Amazon’s Effect On Retail Stores

Lowe’s Cos. and Home Depot Inc. have built a business away from the online reach of Amazon.

The uniqueness of these two retail businesses will be shown in their second quarter earnings. Analysts are projecting for sales at Lowe’s to rise at 4% while 4.8% at Home Depot. This is according to FactSet’s data. This would mean a minimum of 4% year over year growth for both companies.

The sales decline for other retailers

The gains are where other retailers such as Macy’s Inc., Kohl’s Corp. and Nordstrom Inc. are becoming envious. For each of these retailers, there has been an ongoing decrease with an increasing difficulty for them to attract shoppers to their stores. For Wal-Mart Stores Inc., there is also an expected small sales gain for the 2nd quarter. Target Corp. also expects a sales dip.

The retailers reported an improved trend from earlier this year. However, their business strategies are being overturned by the increase in online shopping like buying sweaters in online stores, such as the UglyChristmasSweater.com, or blenders in online appliance stores instead of visiting physical stores.

The sales increase for home improvement stores

With the favorable real estate trends and increase in property purchases, the turnover in this market is remaining steady. According to Home Depot, millennials are buying homes earlier than usual which means store visits to big chains to purchase paint colors or materials for projects around homes.

Since most of the US homes are aged 30 years or more, homeowners spend more on upkeep according to Home Depot. It also helps that there is a rise in home values and there are low interest rates according to S&P CoreLogic. This means that homeowners regard their homes as investments so they spend more on updating their kitchens or replacing their roofs. These trend allows for the home improvement sectors to grow better than the retail sectors.

Amazon vs. other physical stores

According to the Commerce Department, sales at home improvement stores went up 6.4% through July compared to last year’s same period. According to the same data, online sales are increasing faster up to 10.5% for non-store retailers like Amazon. Amazon doesn’t have a greater edge over most parts of the home improvement market, though. However, Home Depot still faces fierce competition from online stores.

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