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Arbor Day is here and the home and garden market is growing thanks to internet retailers like Amazon. As the US housing market continued to recover in 2016, home and garden sales increased for the seventh consecutive year, recording value growth of 3% at current prices. This rate of growth was broadly in line with that of the review period, but fell slightly short of the growth posted by the market in 2015. Growth was fairly evenly distributed across the board in 2016; gardening, home improvement, home furnishings, and homewares all recorded value growth rates of 3% at current prices, as sales of both new and existing homes in the US reached levels not seen since before the economic downturn of 2008-2009.
Clearly, the most important story in home and garden distribution in the US over the course of 2016 was the accelerating growth in online sales. A number of factors contributed to the gains made by internet retailing over the course of the year. Online retail giant Amazon.com continued to add to its already impressive market share. Home furnishings e-commerce specialists, most notably Wayfair LLC, also made extraordinary sales gains. Additionally, leading brick-and mortar retailers in the home and garden space, such as Home Depot and Lowe’s, continued to successfully pursue omnichannel sales strategies. Conspicuously, a growing number of niche manufacturers, such as Casper Sleep Inc – an e-commerce mattress brand – also showed how lucrative focusing on internet retailing in home and garden can be. Taken together, all these trends added up to a very healthy year for online sales.
Store-based retailing remained dominant in the US home and garden market in 2016, accounting for 88% of all value sales. The continued sway of store-based retailing can largely be attributed to the outsized impact of specialist retailers; in home improvement and gardening, home improvement and gardening stores constituted 71% of all retail sales by value – the same share of the market the channel commanded in 2015 – while homewares and home furnishing stores accounted for 51% of all homewares and home furnishings sales by value, which also represents the same market share as the previous year.
Online retail juggernaut Amazon.com has been one of the main drivers of growth in online sales in home and garden, with the company’s Amazon Prime service – which offers subscribers free two-day shipping on any product – proving to be a triumph in the US. Yet there is far more to the story than just Amazon.com. Inspired by Amazon’s business model, a number of other online-only retailers have emerged in recent years, and some of them have found success by focusing on the home and garden space. The most notable of these is Wayfair LLC, a home furnishings e-commerce specialist that has aggressively pursued market share over the last few years; in 2016, Wayfair generated an impressive USD3.5 billion in sales in the US alone. Sensing opportunity, a number of smaller, niche e-commerce retailers have also sprung up to take advantage of perceived gaps in the online space. Casper Sleep Inc, a US-based mattress company founded in 2014, has become something of an overnight success by largely bypassing brick-and-mortar outlets completely and selling direct to customers online. Not to be outdone, large brick-and-mortar retailers in the home and garden space, most notably Home Depot and Lowe’s, have aggressively pursued omnichannel sales strategies in what has so far proven to be a fairly successful attempt to carve out a foothold in online retail.
So far, internet retailing in the home and garden space has had the biggest impact on homewares, but the expansion of the distribution channel into other areas of the market is unmistakably beginning to accelerate. In 2016, 12% of home furnishings sold by value in the US were purchased online. It may not be all that surprising that online sales are making a dent in some segments of home furnishings; home textiles, for example, are – much like homewares – typically compact, lightweight, and easy to ship, and 16% of all home textiles by sales value in the US were purchased online in 2016. In indoor furniture, however, where products are usually larger, heavier, and more unwieldly, the growth of online sales is much more stunning. With ecommerce specialists such as Wayfair leading the charge, internet retailing accounted for 11% of all indoor furniture sales by value in 2016. Mattresses, especially, have become a popular item to purchase online, and e-commerce mattress brands such as Casper are thriving. Younger consumers who grew up with the internet, it seems, have less reservations about purchasing large and relatively expensive furniture products online, and – by 2021 – fully 17% of all indoor furniture sales by value are expected to take place over the internet.