Searching for Solutions
By Tom Lassiter
It’s been nearly 20 years since Amazon.com set out to change the way Americans buy books and ended up changing the way we shop for darned near everything. Shopping today begins not with a trip to a store but with a visit to Google or Yahoo.
Point. Click. Research.
A trip to a merchant eventually may follow. Or a transaction may be completed from the comfort of a sofa.
Point. Click. Buy.
Specialty retailers have justifiable concerns. A recent search for “patio furniture” at Amazon.com returned 107,750 product results. Add other purely online vendors, plus the websites of Big Box merchants, department stores and patio furniture dealers with e-commerce sites, and the digital competition faced by a stocking merchant with utility bills and employees seems overwhelming.
Can the proprietor of a small business compete in a world of global online shopping? Can furniture manufacturers remain true to their longtime brick-and-mortar dealers and also serve the e-commerce market?
The answer to the former question is yes. A mom-and-pop shop can use the Internet to its advantage, which may or may not involve selling products online. How effectively a retailer cultivates its online advantages depends on the owners’ willingness to learn the ropes. Perhaps the commitment to be a legitimate online contender will mean hiring the expertise, either on staff or as a contractor, to play the Internet game.
This much is certain: Tacitly ignoring the Internet (or having just a simple billboard website, circa 1998) is not an option.
The answer to the latter question is more complicated. There seems to be as many approaches to crafting an Internet sales strategy as there are patio furniture manufacturers.
The policy of one company that allows its brick-and-mortar retailers to sell products online gets praised, while another company that doesn’t allow online sales gets chided – because it sells some of its own products directly to consumers online.
Tropitone is fashioning a program that creates a “digital storefront” limited to Tropitone products for its brick-and-mortar retailers. Director of Sales Frank Verna says Tropitone is following “an Omni channel retailing strategy.” The Omni channel approach, according to VCD Research, allows “connected customers (to)
shop for and purchase the same items across many channels.” The idea is to create a consistent customer experience, no matter which channel (website) is used.
Yet another manufacturer solved the problem of selling online by developing a new brand specifically for e-commerce, thus “protecting” its reputation and relationship with brick-and-mortar dealers. (See sidebar: NorthCape International).
For retailers as well as manufacturers, online sales can be a hot-button issue.
Internet commerce accounts for about four percent of all furniture sales, according to Forrester Research. That’s about $3 billion out of total furniture sales of some $78 billion, says Sucharita Mulpuru, a Forrester Research vice president and retail analyst. (Investment banker Jerry Epperson, who tracks the furniture industry closely, says his figures show “pure Internet” furniture sales amounting to about $4 billion last year.)
The good news, Mulpuru says, is that retail stores serve a critical role for consumers as well as manufacturers. Quality furniture “is a high-touch purchase” and requires a great deal of person-to-person interaction to establish trust and answer questions before most people will spend hundreds or thousands of dollars.
Yet growing numbers of consumers aren’t reluctant to make high-ticket Internet purchases for goods they haven’t touched or rump tested. The younger the consumer, the less his or her resistance to making a significant purchase based only on digital information.
Mulpuru herself is an example. On the advice of a designer who showed her a photo on her iPhone, Mulpuru purchased an expensive resin wicker table. The convenience of that transaction lost some of its luster when Mulpuru, 40, had performance issues with the product and had trouble tracing the product back to the vendor.
For older consumers and those more skeptical in general, Mulpuru says, some e-commerce websites are learning to create a virtual high-touch experience. “Companies like Wayfair are doing a good job of that,” she says.
Wayfair.com, founded as CSN Stores in 2002, sells furniture and a whole lot more. The Boston-based company offers some 4.5 million products in 25 categories, according to Inc. magazine. Sales topped $500 million in 2011, the year the name changed to Wayfair.com. Sales grew at a rate of 40 percent in each of the first two quarters in 2013, and revenues may approach $1 billion this year. (See Wayfair sidebar for more information).
The rapid success of companies such as Wayfair, Hayneedle and other pure e-commerce merchants has discombobulated the traditional sales channels for patio furniture and the relationships between manufacturers and brick-and-mortar retailers. Makers of furniture and those who stock and sell patio goods have had to rethink their respective roles and business strategies.
Because it’s still early in the e-commerce era, manufacturers and retailers have few Harvard Business School case studies to guide them. When a case study is written, one can be sure that it will be outmoded before the digital ink dries.
Which means, says Clay Kingsley, president of Kingsley Bate, people in the furniture business must “figure it out. The Internet is here to stay in a big way. You just have to work with it and figure it out. There’s no going back.”
From Retailer to E-tailer
Arizona-based Today’s Patio, which launched an e-commerce website years ago, has a website that plays multiple roles. Most importantly, it raises awareness about the six Today’s Patio Stores in Arizona and the one in California. The website, says CEO Chad Scheinerman, has “been instrumental to our success.”
TodaysPatio.com also gives consumers the ability to purchase goods, whether they live in Scottsdale or San Diego or Bangor, Maine. The website currently generates about 10 percent of Today’s Patio’s sales.
“We plan to get even more technologically advanced over the next few years to give the online consumer an even better experience,” he says.
The thorniest part of running an e-commerce furniture business is not maintaining the website or dealing with the inevitable returns (which vendors say average about four percent of sales). The biggest frustrations, Scheinerman says, result from coping with the myriad rules set forth by furniture makers and that e-commerce sites must follow.
“Every manufacturer has a different policy about how they want you to do online sales,” he says. “There are just a million different rules.”
Some companies, Scheinerman says, “try to play both sides of the fence. Brown Jordan is a great example. They don’t want to be a part of any website that does e-commerce, yet you can go online and buy direct from them. We all know what they are doing. They are testing the market to see how well (a product) will or won’t do.”
Summer Classics also does not allow its retailers to sell the brand online. Only one catalog merchant, Frontgate, sells the brand. “And they are required to sell at a minimum price,” explains Bew White, Summer Classics’ president.
Summer Classics sells discontinued products directly to the public at SummerClassicsDiscontinued.com.
Ebel Furniture allows stocking brick-and-mortar dealers to sell products online, says National Sales manager Mark Bottemiller. However, Ebel requires that advertised (posted) prices online adhere to the company’s guidelines.
“We don’t have a minimum retail price,” Bottemiller says. “We have a minimum advertised price. You can sell (an item) for whatever you want to sell it for.”
OW Lee allows stocking dealers to sell its products online; the price posted online can be no more than 25 percent off retail. OW Lee calls this a minimum retail price (MRP), which applies only to e-commerce sales.
Retailers with a physical showroom may sell OW Lee goods to walk-in customers at any price they wish to set.
OW Lee also has pricing guidelines for e-commerce transactions that ship goods outside a store’s “designated market area.” Company president Terri Lee Rogers says the discount in those circumstances offers “a little more room” than the MRP but doesn’t give the retailer “free rein.”
The policy allows an OW Lee dealer to sell to customers anywhere without undercutting a local brick-and-mortar retailer. If a customer is within driving distance of an OW Lee dealer, she’s likely to find a better price than buying online.
Karen Galindo is a fan of OW Lee’s e-commerce policy, which she calls “far and away the best, bar none.” The policy “allows freedom within the territory, and it allows commerce to continue in the boonies where there is no retail at all. OW Lee’s policy is 100 percent foolproof. It totally works.”
She especially likes that shoppers who see an OW Lee price online probably will find a better deal when they walk into her Outside In Style stores. “It makes us look good,” she says.
Unlike Family Leisure or Today’s Patio, Outside In Style has an information-only website that offers no products for sale online.
Sales by pure e-commerce sites “are not a big part of our business right now,” says Rogers. Furniture sets rarely are sold, she says. Typical e-commerce items include firepit covers and (curiously, Rogers says) table bases.
“I do feel like our retailers need to have an Internet presence, including price, online. I hate to say it, but nobody’s going to buy anything if they don’t know how much it costs,” she says. As a consumer herself, Rogers says she’s not willing to make a trip to a store to learn the price of an item. “I want to know before I go,” she says. “Then it’s up to the retailer to sell it.”
OW Lee’s policy evolved over a period of five years, she says, and was last revised in 2012. The company sells its products through Hayneedle.com and Wayfair.com, as well as through other pure e-commerce sites.
Manufacturers say that, as much as they love their brick-and-mortar retailers, they can’t ignore the potential of the online market. Some 10 percent of Agio’s volume now moves through purely dot-com merchants, says Bob Gaylord, president. That number increases when including customers such as Home Depot, Sam’s Club and other Big Box stores that also do e-commerce.
Seeing Both Sides
As a hearth and patio products manufacturer and the owner of a high-end retail store, Ajay Gupta is able to view Internet pros and cons from multiple perspectives. Gupta is CEO of Everburn Manufacturing, which makes realistic-looking artificial logs for gas-burning fireplaces. He owns Housewarmings, a hearth, patio and barbecue retail store in Lexington, Kentucky, and he manufactures a line of outdoor kitchen counters and islands, pergolas and firepits with the eventual goal of national distribution under the Housewarmings brand.
“We do not encourage Internet sales” of Housewarmings products, Gupta says. “The customer has to come in the showroom, touch the product and understand how the designs are done. The dealer has made a significant investment, and we want our dealers to be protected.”
The ideal role of a retailer website, he says, is to convince shoppers in that market area that the retailer is an expert in Outdoor Room products. “Everybody is on the Internet searching these days,” Gupta says. “Our main focus is to bring people into the store. We want them to find us and be convinced this is the place” to shop.
That’s the approach taken by Family Leisure. Each click on a specific item at FamilyLeisure.com brings up the specific product as well as two brief videos. One discusses the merits of the particular product category (cast aluminum, for instance). The second video may be about a specific company’s products or point out that there basically are two types of outdoor furniture – “disposable” and “permanent” – and how to tell the difference.
Telescope Casual Furniture deals with “a limited few Internet-only customers,” says president Henry Vanderminden IV. “We are cautious about who we do business with,” he says. Most items offered for sale via purely e-commerce sites tend to be smaller products that can ship via UPS. Internet partners, Vanderminden says, “maintain a retail price that is a fair price.”
Telescope’s brick-and-mortar dealers may post prices on websites only at full retail.
Pride Family Brands prefers that brick-and-mortar retailers not post prices online. “Most follow that,” says president Steve Lowsky. Stores that do post prices are supposed to follow the company’s MAP guideline of 30 percent off retail.
Lowsky admits that, with 350 accounts, policing the policy is difficult. “It’s hard to control from the manufacturer side, because we don’t even know about (violations),” he says. “We discourage poaching from one retailer to the next.”
Pride is “mostly focused on brick-and-mortar retailers,” Lowsky says, and doesn’t “do much, if anything,” with purely e-commerce vendors. “We would rather be loyal to the dealers that are flooring our products,” he says. “They are the ones working nights and weekends and helping push our brand.”
Kingsley-Bate’s Clay Kingsley shares that sentiment. “There is no way any good manufacturer is going to sacrifice their core business, their brick-and-mortar stores, and not help family-owned retail stores. No one is going to sacrifice that for a secondary sales outlet” such as purely e-commerce sites. “The brick-and-mortar store is, without question, the backbone of the industry’s sales.”
That said, it’s incumbent upon independent retailers to participate in today’s digital world. “Anyone in any business who complains about the Web isn’t living in the present,” Kingsley says.
Rogers of OW Lee agrees. “I think furniture is one of the toughest things to sell online,” she says, but it’s necessary in this day and age. “I wonder why retailers are not setting up e-commerce websites,” she muses. “I wish the retailers would drive the business back to themselves via the Internet.”
Forever Patio: NorthCape’s New Online Brand
|Forever Patio website.|
NorthCape International last year faced a sales channel dilemma familiar to other leading casual furniture makers – it had a hot product line, an expanding number of brick-and-mortar retailers, yet saw huge potential in e-commerce.
Chasing the Internet market in a serious way would mean spoiling the company’s relationship with the very retailers who had made it wildly successful in recent years. Furthermore, pursuing sales in the online channel surely would cannibalize NorthCape’s business through the all-important brick-and-mortar stores.
So Tom Murray, NorthCape’s president, chose an unusual solution. He and his team developed a new product line and a new brand for sale exclusively through e-commerce vendors.
“Forever Patio is our drop-ship brand,” Murray says. The line was introduced last March.
The brand’s launch cleans up “clutter, confusion, pricing problems, a real mess,” Murray says. That situation resulted from an undisciplined approach to the potential of e-commerce.
He traces the evolution of the situation back to NorthCape International’s early years when, in an attempt to gain a toehold in the market, the company “jumped into the drop-ship business aggressively.” Then, as the catalog business started to diminish and online retailing surged, the company had no definitive online sales policy as it focused on building a network of brick-and-mortar retailers.
“Flushing the system and building a new brand is not easy,” Murray says. “But it’s very difficult for us to ignore the fastest-growing retail channel of a lifetime, while supporting our brick-and-mortar customers. A lot of thought went into this.”
Specialty retailers with a storefront and showroom may sell the NorthCape brand online, but must adhere to minimum advertised pricing (MAP). “If we don’t put MAP out there, it’s a run to the bottom,” he says.
About 25 online-only vendors currently offer the Forever Patio brand of resin wicker furniture. Products sold are drop-shipped by NorthCape.
NorthCape qualifies vendors and only signs up those who are likely to do a significant amount of business, Murray says, which reduces administration headaches. He doesn’t want the Forever Patio brand to be sold on sites offering a smorgasbord of products including “socks and underwear.”
Deliveries are handled by LTL (less than truckload) carriers that typically get boxed product to the curb or near a homeowner’s front door. White-glove delivery usually isn’t an option at the online vendors selling Forever Patio, Murray says, because that adds significantly to costs.
He says the new branding scheme could be doubly good for brick-and-mortar retailers who want to build a significant e-commerce business. Such a retailer, he says, could sell the NorthCape brand in the showroom and advertise it online with MAP pricing. Product sold would be shipped from the retailer’s warehouse. The retailer also could offer the Forever Patio brand through its e-commerce website, Murray says.
Time will tell if the branding scheme succeeds.
“A year from now would be a good time to see if this is a good strategy for us,” he says.
Social Media: Free & Effective
|The Garden Gates website.|
Chad Harris, owner of The Garden Gates in New Orleans, wasn’t far into his social media presentation at September’s Casual Market when he realized he would have to go off-script.
He had asked how many retailers in the room were familiar with a particular Internet/social media term, and only one individual (out of perhaps 60 in attendance) responded by raising a hand.
“At that moment,” Harris says, “I knew I was in trouble.”
Harris was present to share his experiences and insights on how to use Facebook, Twitter and other social media to drive business to his e-commerce site and his retail store. Too many members of his audience, however, were still trying to figure out what a Tweet is.
“These were supposed to be the brightest and best in the industry,” Harris says, “but they didn’t have a clue. And I mean no harm when I say that.”
Casual furniture storeowners are no different from any other type of retailer, Harris says. They’re busy 24/7 just keeping the doors open and lights on. They’re typically older than those who leap on the latest social media app, the so-called early adopters. Only a small percentage of people over age 40 is stoked about marketing via social media and has the time and inclination to pursue it.
That, Harris says, was the issue apparent in his casual furniture audience at the Casual Market. But it points to a larger concern in our increasingly wired and wireless world.
“These guys don’t understand that this is their way to compete” with e-commerce sites as well as other brick-and-mortar stores, he says. “If they don’t get on the bandwagon, they’re going to be in enormous trouble.”
Social media is the Internet’s current hot button. Twitter, which allows an account holder to write a 140-character message to share online instantly, is credited with helping foment revolution in Egypt as well as rivet attention of millions on a particular food, fashion or faux pas.
Websites that share consumer passions and provide forums for discussion also are part of this community-building trend.
Pinterest.com allows members to post photos of their favorite possessions and aspirational products (including outdoor furniture), while Houzz.com goes more in-depth. It’s the national water cooler where people come together to share ideas on home decorating and remodeling.
And Facebook? It has more than 1.5 billion active users reporting what they had for lunch and much more.
Harris’ point is that retailers simply can’t afford not to participate in these online communities.
Paul Yuncker, operations manager at Kolo Collection in Atlanta, agrees. It’s incumbent upon retailers, he says, “to listen to how your customers are shopping.”
When consumers go to Pinterest.com and Houzz.com to seek ideas and advice, it’s smart for retailers to be a part of the conversation. The idea is to establish credibility, trust and ultimately drive some business to their shops.
“Pinterest is really starting to build momentum with the design community and shoppers,” Yuncker says. “It’s all about getting the Kolo Collection name out there, using all those avenues.”
That’s also the strategy Harris uses.
Harris, a relentless competitor, told Hearth & Home that his website, thegardengates.com, generates more than 80 percent of his company’s sales. In addition to patio furniture and a wide range of “outdoor living products,” the website also sells indoor furniture, bedding and seasonal products and gifts. Items purchased are drop-shipped to his customers all over the nation.
He hires recent college graduates with English degrees to pepper the Internet with posts, Tweets and photos about products, trends and design. Every single one links back to thegardengates.com.
Social media doesn’t have to be about e-commerce. Some shops, such as Kolo Collection, use it to publicize their retail storefront.
Ajay Gupta, a manufacturer of hearth products and specialty retailer in Lexington, Kentucky, tasks an employee to manage social media for his shop, Housewarmings. His Facebook strategy is to freshen the Housewarmings page every few days and build relationships with other local businesses that are chasing the same customer demographic.
“You have to bring on board like businesses that say, ‘We like your Facebook page,’” he says.
The goal is to capture the attention of people living in the Housewarmings market area and get them into the store. Only then can they try out a deep-seating group or sample food grilled in a Big Green Egg. “Those kind of experiences you can’t have on the Internet,” he says.
One of the main benefits of social media marketing, of course, is the cost. Unlike radio, TV, direct mail, billboards and a website, social media costs nothing but the time to do it.
“It’s all free,” Yuncker says. “There’s no harm in using it to get your name out there. And it’s so easy, because you can take a picture of a chair with your iPhone and paste it on your Facebook page in minutes.”
Wayfair: From Zero to $600 million in 10 Years
There’s a certain irony in the fact that a co-founder of the newest 800-lb. gorilla in the online furniture business is the son of a casual furniture retailer.
Steve Conine – chairman of Wayfair – as a teen assembled teak furniture for his mother’s New Jersey patio shop, Garden Cottage. Conine’s sister, Sarah, now runs the business, with locations in Morristown and Fairfield.
“As a kid, I assembled more teak furniture than most people in Boston will ever see in their lifetime,” Conine said in a telephone interview. “And I worked the counter a lot.”
In 1995, the year Conine graduated from Cornell, he built a website for his mom’s store. Now he and his partner, CEO Niraj Shah, run a Boston-based website business that offers products from more than 4,000 suppliers and ships an average of nearly 94,000 items each week.
The motto of Wayfair.com is “Everything for the home,” which includes the Outdoor Room. In the outdoor category, Wayfair offers umbrellas for prices ranging from $75 to nearly $4,000. There are nearly 600 conversation sets representing brands such as Panama Jack Outdoor, Whitecraft, Tommy Bahama and newcomer Forever Patio. Dining sets? Wayfair lists nearly 850. A Crosley cushioned loveseat can be had for $300, while a Varaschin Obi sofa is $6,344 (with free shipping).
“We try to offer all price points and styles,” Conine said. “We’ve tried to brand ourself as the best experience out there.”
The roots of Wayfair go back to 2002, when Conine and Shah created a website called RacksAndStands.com, selling stands for loudspeakers and televisions. The duo ran the business, which offered hundreds of products, from a spare bedroom in Conine’s Boston townhouse.
Orders started coming in less than 24 hours after the site went live, Conine told Inc. magazine. The online retail site was not the partners’ first digital venture. They had already started and sold a successful Internet software business before the dot-com bubble burst in 2001.
The entrepreneurs saw huge potential in dedicated websites for specific products. Soon they had scads of websites, including DiaperBagBoutique.com, EveryAdirondackChair.com and JustShagRugs.com. Enter those URLs in your Web browser today and you’ll be directed to Wayfair.com.
With a growing roster of websites, the partners felt they needed to present a less nerdy name to potential suppliers. They combined their initials to create CSN Stores, which became the umbrella site for their expanding product lines.
Revenues hit $100 million in 2006, when CSN Stores had 200 employees and 150 websites. In 2010, the business had 4.8 million customers and revenues of $380 million; in 2012, revenues jumped to $600 million.
Surveys showed that customers of their niche websites, such as SimplyDogBeds.com, loved the shopping experience. But surveys also showed that most customers had no idea that EveryCuckooClock.com and scores of other websites were e-commerce siblings. The shoppers didn’t know the same level of service and value could be expected from a diverse range of websites, so sales opportunities were lost.
In fall 2011, Conine and Shah brought all their websites under one digital roof at Wayfair.com.
Despite Wayfair’s huge success, Conine says that only one percent of those who look at the site make a purchase from Wayfair.com. The other 99 percent may purchase from another online merchant or be more comfortable shopping locally.
Wayfair saw an opportunity in these statistics. When a visitor to Wayfair.com clicks on a specific casual furniture product, there’s a good chance that the resulting page will provide a link to a local merchant with the same item.
Wayfair calls the feature “Find It Near Me.” Conine says the program allows brick-and-mortar retailers to get their names in front of shoppers with “a high purchase intent.” A retailer pays for the privilege of appearing on a Wayfair page every time a consumer clicks the link to check out that local store. Wayfair’s backend programming considers the selected brand, price points, a store’s product array, and the location of the browsing consumer when choosing which store or stores to display as “Find It Near Me” choices.
The cost of the pay-per-click program could be “thousands per month” for multi-store operations in major metro areas, Conine said. For a single store in a less trafficked area, the price could drop to a few hundred dollars per month.
Conine said that Wayfair is “a very strong supporter of MAP policies.” Minimum advertised price policies, he said, “protect everyone from the back-room, fly-by-night operators” on the Internet. “We like MAP policies that are enforced,” he says.
Wayfair operates warehouses in Kentucky and Utah. The seasonal nature of product availability and purchasing patterns causes the company to stock a higher percentage of casual furniture than some other categories.
Furniture returns at Wayfair run about four percent of sales, Conine says, which he considers “a healthy spot for it to be in.” He says product returns at some apparel sites, such as shoe and apparel merchant Zappos.com, can be as high as 30 percent.
“We always try to be fair and do the right thing,” he says. “In the case where you don’t like the look, we have a 30-day policy for returns. And you pay the shipping to send it back. If there’s anything wrong with it, we fix it on our dime. It’s a very friendly policy from a buyer-remorse standpoint.”