Industry weighs in on Amazon furniture stores
March 27, 2017,
HIGH POINT — If Amazon.com opens physical furniture stores as an unconfirmed news report says is currently under consideration, it means a couple of big things for the furniture industry, and neither is dire.
Industry leaders say it signals recognition on the part of the giant e-commerce company that furniture is a tough sell without that brick-and-mortar presence. And it sets the stage for another tough industry competitor, something that best retailers in the business should be ready for anyway.
The newspaper attributed the information to an unnamed source with knowledge of the discussions. Amazon has not responded to requests from Furniture Today for confirmation. But if the thought of the retail giant stepping further into furniture-store territory is at all concerning or regarded as a warning sign, industry leaders aren’t letting on in first interviews since the report.
Todd Wanek, CEO of Ashley Furniture Inds., the nation’s largest furniture supplier and retailer, said he believes it’s “good news for companies that have brick-and-mortar stores.”
“While the industry must compete with Amazon as they potentially build out a physical store footprint, the silver lining is that Amazon has realized that physical stores are necessary for the consumer experience as they shop for home furnishings.”
Some reports have suggested certain retailers could get crushed. A story by TheStreet.com called out already suffering Sears and J.C. Penney, for instance, but also Best Buy and Williams-Sonoma — the latter having seen same-store sales declines at several of its store brands.
But it may be that Amazon furniture stores pose more problems for other pure-play e-commerce companies.
“Furniture has its own issues more so than most products because if needs specialized handling,” Rooms To Go CEO Jeff Seaman told Furniture Today. “But Amazon has a lot of advantages that other e-commerce players do not have — principally its brand and its low (customer) acquisition costs. So it’s a big advantage over other e-commerce players.”
Could Amazon furniture stores be a tough challenge for RTG stores, too? Seaman called Amazon “the one brand that could possibly be successful” in having an impact, but he added that it’s still unclear what Amazon will do exactly. Clearly it’s moving deeper and deeper into the category — with the opening of its own showrooms last year in both the Las Vegas and High Point markets, for example, but it remains to be seen exactly how this will all play out in selling channels.
“They’re a giant company, and they’re experimenting … with a lot of different things,” Seaman said. “They may do something; they may not,” he said, adding it will depend on where Amazon finds the best long-term return for its investment.
But the e-tailer has proven itself to be an outstanding company, Seaman said, and “anything Amazon does or does not do, other retailers have to take seriously.”
Before the latest speculation, industry analyst Jerry Epperson was beginning to think Amazon’s path to more furniture sales was heading in a different direction. In early February, through its Amazon Home Services division, the company announced the launch of in-home smart home consultation services, to demonstrate smart home products, their features and money-saving benefits. Epperson, managing director of Richmond, Va.-based Mann, Armistead & Epperson, figured it wouldn’t be such a big leap from offering these services to adding in-home furnishings design consultation, too.
“But if they’re going to get into stores, it seems to me like they’re going to want to do it for a broader mix of product — primarily product that has to be demonstrated,” he said. "I understand why they need to do it and why they want to do it, but it’s beginning to smell more like a department store, because you’re building in that kind of overhead, rents and labor, and it goes counter to a lot of Amazon’s original promise” of selection married with speedy service.
Like Wanek, Epperson contends this could end up being good news for brick-and mortar furniture stores. "If it’s true, it shows that Amazon recognized that furniture — not home furnishings, but fully set-up furniture — is not going to be sold easily over the Internet.”
Still, it would seem industry players are getting a new showroom force to contend with on top of Amazon’s best-in-class e-commerce strategy. But Epperson said he looks at it in parallel to furniture importers and that straight-to-consumer model may not end up so straight after all.
Years ago, when Asian importers were getting started in the furniture business, they shipped full containers to their U.S. retailer customers. “They didn’t have any of our warehouse costs, labor costs occupancy costs, shrinkage — any of that,” he said.
"As they have had to adapt to doing business here and opened up their own distribution centers and their own warehouses, it has become a lot more like what the U.S. manufacturers were facing — a lot more of the same costs and trouble.”
If the pure-play e-commerce companies would open up about their furniture business, Epperson said, “they’ll tell you furniture is about as big a pain in the rear as you’re going to find.
“And it’s 100% logistics. It’s not buying it. It’s not even getting it here. It’s getting it from the distribution point into the consumer’s home, undamaged. It’s a huge challenge. “
Furniture Today contacted home furnishings e-commerce leader Wayfair to see if CEO Niraj Shah would comment for this story. He was unavailable.
Amazon first called on Carl Prindle of Boston-based Blueport Commerce more than a decade ago and still checks in every couple of years, Prindle said.
“Each time they do, they say the same thing: Furniture is among the largest categories they haven’t cracked yet,” said Prindle, CEO of the home furnishings specific e-commerce platform company.
Prindle called furniture “the most omnichannel of all retail categories” and contended there is only one way to win tomorrow’s furniture shopper — “with world class technology married with world class stores.
“Who wins? Either Amazon becomes great at running furniture stores, or furniture retailers get great technology,” he said.
Like Epperson, Prindle suggested Amazon’s path into the brick-and-mortar furniture world won’t be an easy one. It could end up opening great stores, “but the unique and challenging aspects of running a furniture store are well outside Amazon’s sweet spot,” he said.
Brick-and mortar retailers should have the advantage, thanks to of their existing infrastructure, if they’ve up their technology game with a strong e-commerce platform. “Make no mistake — it’s a race, but unlike most any other retail category, it’s one that furniture retailers should win,” he said.
Asked if the potential for Amazon stores changes anything about how Rooms To Go operates, Seaman indicated that it doesn’t.
“It’s always smart to assume you’re going to have very tough competition in the future, whether it’s Amazon or another furniture store or some new (concept),” he said. “You always have to be on your game for the present set of competitors, not just your future ones.”