Online Hardware and Tool Industry Has Been Growing Strongly

Thanks to Americans' increasing move to online retailers, the online hardware and tool industry has been growing strongly. It has faced some challenges, though, due to slower residential construction and lower home improvement spending during the recession. Also, industry participants have had to continually improve their websites in order to compete with external competition, such as from physical retail stores. Despite these challenges, profit has continued to grow because of stronger supply chains and expanding economies of scale. As construction markets improve and shoppers continue to move online, particularly for tools and hardware, industry growth will strengthen. For this reason, industry research firm IBISWorld has added a report on the Online Hardware and Tool Sales industry to its growing industry report collection. The Online Hardware and Tool Sales industry has grown substantially for more than a decade as consumers increasingly shift purchases online. Every year, more than 100 million Americans purchase goods from the online retail marketplace, one of the fastest-growing industries in the US. Furthermore, according to the IBISWorld report as traditional retailers (i.e. brick-and-mortar) have entered the online realm to recapture sales taken by retailers that sell exclusively online, industry revenue has only expanded. Over the five years to 2012, IBISWorld estimates that revenue earned by online hardware and tool sales will increase at an average annual rate of 7.8%. Although the Online Hardware and Tool Sales industry has been growing strongly, it has faced some challenges. Slowed residential construction and lower home improvement spending during the recession caused industry revenue to slow in 2009. Also, according to industry analyst Mary Nanfelt, "industry participants have had to continually improve their websites in order to compete with external competition, such as from physical retail stores. Despite these challenges, profit has continued to grow because of stronger supply chains and expanding economies of scale. While a number of new participants have entered the industry, its major players, which include The Home Depot Inc. and WW Grainger Inc., have expanded their online presence and increased their overall revenue. Because of the industry’s growing size, however, major players have not been able to capture significantly larger shares of sales, leaving them with stagnant market shares over the past five years." The industry will continue climbing over the coming years, and an expanding construction market will only push growth further. Many of the same factors that contributed to the industry’s ascent in previous years will carry forward over into the next five, including the rising acceptance of online shopping. “Competition is likely to remain a defining trait of the industry over the next five years,” says Nanfelt, with more companies entering because of the industry’s significant profit margins and growing revenue, which will limit operators from capturing a large share of total sales. IBISWorld expects a slew of new participants to enter the online hardware and tool retailing space, diluting opportunities for existing players. The industry will also face a looming threat of regulation regarding sales tax, and a change in regulation could reduce industry profit in the coming years. Source: yahoo.com