April core retail sales posted a 0.2% month-over-month decline after an upwardly revised 1.1% rise in March1. Retail sales have gone up and down since the beginning of the year – with strong numbers in January, a drop in February, another surge in March, and this decline in April. Building materials, garden equipment, and supplies dealers sales sank 1.9%, while clothing stores fell 0.2%. Online and mail-order retail sales were down 0.2%.
Not too long ago, buying furniture or large appliances on the internet was an uncommon and quirky thing. Consumers purchased sofas, mattresses, or beds only after checking the products out in person at sprawling stores that doubled up as warehouses. But direct-to-consumer, digital-native brands such as Wayfair, Casper, and Article have changed the perception that big and bulky items can only be purchased in person and are making furious strides in this space through their online stores. Buying a couch, dining table, or even a dishwasher on the internet is increasingly becoming a routine exercise for consumers.
Shopify estimates that global furniture and appliance ecommerce revenue will grow to $394 billion by 2022, up from $258 billion in 2018. And according to Internet Retailer, mattresses are among the fastest-growing product categories online, with 14 mattress retailers producing $1.77 billion in revenue in 2017 for a 60.6% year-over-year increase. Meanwhile, the market for home delivery of big and bulky items reached $9 billion in 2018 and is on track to increase by a compounded annual growth rate of 10-15% (see figure 1).
But the interesting twist in the tale is that – despite Amazon’s latest attempt to change user behavior – the expectation for speed when it comes to free home delivery hasn’t yet dropped substantially in the US. According to our latest Home Delivery Shopping Survey, consumers are willing to wait 4.3 days on average if they get free shipping – slightly up from 4.1 days in 2018 (see figure 2).
To set themselves apart in this scenario, retailers serving the big and bulky market have to consider offering value-added services alongside delivery options. Consumers have, in fact, increasingly come to expect that the delivery of the large item they purchased online will be accompanied by installation, assembly, or another technical service – even if it comes at an additional cost to them (see figure 3).
Some retailers have already invested in the ability to provide value-added services to consumers through either partnering with providers in the space or via mergers and acquisitions. IKEA acquired TaskRabbit in 2017 with this goal in mind, offering furniture assembly and mounting services to buyers in select markets. The Swedish company has also made an investment in home improvement service Traemand. Crate and Barrel, eBay, and Walmart, meanwhile, have partnered with TaskRabbit rival Handy to provide installation, assembly, and other delivery-related services for big and bulky products.
It’s a great opportunity for retailers to go the extra mile by providing convenience to their consumers, but there are some points to keep in mind before jumping into the services fray:
- Choose your identity
Retailers need to carefully consider what they want to be – or can be – to consumers in this emerging area. If service capabilities are not in the retailer’s wheelhouse, trying to create offerings in-house can be costly and is probably not for everyone. If a retailer decides it cannot create a desired service offering on its own – as many will – it needs to carefully consider who to partner with.
- Experience will pay off
Those with strong brands and/or highly differentiated products will likely succeed in this arena because they can limit consumer options and avoid a race to the bottom. Offering value-added services will quickly come naturally to retailers that have been competing on this front for the last 10-15 years.
- Limit your exposure
Smart retailers will look to segment customers and markets to offer this service profitably on a selective basis. Offering it at a nationwide scale in one go is a recipe for disaster and could result in losses in the current market landscape.
- Keep an eye on inventory
Retailers experimenting with this market need to be careful about inventory deployment, as the desire to deliver everything fast and free will lead to inventory builds and its associated costs, including locked-up working capital.
Today’s consumers value convenience. So, as they get used to buying more and more things online, retailers will need to consider offering one-stop-shop solutions to earn customer loyalty. Brands that sell furniture, appliances, and other large products need to carefully weigh their strategic goals with consumer expectations and then evaluate whether providing services is the right tactical choice.