United States retailing giant, Ashley Furniture, is set to open its first Australian store next month. This does not bode well for Aussie companies such as Harvey Norman Holdings Limited (ASX: HVN), Nick Scali Limited (ASX: NCK) or Myer Holdings Ltd (ASX: MYR).
As reported by The Australian Financial Review, Ashley Furniture claims to be the world's largest furniture manufacturer with more than 500 stores. While it is already operating in Australia through the Le Cornu chain – a brand operated by Fantastic Holdings Limited (ASX: FAN) – it will open its first genuine Ashley Furniture store near Adelaide next month, with plans for plenty more in the coming years.
Until now, Australian furniture retailers have been relatively unaffected by international competition. With the introduction of Ashley Furniture however, the retailers' already thin margins could be further challenged.
In addition, the furniture retailers could soon face an onslaught of online competition. While their sector hasn't been hit as hard from online competition as other retailers (such as those in electronics or clothing), consumers are becoming increasingly willing to spend on bigger items online without having seen them first.
The AFR quoted Ruslan Kogan, the founder of discount online retailer Kogan.com, as saying: "We are now getting to an age of near perfect information… people are realising that getting to sit on a couch or driving a car is irrelevant compared to reading reviews or opinions from experts… It also happens to be the most effective way for manufacturers to sell to customers."
