Furniture’s Race to the Bottom

How can a traditional home furnishings industry adapt to changing customer behavior?

Pat Murphy
February 28, 2020

The furniture industry is in a race to the bottom, with prices dropping both in-store and online. Today’s consumer can compare prices between traditional furniture retailers, online retailers, and ecommerce marketplaces. Typically speaking, the lowest price wins. We call this a “race to the bottom”, where companies try to undercut their competition’s pricing (more on that on Investopedia, here). When likes are alike, the playing field is dictated by competitive advantages such as operational efficiency, effective sourcing, and a bunch of very company-specific factors. However, the race to the bottom is further complicated by the fact that some furniture manufacturers/importers now sell direct to consumer* through their website or online marketplaces, leaving many retailers struggling to match prices.

*Some examples of furniture specific direct to consumer (D2C) brands are Article and Casper.

Changing consumer behaviour — more options than ever 🚶

All these omni-channel options are putting further pressure & stress on an long-standing relationship between retailers and manufacturers/importers. The real question that needs to be asked is how can a traditional home furnishings industry adapt to changing customer behavior? Furniture is approaching a fundamental shift in the way it does business. The shift isn’t necessarily visible until you dive deep into the way the industry operates, the types of companies within it, and everything goes into the operation of a full-scale home furnishings business.

Retailers: still the lifeblood, but feeling the squeeze 🍋

Historically, most manufacturers have been perfectly content with letting retailers take care of all the selling; but some manufacturers are increasingly optimistic about their future in selling D2C, either through their own sites, online retailers, or on marketplaces where they can easily (and often stealthily) operate a private label brand. Others are holding back, unsure how to navigate these long-standing dealer/retail relationships. Ironically, manufacturers who are later to adopt usually consider consider disrupting their main revenue channel “too risky.” In reality, the biggest risk comes from having all your eggs in one basket.

While beginning to slowdown in certain verticals, retail business is still the lifeblood of the furniture industry, with top 100s dominating across the board. The common factor among most manufacturers in the industry is that they don’t want to harm their product flow to retailers. Whether they sell to big box stores or smaller mom & pops across the country, they almost always get paid (sixty days later, if they’re lucky), products aren’t often returned, and they move multiple items within a single purchase order. Given that selling through retailers is a major part of most manufacturers’ revenue stream, many simply go about their days and conduct business as usual.

Retailers, on the other hand, are feeling the squeeze. Products often take a long time to move (or “turn”) in store, retailers are forced to lower prices, further eroding margins. Not fun when you have $$$ in inventory and a bunch of overhead 😧. Retailers are finding themselves competing directly with their suppliers — and, as far as profit margins go, the manufacturer will win.

Jerry Seinfeld Laughing GIF
Omni-channel revenue is good revenue. Just ask Jerry.


A host of key challenges

Ecommerce in this industry is complicated. Products are often bought one at a time, instead of in bulk. Accepting returns can be a logistical nightmare. Revenue can fluctuate. And online portals, dashboards, and extranets are often confusing, demanding, requiring massive amounts of organized product information.

Most furniture manufacturers aren’t set up to handle the requirements of ecommerce, which include fully optimized data, content, and imagery from an information standpoint, and quick shipments, automated inventory feeds, and solid packaging from an operational standpoint. This is even more complicated for domestic products who build per-order. A four-plus week lead time will turn off many otherwise willing consumers. Companies also need to be ready to answer customer service requests, engage in pricing promotions, spend on marketing, and cater to the needs of various marketplaces — not to mention be agile enough to introduce new SKUs to their online catalog on an ongoing basis.

To handle this sort of operation, many companies have decided to either hire more personnel, invest in expensive software or allow a sales representative to list items for a commission. With razor thin margins being a reality, most companies end up spending tens of thousands of dollars on technology, paying large commissions, or adding to their payroll. In return, they see some success on perhaps one key channel, which we typically see being Wayfair.com. While large companies can handle this cost, small- to medium-sized businesses face a massive upfront investment in time, capital, and resources to scale an effective online revenue channel.

When you see upfront costs of old-school EDI/software providers.

Tailor your solutions

The real way to create a sustainable ecommerce revenue channel for most companies is to ensure they keep their upfront cost low, meaning they make an investment that makes sense for their unique operation. Every company has different needs, strengths, price-points, and operational bandwidth, so there’s no blanket solution. But regardless of your unique strategy, ecommerce success in the furniture industry is based on these core pillars:

  • Optimized data and content, presenting items in an effective and easily digestible manner
  • Great imagery that depicts different angles, functionality, colors, and sizing
  • Automated inventory, reducing short-shipments and issues
  • Short lead time (get it out, baby!)
  • On-time fulfilment, with proper 3PL packaging
  • Super responsive and accurate with all customer service
  • Running proactive & highly-automated promotions, driving visibility
  • Adding new products to your online catalog quickly and consistently

The industry is changing, whether manufacturers or retailers are ready for it. It pays to be prepared. 💪

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