Great Hill swam against retail tide in building Shade Store

Great Hill Partners, known for its success with Wayfair, used an old-school retail strategy with a twist to drive consumers to Shade Store.

The Boston PE firm opted not to create an ecommerce giant this time around. Instead, it built more Shade showrooms.

That’s right. Great Hill’s answer to the retail apocalypse, which refers to the death of thousands of retail stores in the past eight years, was to expand Shade’s brick-and-mortar presence.

And the strategy worked: Leonard Green & Partners, the renowned retail investor, said Aug. 9 that it agreed to buy Shade Store from Great Hill. The deal was valued at $325 million, according to CNBC.

Choice, choice, choice

Founded in 2006, the Shade Store provides window treatments including shades, draperies and blinds for consumers and designers.

The Port Chester, New York, company has 63 stores across 19 states, including California, New York and Texas. This is up from 10 showrooms in fall 2013, when Great Hill acquired a majority stake.

The PE firm used its fourth flagship, which closed on $1.1 billion in 2008, to buy Shade Store. How much the buyout shop invested is unclear. Great Hill Fund IV at the time typically provided $50 million to $75 million equity per transaction.

Great Hill, in 2013, attempted to solve a problem that has vexed retailers: How to make buying blinds or curtains or shades enjoyable.

Shopping for such products had been a dull experience for consumers, said Peter Garran, a Great Hill partner. Historically, window treatments had not been a great category for private equity.

But in 2013, Garran saw a huge sector, north of $10 billion in sales, that Shade Store could serve.

Customization was Shade Store’s answer. Its products are cut precisely, Garran said. The website lets users pick the widths and lengths of whatever window treatments they want, along with colors and types of mount. That’s the easy stuff.

Shade Store offers a seemingly overwhelming amount of choice: more than 1,400 fabrics, many from designers, as well as six different versions of shades. (Solar shades come in four different transparencies.)

Blinds appear a simpler option, with users having to choose only between wood and metal — until they’re faced with all the different wood variations.

Curtain lovers must decide among 15 types of hardware just for the rods and rings. Which way should shades roll? Should curtains have a border? And for blinds, customers must decide whether they want a cord, a wand or a motorized version.

Simplifying complexity

To ease the stress of ordering, the Shade Store has a team of experts available online and by phone, but especially in the showrooms, to help customers find the most suitable products.

The stores prominently feature shades, blinds and curtains of various hues and textures to help customers choose. Swatches are free.

“What we discovered when we dug into the business is if we could get consumers to go visit Shade Store showrooms, the service offered there allowed [them] to be more confident,” Garran said.

Consumers spend much more when they visit Shade Store showrooms, Garran said. In-store customers typically pony up around $2,800 versus $1,000 for online purchases.

Shade Store also caters to professional designers and interior decorators, who account for about 40 percent of Shade’s sales.

Amazon, with its commodity products, can’t compete against Shade Store’s customization, Garran said. “It’s that much harder for someone to copycat the [Shade Store] business,” he said.

Another treat? Products in Shade Stores typically cost about 30 percent to 40 percent less than they would if purchased from interior decorators, designers or local retailers, Garran said.

Not Wayfair

Shade Store isn’t Great Hill’s first run at retail. The buyout shop invested in online home furniture retailer Wayfair back in 2011 and the company went public in 2014. Great Hill exited Wayfair, making about 6x its money on its investment, according to SEC filings.

Wayfair is a different sort of retailer. It doesn’t yet have physical stores (although FurnitureToday reported in July that Wayfair would open its first outlet in 2019). The strategy for Shade Store was all about its showrooms.

“Retail is changing but it’s not going away,” Garran said.

Great Hill’s bet paid off. Shade Store’s business has been growing 30 percent a year since 2012, Garran said.

He declined to specify revenue; Forbes reported in November 2017 that Shade Store produced more than $100 million in sales.

The firm put Shade Store up for sale in May, hiring Eric Biddle, Marco Valla and Jeff Hinton of Barclays to run the process.

The auction was geared mainly to PE and a small number of strategics, sources said. Great Hill sought a buyer with a history of high-growth retail investment, one of the sources said.

Leonard Green, Los Angeles, has invested in Neiman Marcus, Petco and Tourneau. Current retail transactions include LuckyBrand, David’s Bridal and Topshop.

“We are thrilled to have helped the company grow dramatically by building a complementary physical retail presence on top of an effective ecommerce model,” Garran said.

Shade Store could not be reached for comment.

Action Item: Email Peter Garran at pgarran@greathillpartners.com