Snippet | Furniture retail’s digital frontline

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Snippet | Furniture retail’s digital frontline

Amazon’s latest version of the e-commerce augmented reality app, Room Decorator, introduces to its iOS customers the ability to virtually place dozens of furniture and decor products in one hundred different configurations. This idea is not new to most furniture retail brands – Wayfair, IKEA and even Amazon brought the functionality to market as early as 2017/18. While the feature is a minor augmentation to Amazon’s furniture offering, it does fit into the e-commerce giant’s larger strategy to enhance the online shopping experience to better reflect its customers’ expectations from retail experiences. The primary objective is to capture the digital market share of furniture retail before furniture-giants like IKEA and Costco build out their omnichannel capabilities.    

According to 1010data, the two web-only e-commerce platforms Wayfair and Amazon capture 63% of online furniture sales. This leaves a multitude of other omnichannel retailers such as IKEA and Costco with market share as little as 1.8% and 3.2% in the online space. IKEA, renowned as the world’s largest furniture retailer, continues to acquire 92% of its sales from existing physical stores, with only 7% accounting for online sales in the 2019 fiscal year. This trend shows a clear divergence between the direct-to-customer and the traditional business models within the industry. However consumption behaviour, particularly in a post-pandemic world, is becoming increasingly defined by digital-physical experiences – where digital-physical experiences can be defined as creating the experience of a physical store whilst providing the convenience of online purchase. This is an intersection towards which omnichannel retailers have been ramping up to retain their market share in the face of consumer habit change. In the absence of an aggressive online presence, omnichannel retailers stand to lose customers who prioritise convenience over the shopping experience to Amazon and Wayfair in the coming decade. 

In this race to capture market share, Amazon can and will lean heavily into its main points of advantage – highly optimised logistics and distribution, diversity in product offerings via a marketplace and personalisation recommender engines. These points of differentiation will pose an uphill battle for omnichannel providers like IKEA whose presence and models are still heavily geared towards physical retail. IKEA, however, has made a series of attempts to digitise its offerings to various degrees of success. Its pilot program to sell smart-lights through Amazon was subsequently scrapped, and the initial iteration of its e-commerce AR app did not provide customers with an option to purchase furniture in-app. This oversight was rectified later down the line as the furniture retailer came closer to understanding the convenience factors that its customers seek from digital experiences. A learning that was applied in its acquisition of Taskrabbit in 2018 to enable customers to hire someone to assemble their IKEA furniture. 

Primarily for omnichannel retailers who are heavily weighted in physical presence, there is a two-fold challenge on the horizon. The first is to transform their supply chains and business models to integrate convenience-first digital offerings and the second is to do so in a timeframe that will allow them to meaningfully compete with their tech-first counterparts, Amazon and Wayfair.  While the omnichannel retailers come up the curve, Amazon will continue to siphon off customers from them – steadily but surely. 

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