Charging the Internet

October 8, 2014  by in Industry, Internet   

By Powell Slaughter

The growth of online home furnishings sales has more vendors looking to partner with e-retailers to service that business through drop shipping to consumers’ homes.

While many of those emphasize that they’re only helping to fulfill orders—it’s in their interest to support a channel that will only grow in the future.

Not surprisingly, we found that some vendors currently serving a drop-ship model for online retailers didn’t want to talk about the subject. If you are a sharp retailer and they’re part of your supply chain, you know who they are. If you don’t, good luck.

 

OBJECT LESSON It ain’t breaking news, but e-commerce is a channel more vendors are finding they can’t ignore. Take Cymax. In 2004, Cymax started as a small audio video furniture e-tailer. Today, the Burnaby, British Columbia-based company is among the fastest growing online furniture retailers with 2014 sales projected at above $140 million, more than 35 percent compared with last year. With more than 50,000 furniture SKUs, Cymax sells products to consumers across North America.

Cymax recently launched a more responsive, fully optimized Web site and expanded into new categories. That takes advantage of the multiple ways customers access information and buy online.

“Mobile and tablet traffic has grown to nearly 50 percent of all Web site visitors, putting the ever-growing Cymax catalog of over 50,000 product SKUs in the hands of every consumer in the U.S.,” said Scott Fullerton, director of marketing at Cymax on the company’s growth. “Further sales have been driven by Cymax’s advances in consumer payment options, including the addition of Amazon Payments and Visa Checkout.”

Pure-play Internet retailers like Cymax, Wayfair and Hayneedle, are making it easier for shoppers to buy, whichever screen they’re using. They’re also investing in telling vendors’ stories online with detailed product information that is breaking down consumers’ perceived reluctance for big-ticket purchases via the Internet. And vendors are supporting those efforts.

Brick-and-mortar retailers like Nebraska Furniture Mart also are doing growing business online beyond their traditional markets.

 

PARTICULAR CHALLENGES Vendors serving retail customers via drop ship often find themselves using a third-party carrier of the retailer’s choosing, and that can create challenges.

Cresent Fine Furniture started sending goods to delivery companies for drop shipment to customers’ homes about five years ago, at first with brick-and-mortar retailers who also sold merchandise online.

“We were very selective with those dealers because we wanted to make sure they’d provide the customer service necessary to support Internet sales,” said Taylor Condra, vice president of operations. “We’re very protective of our brand—whoever sells the product, it’s our name on the box.

“In our case, we are adamant that white glove service is the standard of delivery service. Case goods do not lend themselves to traditional drop shipping.”

The action picked up two years ago when Cresent began selling larger Internet retailers.

The devil is in the details of setting up the SKUs and product descriptions in the retailers’ system.

“That helps us protect our pricing,” Condra said. “Retailers don’t like showrooming, and vendors don’t either. You can’t underestimate the importance of enforcing your minimum pricing, we work to keep the playing field level.”

Pricing is also important to Magnussen’s  e-commerce.

“We have a strict IMAP policy and work hard to ensure this is being met and we only partner with those that hold to the IMAP pricing,” said Christa Albrecht, senior vice president of sales at Magnussen. “Magnussen Home selects their e-commerce partners that have infrastructure to truly service the end consumer and are not just operating a business out of their home.”

Magnussen Home also leaves ultimate responsibility for fulfillment in the hands of its retail customers when it comes to home delivery.

“We do not get involved with white glove delivery or drop ship to consumers,” said Albrecht. “We service our retail partners and work closely with them to maintain high levels of on-time, on-quality delivery so that they can meet the consumers needs.”

 

DEDICATED DIVISION Home Meridian is into drop shipping in a more direct way than many vendors. After leaving the crib business a couple of years ago, the company turned to freed-up resources to launch Right2Home.com, the full-line vendor’s e-commerce drop-ship division. Right2Home started in October 2012 with 1,500 items available for white glove delivery, including goods from Home Meridian divisions Samuel Lawrence Furniture, Prime Resources International and Pulaski Furniture—all with a strict IMAP policy.

Retail customers using Right2Home’s services include Macy’s, Bed, Bath & Beyond, Nebraska Furniture Mart, Wayfair, Cymax, Hayneedle, Costco and Sam’s.

Drop-shipped goods should represent around 10 percent of Home Meridian’s business this year, according to Kevin Walker, president the Right2Home division.

“In 2014 it grew 124 percent, and we expect it will grow another 100 percent next year,” Walker said.

Sixty percent of Right2Home’s goods travelson specialized furniture carriers with the balance on Fedex or UPS.

“Right2Home wants customers to use a specialized furniture carrier on larger items,” Walker said. “Fedex and UPS shipments are constrained by those services’ requirements on sizes, dimensions and weights.

“We have a few customers still trying to chase a (low) freight rate, but we are showing them that it’s worth it” to have the product handled correctly, Walker said.

 

FURNITURE ISN’T EASY Whether or not they’re responsible for lining up the “last mile” of delivering furniture to consumers, vendors still have to do everything they can to make sure their brand doesn’t get associated with problems.

Large furniture pieces like case goods are inherently subject to snags when it comes to drop shipments: they are not palletized, they’re heavy and they can be difficult to handle.

Cresent started putting V-boards for extra cushioning on every furniture edge for drop shipment about a year ago.

“It also helps that big retailers doing business on the Web are using more specialized furniture carriers than in the past,” Condra said. “Drop shipping (for large pieces) only works when the retailer uses a specialized furniture carrier. We’ve seen good results with that.”

Quality issues with delivered merchandised are handled on Cresent’s end.

 

 

“That’s because my people looked at it before it went out,” Condra said. “If it’s damaged (in shipping), it’s more the retailer’s problem, since they’re telling us which carrier to use.

“We also add extra padding on all our merchandise that’s scheduled for drop shipping.”

 

 

 

Magnussen’s drop-ship support for e-commerce accounts is limited to items that meet the weight and size restrictions of FedEx direct shipments to consumers.

“These items are have an external second pack that is completed by item at our North American distribution center,” Albrecht said. “Items that exceed the FedEx standards ship to specialty delivery services that special in white glove delivery as specified by our e-commerce partner.”

The keys for fulfillment at Right2Home are International Safe Transit Association 3a-certified packaging, shipping within 24 hours from receipt of order, and a strong IT department.

“For larger items that must ship via LTL it is imperative to work closely with the e-tailer and a well-run white glove furniture freight carrier,” Walker said. “The product must arrive to the consumer’s home in excellent condition.”

He added that retailers looking to drop ship goods at consumers’ door should not chase the lowest freight rates because they will pay far more in high damages and free replacements.

Walker believes inventory and data management are the biggest challenges to supporting drop shipments.

“This business is a heavy inventory driven business,” he noted. “HMI/Right2Home has made and will continue to make substantial investments into inventory and new product development.  You cannot be successful in the e-commerce space if you are not in stock all the time with the correct products that turn fast.”

Technology systems are challenging. Right2 Home invested in systems that communicate with retailers in real time for functions such as receiving purchase orders, providing inventory feeds to the retailer and invoicing, with the ability to automate the process to receive, ship and invoice within 24 hours.

“Every retailer is different in what they require for onboarding and launching our brands, so we have to be flexible, fast and accurate,” Walker said. “Data is challenging.  Housing, organizing and updating all the data necessary to offer you product line online can feel overwhelming. HMI runs on SAP and within this powerhouse of an operating system we have developed a customized setup process that easily and quickly delivers all the necessary data to the retailer with every image, specification, dimension, romance copy, weights, cubes, preferred shipping method, etc.”

 

THE PLUSES FOR VENDORS The positive aspect for vendors of working with Internet retailers is that they don’t have to fight for floor space with an online retailer.

“It costs nothing to list four bedrooms on their site instead of one,” said Condra at Cresent. “We can also serve areas of the country not serviced by our dealer base. We’ve determined that we want a very small group of very capable Internet retailers. They must have the infrastructure in place to deal with failed deliveries, and in our experience most of those are shipping damage. It’s the age-old question—is it damage, or is it a defect?”

That is an area where vendors are able to leverage domestic warehousing.

“In our Tennessee warehouse, we run a full quality control center,” Condra said. “We’re opening and inspecting furniture every day prior to shipment. This helps us prevent defective product getting to all of our customers, not just Internet retailers.”

It also helps that specialized furniture carriers have adapted quickly and are now offering white glove delivery options.

“Drop shipping works best when the retailer uses a specialized furniture carrier for both the line haul and the final mile delivery,” Condra said. “We are glad to see the carriers get that infrastructure in place.”

Along with increased use of specialized carriers, Condra credits several Internet retailers with effective use of analytics to improve drop shipping outcomes.

“They have so many analytics that they track, and they use and share their data with us to analyze the business and make improvements,” he said.

 

A GROWING BUSINESS Drop shipping furniture items will only continue to grow.

Vendors such as Cresent are tied into their Internet retailers’ systems, so they know when a product is ordered as soon as the retailer. Preparation for shipment begins immediately.

“We’ve determined that we just want a very small group of very capable Internet retailers,” Condra said. Drop shipping “is only growing. We all have to make sure the procedures are in place to provide the consumer with the product they want quickly. We’re usually ready to ship the same day.”

He expects more specialists in third-party drop-shipping fulfillment. Overstock.com, for example, developed an entire third-party logistics division.

“If I want to service my Internet business, they’ll rent me space for same-day fulfillment,” Condra said.

Walker expects HMI’s drop ship portion of business to grow significantly as e-commerce retailers hone their merchandising chops.

“Time was, e-retailing was about making masses of product available,” he said. “Now they’ve become curators and merchandisers of product.”

The number of ways and places for shoppers to find goods online will continue to bolster the drop shipping business.

“The consumer today is shopping for goods that meet their personal style using Internet searches, Pinterest, Houzz, etc., that they cannot buy at their local brick and mortar store,” Albrecht noted.