Online furniture network offers low-cost e-business
By Jay McIntosh -- Furniture Today, June 23, 2008
ENGLEWOOD, Colo. — Target, Costco and the like are eating your lunch with online sales. Why not bite back?
That's the pitch from Andrew Zuppa as he promotes the Discount Furniture Network, a program that allows stores to offer a huge array of products for sale online with little upfront investment and no operating costs outside of promotion and advertising.
“It's completely incremental business for them. It's free money,” said Zuppa, who is corporate general manager and marketing director for Colorado-based Top 100 company American Furniture Warehouse.
American has been building its e-commerce system for several years and now sells $250,000 or more of products online each month.
Now, the company has begun seeking out partner retailers around the country that can sell American's furniture selection via their own Web sites.
It kicked off the Discount Furniture Network late last year with tests at some Western Home Furnishings Assn. member stores and is now offering to extend it to others in the western retail group. At next month's Las Vegas Market, it will begin offering the program east of the Rockies.
Participating retailers can offer nearly 30,000 SKUs now available through the network, a number Zuppa expects will reach 50,000 by the Vegas market and could near 100,000 by the end of the year.
Sharron Bradley, the WHFA's executive director, said the group's board was enthusiastic about the program after hearing an update from Zuppa in May.
“There's millions of dollars (of home furnishings) being purchased online that most of our retailers never know is being purchased,” said Bradley. And if it could create another revenue stream or bring more people into your store, she added, why wouldn't you do it?
One reason could be a fear that the site would cannibalize in-store sales. But Zuppa said that hasn't been the experience — people who want to buy online will generally buy online from whichever site they choose, but brick-and-mortar store traffic isn't likely to migrate en masse to the Internet.
The Discount Furniture Network program starts with a Web site. American's technical staff will create what's called a MyStore site as a link from a partner retailer's existing site or a new site, which the staff also can design and execute. The site design service is free for WHFA members and will cost a few thousand dollars for others.
Once the site is up, the big inventory is available for any customers to buy online. Here's how that works:
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American sets a base price for product, covering its own costs and margin, and the participating retailer adds a markup depending on what he or she thinks the market will bear. For example, the price could be the base plus 20%.
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Each retailer promotes the site, often in its regular print, broadcast or online ads and also using search engine promotions, paying for the number of hits via Google, Yahoo or others.
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For the rest of the sale, the participating retailer is not involved. American's online staff of about 50 takes the order and handles all customer service. Goods are delivered on American's trucks, either to the consumer or to the retailer.
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The retailer gets a check based on the markup amount of whatever is sold.
The available inventory includes branded merchandise, but by agreement with the manufacturers no brand names are used on the Web sites, said Zuppa. The selection also draws from the American Furniture Warehouse's large direct-import program.
About 2,500 SKUs are available with two-week delivery from American's warehouse and other products are sent in four to six weeks. Shipping is free nationwide, with the cost figured into the base price.
Zuppa said that when American started building its e-commerce business a few years ago, it mainly used third-party shippers. But it decided to switch to its own 60-truck fleet.
“Last year we started doing 90% of our nationwide deliveries with our own trucks using our own people,” he said. “Our transportation costs were cut in half and damage was cut fivefold. We get less than 2% returned, which is in line with our brick-and-mortar stores.”
American CEO Jake Jabs recently spent $1 million on new tractors and trailers for the transportation fleet and has committed to spending another $1 million as needed, said Zuppa.
He said his goal is to have one retail partner in every major media market. He expects the first full year of operation will be in late 2009 and into 2010.
“It would be my hope in that first year of full rollout, that we do $10 million (in sales),” he said. “We think we can double that number every year thereafter for the next five years.”
