A Closer Look At Amazon’s Furniture Ambitions

The online furniture market is growing rapidly. Statista estimates that the global online furniture and homeware revenues will reach $220 billion by 2020, growing at a five year CAGR (compounded annual growth rate) of 15%. Amazon (NASDAQ:AMZN) is now increasing focus on this market, and recent reports suggest that the company is constructing four large warehouses to handle furniture and appliances.  Traditional brick and mortar home furnishing retailers are losing market share to specialty stores and dedicated internet only retailers. Wayfair is the largest e-commerce player in the home furniture market in the U.S., and is Amazon’s primary competitor in this market. As customers look at Amazon to fulfill their home furnishing needs, the company is looking to innovate in the furniture segment and drive growth over the long term.

Innovative Products, Easy Research Options To Attract Customers

Much like many other e-commerce segments, customers are attracted to the online channel for buying furniture since it allows them to research a wide variety of designs and products in one place, thus making it convenient and faster to research options. Further, several online furniture sites provide visualization tools where customers can see which product or design suits their homes and choose accordingly. Innovative products, free shipping and installation and customization are the other features which are attracting customers to buy furniture online. Amazon is looking to ride this trend by expanding its selection of products in the furniture and home furnishings segment and enhancing the customer experience through new features such as Amazon Custom Configurations and Personalization. Reports also suggest that Amazon might be opening high-tech brick and mortar furniture and appliances stores in the future.

The furniture segment can become a sizable and steady revenue stream for Amazon. Out of the $220 billion revenues estimated to be generated by the online furniture market, the U.S. is estimated to account for around $40 billion. If Amazon can capture a 25% share in the U.S. market, the company will be able to generate $10 billion in revenues from this segment in 2020, from the U.S. alone. While this is less than 10% of our forecast for Amazon’s total 2020 revenues of around $280 billion, it will drive growth for the company as consumers increasingly prefer to shop for furniture online. Further, the company can expand to other regions such as the U.K. and Asia and generate additional revenues from the segment.

Amazon has a strong loyal base of Prime customers who are looking for convenient ways to shop. As the online furniture market grows at a rapid pace, Amazon’s technology expertise and product innovation will allow the company to capture this growth and generate a steady revenue stream in the long term.

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