partnership | Sep 16, 2021 |
E-commerce is booming in the home industry. Here’s how to take advantage

As businesses continue to adapt to the challenges of the pandemic, an approach that’s equal parts data analysis and gut instinct may provide the way forward. In its second Thought Leadership Lab, Business of Home partnered with Affirm, the pay-over-time company that offers payment flexibility and no hidden fees, to consider how both web-based and in-store shopping experiences can be strategically tailored for consumers considering high-value purchases. The discussion, featuring four innovators in the digital home design space and hosted by BOH editor in chief Kaitlin Petersen, touched upon which tactics to mimic from social media; how to cater to design professionals at every stage of their product search; and why sometimes setting aside all the data points and simply trying something different can yield surprising dividends.

Can you each tell me a current success you’re proud of, and a challenge you’re facing when it comes to online conversion?

Marco Deseri, chief digital officer, Artemest: Artemest is a marketplace focused on contemporary furniture, lighting and home decor. We work with more than 1,000 vendors, with small artisans and businesses all over Italy. We offer a lot of customization opportunities and sometimes make bespoke pieces. It’s something the customers love, but it’s hard to manage with so many suppliers and a very unstructured way of [addressing] customization needs. In particular, we want to improve the time it takes to send out a formal quote to customers requesting a change to a product—because it can take many days, the conversion rate can go down significantly. In the last few months, though, we’ve been able to achieve a positive relationship between customer acquisition costs and the first-order value through a lot of effort and optimization via our online marketing campaigns.

Rebecca Atwood, founder, Rebecca Atwood Designs: My company sells artful, handmade wallpapers and fabrics. I just moved to another state, so my current success is my team, for how wonderful they’ve been during this big personal transition for me. For a challenge, I’d say that being in person is so important, the touch and feel of the product, the quality of the design, the trust and connection that we have in our showroom interactions. Not that this is revolutionary, but our challenge is, and probably always will be, how to convey that in-person experience and care for our customers online, as we primarily sell there.

Eric Tsai, vice president, marketing and business development, Joybird: We’re direct-to-consumer. We’re a growth brand. Our customers are very millennial. Most of our challenges right now involve the topics we don’t want to talk about—shipping and logistics. Most furniture companies have more orders than they can [fulfill]. We’re proud of being able to come together with La-Z-Boy; they’re a 96-year-old company. Within a six-year-old company, that doesn’t always work. Look at players like Casper—they’re still not profitable. It’s amazing you can make $500 million in revenue and you’re losing money. There are so many direct-to-consumer brands out there—from socks to drinks to glasses—and everybody is great, but at the end of the day, nobody’s profitable. We focus on the fact that we know we can grow the business. But every piece of the business, every single touch point, is important to us, and we study that like crazy.

Anne Berger, chief marketing officer, YDesign Group: YDesign retails through two websites, Lumens.com and YLighting.com; we’re the premier online destination for design lighting and also carry some furniture and home decor. Anyone in the home business last year acquired a lot of new customers, so that’s success. How we retain those customers to come back with us in a low-frequency, high-AOV [average order value] type of purchase cycle [is the challenge]. We’ve also been going through a multiyear UX [user experience] upgrade on our websites, so we’re looking to that to drive some growth and help make the e-commerce experience a little bit easier for our customers.

Silvija Martincevic, chief commercial officer, Affirm: Affirm was founded 10 years ago with a mission of building honest financial products that improve lives. As you’re building your business, we help your customers pay over time for almost anything, whether it’s a $6,000 sofa or a $50 pillow. They can pay for that, in-store as well as online, with no late or hidden fees.

How we measure success is how we add value to our merchant partners: We work with nearly 30,000 different retailers—merchants large and small—and over the last 12 months, especially as COVID hit, it just changed the game for everyone. What we heard from our retailers is that they wanted help with longer terms and more flexible options. So instead of just a six-month pay-over-time solution, we’ve seen a massive increase in terms like a 12-month and, for a company like Peloton, for example, 39-month payment options, to provide much more flexibility during this time.

The second thing we offer is [the] time to build customer trust and continue to build your brand. You don’t need to use 20 percent off; you don’t need to use promotions and dilute your brand. Just give your customers the ability to pay over time with no interest.

There’s been so much change in the way customers shop, and new acronyms [to describe it], like BOPIS [buy online, pickup in-store] and BORIS [buy online, return in-store]. Affirm has leaned in and built some of those solutions for our retailers. We recently acquired a company called Returnly, which offers an instant credit [on returns]. When someone returns that chair or couch, they don’t want to wait now for weeks or months to get the money back. We see those customers come back and shop again and spend more because of this brand-new service, so this is something we’re excited to offer to our retail partners.

I’m curious: What metrics are you each looking at to define your success when it comes to online sales, and what data tells you you’re pointing in the right direction?

Berger: We look at visits; we look at orders—conversion in particular, of course; revenue by marketing channel, by customer segment, by new and repeat visitors; the list goes on. What are the trends? Are they moving in the right direction, and can you explain any variants in those trends? With COVID and people being at home, we saw a lot more visits to our content pages. We also saw a little bit of a slowdown in mobile because people weren’t really mobile, but now we’re seeing that pick up again. We closely monitor those metrics to see the trends and if there is action we can take as a result.

What are some of the levers you can use to control and change those trends?

Berger: On the marketing channel side, on the paid side, it depends on if you want to invest more money if you’re seeing profitable growth—that is a lever you can pull. On the nonpaid side, how can you impact those metrics? Can you produce more content? Do you want to send more emails? Do you want more segmentation? We also have a testing program we run for conversion-rate optimization to look at where customers are experiencing difficulty on the site and then testing different options to see if we can improve the experience. And generally looking at conversion and RPV [revenue per visitor] with the testing.

Where do people get stuck, and how can you tweak that?

Berger: Some customers come in through the homepage and go down your funnel as expected, and you try to look at the falloff in those steps to your current conversion. Other customers come in through the sides, through content or through search, and you have to look at those journeys too. Once we see an area where we think we have room for improvement, we develop hypotheses about why that might be happening. If we can get customer feedback, that’s very helpful, and then we set up different options and run tests to see if we can make improvements.

Atwood: We’re probably all using similar analytics and data, but because my company is actually in the process of improving tech on our website, we’re asking ourselves: What are the touch points that [visitors are] experiencing? And because our customer is primarily the trade, are they in sourcing mode? Purchasing mode? Inspiration mode? I think a lot about designers, how we can give them the tools and answer the questions they’re going to have. How can we answer questions before they ask them? How do we build that trust? And feedback. We’re always asking our customers and designers: How do you want the PDP, or the product [detail] page, to work? What do designers need to know, and how can we make sure that hierarchy is clear?

How do you design a site to meet all of those different needs?

Atwood: We did think a lot about how to build in that shopping area so that it’s very clear and succinct and has the filtering people want. If they’re just looking for a blue fabric, can we show them all that really fast, and then they can specify that they need a performance fabric, or an embroidery, or whatever. When they’re in more of the inspiration area, how do we inspire them and lead them through that process? Maybe they are looking to work on a kitchen project, so they’re going to go to our section dedicated to kitchens. There’s a lot to figure out. It’s looking at that data and letting it be a guide.

Marco, you mentioned Artemest had improved conversions. How did you get there?

Deseri: We’ve recently implemented A/B testing. It’s a form of visual search. We have a relatively broad catalog, with more than 50,000 items from more than 1,000 vendors, so it can be tough to find exactly what you’re looking for, and the similarity engine that’s based on the visual aspect of items is helping a lot. That’s an example of how we can improve the customer experience and improve conversion rate.

Silvija, your team is developing tools to increase conversion. How do you measure success in the marketplace?

Martincevic: We want to help our partners decrease customer acquisition costs, and what we’ve seen, especially over the last 12 months, is by adding that pay-over-time option—if you have your online ads, whether on Instagram or other platforms, offering as low as 0 percent financing available, especially for high-consideration purchases—that will drive your CACs down. That’s one important metric of success.

All of your businesses have seen a massive increase in traffic as a result of COVID, but then what do you do to drive the average order value up? Affirm has been doing this for 10 years, and we’ve seen that when you offer that payment solution for your customers at the point of sale, on average, there is 85 percent lift in average order value. So someone who was going to just buy that couch can now add that lamp or can add the rug. That’s an important measure.

The last way we measure success is customer loyalty. More eyeballs are now on our sites; it’s important that they keep coming back. Over the last 12 months or so, we’ve seen a 67 percent repeat rate on our platform, and that’s super critical—for all of us, I think, brand loyalty is our moat.

Eric, you were talking about how so many businesses in the direct-to-consumer and startup space aren’t profitable. So many of them are selling smaller items and impulse buys that are easy to decide on. But you are selling a considered purchase, and arguably, you have to work harder to build that trust with your customers before they decide to buy. How do you see them calculating risk around large purchases?

Tsai: When I first started [at Joybird], we did a lot of surveys. One of the most valuable was surveying people who didn’t buy from us, even after six months. About one-third of them say, “We still didn’t buy anything [from anyone].” Another third say finances are an issue, and that’s when we started talking to Affirm. And then the other third say, “I bought a new house, so I’ve got to change my configuration.” We look at consumer objections.

[When] we run surveys, the website and finance teams say, “Don’t [do it], it’s going to create a negative experience.” But I just need 100 people to tell me right before they enter the [shopping] cart: What is your intent of buying this product? From after they go into the cart to after they purchase, you’re going to get very different answers, and most of the time, we only look at the [customers who have purchased from us]. But 90 percent of people don’t buy from your website, unless you have more than 10 percent conversion. So 90 percent don’t buy, and you don’t talk to them? Come on, we’ve got to.

The other thing that’s important is our stores. Wherever we open the store, we blow up that geography because our store is activation. If you don’t have a store and you’re doing business online, go open a store—you’re going to double the revenue. People are thirsty for that sensory experience. Touching, even smelling: We hired a company that makes the store smell great, [curates] the music. So, how to do that online for the next generation, with AR/VR? Not even 10 percent of people are going to entertain that now, but you’ve got to start thinking about it.

Those are the types of things that we geek out about, and we also try to be realistic. We sent teams to stores to interview the staff and customers, because we can’t be sitting here as leaders and be like, “Oh, we know everything.” We don’t. We’re not even at the store. Go and talk to the people there. They’re going to tell you something different.

Are there changes you’ve made to increase consumer confidence in the shopping experience?

Atwood: It does take a lot of confidence [on the part of the customer] to figure out how they’re then going to make this [product] be in their home, whether it’s an upholstered piece of furniture or wallpaper in the room. We try to bridge that gap, even for a designer, who’s our core customer. If we’re working with a talented designer who can’t convince their client without showing them what [the product] looks like, we’ve created things that address that, and we’ve seen it has increased our conversions with our direct-to-consumer clients. Which is exciting, that those [tools] work for both audiences. For us, it was looking at how do we create install photography, and that might be a rendering to start. But then also, how do we share what our community is doing?

Whenever we have install shots, we make sure we can share that in a newsletter, on our website, across social media, all of that. People like to see proof that these designers are working with this brand. Helping people get to that visualization point when they’re picturing it in their own home, that’s getting them more invested in the whole process. Even giving them the words [to describe] how that space is going to feel. Is it going to be warm and inviting? Is it going to be cool and tranquil? Helping them tell the story with visuals and words, because it’s hard to imagine.

Does that confidence waver depending on price point, or is it more about the visualization piece?

Atwood: We’re fortunate that we work with people who are very affluent. A lot of the time, it’s more about they really need to feel like they want it. They need to feel that desire, and the price isn’t an issue. That’s not to say that payment and finances don’t come into play. One of the complaints we had a few years ago was about having more variety in our price points. So we introduced a lower-priced wallpaper. It was not quite half the price, but it was significantly cheaper. And funnily enough, our more expensive wallpaper outsold it. That’s where it’s about: How are you telling that story for the product? How are you making somebody feel like they’re getting this special experience for their home?

Marco, do you see a correlation between price point and consumer confidence?

Deseri: There is a correlation, because, at least in our experience, we see higher conversion rates for lower-priced items. We also have a broad selection in tabletop, and those are the items with the highest conversion rate, but also with the lowest time from when we first see a customer until they make the purchase.

Do you have to work harder for those higher-price-point items? Do you treat them differently on the site?

Deseri: It’s way more frequent that we have customer service involved for those requests, because it’s those categories that also have the most requests for customization. So there’s a lot of back-and-forth. And I totally agree that it’s difficult for customers. If it’s an interior designer—trade customers—it’s much easier. It’s their job. But we also sell to end consumers, and for them, it’s really tough to understand whether a product will look right.

One of the tactics we implemented, for a very small number of products, is AR models. But they’re pretty expensive to make; for 50,000 products, it’s not doable, not at the moment, at least. But that should be something that builds more confidence.

Seeing is believing. Is that maxim true here?

Deseri: For pieces that are so visual, yes. Their role is to make an environment beautiful.

Tsai: Some of the biggest [takeaways] we got from those surveys was when we asked “emotional” questions. We’d say: “What is the biggest frustration and fear you have with getting your furniture or your space straight?” And I would say 80 percent of the answers have nothing [to do with the product]—it’s very aspirational. It’s like: “It will be my sanctuary.”

Berger: I completely agree that these are very emotional decisions. But then, lighting is a very technical category. It requires different electrical components, installation. We certainly augment our site experience with live sales teams, based here in the U.S., that are very knowledgeable. Sometimes that will help people feel comfortable making the decision. Because most light fixtures are installed, they’re harder to change. Sofas, also: You have to get them in and out of your home.

Tsai: Everything is internal. There’s a lot of fear: “I’m scared that I’ll mess up. That’s why I want to go to Rebecca and have her do it for me.” We always tell our team: If people don’t fall in love with the product, Affirm is not going to help. Because we can’t finance our way to get somebody to buy something they don’t want. So how do you get somebody to fall in love with the product? The highest-traffic area of our website is our customer galleries. Who doesn’t go and see those customer photos? You don’t want to see the catalog—you want to see somebody’s real home. Even if it’s not what you want, [if you think], Oh, wow, that person’s kitchen is crazy. So we build our website like Instagram. It’s all feed-based to cater to their behavior.

I don’t know that I’ve ever thought about the flip side of consumer confidence: What are your customers terrified of?

Martincevic: We spend a lot of time analyzing our customers: What do they want? What do they need? What are they afraid of? The largest generation alive today, Gen Zs and millennials, now have the highest purchasing power. Their relationship with money is very emotional because they grew up in the late 2000s, during the Great Recession. So many of them have seen their parents lose their homes or rack up credit card debt. Millennial and Gen Z customers are not using credit as much and are skeptical about taking on debt. Affirm was created for that generation. They want to be in control of their finances and want transparent, flexible financing solutions. They do not like gotchas or fine print that’s a kilometer long.

When you think about consumer confidence, what comes next?

Tsai: We have started using a lot of chatbots, which have helped us start a conversation but does not replace people, because [customers] want to have the sense of community, that personal touch. At the same time, companies are resource-lacking; it’s challenging to hire people these days. One focus is: How do we continue to make the business less businesslike and more human? Because buying a couch is such a difficult thing, made more so by the pandemic. What are the tools that are going to allow you to close the gap of, “Oh, I’m trapped in my home, and I still don’t feel confident buying directly online.” There are different solutions, but you have to test all of them, and that’s what we’re doing now so that we can implement them quickly when the right time comes.

What’s looking promising in your early testing?

Tsai: There’s still a positive vibe about being at home; there’s more value being put into the space. People spend more time with their kids and pets at home. We want to continue to focus on things that are going to make people happy—that changes the mood. You’re not going to have to worry about, “Oh, my God, who paid for this couch?"

Berger: The pandemic has put an ongoing emphasis on the home—home being where people feel safe, they want it to reflect their personality and their tastes. How can we show our products in an inspiring way? Show how other people use them? How designers have used them? Inspiration is an area we want to improve on over the next couple of years to help people feel good about the changes they’re making in their homes.

Atwood: Generally, I am an optimistic person, so the conversation around customers’ fears is what’s sticking with me. What is the love and care we can show our customers, or what are their needs? And while that does tie into that idea of fear, sometimes the customer’s need is as simple as, “We need room to breathe.” That could be achieved just by going outside, but we are selling a luxury product that can also create that environment. What are these landscapes we can create in people’s homes that bring all of that good?

Creating things that are beautiful gives us a good advantage. In terms of data, I’m optimistic about the new website we’re working on, because it’s how you put that data into action. Listening to your customers, listening to your team, listening to your salespeople, putting the personal side above everything else, but also making sure you’re [analyzing] all that data.

You must use data to ask the right questions—is that correct?

Atwood: It definitely informs a lot, but there are things that, if we just looked at our data, we might not do. We have a section on our website for archived styles that weren’t selling well or were old. But when COVID happened, and people were faced with long lead times and not being able to get stock, we brought the archived styles back, because we could still produce them. And we saw a lot of growth there. The data might have said those files no longer work, but our clients were telling us, “Hey, we need more options.”

Deseri: Something we’ve really missed over the past year and a half is direct contact with customers, because the only occasions we have to interact are during Milan Design Week or at events we organize. We had an exhibition at Milan Design Week this month, and that gave a lot of energy to the whole team: meeting with designers, the trade, the press. It’s the only moment we can actually meet with the people who buy our products, who love our products. It’s pretty special.

Martincevic: I’m another optimist. The only constant in this industry is change. Homes have become our sanctuaries and our workplaces and, for some of us, our schools, so the opportunity will continue to exist for us to redefine how we use our space. Rebecca, I love what you said about looking at the data, looking at the surveys, and then surveying again. It’s almost as if all of us need to be little scientists during this massive time of change.

Thought Leadership Lab is a series of forward-looking roundtable discussions with top executives to explore the future of the home industry. This conversation was hosted in partnership with Affirm.

Affirm’s mission is to deliver honest financial products that improve lives by building a new kind of payment network based on trust and transparency. The company’s products empower millions of consumers to spend and save responsibly, and give thousands of businesses the tools to fuel growth. Unlike credit cards and other pay-over-time options, Affirm shows consumers exactly what they will pay upfront, never increases that amount, and never charges any late or hidden fees.

Homepage photo: Courtesy of Affirm

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