In its second-largest acquisition, Amazon buys the company for $970 million.
Take a book: a small, rectangular object, easy enough for online merchants to ship, it offers consumers only two choices; hardcover or paperback. Now, make it 100 pounds heavier, blow out those neat corners to include unwieldy arms and legs, make shoppers squint at dozens of product options on screen and pump the price up to $1,000 or more-and you will have an idea of why the online furniture sector has sustained a truckload of bad news in recent months.
In August, web furniture merchant Living.com-an estimated $10 million to $50 million in debt-laid off 275 employees, killed its web site and announced plans to file for bankruptcy. Earlier, home furnishings seller PuertaBella.com closed its doors, and Furniture.com announced major layoffs.
Is the online furniture sector on wobbly legs? “We’re still trying to get to where people will spend at those high-price points on the web,” says Heather Dougherty, a digital analyst with Jupiter Communications, New York.
Yet, despite recent dents and scratches in the marketplace, many industry watchers see long-term prospects as reasonably bright for online furniture sales. Even at a scant 1% of total sales, furniture sales on the web will account for $448 million this year, projects Lexington, Mass.-based Gomez Advisors. But to hit the mark, online furniture sellers will have to nail down the basics. “It’s not that it can’t be done,”says Jeff Quinn, Gomez senior analyst.
But to get it done means making the shopping experience as easy as slipping into a comfy chair with customer service, lots of description, and sharp product images that can be enlarged for detail. An infrastructure that supports product delivery is a must, while brand names that customers know and trust in other channels is a clear advantage for bricks-and-clicks sellers.
That’s why William-Sonoma’s Pottery Barn, which went online in August, already is shaping up as a category killer in the opinion of analysts like the Yankee Group’s Rebecca Nidositko “It’s the leading brand in the parent company’s portfolio, and it’s got access to a network of warehouses and fulfillment centers and an established customer base. They’re going to be the category leader,” she says.
But there’s more than one way to cover a sofa. Even mostly pure-plays like Chicago-based KozyHome.com have a chance to compete by going deep on customer service, with service reps trained to invest enough time in one-on-one customer interaction to ensure shoppers are satisfied with the item before they close the sale. KozyHome claims a return rate of less than 2%. For similar reasons, GoodHome.com, San Rafael, Calif., gives its customer service reps 200 hours of training in the fine points of its product line.
“The key is delivering value to the customer,” says Quinn. “Whether the retailer is doing that by eliminating the need for customers to drive around to local furniture stores because it has everything customers want or making them feel good about buying from the retailer because customers are comfortable with that retailer’s process, it’s about adding value, the same here as anywhere else in retail.”