At Home with E-commerce

Home furnishings eyes an even bigger slice of the e-tail pie
May 7, 2015David Gill

By David Gill

Online chartAs any home furnishings executive will say, home is big and getting bigger at e-tail.

Home is one of the fastest growing product categories online, with 18 percent sales growth expected each year for the next decade, according to Wells Fargo Securities.

Home has garnered serious attention from online retailers, including the biggest of them all: Amazon, with total sales of about $79.5 billion in 2014. “We’ve seen double-digit growth year over year in the home category,” said Veenu Taneja, furniture category leader at Amazon. “Furniture in particular has continued to be a strong source of growth over the past couple of years.”

Ryan Fitzpatrick, senior director of category management at Wayfair, said there is great potential for online home furnishings sales as a very small percentage of the $200 billion home furnishings business currently takes place through e-commerce. “As millennials are starting to buy real estate and shopping the Web continues to become easier, there will be plenty of opportunity for the home furnishings category online.”

While less than 10 percent of all home furnishings sales occur through e-commerce, enough business has taken place for websites to single out strong-performing home categories. For flash site HauteLook, area rugs have emerged as a hot seller, according to Kecia Hielscher, the site’s vice president and executive merchandise manager for home.

Bedding and outdoor furnishings are also popular on HauteLook. In outdoor, “we’ve had triple-digit comps so far from last year,” Hielscher said. And in a recent week, floating speakers for pools was the site’s number one performing product, with sales going “through the roof,” she said.

Taneja said Amazon has done particularly well in furniture and floor care. “Customers are finding it easier to shop online for furniture as we work with manufacturers to better showcase products with things like lifestyle imagery,” he said. “In floor care, we have seen growth in our cordless stick vacuums and robotic vacuum categories, two new categories that customers are looking to learn more about.”

Fitzpatrick also identified furniture as a solid performer for Wayfair, but added that the site does well with a range of home categories. “I think a big part of that is having over 7 million products across different price points and aesthetics,” he said. “We have a style for everyone, and there are a variety of navigational tools that allow customers to find products that meet their personal criteria.”

Recognizing that home is a major opportunity for e-commerce in the years to come, the websites are positioning themselves to take advantage. For Amazon, Taneja said, this means continuing to expand its selection and upgrade the shopping experience. “For example, on items shipped and sold by with product weight or dimensions large enough to warrant special handling while in transit, we offer scheduled delivery and returns,” he said. “We are also focusing on ways to optimize the browsing and search experience for customers shopping for furniture and decor” on the site.

At Wayfair, “we are doing a lot more with content and product information,” Fitzpatrick said. “We have a better understanding that each customer wants to shop differently, and that means building out a robust platform that tailors to all types of consumers.” Content is the key for Wayfair. “The biggest hurdle with online retail for both the furniture and decor categories is that the customer cannot touch or feel the product, and it can be difficult to understand size and scale,” Fitzpatrick said.

Pure-play sites such as Amazon and Wayfair have some catching up to do with brick-and-mortar retailers’ websites. Wells Fargo evaluated the sites based on several metrics, and “Multichannel retailers beat pure plays in the searchability, product info and post-purchase categories, which is surprising, in our view, given the pure plays have a longer online history, do 100 percent of their business online and, thus, should excel in these categories that improve the online user experience,” Wells Fargo said in its report “Home(.com) Is Where the Heart Is.”

Multichannel retailers “beat pure plays in the areas of ‘inspiration’ and ‘content’”—hardly surprising “given that the multichannel retailers have more experience in the visual merchandising through stores and catalogs,” Wells Fargo said.

At the same time, major brick-and-mortar retailers have been investing more into their websites, and plan to do more investing down the road.

On a conference call to financial analysts, Steven Temares, Bed Bath & Beyond’s CEO, noted that the retailer had replatformed both the Bed Bath & Beyond and buybuy Baby websites in 2013, “and have since made enhancements to these websites, as well as our mobile Web and mobile apps, and continue to do so.” These enhancements include an improved search experience, better image-viewing features on Bed Bath’s mobile app and an upgraded online registry experience, he said.

These investments for Bed Bath are continuing. The retailer is planning to open a new customer-service contact center in Utah later this year, which will support its sales growth across all channels, Temares said.

Also, speaking to financial analysts in April, Greg Foran, president and CEO of Walmart U.S., said the retailer has vowed to “strengthen our leadership” in the integration of its stores and its digital sector. While short on specifics, Foran’s remarks showed that Walmart is aware of future opportunities from e-commerce.

“With over 4,500 stores, we are within 10 miles of nearly 90 percent of all Americans,” Foran said. “I think if I was running a pure-play Internet company at the moment, one thing I would love is to have 4,500—growing to 5,000—distribution points. We have some good ideas in that space and we’ve got to make sure that we develop the tools and the technology to get there.”

At Target’s meeting with financial analysts in March, Casey Carl, chief strategy and innovation officer, said the retailer’s digital sales are “growing at a breakneck pace,” with a growth rate three times the industry average last year (much of the growth coming in home, Carl said). Target has aggressively invested in its e-commerce technology and has earmarked $1 billion in spending on technology and supply-chain infrastructure this year alone.

Regarding Target’s e-commerce, “we’ve made some dramatic improvements to the user experience,” Carl said. “More than 70 percent of our digital experiences are brand new, including our desktop, mobile apps and registry experience. In the year ahead, we will continue to invest and expand these capabilities, including moving to more cloud-enabled technology to expand capacity, improve speed and reduce overall costs.”

David GillDavid Gill | Senior Editor

David Gill covers home textiles, small electrics housewares, personal-care products, cleaning products, mattresses, consumer electronics and major appliances. He also reports on retailers and writes about the business and financial side of both vendors and retailers. He has more than 30 years of experience in business journalism, and has worked for other publications and websites that cover consumer products from both the manufacturer and retailer sides. His outside interests include sports (he is a big fan of the New York teams and of British soccer), cooking, movies and theater. He occasionally enjoys a good cigar as well.


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