Perspectives about selling furniture on the web from a conventional retailer with a giant web presence.
For those of us with sizable investments in physical stores and inventory, the idea of Internet competition may strike fear deep into our heart. Some large retailers are reacting to that fear by bringing pressure on manufacturers to "ban" or restrict Internet distribution. While the desire to protect one's turf may be understandable, given the dynamic nature of this technology, it's just not going to be possible.
Try this: Go to any search engine site on the Internet. (Infoseek, Yahoo, Excite, there are hundreds more), type in a major furniture brand. Hundreds of Web sites will be shown in the search engine results listing furniture retailers of every size and type, many ready and willing to sell over the Internet.
And more furniture retailers are putting up Web sites every day. It's simple, easy and cheap. Scan in your logo, list the brands you sell, a phone number, and you're in business on the Internet. Some show products, some don't. But many sites offer the eager Internet shopper the opportunity to "call us for prices", with the offer "we ship anywhere".
Sadly for our industry, this business model reduces the high value products we sell to commodity status. When the only point of differentiation is price, the first casualty is service, and as we all know our customers don't suffer the consequences of poor (or non-existent) service happily or quietly.
Manufacturers who make a diligent effort to insure a high quality distribution channel are to be commended for their efforts. But this is an area where a manufacturer needs to be very cautious. Just as in the real world, there are significant differences in the policies and practices of e-commerce retailers.
Additionally, some manufacturers are getting complaints from their large retail accounts regarding their Internet distribution policies. A few have decided to eliminate their products from the e-commerce channel. But, painting with "too broad a brush" in restricting Internet distribution may have far reaching, unforeseen consequences.
THE LEGAL ISSUES
There is a well-defined body of law that precludes a retailer or manufacturer from taking steps to restrain free trade, or otherwise engage in practices that could be construed as monopolistic or anti-competitive in intent. A manufacturer's effort to appease a large retailer or group of retailers, by attempting to restrict the Internet as a legitimate channel of distribution may result in FTC action and a very costly legal battle.
The FTC has extensive experience in enforcing restraint of trade issues, courtesy of the home appliance and electronics industry in part. Interestingly the FTC is presently investigating restraint of trade issues in connection with Internet distribution policies.
BRANDING AND MARKETING IMPLICATIONS
Consider the reality: Over 70 million people in the U.S. are now online, with over 60,000 more signing on daily. Millions of these very demographically desirable folks are using the Internet to gather information before they go shopping, especially on large ticket purchases. They understand that knowledge empowers them. They may use one of the many search engines to locate Web sites with a high relevancy to their search word.
A manufacturer that chooses to remove their branded products from a high traffic online store will miss a golden opportunity to have their products showcased. This will allow other suppliers to fill that category in the online showrooms.
Let's face it, there is very little in the home furnishing business that is truly exclusive. At this very moment, somebody, somewhere, is building a "knock-off" of every item that attains any measure of success in the marketplace. The online store will simply show and sell the available alternatives.
Thus, a manufacturer that removes their brand from the Internet gives their competition a very generous gift: Free national branding.
Astute manufacturers have come to realize the advertising value of having their brand and products featured on one of the major internet sites. To understand the value involved, consider the cost of a full color ad in one of the nationally distributed shelter magazines or a national television ad schedule. A manufacturer, for example, featured at FurnitureFind.com benefits from tens of millions of ad and page impressions every month, free.
Clearly, a manufacturer faces a host of risks both legally and from a marketing standpoint in trying to prohibit Internet based distribution. On the other hand, there's also a risk in facilitating a web site or "800 number" operation to sell furniture without well-defined systems in place to take care of the real needs of our customers.
However, there is a middle road between these two extremes that will bring the greatest benefit to manufacturers, retailers (both online and off), consumers, and the entire home furnishings industry.
A BETTER OPTION: STRATEGIC ALLIANCES
Forward-looking manufacturers are now forming strategic partnerships with carefully chosen, customer focused Internet retailers. (We're getting inquiries every day from manufacturers seeking a slot at FurnitureFind.com. To the extent that they fit our quality/value parameters and corporate philosophy we are adding manufacturers rapidly.)
Make no mistake: The Internet is creating a new group of market leaders among manufacturers and online retailers. But unlike other retail channels that simply divide the "pie" into ever-smaller pieces, we believe the Internet has the potential to increase the size of the home furnishings market as a whole. While some consumers do respond to the convenience of online shopping, easy access to huge amounts of consumer information also drives increasing numbers of well-informed consumers into their local stores. Real world retailers who pro-actively position themselves to take advantage of this retail trend will reap the benefits.
PROTECTING BRAND AND IMAGE
A manufacturer has an understandable interest in protecting its brand name and image in the marketplace. Ultimately, that means protecting the interests of the end consumers.
Clearly, to prevent the Internet from becoming a bottomless quagmire based on "call us for a quote" advertising strategies, pricing structure standards need to be set by manufacturers.
This allows manufacturers to screen retailers in any retail channel (storefront, catalog, Internet, "consumers club" etc.), based on criteria that are designed to insure a high level of service all the way through the shopping and fulfillment process.
This is similar to the system Whirlpool Corporation uses to screen retailers for "Gold Ring" dealer status. Generally this includes provisions to maintain a representative product display, to provide regular sales training, quality delivery, qualified service, and an agreement to maintain minimum advertised prices (MAP pricing). We believe these standards are appropriate for the home furnishings industry as well. The standards we've proposed to manufacturers include these four basic criteria:
- That an authorized retailer commit to stocking a representative display of the manufacturers line in a physical showroom. This allows a customer an opportunity to inspect the products, provides the manufacturer with a financial and floor space commitment from the retailer, and facilitates high quality sales training.
- That an authorized retailer maintain a dedicated, factory trained sales staff to insure professionalism and accuracy in assisting customers to make informed buying decisions, online, by phone or in a physical store.
- That the retailer has a system in place to provide customers with qualified, professional delivery, and available set-up and "clean up" services. In our industry this would generally mean in-home delivery by two uniformed furniture delivery people. In our experience, "common carrier" home delivery does not provide a level of service consistent with our customer's expectations.
- That the retailer has a system in place to provide their customers with professional service after the sale, in any area the retailer chooses to sell and deliver the product. This responsibility should not rightfully be dumped back on the manufacturer or the local retailer. If you're going to sell it, you should be prepared to service it.
Along with these basic standards for approving or authorizing a retailer, a manufacturer could further protect its brand by establishing Minimum Advertised Pricing (MAP) guidelines. (Again, this is from the Whirlpool Gold Ring model.)
If the Internet is defined as an ad, (which it is, by definition) then MAP pricing could be required of Internet retailers. This would solve the "call us for a quote" syndrome. Anyone who chooses to sell a product online could be required to show prices, in line with MAP requirements.
Note: Under Federal law, a manufacturer can not dictate actual selling prices. This is viewed as price fixing. However, MAP prices are widely used in the major appliance and electronics industry, and have helped to bring some measure of stability to that very chaotic market, which by extension insures the retailer's ability to provide the kind of customer service essential to long term customer satisfaction.
A manufacturer who implements a program of this kind encourages consumers to shop with retailers (both online and off) who earn the right to display the authorized dealer status.
Retailing in general is going to see some tumultuous and far-reaching changes in the months and years ahead. Unmistakably, the Internet is going to play a part in the process.
It's up to each of us as retailers and manufacturers to recognize and take advantage of the opportunities this technology presents us. Rather than fear the emergence of the Internet as an alternate distribution channel, we see it as a technology with a great potential for good in the home furnishings industry. Here's why:
PROPERLY MANAGED, IT'S GOOD FOR CONSUMERS
There is no doubt that consumers will increasingly use the Internet to educate themselves before they make any major purchase. With that assurance, the great majority of these shoppers will reward deserving merchants (both online and on Main Street) with their business.
The same trend is being seen in the automobile industry as millions of consumers now use the Internet to gather information. Still, the vast majority end up buying from their local dealer. By pre-shopping their furniture purchase on the Internet the consumer saves time and feels more confident making a well informed choice. So informed, the majority of shoppers will seek out a real world retailer and buy locally.
But, for those customers who are constrained by time or distance, (or those few who are inconsolably disgruntled with their local retailer) the Internet provides an exciting means of satisfying their needs and wants in an greatly enhanced way.
PROPERLY MANAGED, IT'S GOOD FOR RETAILERS
For those retailers prepared to sell and service their customers with a high level of professionalism, the Internet is already stimulating millions of potential buyers to visit their closest retail showrooms to "sit and touch" before making a major furniture purchase. Given their "home town advantage" well managed, customer focused bricks and mortar retailers all over the country already reap the obvious benefits.
PROPERLY MANAGED, IT'S GOOD FOR MANUFACTURERS
We believe the Internet will help to fuel increased consumer demand for home furnishings as a category and at the same time increase brand awareness and unit sales for manufacturers that have partnerships in place and "floor space" in the most highly trafficked online showrooms. (To put that expression in perspective, as of the time of this writing, in February 1999, FurnitureFind.com has hundreds of thousands of visitors monthly, with page views in the millions).
The course we've outlined here is the informed "middle road". This strategy allows our industry to take advantage of the power of the Internet as an information and branding tool, without letting it turn our beautiful, high value products into commodities sold by the lowest bidder. And, it's a model many of our key vendors have already endorsed.
When something is good for furniture consumers, retailers and manufacturers, it's good for the furniture industry as a whole. But for our industry to see those benefits, it's up to the leading manufacturers to resist the pressure being brought on them to "ban" Internet distribution. Clearly, standards need to be set to insure a high level of customer service throughout the transaction process and afterward as well.
Manufacturers who choose to authorize and facilitate a service based Internet distribution model with a well managed, customer focused online retailer will see impressive gains in branding, market share and sales.
Stephen Antisdel, is President of Bookouts Furniture - Steve's main focus is administration, personnel and store advertising. He oversees strategic planning, budget forecasting, insurance, and tax matters. In the retail furniture business since 1968, he started at Bookouts on the delivery truck, showed an aptitude for sales, then buyer, and finally to management, by 1978. Questions or comments can be directed to Stephen care of FURNITURE WORLD at firstname.lastname@example.org.