places, such as the impact of shipping.
- Repurpose materials: The startup minimizes wasted resources as well as the impact of returned products.
- Target uniqueness: Large companies should target the individuality of the consumers. Particularly with higher-end products, the consumer is looking for a product that feels special, something that is not standard.
- Show the story: Hugo & Hoby are trying to incorporate the story of the product into the whole experience by letting consumers know where the wood comes from, who the craftsmen are and so on. This helps consumers relate to the product and inspires a feeling of ownership.
- Create a bond: It is also important to create a bond between the consumer, the company and the people who actually craft the products. This leads to consumers who feel invested in the company and might potentially promote the products.
- Link sustainability to quality: Hugo & Hoby do a great job highlighting the quality, design and unqiue characteristics of their products as the main selling point. The brand realizes that the value proposition of the product should be its quality and only after this is when they link the sustainability aspect. The sustainable characteristics come as an added benefit, but are not the main driver of the proposition.
By Stefan Kuzmanovski, Francisco Gonzalez, Karen Ramirez-Estrada, Freddy Zhang, Jeong Min Lee in partnership with Professor Kosuke Uetake of the Yale School of Management, Yale Center for Business and the Environment and Yale Center for Customer Insights.