Navigating the Turbulent Home and Furniture eCommerce Market in 2023 with the Power of Competitive Intelligence

The home and furniture retail industry is going through a turbulent time. As inflation reared its head mid-2022, leading retailers in the category have been grappling with the higher costs associated with producing and distributing their products, as well as reduced shopper demand. The rising costs of raw materials, transportation, and labor have had a direct impact on the pricing dynamics within the industry. For example, reports indicate container rates soared to nearly 10 times pre-pandemic levels towards the end of 2021.

Furthermore, shoppers’ spending power has been constrained, while higher interest rates have suppressed demand. Retailers have had to adapt their assortment and pricing strategies to cater to a wider range of shopper preferences driven by changing lifestyles and a growing emphasis on sustainability. Post-pandemic, demand has been primarily driven by affluent shoppers.

Towards the end of 2021, due to supply delays and disruptions, retailers heavily stocked up on available products. However, when demand subsequently decreased in 2022, they were left with a significant amount of unsold stock that was purchased at high rates. This put them in a difficult situation, as they had an excess of products but were unable to sell them even at reduced prices without impacting their profit margins. Additionally, staying competitive in a rapidly changing market environment was equally important.

Given this context, it is crucial for home and furniture retailers to adopt a data-driven approach that utilizes competitive and market insights to consistently maintain or increase their online sell-through rates. DataWeave’s Commerce Intelligence solution offers exactly that, empowering retailers across various industry segments to stay updated on evolving consumer trends and competitor actions.

To gain a better understanding of the pricing strategies employed by leading home and furniture retailers throughout the past year, we leveraged our proprietary data aggregation and analysis platform to track and analyze the pricing of a wide range of products across multiple retailers and subcategories within the industry.

Our Research Methodology

• Number of SKUs: 400,000+
• Key retailers tracked: Amazon, Wayfair, Home Depot, Overstock, Target, Walmart
• Key categories reported: Home and Office, Bed and Bath, Bathroom, Bedroom, Decorative, Dining Room, Kitchen, Garden & Patio, Hardware
• Timeline of analysis: April 2022 to April 2023

Our Findings

Interestingly, our analysis indicates that average prices in the home and furniture category rose by around 5% between March 2022 and April 2023. However, there have been seasonal fluctuations in the prices over the course of the year.

Among the various subcategories, the most substantial price surge was observed in home office equipment, with an uptick of 9.3% in January 2023 when compared to March 2022. The surge in demand for home office furniture, fueled by the widespread adoption of work from home arrangements, played a pivotal role in depleting inventories and consequently driving up prices. Additionally, the shift towards collaborative workspaces and the gradual expansion of office environments have contributed to the sustained demand for office furniture.

While prices for several subcategories rose significantly, others experienced subdued growth, such as bed and bath. The subcategory experienced the lowest price increment, registering a modest 2.8% increase annually. This can be attributed to the impact of a subdued housing market and a decrease in first-time buyers, which may partly be due to the global recession and inflationary pressures.

Moreover, retailers overestimated the demand for home furniture during the holiday season, leading to an overstocking of inventory. Consequently, prices experienced a dip from October to December 2022. In fact, this was a common trend across all home and furniture subcategories. As retailers emerged from the holiday season, prices rose to their highest level in January 2023, and have stayed relatively stable since.

Some of these trends vary among retailers as each faces different challenges and responds in distinct ways.

Wayfair, for example, shows a significant dip in pricing after October 2022, with prices stabilizing in 2023. This could be in response to the retailer’s shrinking consumer count, losing 5 million of its 1.3 billion consumers in 2022 due to declining demand.

In fact, online furniture retailers like Wayfair and Overstock reported declines in annual revenue in 2022, as the furniture sector continued to normalize from the high spending seen during COVID-era lockdowns. Wayfair reported that its 2022 net revenue was $12.2 billion, down almost 11% from the year prior. The company also laid off 10% of its workforce in August 2022. Overstock’s reported annual net revenue in 2022 was $1.9 billion, a 30% decrease year-over-year.

Interestingly, both companies took contrasting approaches in response to this situation. Wayfair opted for aggressive cost-cutting measures, including layoffs and a reduced marketing budget. On the other hand, Overstock focused on attracting new customers through influencer marketing and improving their app, aiming to expand their customer base. With a strategy geared towards younger buyers, Overstock allocated a larger marketing budget than ever before. Our data supports the fact that Overstock did not rely on price reductions to entice shoppers.

Target has consistently maintained lower price increases compared to Walmart, defying the common perception of Walmart being more conservative in its pricing. Notably, Amazon also stood out minimal price increases throughout the year, being surpassed only by Wayfair since November 2022.

As price sensitive shoppers increasingly compare prices before making a purchase decision, retailers need to ensure they are priced competitively in the market on a consistent basis to liquidate stock and gain market share without compromising significantly on margins.

A Sophisticated and Versatile Product Matching Solution is Essential to Achieving Price Leadership

Product matching plays a vital role in monitoring competitive prices and analyzing price leadership. Within the home and furniture category, there is often a multitude of representations for the same product across various online platforms. Furthermore, eCommerce websites offer a wide array of options, including variations in size, color, material, and similar products. Without an accurate and comprehensive method of matching these products, it becomes impossible to track and compare prices effectively, especially on a large scale. Thus, a versatile product matching engine tailored to the unique requirements of the home and furniture sector becomes essential.

DataWeave offers an industry-leading product matching platform that harnesses advanced AI models specifically trained to identify and leverage multiple product attributes extracted from titles, descriptions, and images to accurately match products across websites. Additionally, our platform intelligently matches similar products based on a diverse range of extracted attributes. This empowers our retail partners to gain competitive pricing intelligence not only on exact product matches but also on similar and substitute products, as well as their respective variants.

With our competitive pricing intelligence solution, retailers in the home and furniture industry can confidently analyze and track prices, ensuring they stay at the forefront of price leadership in their market.

To learn more, reach out to us today!

- Shailendra Nagarajan
Director, Global Marketing at DataWeave, 29th Jun, 2023

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