The premature demise of Made.com

Was the pre-mature demise of Made.com an unnecessary IPO or a colossal marketing mismanagement? Find out everything you need to know.

June 15th, 2023

Made.com was predictively valued at £1bn prior to its flotation in June 2021. In November of 2022, it entered administration and sold its brand, domain names and intellectual property to Next. But how did this occur?

Here, we explore the pre-mature demise of Made.com, providing insight regarding its plummet in valuation and its failure to capitalise upon the benefits of the post-pandemic climate.

How did Made.com start?

Founded in 2010, Made.com established itself as a member of the growing wave of digital-centric businesses that emerged during this period of time. $137m was raised in investment, helping drive forward manufacturing processes, various design configurations and promotional drives.

Made.com tailored its products towards the more affluent portion of society and ultimately desired to operate with a dynamic ecommerce and Just-in-Time model, minimising overheads by not owning tangible property and by not holding stock.

This business model was fundamentally ahead of its time, long before its benefits would be optimised during the COVID-19 pandemic, when ecommerce was the only way in which many businesses could ensure their survival.

The rise of Made.com

When the IPO was initiated, Made’s flotation depleted by 22.5%, leaving the IPO’s valuation at a relatively underwhelming £775m. Following the listing, £100m worth of shares were sold via its London listing whilst existing shareholders sold a further £94m.

Not a catastrophic entrance to the world of public listings by any means. In fact, raising finance via an IPO was never a concern for any of the parties of interest.

Made.com was widely perceived as a brand of stability and reflected the growing digitisation and innovation of the corporate world in the post-pandemic climate – the predicative valuation of £1bn was very much a reflection of this.

Ultimately, the cause of Made’s downfall was the mistiming of the IPO and the inspiration that acted as its catalyst.

Moreover, its demise was caused by an accumulation of factors. At the time, business valuations were inflated, markets were volatile, and the ecommerce market size was further intensifying in competition, becoming increasingly saturated and making it ever more difficult to monopolise respective markets.

Here’s the integral aspect of the argument – this was in conjunction with an over emphasis on overseas expansion, supply chain bottlenecks, and no tangible post-pandemic strategy. Made.com served as the epitome of the rhetoric: ‘hit and hope’.

Supply chain malfunctions and external issues

Made.com had an excess of factories and warehouses sourced internationally, operating within an array of international markets, including Portugal, Italy, Spain, Sweden, and Denmark.

This has its benefits in terms of diversifying product reach and increasing brand recognition, and it meant its international reach was minimally hindered by the effects of Brexit as its products were not exported from the UK.

The demise of Made.com stemmed from the issues that the year 2022 presented – the COVID-19 hangover.

Between 2020-2021, Made.com had a 61% increase in revenues, re-affirming how much the business benefitted from the unconventional practices that the global pandemic brought on.

This substantial growth led the management of Made.com to adopt the consensus that this growth was sustainable whilst being hampered by supply chain disruptions, which prompted the company to revise its supply chain strategy.

Made.com believed that it needed to instil modernised policies to advance the business and fully exploit this provisionally exponential growth.

The new supply strategy that ensued consisted of holding stock as supposed to the initially opted for ‘JIT’ system. But, as we’ve experienced in the last two years, unpredictable external impacts can play a role.

In 2022, the significant increase in the rate of inflation in the UK, in conjunction with the Ukraine crisis cementing itself as a driver behind the increase in fuel costs, resulted in the extensive reduction of consumer spending amongst many, and Made.com simply couldn’t keep pace.

Increasing transportation costs as well as a reduction in consumer spending severely hindered the company’s market valuation and sales. Made.com had implemented high price points as a reflection of the quality the brand provides, so that when consumers had less disposable income, their sales began to depreciate substantially.

Eventually, this accumulation of factors culminated in Made.com having to stop taking new orders in October 2022 and its shares being suspended on 1 November 2022, with the business going into administration on November 9. Just a year after being valued at £775m, Next bought the business for just £3.4m, exemplifying just how catastrophic its collapse was in the end.

What can businesses learn from Made.com’s collapse?

So, what are the main learnings businesses should take from the Made.com story? Businesses should keep a close eye on changes within customer demand and spending in line with current affairs, adopting the right strategies in response.

As we approach a potential recession, the need to reform marketing strategies simply to remain buoyant has never been more crucial. Herschel Ozturk-Walker, marketing manager at Brandwidth  remarked retrospectively (in regard to Made.com) that the most obvious lesson to be learned is to diversify inventory, whether by developing aftermarket services or exchange programmes, as well as adopt predictive technologies to improve supply chains and better cater to customer service.

Businesses also need to closely monitor evolving consumer trends, making the required modifications to their products to ensure that they sustain value and purpose to consumers.

Illustrative manipulation of price points (psychological pricing) by instilling the 99p effect to make products illusively appear less expensive than they actually are, can be utilised to bolster sales.

A similar strategy involves initially selling a product at a higher price point, subsequently creating a sale for said product, thus enticing consumers to buy it at a seemingly discounted price.

Promotional drives will be equally significant in raising the required awareness; whilst brands are slashing costs across all frontiers, your business can claim their neglected market share.

A post-crisis climate ensures that changes are gradual and not instantaneous, making alterations in line with shifting consumer preferences.

What about PE and M&A firms?

Adopting a new perspective, there is certainly leverage for acquirers to benefit from the demise of various businesses.

As is evidenced within this article, Next purchased a business which was previously valued at £1bn for £3.4m, an unbelievable depreciation in value.

In the midst of economic downturns, businesses will fall in valuation in concurrence with a reduction in consumer confidence, allowing for the acquisition of undervalued businesses, ensuring that when the post-recession climate comes along, there will be leverage for exponential gains.

Public markets have been increasingly volatile as of late. This, in conjunction with the increasing depreciation of private valuations, makes the idealistic climate for PE investment.

In essence, for businesses - invest proficiently within your marketing sectors to keep up to pace with changing consumer preferences, strip inefficiencies and consolidate your brand loyalty. For PE investors - wait until private valuations reach their lowest and offer the possibility for an exit and potential for rejuvenation to help revitalise the brand.

It is critical that entrepreneurs have the required framework to anticipate and circumvent potentially destructive obstacles.

Champions UK plc can help by crafting insightful marketing strategies in conjunction with a vast array of other strategies aimed to revolutionise the current state of your business and place it on a path to success.