Amazon sets (new) sights on home furnishings market
A Wall Street Journal report last week noted that Amazon intends to “build four massive warehouses to help it deliver bulky appliances and furniture,” as “part of a strategy to expand furniture offerings and speed up delivery times.”
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Is there anything that Amazon cannot do?
OK, so that is clearly a tongue in cheek question, but on many levels it could be viewed as up for debate, right?
In recent months and years, we have seen the global e-commerce bellwether ostensibly rewrite the logistics playbook, something with far more than just running the option and throwing a screen pass, on the fly, whether it is its commitment to free shipping for its Amazon Prime members, or same-day shipping for Prime members, its in-(ware) house robotics, Sunday delivery partnership with the USPS, its intent to get into the emerging last-mile network, its leasing of air freighters, and rumored plans to build out larger-scale transportation and logistics operations to add capacity beyond existing providers, to lower logistics expenses, and ultimately, to offer specialized 3PL services to third parties.
To be sure, there is way more going on behind the curtain at Amazon than just these topics, but you get the idea.
One of those things was featured in a Wall Street Journal report last week, which noted that Amazon intends to “build four massive warehouses to help it deliver bulky appliances and furniture,” as “part of a strategy to expand furniture offerings and speed up delivery times.”
OK-that makes a lot of sense, considering how diversified Amazon is in both the things they are doing and, obviously, delivering, too.
As most know, Amazon is not really well known for being incredibly candid on the record, not by any stretch of the imagination.
But in an unsurprisingly succinct manner, it told the WSJ this in a prepared statement: "Furniture is one of the fastest-growing retail categories here at Amazon.”
Short and sweet and to the point, but as the report points out, it will surely be worrisome news for furniture and home furnishing shippers, while also likely leading to a need for more outsourced logistics partners to ship large items like couches and dressers.
Other key points cited in the report included:
- furniture shipments grew by 18 percent online in 2015, second only to groceries, according to Barclays, and roughly 145 percent of the $70 billion U.S. furniture market was sold online, according to IBIS World; and
- Amazon has around 17 percent market share in the broader home furnishings category, according to Morgan Stanley
What’s more, the report explained that retailers are still figuring out how best to go about certain aspects of selling furniture online like what variety to offer online, coupled with the most optimal approaches to deliver to customers at home. And from an Amazon perspective, the company is now focusing on expanding product selection, as well as increasing delivery to 1-2 days in certain cities, the report added.
Just because Amazon has rolled out its plans to increase its presence on the bulk/heavy items side, does not mean they are immediately heralded as kings of the hill for the segment. There are a lot of players in this space from both a furniture and appliances perspective, as well as those focusing on related logistics and distribution, and last mile services, too.
“It makes sense Amazon would need to improve their distribution network to facilitate the delivery of bulky items,” said Rob Martinez, president and CEO at Shipware, an audit and parcel consulting services company. “Both FedEx and UPS have experienced increased demand for transportation of larger and heavier packages. With the growth of ecommerce, demand for oversized shipments (mattresses, basketball rim/backboards, trampolines, large-screen TVs, large appliances, etc.) have required that the parcel carriers re-engineer their networks as most of these larger items are not transportable by conveyor belt. In fact, the carriers have had to create both permanent -- as well as temporary facilities during peak -- entirely dedicated to the sortation of oversized packages.”
These changes are costing shippers more, he explained, with both FedEx and UPS having recently announced new surcharges for “unauthorized” and “over maximum limits” to be applied to overly large and/or heavy pieces, which disrupt operations and require the carriers to incur additional handling costs. There are other surcharges for larger items including Additional Handling Surcharges, Oversize Fees and Large Package Surcharges, too.
Jerry Hempstead, principal of Hempstead Consulting, told LM that there is really more than one answer and also more than one solution to be approach this somewhat new market.
“Amazon is investing in just about every item an individual buys,” he said. “At one end you have digital delivery of movies, music, games, books and software. They also want your food purchases, which have its own set of needs. A small package under 50 pounds has a lot of options. Then there is what we used to call the ‘ugly freight.” Obviously FedEx and ups and the USPS are not good options for couches, bookcases, washers and dryers, not even for final mile. So the solution is to forward locate as best you can with predicted demand and find regional carriers with lift gate capability and or white glove service.”
What happens from here remains to be seen, but it is clear Amazon is up for the challenge.
About the AuthorJeff Berman, Group News Editor Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. Contact Jeff Berman
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