Amid a challenging economic climate, Temple & Webster plans to use AI, data, and technology to support substantial revenue growth.
Temple & Webster (ASX: TPW) says its internal team of data scientists, engineers and product managers applied AI technology throughout the business in FY23 to increase conversion rate, add-to-carts, and revenue per visit. It also aims to leverage AI, data, and technology to support growth plays in the financial year ahead.
The Group is targeting annual sales of $1b+ within the next 3-5 years, with technology said to underpin the growth and scalability of its business model. The company detailed five strategic priorities in its FY23 results presentation, aimed at reaching that lofty $1b goal. One of its key drivers is “developing market-leading capabilities around technology, AI and data”.
The last few years have shown mixed results for Temple & Webster. Online spending in the furniture and homewares category benefitted from work-from-home requirements and lockdowns and restrictions of the pandemic, though more recent shifts in the economic climate look to bring new challenges.
Pandemic-led consumer buying behaviours in FY21 contributed to record revenue for the company of $326.3 million, up 85.1 per cent on the previous year. Although FY22’s $426.0 million in sales still represented a healthy growth of 30.6 per cent, adjusted EBITDA fell by 12.4 per cent.
Revenue and profitability took some hits in FY23 as macroeconomic conditions shifted. Temple & Webster showed a 7.2 per cent decrease in sales from $426.3 million in FY22 to $395.5 million in FY23. However, adjusted EBITDA remained steady at $17.9 million despite the drop in revenue.
Temple & Webster CEO Mark Coulter comments on the FY23 results, “In this environment, shoppers are searching for quality items at affordable prices as cost-of-living pressures impact household budgets.”
Coulter further notes, “Increasing scale will drive better financial returns, cost efficiencies and bigger budgets for marketing, people and technology, especially as we leverage our data and early adoption of AI.”
Earlier this year, Temple & Webster announced the use of AI-based language model ChatGPT, powering pre-sales product queries (accounting for 25 per cent of all chat requests) through its live chat facility, Sage. It says the technology is now powering all pre-sale product enquiry live chats and around 20 per cent of all customer queries.
The company has also invested in Renovai, an AI-based interior design platform, to deliver a more tailored shopping experience for customers. The AI technology generates personalised shopper “mood boards” and enhances product descriptions across its 200,000+ products, which has reportedly led to increased conversion rate, add-to-carts, and revenue per visit.
The latest investor presentation highlighted AI integration into the Temple & Webster marketing strategy, detailing, “We will continue to invest in other direct and organic traffic channels. For example, in FY23, using AI assisted keywords on content pages delivered a 50% improvement in ranking for most of the targeted keywords”.
Additionally, data-led personalisation is said to have driven revenue increases from personalised category affinity emails of up to 350% through “smarter targeting”.
In FY24, Temple & Webster aims to leverage generative AI and other technologies to target all first-time care interactions, logistics routing and exception handling, pricing and promotion.