Houzz: “re-coupling” services that e-commerce has “decoupled”
Houzz's success illustrates a potential path forward for brick & mortar stores and service providers, which are feeling the heat from Amazon.
Houzz is an online community valued at $4 billion, which focuses on architecture, landscape design, home improvement, and interior design. With over 16 million home-related photos, Houzz is a crowdsourced content community that also connects people to product vendors, service providers, and informational forums. Against the backdrop of e-commerce websites like Amazon disrupting and decoupling the brick-and-mortar experience, Houzz actually “re-couples” many of the value-added services that Amazon lacks. In essence, Houzz is a brilliant case study of how brands, vendors, and service providers can strike back against the Amazons of the world.
On Decoupling
In lieu of platforms like Houzz, what does a customer lose in a post-brick & mortar world? For starters, the customer loses the advice of a seasoned sales representative, a visualization of how a collection of furniture pieces and accessories can create a beautiful aesthetic, access to credible service providers, and elements of the fun “social” aspect of shopping for home goods. This is real value that brick & mortar entities provide, which firms like Amazon often disrupt with bare-bones, low-cost offerings.
Houzz’s response to e-commerce 1.0
Houzz, however, strikes back with its compelling platform and ecosystem. With a keen focus on the Home & Garden space, and starting with an enormous and growing collection of crowdsourced photos, Houzz is a space that convenes homeowners and hobbyists alike. However, it doesn’t just stop there. Its algorithms analyze and tag photographs, matching sofas light fixtures, and beyond with “look-alike” products from product vendors, which you can conveniently purchase. Moreover, it allows you to find professionals, read through its curated collection of “stories and advice,” and share content with friends and family.
By creating an experience that harnesses all of these aspects, Houzz provides a full-stack solution within the Home & Garden space. It enjoys same-side network effects among its customers, and it benefits from cross-sided network effects between its customers and its providers. In creating this platform, Houzz effectively recouples much of what Amazon disrupted and decoupled from brick & mortar stores. In doing this, Houzz captures value through advertising products, having premium listings of service providers, and collecting commissions from its marketplace.
Implications for Amazon
Houzz’s business model is one to be replicated across other select retail verticals. As much as firms like Amazon and Wayfair have created value for customers through enormous scale and scope, the simple truth is that brick & mortar stores offer value which classic e-commerce players fail to provide but happily appropriate. In contrast, Houzz creates and captures the value it creates at scale across its content, sales, and advisory offerings.
This model is particularly useful for any vertical that involve long, complicated, relatively expensive, and potentially recurring sales cycles. All of these adjectives qualifiers tie in with complementary services, which can directly benefit from and can directly attribute their monetization to a platform like Houzz. Thus, this sort of model may work well for hobbies (i.e., paintball, woodworking, etc.), sports (i.e., road biking, yoga), or even wellness (i.e., recipes, diets, yoga, exercise), more broadly.
Citations
[1] https://techcrunch.com/2017/06/09/houzz-400m-raise-4b-valuation/
[2] https://www.architecturaldigest.com/story/houzz-designers-petition-visual-match-ecommerce