For increasing numbers of newspaper and magazine publishers, affiliate e-commerce has become a high-value substitute for lost advertising revenue. But, ironically, B2B publishers – many of which have demonstrated their versatility by diversifying into trade shows, training, research, and consultancy – have been slow to get into online retailing.
They should be inspired by Adam Sandow, a Florida-based publisher of design and architecture magazines for designers and high net worth consumers. His brands include: Interior Design, Luxe, Metropolis, and New Beauty. His portfolio has always been a captivating blend of B2B and B2C.
In 2018, he came up with the idea of establishing a B2B marketplace for designers and architects to get samples of textiles, wallpaper, flooring and paint. Four years later, his Material Bank operates a huge logistics facility with millions of samples from more than 500 brands. It’s used by up to 100,000 professionals, is believed to have revenue of some $100m, and has a waiting list of thousands of designers. The company was valued at $1.9bn in a recent funding round, and has raised a total of $325m.
The amazing project was sparked by Sandow’s awareness of the frustrations of an industry, and he worked out how best to use tech to meet the requirements of people who happened to be his readers and advertisers. Traditionally, designers and architects would browse through catalogues (one for each type of material) and then order various samples from each individual brand. They often also had to visit local showrooms which only had a small selection of samples. They then requested swatches of carpet and other samples from countless manufacturers, trying vainly to keep track of them, knowing that delayed samples meant expensive delays in building projects.
Sandow observed a building materials industry that had been slow to change and said: “Some of this search had moved online… but it was still highly fragmented and incredibly inefficient. A single resource for design professionals didn’t exist, and I saw the opportunity to dramatically improve the specification process. I had built a very successful design and architecture media company, so we knew the architects, interior designers, brands, and manufacturers intimately – and had gained their trust.”
The publisher’s commonsense analysis was the easy bit.
Sandow spent years of research into how best to use robotics and the latest AI technology to pick, pack and achieve the distribution speed of Amazon. And that’s what he has done at Memphis distribution centre – crucially close to FedEx’s world hub. State-of-the-art robots process the online orders, drive to warehouse locations and signal the material they need to human workers who find the samples and ‘hand’ them to the robot for delivery to the packing area. “On any given night, we handle tens of thousands of materials going out to the industry. We couldn’t do it without robots.”
Revenue comes from the manufacturers and vendors who pay a monthly fee to be included in the marketplace, and additional fees when their items are ordered. The service is free for users.
In ways which highlight its integration with an information business, Material Bank provides highly qualified sales leads, creating a new customer acquisition channel. But it can also offer suppliers the ability to expand into new material categories, offer new products, and grow in new geographies.
The fundraising is helping Material Bank to fast-track development of new digital tools and also the acquisition of complementary businesses including:
- Clippings: UK-based procurement platform for the interior design industry
- Amber Engine: Detroit-based product data technologist
- Architizer: US database of 3m architectural images
Material Bank operates in the US and Canada and has recently expanded to Japan, and expects to launch an adjacent service tailored to residential brands for customers who will be able to purchase samples.
Sandow’s business interests are unusual in many ways, not least in this breadth of diversification. But he has always been distinctive. The company – focused equally on upmarket consumers and design professionals – saw the newststand as the best way to sell upmarket magazines at premium cover prices, even in the US where posted subscriptions were the norm. Cleverly, he went further with the launch of the Media Jet distribution network targeting private jet passengers. He also acquired research and consulting services years before some B2B publishers started to do the same. And his New Beauty magazine was years ahead of major women’s magazine publishers in charging its readers to be the first to sample new products. Perhaps that sampling service was the seed of Material Bank.
Three years ago – even before the business had become profitable – Sandow said: “I think one of the best examples of how a media company can use its strength, its connections and its influence in the industry to build a tool that is frankly used by an entire industry is Material Bank. We are completely changing how designers are doing their jobs and the growth is unlike anything we’ve ever seen.”
But this brilliant innovation – and two decades of Sandow’s own lateral thinking – sprang from an almost typical publisher’s knowledge of the workings of a B2B vertical: “Material Bank came from a deep understanding of the industry with lots of real, serious connections. I’ve seen just how inefficient this part of the industry is. I spent years researching this, sitting down with CEOs, sitting down with designers. I took a clean sheet of paper and thought of how to solve this. I heard the pain points and complications, but I also understand the necessity of the sample. That’s never going away. No one is building an 800-room hotel and buying carpet from virtual reality.”
There will not, of course, be many publishers (or anyone else) with the vision and appetite to create a business like Material Bank from scratch. But it still has fundamental lessons for B2B and specialist media everywhere, including:
- There is, increasingly, no ‘hard’ border between B2B and B2C media – for readers and marketers. Business people and ‘prosumers’ share interests.
- There is more opportunity (and less conflict of interest) in online retailing than there once was – when advertising was a larger revenue stream for publishers. Why are so few B2B media involved in e-commerce or even collaborating in digital marketplaces?
- Expert niche market knowledge can help to identify major new business opportunities that don’t fit the traditional definition of ‘media’. Market knowledge and relationships – not “just” the brand – provide the key to diversification. It is almost a decade since Adam Sandow said: “Our goal as a media company is not just to migrate print readers to online but to “layer on” businesses that will allow us to continue to grow and come up with new ideas and strategies.”
Think about it.
