From Home Furnishing Business
Statistically Speaking: Omnichannel Brick and Mortar Stores Play Catchup to Pure Play E-commerce
This is a story of what has happened to furniture and home furnishings stores in the past decade, and more importantly in the past five years. And, it has nothing to do with brick-andmortar big box stores or warehouse clubs. It has to do with the internet. E-commerce (business-to-consumer) began to evolve in the furniture and home furnishings industry less than 20 years ago when Wayfair, the largest online retailer, came on the scene in 2002 as CSN Stores.
However, it was not until around 2005 when online shopping kicked into high gear only to get stymied by the Great Recession. It was five more years in 2010 when e-commerce retailers, identified as those whose primary business activity is in furniture and home furnishings, really took off. But even then, it took until 2014 for brick-and-mortar furniture stores to fully realize how rapidly they were losing ground. At that same time, Wayfair, with its subsidiaries, went public and other furniture and home furnishings e-tailers began to flood the marketplace. E-commerce sales grew swiftly until last year when the pandemic accelerated growth even faster with online furniture and home furnishings sales reaching an estimated $97 billion in 2020 (Table A).
In this feature, we explore how e-commerce retailers with furniture and home furnishings as their primary business activity have impacted brick and mortar stores and how these traditional retailers are attempting to slowly catch up. Furniture and home furnishings retailers are now divided by the Census Bureau into three categories –
(1) Traditional brick and mortar stores, where e-commerce sales, if any, are fulfilled from within the store or a common distribution center,
(2) Omnichannel stores which are larger retail chains with separate brick and mortar and e-commerce operations, and
(3) Pure Play stores that are online retailers with no brick-and-mortar presence and who only operate online.
Note, that some Pure Play retailers are opening brick and mortar stores, primarily as clearance stores. Also note that the old mail-order category is becoming a grey area and is generally incorporated into e-commerce sales as most transactions are online.
As shown in Table B, e-commerce sales from omnichannel brick and mortar stores reached $14 billion in e-commerce furniture and home furnishings sales in 2020 – gaining a share of 7% of total furniture and home furnishings sales. However, the competition of Pure Play e-commerce now makes up 40% of the total industry with $84 billion in sales. While still the majority share at 52%, store front sales are quickly losing ground to online retailers. Store front sales (non e-commerce) had small but positive growth from 2017 through the first two months of 2020 before the pandemic resulted in a drop of 5.6% for the year (Table C).
After e-commerce sales increases above 20% in 2017 and 2018, traditional smaller brick and mortar retailers experienced a large downturn in sales in 2019 of 17.5% most likely the result of either retailers crossing over from traditional brick and mortar stores into the omnichannel or smaller traditional retailers unable to grow their online businesses. Omnichannel brick and mortar store sales catapulted 47.7% in 2020 after annual steady growth between 11% and 13% from 2017 to 2019. A few pure play retailers are sticking their toes in the omnichannel category, opening mostly brick and mortar clearance centers for now. Sales growth among pure play retailers has remained consistently high since 2017 with 2020 growth at 29.2%.
Over the last four years the gap has widened between pure play e-commerce sales and omnichannel brick and mortar sales among furniture and home furnishings stores (Table D). While store front sales are down from $111.4 billion in 2017 to $109.6 billion in 2020, pure play e-commerce sales have almost doubled – increasing by $40 billion.
Brick and mortar omnichannel retail sales have also almost doubled 2017 to 2020 to $13.9 billion. Pure play e-commerce retailers have grown from contributing 27.3% of total furniture and home furnishings sales in 2017 to 40.1% in 2020. While omnichannel retailers keep increasing their share of total sales – finishing 2020 at 6.6%, the growth from 2019 to 2020 was 1.7 percentage points compared to the pure play e-commerce category’s increase of 6.6% (Table E).
Looking only at e-commerce sales, when it is all said and done, omnichannel retailers have made little headway in cutting into the market share of the pure play furniture and home furnishings retailers. In 2017, omnichannel businesses controlled 13.7% of e-commerce sales and in 2020, 13.9% (Table F).
The internet’s impact on brick and mortar furniture and home furnishing store sales last year cannot be overstated. Wayfair alone acquired five million new customers in just three months, something that normally takes a year to achieve. Despite the pandemic and all its restrictions, Wayfair fulfilled nearly 19 million orders in the second quarter – a 106% increase from the same quarter a year ago. Brick and mortar companies that have successfully transitioned into omnichannel retailers with dedicated e-commerce business models have made progress in keeping up with pure play growth but have gained little market share away from them.
What is unclear in the data is how store front sales have grown within the omnichannel compared to their e-commerce activity. Many smaller traditional retailers are without resources to enter the e-commerce marketplace with any conviction and, in many cases, are facing dire circumstances just trying to keep the doors open.