Amazon Survival Guide for Furniture Industry

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Many industries such as bicycles, mattresses, and even furniture thought their industries were once untouchable from eCommerce sales and the thought was it would continue on that way until retirement. But consumers and their behaviour has changed shifting more time and spending online increasing the willingness to buy furniture over the Internet. With Amazon poised to enter the furniture industry with their recent push to partner with in-market furniture dealers and buying groups, flags should be raised. At first glance, this sounds great that all those eyeballs on Amazon are going to help drive sales for a local dealer and manufacturer. The company has even come out and stated they need to partner with in-market dealers to figure out last mile delivery. At least in the short-run, but obtaining those sales will come at an eventual cost to all parties in the channel except the consumer, who will always win.

The company is aiming to charge retailers on the platform between 15-20% of the sale, which is a significant portion of margin that was once paid to sales people on the floor. How can Amazon restore some of those margins to the dealer? The first step is by becoming their supplier as well. Developing their own products is not a new strategy for the eCommerce juggernaut as they are on pace to become the largest market share holder in the apparel industry with their multiple private label lines.

Unlike most categories Amazon plays in that have killed off retailers, the furniture market is different. They need the retailers to perform last mile deliveries and serve as a showroom so for today they will spare their lives. Where they will take aim first is at branded manufacturers who command a premium at retail. Similar to clothing or Amazon Basics they will collect sales data and determine top sellers and run rates to prime themselves to introduce a new line. Most people are brand agnostic when buying a sofa and that plays well into an eventual private label line.

Furniture brands and retailers now more than ever need to find a way to stay relevant. Here are the steps that can be taken to mitigate the risk:

  1. Rather than Amazon partnering with dealers, manufacturers with existing relationships and distribution should start selling online with local fulfillment. This will help alleviate some of the pressure of making products easier to buy to satisfy consumer demand. Amazon is winning because they focus on the end customer. Traditional B2B businesses have not and hence why they haven’t sold online. Today’s retail battleground is being won and lost on customer experience, those who focus on the consumer will be the winners.
  2. Brands and retailers need to focus on areas Amazon is not good at, customer experience. Consumers are proving you can buy from anyone, anywhere, even without seeing the product. So additional effort should be placed into programs to drive traffic to brick and mortar giving consumers an element of surprise (in a good way). With consumers increasingly spending more money on experiences and less on products, why not turn the purchase into an experience?
  3. Retailers should slow investment in eCommerce and spend more on in-store technology and personalization efforts with consumers. Amazon loses money hand over fist investing in its infrastructure and trying to compete head-on is a losing proposition.
  4. If interested in listing products on the service, sell excess and obsolete inventory instead of top sellers to protect your sales data. This will ensure your top sellers remain your top sellers and not a new private label line or overseas knock-off that uses Amazon to access the North American market.
  5. Brands and retailers as part of a mutual reseller agreement can include clauses not to list furniture on marketplaces such as Amazon. When brand names get listed on Amazon it will bring legitimacy, comfort, and trust to the marketplace and consumer acceptance.

Listing products on the marketplace is great short-term but damages brand equity and accelerates the eventual death of brands and dealers alike. More choice and competition is good for everyone, including the dealer and consumer. If one party gets too large, they can command the market and make others play by their rules. For more information, watch this video by L2 on How Amazon is dismantling Retail.


Amazon Survival Guide for Furniture Industry