History: Furniture.com's basic business model was a classic example of dot-com exuberance: Why not have furniture shipped to customers' doorsteps with the click of a mouse? While some believed the idea had promise, . Home furniture delivery had long been available from brick-and-mortar retailers, but the sofa-buying public was new to the idea of ordering large items online.
However, Steven Rothschild tells The Industry Standard that this wasn't as large of an issue as many believed.
"[Large furniture] brands helped to overcome consumer skepticism," says Rothschild. "For every person who said 'I have to sit on it,' there were three who did not. Also, the ability to call and speak with sales people helped."
Rothschild adds that initially the furniture was presented with high-quality photos, but eventually rotation views and room planners were added. He says that larger-scale changes were needed as well. "[The site] had to be built and rebuilt for scale and to be current. As consumer access to high-speed Internet access increased, expectations of a heightened experience increased."
The company relied on manufacturers to ship merchandise rather than store its own inventory. However, this led to some unexpected problems, Rothschild says. "The biggest issue we faced was getting vendors to agree to continue supplying us, while their other customers complained about the competition," he says. "Today that battle still goes on with 'No Internet' policies and minimum retail pricing policies."
Shipping and marketing problems also cropped up. "Originally we charged for delivery and even made gross margin on the delivery, [but the policy was changed to] free freight," Rothschild recalls. "We had two levels of delivery, sidewalk [delivery] and delivered and set up, [but this was changed] to only delivered and set up [for free]. We [initially] limited marketing to a level that left the transaction profitable. [This was accelerated] to a level where the first transaction could not be profitable. We charged a given price. Discount coupons [were offered] on the first transaction. Eventually each sale cost the company on average $700. At that rate the company could not be profitable."
The profit picture was further clouded by the expectations of investors. In 1997 and the spring of 1998, the company was profitable. However, as soon as the VCs invested in June of 1998, the situation changed, according to Rothschild. "[Venture capitalists] said things like 'money is rocket fuel -- burn it' and 'get big or go home'. They didn't realize it was just another go to market strategy and still had to be run like a business," he says. The company's planned IPO was pulled at the last minute when the market tanked in 2000. According to the company, its revenues for the first nine months of 2000 were $22 million, more than twice its net revenues for all of 1999. However, according to its IPO filing, .
What Happened: Rothschild says that a turnaround was impossible, considering the company's astounding cash burn, the crushing debt load owed to vendors, and a lack of profitable sales. The company closed its doors and filed for bankruptcy in November 2000.
Where Are They Now? Steven Rothschild is CEO of online light bulb retailer bulbs.com. Misha Katz is CEO of ad optimization firm AdHarmonics.
Reflecting on Furniture.com's closure, Rothschild describes what running an online business should always be about. "I always believed that solid business principles like positive gross margin, cash flow, profit, and delivering sold orders to customers was still relevant," he says.
Eighteen months after declaring bankruptcy, Furniture.com relaunched, using intellectual property (including the furniture.com URL) which had been purchased at auction. The company's new president is Carl Prindle, who was executive vice president of the original company. It uses a new model involving partnerships with large furniture retailers (initially Seaman's Furniture and Levitz Home Furnishings) for .