E-Commerce – Is the Tsunami Over?

September 9, 2016  by Jane Chero in Industry, Internet   

One of the most discussed issues in the industry today is the internet and the impact this new distribution channel is having on traditional ‘brick and mortar’ retailing. The reason for this concern is obvious when we look at the graphic below.

Without a doubt, a significant percent of furniture revenue is moving through e-commerce. The saving grace is that of this total, 49% is sold through furniture retailers with a ‘brick and mortar’ presence.

The growth of internet sales is still more than twice the rate of store sales growth. However, in the last two years, e-commerce growth has slowed down as the table below illustrates.

This finding is the same as was found in the Fourth Annual Major Purchase Consumer Study (June 2015) conducted by Synchrony Financial that concluded a 2% drop in purchases online from 2014 to 2015. While the total number of purchases has decreased, the total sales volume through e-commerce has grown.

However, it still remains a significant portion of the industry volume. To raise another point, other alternative channels are capturing almost the same level of sales as e-commerce. In some cases, such as mass merchants, the sales levels are higher than those seen with e-commerce. The question must be raised, “Should the industry not be as concerned with these channels?  The graphic, a repeat from the April issue on distribution channels, explores the impact.

An historical perspective can sometimes be viewed as a negative. However, when the catalog showrooms, such as ­­Blackwelders, Roses, and Furnitureland South, threatened the status quo of the industry, the discussion was the same. Furnitureland South alone remains, but only by adapting its strategy. Likewise, when Costco debuted its “furniture only” store in Washington State, many proclaimed the end of furniture retailing as we knew it.

The traditional industry has weathered the storm of other alternative channels and survived, but each new channel has taken a portion of sales until the traditional channel now represents less than 40% of the market. Maybe we need to change instead of surrendering a portion of our sales.