Market Shifts & The Furniture Industry

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Adapt or die—the credo by which success is often distilled in the marketplace. Those businesses which are able to adjust and meet shifting market demands are those which thrive. All to often however, businesses and entrepreneurs hold on to a nostalgic sense of how their success has been found in the past, rather than focusing on how it will continue to be found in the future. The internet has changed the way we communicate forever, and while it may seem to have encompasses our entire planet—realize it’s just now ~20 years old. Sure, scientists were sending ‘hello world’ messages on DarpaNet in the 80’s, but the average person hadn’t gotten their first AOL disk in the mail until the mid nineties. Many people felt the internet was a trend, and many businesses resisted making the move to an online presence. Websites were larger investments in the 90’s than they are now, and only a few retailers really went all in. Amazon, known as the world’s largest retailer, has only been around for 22 years. That’s an extraordinary number that most people simply don’t appreciate. One of the world’s largest retailers, not just online, is only 22 years old.

Big Changes

There are certainly a great many markets and industries out there that haven’t really made the transition into the digital space. One of the best examples however is the furniture industry, still nostalgic towards high markups and overwhelming buying processes. The majority of all United States furniture is produced overseas in countries like China and Vietnam. These countries offer manufacturers deeply discounted labor rates, and help preserve the 50-80% markups that are seen throughout the industry. A chair that costs $75 to produce in China commonly retails for more than $300 in the United States. In a world where operating margins are shrinking, it seems the furniture industry has been resisting so far. While this aspect of the industry is no doubt loved by the best furniture brands, a lot can be learned by an analysis of just how this industry has been changing recently.

In 2015, furniture retailers saw a very stagnant period of growth. Industry-wide, the majority of brands and retailers saw a +/- of ~5% in the top line revenue. However, amidst such market melancholy, Wayfair.com saw a 60% increase in revenue. This number is astounding for several reasons, but the most amazing facet is in what it hints at. Local furniture stores, of the mom and pop variety, offer little more than a middle-man service to get furniture from manufacturers to you. Other than the giant stores like Rooms to Go, Furnitureland South, and a select few other large floor-space businesses, local furniture stores are being replaced by online shopping experiences. Online retailers such as Wayfair offer direct from manufacturer purchasing (they even use manufacturer warehouses) and oftentimes free delivery and assembly. If you can get a good handle on the quality offered by furniture brands, there’s really no advantage of buying from local stores—unless you just have to have that new kitchen dinette set before the end of the week.

The New Face of Salesmen

With this shift towards an online shopping experience, buyers are offered an unprecedented amount of options, variations, and opportunities for finding cheap furniture from quality manufacturers. Still however, the experience of many furniture buyers needs to be guided much the way salesman have helped select purchases in the past. Imagine walking into Furnitureland South (a 1.3 million square foot furniture store) and being left to fend for yourself. Speaking from personal experience, you can quite literally get lost in there, and without someone to help direct your approach, you’ll likely never find what you came for. So if online furniture retailers are the new local furniture stores, does that make them the salesmen as well? Many of these websites offer great savings, free delivery, and excellent customer service—but don’t really get to know you as a buyer until after you’ve made your purchase. That’s the trade off of online buying—you save a lot, but you still lose a little. Amazon.com for example, has a remarkably low price on lots of furniture, but if something goes wrong with your purchase who do you call?

When people are shopping for toothpaste, or a new shirt, they don’t mind paying an extra 20% to be able to try it on in the store or ask a clerk what people are saying about that product. However, when you consider that 20% of a furniture purchase can be in the hundreds of dollars, people become very willing to sacrifice the nuances of face-to-face purchases. Enter the affiliate marketer. If large retailers like Amazon and Wayfair are the new local stores, than affiliate partners are the new salesmen. The internet is teeming with information; updated prices, shipping options, and return policies alike. It’s as easy to get overwhelmed when comparing online prices as it is trying to pick out a cocktail table in Furnitureland South. Affiliate marketing is nothing new, and has been around long before the advent of the internet. The concept is simply, these businesses help walk you through the buying process, then refer you to the seller. Where you’d historically be walked to the checkout counter by your salesmen, online you’re simply given a link to various offers where you can purchase you goods. This linking process records the referring site, and the seller provides the affiliate a small percentage of the sales. Amazon built their business on the backs of affiliates, and has been largely regarded as the best source for passive affiliate income.

This new dynamic of the online salesman has afforded many companies the ability to develop truly exciting shopping technologies to help power the online shopping experience. Businesses such as Direct Furniture Sets, Labdoor, and The Wire Cutter are all affiliate-based websites that help aggregate and review products. Effectively, they are the new breed of online salesmen, and connect with people on channels such as Facebook, Twitter, Instagram, and even Snapchat! These businesses help people through the purchasing process, helps them find order in the chaotic sea of available products, and will often aggregate pricing to help find the best available offer. Just check out some of the modern furniture offered by DFS&Co. to see what I mean—they look like a retailer, behave like a retailer, but spend all their time and effort on finding the lowest deals and organizing products in an easily-sortable manner. Effectively what these types of businesses are doing is rising to the demand of an online salesman. Whereas local salesmen formerly would walk you around a sales floor, these sites strive to take you around the entire internet. The game has changed, and those that remain romantic towards it’s shift are going to find themselves without a lunch sooner than later.