E-commerce is Here (and the Numbers that Prove it)

My Michael J. Knell

For the best part of two decades now, furniture, mattress and appliance (FMA) retailers have heard their own distinct version of Paul Revere’s cry: “E-commerce is coming, e-commerce is coming!” Experts and consultants of every stripe and kind have been warning tradition brick-and-mortar store owners from the single-unit independent to the national chain that the internet and its offspring, e-commerce, was a significant threat to their continued ability to grow sales and profit.

Finally, there is some hard, empirical evidence to support their foreboding predications, but the picture doesn’t seem as bleak as one would think.

Statistics Canada — which the author lovingly describes as the national bean counter — is beginning to measure e-commerce purchases by consumers for big ticket home goods such as infant, indoor and outdoor furniture; mattresses; decorative accessories; and major appliances as well as televisions and audio/visual equipment as part of its quarterly Retail Commodity Survey (RCS).

By way of explanation, it should be noted the RCS measures what the consumer buys and is not directly related to the agency’s Monthly Retail Trade Survey (MRTS), which measures sales by brick-and-mortar or location-based retail stores without regard to product category.

Only recently has Statistics Canada added what it describes as ‘electronic shopping or mail order houses’ — but what HGO calls ‘e-commerce platforms’ — to the RCS as a channel through which the Canadian consumer purchases the big-ticket goods described above. While these merchants were always part of the MRTS, the agency only recently began examining their sales by product category.

When reviewing the data, there are a few things should be kept in mind: the survey measures the purchases made by Canadian consumers from Canadian retailers, whether brick-and-mortar or online or a combination of both. When referring to sales of a certain product category by furniture and home furnishings stores, the figure includes both in-store and online sales. (In other words, sales by Leon’s Furniture Limited’s furniture.ca or Sleep Country Canada’s Endy.com are included in ‘furniture and home furnishings stores’ not ‘e-commerce platforms’.

The survey also doesn’t include purchases made by Canadian consumers from e-commerce sites outside of Canada.

It should also be noted sales by ‘e-commerce platforms’ are not included in ‘all retail stores’ so total consumer purchases of the product category are the sum of the two where both sets of data are provided.

There are also gaps in the data. For reasons not completely understood, Statistics Canada will occasionally decline to disclose sales data for a product category by a particular channel during a particular quarter. In most of these cases it cites privacy concerns but provides no detail as to their nature. Occasionally, it will say the data isn’t sufficiently accurate to be included.

What is clear by examining the data is Canadians are becoming more comfortable buying furniture, mattresses, appliances, decorative accessories and televisions online. While this level of comfort has been building for the past several years, most observers say it was clearly accelerated by the pandemic, which essentially closed most brick-and-mortar retail for roughly two-thirds of the available shopping days over the 12-month span beginning in April 2020.

Indeed, the trend is evident across all seven categories of product carried by most FMA store operators across the country.

The pandemic acted as an accelerant, speeding consumer spending via the Internet on indoor furniture to new heights. The Vancouver-headquartered digital furniture specialist Article initiated contactless delivery in the Greater Toronto Area and several other North American cities in the pandemic’s early days to help maintain sales while providing good customer service.

Fifteen Per Cent of All Mattress Sales were Made on the Internet this Year
In 2019, the year immediately before the onset of the current global health crisis, Canadians purchased mattresses valued at just over $2.06 billion. The following year, their purchases fell slightly to $2.02 billion.

Furniture stores  — a category that includes mattress specialists such as Mattress Mattress and Dormez-vous  — continue to be the consumer’s first choice when it comes to buying mattresses. In 2019, their sales in this category were valued at $1.94 billion. In 2020, they were essentially unchanged, thanks to surges in consumer demand during the last six months of the year.

The pandemic truly made itself felt in the first half of 2020, particularly in the second quarter when sales fell to a low not seen over the past decade.

The other fact to note is despite the government-mandated closures, furniture stores improved their brick-and-mortar market share from 94.2% in 2019 to 96.3% last year.

Last year was also the first year for which Statistics Canada provided estimates for consumer purchases from the so-called pure play e-commerce mattress purveyors, such as Polysleep, GoodMorning.com, Lunazen and others. These sales were estimated to total $194.5 million.

However, most of the major brick-and-mortar retailers reported their online stores generated as much as 20% of their overall revenue in 2020. Because of this, HGO is estimating Canadian consumers spent has much as $340 million buying mattresses online last year, giving the Internet an approximate market share of 15% in 2020.

Consumers continued to buy mattresses, both instore and online, during the first six months of 2021. Statistics Canada valued their purchases at $929.6 million, while that’s 27.6% higher than the $728.5 million sold in the first half of 2020  — at the height of the slowdown caused by the pandemic — its 1.8% below the $949.6 million for the same in 2019.

Meanwhile, proving the consumer’s increased willingness to buy from them, purchases through the e-commerce vendors leaped 30.6% during the first half of this year to $102.8 million (the first time it’s broken that particular barrier) from the comparable period’s $78.7 million. Citing privacy concerns, Statistics Canada didn’t provide figures for 2019.

Furniture Spending Made Great Strides in 2021’s First Half
In what’s shaping up as an all too familiar pattern, consumer purchases of furniture — particularly infant and indoor furniture (upholstery and case goods) — fell dramatically in the first half of 2020, once again driven by the government-mandated store closures imposed in the fight to slow the spread of COVID-19. And they’ve been perking up ever since.

The Retail Commodity Survey pegged sales of indoor furniture at $2.70 billion for the first half of 2020, down 18.3% from the same period of 2019. For the opening six months of this year, spending accelerated to $3.36 billion, a gain of 24.5% over 2020 and a 1.7% edge over the same period of 2019.

In another telling example of the pandemic’s impact on the industry, indoor furniture sales fell 8.2% from $7.07 billion in 2019 to $6.53 billion in 2020.

In what should be good news for FMA retailers across the country, furniture and home furnishings stores are still the first choice for consumers wanting to buy sofas, bedroom suites and related items as they capture 86% of all such sales year in and year out.

In recent years, tradition furniture and home furnishings stores have gotten serious about adding outdoor furniture to their assortments and have made a dent in the market share traditionally held by retailers such as Canadian Tire and Home Depot, who have usually led the category. What’s more, stay-at-home orders issued by various governments at the beginning of the pandemic, turned the consumer’s interest inward. Since she couldn’t travel, go to restaurants or the movies, she began investing more heavily in her home.

Outdoor furniture is a good indicator of this development. Total sales in this category reached $1.32 billion in 2019 before climbing 8.5% last year to $1.43 billion.

While Statistics Canada didn’t report outdoor furniture sales by FMA retailers in 2019, they totalled $177.9 million for the year 2020. What’s telling is they jumped from $104.8 million in the first half of 2020 to $119.0 million for the same period this year — that’s a 13.5% jump forward.

The agency also didn’t cover outdoor furniture sales by the e-commerce providers for the years 2019 and 2020 but did estimate sales at $207.0 million for the first half of this year. This is one of the few big-ticket categories where the e-commerce platforms had greater sales than traditional FMA retailers.

Overall sales of outdoor furniture hit a record high $1.24 billion for the first half of 2021 — 39.3% higher than the $891.8 million rung-up in the same period last year.

Stay-at-home orders issued to combat the Covid-19 pandemic did wonders for major appliance sales. This was particularly good news for category specialists like Trail Appliances, which operates 19 locations in British Columbia, Alberta and Saskatchewan. Seen here is their store in Saskatoon.

Major Appliance Spending Gains Ground Both In-store and Online
Unlike their American cousins, who tend to be specialists, the majority of those Canadian retailers defined furniture stores carry major appliances — in fact, the category usually accounts for roughly 15% of annual revenue. Historically, furniture stores account for around 30% of all major appliance sales to the consumer.

However, once again citing unexplained privacy concerns, Statistics Canada no longer reports sales of major appliances by furniture and home furnishings stores to Canadian consumers. Furthermore, its reporting on these sales by this country’s various e-commerce platforms is inconsistent and spotty.

The published data says major appliance purchases by Canadians have been climbing steadily for the eight quarters since the beginning of 2019. For the year 2019, consumer purchases were valued at $6.0 billion before jumping 21.2% the following year to $7.28 billion. Electronics/appliance stores accounted just over half of these sales in each year. These merchants include such names as Best Buy Canada, Coast Appliances, Trail Appliances and many others.

According to Statistics Canada, e-commerce platform sales of major appliances totaled $65.1 million in 2019. After that, the agency declined to provide figures for the first and fourth quarters of 2020 as well as the second quarter of 2021, so it is difficult to provide real insight into sales growth in this category.

What is known is that for the six-month period encompassing the second and third quarters of 2020, e-commerce sold $347.4 million worth of major appliances to Canadian consumers. They also sold $185.9 million worth in the first quarter of 2021 — an amount that is 15 times greater than the $12.3 million sold in the first quarter 2019.

Therefore, its obvious white goods are among, if not the fastest growing big-ticket category for the e-commerce specialists.

A similarly fast-growing category are televisions and audio/visual equipment, although once again the data provided by Statistics Canada is spotty with data for three of the eight quarters between January 2019 and June 2021 being withheld for unspecified reasons.

The trend is obvious when looking at first quarter category sales by e-commerce platforms in each of the three years — they range from $61.5 million in 2019 to $65.3 million in 2020 and $113.4 million this year.

While this category has generally been waning for most FMA retailers in recent years, their sales of TVs and home theatre quarter have been growing in recent years. They were $124.4 million in the first half of this year, an improvement on both the $104.9 million for 2020 and the $117.7 million rung-up in the same period of 2019.

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