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Amazon’s Next Big Play: Furnishing American Homes

As consumers progress through life stages, each stage presents predictable triggers for consumer purchases in specific categories. Now that the 92-million strong millennial generation is finally starting to grow up, marketers targeting young adults are getting ready for a killing.

Born from 1980-2000, the leading-edge millennials are turning 37 this year and while they have delayed assuming the responsibilities of adulthood, they can’t avoid it forever. With the economy finally starting to improve, more millennials will be moving out of their parent’s basements, setting up households, getting married and starting families.

Their consumer needs in this life stage, e.g. sofas, major appliances, cribs, diapers, will be much the same as that of previous generations. What’s going to be vastly different is their path to purchase. That is going to mean online.

Amazon.com, of course, is getting set for its next play: furnishing millennial’s home easily and quickly via the internet. Recently Wall Street Journal reported on its move in the category, with a focus on getting the logistics of furniture delivery right.

Amazon.com has competed in the home furnishings market for years, but more so in housewares, decorative accessories and soft goods, rather than sofas, case goods and major appliances. That is about to change, as Veenu Taneja, furniture general manager at Amazon told WSJ, “Furniture is one of the fastest-growing retail categories here at Amazon.”

Amazon may be a little late to the party. Wayfair, with its family of online home-furnishings brands, including Joss & Main, AllModern, Dwell Studio and Birch Lane, has grown from sales of a mere $601 million in 2012 to $3.4 billion in 2016. Its business boomed last year, with total net revenue up $1.1 billion, 50.2% over previous year. Wayfair’s growth coincided with a national television advertising campaign running on cable channels HGTV, Bravo, and TBS, as well as broadcast network programs.

That the e-commerce home furnishings market is growing fast is without question, with WSJ quoting Barclays’s claim that online furniture sales grew 18% in 2015, second only to groceries as the fastest growing online category.

A more important question is how much of the total $316.5 billion home furnishings and durables market can be expected to migrate to online channels? IBISWorld reports that 15% of the $70 billion U.S. furniture market have moved online, or about $10.5 billion, a mere drop in the bucket of the nearly $500 billion retail sales attributed to the electronic shopping retail sector. While neither Wayfair nor Amazon report sales of furniture specifically, my suspicion is Wayfair is way out in front of Amazon in overall market share.

What does Amazon have to do to become a major player in the home furnishings market? In many ways cracking the code for selling furniture, a mature and well-established retail category, is similar to another category that Amazon has struggled with: fashion. What they share, very simply, is fashion. Both are style driven where the appeal lies in the eye of the beholder. The consumers’ purchase decision is right-brain (emotion) guided, rather than a left-brain (rationale) one.

Amazon excels in marketing products that are objective and left-brain driven, where product brands are known, the product features, benefits and values are quantifiable and Amazon’s price advantage is clear-cut.

Ask anyone working in the furniture business today and you’ll discover that clearly is not the case in this category. There are few recognized brand names in furniture and those brands are usually built by well-entrenched retailers (RH, IKEA, Pottery Barn, West Elm, Crate & Barrel, Ethan Allen, La-Z-Boy).

Quality in furniture is hard to measure. It’s more than just a list of fabrication and materials and goes into product construction that is literally invisible to the consumer. And in the case of upholstered furniture, there is the essential comfort test, as measured in how it feels and how it sits.

Size and scale are harder to assess in upholstered furniture than in an emerging online category like mattresses where standard sizes are established. This also presents challenges for in-store retailers where the perceived dimensions of an item on the sales floor are hard for the customer to translate into the home.

Given these factors, a clear-cut pricing advantage that gets Amazon clicks in so many other categories is not so obvious. In the case of a sofa, maybe the $2,500 choice is a far superior value and bargain than a look-alike priced at $1,500.

By now we’ve learned not to count Jeff Bezos and his team out in any category they set their sights on. Wayfair and other online players have proven that consumers will buy furniture online, Interior Define being one I admire. It’s going to present Amazon with challenges that go far beyond logistics. I suspect it’s going to be as hard for Amazon to figure out how to furnish American’s homes as it has been to figure out how to dress them.