by Anna Henriksen, One Click Retail

Amazon wants to be your roommate. American consumers are inviting Amazon into their homes and the ecommerce giant is doing a very good job of making itself indispensible. The home automation boom has helped to populate American households with Alexa and Amazon is using this trend to capture more marketshare in household goods. So it’s no surprise that Home is now one of Amazon’s key product groups, one of only a handful that earns more than $1 billion per quarter. As of the first half of 2018 (H1), year-over-year growth of this group is 16% – a sales increase in the hundreds of millions of dollars. Let’s take a look at the current and future trajectory of this key market.

AMZ H1 Update: Home

 

Home Environment

Of the major categories, Home Environment is leading the pack, driven by a convergence of multiple trends. First, Amazon is quickly evolving into one of America’s leading appliance retailers; the company invested heavily in 2017 in upgrading its logistics and warehousing to accommodate the growing popularity of large household products. Shoppers are driven to Amazon.com as the best source of product information and consumer ratings & reviews, and since the site not only matches or beats the prices of their major brick-and-mortar competitors but also offers free shipping on orders over $25 (which includes just about any appliance), there is no incentive for people to drive to the store.

Secondly, Americans are more health-conscious than ever. Controlling the air quality in their homes has become a point of real consideration for Amazon shoppers, driving sales of air conditioning, filtration and humidity control. The largest Home Environment subcategory overall is Portable AC Units, with Honeywell controlling several of the bestsellers but several other brands performing well, while the Air Purifiers and Dehumidifiers subcategories are more concentrated. Air Purifiers is the second largest subcategory and responsible for the most growth (31% YoY in H1 2018). The bestselling Air Purifier, the Germ Guardian AC4825, is the #1 Home Environment product on Amazon year-to-date and #3 in Home overall. Frigidaire leads the Dehumidifiers subcategory with the #5 bestselling Home item of 2018 so far.

But something big is on the horizon. Without a doubt, the Home Environment space is poised to undergo a major – and inevitable – transformation. At this time, the leading brands in each of these three main subcategories are overlooking the emerging home automation trend. In other categories, including vacuums, thermostats and doorbells, consumers have made it clear that they want to be able to control their home appliances from their smartphones. But none of the top selling products in Home Environment are WiFi or Alexa enabled (the Rollicool brand makes an Alexa-enabled portable AC unit, but it suffers from a poor customer rating). Without a doubt, automation is coming to the Home Environment category – it’s just a question of which brands will be the first to implement it successfully.

 

AMZ H1 Update: Home

 

 

Home Storage & Organization

Home Storage & Organization is a very broad category. Though it doesn’t quite match the value of Home Environment – both a big priority for Americans today and primarily containing items which cost in the hundreds of dollars – it’s no surprise that this category is the second largest in Amazon’s Home product group.

During the first half of 2018, the Simplehuman brand controlled more than 10% of all first-party (1P) sales in this category. This is in part due to the fact that Simplehuman produces a wide assortment of products that fall under this umbrella, but their specialty – and the real secret to their success – is the surprising popularity of their trash cans. The brand’s high-quality stainless steel trash cans range from $20 to $250 depending on their size and design and are supported by their own dedicated landing page on Amazon, with high-quality photography and helpful subcategories.

This just goes to show how something as mundane as a trash can benefits greatly from being presented in an attractive and elegant way, and how that can mean all the difference between a forgettable product and a bestseller.

After Simplehuman, one of the next largest (and fastest growing) brands in this space is AmazonBasics. Amazon controlled about 5% of the Home Storage & Organization market in H1 2018, which is a big increase from the same period in 2017 when they controlled only 1%. Again, this brand, which is the company’s largest private brand overall, benefits from producing a wide assortment of products: the leading AmazonBasics item is a 5-rack shelving unit, but the brand also sells several high volume waste bins and a variety of hangers, hampers, and other clothing storage items.

 

AMZ H1 Update: Home

 

Vacuums

Despite ranking as the #3 category, 7 of the 10 bestselling Home items on Amazon.com were vacuums. The Vacuums category is growing twice as fast as Home Environment and is on track to rank as the #2 category before the end of the year. iRobot deserves some credit for this. The Roomba robotic vacuum from iRobot was an instant classic, a breakout hit that revolutionized vacuuming and home automation alike. It was also one of the first wave of appliance brands to introduce Alexa-compatibility to their products.

This brand exemplifies the consumer adoption of Alexa home automation. The “classic” Roomba model is the 650, which was consistently the bestseller in past years. The 690, the Alexa-enabled equivalent of their classic model, was introduced in early 2017 and while it sold well, the 650 remained the bigger seller during 2017. But in H1 2018, not only did the 690 sell better than the 650, but two different models from iRobot’s more advanced (and more expensive) 900 series outranked it as well: the Roomba 960 is the bestselling Home item of the year so far.

Consumer trends, once biased toward lower-cost robotic vacuums, have now shifted in favor of high-tier models. A side effect of this is how it poses an opportunity for 3P sellers. In 2017, about 15% of vacuum sales came from 3P sellers, while during the first half of 2018 that more than doubled, reaching 35%. iRobot’s higher-tier 900-line in particular is being targeting by 3P sellers, who are winning the buy box from the primary seller by undercutting them on price. Brand manufacturers need to be careful to control their supply chain and keep their prices competitive – on Amazon, there is an escalating price war over high-cost home electrical appliances.

It’s no wonder that Amazon is becoming one of America’s major Home and Housewares retailers. Their voice-activated personal assistant, Alexa, has been embraced by the home automation industry as a key technology, and their commitment to both offering the lowest price on the market and providing free shipping has made them the obvious choice for busy consumer to buy bulky, expensive appliances. Home is already one of Amazon’s biggest product groups and there is still plenty of room for growth, competition and innovation. Amazon is investing in Home – and smart brands are investing in Amazon.

 

 

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