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Is Ikea the Next Victim in Amazon.com, Inc.’s Headhunt?

AMZN aims to furnish your living room with Amazon Rivet and Stone & Beam

Home furnishing retailers in the U.S. have been nervous since May, when it was revealed that Amazon.com, Inc. (NASDAQ:AMZN) was interested selling furniture. Things are getting a lot more real now that the company has launched it’s own Amazon furniture lines: Amazon Rivet, and Stone & Beam.

Is Ikea the Next Victim in Amazon.com, Inc.'s Headhunt?
Source: Amazon

The collections feature hundreds of pieces, including sofas, and they’re available with free shipping to Prime members. It looks as though Amazon is preparing to take on the likes of Ikea with this latest move.

Amazon’s Furniture Retail Play

We first reported on Amazon’s furniture ambitions back in May. The company was making moves to capture a piece of the rapidly growing online furniture market, including building four new warehouses dedicated to furniture. That move would represent taking a shot at established online furniture retailers like Wayfair Inc (NYSE:W). At the time, they didn’t seem particularly worried. AMZN stock got a 1% bump as that news broke.

Then the Amazon furniture story faded a bit. The company wasn’t making the big splash that some had expected. That all changed this week, when AMZN launched its own in-house furniture brands, Amazon Rivet and Stone & Beam.

Amazon Rivet and Stone & Beam

On Tuesday, Amazon officially took the wraps off its own furniture brands. Amazon Rivet is described by the company as “stylish and versatile mid-century modern furniture and decor.” Stone & Beam is “modern farmhouse” with an emphasis on comfort and durability.

Like Ikea, Amazon furniture doesn’t exist in a vacuum. Each collection consists of themed, matching pieces such as sofas and chairs, along with hundreds of complementary accessories. An Amazon Prime customer could buy everything to furnish their new condo living room from the Amazon Rivet collection — from sofa to lighting, rugs and wall art — and have it all delivered, for free. Instant, showroom quality, tastefully appointed room furnishing.

The quiet launch of Amazon Rivet and Stone & Beam didn’t move the AMZN stock needle. However, as the Seattle Times noted on Tuesday, when reporting on the new Amazon furniture brands, it certainly had an impact on furniture retailers. Wayfair was down 5.9% on the news, and Williams-Sonoma, Inc. (NYSE:WSM) took a 4.1% hit.

Will Amazon Furniture Help AMZN Stock?

Amazon offers so many different products that’s it’s tough for any one to have a material impact on its bottom line. Pieces in the Stone & Beam line include $2,299 sectional sofas, but also $39.99 wall prints.

The U.S. furniture market is definitely a big potential source of revenue, as shown by this Fung Global Retail & Technology report. In 2015, consumer furniture and bedding sales were reported to be $102 billion. With U.S. home sales in a period of growth, that number is predicted to hit $120 billion by 2020. And according to the Fung Global report, the living room is the first stop for homeowners planing to redecorate, with a sofa the key purchase, and a preference for accessories that complement that sofa.

Amazon clearly read that report when it planned its furniture strategy.

The focus is on the living room — unlike Ikea, there are no bedroom or dining room options (at least not yet). Both Amazon Rivet and Stone & Beam feature sofas, and the accessories are all designed to complement these key pieces.

The two lines are also targeting different demographics. Amazon Rivet is lower priced and offers smaller pieces — ideal for millennials, young families and condo dwellers. Stone & Beam gets into pricer, more substantial furnishings.

An Amazon rep told FurnitureToday:

“Customers are increasingly turning to Amazon for their home furnishing needs, with furniture as one of the fastest-growing retail categories here at Amazon, and we are excited to continue innovating on behalf of customers as well as expanding our selection of products and offer customers Rivet and Stone & Beam.”

The launch of its own Amazon furniture brands may not move the AMZN stock needle appreciably, at least not immediately. But it adds to the company’s overall ability to dominate the market as a true one-stop online retailer. And if it can tap into that $102 billion U.S. furniture market in a meaningful way, then there is definitely an upside for AMZN stock.

As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.

Article printed from InvestorPlace Media, https://investorplace.com/2017/11/ikea-next-victim-in-amazon-com-inc-headhunt/.

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