More Capacity Comes Out of Home Furnishings Industry

I’ve always thought of dot.com as both a big risk and a big opportunity for the likes of Bed, Bath and Beyond. On one hand, virtually every item at a home goods store can be purchased online with little to no risk of getting the wrong size. In contrast, an apparel company can do dot.com to a lesser degree as there is some, but not massive, variability in sizing. At the extreme is footwear, where one SKU x 3 colors x 28 different sizes = massive complexity. This gives BBBY an edge vs. these other categories.

But within the home goods category the edge is less clear. Specifically, the barriers to entry are extremely low, as just about everything at a Bed Bath can otherwise be ordered at any of hundreds of sites, and shoppers can price shop using shopping bots. The key here for BBBY is to exploit its leverage and be sharp on price points while upselling the consumer on impulse-purchase items.

This is working to a degree, as Home Décor Products Inc, an on-line retailer and operator of nine sites that sell home furnishings, ceased operations. The company is one of the largest online home products retailers ranking number 143 in the Internet Retailer Top 500 Guide and generated sales just shy of $100mm. This is only a drop in the bucket to BBBY (BBBY’s revs are $7.2bn in a $110bn category), but it is still capacity removed from the industry. On the margin, a good thing for BBBY.

More Capacity Comes Out of Home Furnishings Industry - 3 30 2009 10 00 30 AM