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.
October 8,
2014 by in Industry
The growth in e-commerce has given the ready to assemble furniture category a boost of late as the flat packing allows for easier shipping than traditional furniture.
And no one can argue with the success of Swedish retailer Ikea—multiple floors of modular, ready-to-build furniture in a variety of categories.
Traditional retailers say the channel of distribution has shifted of late away from mainstream furniture retailers. They lament that many suppliers of RTA have turned to big box discounters, successful e-tailers and office superstores as alternative partners.
Some traditional retailers, who typically had been selling ready-to-assemble goods with the service of assembly, say the race to the bottom in pricing and lower overhead for online retailers makes it too hard to compete in the category.
Factoids
$2.77 billion
2014 YTD RTA sales
2.4%
Sales increase through first half of 2014 over same period last year
7.6%
RTA’s percentage of total industry sales through 2Q 2014
Retailers Say
Sauder's 411897 bookcase
"It is a great basic bookcase with flexibility on storage." Retail is $74.99.
Irv Blumkin
Nebraska Furniture Mart
Omaha, Neb.
Jesper’s Expandos
“Designed to offer a smaller footprint for multiple work settings, the Expandos shelves are available in three finish options.” Retail is $250 per L-shaped unit.
Andy Thornton
LaDIFF
Richmond, Va.
Suppliers Say
Naia by Tvilum
Tvilum’s Naia bedroom collection includes beds, nightstands, chests, sideboards and double dressers. Drawer fronts and doors are handle-free creating a stylish, timeless dimension.
The Cabot Collection from Bush Inds.
With a focus on function, durability and style, the Cabot collection is available in two finishes. The group offers storage with technology integration—both important features in the home office category. The L-shaped desk retails at around $400.
The Carson Forge Gourmet Cart from Sauder
As one of Sauder’s top sellers, the Gourmet Cart provides a versatile kitchen and dining piece. Crisscross storage, hanging hooks and wrought iron hardware offer sophisticated Mission styling. The piece is versatile enough to live in a variety of rooms.
Walker Edison’s Soreno L-shaped Desk
The Soreno L-shaped desk is a space-saving desk that can be used separately as two desks. The glass and metal construction blends with a variety of décors. A functional sliding tray allows for easy storage of bulky keyboards. Suggested retail is $119.
October 8,
2014 by in Furniture Retailing, Industry, Merchandising
Welcome to the first installment of Home Furnishings Business’ new feature, Take 5.
Each month, we’ll pose five questions to a mover and shaker in home furnishings. We kick things off with Steve Stagner, President and CEO of Houston-based Mattress Firm, who discusses the bedding retailer’s acquisition strategy during its eight-year growth spurt.
Home Furnishings Business: Mattress Firm has made 18 acquisitions since 2006. What’s the driving strategy behind the acquisition mode?
Competitors have entered our markets, and some have done well, but as we develop a fortress position it enables us to drive profitability. Those 18 acquisitions since 2006 enabled us to build that fortress position faster.
(Acquisitions) help us leverage scale for several advantages: increasing advertising at a more efficient rate; increasing our presence in the marketplace; and increasing our ability to educate consumers in those markets about the benefits of better sleep.
HFB: Mattress Firm will be up to 2,030-plus stores with the latest acquisition of Sleep Train. Is there still an appetite for more?
Stagner: We have a long history of doing acquisitions, and right now we have a lot going on with Sleep Train (311 stores), and concurrently Back to Bed (135 stores).
Our primary focus right now is on digesting these acquisitions. We want to ensure a smooth transition and success in the long term. That said, there is an appetite for more. We could do some smaller ones where it makes sense in the near term--our stated goal is to go coast-to-coast and build a national presence.
(Digesting) is our preference right now, but we do have a fantastic organization that's demonstrated a capacity to handle a lot of activity.
HFB: Do you plan to convert any of the new brands to the Mattress Firm name, or will they continue operating under their own banner?
Stagner: Our first focus is to expand the Mattress Firm brand across the country to leverage the benefits of advertising, so yes, we will convert some locations to Mattress Firm.
That said, many locations, particularly with Sleep Train, have done a fantastic job building brand equity in their markets. We'll examine that over time. Sleep Train currently has a multi-brand approach on the West Coast, and we're comfortable with their experience operating a multi-brand company.
We feel the market can sustain multiple brands.
HFB: Something about the companies you’ve acquired obviously caught your eye. What criteria do you consider when looking at an acquisition?
Stagner: We look at a variety of things such as the quality of the real estate, the quality of the culture.
One of the most important things is what their position in the marketplace is. What share do they have? How does that fit our goals in that particular marketplace where they operate?
HFB: Moving ahead, what challenges do you see for the bedding retail segment? What indicators are most important to ensure Mattress Firm remains successful?
Stagner: The largest challenge we have is battling an apathetic consumer. There are a lot of consumers, based on our research, who have mattresses that are more than 8-years-old.
We believe that, both as retailers collectively and the wholesalers, the opportunity to provide in our advertising the benefits of better sleep. We can unlock a lot of consumers who, candidly, are sitting on the sidelines.
We look to strategic indicators such as what is our relative market share?
We also measure our turnover rates. We have lower turnover rates than most of our peers and retailers in general. We focus on our culture and our people. We focus on our customer care and response time.
Those are the leading indicators--the overall effectiveness of our people and culture, and our customer service. If we take care of those, the lagging indicator of profitability will be fine.
October 8,
2014 by in Industry
By Bob George
In this issue, we have focused first on the war between the alternative distribution channels and the traditional furniture retailers whose share over the past 25 years has been depleted to less than 40 percent of the total revenue of furniture sales. Our next level of focus is the war erupting between traditional furniture retailers.
As the larger retailers begin to expand within their home states and adjoining states, they compete with other traditional retailers. One of the driving forces behind this expansion is the need to replace the volume lost to the alternative channels. The option is to reduce fixed costs and not allocate resources to invest in needed changes to compete for the consumer’s dollars. All of this is explored in depth in the later pages of this issue.
The challenge for retailers is to recognize the real enemy, all of the other products that fight for the consumer’s discretionary spending. Obviously, we are losing the war when Apple’s latest release captures worldwide attention, the imagination of the consumer, and first-day, skyrocketing sales.
Has there ever been anything close to that amount of hullabaloo for a furniture introduction?
The closest the furniture industry comes to the excitement of the iPhone is within the mattress category where we’ve had an upsurge in premium bedding. However, we’re now to the saturation point and have overexposed our “innovations” with the offering of a myriad of materials.
Now, we’re in the race to the bottom.
Even with that brief spark, the furniture industry’s slice of the personal consumption pie has fallen 24 percent since 2006. The accompanying chart shows this decline. It’s time for the industry to refocus.
Stopping this erosion is a cause that all retailers, whether traditional or alternative, can join.
