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What About The Business Model of Home Decor Products Inc.?

March 31, 2009


As a stockbroker, I tried not to become locked into a perticular belief about the direction of a stock or the market as a whole.   What happened if I made that mistake was that I tended to lock in on evidence that supported my view and blocked out evidence contrary to my opinion.

I run that risk by bringing to your attention the failure and subsequent filing of Chapter 7 bankruptcy by Home Decor Products Inc.,  a company that was no 143 in the  Internet Retailer Top 500 Guide.  Home Decor Products was an online retailer and operator of nine e-commerce sites that sold housewares and home furnishings.  In 2007 the company reported sales of $83.8 Million.

My belief is that the internet is killing margins in the online competition for sales, and contributes nothing to loyalty that keeps customers coming back.  The Internet Retailer reports that

One reason Home Décor shut its doors was because of excessive inventory costs, says the recipient of Home Decor`s letter. “Inventory was listed as the defining reason for their demise,” the source says. “Looks like they wanted to switch back to their roots of drop shipping but it was far too late.”

Someone has to hold the inventory, unless it's made Just In Time, either the manufacturer or the retailer.  Then there is the cost of shipping.  Many online retailers offer free shipping.  Of note in the filing is a debt of $152,771 to UPS Supply Chain Solutions.

I read, also, that Home Decor Products Inc. partnered with Easy2 Technologies. 

"These partnerships offer the ability for our clients, and their affiliates, to help customers get a feel for products as if they were shopping in-person at a retail location, while still experiencing the ease and convenience of online shopping," said John Bukovnik, Easy2 president and co-founder.

My point has been that consumers want to research on line and then go to the bricks and mortar store for a hands on experienmce.  I think this partnership attempted to duplicate the in-store experience.  Did it work?  This bit of evidence says no!  And the filing by Home Decor Products Inc, a company that had reached a significant size, tells me that we are still searching for an online model that will succeed.

Thoughts?  You can comment directly, email me at landfair3554@comcast.net or follow me @landfairfurnitu.

Posted by Mike Landfair on March 31, 2009 | Comments (1)