Online Disruptors in Home and Garden

Strategy Briefing

About This Report

Dec 2018

Internet retailing was the fastest growing home and garden distribution channel over 2012-2017. Pure play online retailers continue to disrupt home and garden, wrestling market share away from store-based retailers. Store-based players are, however, fighting back with augmented reality and virtual reality technologies. Home and garden retailers continue to face rising delivery and logistics costs, and are thus increasingly adopting click-and-collect strategies.

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Online Disruptors in Home and Garden

Key Findings

Online sales climbing, but penetration still low

Home and garden online sales doubled between 2012 and 2017, with the online share rising from 4% of global value sales in 2012 to 7% in 2017. Home furnishings is the most popular category for online sales, accounting for 65% of global online home and garden sales in 2017.

China the second largest market for online sales

North America was the leading region for home and garden online sales in 2017; however, China has quickly risen to become the second largest market, after the US. Online sales penetration is dependent on the digital landscape, including fixed broadband and mobile internet access.

Pure play online retailers raise the stakes

Pure play online retailers continue to disrupt the home and garden industry, primarily within home furnishings. Online players typically adopt direct-to-consumer or marketplace models, and large e-commerce players (eg Amazon and Flipkart) are ramping up their private label offerings, threatening existing home furnishing brands.

Store-based retailers fight back

Store-based retailers are fighting back with omnichannel strategies, using technology both online and in-store to claw back consumer interest. Click-and-collect, augmented reality and virtual reality are some of the ways that home and garden stores are competing with pure play e-tailers.

AR/VR opportunities, but players need to invest in logistics

Augmented reality, virtual reality and even IPOs represent opportunities in the online space; however, both store-based and online players still face the challenge of logistics and delivery costs, as well as the potential for online sales tax in the US.

Introduction

Scope
Key findings

Global Overview

Home and garden specialist retailers account for two thirds of sales
Home and garden online sales double in value over 2012-2017
Low online sales penetration rate for home and garden in 2017…
…but still translates to high value sales relative to other industries
Internet retailing the fastest growing channel in home and garden

Rise of the Digital Consumer

The rise of the digital consumer
Connectivity transitions towards connected commerce
Developed markets demonstrate more robust digital infrastructure
Smartphones more popular in developing regions
Mobile connectivity the doorway to online sales in developing markets
Best price and time savings the top motivations for shopping online
Millennials more likely to be influenced by social media and reviews

Geographic and Category Opportunities

North America the largest region for online sales over 2012-2017
Majority of markets clustered at under 10% online sales penetration
China’s rapid climb to second place over 2012-2017
Top 10 growth markets account for 90% of global absolute value growth
Indoor furniture the most popular category for online sales
Home improvement the fastest growing sub-category for online sales

Pure Play E-Tailers Raise the Stakes

Emergence of pure play internet retailers in home and garden
Wayfair: world’s largest internet retailer dedicated to home furnishings
Wayfair’s digital crusade comes at a high cost
E-commerce mattress companies remodel the path to purchase
Amazon launches private label furniture, and partners with Tuft & Needle
Competition for India’s young, urban, aspirational nomads heats up
home24 achieves 14% revenue growth, but high costs lead to loss
Pure play online retailers go offline to boost customer engagement
Big data meets bricks-and-mortar in Alibaba’s Home Times in China
Casper ties up with Target and opens its own physical stores
Pepperfry expands its physical studios in India
Wayfair’s pop-up stores in US shopping malls just in time for Christmas

Store-Based Retailers Fight Back

Home and garden store-based retailers adopt omnichannel strategies
Walmart transforms into an online destination for the home…
…and makes shopping in-store easier at its Lawn & Garden centres
Home Depot buys The Company Store and installs pick-up lockers
Ikea invests in distribution centres to grow online sales in Australia
Unbounded retail: Qumei partners with JD.com in the home space
If you can’t beat’em, join’em: Serta Simmons buys Tuft & Needle

Outlook: Opportunities and Challenges

Augmented reality, virtual reality and IPOs as key online opportunities
Virtual reality and augmented reality in home and garden
Macy’s mixed reality furniture experience launches in-store in 2018
The power to revolutionise DIY through augmented and virtual reality
Wayfair Inc’s share price surges upwards over 2017-2018…
…but profitability still out of reach for the furniture seller
Direct-to-consumer online players look to IPOs to expand operations
South Dakota v Wayfair : landmark ruling for internet retailers in the US
Wayfair ruling allows states to collect tax on internet retailers
Online sales tax more likely to impact smaller sellers in the US
Internet retailers invest in logistics to tackle delivery challenges

Key Takeaways

Key takeaways for home and garden players active in the online space (1)
Key takeaways for home and garden players active in the online space (2)