Market Trends July 2021

7/13/2021

Home Improvement Market Growth
The Home Depot and Lowe’s have about a 30% market share of the home improvement market, according to data provided by Bank of America (BoA). Home Depot has about 17% share and Lowe’s has 12%, which means the industry remains extremely fragmented. Because THD and Lowe’s have considerable advantages over hardware stores and others in the category, including ecommerce capabilities and access to inventory, Bank of America expects both companies to continue to gain share. BoA estimates that the average US household spends $3,000 on home projects each year. When millennials were surveyed, 72% said they were likely to buy a home in the next two years. BoA identified a substantial market opportunity for what they termed a “consistently profitable” category. RBC Capital Markets analysts also forecast continuing demand in the home improvement category despite the fact that consumers are headed back out into the world for parties, work, dining out, events and vacations. BoA estimates the market is moving toward $1 trillion overall.

J.D. Power Home Improvement Study
The J.D. Power 2021 US Home Improvement Retailer Satisfaction Study delved into facts behind the boom in home improvement sales. About 30% of US consumers said they are either planning or actively working on a home improvement project.

Just 13% of respondents said they purchased products from the retailer’s website, while 87% shopped in a store, with 98% of in-store shoppers saying they felt safe and comfortable even at the height of the pandemic.

Customers don’t want to have to spend more than five minutes finding an item or an aisle. A majority (66%) of respondents said that their retailer met that threshold, although there was a fairly wide gap between the best in class (72%) and the worst in class (49%).

Younger customers have the highest levels of satisfaction, with Gen Y and Gen Z customers averaging 842 on a 1,000-point scale and Gen X and Boomers averaging 824.
Younger generations have increased their home improvement activity within the past year, with 42% planning for or in the process of doing a project in the next three months compared to 27% of the older generations.

Thanksgiving and Holiday Plans
Walmart, Target and Best Buy have already announced that stores will be closed on Thanksgiving Day in order to allow associates to spend the holiday with their families. Last Thanksgiving during the pandemic many retailers remained closed in order to avoid driving traffic to stores and pushed online promotions instead.

Amazon Prime Day Impacts Retail Sales
Total US online spend across retailers surpassed $11 billion during Prime Days (June 21-22), which represents a 6.1% increase from Prime Day 2020, according to Adobe Digital Economy Index data. The moderation in year-over-year growth may be indicative of the general direction ecommerce sales are heading in now after booming during the pandemic. Analysts noted that Prime Day 2021 was just eight months after Prime Day 2020, and several weeks ahead of Amazon’s traditional mid-July date, traditionally when consumers are engaging in back-to-school shopping and many begin holiday shopping. Retail analysts note that Amazon may have decided to get Prime Day in before people start vacationing, traveling and diverting spending to services. In addition, constrained inventory and unreliable supply chains have forced virtually all third-party sellers to be selective with promotions. Chain Store Age reported that a recent survey showed that 35% of consumers say their favorite retailers are still dealing with out-of-stock issues and 48% have changed buying habits due to the pandemic, including buying more items in bulk and restocking household items earlier than they would have before. The retailer supply chain issues are so severe that the National Retail Federation (NRF) recently sent a letter to President Biden asking for help in fixing supply chain disruptions that are adding days and weeks to supply chains as well as leading to inventory shortages that impact their ability to meet their customers’ needs.

Retail Sales Forecast
The NRF has upwardly revised its most closely watched forecast and now expects retail sales to total between $4.44 trillion to $4.56 trillion this year, up from $4.02 trillion in 2020. Their numbers exclude automobile dealers, gasoline stations and restaurants. The NRF’s initial projection of at least 6.5% growth was made in February. Non-store and online sales, which are included in the total figure, are expected to grow between 18% and 23% this year, to $1.09 to $1.13 trillion, up from $920 billion in 2020. NRF also forecast full-year GDP growth of 7%, up from 4.4% to 5% forecast earlier. The NRF is seeing clear evidence of a strong and resilient economy and noted that the sheer amount of both fiscal and monetary policy intervention has lifted personal income and replaced income lost back in March and April 2020, creating an excess of purchasing power.

New Ways to Pay
Target is partnering with Minneapolis-based financial tech company Sezzle to provide customers with new options to pay for goods both in stores and online. Sezzle allows customers to split payment for their orders into four interest-free installments over a period of six weeks. There is no fee if customers pay on time. Target mentored Sezzle’s founders in 2019 through their Techstarts retail accelerator. Sezzle went public in 2019 and got a surge of new customers during the pandemic. Sezzle said its platform is used by more than 34,000 retailers.

International Corporate Tax
The G7 countries are working out an international corporate tax agreement that would ensure that multinational companies with operating margins of 10% or more would pay a minimum tax rate of 15%. When they realized that Amazon might not have to pay because their overall operating margin is around 7%, the proposal went back to the drawing table and will be represented in July. At the press conference after the deal, US Treasury Secretary Janet Yellen said that companies like Amazon and Facebook would be taxed but did not detail how that will happen.

Who’s on Facebook?
Facebook, founded in 2004, now has more than 2.8 billion monthly users worldwide, with 69% of US adults saying they use Facebook, compared to 40% who use Instagram, the second most popular social media platform. About 70% of US adult Facebook users visit at least once a day, and almost half check in several times each day, according to a recent study from Pew Research Center.

Around three-quarters of US women (77%) use the platform, compared with 61% of men. There are differences by education level as well. About three-quarters (73%) of adults with a college degree or more use Facebook, compared with 64% of those who have a high school diploma or less.

Americans ages 65 and older are the least likely age group to use Facebook, with just half saying they do so. But that still represents a 30% increase since August 2012, when just 20% reported using it. Only about half of American teens are on Facebook, and 70% of those who do use Facebook come from lower-income households.

Facebook is a surprisingly nonpartisan platform, with a roughly equal percentage of Republicans and Democrats. About a third of adults say they get their news from Facebook; however, about 60% of adults say they are highly distrustful of the news on Facebook.

Nearly three-quarters of adults were not aware that Facebook shared information about their traits and interests with advertisers; more than half of all the adults on Facebook were uncomfortable with Facebook collecting and sharing their information.

Bipartisan Infrastructure Deal
President Biden announced agreement on a $1.2 trillion infrastructure deal that represented a bipartisan compromise to his original proposal of $2.3 trillion. A White House release said the compromise includes $109 billion for roads and bridges, $66 billion for passenger and freight rail, $65 billion for broadband internet, $55 billion for water infrastructure, $49 billion for public transport, $47 billion for infrastructure resilience, $25 billion for airports, $7.5 billion for electric buses and $7.5 billion for electric vehicle charging stations. A vote is anticipated before the government’s fiscal year ends September 30.

Market Trends