What does the Modsy shutdown mean?

Is the shuttering of Modsy’s online interior design service for consumers the story of one company’s particular troubles or is it an example of broader challenges facing the furniture industry?

Modsy, founded in 2015, has received more than $72 million in funding for its online design service platform.

On June 29, TechCrunch reported that Modsy had stopped offering consumers e-design services and shared this statement from Shanna Tellerman, founder and chief executive officer of the San Francisco-based company:  “We have worked hard over the past seven years to build Modsy and never expected we would have to disrupt our business. Our focus has always been, and still is, on our customers. We intend to fulfill customer merchandise orders and we are working through a process for our design service customers. We ask for your patience as we work through this plan. I hope that for many people, the Modsy story will not be defined by this turn of events, and we are truly sorry. We would like to thank our team, our designers and our customers.” Business of Home reported that same day that Tellerman told employees the company’s leadership was “winding down ‘the corporate and legal entity of Modsy.’”


Since those early statements, the company’s leadership has been quiet.

A skeleton of the Modsy website is still up and running, populated mostly with images of customers’ projects and room-by-room design ideas. It also features a “Coming Soon” promo of Modsy Pro software for interior designers, indicating a corporate pivot. The site promises the software “will transform” the way interior designers do business, offering them access to its “proprietary room-scan technology, 3D renders, and easily editable and shoppable designs.”

Just last spring, Modsy said it had been beta testing a new service that would move it beyond interior design and into home renovations, allowing customers to work with the company’s designers on bathroom, kitchen and other remodels, at a starting price of $999 per room. Tellerman told Business of Home in March that it had done 250 renovation designs and had hired a team of designers just to work on the remodeling platform. There’s no mention of the renovation service on the Modsy.com.

The company’s website currently features promos for Modsy Pro.

The company had received $72.7 million in funding since its founding in 2015, the most recent Class C round coming in May 2019, according to Crunchbase. Some reports of Modsy shutting down its consumer-facing platform indicated that a potential sale of the company had fallen through.

Online design has been a growing part of the home furnishings business and there are still plenty of companies offering the service, including Havenly and Decorist, both founded the year before Modsy, as well as Collov, Decorilla, RoomLift and Spacejoy. They have individual strengths though follow a similar model: charge customers a design fee and earn a percentage of sales when customers purchase furniture and accessories through the platforms. More traditional retailers, like Ethan Allen and Pottery Barn, are offering online, 3D design services, too. And consumers seem to love them, both for their pricing and ease of use.

A tough time for tech

The furniture industry is increasingly tech centered — whether via e-commerce at the retail level or through more service-oriented companies like Modsy. And I don’t think demand for online shopping and services is going to disappear. As consumers, we are too accustomed to the convenience and competitive pricing. And the 3D- and AI-driven technology that allow us to envision products on our bodies and in our homes keeps getting better and better.

But tech-oriented home furnishings companies are more susceptible to the shocks rocking other tech companies. And, let’s face it, the tech sector has been taking a beating, with its falling stock prices helping to lead the stock market into bear territory.

U.S. stocks got off to a rough start again this week, with the Nasdaq composite falling 2.3%, the S&P 500 declining 1.2% and the Dow Jones Industrial Average sliding 0.5% on Monday. Tech stocks, including Twitter (down 11.3%), Duolingo, Meta and Uber, were among the big dippers.

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Last month, Lise Buyer, founder of Class V Group, which helps companies go public, told MarketWatch that the tech sector has been overvalued. “For the last two years, valuations haven’t made any sense. People have speculated and won, but no one should think it was investing at those values. … Markets are cyclical, neither extreme lasts very long,” Buyer said in a June 4 article.

Furniture industry headwinds

Are we heading toward another bursting of a dot.com bubble on par with that of the early 2000s? Could more tech-oriented home furnishings companies implode?

Or is what’s happening at Modsy more representative of a correction? In terms of demand for product, the furniture industry has enjoyed two of the best years that it has seen in decades. But as consumer spending shifts from home to travel, dining and other experiences, inflationary pressures mount, interest rates rise and supply chain issues persist, we see the entire industry slowing down. In the past few weeks, sister publication Home News Now has reported an uptick in plant closures, layoffs and bankruptcy.

Class V Group’s Lise Buyer was talking specifically about tech companies when she said this: “There will be layoffs, and some companies will go away. I am not predicting that these companies go back to those higher levels (of valuation), but if they mend their profligate ways, those that can tighten their belts will come out of this stronger.”

I can’t help but wonder if her prediction won’t also serve as a forecast for the broader furniture industry.

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