hen I looked at a mail list of furniture stores in Jan 1999, I saw a list of 15,451 stores. When I looked at a mail list of furniture stores in Jan 2002, I saw a list of 12,868 stores. What happened to 2,583 stores in the intervening timeframe?

They hit the wall on profitability and basic economic rules came into play.

There are three type of retail furniture stores today, those stores that will survive the downhill leg of this roller coaster economy, those that will be absorbed by those that survive, and those that will not survive. This statement applies to the top one hundred and the big regionals as well as small independent retailers.

We only have to look at the changes that are transforming other retail industries such as the booksellers and auto dealerships to see the future of retail furniture.

Since Amazon.com began operations, the profit margins in book selling have dropped for all booksellers. Many smaller retail operations have gone under unable to compete with Amazon's pricing or selection.

Now Amazon is in serious trouble despite a $1.2 billion annual revenue stream, because the big box booksellers such as Borders, Barnes & Noble and Wal-Mart developed Online strategies and went into Amazon's world and destroyed Amazon's ability to generate profitability.

The Internet is changing the way people shop for vehicles. Today, 30% to 40% of people planning to buy new cars are researching their purchases on the Internet prior to going to the showroom. In doing so, consumers are going to the dealerships armed with more information on dealer mark ups and alternative buying options helping them challenge the margins of the dealerships.

The same trend is developing in furniture as manufacturers all rush to develop a presence Online. Eventually consumers will be able to use information to put pressure on furniture retailers, much the same way consumers are now using information to put pressure on auto dealers.

In 1996 no one bought cars Online. In 2002, it is estimated that 2% of all cars sold, were bought over the Internet. By the end of 2003 it is estimated that 4% of all cars sold will be bought over the Internet. Car manufacturers are moving slowly on to the web and the process is creating havoc within the dealership channel.

In spite of the recent problems faced by the dot.com companies, the Internet has already changed the way companies do business and it is not going to go away.

In the past two years we watched as a number of furniture e-tailers came and went. The first wave learned many things, the second wave will take into account and do it better the next time around. Even now there are new furniture e-tail companies forming that are benefiting from the mistakes made and lessons learned about the way people buy furniture.

The next wave of furniture e-tailers is going to do a better job selling over the net than the first wave did. That is going to put additional pressure on the margins. The question is: "Will you be part of the next wave?" or "Will you be knocked off your feet by it and drown?"

Right now furniture manufacturers are using the web to provide information to help consumers make decisions. Eventually they will begin direct sales efforts. To soften the blow and attempt to deflect dealer complaints they will offer to "compensate" the dealer in the territory a sale is made.

With all the furniture manufacturers trying to figure out a way to make money on the net, it is only a matter of time before they figure out a way to play the Internet game much the same way they figured out ways to play the 1-800 game.

In fact, now that the dot.coms have opened the eyes of the executives of traditional companies, the Internet will become just another tool used by businesses to make money.

Jack Welch, Chairman/CEO of General Electric: "Now that the old line companies figured out how to make money on the Internet, all we have to do is digitize and let scale of economies kick in and we will make money hand over fist."

With large companies looking for ways to use the Internet in their businesses, the technology is going to transform the way they look at business opportunities. That is going to open up a whole new category of competitors that will have to compete against traditional furniture stores for consumers.

As traffic falls, the big box retailers are going to look for new markets to build traffic; the impact is going to be felt on the traffic of the independent retailer.

Manufacturers who are feeling a lot of pressure right now are going to look for ways to drive revenue, and the impact is going to be on the revenue of the independent retailer.

As recent events in the economy have shown, growth in revenue alone is not a good indicator of the health of a business. With so many people focusing on revenue; focusing on profitability is going to be the best weapon to ensure the survival of the independent furniture retailer.

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