Home Retail Can brands furnish an online retail future in home decor? Wayfair and Williams Sonoma have their own designs for survival

Can brands furnish an online retail future in home decor? Wayfair and Williams Sonoma have their own designs for survival

by Ozva Admin
Need some improvement…

Earlier this month, online furniture retailer Made.com, once a retail darling, collapsed into administration, with Next taking its brand name, domain names and intellectual property for £3.4m. The downfall of the company can be seen in the fact that only a few years ago it was listed on the London Stock Exchange for £775 million.

Founded by Brent Hoberman, co-founder of Lastminute.com, and Chinese entrepreneur Ning Li, Made.com had enjoyed quite a pandemic as people stuck at home embarked on improvements to their living and working environments. The DIY and home improvement sector experienced a massive boom in business during the height of the COVID crisis; so did the decorating game.

But as lockdowns were lifted and the cost-of-living crisis began, the disposable income on a new sofa or bespoke desk started to get tighter. Zelf Hussain, a partner at the administrator PWC, summed up the situation thus:

A combination of factors, including a significant decline in consumer spending due to cost of living pressures, rising import costs, and ongoing supply chain pressures, has meant business can no longer continue. .

The company was no doubt hit by rising inflation and a generally hostile macroeconomic environment, but also perhaps by its just-in-time production model crashing into the global supply chain crisis. He may have also had specific corporate reasons for his problems, but it’s also possible to argue that he’s symbolic of the pressures facing the online furniture business.

The way back?

Look no further than Wayfair, which recently celebrated its 20th anniversary but is now embarking on a major push to try to stabilize and turn around what once seemed a thriving concern. Co-Founder and CEO Niraj Shah maintains that since its inception, the company has had a vision to create a premier online shopping destination for the home:

We’ve gotten big and bold every step of the way, and for nearly a decade, we’ve been able to self-fund our growth as we reinvest operating profits back into the business… In the decade since 2011, we’ve grown the business nearly twenty-fold and we made significant investments in building our catalogue, client file, geographic presence, logistics platform and more. With the size and scale that we have achieved, we are now in a position where we can operate the business for both profitability and growth and are well on our way to returning to a self-financing state once again.

But there is a catch, and that is the harsh reality that the prevailing consumer climate has become less friendly in a relatively short space of time. Shah explains:

Inflation persists across the board and with spending pressure across the spectrum of discretionary goods, we continue to see shoppers being very discerning about where their next dollars are going. For much of the summer months, that discretionary spending shifted from goods to services, and the pressure was felt across a wide range of retail sectors, including ours. While interest in the broad category of homes remains, we are seeing buyers being more deliberate with their spending patterns as they seek great value and expect promotions.

He adds that he is confident Wayfair can find its way through this:

I think what we’re seeing in customer behavior is that customers are responding well and as we expected to what we’re doing relative to the macro environment. So if we look at the macro environment and we see customer sentiment is low, we see product glut, we know the playbook for that… we know how to execute that playbook.

Some things haven’t changed, he argues:

Our competitors are the same set of competitors. There is a long line of competitors. So we have some kinds of big competitors, and then a long list of people in the category. However, I think when we talk about the macro tailwinds, I think there are a few things that during the COVID cycle hurt us. I try to talk about the big three sometimes, but basically product availability got pretty bad over a period of time. The speed positioning, the forward position of the products became quite bad. And then retail got pretty bad. The combination of how inflation was passed on and the lack of forward positioning, if you think about it, erodes an offer.

Well, where are we now? Now we’re reasonably far along in a cycle, which is reversing those things. We have reached all-time highs in speed, and that continues to increase at a rapid rate. Availability has picked up quite nicely, and that actually still has a good margin to go, which we have a very good feel for, and retail prices have been coming down quite nicely… So there are some of these things that are working. fairly good. We feel very good about our position, both as a home retailer and the custom things that we’re doing, and then specifically with these core elements of the offering, and particularly where we are relative to where we were a year ago because of the kind of from these external forces that were out of our control.

Keep calm and carry on, the underlying message appears:

I think this environment is going to be here for a while. It’s not something that’s going to go away. The amount of excess inventory will also take a bit of time to work out. So you can think about this environment lasting for, I would probably say, a small number of quarters. But it’s not weeks or months shorter… During our 20-year history, we’ve seen several business cycles. a thing that [co-founder] Steve [Conine] What I’ve learned is that moments like this present an opportunity to set us up for continued success as a category leader. An irony is that this is when we are at our best. We built this business without outside capital and [against] well-funded competitors. We know how to win by being lean and focused.

consumer change

But the competitive landscape gets tougher, insists Laura Alber, CEO of Williams Sonoma, calling for a greater focus on offering differentiation:

The macroenvironment or competitive environment has always been promotional. When you really go back and think about it, even before all these startups came along, Macy’s was always in business from home, and a lot of other big players, and then Amazon and Wayfair came along. They have always looked for the price first. What we do against them is very different. We are designing our own products and have been doing so for many years. Therefore, we tend to be first with new trends and can achieve finishes that others cannot replicate. Even when they try to copy us, they can’t replicate. When you go and look at the difference between our furniture or even our table or any of the categories compared to theirs, you will see a huge difference in quality and resulting price. Even with their rebates, our value is better.

But that’s a magnanimous view that’s not immune to commercial reality. Alberto admits:

There are always some exceptions. There are always some opening price points that you wish were sharper. Those are the opening price points of the place that I want to go back to, be more competitive like we were before the pandemic. Those are the areas where I think everyone got too high. But overall, I don’t really think it’s a competitive pricing issue, because it’s hard to compare our products to anyone else’s products.

Now, in terms of inventory in the channel, Bed Bath & Beyond has a ton of inventory that they are pushing, and will continue to push, deep markdowns. Again, different products, but will that hurt all the fringes? That might be the most important factor. But Wayfair and Amazon, those guys are the biggest out there, it’s a very different business. So you can buy them a thing for your garage or something like that, but you’re not going to furnish your living room, your entire bedroom with some of those brands. Our client won’t do it anyway, because what he’s looking for is a much higher level of quality and design sensibility, and he wants someone to help him put it together.

But those customers are in a different state of mind, something that can’t be ignored. Alber admits that consumers are nervous, but insists that people still love their homes and want to improve them:

The feeling is still: ‘I want a nicer house, I want a second house, I want a bigger house.’ Now they are not going to buy one, because nobody wants to buy now. That doesn’t mean you still don’t love your house, you don’t want to keep spending money on it. A lot of those renovation projects are still lagging behind in the pandemic when you couldn’t even get a fridge, right? You still can’t get a refrigerator. So, you’re not done with your cooking, so you’re not finishing your cooking yet.

So it’s interesting that those projects are still lagging behind. In my opinion, there should still be a huge advantage when they finish those projects and then go to arrange the furniture. Because if you spend a lot of money on your new bathrooms and your new kitchen, which is usually where people go first, generally speaking, you’ll buy furniture next. So it should be a very positive thing for us.

What I think is happening right now is more fear than reality, and we’ll see what happens and where it goes. But as I said before, our clients are still in very good financial shape. I think they’re taking a little break for a minute as everyone’s been talking.

Again, the bottom line is, keep calm and carry on:

We just have to make sure we’re not distracted by a momentary problem and that we’re all focused on what we’ve built here and keep feeding it, which means innovation, product and service innovation, and keep going when everyone else is ducking and covering. . It’s exciting, even though it’s a different hand than what we were expecting at this point. It’s an exciting time to really think about offense. What is the company we want to look like and again make improvements? If this is a recession, what will we look like on the other side of it? I think when you saw us come out of 2008, we were stronger, and we’re much stronger coming out of the pandemic. Whatever it is, I would say the same thing, we will also come out of this much stronger.

my take

Having stung me a couple of times when buying furniture online, I’m not a big fan of the sector. Clearly, it was one that would always benefit from the lockdown, but equally obvious it was a business model that was going to struggle once people were able to return to showrooms to touch and feel the products. The ‘don’t panic’ mentality displayed at both Wayfair and Williams Sonoma is commendable to a degree. After that point, you need not stumble upon the smoldering remains of Made.com.

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