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Suppliers more focused on online retailers

Heath E. Combs -- Furniture Today, February 8, 2013

This Dining EssentialsThis Dining Essentials two-shelf kitchen cart is a popular item for the Whitewood Inds.’ International Concepts division, which targets online merchants and has a separate line from the John Thomas division for bricks-and-mortar stores.
HIGH POINT - Time, and perhaps the recession, have helped online retailers gain acceptance among furniture suppliers as a distribution channel.
     Now, for companies like Whitewood Inds. - where a UPS trailer at its warehouse here is daily loaded with drop ship orders from online retailers - the channel has become a routine part of business.
     Online retailing is becoming tough to ignore. In 2011, online furniture and bedding sales grew 5.8% to about $6.8 billion, well outpacing the 2% growth of all other distribution channels, according to Furniture Today research estimates. E-commerce accounted for an estimated 8% of total industry sales that year.
     Whitewood took an approach some suppliers have used since getting into the online sales channel - it started an online division.
     Founded in 2003 and called International Concepts, the division targets online merchants and has a separate line from Whitewood's John Thomas Furniture division. It has more than 300 items.
     The move was intended to address the category and protect brick-and-mortar stores selling the John Thomas line, said Bryan Sprinkles, national sales manager.
     Accent furniture source Butler Specialty decided to make the online channel a major focus about five years ago. Sales in the channel have shown double-digit increases in each of the last three years, said Monty Sihweil, executive vice president of sales.
     While the company has drop-shipped for decades, selling to Internet retailers demanded change, Sihweil said - namely, making the line more Web-accessible.
     Beyond creating a good database of product specs to make the line turn-key for Web page creators, the company aimed to show it had a good understanding of quick shipping and packaging. The goal was to show online retailers it took their business seriously, he said.
     Butler Specialty would cater to online retailers' unique needs: helping service consumers who want products shipped quickly with no problems, and offering responsible solutions if problems do occur.
     Initially, Sihweil said, it was hard to conceive that small individual orders of the direct to- consumer segment - as opposed to larger stocked orders of traditional retail - would be worthwhile.
     "It is more laborious, there's no doubt about that. But the results have certainly warranted the efforts we put into it," he said.
     Ray Steele, co-founder of furniture source Gail's Accents, said the company does business with about five online retailers and limits what items can be sold online.
     Gail's Accents refused to sell online retailers for years, but that changed in the tougher economy of recent years. Steele said 10% of Gail's sales are now with online retailers, and "it's a growing 10%."
     "For us it's not a big deal, but it's definitely plus business versus what we used to have," he said.
     The Internet presents challenges for suppliers - like having to create 20 bills of lading for 20 items sold, rather than a single bill of lading for 20 items sold to one conventional retailer, for example. Vendors also have to police sites for compliance with pricing policies, Steele said.
     For him, the online retail channel may - for better or for worse - end up a lot like the brick-and-mortar stores. "I believe that the problem with the Internet is just like retail.
     When you get too many people into the mix then nobody makes any money because everybody's trying to be cheaper than the guy next door," Steele said.
     "When you throw into that mix all the furniture stores that have websites, it's even more confusing. Because there's probably not a retailer out there that's of any consequence that doesn't try to sell furniture on a website."
     At John Thomas, Sprinkles said the line between channels is blurring as more brick and- mortar stores also want to sell online. While some similar product may be sold among Whitewood divisions, the company has aimed to protect traditional stores so online price and comparison shopping can't occur or is difficult.
     John Thomas items can be sold online by brick-and-mortar store customers only to areas where those stores distribute, he said.
     Sprinkles said he sees less price fluctuation between online retail competitors than among brick-and-mortar stores. Traditional retailers' costs vary more because of their differing operational models, he believes.
     Another "primary wrinkle" in online sales is delivery, Sprinkles said.
     While bigger ticket items are starting to sell more online - table and chair sets, for example - smaller items like stools, chairs and cabinets that can more easily be shipped one piece at a time are still the better sellers, he said.
     There's a marked advantage to sell the larger items through brick and mortar stores, Sprinkles said, especially since the bigger-ticket items can mean bigger losses with returns due to buyer remorse or damaged product.
     Butler Specialty's Sihweil said online retail sales are having more of an impact on how suppliers evaluate their lines.
     For example, in the midst of the recent recession, some groups at the higher-end of Butler's price range that weren't selling as well on retail floors - like its Connoisseur's and Heritage groups - continued to sell online.
     "We would hear from Top 100 retailers: ‘Price is king. They're not interested in quality, they're interested in getting the best price possible,'" Sihweil said. "The products were being exposed online where they weren't being exposed in the brick and mortar marketplace."
     He said e-commerce is changing the business is by giving suppliers a better picture of what sells, Sihweil said.
The mantra of making the cut at market doesn't hold as true when items can prove themselves online later - making market less of a gauge, he said.
     "When I started 10 years ago we dropped products during market because they didn't sell. We don't drop a single product at market anymore," he said.
     "We walk in on a Monday morning and there are hundreds of orders waiting to be entered. That's a pretty strong gauge of what's happening in the marketplace, what consumer demand is at that moment in time."

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