Amazon

Amazon Tracker: (Not So) eCommerce Immune

Amazon has maintained its growth streak through the second full week of May, hitting all-time highs above $960 on Friday afternoon. Though the opening bell this week saw gains dampened slightly, the online retail giant’s shares are still on a hot streak.

At the time of writing mid-day Monday, AMZN was trading at $959.92, down 0.15 percent from Friday’s close, though well up for the month and the year-to-date.

While the future of Amazon points toward AI, AWS and logistics, that doesn’t mean that retail won’t still be a key factor for growth and development as well—especially as tech developments (ahem, Echo Show) enable more frictionless retail experiences.

Amazon is the online retail giant, after all, and hardly a stranger to reinvention—and disruption. (Lest we forget, it started off as an online bookseller.) Since then, it has evolved into an online retail, logistics, consumer technology, cloud computing and media streaming tour de force.

Still, even with the push to expand online sales more broadly, there have been certain categories that were largely considered ‘eCommerce immune.’

The use of the past tense should signal what comes next.

Recently, data from One Click Retail found that items once considered ‘eCommerce immune’ are starting to see sales shift online — especially on Amazon. Across categories such as home improvement and tools and outdoor, home appliances and sporting goods, U.S. consumers are increasingly moving to Amazon to make purchases.

This trend is likely to continue as millennials increasingly become homeowners. As the young, connected generation looks for supplies to maintain and manage homes, Amazon’s share of the home goods and tools category will continue to grow at a disruptive rate.

“Though often seen as an Amazon-proof industry, the old-fashioned American hardware store is not untouchable,” said Nathan Rigby, VP, One Click Retail. “Amazon has all the same advantages in the tools and home improvement sector that it has in grocery, beauty products and health care — and we’ve seen plenty of evidence of those industries feeling the Amazon Effect.”

Similarly, Amazon saw 20 percent year-on-year sales growth in the outdoor and sporting goods category, reportedly four times the rate of the overall market, valued at $120 billion.

And while the household appliance category — refrigerators, cooking appliances and laundry units, etc. — raked in just $16.5 million in 2016 for the online retail giant, One Click Retail anticipates that this category could soon see Amazon sales growth similar to the 30 percent seen in housewares across 2016.

It shouldn’t come as too much of a surprise, then, that Amazon is also gearing up to grow its presence in the online furniture market to more directly compete with the likes of Wayfair, Pottery Barn and IKEA, among others.

While the company has sold furniture for some time, it’s doubling down on its efforts, said the Wall Street Journal, and looking to build four or more warehouses to handle what it expects to be booming orders of bulky household items.

Furniture is the second-fastest-growing segment of online retail in the U.S. behind groceries. Citing Data from Barclays found that online furniture sales grew 18 percent in 2015. Likewise, IBISWorld found that some 15 percent of the $70 billion furniture market in the U.S. is online.

It’s also one of the fastest-growing retail categories at Amazon, Veenu Taneja, furniture general manager at Amazon, told WSJ, noting that Amazon is adding more Ashley Furniture sofas and Jonathan Adler home décor.

Additionally, Amazon has plans to roll out custom furniture design services and will provide one- or two-day delivery in certain cities around the country. Add that to the list of on-demand, customizable products the online retail giant is after.

It’s an ambitious plan, even for Amazon. The cost of shipping is significantly higher for these bulky SKUs, and consumers will likely require additional delivery services on their end — moving the furniture indoors, assembly and disposal of old items. These post-delivery services will likely cost consumers extra.

And it’s going to cost Amazon as well — and not just in the sense of taking additional hits on shipping losses. The online retail giant will need to pay for third party logistics services to fill out the supply chain.

Troy Cooper, CEO at XPO Logistics Inc., told WSJ that a two-day furniture guarantee requires a dozen large warehouses throughout the U.S., along with more than 100 smaller shipping hubs. Currently, Amazon is using XPO and other third-party logistics companies to handle distribution and delivery.

That is, until Amazon builds out enough logistics infrastructure to go its own way. Given that logistics is part of the online retail giant’s future, it’s likely just a matter of time before that happens.

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