The Next Wave Of Furniture Three-Tailers

June 30, 2007  by in UnCategorized   

By Home Furnishings Business in Retail Technology on July 2007 When you think of the furniture industry’s “dot-com pioneers,” R.C. Willy, Raymour & Flanigan and Nebraska Furniture Mart probably aren’t the first names that leap to mind.

But those very traditional brick-and-mortar retailers are leading the furniture industry

into a new Internet age. All three of them started extensive Internet retail sites in the last 18 months or so. Each site takes a dramatically different approach to selling furniture online than those of the first dot-com wave in the early ‘90s. Failed sites like Furniture.com, Living.com and GoodHome.com all burned brightly for a brief time, but were ultimately doomed by high costs—especially the costs of shipping chairs, tables and other furniture nationwide. Furniture.com was resurrected five years ago as an e-Commerce platform for established furniture chains.

The three major traditional furniture retailers now charting a new path in Internet retailing are squarely focused on serving only their existing delivery areas with the trucks and infrastructure they already have. In many ways, furniture’s newest dot-coms are building on the lessons provided by the success of Internet furniture retailers such as potterybarn.com and crateandbarrel.com. Both retailers leveraged the strength of their existing stores and catalogs to move to the Internet profitably with what’s become known as a “clicks-and-mortar” strategy.

One of the best examples of the new breed of traditional furniture chains that has successfully moved into e-Commerce is Salt Lake City-based R.C. Willey, which launched an Internet retail site about a year ago in response to what President Jeff Child said was a growing surge of visitors to rcwilley.com when it was purely an informational site.

Another Internet innovator is Liverpool, N.Y.-based Raymour & Flanigan, which operates 72 stores in the Northeast and added e-Commerce capabilities to its Web site, Raymourflanigan.com, in early 2006.

Three Types of Internet Shoppers

Child said rcwilly.com serves shoppers in three ways: “One is the guy who gets on and buys a mattress or electronics right away without ever visiting a store. Then there’s a huge group who wants to research (your store) and see whether you have the looks they’re searching for before they come to the store to purchase it. Then you also have a third group who—for whatever reason—leaves a store without buying, but then decides to go on the Internet to purchase something right from home without making a trip back to the store.”

Asked about those shoppers who visit stores but wind up purchasing online, Raymour & Flanigan Vice President of e-Commerce Lance Wardell said, “With today’s buy lifestyles, consumers do not always have the time to return to a store to complete their purchase. In addition, the Internet provides an element of privacy to customers to make decisions on their own terms. Therefore, we believe the Internet will continue to play a growing role in sales that may have orginated in a store.”

The Internet’s $1 Trillion Impact on Stores

Recent studies assert that 51 percent of consumers fall into the second group as “cross-channel shoppers” who rely on the Internet as a research tool before making a store purchase. Across all categories of retail, Forrester Research estimates that online research by consumers will influence $400 billion in in-store purchases this year—or 16 percent of all store sales. It expects that “cross-channel” influence to grow to more than $1 trillion by 2012.

Internet experts say cross-channel shopping research is much more effective for consumers on a full-fledged e-Commerce site that includes pricing along with other product information.

In a May report on cross-channel shoppers, Forrester Research Analyst Tamara Mendelsohn said retailers are taking note of the rising number of cross-channel shoppers, especially in high-ticket categories where consumers often want to examine the product in person. According to a recent survey by the firm, “45 percent (of cross-channel shoppers) say that they buy additional products once in the store, spending an average $154 in (add-on) purchases. This behavior enables the Web to affect store sales, making cross-channel shoppers the segment to watch over the next five years.”

Because a full-fledged e-Commerce site is an enormously complex and expensive undertaking, moving to Internet retailing can give larger retailers additional advantages over smaller rivals. That’s especially true for the Web sites of furniture chains that offer features such as online credit approvals and delivery tracking in addition to the ability to purchase online.

Fewer Store Visits, Ready to Buy

Child declined to offer specific figures on R.C. Willey’s online sales, but said the main focus of rcwilley.com is as a marketing tool customers use for research. “It used to be that people might look at five or six (different furniture stores) and come back to your store two or three times before they bought something. Now, they’re doing a lot of that research right in their own home, and then they come in with a pretty good idea of what they want and they buy it.”

In fact, Child said R.C. Willey prefers to serve customers in its stores, where they can get assistance from a salesperson who can help them find complementary items or point out the advantages of higher-priced products. “Surprisingly, there are a lot of people who are very comfortable purchasing product over the Internet. A lot of times, it’s a convenience thing. They might have a second home (in Utah), for example, and the Internet makes it easy for them to have a mattress delivered when they get there.”

At Raymour & Flanigan, Vice President of Marketing Lisa King said the store’s Web site assists customers in ways that go beyond online sales alone. “The efforts online complement the in-store experience by empowering customers to pre-shop, apply for credit and even see if their furniture selections fit their rooms by using our interactive room planner. We are committed to creating an exceptional experience at every touch point.”

Furniture.com CEO Carl Prindle (who is featured in this month’s Table Talk, p. 58) has nearly a decade’s worth of experience in selling furniture over the Internet. In 2002, he bought Furniture.com and changed its business model completely. It now serves as the e-Commerce platform for retailers such as New York’s Levitz, Chicago’s Harlem/Roomplace, Canada’s Leon’s Furniture and RoomStore in the Southeast. Prindle said large furniture retailers, in particular, are becoming keenly interested in the role a store Web site can play in driving customers to stores. “Consumers who see a flyer (often) look at the retailer’s site online. If they see a particular bedroom on sale, they tend to look at other bedrooms in case they don’t like (their first choice) from the flyer once they get to the store. So, the flyer is sort of a lead-in to the Web site, but we often find them shopping and, ultimately buying something that wasn’t in the flyer.”

Spurring Online Purchases by Mail

Of course, so-called “click-and-mortar” stores like Pottery Barn have long seen a similar response from consumers. In a recent earnings statement, San Francisco-based Williams-Sonoma, Pottery Barn’s parent company, officials said 55 percent of Internet sales are driven by customers who just received a catalog. The company’s Internet business, which increased 21 percent to $927 million in 2006, is a key point of emphasis for Williams-Sonoma and other traditional catalog retailers because “click-to-buy” transactions cost far less to process than catalog orders that operators take via the phone.

Sev Ritchie, president of Furniturefan.com, which connects online shoppers with furniture stores in their area, said some of the barriers that once made traditional furniture retailers resist selling online have fallen away in recent years. In particular, fewer manufacturers object to seeing retail prices displayed on store Web sites. At the same time, the amount of furniture being sold online is grabbing the attention of major furniture chains. The U.S. Commerce Department estimates that consumers bought $1.3 billion worth of furniture on the Internet in 2006, and many observers predict that figure could top $2 billion this year. “There’s a reason why R.C. Willey, Nebraska Furniture Mart and Raymour & Flanigan have all gone to the Internet,” Ritchie said. “You are going to see a whole lot more retailers starting to use it in their local markets.”

Prindle said he’s been in talks with a number of large furniture retailers who are considering moving to Internet sales. “In the last 18 months, e-Commerce has risen to the top of the agendas of many major furniture retailers,” he said.

What remains to be seen is whether rising gas prices will give the Internet an even more important role in capturing customers who delay a purchase decision in the store, then use the Internet at home to order once they’ve made a decision—thus, avoiding a return trip to a store.

“It’s a wonderful safety net for stores,” Ritchie said. “Normally when a customer who can’t make up their mind goes home, it’s so easy for that customer to abandon the sales process. With the advent of (Internet) shopping carts ... retailers are seeing more and more customers buying later via their Web site.”

‘Upside Potential’

eMarketer Senior Analyst Jeffrey Grau said that the relatively low number of furniture retailers now selling online means furniture still has “a lot of upside potential.”

Grau said furniture is a lot like the rapidly growing appliance and electronics categories in that online shoppers want to view the items in a store before making a purchase decision. “They’re all products that are complex and that you may want to see in person to evaluate,” he said. “The Internet is ideal for doing the research, but most people want to actually sit in a chair (in a store) or see the fabric close up.”

Prindle said Furniture.com studied cross-shopping for one of its retail clients. The study identified people who had registered on the retailer’s Web site, and then tried to identify how many of those names turned up on in-store sales tickets. Prindle said that for every online order, those registered customers his company tracked made five in-store purchases at his client’s furniture store. “If a retailer is looking at getting a certain percentage online, they’re looking at a five-time multiplier in stores (since so many) customers want to touch and feel the product, as you might imagine.”

How a Web Site can ‘Backfire’

Grau said that with so many furniture shoppers using the Internet for research, having a detailed Web site that provides an extensive overview of the products a store carries is becoming a major advantage for large retailers that it’s difficult for smaller stores to match. “It’s no small investment,” he said. “Providing the ability to do research along can drive traffic to stores. However, it works both ways in that having a Web site that’s sort of half-hearted in its execution can kind of backfire and not provide any of the advantages” in driving traffic to stores.

Of course, the risk in displaying detailed product information on the Internet is that shoppers seeking a specific product will search the Web sites of multiple furniture stores in search of the lowest price. While some bargain shoppers will only focus on price, Grau said retailers can use their Web sites to point out distanct advantages such as rapid delivery, an easy return policy or the convenience of a store’s location.

Despite the rapid growth of online furniture sales in recent years, the reality is that the vast majority of furniture stores don’t have Internet retailing capabilities. Ritchie said thoese stores can use informational Web sites to drive customers to their stores. “The biggest problem retailers have right now is a lack of continuity. Those retailers might have a great Web site but it doesn’t match to what customers see in the retailer’s print (or television) advertising. Or, the customer really likes what they see on the Web site, but when they get to the store, it doesn’t look the same or the products they see are not available. Those continuity problems create consumer distrust.”

Faded Online Billboards

A common problem, according to Ritchie, is that some retailers invested in an informational site years ago, but rarely update it. In many cases, he said the retailer may not be aware of how many furniture shoppers are looking at its Web site. “They put it out there like they put up a billboard, and, like a billboard, it will get old and faded after a while. If you fail to change your look and make it exciting for the customer—just like you change out merchandising on the store floor—it makes the customer feel your store is not exciting or they figure nothing has changed in your store.”