Online buying of DIY products; is the market being ‘Amazoned’?
General online players, of which the most famous one is Amazon, have been broadening their product range over the years. For example, in the UK during 2016 Amazon has been broadening their product range from 400K SKU’s to 600K SKU’s. This leads them into direct competition with DIY retailers. Both are responsible for a significant part of the volume in online DIY purchases. In previous posts, we showed the share of online purchases of DIY products, but where do consumers buy, when buying home improvement products online? I would like to zoom in on the differences between general online stores and online operations of DIY stores in Germany.
What stands out, is that the share of online purchase at the general online store is really high in Germany. This is 64% of the online purchases in Germany. The German consumers buy less via the online operations of the DIY store, when buying online. 26% of the home improvement products in Germany are purchased via online operations of DIY stores. We also see this, to some degree, in other countries where Amazon is present, for example in Italy and the UK.
In Germany, it was not until 2011 before the leading DIY retailers adopted online shops. This is in some way surprising, because large parts of the DIY product range (like power tools and garden products) are quite suited for e-commerce. This late adoption had its consequences.
The more specialized online merchants (like Amazon) were already active on the market by then. These pure online players had a role in forcing the DIY retailers to adopt a more profound online strategy. It will be very interesting to see how this develops in the upcoming years. During this year’s DIY summit the CEO of OBI, Mr. Giroldi, mentioned that he expects that Amazon will be the market leader in Germany for DIY products in a couple of years’ time.
Coverage of hubs
The retailers need to adopt, but they have ample opportunities to do so. They already have the coverage or ‘hubs’ as Amazon calls them, with their stores. This could enable fast delivery & returns. Furthermore, in some product categories (like paint, flooring, insulation and so on) I would be very surprised if the market share for online would grow higher than 15% .
Other opportunities lay with becoming a ‘total solution supplier’. With this I mean not only selling products, but also take care of the design and the installation (via third parties). With a growing DIFM segment, this could be a potentially big market. Service and a good shopping experience will be key , however this will mean more qualified staff and thus additional overhead costs.
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