Are Amazon, Wayfair a threat to specialty retail?

Home Featured Post Are Amazon, Wayfair a threat to specialty retail?

amazonIn the classic sci-fi action flick, “Predator,” an alien utilizes a cloaking device that renders it invisible. The stealth creature is able to outmaneuver and attack its pursuers mainly because they couldn’t see it coming until it was too late.

The retail business witnessed its share of “predators” over the years, alternative formats who went largely undetected as they gobbled up market share. Two online behemoths who reportedly tried their hand at different sorts of businesses—and done well in many of them—pose the latest threat, industry watchers say. Despite maintaining extensive product selections, logistics hubs and customer service centers, Amazon and Wayfair appear to be flying under the radar in the residential flooring business.

“There’s no way to know for certain what the direct impact is unless consumers visit our store first and inform us that they also received an online price,” said Scott Browne, president, Macco’s Floor Covering, Green Bay, Wis. “We monitor traffic and closing rates in each location, and if we lose an order we document who won the project.”

Online vendors continue to change the way consumers shop for home goods, including flooring. E-commerce’s share of total retail sales is expected to rise from nearly 21% to almost 24% in 2023, CBRE, a commercial real estate and investment firm, reported. “We know the vast majority of shoppers are going online for any purchase, at least to research, if not to buy outright,” noted Eric Wooten, general manager, Johnson Floor & Home Carpet One, Tulsa, Okla.

If retailers are aware of Amazon and Wayfair, the thought of losing business to them might not be front of mind. “While we don’t spend an inordinate amount of energy worrying about competition or things we can’t control, we do pay attention, learn, adjust and apply where it fits,” Ron Dunn, CEO, CarpetsPlus ColorTile, stated.

Indeed, dealers and retail groups contacted by FCNews say it is rare when customers mention online vendors. “To my knowledge, we have never competed with Amazon or Wayfair,” said Penny Carnino, director of operations at Grigsby’s Carpet, Tile and Hardwood, Tulsa, Okla. “We are fortunate that in our market, people want to see product and touch it.”

Nonetheless, a difficult challenge for any retailer is knowing when they are losing customers to competition. Oftentimes it happens right under their very noses. “It’s the proverbial ‘head in the sand,’” said Olga Robertson, president, FCA Network. “The reason their presence isn’t being felt is because the dealer never had a chance with that consumer.”

Size, scale matter

It’s hard to ignore the sheer number of customers Amazon and Wayfair service and the volume of home improvement products posted on their respective websites, each totaling in the millions. A case in point is area rugs, a category increasingly moving from brick-and-mortar to online. An estimated 80% of the business is $199 or below for e-commerce, according to published reports, with sites like Wayfair and Amazon offering 5 x 8 machine-made rugs for as little as $59.

These products, which do not require professional installation, appeal largely to cash-and-carry shoppers, a customer base that specialty retailers often service on a reactive basis. Amazon and Wayfair, however, also sell a wide selection of flooring online with the option for professional installation. Amazon promotes “best” flooring materials, which consists of the 100 most popular items for categories such as laminates and vinyl.

“Amazon is great at shipping anything in a box, and now you can receive a list of professionals in your area who can come out and not just measure but also provide consultation as well as install your LVP once you receive it,” FCA Network’s Robertson said.

Not to be outdone, the Wayfair site lists ceramic tile, laminates, vinyl, carpet tile, hardwood and bamboo, plus garage floors and mats. Flooring is available from major brands such as Mohawk, Dal-Tile, Emser Tile, Mannington and Shaw Floors. Furthermore, Wayfair offers free in-home consultation and measurement from a licensed local contractor and professional installation service with a certified “Installation Made Easy” contractor.

“Amazon and Wayfair are established, trusted brands,” Robertson stated. “Their business will continue to grow as long as they continue to make it easy for the consumer to shop.”

Consumer awareness is amplified by press coverage of both e-commerce giants. For instance, multiple published reports referenced the best deals from Wayfair’s “Way Day” sale. Bob Vila identified a low-pile beige and navy rug from Three Posts as the most heavily discounted item on its list of best early Black Friday deals, selling at more than 70% off at $164.99. And USA Today reported that Wayfair’s colorful area rugs were among the 10 best deals of Way Day, selling for up to 77% off.

“Well capitalized, easy-to-use entrants always cause concern to established businesses in every category,” noted John Gilbert, president, Carpet One Floor & Home. He noted how Carpet One invested heavily in both its online presence and brick-and-mortar shopping experience and is confident it can meet current and foreseeable challenges. “We need to be aware of—and counter—any viable threats to our business.”

While brick-and-mortar specialty retailers have an advantage due to their local presence, many shoppers, ironically, often start researching desired products online before stepping a foot inside retail showrooms. “If we’ve done our job in qualifying our customers and have listened to their needs, we typically earn their trust,” Macco’s Browne noted. “If they present a lower price from an online dealer, it’s because they want to do business with us and need confirmation that they’re making the right choice.”

Friend or foe?

How impactful are Amazon and Wayfair in the residential flooring replacement business? It’s difficult to say as category sales are not reported by either publicly held company. If you factor in size, scale and product availability, observers say, there is enough evidence to support the notion that a good amount of area rugs and professionally installed hard surfaces are being sold online.

“It’s quite possible that the impact is being felt at retail, but we’re not seeing it or hearing about it,” Carpet One’s Gilbert said. “Despite the e-commerce efforts, there does not seem to be much impact on retailers offering full-serve installation like our members do.”

Most e-commerce operators leverage the same core benefit: consumers can shop without leaving their home or office. But when it comes to service, the playing field is leveling as online shoppers have access to many of the same benefits offered by specialty retailers. For example, specialists are available from Wayfair to provide live help online and samples can be sent quickly to shoppers. Wayfair also offers the convenience of financing options for flooring and installation, plus a branded credit card.

“Amazon and Wayfair are disrupters,” FCA’s Robertson agreed. “They are here to stay and getting better and more efficient as technology improves.”

Whether online operators target the same diverse customer base as retailers is up for debate. Home centers and mass merchants, for example, have long catered to the needs of bargain hunters and do-it-yourselfers, but they have typically shied away from high-end goods. “I do not believe they are disrupting the full-service retail replacement and full-service builder business, which are areas where our group concentrates and succeeds,” one retailer told FCNews on the condition of anonymity.

Selling tactics

An ongoing challenge for specialty dealers is competing against the numerous places where consumers can find flooring. Still, there is something to be said about reading product descriptions online versus engaging with trained sales staffs who can recommend floor coverings that meet their styling needs and budget. “Occasionally, a customer will ask if we have a product they saw online,” Johnson’s Wooten said. “If we do, great; we typically earn their business even if the online price is lower than ours.”

Consumers value being able to personally interact with retailers before, during and after the installation. These value-added services represent a major competitive advantage. “We explain the costs associated with a brick-and-mortar store and the advantages of doing business with a local, established store that has the product knowledge necessary to help the customer make an educated decision about what is the best product to use,” said Tony Fry, owner of Texas-based CarpetsPlus ColorTile of Winnsboro.

If there is a lesson to be learned from competing against the Amazon and Wayfair business models, it is the importance of maintaining a compelling online presence. “We are constantly assessing our site and our SEO to ensure our customers see us right alongside other online vendors,” Johnson’s Wooten explained.

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