At some point in time we all have the need to get some furniture. When this happens to you, what do you do? Where do you go to get furniture? If you are like a lot of us there is probably some local store that runs a million ads on TV or in the newspaper that is the place that we all start our search at. However, what if you could start your search someplace where you already buy a lot of things? What if you could go to Amazon and buy that chair, table, or dresser that you’ve decided that you need?
Why Amazon Is Getting Into Furniture
Amazon, the company that started out sending you books in the mail, has decided that it wants to be the place that you go to buy furniture. This means that they are gearing up to change their product development definition and make a big push into the furniture and appliance market. What this push means is that Amazon has gone ahead and built four of their massive warehouses just to hold bulky furniture items.
This means is that Amazon is preparing to go to war with the two firms that currently dominate the online furniture business: Wayfair Inc. and Williams-Sonoma. The reason that Amazon has become interested in this new market is because online furniture sales is one of the fastest growing segments of the online market. This segment grew by 18% in 2015 – competing in this market would look good on anyone’s product manager resume. That growth makes it second to the fast growing online grocery business. Right now, roughly 15% of the 70B U.S. furniture business has moved online.
What makes the furniture market segment so interesting for product managers is that there are not yet answers for all of questions that currently exist. There are big issues that all of the major players are still struggling with. Other markets like books, videos, and clothes have well established rules for how to sell these items online. However, the world of online furniture is so new that nobody has all of the answers yet. Basic questions like just exactly how much variety should be offered to customers is not yet clear. The biggest open question has to do with trying to find the most efficient way to deliver furniture to customers.
Why Amazon Thinks That It Will Be Successful In Furniture
Amazon has been selling furniture for a number of years. However, they have recently noticed that furniture has become one of the fastest-growing retail categories at Amazon. This is the reason that they have now decided to move more completely into this segment. Not only will the Amazon product managers be selling popular furniture lines such has Ashley furniture and Johnathan Adler, but they will also be offering custom furniture design services.
In the broader home furnishings category, Amazon already has a 17% market share. One of the things that the Amazon product managers need to be aware of about the furniture market is that it is different from all of the other markets that they are currently competing in. A key factor is that it is going to cost Amazon a lot more to deliver a couch or other large furniture item in part because such items take up a lot of space and so a driver will be able to make fewer deliveries. An additional factor is that furniture customers often want the furniture brought into the house, unpacked, and then to have the trash taken away.
Right now shoppers are indicating that they are still willing to pay for shipping of large furniture items. However, more and more they are indicating hey are not willing to wait for delivery – it has to be fast! Right now Amazon is offering free shipping on all orders over $25 and on all orders for Amazon Prime customers. Note that items that ship from 3rd party providers may have a shipping fee associated with them.
Initially Amazon is expected to rely on 3rd party logistics providers to handle distribution centers and to make deliveries of furniture and appliances to customers. Over time, Amazon is expected to bring more of its logistics in house. As the sales of furniture items goes up, the cost associated with delivering the furniture goes down. The reason that these 3rd party providers are becoming so important to Amazon is because both FedEx and UPS have been complaining that large and bulky items tend to clog their distribution centers which were designed to process millions of smaller packages.
What All Of This Means For You
Furniture items are big. They are awkward to move and they are a real challenge to deliver to customers. These facts make it all the more amazing that Amazon, the company that became huge by delivering books and DVDs, has decided to become a big part of the online furniture market. This is going to change everything both for customers and for the established players in this market. Looks like their product managers are going to have to go back and take a look at their product manager job description in order to figure out how to be successful.
In order to prepare to deliver more furniture, Amazon has gone ahead and constructed four large warehouses. They will now be competing directly with Wayfair Inc. and Williams-Sonoma for the online furniture market. The online furniture market is growing rapidly. There are still a number of questions that need to be answered like how much variety to offer and how to deliver the big, bulky items. Amazon will be selling popular furniture lines like Ashley furniture and Johnathan Adler. The Amazon product managers need to realize that furniture deliveries cost a great deal and customers often want a lot of delivery service. Shipping costs may be an issue with large furniture items. Amazon is going to start thing off by relying on 3rd party firms to manage their furniture and make deliveries.
The online furniture market is so large that there was no way that Amazon could keep ignoring it. Their entry into this new market is going to fundamentally change how it operates. The Amazon product managers are going to have to realize that the furniture market is fundamentally different from all of their other markets and make the necessary adjustments. If they can do all of this, then the next time you need some furniture, you just might find yourself going online to Amazon to get it!
Question For You: What can Amazon do to make their online furniture offerings stand out?
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What We’ll Be Talking About Next Time
Hopefully by now we are all aware that Amazon has purchased Whole Foods and has gotten into the grocery business in a big way. However, what a lot of product managers may not be aware of is that Amazon’s grocery dreams don’t stop with Whole Foods. Instead, they have their own plans about changing their product development definition and finding out what an Amazon grocery store that they built from the ground up would look like. What lessors are product managers going to be able to learn as we watch Amazon expand even further into the grocery business?