By Warren Shoulberg
Remember the old joke about denial? The punch line was that it’s the longest river in Africa.
Denial is also what people are in when it comes to another very long river...except that this time the punch line is Amazon.com.
From its humble beginnings in 1994 as a place where people could buy books and CDs on the Internet—the what?—Amazon has developed into a $20 billion-a-year business that now gets more than half its volume from outside the book and media category. And an ever-increasing chunk of those sales are coming from home furnishings products, basics like kitchen gadgets and TV cables, but also larger and more expensive merchandise such as furniture, lighting and bed and bath products.
Yet many in the home business skip right over Amazon when they mention their competitors and a surprisingly large number of vendors don’t want to talk about the company, fearful perhaps that there is still some stigma attached to selling online.
But Amazon’s incredible growth—double digits in the past year when virtually every other retailer in America was bleeding sales—and its expanding offering of its own private-label home and housewares products makes the company the single most exciting retailer in the country right now.
It also makes Amazon HFN’s Retailer of the Year for 2009.
Not that it needed any more validation. Some competitors, like Walmart, are acutely aware of Amazon’s growing presence and the two are engaged in a classic game of Pricing Chicken this holiday season in such key classifications as books and toys.
And consumers certainly don’t need any reminders that Amazon is the go-to site when it comes to buying any of the millions of individual products it sells.
“Amazon has gone from ‘that bookstore’ in people’s minds to a general online retailer and that is a great place to be,” Scot Wingo, chief executive of the online consulting company ChannelAdvisor, was recently quoted as saying in a New York Times article on Amazon. He predicts that online will grow to 15 percent of overall retail sales over the next decade from 7 percent today, and “if Amazon grows their market share throughout that period, and honestly I don’t see anything stopping it, that is pretty scary.”
Maybe to others, but not to Amazon. “Frankly, it’s a never-ending quest,” Laura Orvidas, director of Amazon’s Home & Garden store, told HFN, talking about the company’s expansion. “Amazon strives to offer customers everything they want to buy online and the Home & Garden store is no exception. Continuing to add to our selection underlies our growth.”
Those additions will come from both branded and private-label goods, she said. Since 2004, Amazon has added a number of proprietary brands, not insignificantly starting with home. The first such label, Strathwood, includes outdoor furniture, home decor and lighting. A year later came Pike Street featuring bedding and bath products. The same year, Amazon launched Pinzon with bedding, bath, tabletop, kitchen tools and cutlery, adding indoor furniture in 2008.
This past June a sub-brand, Tom Douglas by Pinzon, named after the Seattle chef and restaurateur, was launched, including cookware, kitchen utensils and tableware.
There are also the Denali and AmazonBasics brands for tools and consumer electronic accessories, respectively. The latter was just added in September. And of course there’s the Kindle, the electronic reading device that has become a best seller.
Orvidas wouldn’t get specific on the size of these businesses and Amazon only breaks out this segment as “electronics and general merchandise,” but she said it is a growing category. “Through customer discussions and reviews, we’ve learned that customers are responding very well to the private-label products.” In general, Amazon said its growth in the overall non-media category was 35 percent in its quarter ending this past June.
Where will Amazon go next? Again no specifics, but there’s certainly more to come in private-label businesses. “As for future releases,” Orvidas said, “we love to innovate on behalf of our customers, especially with our private-label offerings.”
Vendors who work with Amazon, or are considering it, believe that the company is already a strong player in the category, one they like to work with. “Amazon is an amazing retailer,” said Nicholas Harmon, president of Verilux Inc. “Their momentum is staggering.”
Lifetime Brands’ Pfaltzgraff unit was one of the first tabletop brands to work with Amazon, starting a decade ago. Gwen Opfell, vice president and chief merchandising officer for the housewares tabletop division of Lifetime, said Amazon has come a long way since, all for the better. “They have excellent and open communication with their vendor partners,” she said, citing Amazon’s sharing of data and working with the vendor to ensure proper inventory levels as two key tactics.
Amazon’s strengths are on both the front end, the part the shopper sees, and the back end, where it interacts with its suppliers, she said. “They were the first to incorporate ‘romance shots’ of product collections to enhance the consumer’s shopping experience, and they continue to refine the logistical part of the business with monthly conference calls and constant analysis of their sales.”
“They will be and are the leader in online home sales,” said David Zrike, president of Zrike Co., the tabletop resource that has worked with Amazon for about five years. “It has set the bar for service and selection for many other retailers as they try to play catch-up.”
“Amazon is already a major player in the housewares industry,” agreed Antonio J. Galafassi, president and CEO of Tramontina USA. “They are a well-managed company which is finely tuned to consumer trends, desires and price points.”
“They are professional, very serious people,” added Tage Strom, senior vice president of sales and marketing for Nikko, the tabletop resource that has worked with Amazon for several years. “They come to every tabletop market with a large delegation of people and they work hard and are very detail-oriented.”
Amazon’s future growth may not be unlimited, suggested a recent article in Business Week that cited luxury as a category with which it has struggled. Citigroup analyst Mark Mahaney was quoted as saying, “They have not been successful in all categories.”
That said, home furnishings vendors generally believe Amazon can only go up in home. “Amazon has the ability to become one of the biggest players in home,” said Chris Ann Ernst, vice president of Sleep Studio.
“There will always be an important place for brick and mortar,” said Harmon of Verilux, “but Amazon’s market share will only increase over time and they will completely dominate this arena in the future.”
The numbers would seem to suggest Amazon may already be there. Orvidas said the company’s recent guidance to the investment community on its fourth quarter sales projected a growth rate of between 21 and 36 percent over 2008.
“It’s our mission to offer customers everything they are looking to buy online,” Orvidas said. “We are always evaluating where we can deliver quality and value to our customers through our Home & Garden store and will continue to look for new opportunities to do this.”
In the company’s most recent annual report, founder and president Jeff Bezos included, as he has done every year since the company went public, his original 1997 letter to shareholders. In it, he wrote, “We feel good about what we’ve done, and even more excited about what we want to do.”
Going on 13 years later, Amazon is still sailing very much on that course.
