Clint Engel -- Furniture Today, July 15, 2013
BOSTON - Schottenstein Stores and Rooms To Go have taken an ownership stake in online retailer Furniture.com, which will re launch later this year, backed by a network of large retailers across the country handling fulfillment.
Schottenstein is the owner of Columbus, Ohio-based American Signature, the Top 100 company that operates 128 American Signature and Value City Furniture stores in 19 states.
Terms of the deal, including the size of the retailers' stakes in Furniture. com, were not disclosed. Furniture.com management and New York private equity firm Mistral Equity Partners also are stakeholders.
The retail stakeholders, along with other large players - Leon's in Canada, Salt Lake City-based R.C. Willey, and others that have yet to be named - will serve as "anchor tenants," on the revamped site launching in the fourth quarter, said Carl Prindle, President and CEO of Furniture. com and Blue port Commerce, the related e-commerce platform that powers retailer websites.
The plan, Prindle said, is to marry the scale and strengths of these major retailers - their buying power, product expertise and delivery and service capabilities - with the e-commerce technology strengths of Blue port and the power of Furniture.com's domain name. The Web address is typically a No. 1, 2 or 3 result when consumers search for "furniture" on Google and other search engines, he said.
The retailers involved will get the sales dollars coming from consumers buying online at Furniture.com. What the retailers pay for that connection "depends on the client and the circumstances," Prindle said, but he added that it's typically a service fee, including a percentage of sales.
Prices on Furniture.com will be comparable to what consumers would see in stores, he said, and consumers will know which retailer is handling fulfillment.
In a news release, Jay Schottenstein, chairman of Schottenstein Stores, said the new partnership "enables e-commerce innovation and collaboration between the largest furniture retailers in North America."
It will be an extension of an online business American Signature has seen grow dramatically since it hired Blue port to build the e-commerce websites for both its Value City and American Signature brands. They launched this spring after six months in development.
"Put simply, we see online as the future of furniture shopping and of our brands," said Bryan Beam, American Signature executive vice president.
"Blue port quickly solved a lot of challenges we faced in capturing this opportunity," he said, noting, for instance, features such as omni-channel capability, which allows customers to start the shopping and order process online and finishing it in a store or vice versa.
Beam wouldn't disclose sales on its e-commerce sites, but said, "The results have been beyond anything we expected."
Furniture.com will be separate and is expected to lead to incremental business for the participating retailers, which operate their own branded online stores and bricks and mortar businesses. They see Furniture.com as a way to expose their names and products to new customers.
Prindle said Furniture.com also will allow retailers to sell different merchandise that may not be a perfect fit in their stores, as well as expand into new geographical territories.
Jeff Seaman, CEO of 130-store Seffner, Fla.- based Rooms To Go, said he was "thrilled to announce our investment," adding, "Furniture. com represents a unique opportunity in our industry for large furniture retailers to coexist and take advantage of national economies of scale in a new, quickly growing retail channel."
Furniture.com got its start in the late 1990s and "attempted to be the Amazon of furniture," Prindle said. He wouldn't disclose current sales, but said back then the e-commerce site was selling about $80 million worth of furniture a year.
"The problem was we couldn't deliver any of it. The economics of those orders were awful," he said.
The challenge then was the same the industry faces today. Finding LTL or direct ship carriers that could get something like a bedroom group from manufacturer to consumer was tough, and if there was a customer service issue and a return, the problem and cost was magnified.
Furniture.com ended up losing $100 to $150 per order, Prindle estimated.
The company restructured in the early 2000s and started working with the late Alan Rosenberg of the former Seaman's Furniture, pursuing a similar strategy to what it's doing now on a larger scale, Prindle said. That is, "take what we know how to do well - build a website, direct market furniture online - with what he could do well, which was source product and deliver product cheaply and quickly, and if something went wrong, it would be easy for (Seaman's) to take back.
"The basic premise is that furniture e-commerce, for the big-ticket items - for sofas and, bedroom suites and the rest of it - this is an area where brick and mortar retailers really have a fundamental advantage," Prindle said.
"Furniture is one of the few category we think where, rather than see the online business go to new entrants, to direct plays, if retailer leverages their assets - their showroom, their ability to buy product and delivery product - and marries that with a technology provider like Blue port, they can actually be the one to profit as this business goes online."
Prindle said Furniture.com has been fairly dormant and had been focusing more on the Blue port side of the business, building branded websites for retailers powered by its technology.
To be effective, he said, Furniture. com "really needs some very large anchor tenants and what's breathing new life into the Furniture. com brand is the addition of leading players like Rooms To Go, R.C. Willey, and American Signature."
Once its current retailer lineup is included, Furniture. com will be able deliver to 65% to 70% of the U.S. population, he said, and that number will grow as the company adds tenants. Prindle wouldn't say who he had in mind, but noted one area that still needs to be filled out is the West Coast.
Both RTG and American Signature said they're gearing up for increased online business.
Earlier this month, RTG announced it is building a 1.1-million- square-foot showroom and distribution center in Dunn, N.C., in part to handle online business, but Seaman added later that the retailer also was in need of the extra capacity for its existing operations, especially on the Eastern seaboard.
American Signature's Beam said his company is in the process of revamping its delivery network - for both the new online business and home delivery business in general - and expanding its territory reach for more e-commerce sales.
Furniture.com will be "a really unique consumer shopping experience online, where you can find phenomenal product, have the assurance that someone delivering it actually knows how to deliver furniture, can get it to you in a couple of day for reasonable delivery cost, and if something goes wrong, can always take it back," Prindle said.
"That to us is sort of that Zap pos moment in the industry," he said, referring to the online shoe retailer acquired by Amazon in 2009, "where finally, a consumer experience that lives up to what consumer have come to expect online is possible.
"And that really is purely through the fact that we are leveraging the very significant assets of massive players."