• Clint Engel

Reports continue to mount: Amazon targeting furniture segment

If a report this week that Amazon is constructing four massive furniture and appliance warehouses is on target, this would be just the latest move in a very furniture-active two months for the e-commerce giant. (See earlier story from Monday, May 15.)

It’s also another indicator Amazon is making some necessary adjustments to make heavy, bulky furniture a more competitive part of its offering.

The latest unconfirmed report by The Wall Street Journal cited unnamed sources “familiar with Amazon” plans. It didn’t disclose where the four large distribution centers are being built or the actual sizes. But it stirred up industry interest and was enough to knock shares of Wayfair stock slightly off a record high following its latest sales and earnings report this month.

The report said Amazon is expected to rely on third-party carriers, such as XPO Logistics and others, to manage distribution centers and handle deliveries “for the near future, even as it takes more of its logistics in house in other parts of its business.”

And late last week, a furniture supplier selling on the marketplace told Furniture Today a major last-mile delivery company specializing in furniture is in a final round of bidding to provide that last-mile service for Amazon.

This follows news last month at the High Point Market, where Amazon representatives pitched a change coming to its marketplace designed to make it more compelling for local furniture stores to list products on Amazon. The e-tailer giant also struck a deal with Ethan Allen for an Ethan Allen Design Studio on the marketplace, and it’s working with Cloth & Company and Apartment Therapy to offer a line of home furnishings.

In an earlier unconfirmed report, The New York Times said Amazon is considering opening its own high-tech brick-and-mortar furniture and appliance stores.

The latest Journal report indicates another stab by Amazon to address what appears to be nagging logistics and last-mile-delivery problems that Brett Hobson, an Amazon business development representative in the furniture space, noted in his presentation to furniture retailers in High Point.

Timing is everything

But the timing of the new report seems “pretty odd,” said Carl Prindle, CEO of Blueport Commerce, the Boston-based provider of popular e-commerce platform for home furnishings retailers. He suggested it may have been designed to take down a notch its main pure-play home furnishings competitor Wayfair.

Prindle pointed to the High Point Market news from Amazon about the major adjustment coming to its marketplace model to embrace furniture retailers (news that, according to business reports, drove online competitor Wayfair’s stock price down, albeit temporarily).

Earlier this month, Prindle was a guest speaker at the SunTrust Robinson Humphrey Annual Internet & Digital Media Conference in San Francisco, which included a detailed debrief of recent Amazon warehouse builds — hundreds of pages of details, he said, “but furniture as priority was nowhere to be found.”

Then Wayfair’s first quarter earnings and sales were released, and the stock hits a record high of more than $60 a share. The next morning, “Amazon has a story in the Journal making noise about doing furniture themselves,” Prindle said.

“Some of this is just Amazon’s playbook vs. insurgents,” he said. “When another player is making headway in a category, Amazon will take a crack at them, generally starting with a news story that they are getting into the space.”

An Amazon spokeswoman, contacted by Furniture Today about the warehouse report, said the company doesn’t comment on rumors or speculation. She offered this statement from Veenu Taneja, Amazon’s furniture general manager:

“Furniture is one of the fastest-growing retail categories here at Amazon. We’re expanding our selection of products, offering everything from Ashley Furniture sofas and chairs to Jonathan Adler home décor, as well as enhancing the shopping experience for customers with new features like Amazon Custom Configurations, Personalization, and our free swatch program.

“We have fulfillment centers across the U.S. that specialize in handling large-sized items such as furniture and mattresses. We offer scheduled delivery for these heavy or bulky items with increasing delivery speeds; in fact, some products are available for scheduled delivery in just one to two days in select cities.”

Taneja said, “Customers are increasingly turning to Amazon for their home furnishing needs, and we’re excited to continue innovating on their behalf to create the best possible shopping experience.”

In an emailed statement to Furniture Today, Wayfair Co-founder and CEO Niraj Shah didn’t appear overly concerned about the latest reports.

“While Amazon is clearly a powerhouse in e-commerce, Wayfair has an exciting opportunity as a specialist in the furniture and home furnishings category to leverage distinct advantages in merchandising, selection and logistics,” Shah said.

“As a specialty retailer, we are well-positioned to deliver an unparalleled customer experience in our category and are uniquely focused on building the business in a way that benefits our supplier partners.”

National footprint

But if Amazon furniture-specific warehouses come to pass, it will be “huge for a couple of reasons,” said Bruce Tucker, co-founder of home theater seating supplier Octane Seating, which sells on Amazon, Wayfair and other online platforms, as well as to brick-and-mortar stores.

“One of the big challenges, when you’re selling single orders to consumer across the country, is the shipping challenge,” he said. The products get shipped via less-than-load carrier where they’re mixed with other goods and become more prone to damage along the way. The risk increases the farther the product has to go, he said.

By opening furniture warehouse in different regions, Amazon not only would be cutting the distance suppliers need to ship, but also it would give companies such as Octane a place to send and stage full truckloads of like products.

“It has a huge benefit from a logistics cost perspective, from a logistics management perspective and also for exposure (to the end consumer),” Tucker said. Since Amazon presumably would handle or arrange the last-mile delivery, that final exposure to the consumer — and issues of damage or late deliveries, for instance — falls to the e-commerce company.

That’s not to say Amazon has figured everything out, he added.

“There are a lot of obstacles in that equation, but I think the best company to be able to figure this out will be one that has a very large national footprint,” he said. “You need deep pockets to play properly in the space on a national level; Amazon has that ability.”

Tucker doesn’t believe there’s any doubt Amazon is digging deeper into the category. Earlier this week, he spoke to a top furniture-specific last-mile delivery company that has been through three request-for-proposal rounds with Amazon. Tucker declined to name the company but said it’s currently bidding in a final round to handle the customer deliveries.

Exactly how all of this will play out and the extent of the impact on brick-and-mortar furniture stores remains to be seen.

Prindle noticed a reader comment on the Journal report that points to another company that’s already big in the appliance space and has a very reliable website, where consumers can order every major appliance brand online at competitive prices and with prompt delivery and service from people with expertise.

But, “unfortunately, it seems like few people use it, because it’s ‘old’ and the current owner has done a mediocre job of marketing the place,” the comment said. “It’s called Sears.”

“And I think that sums up the position of furniture retailers,” Prindle said. “They have tremendous advantage but need to reach today’s shoppers in new ways (or become Sears).”

Clint EngelClint Engel | Senior Retail Editor, Furniture Today

Please feel free to email or call me with all of your retail news and tips, including expansion news, successful merchandising and marketing strategies and anything else you would like to see covered by Furniture/Today.  Contact me directly at cengel@furnituretoday.com or 336-605-1129.

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