Surprise: Online furniture sales take off

Furniture customers are happy to buy before trying

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It seems some consumers are happy to buy their furniture online without first sitting, lying or bouncing on it.

Online furniture sellers are experiencing double digit growth in sales, forcing traditional bricks-and-mortar retailers to open or expand their online offerings, according to a report in today’s Australian Financial Review. Online furniture sales are expected to see a rise of up to 16% this year, which is five times the growth forecast for traditional furniture retailers.

IBISWorld is reporting that while total furniture sales are expected to fall 0.5% over the next five years, online sales are forecast to rise 9.8% per year, to $500 million.

Fantastic Holdings (ASX: FAN) has said that the strength of online demand had taken the furniture retailer by surprise, and there seems to less aversion to buying furniture before trying it, especially for younger consumers. Online sales at Fantastic Furniture’s Original Mattress Factory grew 12% last year, with 70% of those sales coming from customers who hadn’t gone into the stores. Fantastic now expects to roll out online sites for its other brands, including Plush and Fantastic Furniture, within the next 12 months.

Traditional retailers like Harvey Norman Holdings (ASX: HVN), IKEA, and Freedom Furniture have only rolled out online stores within the last 12 months, allowing newcomers Milan Direct, Wayfair and Zanui to gain a foothold in the market.

Upmarket furniture retailer, Nick Scali Limited (ASX: NCK) has yet to open an online store, and after reporting a drop in same-store sales of 2% last financial year, is expecting growth to come from new stores, and an uptick in consumer confidence. I might suggest that the company could be facing some serious threats to its business, and an online store might go some way to alleviating that threat.

Departmnent store, David Jones Limited (ASX: DJS) also sells furniture, and it has yet to add that line to its online store. Still, with the company planning to have 90,000 items for sale online by Christmas, we may yet see the company offering furniture online.

If you only invest in one company this year, make it our “Top Stock for 2012-13”. Operating in two hot markets — one set to double by 2012, the other predicted to grow 5x over the next five years — this stock is a solid growth play that also boasts strong recurring revenue, zero debt, and lots of cash. Get its name and full research case in this brand-new FREE report.

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Motley Fool writer/analyst Mike King owns shares in David Jones. The Motley Fool’s purpose is to help the world invest, better. Take Stock is The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it’s still available. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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