Will Amazon dominate the online furniture market?

Source: Amazon.com
May 12, 2017
George Anderson

Wayfair.com, Williams-Sonoma and any other retailers selling furniture and appliances online beware. Amazon.com has its sights set on ruling the online market for these products and is building “four massive warehouses” designed to quickly fulfilling orders, according to a Wall Street Journal report.

Furniture, as per the Journal‘s reporting, is among the fastest growing product categories online. Roughly 15 percent of the $70 billion market for furniture in the U.S. has moved online, according to IBISWorld.

As it has done in other categories it has entered, Amazon is expanding its selection. Veenu Taneja, furniture general manager for the e-tailer, said Amazon is also adding custom design services for furniture and increasing the number of locations where deliveries can be made in one or two days.

Wayfair CEO Niraj Shah, who appeared on CNBC’s “Closing Bell” show on Wednesday, said people shop differently for furniture online than how they shop for other products and this behavior should benefit his site.

“Furniture, decor, these types of items, these are non-branded items where people … want to own unique items, so they don’t want to own the same exact items as everyone else. So, the way you shop for them, it’s very visual in nature,” Mr. Shah said.

“That nature doesn’t lend itself to … keyword search,” he said. “All of a sudden the visual merchandising you would need and the way a customer discovers what they want is different, and then the fulfillment and delivery is different.”

Shipping and the associated costs are a major issue when it comes to the profitability of furniture and appliance retailing whether online or off. Wayfair, the Journal reports, offers free shipping on orders over $49. Delivery times can be one to two days or weeks depending on the item purchased. Amazon offers free shipping on products it inventories to Prime members for purchases of at least $25. Items sold by sellers on its marketplace may have extra costs added for shipping.

DISCUSSION QUESTIONS: In what ways do you think the furniture category will be disrupted in the years to come? Do you see Amazon.com becoming a major force in the furniture category?

"More and more of the furniture category will shift to online sales. It’s simply more convenient."
"The mobile and desktop experience could be a good starting point. Especially when you integrate virtual reality and augmented reality capabilities..."
"The risk of problems with quality, satisfaction, preference is too great for returns for larger purchases for Amazon to gain major marketshare."

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23 Comments on "Will Amazon dominate the online furniture market?"

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Charles Dimov

You CAN’T discount Amazon! If they are stepping up their game in the home furnishings business, then all furniture retailers have to plan their strategies well. When Amazon sets its mind to an area they drive a hard competitive game.

Furniture retailers need to drive their omnichannel strategies more aggressively. Where Amazon is still weak is in their physical in-store capabilities. They don’t have the footprint and presence that many other furniture retailers have, so furniture retailers have to make sure they get their in-store pickup to click. Then they must make sure to emphasize the “come in to see it, touch it, feel it — before you pick it up” element.

Key message: Get your Buy Online or Reserve Online working well. Then ADVERTISE it on your website. It can’t be an option that customers discover in the last phase of putting in their online order.

Key strategy: Compete where Amazon cannot — in the omnichannel domain.

Ron Gerace

Great points … the wild card is Amazon adding the home as a channel. Unlike omnichannel retailers and even Wayfair, Amazon’s technology such as Echo Show is a critical differentiator. The ability to scan a room for size, render furniture options and show what it looks like “in place” represents as close to a perfect furniture buying experience as possible. Better than uploading pictures, better than providing room dimensions and style preferences … better than even VR. With the expected install base of Echo Show, Amazon will truly have a diabolical advantage. In my humble opinion.

Lyle Bunn (Ph.D. Hon)

Visit the Nebraska Furniture Mart in Dallas before having too much confidence in answering this question. Discovering, selecting and sitting in the product, visual accessorizing, inventory visibility, quick picking from the warehouse and even financing on-site all provide an extraordinary experience in furniture shopping — with zero returns.

Meaghan Brophy

More and more of the furniture category will shift to online sales. It’s simply more convenient. Wayfair has been very successful the past few years. However, Amazon is in a good position to absorb a lot of those sales, especially since they also offer assembly services.

Doug Garnett

There are big challenges in the furniture market for Amazon or any other online retailer because the cost of returns, meeting shipping expectation and the pick and pack are quite high. Given that Amazon needs to find a way to show profit in retail-like sales, furniture seems an unlikely candidate.

I’m told by furniture sellers that there is a particular returns problem. That the minute furniture leaves your warehouse, the value has dropped 10 to 20 percent because it doesn’t get returned in sellable form. That adds incredible cost to any return.

Of course, this is Amazon. Either they sort out a way to solve that or it is another mis-direction designed to keep retailers on their heels.

Still, register me as “doubtful.”

Chris Petersen, PhD.

Where online furniture sellers can disrupt traditional retail, Amazon has the capacity to disintermediate. Amazon Prime Air and leased ships can bring goods directly from Asian factories to consumers, disintermediating even distributors in the supply chain.

There is a significant problem with large furniture … once the online shipper drops it in your driveway, how do you get it into your house by yourself? Low-/no-cost home delivery and setup can be a huge differentiator for local retailers.

Furniture is a considered purchase, typically at significant price points. It is still a category where customers want to touch, feel, sit and lay on it in a store. The question of how much share will be lost to Amazon depends upon whether stores will step up to differentiate value based on customer experience, professional staff and service levels.

Ed Rosenbaum

There will be more online furniture shopping in the years to come as more of us begin to rely on e-commerce. The busier we are the more we will be relying on online shopping, even for those larger ticket items. I have friends that swear by Wayfair, both in quality and cost. I have never thought of myself as a big-ticket buyer online. Yet I tend to use the internet to find the best bargain before going out and doing the actual legwork. I still have to “kick the tires” as the expression goes. The next step is finding the confidence to put my toes in the water and make that first larger purchase.

Brandon Rael

Most certainly! We should never underestimate the power of Amazon. Furniture is yet another frontier that Amazon may conquer with their relentless innovation and reach. However, unlike home goods, electronics or perhaps basic clothing, furniture shopping is a multi-sensory experience where the customer wants to touch, feel and see how the furniture will fit into their lives.

The mobile and desktop experience could be a good starting point. Especially when you integrate virtual reality and augmented reality capabilities, which enable the consumer to strategically place the furniture in their homes and determine the right dimensions, all conveniently from their smartphone.

This may also be another targeted category for Amazon to open furniture showrooms in strategic markets such as NYC, Boston, Chicago, Los Angeles, etc., as that would resonate well with consumers.

Bob Phibbs

Wayfair, according to the Motley Fool, is chronically unprofitable. Gross margins are low, typically around 24 percent, far below its peers. Williams-Sonoma enjoys gross margins in the high 30s. And privately held IKEA generated a gross margin of 42.9 percent last year.

It’s a category I don’t know how is supposed to deal with returns which historically are high for online. Couple that with abusers who could simply buy it all and return within a few weeks and I don’t share the “gee-wow” of this announcement. But you probably knew that.

Ryan Mathews

Let’s unbundle the question a bit. Will Amazon disrupt a segment of the furniture business? Yes. Will the size of that segment grow over time? Of course, the online share of every category will grow overtime. Could Amazon become a major force in furniture? I suppose so, if they choose to. So what’s to stop them? Well, it’s easier to ship a book than it is to truck around a fully assembled bookcase. You can leave a package with a CD by the door, but what do you do about a couch? How happy will third-party carriers be with hauling around large freight? And what about those nice bells and whistles like assembly, placement and — takeaway of old furniture such as bedding or appliances? So the answer is yes, they could take a bigger piece of the furniture market if they wanted. But the better question is, do they really want it?

Dave Nixon
Dave Nixon
6 months 9 days ago

They can disrupt once again for smaller, easily managed items, but not for large purchases. The risk of problems with quality, satisfaction, preference is too great for returns for larger purchases for Amazon to gain major marketshare. Plus, who handles large items when they drop ship them to your doorstep?

Wayfair has also struggled financially with the large item return policies (which have a higher return percentage than traditional retail items). For accessories, lighting, etc. YES!

Gene Detroyer

The difference between Amazon and everyone else is that Amazon doesn’t start with the product. They start with the customer. They connect and understand the customer and how they behave and build the engagement around that. When you get down to it, Amazon really doesn’t sell products. They fit products into their connection and infrastructure. If they deem furniture fits, they will win, just like they do on everything else.

Others who focus on the product (furniture) first will always come in second to Amazon.

Dick Seesel

I commented a couple of weeks ago that Amazon had not yet made big inroads into the major appliance market — but obviously they are headed in this direction, along with furniture. To some degree IKEA has already figured out how to generate furniture sales not tied to its showrooms, so it’s clearly an opportunity for Amazon too. No doubt that they will figure out the logistics of bulky products but this still seems like a business where customers want to “kick the tires” — so perhaps Amazon ought to test showrooms in their early test markets.

Camille P. Schuster, PhD.

IKEA disrupted the furniture business and is very popular with Millennials. A recent article said that Millennials are beginning to purchase homes. If that is accurate, then the furniture marks stands to expand. However, it will expand as business as usual. Millennials have different tastes than their parents. Amazon may well be able to take advantage of that.

Tony Orlando
From electronics and kitchen gadgets to food and HBA, Amazon has significantly disrupted the marketplace in markets where many brick-and-mortar retailers are shuttering their doors. My concern with furniture is the delivery and setup inside the home and with removal of the old stuff, which is why I like buying local. Who are they going to hire to bring the furniture into the home and make the customer happy? If the furniture is dropped off in the driveway without the white glove service and it is pouring rain, who is responsible for selling a sponge that used to be a couch? U.S. Appliance sells everything. You must pay extra to have them bring it into the home and you must hire your own service person to install it. Amazon wants to own everything that is a consumable good, and if they figure out how to do it right they will be successful. Our downtowns are becoming ghost towns, and if this furniture business grows online it will continue to decimate the local furniture stores that I enjoy dealing with. It is sad, but you can not stop commerce from moving online. Pretty soon Amazon will have mobile beauty parlors that… Read more »
Dave Bruno

Amazon must always be considered a threat, but this category will be a challenge for them, without question. I used to work with hundreds of furniture retailers in my days at GERS, and one thing they all told me, time and time again, is that furniture buying is an emotional process. While Amazon is perhaps the best on the planet at removing emotion from the retail transaction, and they will surely grab some share of the market, I am not sure their model translates at scale to motivate purchases that people expect to last for a decade.

Jeff Miller

Amazon is already a decent sized force in furniture via the marketplace. Many of the intelligent furniture brands are using platforms like RevCascade to effectively set up drop ship programs on Amazon, Houzz and many other marketplaces.

Amazon has a pretty clear playbook they follow and I don’t think there is a product category out there that they won’t go after eventually. 1) See which categories, brands and products start to grain traction in the marketplace 2) start to purchase and sell the top brands who can’t resist the potential volume and reaching the Amazon shopper 3) Private label and then merchandise on the site similar products.

I don’t see furniture any different than batteries, apparel and I think next food items.

However, the way that furniture brands and more specifically retailers can compete is by providing custom products, personalized guidance and high quality customer service to help people make what can be a tough purchase.

Craig Sundstrom

Hard to imagine furniture being an entirely online business: i.e. I would think one would (still) need a showroom to view what you’re buying … would YOU lay down thousands for, say, a sofa without being able to sit on it, feel the fabric, etc?

And it’s equally hard to believe that IKEA was left out of list of “usual suspects.”

Other than that: well, yeah, sure “Amazon”, cuz … well it’s always them, ‘cuz, isn’t it?

Tom Redd

I CAN discount AMZN and Jeffrey. They can afford to lose money on furniture due to how they live on the profits of their AWS program. When they can match Ethan Allen, then they can get my interest. I would never buy furniture on Amazon. Let the Mills fall for it.

Also Wayfair and others online have not driven that much margin. Be careful, and remember the online world is not all feasible or sensible.

Ken Morris

With new competitors entering the fray of the furniture market — like Amazon and Alibaba — with an online approach, and several start-up companies, the competition is heating up. We will likely see some bankruptcies and/or consolidation shaking this industry in the next few years.

While the online giants will take a chunk of the market share, the brick-and-mortar players that succeed are the ones that personalize and differentiate the shopping experience. Furniture purchases are often omni-channel shopping journeys with a combination of showrooming, webrooming and catalogrooming impacting the final purchase decision. Savvy retailers are focused on optimizing the cross-channel experience and capitalizing on the benefits of the physical store experience that can’t be replicated online.

Just look at what RH Gallery has done. Building showrooms in major metro areas by leveraging fabulous real estate with truly amazing catalogs they have clearly differentiated themselves from the pack. Low end good looking furniture may be susceptible to disintermediation but touch, feel and smell is a must for higher end product. The end result may be an online purchase, but it starts via the catalog, online, store visit and final online purchase that are all part of the customer journey.

Brittain Ladd

I won’t provide too many details other than to state that at Amazon, I was frequently asked to provide consulting internally on topics where I had a level of experience. For example, white glove services for furniture and appliances as well as designing and implementing heavy/bulky supply chain and logistics strategies. Not only will Amazon be successful, within five years they’ll have the majority of online market share in the categories of furniture, home furnishings, and appliances.

As for stores … you don’t need stores when you can leverage small showrooms and virtual reality that allows a consumer to experience replacing furniture in their home, viewing how a picture will look on a wall, how a throw rug will look with a specific coffee table and so on.

As I have stated publicly many times — it is time to crush all assumptions when it comes to Amazon and the impact of technology and hyper-logistics on retail. Amazon has the ability to move into any industry, be it auto parts, oil and gas, or home improvement and be successful. Master logistics, operations, and technology to create a new and improved customer experience, and you can disrupt any retail category.

Adrien Nussenbaum

Amazon has proven that it can move into any category it wants and dominate. The company has a business model that allows it to move into categories in a profitable way (e.g. through its marketplace of 3rd party sellers) before deciding if it wants to invest more in the category on its own, either through owned inventory or logistics or both.

Keith Nealon
6 months 6 days ago

With the success Wayfair and Overstock, it’s natural that furniture retailers will need to shift to having an online presence to remain agile. However, while today’s customers may enjoy the ability to browse for furniture pieces online, it’s not enough for them to see a couch just look good online. They also need the affirmation that it feels good and visually fits in their personal space. For many customers, furniture is an emotional purchase.

Disruption in this vertical will have to be two-fold: providing and maintaining an innovative shopping experience not only online, but also in-store. If certain features are available online, like financing or specific payment promotions, it will be imperative that these same features extend in-store. Naturally there will be different forms of innovation unique to the channel, like improving visual search for digital shoppers or letting in-store shoppers load items into a digital cart, but cohesiveness between channels will be key.

The fact of the matter is that Amazon is a threat in every category. Their challenge lies in whether they can cater to the customer emotions involved in the furniture purchasing process and compete with omnichannel furniture retailers.

"More and more of the furniture category will shift to online sales. It’s simply more convenient."
"The mobile and desktop experience could be a good starting point. Especially when you integrate virtual reality and augmented reality capabilities..."
"The risk of problems with quality, satisfaction, preference is too great for returns for larger purchases for Amazon to gain major marketshare."

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