Dive Brief:
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Sales at home improvement retailers rose 6.4% in July 2016 compared year-ago totals, in sharp contrast to surprisingly flat overall July retail sales data reported by the U.S. Department of Commerce.
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Analysts expect home improvement and do-it-yourself sales to continue to rise, forecasting a 4.8% second quarter increase at Home Depot and a 4% spike at rival Lowe’s, according to data from FactSet, cited by the Wall Street Journal—the eighth consecutive quarter those chains have experienced at least 4% year-over-year growth.
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The home improvement category appears to be insulated from the so-called “Amazon effect,” which has forced retailers across categories to compete on price, the Wall Street Journal posits.
Dive Insight:
In an era when the Great Recession and the great rise of Amazon have helped make commodities out of products in just about every category—a situation that leaves price as the great differentiator—garden and home improvement stores have largely been spared.
The reasons are both psychological and practical. The psychological: Many home owners don’t see spending on their homes as a luxury or discretionary purchase, but as an investment. The practical: Shoppers still see a need to run to a home improvement store to browse and buy colors of paint, for example. Add to that the fact that about two thirds of homes in the U.S. are older, requiring more upkeep, and that low interest rates and rising home values are making such spending highly palatable.
Still, the Amazon effect may yet be coming to this category, considering that the number of U.S. shoppers willing to consider Amazon as a source for home improvement products is rising. According to a June UBS survey cited by the Journal, 11% of consumers planning a home improvement project planned to turn to Amazon, up from 7% a few months ago.
Dedicated home improvement retailers may also face challenges from other directions. In May, J.C. Penney announced that it’s expanding its window-covering sales by allocating another 25% of floor space to curtains, blinds, shades, and decorate hardware. Before the recession, J.C. Penney was helping a third of U.S. households to dress their windows, according to the Dallas Morning News.
