Online sales outpaced all other distribution channels over 2012-2017. Pure play online retailers (e.g. Wayfair, Casper, Amazon, Pepperfry etc.) are disrupting the home and garden industry, offering online sales and transforming the homewares and home furnishings retail landscape. Online retailers are winning the competition for market share, but still face profitability issues, as well as delivery and logistics challenges.
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Pure play internet retailers in the home and garden industry typically operate as a marketplace or direct-to-consumer, or a combination of both these models. Examples of marketplace retailers include Wayfair, Flipkart and Amazon etc. Direct-to-consumer players (e.g. Casper etc.) typically focus on niche categories. Most pure play online retailers have emerged within homewares and home furnishings, as opposed to home improvement and gardening.
While marketplace players continue to source home and garden products from third party suppliers, more and more retailers are shifting their focus towards their own private label brands, e.g. Amazon now has three private label furniture brands. Private label brands challenge well-established homewares and home furnishing brands.
Despite fast growth in online sales, pure play online retailers recognise the need to connect with customers in-store. Consequently, many players have moved offline through pop-up stores, partnerships with other retailers or even setting up their own stores, e.g. Wayfair’s US pop-ups, Casper’s decision to partner with Target in the US, and Pepperfry’s physical studio expansion in India.
Pure play online retailers are winning the race for market share, but at the same time are often still struggling to achieve profitability. Online retailers invest heavily in advertising to capture share of wallet, but these mounting costs continue to impact the bottom line. As a result, online retailers look to Initial Public Offerings (IPO’s) as an opportunity to alleviate debt and as a means for expansion.