Online furniture retailers continue to make inroads

Occasional tables, entertainment and youth are top furniture purchases on Web

Dana French -- Furniture Today, July 16, 2009

HIGH POINT - Online retail sales, excluding travel, event tickets and digital downloads, totaled $132.4 billion in 2008, according to the U.S. Department of Commerce. And a recent estimate from comScore pegs the furniture category at about 3.5% of all e-commerce retail sales. That means online furniture sales totaled approximately $4.6 billion last year, or about 6% of total consumer spending for furniture and bedding.

The online channel is not immune to the recession, though. According to the U.S. Department of Commerce, online retail spending in the first quarter of 2009 was $31.7 billion, down 5.4% from $33.5 billion in the first quarter of 2008. eMarketer recently forecasted online spending to rebound in 2010 and hit a projected $163.9 billion by the end of 2011.

There's no doubt that the face of retailing in the United States has changed dramatically. While there were about 1.1 million brick-and-mortar stores operating at the beginning of 2008, according to the Bureau of Labor Statistics, 148,000 of them closed during the year. That was on top of the 135,000 retail stores that closed during 2007. And the International Council of Shopping Centers projects another 150,000 stores will close in the United States this year. This reality has presented online retailers with opportunities to grab consumers wanting to buy. And they've done just that. The 20 online-only home furnishings retailers highlighted in this report alone sold about $1 billion worth of furniture during 2008.

Online-only furniture giants include Boston-based CSN Stores and Omaha, Neb.-based Netshops. These retailers both operate more than 200 niche storefronts, each focusing on a product category. While many product categories have more than one storefront, behind each is a corporate support system that fulfills all marketing and customer service functions.

Take the home office category as an example. CSN features WritingDesksandMore.com in its arsenal, and NetShops operates WritingDesks.com. Both companies realize online consumers are not likely to type CSNStores.com or NetShops.com into their web browser. Instead, online shoppers go to Google or another search engine and look for a "desk."

The granddaddy of all e-tailers is still Seattle-based Amazon.com. Amazon burst onto the scene in 1995 and is still going strong. Amazon's 2008 total sales grew 29.5% to $19.2 billion, accounting for about 14% of total online retail spending.

The online channel is far from mature. CSN Stores CEO Niraj Shah is "seeing a lot of marginal players go away and consolidation starting to occur." Shah believes that e-tailers who provide the best selection, service and competitive prices "will continue to flourish and gain increased traction." In an effort to solidify its position, CSN Stores has been "spending a tremendous amount on new technology on both infrastructure and user features," Shah says. While some of the technology has already rolled out, most is slated to go live during the third quarter of this year.

Previous research has estimated that between 70% and 80% of U.S. adults have purchased something online. And according to Furniture/Today and HGTV's 2009 Consumer Views Survey, 44% of adult U.S. consumers have purchased home furnishings online. Occasional tables, entertainment furniture and youth furniture are the leading furniture categories purchased online, followed by desks and master bedroom. Home accents, such as wall décor and area rugs, have higher purchase rates through the Web.

The exclusive consumer data shows that Generation X - currently between the ages of 34 and 44, numbering 44.5 million or 16% of the U.S. population - is the No. 1 generation purchasing furniture online. And higher-income households, those with incomes of $100,000 or more, are more likely than lower-income groups to purchase furniture through the Internet.