The Elephant of Ecommerce

Some interesting news reported by Reuters regarding some of China’s largest commerce and technology outfits teaming up:

By teaming up with Tencent and Baidu, Wanda will become the biggest online-to-offline e-commerce platform in the world, said Dong Ce, the chief executive of the new venture. Online-to-offline, or O2O, involves people using their smartphones to find and purchase goods and services, often physically close to them.

If most folks didn’t believe that the country is leading the world in terms of pushing forward ecommerce, maybe they will start to take notice with news like this.

 

Can You Sell Bulk Goods Like Furniture Online? Wayfair Thinks So

According to Recode, online furnishings company Wayfair is filing to go public:

Wayfair, the online home goods company that built its business for nearly a decade with no outside funding, is planning to go public, according to paperwork filed today with the Securities and Exchange Commission. The company said it is looking to raise up to $350 million in the offering.

Wayfair’s an interesting company as despite losing money, it appears to have grown a larger online customer base in a category that’s been relatively slow to adapt to ecommerce. This is evidenced by the nascent approaches of traditional store based furniture retailers like IKEA.

Despite this apparent success, it has to be noted that retailing furniture on the Internet – at least at this moment – is not particularly attractive from a cash flow perspective:

The company recorded a net loss of $15.5 million on $916 million in revenue last year.

It’s probably a combination of factors leading to this result but one obvious factor in the furniture category would be shipping. Unlike media (which is rapidly going digital) and other popular items like clothing and electronics, furnishings are generally bulky. This added size and weight will dramatically add shipping expenses; but combine this with the dreaded ‘free’ returns prevalent in today’s ecommerce models and what emerges is a very tough business.

One route for Wayfair to go to improve financials post IPO would be to do what many pure-play ecommerce companies are increasingly doing and that’s open stores. If companies like Wayfair however can make categories like furniture work, there’s probably ample opportunities to disrupt big box stores that are wholly reliant on the sales floor.