Home Improvement Retailers Beware: Amazon is Here

  • Categories:

    Industry Trends

  • Date:

    September 14, 2016

Home Improvement Retailers Beware: Amazon is Here

Industry Trends

Sam Walton forever changed the retail landscape when he opened the first Walmart store in Rogers, Arkansas, on a summer day in 1962. Today Walmart is known mostly for its low prices, but the iconic retail chain also redefined convenience. 

Now, more than 50 years later, Amazon is sparking another sea change. 

Founded by Jeff Bezos in 1994 at the height of the internet boom, Amazon survived the dot-com crash and grew to become the world’s largest internet-based retailer. In 2017, it will be the number two global retailer trailing only – you guessed it – Walmart. 

So how did the e-commerce giant climb the retail ranks so quickly? If you market or sell home or building products, how much should you care? 

Here are five key facts to know about the role of Amazon in the home improvement space – and strategies to make it work for your business. 

  1. It has plenty of room to grow. Amazon still has wells of untapped potential across home improvement categories such as building materials, hardware, flooring, lighting and power tools. Amazon’s share of most of these categories is currently in the single digits, but its capture rate (share of shoppers) per category is steadily increasing. In addition, cross-shopping with Amazon is growing among Home Depot and Lowe’s shoppers. While shoppers haven’t yet made Amazon their first stop for purchases in traditional home improvement categories, frequent cross-shopping between Home Depot, Lowe’s and Amazon signals potential to capture more home improvement business on Amazon.
  2. Prime is powerful. After Amazon Prime saw 26 percent growth in 2015, nearly one-third of U.S. households are now members. Few other retailers can count on so many loyal customers. Almost half of Amazon Prime members are Gen Y customers with children. And Prime isn’t just prevalent – it’s powerful. The subscription-based service influences behavior, as 55 percent of members go to Amazon before shopping anywhere else. It also drives them to buy from a wider assortment of categories, and some members have even stopped shopping at retail stores altogether. Additionally, add-ons like Amazon’s Prime Now app allow Prime members to shop for thousands of daily essentials and gift items with free two-hour delivery, seven days a week. It’s getting easier to imagine a world where most of us won’t leave the comfort of our sofas to shop for everything from hairspray to hand tools. For home marketers, it’s crucial to remember that Prime’s most powerful tool is its ability to move customers toward no click purchasing. That could cause shoppers to eliminate traditional retailers as resources they turn to for home improvement products – emphasizing the value of marketing and merchandising on Amazon.
  3. Shopping is smarter than ever. Products like Amazon Echo are making shopping smarter, more integrated and more interactive, all while pumping mass amounts of data into the system. This creates new ways for owners to make their homes smarter and more opportunities for retailers to capitalize on impulse and routine buys.
  4. Amazon Home Services is a game changer. Launched in 2015, Amazon Home Services allows shoppers to add related services to their carts with a single click, appealing to consumers who want to line up an electrician when they purchase their ceiling fan. Initially available in 25 U.S. cities, the pro service modeled after sites like Porch and Angie’s List is primed to expand.  Amazon is working hard to recruit the right pros: all those listed on the site were hand-selected and interviewed. Amazon’s growth as a services platform could be the difference maker for home improvement retailers, particularly when it comes to targeting younger people who are already Prime customers.
  5. Pros are warming up to Amazon. Speaking of pros, they’re catching on, too. Painters, electricians and others in trades that allow for advance planning order a lot of commodities through the site. Many builders and home improvement pros balance a weekly visit to Amazon.com with daily stops at their favorite brick and mortar store. While they’ve been slower to adopt some technologies and online trends, it’s important to remember that like their customers, pros appreciate anything that can make their jobs easier. These days, Amazon fits the bill.

Do you see Amazon as a nuisance siphoning off a few of your more tech-savvy customers, or does it already play a large role in how you do business? Bottom line: if you’re a traditional retailer or supplier and have not been paying close attention to Amazon as you develop strategies for long-term success, it’s time to make a change.

This post includes data from a Kantar Retail study, Amazon’s Potential to Disrupt Home Improvement Retail, courtesy of the Home Improvement Research Institute. If you have questions about the study or would like help tailoring your marketing strategies, contact Kent Panther at kpanther@wrayward.com

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