The worst time to be in the furniture business might be during a global supply chain crisis set off by a "100-year" pandemic. Research compiled by Statista in early 2021 showed that home furniture online shopping converted to sales at the lowest rate out of 17 key verticals - on par with luxury handbags and lower even than luxury apparel.
I can share my experience and what worked for us at a few of my companies, Manhattan Home Design and Barcelona-Designs. Like most furniture companies, mine saw sales grow at the beginning of the pandemic as more people built home offices to accommodate their jobs moving online.
Unfortunately, the supply chain crisis came at a time when I was looking to parlay that growth into capital to help my company continue growing. Would-be shareholders are now squeamish about hardline retail.
I realized my company had to do something different to show that e-commerce furniture was still a safe bet for investment. That meant doing things differently to capture revenue. Here are some of the secrets to how my company kept its spot on Inc.'s 5000 Fastest-Growing Private Companies.
Abandon carts, not hope. Do you track customers who shop on your website, get to the point of entering their contact information but click away before the sale goes through? One thing my company did to capture revenue when sales started to decline was have staff follow up personally with the customer. We were able to convert 26% of abandoned carts into sales - revenue that would have otherwise been lost. The potential to make a sale already exists with these clients, so it's a low-cost, low-risk way to convert those on the fence.
Think fast … move faster. You should always be looking to improve every area of your business, from marketing, logistics, operations and even product returns. Having data to work from is a big part of that. My company helped develop a custom customer relationship management (CRM) and enterprise resource planning (ERP) software to help show us what our leads have visited before coming to our website, as well as all their previous interactions across our phone systems, emails, chats, showroom visits, swatches and more. Using it has enabled us to improve our marketing efficiency ratio to 12%, which is higher than the average for e-commerce furniture.
Reverse engineer. When considering how to structure my business, I looked at what Zara was doing in the fashion industry. It focuses on trends, quick launches and a fast turnover with lower price points. So, now, my firm continually assesses market trends to narrow down the 30 bestselling items, and then we dive into sourcing costs, cost of goods sold and potential margin to find the 10 most profitable. Next, we do paid social media campaigns to micro-test each product. We focus on clickthrough rates, cost-per-click and return on advertising spending. Once we find products with above 7x ROAS, we launch them on our website and look for conversions. Once we get a few conversions, we start manufacturing the items. As Gordon Gecko said, "We bet on sure things." Instead of taking 1-4 years to launch new products, this can help you shrink a full product cycle to just 12 weeks.
Lower your cost, lower your risks. Whether it's a supply chain crisis from a global pandemic or an oversized ship stuck in a canal, it's beneficial to be limber. My company only pays our manufacturers for their products when they are at the loading dock with a shipping label. This can lower your inventory and financial risks and allows you to easily expand to other products and verticals.
No matter what crisis affects your e-commerce furniture company, with the right strategy and funding, there is always room for growth.
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Manhattan Home Design
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