The hardware and home improvement category is poised for a big shakeup, as sales in this sector—so far one of the least penetrated by e-commerce—are fast moving to the web.
That’s one of the principal findings of the just-released Online Hardware and Home Improvement report, which reveals that 7.7% of total retail sales in the category were transacted on the web last year, up from 4.0% five years ago.
It’s largely the big retail chains that are benefiting from this shift. As a group, nine hardware and home improvement retail chains in the Internet Retailer 2017 Top 1000 experienced collective sales growth of 18.5% in 2016, reaching $13.2 billion. Compared with Top 1000 retail chains across all categories, that was impressive growth. That easily beats the online sales growth in 2016 notched by all 223 retail chains in the Top 1000, which was 10.8%, to $121.5 billion.
Why did the hardware/home improvement chains do so comparatively well? One big factor was their investments in omnichannel strategies to press the advantage of having thousands of stores—each with literally tons of inventory—near where, collectively, tens of millions of shoppers live.
To lure those shoppers, hardware/home improvement retail chains use web technology to give consumers real-time local inventory information and buying options. Such purchasing options include picking up online orders at stores, getting orders shipped from the store (from a store or a distribution center, depending on the order), or having online orders delivered locally to their homes. In addition, online orders shipped to a consumer’s home can increasingly be returned to a local store for a refund.
Mobile apps are a big part of what hardware/home improvement chains are using to integrate their stores and online operations.
Apps, such as those offered by Lowe’s Cos. Inc., The Home Depot Inc., W.W. Grainger Inc., Menards and Ace Hardware Corp. allow customers to check to see if an item is available at a local store. Many of the apps—notably those from Home Depot, Lowe’s and Menards—will tell customers exactly where in a store to find the things they are looking for.
The Menards mobile app includes a version of augmented reality that enables customers to use a mobile device to take a photo of an area where they plan a door, skylight, wall light, appliance or other item, and then superimpose an item from the Menards inventory into the picture.
Lowe’s is pushing the boundaries farther by using a more advanced form of augmented reality in two mobile apps created by Lowe’s Innovation Labs, which the company founded in 2014. So far, however, the retailer’s use of augmented reality can be seen mainly as an investment in the future, because each of the apps relies on Google’s augmented reality platform called Tango, which has yet to be widely adopted.
Those efforts are paying off in significant ways:
- In a filing with the U.S. Securities and Exchange Commission in April, Lowe’s reported that about 60% of its online orders are picked up in store, and 40% of those shoppers wind up buying something else when picking up their online order.
- At Home Depot, more than 45% of the retailer’s online orders are picked up in one of its stores, CEO Craig Menear told analysts on Home Depot’s Q1 earnings in May.
- Speaking to reporters at W.W. Grainger’s summit for customers and suppliers in Orlando in March, W.W. Grainger CEO D.G. Macpherson said Grainger is on track to do 80% its total sales through e-commerce. He added that e-commerce has become a purchase point and an acquisition vehicle for “every type of customer.” Grainger sells primarily to business customers.
- At Tractor Supply Co., the company’s Buy Online Pick Up in Store program—which it finished rolling out in the second quarter of 2017—now accounts for 55% of all online orders. E-commerce represented only 1% of sales in the first six months of 2017. But, in a July 23 earnings conference call with analysts, CEO Gregory Sandfort said he attributes much of Tractor Supply’s growth to increasing connections between bricks-and-mortar and online stores.
In addition to an analysis of retail chain performance online last year, The Online Hardware and Home Improvement report includes details on how web-only merchants including Amazon compared. It also includes:
- Key data on the 58 largest online hardware and home improvement retailers
- Key data on Amazon’s hardware sales
- Analysis of growth rates of by merchandise category and merchant type
- Demographics of online home hardware/home improvement buyers