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Selling Sofas Online Is No Snap


Marketing: E-Commerce

Selling Sofas Online Is No Snap

The market's getting crowded, and delivery costs are a killer

When Mark and Rebecca Warner of Wheeling, W.Va., were in the market to buy a $2,000 entertainment center last fall, the two-income, two-child couple decided to try the Internet. "We were able to do it at 9 or 10 at night when the kids were in bed," says Mark, a pilot who travels about two weeks a month. "It was fun." Indeed, they returned two months later to pick up a bedroom set for $4,000.

Any uncertainty about whether consumers would drop thousands of dollars on chairs and sofas they could not try out is rapidly vanishing. Stories like the Warners' have helped launch the latest gold rush in online retailing: the $200 billion home furnishings business. The Warners' site of choice, Furniturefind.com, is just one of many upstarts battling it out for Web supremacy. Plus, some of the biggest bricks-and-mortar furniture outfits, including Ethan Allen Inc., are coming online.

The delectable demographics of the furniture business are enough to get these companies to suffer headaches like delivery difficulties and balky manufacturers. Baby boomers, now in their peak earning years, are buying not only bigger homes but also second homes. Gen Xers, meanwhile, are just entering the market. And so far, the online furniture business is virgin territory. Last year, cybersales reached just $595 million.

What's more, land-based furniture sellers provide a less-than-stellar shopping experience. The furniture retail market is fragmented--even Ethan Allen, the nation's largest chain, has less than 2% market share. That means shoppers must schlep from store to store and then often wait months for delivery. Internet furniture players have a chance to snag consumers by bringing speed and convenience to the table, says Shelly Hale, an analyst with Banc of America.BARGING IN. But luring those customers won't come cheap. To attract attention, many of the pure Internet plays are spending money like Presidential candidates. Living.com Inc. recently inked an exclusive five-year, $145 million portal deal with Amazon.com, guaranteeing access to Amazon's 16 million Net-savvy shoppers.

GoodHome.com LLC is also spending big, including $20 million on portal deals plus a print and online advertising blitz. The site offers customer service via live chat, phone, or e-mail, and the company's technology allows shoppers to check out proprietary furniture in various upholsteries. That sold Brenley Morris, a telecommunications manager in Marin County, Calif., who has a new home to furnish. "We're really hooked on it because of the time aspect," she says. Douglas Mack, CEO, says monthly sales top $1 million, thanks in part to a recent merger with Furniturefind.com, and he hopes to see profits in two to three years.

Now, traditional retailers are starting to barge their way into the online marketplace. Ethan Allen's Web site will begin taking orders this spring. Chief Executive M. Farooq Kathwari has crafted a program that lets consumers shop online with help from store-based staffers. "Our advantage is 90% brand recognition and 3,000 professionals in our stores," he says. Crate & Barrel has already rung up sales of $13 million since its Web site was launched last fall, and it's already making money, says Gordon Segal, the CEO.

But even as the big players move online, the hurdles are high. Many top furniture makers are wary of letting their goods go to online retailers for fear of undermining their store partners. They also don't want the bother or the cost of shipping "onesies" to individiuals. "We don't believe the infrastructure over the Internet makes sense at this time," says Wilbert G. "Mickey" Holliman, CEO of Furniture Brands International Inc., maker of Thomasville and Lane brands."NIGHTMARE." In fact, delivery is probably the single biggest barrier to the business. Stores traditionally handle last-minute assembly chores, such as putting on handles, that factories don't want to take on. "It's a customer-service nightmare," says Michael West, CEO of HomePoint.com, which acts as an online middleman between manufacturers and retailers. Recently he abandoned an attempt to sell direct to consumers. Delivery is also expensive. Most virtual furniture merchants use free shipping as a marketing come-on--a service that cost one retailer, Furniture.com Inc., a sum equal to one-third of sales last year.

Even the big players such as Williams-Sonoma Inc. have hit a few snags building Web businesses. While the Williams-Sonoma Web site generated $10 million in sales in just the last two months of 1999, an inventory glut pressured first-quarter earnings. That's the sort of snafu that has some traditional retailers taking their time. Ikea International has a Web site but isn't planning e-commerce until next year.

When Ikea does go online, it will find the virtual furniture mall crowded. The coming year will be critical, participants say. "We're running a marathon, and the first 400 yards are at a sprint pace," says living.com's CEO, Shaun Holliday. It remains to be seen who will be sitting pretty once the e-dust settles.By Janet Ginsburg in ChicagoReturn to top


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