Retail E-Commerce No Longer a Diamond in the Rough | Article

diamondAmerican soldiers in Iraq are now shopping together–at the same time–with their spouses back in the US–for furniture for their homes back in the US. They’re buying dining room sets, bedroom sets, sofas, etc. online at FurnitureFromHome.com. In fact, Milan Rousset, the company’s owner, says 60 percent of its customers are now soldiers stationed in Iraq.

“We do conference calls with the guys in Iraq and their wives in places like Arkansas, Virginia, or Tennessee, and help them figure out the styles, etc.” says Rousset. The company also takes care of shipping details, set-up after the furniture arrives at a home, and even repair if necessary. The first military sale happened with a couple where the wife was in San Diego, California. She and her military husband liked the process so well and the fact that the wife didn’t have to worry about anything associated with the purchase, and the word spread quickly to others in Iraq.

In New Orleans, Louisiana, victims of Hurricane Katrina who have successfully managed to rebuild their homes are, unfortunately now finding that there are few furniture stores in the city. Like the military couples, Katrina’s victims like the convenience of shopping online at FurnitureFromHome.com.

Rousset’s online store–which is also a virtual business–is the ideal solution for consumers who want the convenience of shopping at any hour from home or the office, or even a war zone, for brand-name furniture at prices lower than in traditional retail stores.

Rousset outsourced the site development offshore to Multisoltech Web Designs in India, which he found and vetted through the online marketplace, eLance.com. The offshore outsourcing strategy lowered Rousset’s costs in the range of $7,000-$10,000–a significant bottom-line improvement for a small business. Outsourcing is also the business model for the site’s hosting and maintenance solution, as well as its mailing systems.

Growing a Business

In September 2002, when Rousset started his online furniture business, e-commerce was still considered a significant risk and not really attractive to consumers for some types of products. “People back then believed furniture purchases were very tactile, so merchants believed consumers wouldn’t buy furniture online,” he recalls. It was also considered to be too big, bulky, and fragile, thereby increasing the costs of shipping individual items to individual consumers.

At that time, he was a student finishing studies in international relations and had decided to go into sales. And he was a man with a vision of using the Internet as a marketing channel. He at first established his Newport Beach, California-based business to market furniture for 10 name-brand California-region furniture stores. He forwarded all the Internet sales orders to the appropriate store, which then took care of delivery and set-up of its products.

It was a successful venture–and that became part of the problem. The original vision was just to accommodate regional sales for the 10 stores; but within a year, consumers had taken to e-commerce and people from all around the US wanted to order furniture from the site. This became too much of a hassle, as the 10 stores were independently owned and used different systems.

Recognizing the challenges and opportunities of e-commerce, Rousset altered his business model, shifting away from marketing for the 10 California stores, instead becoming a channel for selected high-quality furniture of all types manufactured in such locales as Malaysia and Indonesia as well as the United States.

He also takes advantage of the benefits of the online community’s connectedness in that his products are also available to consumers through SHOP.COM, an online marketplace with more than 1,000 merchants. Through this channel, consumers such as Rousset’s military and Katrina families can not only conveniently purchase furniture for their homes but, through SHOP.COM’s OneCartTM, can at the same time, purchase toys, iPods, jewelry, books, and other items from other retailers all in the same shopping cart and check out all at once with a password-protected account.

Now that FurnitureFromHome.com’s business has really taken off and is becoming even more sophisticated, Rousset says outsourcing will play an even bigger strategic role in facilitating the business. Up till now, the strategy for shipping product orders has depended on the best price among several shipping firms. However, he says that “the relationships with our shippers are now becoming more important, and we need to focus on only one company for shipping to make sure every sale goes smoothly.”

Similarly, he knows an outsourced warehousing and distribution solution will be necessary for future growth. Currently, the manufacturers of furniture his company sells online handle their own warehousing. “But there are certain items we sell on a certain basis, so we need to ensure timely delivery,” says Rousset. A warehousing solution would also enable the company to purchase in larger quantities, thus further reducing costs.

E-commerce Levels the Playing Field

Whether online or in stores, business growth in retail is volatile. A key factor is gaining customer loyalty among consumers always on the lookout for the best deal. Rousset believes “the best deal includes treating all customers respectfully and with care. We bend over backwards on all customer issues,” he states.

This mind-set and business practice not only draws repeat customers and referrals, but it enhances a small or virtual business like FurnitureFromHome.com’s ability to compete with large, name-brand retail enterprises. “We don’t have the bureaucracy they do,” Rousset says. “We can meet our customer’s individualized requests–like conference calls to Iraq–as well as handle refunds or get something fixed much faster.”

Rousset’s advice to others considering launching an online retail business is to “work with partners where you have a cultural fit and can develop good, strong relationships. Those relationships are what will help grow and streamline a business over the long run.”

The Internet: Now the Top Influencer of Sales

The hot spot for all sorts of shopping is now the Internet, whether it’s an online purchase or researching products and offers before an in-store purchase. Numerous studies reveal that the Internet is now the number-one influencer of retail purchases.

Shop.org proclaims that online sales will top $200 billion this year ($138 billion if excluding travel sales), according to its report, “The 2006 State of Retailing Online,” resulting from the ninth annual study of 174 retailers conducted by Forrester Research, Inc.

In addition, SHOP.COM recently surveyed 2,402 consumers. Cori Tuck, its Director of Merchant Solutions, says that “All indicators point to the 2006 holiday season being the biggest season yet for online shopping. Jupiter Research reported that consumers will spend an average of $274 with online retailers, up about $10 from last year.”

Retailers are now investing in multichannel solutions that integrate their stores and Web sites. The muiltichannel strategy serves customers better and increases sales. As evidence, Shop.org reports that retailers’ Web sites now influence 22 percent of in-store sales. Similarly, a study conducted by Hall and Partners for the Consumer Electronics Association and Yahoo reveals Internet research influences 77 percent of consumer electronics purchases.

SHOP.COM’s recent survey also affirms the trend. The survey reveals that 28 percent of respondents say it’s important to look for a good deal, and 27 percent say it’s a deliberate, considerate process.

Outsourcing Facilitates E-commerce Trends and Success

With the increased online sales comes an increase in retailers outsourcing related business processes, such as customer contact centers and fulfillment processes. In addition, retailers’ technology investments this year have primarily focused on:

  • Increasing the security of their Web sites
  • Facilitating the redeeming of gift cards and loyalty programs online as well as in stores
  • Incorporating more online tools (such as buying guides) to help their customers better understand products
  • Incorporating more online payment options

No longer a diamond in the rough, e-commerce was put through the fire, sharpened, and polished during its first 10 years. Carrie Johnson, Research Director, Vice President at Forrester Research and lead author of the Shop.org study, says “Companies are now busy planning strategies and prioritizing technology investments for the long term. As a result of these efforts, the next five to 10 years of online retail will be even more competitive and more innovative than in the past.”

Innovation is costly and risky, and capturing market share often depends on time to market. Outsourcing is a proven business model for successfully achieving these three objectives, as well as managing the risks of change from evolving market demands.

Lessons from Outsourcing Journal:

  • Online retail stores are the ideal solution for consumers who want the convenience of shopping at any hour from home or the office, from anywhere in the world. Because e-commerce has grown in popularity with consumers, retailers are increasing their investments in online stores and associated outsourcing of processes such as Web development, warehousing and distribution, and order fulfillment to facilitate the online business.
  • Outsourcing Web development to an offshore service provider can cut thousands of dollars from the buyer’s bottom line.
  • E-commerce levels the playing field among large and small–or even virtual–retail businesses.
  • Retailers are now investing in multichannel solutions that integrate their stores and Web sites. The muiltichannel strategy serves customers better and increases sales. Increasing the security of Web sites and incorporating more online tools to guide consumer choices are also two current focuses of retailers’ investment.
  • Retail success often depends on innovation and time to market. Outsourcing is a proven business model for successfully achieving these objectives, along with risk mitigation for managing the change from evolving market demands.


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