As Lee Corson, Executive Vice President of RetailMetro said, "Due to its diverse nature and its past reluctance to embrace technology, the home furnishings industry is uniquely positioned to benefit from the power of the Internet.  Business-to-Business commerce will redefine and enable manufacturer/retailer relationships, ultimately enhancing the performance of both."  The home furnishings industry has been very slow to adapt to technological changes.  As the Internet has come into the industry, its use is still not widespread, and its advantages not fully exploited by the industry.  The current role of online furniture intermediaries is solely to link buyers and sellers.  There is little to no actual transaction flow.  Retailmetro recently completed the first online transaction of any intermediary, and that was only in February of 2000.  Therefore, the role Business-to-Business electronic intermediaries are currently taking is that of a "virtual showroom" or extranet.  They act as a link between manufacturers and retailers, and allow retailers to view manufacturers products and place/track orders online.  The ultimate ordering, until now, has been done by fax or at trade shows.  The RetailMetro transaction signals a shift in the role of electronic intermediaries in the industry.  Manufacturers see web sites as a way to solve the problems of industry fragmentation, identify new trade partners, and to optimize communication with retail buyers.  Processing transactions between manufacturers and retailers will become the new role of online intermediaries, with a likely revenue model based on per-transaction fees.  Since furniture manufacturers and retailers are so slow in their adoption of the Internet, it will be likely that these companies will be able to succeed by providing expertise and a helpful hand in the confusing world of online commerce.  The major players at this point in the game appear to be  FurnitureShow, RetailMetro, Armadillo, Exclaim, HomePoint, and TradeInteriors .

History
FurnitureShow.com , an Austin, Texas based company, was founded in March of 1999.  The company launched a "beta test" site in August, 1999 with 25 manufacturers listed.  Six months later, the company announced that it had 100 online showrooms on the site.  FurnitureShow is positioned in the market as a virtual tradeshow.  The technology they have developed provides a way for manufacturers to receive orders online.  FurnitureShow does not feature unique sales and distribution requirements that manufacturers and retailers have made, such as tiered pricing and exclusivity arrangements.  Manufacturers are unable to manage or process the orders they receive.  Exhibitors in the site can display an unlimited number of products, and buyers can now browse through the showrooms and submit secure orders.  The company has announced plans to launch an industry-wide marketing campaign in partnership with Tatum, Toomey, Whicker, Inc. to inform furnishings manufacturers and industry buyers about the services available through the FurnitureShow.com Web site.  FurnitureShow used the semi-annual industry tradeshow in High Point, NC to unveil its online B-B marketplace to buyers in the furniture industry.  "Manufacturers are excited to learn that with FurnitureShow.com they can improve marketing and operational efficiency without disrupting their current distribution channels," says Ethan Phillips, CEO of FurnitureShow.com.  The company expects the site to be a big hit with brick and mortar retailers, due to cost structure problems facing traditional retailers.  New technology allows retailers to improve their margins by cutting transaction costs.  The company aims to create a unified platform for online industry commerce by bringing together furniture suppliers and wholesale buyers online and providing them with the tools to automate processes such as product ordering, order tracking and inventory.

Financial Backing
Early financing came in April, 1999 from Thomas Martin and Peter Zandan, two Silicon Hills veterans.  Martin was Vice President of Relationship Group Marketing at Dell Computers, and now serves as FurnitureShow.com's Chairman.  Martin also served on the boards of Zilliant.com, Absolute Multimedia, Inc., and Catalyst Development.  Martin had several years of marketing experience in the Internet and technology sectors, having served as Vice President of Marketing for Toshiba, Vice President of the laptop business unit of NEC, and a consultant with McKinsey & Company in addition to his positions at Dell before going to FurnitureShow.  Zandan is the founder and Chairman of IntelliQuest, Inc., a publicly traded market research company.

Key People

• Ethan Phillips, the co-founder and CEO of FurnitureShow.com, spent several years as an Internet developer and consultant prior to founding the company.  His credentials include Web consulting for Sprint, NASDAQ, and Packard Bell.  Phillips began focusing on the furnishings industry in 1998, the year he founded Incite Studio, which served as an e-commerce development and consulting firm focusing on small and mid-tier manufacturers.

• Kevin Daly, co-founder and President of FurnitureShow.com, previously worked as a research analyst at the Federal Reserve Bank.  He left the Fed in 1998 to further his research into the furnishings industry and to begin development of the FurnitureShow.com business model.

• Kevin English is a veteran of three prior technology start-ups, including successes at IntelliQuest and MoneyStar.  English has twenty years' experience developing networking and database applications.

• Jessica Phillips, co-founder and Creative Director of FurnitureShow.com, has been designing and developing e-commerce Web sites for over five years.  She designed and developed Web sites for several furniture manufacturers as Creative Director at Incite Studio.

History
RetailMetro, a Washington, DC-based firm with offices in North Carolina and Florida, was founded in February of 1999.  The actual site was launched in November of 1999, with half of the industry's top 25 manufacturers participating.  Retailmetro has sought alliances within the industry to build brand.  Partnering with Furniture/Today, an online furniture information source, has helped the company gain exposure in the online furniture market.  Retailmetro was the first company in the industry to complete a transaction in real time online, and is hoping to exploit first-mover advantages and associations within the trade to stay ahead of the competition.  RetailMetro offers services consisting of an industry-standard commerce platform, the online trade exchange, and systems integration to interface with existing systems.   Elisa Harnquist, chief marketing officer for RetailMetro said, "We are providing a common medium for manufacturers and retailers to interact online.  Within the home furnishings industry, 90 percent of orders are faxed or phoned in, which is very inefficient. We are giving manufacturers a way to manage their retail channel, and we are giving retail buyers a common medium for viewing products and placing orders across multiple manufacturer's lines."  Each showroom in the RetailMetro network has its own domain name, and links back to the participating company's website.  In order to attract manufacturers to the site, RetailMetro creates the showrooms for free, and then charges a monthly service fee based on the volume of business through the site.  RetailMetro views its assistance as a management system for large companies, and a marketing play for smaller ones.  Manufacturer's sites that are created contain secured pricing information, and the payment security process generally takes about 24 hours.

Financial Backing
RetailMetro has undergone two rounds of angle funding.  The company is funded by Steve Walker & Associates, a Washington-area investment firm, and has received private funding from several individuals.  RetailMetro has formed partnerships with Cahners Publishing, Compaq Corporation, Signio, Dun & Bradstreet and Micro Modeling Associates.

Key People

• Founders Jeremy Nurse (also CEO) and Elisa Harnquist have expertise in the Internet economy in researching, marketing, creating and developing one of the first Fortune 500 sites.  They also have experience in the home furnishings industry.

• Terry Markham, Director of Business Development, has over 20 years of experience in the furniture manufacturing industry, both nationally and internationally.

• Lee Corson, executive VP has 38 years in the furniture manufacturing industry and was President of the American Furniture Manufacturer's Association.  He continues to serve on the Board of Directors of this group.

History

Armadillo.com, a Seattle-based company, is an outgrowth of the Retail Group.   Retail Group was a consultant company focused on large retailers.  The company does not have prior experience in building retail commerce systems.  Armadillo contains a shopping cart feature that is customized for each member.  They provide direct mail services to brick and mortar and Internet customers, and integrate with existing legacy systems.  Armadillo also used the furniture market in Highpoint, NC to attract attention to their idea.  As founder Amy Owens says, the site is, "an intranet being designed for the furniture industry, to allow retailers and manufacturers to communicate."  The site is set to launch in March, 2000, and represents and $10 million venture.  Owens is well known in the furniture retailing and manufacturing industry, and has used her contacts within the industry to stimulate interest in Armadillo.  She expects the site to eliminate Electronic Data Interchange systems, which were commonly used in the industry to place orders, check availability, and invoice, all in an electronic format.  The site will offer manufacturers a mechanism for order placement, marketing applications, and e-mail to existing online and off-line customers.  Armadillo will also feature real-time tracking, and integration with existing systems.  In order to protect privacy and offer security to users, Armadillo accounts will be accessible through passwords only.  Armadillo claims it will only have access to accounts to provide maintenance and support, and will not offer client information to outside parties.

Financial Backing
Armadillo will spin off from Owen's Seattle marketing firm, the Retail Group, which has $7 million in sales annually. The Retail Group will retain a stake in Armadillo.

Key People
Armadillo will be staffed with former executives of Amazon.com and Microsoft.  However, their biggest asset is Amy Owens.

• Amy Owens has an extensive background in the furniture retail and manufacturing industry.  She has been referred to as the "diva" of the industry.  She recently completed high-profile projects for furniture retailers, as well as retailers in other industries such as Blockbuster, Star-bucks, The Body Shop and Nike.

History
Exclaim.net is a start-up based in San Jose.  They introduced their furniture portal on October 13, 1999 at the trade show in High Point, NC.  Exclaim features a search engine that allows users to identify, locate, and purchase furniture products quickly.  Exclaim was born out of Exclaim Techologies, an application service provider (ASP) that designs and operates B2B intermediaries in vertical market segments.  Excite's secure Web site provides buyer profile information, standardized orders, and shipping and order tracking and information.  Exclaim is free to use for customers, but charges a small transaction fee to the seller for each online transaction.  Exclaim also charges a small fee to setup a new seller account.
 
 

History
HomePoint.com is headquartered in Greenville, SC.  It was founded in December 1998.  The company was initially pursuing both a B2B and B2C strategy.  They have recently planned to discontinue sales to end consumers, and focus solely on being a B2B intermediary.  Homepoint uses a "click and mortar" strategy that encourages retailers to search for manufacturer's products online.  HomePoint already has hundreds of retailers and manufacturers participating in what they have called the HomePoint Advantage Network.  The network contains access to over 60,000 furniture selections for retailers using the site.  HomePoint is targeting independent retailers looking to compete with large national retailers.  HomePoint has made a deal with the SEC conference to generate marketing exposure for the company at key SEC events.  Through affiliation with the network, have access to a centralized purchasing program, relieving them of the burdens associated with negotiating contracts. They also benefit from volume pricing discounts.

Financial Backers
THLi is a New York-based equity investment company that invests in Internet-related businesses.  Also, in August 1999, HomePoint received $16.5 million in equity financing from Catterton Partners and GE Equity, and New Millennium Partners and Piedmont Venture Partners.
 

Tradeinteriors.com, founded in June 1999by Jill Curran and Nova Biro, is based in San Mateo, CA.  The company is focused on becoming a vertical B2B portal serving the interior decorator segment, which is a small portion of the total furniture industry.  Tradeinteriors services are free of charge.  TradeInteriors had identified three main frustrations common to interior designers that they seek to eliminate: administrative hassles, the time spent searching for goods and limited access to the universe of furnishings manufacturers.  TradeInteriors charges no upfront fees.

Key People
Other team members include furniture industry sales professionals and Internet veterans. In addition, experts from each segment of the design industry are active advisors to the company, including manufacturers, trade showrooms and interior designers.  Our management team has experience in both electronic commerce and the design industry.

• Jill Curran, the co-Founder and CEO of TradeInteriors, has experience as a Product Manager at an e-commerce software provider.  She also has experience developing e-commerce business plans at Mercer Management Consulting.
• Nova Biro serves as co-Founder and Director of Product Management at TradeInteriors.  Biro had previous experience in Internet product management at Lycos and WebTV.  She also worked as a consultant at Gemini Consulting, where she provided strategic analysis of technology and communications companies.
• William Grenewald, the Vice President of Business Development for TradeInteriors, has twenty years experience in design showroom marketing and operations.  He lends furniture industry experience to the management team.
• Bruce DaCosta, Vice President of Technology, has experience in managing software and networking companies.  He has served founded several high-tech companies.
• Elizabeth Connolly, Director of Marketing has 14 years of experience in product strategy, including Internet experience at such companies as SmartAge.  She also has held positions in the home furnishings and interior design industries.
• Jeff Breininger serves as Director of Operations at TradeInteriors.  He has experience working in furniture trade showrooms, as well as serving as Operations Manager at a semiconductor equipment manufacturer.

As the table shows, distinctions between furniture B2B intermediaries are hard to make.  The main competitive advantage, therefore, seems to come in the first-mover advantages.  RetailMetro was the first to actually process an online order in RealTime using their system, and therefore, holds the first-mover advantage right now.  In the opportunities for electronic intermediaries section, we will further discuss ways to set furniture intermediaries apart.

Primary Obstacles
The primary threat to the success of home furnishings intermediaries is the lack of technology adoption in the industry. The industry manufacturers struggle to manage their thousands of dealers (retailers) whose primary communication channel is via fax where up to 30% of orders are lost. Gross margins hover in the low single digits, and any means to improve this metric should be pursued. A compelling case can be made to manufacturers to introduce the concept of streamlining via the use of the Internet, but must be made slowly and with full involvement from industry professionals. RetailMetro has assembled an industry advisory board made up of manufacturing and retailing executives in order to facilitate a friendly and efficient entry to market. Since retailers have significant clout over manufacturers due to the number of manufacturer lines represented in the store, manufacturers also have incentive to strengthen existing relationships. Retailers determine their profitability in terms of Gross MArgin Return on Investment, which is calculated as GM/Cost of Inventory. Retailers have incentive to reduce inventory turnover cycles. This can be done by streamlining the ordering process, utilizing competitive intelligence to determine consumer buying preferences, and identifying new product lines faster. Often, consumers wait for weeks and months to receive orders and have no means to check order status through the manufacturer. Intermediaries solve this problem by allowing retailers to check inventory and order status online.

Another threat involves overcoming asset specificity and product descriptions. Home furnishings are all very unique and there are many different types, colors, and styles of fabric, wood and other materials which can be very difficult to desribe online. The 'Markets' were established in part to address the retailers need to actually touch and see the home furnishings products. The intermediary utilizes digital photos to represent products and detailed product measurements and descriptions. The intermediary cannot replace the traditional use of showrooms, but can offer a streamlined and enhanced mechanism for identification, communication, and ordering. Trust is not currently an obstacle for the intermediaries since most relatioships are cultivated offline at the markets.

Currently, no home furnishings intermediaries handle payment transactions. Given the strength of relationships bettween buyer and sellers and the need for negotiation, payment is being handled via the traditional method of purchase orders and invoicing. It is expected that payments will be added to the total solution after the industry embraces the initial technology solution.

Critical Mass
It is essential that the intermediary obtains a critical mass of buyers and sellers to remain an ongoing concern. The strategy for obtaining critical mass initially targeted manufacturers in the hope that their portfolio of retailers would join. It was expected that by capturing 25 of the top 100 manufacturers would lead to the necessary critical mass as the manufacturers would then be used as a marketing mechanism and source of leverage to attract their top 100 retailers. This strategy has shifted recently in response to manufacturers concerns that their retailers would not move online. Many intermediaries now are using a simultaneous two-pronged attack by working with both buyers and sellers.

Technologies
The leading edge electronic commerce technologies employed in this niche are proprietary extranets.  As far as payment mechanisms, all of these companies are just entering the payment arena, and therefore do not have an obvious payment protocol, but all promise "secure transactions" for buyers and sellers.  Excite is using Verisign to authorize users, and other sites require users to register and use a log-in and password to access the site.  All of the sites except Armadillo allow users to register, but TradeInteriors requires it to use all of the features of the site.  Every company has what they refer to as a proprietary software technology, but it is unclear how different these technologies actually are from each other.  In this archaic business, the reality is that there is little in the way of exciting new technologies being used.  As this industry becomes more comfortable with, and increases their use of technology, new developments should be soon to follow.  In the meantime, furniture intermediaries are stuck using very basic Internet technologies in order to connect buyers and sellers.