Insights

AMZ Effect: Power Tools

By September 6, 2018 No Comments

By Ojastro Todd

Now is a good time to buy power tools. Like any seasonally-driven category, the late season is the when you find the best deals, since manufacturers and retailers want to unload as much of their stock as possible. During the offseason, whatever isn’t sold will gather dust and occupy valuable warehouse space that would be better off being filled with next year’s models.

On Amazon, power tools experience a unique lifecycle, thanks to Prime Day. Unlike most other huge deal days, Prime Day is specific to Amazon, and it has set a new sales record for the eCommerce giant every year since its inception. And because Prime Day falls in mid-July, it holds a special influence over Amazon’s Power Tools category. Typically, Q2 is the biggest quarter for a Power Tools brand – in 2018, the peak sales period lasted from mid-April to early July. This has the effect of giving the category a significant pre-Prime Day sales boost. Since Power Tools brands are entering Prime Day with their flywheels rapidly spinning, the lift generated by the massive amounts of traffic effectively extends Amazon’s Power Tools season well after sales have slowed at all other major retailers. Brands can then take advantage of this improved visibility by using strategically-timed late-season discounts to maintain strong sales well into the fall, ultimately positioning themselves for a winning holiday season.

This unique schedule makes Amazon a crucial retailer for Power Tools brands. Because of the retailer’s ability to extend the category’s traditional peak sales period – not to mention the fact that consumers are increasingly abandoning the brick-and-mortar hardware store in favor of Amazon – brands would be wise to prioritize an Amazon-first strategy.

AMZ Effect: Power Tools

Going Cordless

In the first half (H1) of 2018, typically the bigger half of the year, Amazon sold approximately $150M worth of Power Tools, an increase of 30% compared to H1 2017. The biggest share of these sales was controlled by Cordless Drills, the subcategory which has led Amazon’s Power Tools sales for years.

Cordless Drills continuously rank as some of the bestselling items in the Power Tools category, having become something of a household staple. Because it’s one of the first and most common Power Tools purchases, it experienced a lot of growth on Amazon at a relatively early stage, well ahead of most other products in this category. In H1 2018, 3 of the top 10 Power Tools were Cordless Drills while another 3 of them were combo kits containing drills. The most popular drill, the Dewalt 20V MAX Lithium Ion Compact Drill Driver (#2 Power Tool of H1 2018), is currently on sale for 41% off the list price.

Today, Cordless Drills saw the least YoY growth – only about 15%. This is a sign that Amazon’s $30M Cordless Drill market has reached a relatively mature size and sales are beginning to plateau. But growth is a long way away from flat-lining: Amazon’s market share continues to grow year after year, so brands that control a piece of that share will keep earning new customers.

AMZ Effect: Power Tools

 

Bundle Up

We must admit that we’ve misrepresented the full impact of Cordless Drills. The fact is that the Combo Kits, the second-biggest Power Tools subcategory during H1 2018, is also mostly made up of Cordless Drills, this time bundled with a variety of related tools and accessories. Combo Kits’ YoY growth in sales surpassed that of its individual drill counterpart by a wide margin – 35% compared to 15% – and is rapidly approaching the latter category in size. In fact, the bestselling Power Tool during the first half of 2018 was a Combo Kit from Dewalt, although Hitachi and Ryobi were also key players in this category.

The popularity of this subcategory is not hard to understand. An Amazon search for Power Tools would turn up both stand-alone tools as well as related Combo Kits, and shoppers would be enticed by how these bundles can save them the hassle of finding compatible items and accessories. Combo Kits are even advertised, almost without exception, on the product detail pages of the individual tools they contain.

One of the secrets to Amazon’s success is how it has made product research and discovery much more accessible to busy consumers. The popularity of DIY home improvement today is indebted in part to the digital marketplace, and consumers with an interest in woodworking and construction will gravitate toward Combo Kits as a quick and convenient way to get started on their new hobby.

AMZ Effect: Power Tools

The Great Outdoors

The seasonal nature of this category is especially impactful in Outdoor Power Tools, and a few additional factors helped to drive this subcategory to experience the highest YoY growth in H1 2018. In some parts of the US spring started about 20 days earlier than usual, leading some customers to begin their lawn care shopping a little sooner than in 2017. Since Mowers hold the biggest share of Outdoor Power Tools, the category benefitted from the earlier start to the sales season.

Additionally, a major trend in the Mowers space is the shift away from gas lawnmowers in favor of electric. Initially-reluctant consumers have now been convinced of the value of electric lawnmowers and trimmers, influenced by decreasing prices and the significant reduction in noise. Greenworks is winning in the Mowers subcategory, with both their cordless and corded 20-inch models ranking among the top 10 items of H1 2018, while Black+Dekker controls the largest share of electric trimmers.

One of the key challenges in the Power Tools space is the fact that many products are expected to last for years or even decades, but the rapid shift from gas to electric mowers proves that innovation pays. By offering something better, whether by improving comfort, reducing noise, or making something more “green”, brands can stand out in a saturated market and capture a whole new audience.

DIY home improvement is more accessible than ever. Today, there is a wealth of online tutorials, forums and YouTube guides which make it easy for consumers to teach themselves the skills required – and these are the same consumers who make up the bulk of Amazon’s audience. The US Power Tools industry is fairly healthy overall, but in pure growth terms Amazon is the winning retailer. If they haven’t already, now is the time for brands to invest in an Amazon-first strategy.

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