Will home furnishings soon be a ‘digital-first business’?

Discussion
Source: homegoods.com
Nov 23, 2020
Santi Briglia

Williams-Sonoma is working to rationalize its store base while TJX Cos. is adding e-commerce to its Homegoods website as home category purchases continue to move online during the pandemic.

Williams Sonoma, which operated 614 stores largely across the Williams Sonoma, Pottery Barn and West Elm banners at the end of its third quarter, announced last week plans to close approximately 40 stores this year with more planned in the years ahead.

“We have half of our leases coming up for renewal in the next three years, and we’ll be looking at each lease and keep only those stores where the economics of the deal makes sense and where they are brand enhancing,” said Julie Whalen, CFO, on its quarterly conference call. “Stores continue to be a competitive advantage as people like to see merchandise in-person. However, we are anticipating a future with fewer, better, more profitable stores.”

Laura Alber, president and CEO, added that, while the furniture and home décor sector has benefited from stay-at-home trends, the “bigger” pre-pandemic trend has been the industry consolidation away from brick-and-mortar. Williams-Sonoma’s online penetration had already grown to 56 percent of sales and is expected to reach “upwards of 70 percent” post-pandemic.

“We’ve been investing in e-commerce for so long that our platform is able to hold a lot more volume without these huge step-up investments that other retailers who’ve had only 10 percent to 20 percent took time to invest. So we fully see ourselves in the digital-first business with great stores, more profitable stores than ever,” she said.

TJX announced plans to launch a HomeGoods e-commerce platform after the chain belted out a 15 percent third-quarter comp gain.

A HomeGoods e-commerce platform, TJX’s CEO Ernie Herrman told analysts, would “satisfy our customer base and attract new shoppers.” He still felt the majority of market share gains in the home category will come from the accelerated expansion of Homegoods locations over the next five years.

“Not everybody wants to buy their apparel even online,” Mr. Herrman said. “They don’t always want to buy a sofa, a chair, an accessory item. They want to feel the fabric.”

DISCUSSION QUESTIONS: Will home furnishings and décor purchases significantly shift online post-pandemic? Are stores any more or less important in supporting purchasing decisions around home goods versus apparel and other categories?

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"Given the technologies available (especially AR), I think this premise will be successful for digital-first businesses."

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22 Comments on "Will home furnishings soon be a ‘digital-first business’?"


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Oliver Guy
BrainTrust

This is a tricky one as people seek to look at and feel such significant purchases. (Significant in terms of amount of money and impact on their everyday lives.) However more and more consumers are choosing to buy digitally first – the pandemic has only enforced this. Augmented reality and improved online product information will accelerate the transformation.

Bob Amster
BrainTrust

The key words are “rationalizing the store count,” “feel” (of the fabric), “stay-at-home trends” and one or two others. This points a rebalancing of the sales by channel. There are many home goods items that can easily be purchased online, and will be. The bottom-line prediction: fewer but more profitable stores and more online sales. What is wrong with that?

Rodger Buyvoets
BrainTrust

Given the technologies available (especially AR), I think this premise will be successful for digital-first businesses. It will give shoppers the opportunity to test the products they want in the spaces they have. However there’s still room for improvement. AR isn’t exact enough to show the fabric details, or how comfortable something is. Home decor retailers will have to find a solution for this.

Neil Saunders
BrainTrust

Everything has become more digital because of the pandemic, and some of that shift will stick around into the years ahead. However this year only 17.7 percent of total home spend (which includes home improvement as well as homewares and furniture) will be online, so it is very much short of being digital-first. Stores also play a vital role in supporting many online sales, including for browsing, tactile interactions, and getting advice. In short, the role of the store is far from dead in the home category.

Jeff Sward
BrainTrust

Fit and feel and scale will always be important in home furnishings, just like they are in apparel. But a number of AI and VR apps I have seen lately look like they will greatly enhance the shopping process for home furnishings. Being able to populate a VR room with various furniture options is going to be table stakes, but the stores’ role in confirming all the shopping homework will still be vital. There just won’t be as many of them.

Ralph Jacobson
BrainTrust

Online shopping is simply too easy to ignore for shoppers since the pandemic. And new habits will be hard to break. Just keep an eye on each store’s performance and make moves in your physical store network before they dip beyond the point of no return.

Brandon Rael
BrainTrust

Before the pandemic struck, digital and virtual shopping were emerging forces as part of the end-to-end customer journey. While the narrative has changed with the great digital COVID-19 acceleration, Home furnishings is far from a digital-first business operating model. Most customers still want to touch, feel, and experience the products in person.

We should expect digital home furnishings commerce to gain prominence, especially with e-commerce representing 16 percent of the overall retail commerce pie. However in a post COVID-19 pandemic world, we should expect a hybrid physical and digital model. Most pre-shopping and research are completed online; however most conversions will still occur in a physical space for the foreseeable future.

Doug Garnett
BrainTrust

We are told to be capable of holding two opposing ideas in our minds at once. Why? Because very often the truth a combination of the two.

I cannot believe that Williams-Sonoma is unable to hold the “mix” idea together and seems to need to believe the world is either digital-first of bricks-first.

It’s not. Brick and clicks thrive together and survive together. History shows that by making clicks first, a company is embracing doom.

Let’s hope wiser heads prevail. I know it’s difficult to look at what’s going on today and have it all make sense. But making one’s long-term choices based on short-term pandemic economics is a sign of weak strategic thinking. I’m disappointed.

Adrian Weidmann
BrainTrust

If my 23-year old daughter is any indication, then home furnishings and decor purchases will certainly be a digital-first business. Dining room table, frames, shelving, sofa, coffee table, security system, cabinet – all purchased online. Also noteworthy is that “free shipping” is a priority when it comes to selection. Another fascinating observation is the number of these larger items that were disassembled and returned!

Natalie Walkley
BrainTrust

Wow! That is interesting. I don’t think I’d have the patience to disassemble something to send back. LOL.

Kenneth Leung
BrainTrust

I think signature pieces of furniture for living rooms and bedrooms are tough to buy online. Office furniture got a boost from all the work-from-home demand, but I personally won’t buy a sofa that will last me 10 years without seeing it in a showroom. Smaller accessories, side tables, and shelves I can see moving a lot online.

Georganne Bender
BrainTrust

In the short term everyone is buying online. Who knows where that will land once the pandemic is under control? I agree with TJX’s CEO: not everyone wants to buy online. Personally I am okay with home decor accessories, but not with a significant furniture purchase. For that I need to see it, sit on it, feel the fabric, look at its size to see if it will work in our home, etc. I think too many are all rushing to push a world where every purchase is made online and, frankly, I don’t think that will happen. People still want a brick-and-mortar experience.

Cynthia Holcomb
BrainTrust

The convergence of the new, young adult population, the ease of buying and returning online, the desire for a modern life devoid of the accoutrements of the past century, fancy tech simulating virtual contextual home furnishings realities all say, wow yes, digital-first home furnishing and home goods are the modern way, the hassle-free way to shop everywhere, buy, try, keep or return.

Home furniture and home goods shopping technologies are in the process of crossing the human mind chasm of real-world sensory perceptions once aided and abetted by “feel” into digital preferential realities controlled by virtual realities touching human emotion resulting in blinded love for a product before it is even delivered to a home. So yes, crazy as it seems, home furnishings with its large retail physical world footprint, is well on its way to being a digital-first business. Williams-Sonoma has been leading the way.

Natalie Walkley
BrainTrust

Home furnishing and decor is a pretty broad category. The logistics of shipping big-and-bulky items like furniture varies greatly from smaller items like vases and pillows. I can absolutely see a continued shift in the latter moving online. For the bigger items, I wonder if more stores will move towards the showroom-store model focused on experience—to allow customers to sit on their future couch before purchasing—but then the transaction is made online. The perk for consumers is not having to transport, but that results in higher freight and final-mile costs for the retailer.

Kathleen Fischer
BrainTrust

While there has been a significant increase in online home goods purchasing, there needs to be a mix going forward as many consumers want to touch and feel a large purchase item such as a couch. Augmented reality can help as a customer can “see” an item in their space, but unfortunately doesn’t help much when it comes to comfort and feel.

Anne Howe
Guest

I believe that the predictions are right. Less big stores, much more online ordering and better online services as well.

Bindu Gupta
BrainTrust

The in-homing behavior has a huge impact on shifting more furnishings and decor purchases online. However post-pandemic, once the consumers feel safe again to venture out and enjoy the process of picking these items by way of how they feel, there could be hybrid behavior where they might shop in-store and ultimately buy online.

Luke.Yamnitz
Guest

Conveying product “quality” will be the biggest hurtle for digital buying adoption in the home furnishings vertical. AR capabilities today are ideal for getting a visual, aesthetic “feel” for a piece (and thus perfect for smaller décor items), but furniture shopping is often just as dependent on the the actual physical feel and build.

Promoting consumer ratings, optimizing positive reviews that reference quality, and offering free returns will prove more impactful than visual AR tools in digital buying adoption for mid-market/high-end furniture retailers.

Dan Frechtling
BrainTrust

I agree with those who cite the advances in augmented reality (AR) and personalization for promoting more online buying of home furnishings.

AR simulates a true try-before-you-buy-experience better than the traditional retail shopping model. These are now more accessible than before, with AR available directly from retailer websites rather than downloaded app as in the past.

Personalization of fabrics, finish, size and depth reduce the rigidity of purchases. And the ability to order free swatches or printouts of furniture and floor coverings adds extra confidence the purchase will “fit.”

Younger buyers are familiar with visual tools, from Pokemon Go to iOS virtual masks to SnapChat filters. These technologies are likely to produce lower returns than the showroom model because they promote more pre-purchase research.

Casey Craig
BrainTrust

It would be difficult for the higher-end home decor retailers to be digital-first as their items usually prove to be too difficult to return if they do not fit the space they are intended for.

Instead, retailers should develop and deploy virtual showrooms where customers can start the journey online and complete it in-store, allowing them to touch and see the product before they purchase it. This would also allow customers to book appointments and give store associates a chance to plan for the store visit.

Ricardo Belmar
BrainTrust
There will always be a mix of digital and in-store buying for home goods products. It will vary based on which products we’re looking at — furniture pieces, despite Wayfair’s pandemic success, will still favor store-based buying, but many decor products will shift to online first. We can’t underestimate the difference that age demographics can make in this respect. The notion of “impulse buying” when you see a product you “must-have” can be quite different across demographics that have grown up buying online first for every product category. Yet there will be many others who will never feel right buying that next sofa online without sitting in it first in a showroom! The idea of right-sizing your store count makes sense, however. I believe what the Williams Sonoma CFO said could be a bit oversimplified. You can’t ignore that when you close stores in a region, you risk cutting off some of your online sales as well because you’re now out of mind for that customer segment. However, Williams Sonoma is in a good position… Read more »
Allison McGuire
BrainTrust

Almost every other category is moving to digital first, so I don’t see home furnishings being any different. The main obstacle with ordering furniture online is the return process. Things can look very different in person and the key to keeping this under control is excellent photography, videos, and product reviews. If you’re missing any of those, your business could be in for a major returns debacle.

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"Given the technologies available (especially AR), I think this premise will be successful for digital-first businesses."

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