Internet retailers expected to take big share of sales

Lissa Wyman -- Furniture Today, February 18, 2013

Internet retailers are the prime target for 2013 rug industry growth. Both the Atlanta and Las Vegas markets were crawling with these good natured entrepreneurs, and rug vendors welcomed them with open arms. Most of them are young and enthusiastic and full of hope and new ideas.

In the rapidly changing rug industry, this new breed of retailer is expected to account for an important share of total rug sales over the next few years. It's difficult to get a firm number, but 30% in the next three years seems to be a fair estimate.

There are distinctly different types of Internet retailers, and all have their own needs. There are rug specialists such as Rugs Direct, home furnishings specialists such as furniture.com, general merchandisers such as Amazon, flash sales such as RueLaLa, off price merchants such as Overstock.com, auctions such as E-Bay and a host of others. There's a niche for everyone.
As in every type of retailing, customer service is the key to a successful Internet business.

Getting the product to the end user quickly and efficiently is the goal. Many large rug vendors such as Nourison, Oriental Weavers, Safavieh, Feizy, Surya, Kas and others ship products sold online directly from their warehouses to the consumer's home. The vendor takes responsibility for holding inventory, not the retailer.

Great if you're a big vendor with sophisticated distribution systems. Not so great if you're a small guy with limited resources.

Although rugs are not breakable and are relatively easy to ship, providing service for Internet sales can be an expensive proposition. Essentially the online business is a huge "onesy" operation. One piece goes to Dubuque, one piece goes to Rochester, one piece goes to Omaha. What if the lady in Dubuque got the rug meant for the guy in Omaha? And what if the person in Rochester decides that the color isn't right? Who gets the returns? Then what the heck do you do with them?

The economics of scale loathe this type of distribution. A large-scale operation is set up to send out 1,000 pieces to one customer, not one piece to 1,000 customers.

Then there is a little thing called MAP, or Minimum Advertised Price for first quality goods. Most vendors publish a MAP price and tell their retailers there will be dire consequences if they are violated. The concept and legality of MAP, how to police Internet pricing and how to properly punish the violators are all areas of constant concern for Internet retailers and vendors.

This Internet stuff is exciting, but it's not a simple happy thing. The reality can be expensive and also a pain in the butt.

This is going to be an interesting journey.