By Nathan Rigby, VP Sales and Marketing at One Click Retail
Can Amazon compete in the European Home Improvement market? Major brick-and-mortar chains like Kingfisher, Bauhaus and Adeo currently hold approximately 93% of the marketshare and the sector is one of the few that is still sometimes called ecommerce-proof. But it's been proven time and time again that the question isn't if Amazon will become a major player in any given retail sector – the question is when.
In 2017, Amazon made an estimated €1.4 billion in Home Improvement sales in Europe, with the bulk of those sales taking place on Amazon.de, the company's German site. This is only a sliver of the sales made by the major hardware store chains (commonly called "DIY stores" in continental Europe) – but brick-and-mortar sales are only growing at less than 2% YoY. In comparison, Amazon is averaging 30+ percent growth in Europe, more than fifteen times the growth in offline sales.
The Home Improvement market is moving online as surely – and inevitably – as any other product group. Since Amazon is by far the largest online retailer in Europe, brands in this sector have no choice but to invest in Amazon if they want to remain competitive.
What's Big: Power Tools
Amazon's Home Improvement sales in Europe are dominated by Power Tools. In Germany, the largest of Amazon's European marketplaces, Power Tools sales earned over €200 million according to our estimates, almost 2.5 times the sales of the runner-up category (Plumbing & Bath) and also ranked as the #1 category in both the UK and France.
Three key brands led the Power Tools market with varying success depending on the country: Karcher, Makita and Bosch. In Germany, the top three power tools (ranking as the #2, #3 and #4 bestselling Home Improvement items of 2017) were from each of those brands respectively, but while Karcher and Bosch each only had one item ranking in the top 10, Makita supplies 5 of the top 10 items of 2017. Makita was also the market leader in France with a bestselling screw gun. In the UK, the Bosch Cordless Combo Drill led not only the Power Tools category, but was also the #1 bestselling Home Improvement item last year.
Karcher, uniquely, has found most of their success by cornering the Pressure Washers market. With virtually no competition, Karcher Pressure Washers ranked among the top 20 items in Germany, the UK and France. The brand was particularly successful in the UK where 6 pressure washer models (as well as 2 different window vacs) ranked among the top 20 items and single-handedly drove Pressure Washers to be the #1 subcategory of 2017.
The strategy of cornering a specific niche on Amazon, as illustrated by Karcher, allows a brand to own the relevant search terms and results pages, making it challenging for competitors to gain visibility and rank above the current market leader. This is why it's so important for brands to invest in Amazon early.
What's Growing: Amazon Home Automation
In 2017, brands across many different product groups found success but adding Alexa-integration to their flagship products. Alexa, Amazon's voice-activated personal assistant originally developed for the Echo smart speaker, has allowed everyday household items such as lamps, sprinkler systems and thermostats to compete in the emerging home automation space and climb to the top of their respective categories.
Today, home automation is a major purchase motivator for consumers and an opportunity for brands in the Home Improvement space. In Germany, Amazon's largest European market, the bestselling Home Improvement item was the TP-Link Smart Plug, an Alexa-compatible device which lets you control your outlets from a distance. In the UK, the #2 bestseller was the Nest Learning Thermostat – which introduced Alexa-compatibility to the 3rd generation of its successful smart-thermostat line and helped to drive a growth of 99% in the Timers subcategory. Also in the UK, the bestselling item in Garden & Landscaping Tools (the third-largest category of 2017) was the Flymo Robotic Lawnmower, illustrating the high consumer demand for more automation in their lives.
What's Stable: DIY
The DIY culture is gaining prominence in Europe, with rising labor costs encouraging more consumers to take on maintenance and repair projects as well as growing incomes among the younger generation attracting them to craftsmanship-based hobbies. This trend is driven by the proliferation of online tutorials and YouTube guides – and with consumers already getting all their home renovation knowledge online, it's not much of a leap for them to open a new tab, type "Amazon" and buy the tools, parts and fixtures they're going to need.
After Power Tools, there are three major categories that rank in the top 5 consistently across Amazon's German, French and British sites: Hand Tools, Plumbing and Garden & Landscaping Tools. However, the top items in each of these categories don't rank very high in any of these three countries – of the three, Garden & Landscaping Tools has the highest ranking item in all countries, but doesn't rank among the top 5 bestsellers in any of them. What this tells us is that sales in this category are spread out across many products and many brands, suggesting these product categories are ripe for competition.
What's Next: Security & Safety
Brands can learn a lot by keeping an eye on how Amazon invests their money. They have one of the world's largest collections of consumer behavioral data, so their actions speak loudly about the latest consumer trends. Most recently, Amazon purchased the home security startup Ring, best known for the Alexa-enabled Ring Video Doorbell (#11 bestselling Home Improvement item in the UK) in response to the growing consumer demand for security and safety products.
Security and safety is one of the key emerging trends in Europe. Fire Alarms & Security ranks as the #4 category in Germany with a YoY growth rate of 28%, but security-related products are driving sales across all countries and in several different category. Security cameras from Netgear, Nest and Netatmo lead the category in Germany, the UK and France respectively while the Ring Video Doorbell, which falls instead under Electrical, is a leading item in the UK and helping to drive a growth of 42% in the Electrical category.
The total growth in this space is obscured because Amazon organizes these items into several different categories, but the flipside is that brands have a big opportunity to get a lot of visibility as consumers place more and more value on safety and security.
Amazon's share of Home Improvement in Europe remains low, but the company is slowly capturing more of the market with sales growing at over 30% YoY. As a new generation of homeowners invests in Home Improvement, opting to do it themselves rather than hiring an expensive contractor and taking on landscaping, craftsmanship and home maintenance as hobbies, these consumers are increasingly likely to choose Amazon over the leading brick-and-mortar chains. The DIY retail store is going to feel the Amazon Effect – and the brands that invest in this sales channel early will reap the reward.
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