Is the online sales boom over?

HIGHLIGHT – As the pandemic slowly dies down, the online sales boom it caused also appears to be slowing.

According to figures released by the US Department of Commerce in February, digital spending in 2021 grew by 14.2%, less than half of the unprecedented 31.8% seen in 2020.

When looking at Wayfair and Overstock – whose sales have slowed and whose active customers have fallen – online furniture sales seem to be following the same trends: they’re still strong and still growing, but at a slower pace than that observed during the first year of the pandemic.

Furniture manufacturers have taken notice of this but at the same time seem to be largely optimistic.

“As the pandemic hit us all at the start of 2020, the most nimble manufacturers turned to e-commerce in a big way,” said Jason Phillips, vice president of Phillips Collection.

“E-commerce sales gave our brand an increased virtual audience, especially when showrooms were closed and travel was restricted,” Phillips said. “It also allowed us to move our branded or unbranded clearance to 50 cents on the dollar instead of 10 cents. Overall, the growth of our e-comm has increased our sales and helped us diversify during the pandemic. »

Walker Edison, a furniture maker exclusively serving e-commerce, is optimistic but thinks growth is indeed slowing.

“Early on, we saw dramatic increases,” said CEO and co-owner Brad Bonham. “The first thing people bought was a desk. Then he slowly made his way through the house. We were seeing tremendous growth.

“And it’s going to keep growing,” Bonham continued. “In five days it will be bigger than it is today. That said, there was an interesting boost where demand jumped and then fell.

“It’s been a little soft to start the year. Not where it was a year ago and not where it was at the start of last year. Overstock saw a 40% decrease in site People are starting to leave their homes Mandates are being lifted Growth will slow, but we expect it to continue.

Klaussner Home Furnishings, which makes around 25% of its sales through online channels, gave a similar analysis.

“E-commerce has modulated a lot,” said CEO Terry McNew. “It came back across the board in May 2020. But over the course of 21, while still strong, as the pandemic subsided, orders kind of normalized and even pulled back slightly.

“If you look at the five-year projections, the annual growth of e-commerce is around 2.5%. When you compare brick and mortar to e-comm, the data clearly suggests that brick and mortar will be dominant, at over 70%. E-comm should be around 20%. »

The challenges of e-commerce

From fulfilling orders to satisfying e-commerce consumers, selling in the online space presents challenges.

At Phillips, fulfilling furniture orders online is challenging but manageable. The company has developed a custom ERP system in-house that allows it to channel real-time inventory and sales data to e-commerce partners via its API.

“We handle some of the largest and heaviest items in the industry as well as thousands of SKUs that ship in smaller packages. Ensuring our product data is organized intelligently has therefore been critical to our online success,” said Jason Phillips.

“In educating consumers who are eager to purchase our larger scale chamcha wood console tables that weigh over 500 pounds, how do we get out of this? It’s a logistical challenge that I’m happy to say we successfully met.

“Another interesting thing we’ve learned is that some e-commerce consumers are much less understanding than our traditional B2B customers,” Phillips said. “So while selling online is profitable and necessary, it has also made us fully aware of our core customer base and how important they are to us.”

Order fulfillment is also a challenge for California-based Abbyson, which launched its drop-shipping model in 2008.

“Over the past two years, we have opened several faculties around the world with state-of-the-art warehouse technology,” said CEO Yavar Rafieha. “Technologies such as Infolink, automatically steer forklifts to picking locations, reducing picking errors, thereby reducing labor and returns. This allows us to meet demand and supply our e-commerce partners a constant flow of inventory, as well as the ability to stay nimble and pivot as needed.

Abbyson is also strengthening its product offering.

“Expanding our product offering is necessary to attract a larger online audience,” Rafieha said. “So we introduce designs in every home category and provide trendy luxury furniture that can be obtained.”

Bonham says the challenge at Walker Edison is inventory risk. “All inventory risk is on us,” he said. “While Walmart can place an order for 50,000 desks, we only sell one desk at a time and have to fill it.”

Another challenge is data and search engine optimization.

“Search engine optimization is huge for a business like ours,” Bonham said. “You must be good at it. »

What’s on the horizon?

Phillips sees e-commerce following two paths in the coming years.

“First of all, I see it as a way to displace existing products and increase brand awareness,” he said. “Second, (I see it) as a new area for product development on items that either sell exclusively online or fetch a specific price point. Additionally, our e-commerce partners share data metrics and insights with us. analytics that we didn’t have access to before. This has helped us focus on expanding which collections have sold best and how to grow certain categories, based on what consumers are most interested in.

Abbyson only expects growth.

“E-commerce will only continue to grow for our industry,” Rafieha said. “The easier and more convenient we make it for the end consumer, the more they trust the process.”

McNew at Klaussner believes that more and more companies will need an omnichannel presence.

“Omnichannel presence is the key to moving forward,” he said. “Physical retailers will create an online presence. But it will also go the other way. We will see e-commerce platforms evolve into brick and mortar. Wayfair is already moving in this direction.

“The ultimate solution is a combination. There are endless possibilities for people to explore,” he said.

Source link

David A. Albanese