Nov 28 2017

Ecommerce Trend: Furniture Retail Growth Opportunities

The following is part of a Blue Acorn series devoted to the furniture industry. Download the full “2017 Furniture Ecommerce Report” here.

The most notable favorable demographic trend is that millennials are now the largest segment of the U.S. consumer population and are expected to become a more dominant buyer of furniture.

In terms of behavioral trends, with furniture purchases being research-intensive “considered” purchases, 80% of shoppers research furniture online before they purchase, with millennials most likely to shop on smartphones before, during and after a store visit.

Illustrated above, most of the growth in retail sales is forecast to come from in-store sales influenced by online research and shopping.  In fact, some brick and mortar furniture retailers have reported the ratio of online research on in-store sales is 10X their online sales.

Also, online retail furniture sales as a percent of total retail have been increasing double-digits, and recent research forecasts a large annual percentage increase in 2018.

However, the relative attractiveness of the domestic furniture market will result in a continued influx of new entrants to the market and increased competition from Wayfair and Amazon.

Lessons-Learned from A Furniture Retailer

If you’re a furniture brand selling direct to consumers or thinking about doing so, if you’re a furniture retailer considering investment in ecommerce or other digital commerce technologies, or if you’re a furniture brand or retailer looking to optimize your digital commerce results, this post about a current engagement with a furniture retailer is for you.

The following addresses furniture retail challenges and opportunities different sales channels present that you should  include in your digital commerce requirements, planning and budgeting, for example mitigating channel conflict if you’re a furniture brand, showrooming in retail stores, shopping online for in-store purchases and ecommerce store “endless aisles.”

Considering the long-term commitments of most ecommerce and digital commerce initiatives, you should base your plans on where your organization is going and how it will compete in the future.

It should be noted that though not a focus of this post, there are numerous B2B digital commerce growth and efficiencies opportunities that have become available to furniture brands in the past couple years.

Strategies-First

It’s widely accepted that roughly 80% of all ecommerce technology requirements are similar, and defining the 20% that are unique to each business determines the extent of success.  Fortunately, many similar needs (eg. all ecommerce stores need a shopping cart) means that you don’t have to reinvent the wheel.

Unfortunately, because many requirements are alike, the requirements definition process is often approached by filling out “boilerplate” templates listing functionality and features.  Critical strategic initiatives such as ecommerce store redesigns or re-platforming will only take a company so far if they’re based solely on functionality, and not based on untapped business opportunities, competitive advantages, and future competitive strategies.

Put another way, even if you implement state of the art technologies, but don’t have a compelling competitive advantage in the future, you’ll still have problems with the opposition. Given disruption and increased competitiveness, furniture brands and retailers both need a strategies-first approach to leverage an investment to increase competitiveness fully.

The Aha Moment

When we first met with the furniture retailer referred to earlier, their request was straightforward. Based on customer service contacts and Website analytics they knew consumers were having difficulty shopping and making purchases on their ecommerce store. What they didn’t know was why, or what the best opportunities were to improve results.

By benchmarking their online sales conversion and percent of sales taking place online, we were able to quantify the financial impact of the known opportunities.  We didn’t yet know the “whys,” or what other opportunities there could be, so we suggested identifying, quantifying and prioritizing opportunities before starting on an ecommerce store redesign and migration to a new platform.

Benchmarking their results against other furniture retailers, we were able to identify the “whys” and quantify previously-unidentified opportunities. The aha moment came when they realized that though we determined how their ecommerce user experience could be improved and what the financial impact would be, fixing it alone would be missing more impactful opportunities that they didn’t have on their radar.

The Big Levers

Have you heard of “Brand Development Indexes” before? Not to be confused with share of market, BDIs identify product categories in which you’re over-performing and under-performing relative to the market.

The information often uncovers opportunities for unutilized short-term competitive advantages. In the case of an ecommerce store redesign, the insights can impact navigation, product taxonomy, page templates design and merchandising.

Another example is “SKU efficiencies.”  SKU efficiencies rank product sales based on the average revenue (or margin) per SKU at the brand, product line, and assortment levels–which identifies opportunities to increase revenue or margin with existing products. The information can have an impact on ecommerce store search/navigation technology requirements and page templates design.

What makes a strategy a “big lever?” Big levers are scalable, significant opportunities that you can benefit from both short and long-term. Your big levers will be determined by your business model and sales channels strategies—if you are a direct-to-consumer retailer who only sells online or a retailer who sells online and in-store.

Here’s another example. All ecommerce store redesigns include a competitive analysis. Usually, they just scratch the surface of a more comprehensive competitive analysis. As a result, businesses miss scalable opportunities that they could factor into an ecommerce store redesign.

Working with the furniture retailer, we identified existing untapped opportunities and areas they needed to improve on to be more competitive online, such as delivery, shipping and handling, customer service for smartphone users, guarantees and more.

Requirements Definition

Up to this point, our focus has been on helping furniture brands and retailers identify previously-unidentified opportunities and take a strategies-first approach to planning ecommerce, digital marketing and omnichannel retail initiatives and investments.

Some of what we’ve covered reflects a unique process. What also differentiates this approach is when some of the discovery and strategies work takes place. What has worked for us, the furniture retailer and other clients, is doing more discovery and strategies work before requirements definition and the RFP process.

Ecommerce store redesign and platforming engagements, as well as in-store digital initiatives such as empowering sales associates with real-time inventory visibility across stores and distribution centers, include discovery and strategy work. However, it is often done as part of the kickoff stage after the requirements have been defined.

As stated earlier, the requirements process is well documented and includes Search / Navigation, Merchandising, Conversion Funnel, Checkout, Content Management, Integrations, Implementation and Data Migration. The purpose of this post is not to discuss requirements definition in detail, but to help your company prepare for requirements definition.

What industry research often recites as two significant opportunities specific to brick-and-mortar furniture retailers, is the impact on the buyer journey leading up to a store visit and the impact of smartphone usage in-store. Taking a “mobile-first” approach to your ecommerce store design will not be enough to gain competitive advantage—it’s a cost of entry today, not a differentiator.

For a brick and mortar retailer to take full advantage of these two opportunities, they need to understand how their customers are using mobile and how their ecommerce store will be part of their customers’ larger buyer journey that includes digital and in-store–not necessarily the focus of ecommerce store requirements or design.

Based on recent work with a furniture retailer selling online and in-store, following are examples to illustrate how the recommended process has been beneficial.

Site search can be configured for different objectives. We didn’t set up site search to maximize online sales conversion. Instead, we configured it based on the increasing use of search on mobile phones.

With many users shopping the retailer’s ecommerce site for a specific store, how product listing pages (PLPs) were designed and product, inventory and delivery data integrated into PLPs was different than if the retailer exclusively sold online.

For brick and mortar retailers, “local intent searches” such as “furniture store near me” is an opportunity for competitive advantage, and to take full advantage of it requires more than a basic off the shelf store locator—our requirements reflected platforms that integrate a store locator across channels.

You can also look to take advantage of Google PLAs (where many retailers have increasingly been investing), which required new product feed requirements.

Paths Forward

The preceding is not to suggest that all digital commerce or omnichannel retail initiatives warrant this approach, but it may be beneficial for major initiatives.

The approach may also seem expensive or time-consuming. For an initiative like an ecommerce store redesign and re-platforming that requires more than off-the-shelf software and little in the way of systems integrations, the cost-benefit is often attractive.

Why is the cost-benefit attractive? Because of previously-missed opportunities that are almost always identified, and it’s less expensive and less time consuming to have identified and prioritized your requirements sooner than later.

Also, some businesses don’t need to make a major investment in technology immediately, and by optimizing their existing technologies and strategies they could improve performance and make the longer-term technology investment partially self-funding. And, the bottom-up financial planning based on benchmarking tends to be more actionable and reliable.

In summary, above all else, what we hope you take away from this post is that by going about requirements definition somewhat differently and in a slightly different order you’ll end up with a more holistic, integrated digital commerce strategy that incorporates previously unidentified opportunities, increases your competitiveness and is based on industry trends and where you’re heading as a company—often at the same cost and timeframe as other approaches.

If you’re interested in learning more about current ecommerce trends for furniture retailers, check out the” 2017 Furniture Ecommerce Report.”

The author, Paul Becker, is a Senior Consultant with All Industry Consulting. AIC provides advice focused on helping companies grow faster and operate smarter. You can connect with Paul on Linkedin or learn more about AIC on their website.

Paul Becker

Senior Consultant for AIC

Paul is a Senior Consultant with All Industry Consulting. AIC provides advice focused on helping companies grow faster and operate smarter.

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