Global Furniture and Homewares E-Commerce - Deborah · PDF fileIn this report, we explore global online furniture and homewares retailing, ... Global furniture and homewares market
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1) Global online furniture and homewares revenues areprojected to increase by a five-year compound annualgrowth rate (CAGR) of 15% to US$220 billion in 2020,accordingtoStatista.
2) TheUSandtheUKareexpectedtosee7.6%and13.7%CAGRs in online furniture and homewares salesbetween 2015 and 2020. In 2015, the UK had thehighest percentage of furniture and homewarespurchases made online in Europe at approximately12.1%.
3) More customization options are available online andallowforalevelofdifferentiationnotavailablein-store.
4) Inthelastfewyears,numerouspure-playfurnitureandhomefurnishingsretailersestablishedacrosstheworld,including Made.com and Loaf.com, have broughtinnovationtothemarket.
DEEP Dive: Global
Furniture and Homewares
E-Commerce
D E B O R A H W E I N S W I G M a n a g i n g D i r e c t o r ,
F u n g G l o b a l R e t a i l & T e c h n o l o g y d e b o r a h w e i n s w i g @ f u n g 1 9 3 7 . c o m
U S : 6 4 6 . 8 3 9 . 7 0 1 7 H K : 8 5 2 . 6 1 1 9 . 1 7 7 9
EXECUTIVESUMMARYThe online furniture and homewares market is highly competitive andgrowingatavery rapidpace.According toStatista,globalonline furnitureandhomewares revenuesareexpectedto increasebya five-yearCAGRof15%toUS$220billionin2020.
Among major Western markets, the UK has the highest penetration ofonline furniture and homewares sales and is expected to experience thefastestonlinegrowthinthecategorygoingforward.
Although traditional brick-and-mortar home furnishings retailers stillgeneratethelargestchunkofindustryrevenue,thesestoresaretendingtolose market share to rival channels such as specialty chains, off-priceretailersanddedicatedInternet-onlyretailers.
In the last few years, numerous innovative pure-play furniture and homefurnishings retailers were established across the world, but few havereached critical mass. US-based Wayfair is the only online pure-playfurnitureandhomewarescompanyofsignificantsize.
Theonlinechannelmakes iteasyandconvenient to researchhundredsofvaryingdesignsandproducts,andmakesitunnecessarytovisitanendlessroundofstores.
INTRODUCTIONInthisreport,weexploreglobalonlinefurnitureandhomewaresretailing,lookingatthesizeofthemarket,forecastgrowthrates,andtheproportionof furniture and homewares sales generated online compared to totalsectorsales.
We will also profile retail formats and focus on leading furniture andhomewaresretailersthathavebuiltlargee-commercebusinesses,aswellaspure-playandinnovativestartuponlineretailers
The online furniture and homewares market will continue to experiencerobust growth globally because the Internet is a very suitable channel forresearch and purchasing given the hundreds of customization optionsavailableonlineversusin-store.
Theonline homewares and furnituremarket is fragmented, highlycompetitiveandgrowingataveryrapidpace.AccordingtoStatista,globalonline furniture and homewares revenues totaled approximately US$110billion in 2015. China generates almost half of the total global marketrevenues.
Internet businesses and now derive a large portion of total revenuesthrough their online channel. Although traditional brick-and-mortar homefurnishings retailers still generate the largest chunk of industry revenue,these stores are tending to lose market share to rival channels such asspecialtychains,off-priceretailersanddedicatedInternet-onlyretailersthatoffer wide ranges and low prices. Various retailers have launchedhomeware product collections and expanded their offerings both in-storeandonline.
Numerous innovative pure-play furniture and homewares retailers havelaunched, but few have reached critical mass or even reported a profit.Wayfair is the only US publicly-traded online pure-play furniture andhomewares company of significant size. Although the retailer has grownrevenuesrapidly,thecompanyisstillunprofitable,whichgivestestamenttothe fact that the online channel can be a difficult one, regardless of theproductcategory.
Source:Wayfair
The furniture and homewares retailers presented in the charts below arethose major stores that disclose the amount of online sales or the year-over-yeargrowthrateoftheironlinerevenues.
Among the biggest brick-and-mortar retailers, Williams-Sonoma andRestoration Hardware lead in online contribution to revenues, both witharoundhalfoftotalsalesfrome-commercein2015.
Theprocessofpurchasingfurnitureorhomewaresdiffersfromshoppingformanyotherproductcategories.Consumerstendtoseekuniqueandoriginalmerchandise and often have a hard time articulating precisely the exactproduct and design they are looking for. Additionally,many furniture andhomewarepurchases are items thatwill beusedover the long-term. Thisleads customers to conduct more research and comparisons, processeswhicharefarsimplerandquickeronline.Customerreviewsfoundonsomesitesalsoprovideanotherinformativeserviceforconsumers.
The online channel is very suitable for researching hundreds of varyingdesignsandproducts,withouttheneedtovisitanendlessroundofstores.More customization options are available online and allow for a level ofdifferentiation not available in-store. Tools such as Pinterest and designblogs provide inspiration and curation. Several new resale sites havecropped up and provide consumers with new design and product ideas.Multiplecompanieshavelaunchedtechnologyplatformsthathelpfacilitateroom visualization and provide 3D tools so consumers can see whatparticularproductsordesignswouldlooklikeintheirhomes.
Manye-commercecompaniesofferdiscounts, freeshippingandevenfreeitemswithordersoveracertainvalue.Thesespecialoffers lurecustomersto the online channel because promotions like these are less common inbrick-and-mortarshops.
Theglobalonlinehomegoodsmarketwilllikelygrowfurtherastech-savvymillennials age and start families, and baby boomers become more
comfortable purchasing online. As the online channelmatures, customersarealsobecomingmorefamiliarwithmakinglargepurchasesonline.
Nevertheless, for now, the online channel is disproportionately aboutresearch:asthetwographsbelowshow,theInternetratesmorehighlyforresearchingpurchasesthanforactuallybuyingfurnitureandhomewares.
Figure 5. Global: Preferred Method of Researching Furniture and HomewaresPurchases
According to Statista, furniture and homewares e-commerce revenues intheUS totaledUS$21billion in2015.Revenuesareexpected togrowatafive-year CAGR of 7.6% to US$31 billion in 2020. However, furniture andhomewaresonline saleswill grow slower than totalUSonline retail sales,whichwillgrowatafive-yearCAGRof10%,accordingtoForresterresearch.
US online home goods sales made up 8.6% of total home goods sales in2015,accordingtoEuromonitorandWayfair.
In theUS,homewaresand furnitureare sold in a varietyof retail formatsincluding: furniture stores, big-box retailers, department stores, specialtyandonlineretailers.AccordingtoDigitalMarketingMagazine,thetop-fivehomewares retailers in theUS are:Walmart, Costco, Target, Bed, Bath&BeyondandSam’sClub.
Thevastmajorityof retailersmentioned in Figure8belowhaveextensiveonlineplatformsthatincludefurnitureandhomewaresproductlines.
US-basedWayfairistheworld'slargestpure-playonlinehomewaresretailerand distributes more than 7 million products from more than 7,000suppliers across five distinct brands. Product categories include furniture,décor, decorative accents, housewares, seasonal décor and other homegoods.Manysuppliersaresmall,family-runbusinesseswithoutwell-knownbrands andwithout established distribution channels to a large customerbase.
The company is focused primarily on the mass-market price segment.Women represented 75% of Wayfair home goods customers in 2015.Accordingtothecompany,thetypicalWayfaircustomerisa35-to65-year-oldwomanwithanannualhouseholdincomeof$50,000to$250,000.
Source:Wayfair
The retailer has been growing very rapidly in the past few years; netrevenuesincreased71%yearoveryearinFY15toUS$2.2billion.Wayfair’saverage customerorder value in FY15wasUS$222. In FY15, the companyhadanactivecustomerbaseof5.4millionanddelivered9.2millionorders.Activecustomersaredefinedasthosewhohavepurchasedatleastonceinthepast12months.Purchasegrowthfromrepeatcustomerscontinuestooutpace that of new customers. However, Wayfair is not profitable yet.Outside of the US, Wayfair delivers products to customers in the UK,CanadaandGermany.
Williams-Sonoma
Since launching itsonlineoffering in2000,Williams-Sonomahasgrown itsInternetsalestoalmostUS$2.5billion,representingafifteen-yearCAGRof27%.Onlinesalescontributed51%oftotalrevenues,andslightlysurpassedretailstorerevenues,in2015.
The brick-and-mortar Linens-N-Things chain went bankrupt in 2008, andafterownershipchanges,thebrandwasre-launchedasanonlinebusiness.
Source:Linens-N-Things
BedBath&Beyond
Bed Bath & Beyond recently acquired the flash-sales website, One KingsLane,whichspecializesinhomefurnishings.BedBath&Beyondreportedlypickedupthepureplayforlessthan$30million,afarcryfromavaluationofaround$900millionplacedonOneKingsLanein2014.
The UK is one of themost developed online retail markets in the world.Online sales comprised 13.4% of total retail sales in the UK in 2015,according to Euromonitor. Our analysis of these data suggests the onlineshareofnonfoodcategorieswasmuchhigher,ataround21.9%lastyear.
According to Statista,UK e-commerce furniture and homewares revenuestotaledUS$5billionin2015.Revenuesareexpectedtogrowatafive-yearCAGRof13.7%toUS$9.6billionin2020.OnlineistakingagreatershareoffurnitureandfloorcoveringsrevenuesintheUKandaccountedfor12.1%ofsectorexpendituresin2015,accordingtoVerdictRetail.
Conluminoforecaststhenumberofonline-purchasedhomewaresdeliveriesintheUKisexpectedtogrowbyaCAGRof2.5%between2013and2018,from 27.5 million to 31.1 million. According to Webloyalty, the share ofmobileretailspendingofthetotalretailspendingonhomewaresintheUKin2014wasestimatedat2.2%anditisexpectedtogrowto8.5%by2019.
AccordingtoMintelhowever,socialchangesarelikelytonegativelyimpacttheUKfurnituremarket:theproportionofrentersversushomeownershasbeen increasing, particularly among millennials in the UK, and thisencourages shorter term and lower price furniture and homewarespurchases.
TheUK homewaresmarket is very fragmented and, apart fromdedicatedhomewaresandfurnitureretailers,housewarescanalsobepurchasedatavariety of retail store formats including big-box retailers and departmentstores.
According to 2015 data fromConlumino, Ikea is theUK’s top homewaresandfurnitureretailer,with6%marketshare;JohnLewisisinsecondplace,with 5.8% of the market, and in 2015 itsManaging Director Andy Streetannouncedanintentiontogainfirstpositionwithinfouryears.
Numerous apparel specialist retailers havebranchedout intohomewares:Next was one of the earliest, and it has been followed by Zara, H&M,Primark and Anthropologie. E-commerce platforms such as Amazon andnumerous innovative online pure-play furniture and home furnishingsretailershavealsobeenestablishedinthepastfewyears.
In the UK, 12 out of 20 prominent homewares retailers offer click-and-collect, but 71%of surveyed shoppers rarely use the option, according toDigitalMarketingMagazine.
The DFS Furniture website continues to attract more than 40% of all UKupholstery web traffic and generates double-digit percentage growth inonline sales, according to company management. More than 70% of thecompany’scustomersbegintheirfurnitureandhomewaresresearchonline.InFY15,DFSgrewonlinesales17%yearoveryear.
LauraAshley
Total e-commerce and mail order sales accounted for 17.9% of total UKretail sales in 2015, and increased 8.6% year over year. The number ofregisteredLauraAshleye-commercecustomersgrew14%yearoveryearto2.4millionforthefinancialyearendedJanuary31,2015.
Habitat
Inthepastyear,Habitathasseena35%jumpinonlinecustomertraffic.Theretailer plans to launch a click-and-collect service. More than half of theretailer’s e-commerce sales are completed through mobile or tabletdevices.
Worldstores
Founded in 2000, the online retailer sells both branded and unbrandedproducts. The company posted sales growth of approximately 12% yearoveryearinFY14,butisnotyetprofitable.
ElsewhereinEurope,e-commerceisarapidlygrowingchannelforfurnitureAccordingtoMaisonsduMonde,onlinedecorationandfurniturerevenuesinEurope,includingtheUK,areforecasttogrowatafive-yearCAGRof11%to €9.8 billion (US$10.9 billion) in 2019. Strong growth is forecast for thesame period in France (10% CAGR), Italy (17% CAGR), Spain (16% CAGR),Switzerland(11%CAGR)andGermany(11%CAGR).
Onlinepenetration for furnitureandhomedecor is still significantly lowerthanformanyothernonfoodproductcategories.AccordingtoMaisonsduMonde, in France, online penetration of furniture and decorwas just 2%,whichwasoffsetby18%forelectronicsandappliances,and14%forapparelandfootwearin2014.
Theonlineshareof total furnitureanddécorsales inFrance is forecast todoublefromthecurrentlevelto4%by2019.Frenchcustomerswhomakepurchases both online and in stores tend to spend more and buy morefrequently.
In Germany, online furniture and homewares sales made up a smallerpercentagethanoverallGermannonfoodonlineretailrevenuesof15.3%in2014,accordingtomarket-researchfirmGfK.
FrenchfurnitureandhomewaresretailerMaisonsduMondecompletedanInitial PublicOffering in2016. In France,MaisonsduMonde isoneof thetop-three online decoration and furniture retailers in terms of revenues.Thefirmlaunchede-commercesalesin2006andfeaturesthemajorityofitsproductrangeonline,anddisplaysanaverageofapproximately8,700stockkeepingunitsatanygiventime.Furnitureaccountedfor78%ofMaisonsduMondeonlinecustomersales,anddecorationaccountedfor22%,in2015.
The company has an online presence in France, the UK, Austria, theNetherlands and Portugal and hosts 11 e-commerce websites.Approximately40%ofMaisonsduMondetotalonlinecustomersalesweregeneratedoutsideofFrancein2015.
InFY15,MaisonsduMonde’sonlinesalesincreased32%yearoveryearto€121 million (US$135 million), and online revenues represented 17% oftotalsales.Thecompanyaimstoincreaseonlinesalestomorethan25%oftotalsalesby2017–20.
INNOVATIVEONLINESTARTUPSIn the last few years, numerous innovative pure-play furniture and homefurnishingsretailershavebeenestablishedacrosstheworld.
European pure-play online retailers focused on decoration and furnitureincludeMade.com,Westwing and Home24, which are all accessible frommultipleEuropeanjurisdictions.
Houseology
Theluxuryhomewaree-tailer,Houseology,wasfoundedin2010andoffersmore than 200 designer furniture and homeware brands through itswebsite.Thecompanyraisedmorethan£1million inequitycrowdfundingin December 2015 and had a turnover of £3.7million in FY14, andmorethan30,000customersin100countries,accordingtoCrowdfundInsider.
Made.com is an online startup that cuts out themiddleman and enablesbespokepurchases of designer furniture directly frommanufacturers. Thecustomerisdirectlyconnectedwithdesignersandcanreceivesavingsupto70%.Made.comgrewitssalesby63%to£42.8millionin2014,accordingtoVerdict Retail. Made.com participated in three rounds of funding andinitiallyraised£2.5million,anadditional£6million in2012and£38millioninthelastround,in2015.
Source:Made.com
Loaf.com
Loaf.com, another UK privately owned online startup, offers a similarservice. Loaf had sales of £27million, including value added tax (VAT) inFY15 and plans to grow sales to £100 million over the next five yearsaccordingtoRetailGazette.Loaf.complanstoopen10stores inthesoutheastby2018,accordingtoVerdictRetail.
Source:Loaf.com
Furnishr
Furnishr is a Toronto-based startup that offers a full-service turn-keysolutionformovingandfurnishing.Thestartupispartinteriordesigner,partfurniturestore.
Chinese online furniture startup Zaozuo Zaohua Zworks opened its firstoutlet in an upscale mall. Zaozuo lets customers vote on the design andstyleoffurnitureitemsattheprototypestagebeforemassproduction.Thisstrategy reduces inventoryandcosts.Online furniture companies inChinacurrentlyholdasmallsliceofthemarket,butaregrowingrapidly.Privately-heldZaozuosaidsalesareincreasing40%annually,althoughthecompanyisstillunprofitable.MZGFFurnitureStudio,anotherChineseonline furnitureretailer,statedsalesgrewabout200%yearoveryear insomemonths lastyear.
Source:Zaozuo
KEYTAKEAWAYSWhat follows are the key takeaways from our assessment of the highlycompetitive and rapidly growing furniture and homewares e-commercemarket:
• Thereareseveralfactorsdrivingtherobuste-commercegrowthinfurniture and homewares compared to stores, includingdemographics and the endless customization options availableonline.
• Global furniture and homewares market revenue is expected toincreasebyafive-yearCAGRof15%.TheUSandUKisexpectedtoexperience 7.6% and 13.7% growth for the same time period,respectively.
• The UK had the highest percentage of furniture and homewarespurchasesmadeonlineinEuropeatapproximately12.1%inFY15,evenhigherthanthe8.6%intheUS.