by President and COO Kristin Toth tells HNN how the company meets young consumers where they live … and work
LOS ANGELES — With interest rates rising and young people changing jobs and moving more frequently, the definition of home could be somewhat different than some people have known in the past.
It’s a subject that for several years has guided the business of rent and rent-to-own furnishings specialist Fernish, which got off the ground in 2018, well before the pandemic changed everything from where we work to how we furnished and invested in our homes.
Realizing that its core audience — made up largely of younger people on the move in their lives and careers — needed flexibility, the company offered just that: a flexible way to buy furniture that allowed them to pick certain pieces based not just on the size of their homes but also how long they wanted to live there and keep certain items.
Home News Now recently caught up with Fernish President and Chief Operating Officer Kristin Toth to discuss how she views the business today and moving forward.
Home News Now: How would you define the mission of Fernish?
Toth: Our mission is to make it effortless to create your home — and home being a place that you really feel a number of different ways: safe, proud, excited, happy, joyful, all of these different things. It’s not just a space. And the idea is that home can be there for a couple of months, a couple of years, it can move around, and so I think that part of our mission is really important. And the effortless part is that maybe we can be with you if you need one thing for a couple of months, or an entire home for the foreseeable future. We are trying to be flexible and provide a personalized experience to each of our customers.
How would you describe your customer base?
Toth: We have a very strong core group of customers who are either very mobile in that they know they are going to be moving around. Or they don’t want to necessarily make a commitment for a long period of time and that’s to the space or to the furniture. So, what we do is give a lot of options and flexibility to people where they don’t have to go out and buy a piece of furniture and then try to figure out what to do with it if their life changes or they decide to sort of take an adventure or move around a lot more. But while they are in that space, they can really love where they are living… They tend to be a little earlier in their careers so they can have the flexibility to move around and they have that mindset of, “I don’t necessarily have to own everything to have a great experience.” So, I think we lean a little bit toward that 25–40-year-old demographic.
Are there any other parts of the population that are gravitating towards Fernish?
Toth: We do have a wide variety of people who want that flexibility or want that cash flow. We have a lot of customers who have a second home and they may be renting it out at times, so they want to pay for the furniture that matches their cash flow. Or they want the ability to change things out as it wears or as they are using that home in a different way. And we are supporting a lot of partners, a lot of companies that are also in this market. There is this sort of industry that has grown up around either individuals renting out places or even people who are in the wider real estate industry who are creating furnished apartments for shorter-term experiences. So, we are helping a lot of companies that want to do that but without having to do all their furniture sourcing, warehousing, delivery and refurbishment operations on their own.
Do you see most of the interest or demand for the services and products you offer centered around large MSAs or larger cities? And has that influenced where you have positioned yourselves geographically?
Toth: I think that when you look at that demographic, yes, we have been really focused on larger markets, and I think some of it is a little bit of a self-fulfilling prophecy… So that means we have to decide where we want to go service — it is not like an e-commerce company where we can ship a package across the country and service anybody who has a place to receive it. We are doing the full install, assembly, taking away all of the packaging and we will sort of swap things out if you want at the end of your subscription — you have lots of different options for us moving you or swapping things out… That means we have chosen for various reasons to be closer to big cities and our service area is really large. Los Angeles was our first market and we started out with a roughly 70-mile radius around our south L.A. area warehouse and we have grown that to go to southern Ventura County all the way down to the California Mexico border. So yes, we see a fair amount of people who are in the dense urban areas, which is good for us on the logistics side of things. But we are also seeing it sort of spread not just to the most dense part of those areas. I am really encouraged that as we continue to grow in scale, we will find customer segments who are maybe in secondary and maybe tertiary markets as well.
In addition to leasing products, can people buy products outright on your site as well?
Toth: In that effortless bucket, you sort of shop our site kind of like any e-commerce site. You pick out the pieces that you love and when you put them into your cart, the only thing that is a little bit different besides just the quantity and item, is that we also say for how long, how long do you want it for? And we then are very, very flexible, so if your plans change, we can accommodate that. And if your needs change and you want to keep some things and you want send some things back, that’s all in our core rental product, and that service is what most people are using. But we also have the option for people to buy outright and we provide all the great delivery, assembly, taking the packaging away —we provide the same service to those customers who want to buy outright as we would to our renters. And for the renters, they have the option to keep renting, to rent for a period of time and return, and they have the option for us to move their Fernish stuff from one apartment to the next. Or if they are moving from New York to L.A., we can sort of magically make that stuff appear in L.A. And then if people decide they want to buy things outright, they can buy piece-by-piece to apply all of the payments they have made in rent toward the retail price of the item and then buy that out whenever they are ready.
It sounds like you have an extensive network of services in the main markets you serve
Toth: We have our own warehouse and delivery staffs and they go out and not only put everything together and take away all the packaging, but you can also tell us where to put it — they will arrange your furniture for you.
What categories do you offer and which are the most popular?
Toth: It is a full range of home-based furniture, so sofas, dining tables and chairs, beds, nightstands, dressers, outdoor furniture and then a bunch of decor such as rugs, throw pillows, wall art and mirrors. But most of our customers are coming to us for a core piece and that’s usually a sofa or a bed. What we see is that, generally, is the anchor for their order, that sofa or that bed and then customers say, “I don’t really have a nightstand that goes with that bed, so I want to add a nightstand, or I need a dresser in there. Or I need a lamp for the nightstand that I already have.” You see them generally building out rooms around that core anchor piece.
Are you seeing any activity in the home office category?
Toth: I would say if you asked me that in 2019 when we were brand new, we hardly moved a home office set up. There were a few, but we weren’t really focused on that because our customers weren’t telling us they needed it. March 2020 hit and things changed dramatically, and I think we were such an excellent solution for customers who all of a sudden were like, “I don’t know how long I am going to be working for from home, but I am kind of sick and tired of sitting on my sofa all day long or at my dining table.” We did see a massive spike in demand back in March, April, May 2020 as people were starting to get used to and settled into a remote work place and we are seeing that trend kind of continue. Even with corporate housing and some of these real estate partners I mentioned, most of the time…the packages they would want would be bedroom, dining, living room furniture and then we had these kinds of packages built out for them and now they are like “We never had to do this before but we need to make sure there is a desk and a chair in there.” So, we are even seeing the demand come through on our partnership side also, adding that home office into the mix. So definitely, over the past couple of years, we have seen that accelerate pretty quickly, and I think it’s here to stay, especially for those who are moving around, they are working… they need a place to work that they can set up.
How would you describe your price points?
Toth: Because we have a very circular business, where things go out and they come back and we refurbish them, we are very curated in terms of the products that we are offering. And it means they have to be durable. And they have to be modular. So, we can swap out pieces that aren’t wearing well or need to be replaced and they need to be able to be cleaned and be able to be sanded and restained — we need to be able to refurbish them. They also have to have longevity of style —it has to be something that people would want in a couple of years…That all said, we probably don’t compete really well with the cheapest stuff that you can find because we offer quality. But we also are not trying to compete with the highest end furniture that is out there. We are trying to really be an accessible price point for customers that also brings the service element into it. So, if I were to compare ourselves, we do source Crate & Barrell and CB2 — our price point is generally in there.
Where does your product mix come from?
Toth: We have mix of things like I mentioned, such as Crate and Barrel and EQ3. And we continue to work with these sort of consumer, name-brand partnerships to source furniture. That has evolved over time in terms of what we are sourcing and how we are working with them. We also work with furniture wholesalers, but we are starting as we continue to mature and scale to also design and manufacturer furniture that is really purpose-built for this circular model — the durability, the modularity, the ability to refurbish — and the longevity because a lot of times furniture retailers will get rid of a line and we want to continue to offer that line. So, we have a big mix of retail and wholesale — and our own kind of designed and manufactured or partnered and manufactured — items in our catalog.
How was your business during the pandemic?
Toth: We had massive growth during the pandemic and there were some head winds and some tail winds. Like I had mentioned about home office furniture, there was some amount of folks feeling like “Alright I am in sort of this uncertain situation. Rental really seems like a great way to do it.” But there were other people who were pulling back due to the uncertainty and we went through the same supply chain environment as everybody else. I think we were really set up well given our business model and the way we were working with our vendors already…The pandemic had some headwinds and some tailwinds for us and we managed to grow through that. And now we are still more than doubling year over year…So I would say yes, every year has been a little bit different, but we have managed to grow massively over the last couple of years. And we were named one of the fastest growing companies on the West Coast by Inc. magazine
Are you seeing any impact from the effects of inflation or the economy in general?
Toth: We are definitely working in the current environment. So, over the last couple of years, we have seen the availability of products and cost of products and costs of labor and all those kinds of things move around just like everybody else has. So, we have had to be very cautious about and thoughtful about how are we pricing what we are doing and what are the services we are providing. We have done some amount of increases, but I think we have really lagged what furniture has done in terms of price increases over the past couple of years, just by finding more and more scalability and productivity efficiency in what we are doing. So, we are really proud of that and excited that we can continue to bring more and more value to the customers that we are serving.
On the slowdown piece of things. It is hard, right? When you are new and you are growing, a lot of the things that you are doing today are investments that you hope are going to pay off in the next six months. And I would say the last eight months have been very much that, investment time for us where we have just been really seeing a lot of people coming to our site and converting into customers. The company so far has been incredibly resilient and has weathered all of the macro-economic things that are going on pretty well and is continuing to grow. But I think as people discover rent-to-own is another option and we can offer that kind of flexibility for them, we are just creating a little bigger pie on that rental side than what existed before. I mean every year is better, but I think over the last 9-10 months we have seen the growth that we had hoped for from that. Of course, we always want to do more, but so far, knock wood, we really haven’t seen a drop off.
Can you fill us in on any big plans moving forward in terms of your growth or market penetration?
Toth: “I think our goal is just to continue to bring Fernish and all the flexibility we offer to more people. We recently expanded to New York and Washington, D.C. kind of quickly on the expansion we did in Texas — Dallas, Fort Worth and Austin. Geographically we want to be able to service more and more customers, but we also want to make sure that we can help customers in a number of different ways. I mentioned those partnerships that continue to be a focus for us on the B2B side. So even if we are not able to help a customer or it doesn’t make sense for us to help a customer directly, then we are still able to provide those experiences through other partners. So, I would just say we are going to continue to try to bring the Fernish flexibility, convenience and value to more and more customers through a number of different expansions we are building out and continuing to push on.
