The online household furniture industry has thrived over the past five years.

Industry revenue is expected to grow at an annualised 12.1 per cent over the five years through 2012-13, to reach $303.7 million.

According to IbisWorld industry analyst, Aries Nuguid, the industry has grown rapidly from its small base as Australians have shifted to online shopping, supported by an accelerated number of internet connections.

The greater traffic through online stores has boosted industry sales.

The industry attracts value-driven customers due to lower prices and convenient product comparison.

Online household furniture sellers are able to offer low prices due to having little need to maintain a large floor space to display their products.

Profitability has increased over the past five years as operators have benefited from economies of scale and invested in labour saving equipment.

Industry revenue is expected to grow strongly in 2012-13 as players continue to enter the industry and consumers become more accustomed to online purchases.

The online household furniture industry is characterised by a large number of small operators, each carving out its own share of the market.

For instance, some pure play operators focus on supplying the replica designer furniture market, while others focus on providing lower priced furniture products.

The two largest players in the industry in 2012-13 are expected to be Milan Direct and Harvey Norman.

The industry’s market share concentration is relatively low due to the recent entrance of a large number of players.

For instance, many traditional retailers have only launched e-commerce websites in the past year or so.

“Although these companies have established networks due to their distribution of retail outlets, their online capacity will take some time to ramp up,” says Nuguid.

On the other hand, pure play retailers are gaining larger market shares more quickly due to their instant online retail operations.

The industry will welcome even more customers onto its online stores over the next five years. The formation of more households, more entrants, and customers shifting online will support the quick growth.

However, profitability is expected to diminish.

The entry of new players is expected to increase competition, which will encourage price drops that will cut into profit margins.

For more information, visit IbisWorld’s Online Household Furniture Sales report in Australia industry page.