Post by dividavi on May 11, 2021 1:23:37 GMT
1 Reason Why Amazon Can't Mess With Home Depot
It's a pretty simple explanation, and one that investors need to know.
www.fool.com/investing/2021/04/25/1-reason-why-amazon-cant-mess-with-home-depot/
Neil Patel
(TMFBuyAndHold)
Apr 25, 2021 at 7:45AM
Author Bio
The cause of the so-called retail apocalypse often gets attributed to the efforts of one major company: Amazon (NASDAQ:AMZN). The $1.7 trillion behemoth has upended numerous shopping categories with its e-commerce excellence, from apparel to electronics and even groceries.
But one sizable segment the Seattle-based company hasn't really hurt is home improvement. The largest such retailer in the world, Home Depot (NYSE:HD), has so far been defending its turf. Even as Amazon has increased its dominance over the last few years, Home Depot's revenue and profit have continued to climb. And its stock price has followed, rising 142% since April 2016.
The key to this success has to do with the exact nature of Home Depot's products and customers, which are paramount to its ability to fend off Amazon.
IMAGE SOURCE: GETTY IMAGES.
Home Depot's big advantage
Compared to most other types of brick-and-mortar stores, Home Depot is a project retailer. This means that its products require more research and consultation before purchasing. Customers need to ensure that they are getting the correct items for whatever they are trying to accomplish, whether it's sprucing up the patio or fixing a plumbing issue. The stakes are higher with home improvement.
The company's previous investments in supply chain and e-commerce capabilities to bolster the customer experience bore fruit last fiscal year, as digital sales soared 86% compared to fiscal 2019. The main figure, however, is that 60% of these orders were actually picked up in stores.
Because home improvement products tend to be larger, heavier items, the effectiveness of a delivery strategy is diminished. Sorry, Amazon.
This buy-online, pickup-in-store consumer behavior is noteworthy for a couple of reasons. First, Home Depot is continuing to invest in fulfillment centers with the goal of providing same-day or next-day delivery to 90% of the U.S. population. Even with this capacity, however, customers' willingness to complete their orders in-store is a blow to Amazon.
Second, it shows the urgency of needing products as soon as possible. This is particularly true for Home Depot's do-it-for-me customers (what the company calls Pros), who need tools and supplies quickly so that they can finish their home contractor jobs.
These factors, namely the size of products as well as customers' needs, have kept Amazon at bay and fed Home Depot's competitive advantage. You see the same dynamic at play in the auto parts industry, where businesses like O'Reilly Automotive and AutoZone keep performing very well.
The takeaway for investors
There aren't many companies out there that can defend themselves against the giant that is Amazon. It seems as if the e-commerce, cloud computing, and digital streaming juggernaut is infiltrating every single industry, wreaking havoc on established businesses the world over.
Home Depot is not only surviving the threat, but finds itself thriving in this fast-paced competitive environment. As long as the home improvement retailer can continue leaning on its omnichannel strategy to serve its customers in whatever way they want, I'm not worried about Amazon.
Shareholders in Home Depot shouldn't worry either.
Should you invest $1,000 in The Home Depot, Inc. right now?
Before you consider The Home Depot, Inc., you'll want to hear this.
Investing legends and Motley Fool Co-founders David and Tom Gardner just revealed what they believe are the 10 best stocks for investors to buy right now... and The Home Depot, Inc. wasn't one of them.
The online investing service they've run for nearly two decades, Motley Fool Stock Advisor, has beaten the stock market by over 4X.* And right now, they think there are 10 stocks that are better buys.
See the 10 stocks
*Stock Advisor returns as of February 24, 2021
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Neil Patel has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon and Home Depot. The Motley Fool recommends the following options: long January 2022 $1920.0 calls on Amazon and short January 2022 $1940.0 calls on Amazon. The Motley Fool has a disclosure policy.
It's a pretty simple explanation, and one that investors need to know.
www.fool.com/investing/2021/04/25/1-reason-why-amazon-cant-mess-with-home-depot/
Neil Patel
(TMFBuyAndHold)
Apr 25, 2021 at 7:45AM
Author Bio
The cause of the so-called retail apocalypse often gets attributed to the efforts of one major company: Amazon (NASDAQ:AMZN). The $1.7 trillion behemoth has upended numerous shopping categories with its e-commerce excellence, from apparel to electronics and even groceries.
But one sizable segment the Seattle-based company hasn't really hurt is home improvement. The largest such retailer in the world, Home Depot (NYSE:HD), has so far been defending its turf. Even as Amazon has increased its dominance over the last few years, Home Depot's revenue and profit have continued to climb. And its stock price has followed, rising 142% since April 2016.
The key to this success has to do with the exact nature of Home Depot's products and customers, which are paramount to its ability to fend off Amazon.
IMAGE SOURCE: GETTY IMAGES.
Home Depot's big advantage
Compared to most other types of brick-and-mortar stores, Home Depot is a project retailer. This means that its products require more research and consultation before purchasing. Customers need to ensure that they are getting the correct items for whatever they are trying to accomplish, whether it's sprucing up the patio or fixing a plumbing issue. The stakes are higher with home improvement.
The company's previous investments in supply chain and e-commerce capabilities to bolster the customer experience bore fruit last fiscal year, as digital sales soared 86% compared to fiscal 2019. The main figure, however, is that 60% of these orders were actually picked up in stores.
Because home improvement products tend to be larger, heavier items, the effectiveness of a delivery strategy is diminished. Sorry, Amazon.
This buy-online, pickup-in-store consumer behavior is noteworthy for a couple of reasons. First, Home Depot is continuing to invest in fulfillment centers with the goal of providing same-day or next-day delivery to 90% of the U.S. population. Even with this capacity, however, customers' willingness to complete their orders in-store is a blow to Amazon.
Second, it shows the urgency of needing products as soon as possible. This is particularly true for Home Depot's do-it-for-me customers (what the company calls Pros), who need tools and supplies quickly so that they can finish their home contractor jobs.
These factors, namely the size of products as well as customers' needs, have kept Amazon at bay and fed Home Depot's competitive advantage. You see the same dynamic at play in the auto parts industry, where businesses like O'Reilly Automotive and AutoZone keep performing very well.
The takeaway for investors
There aren't many companies out there that can defend themselves against the giant that is Amazon. It seems as if the e-commerce, cloud computing, and digital streaming juggernaut is infiltrating every single industry, wreaking havoc on established businesses the world over.
Home Depot is not only surviving the threat, but finds itself thriving in this fast-paced competitive environment. As long as the home improvement retailer can continue leaning on its omnichannel strategy to serve its customers in whatever way they want, I'm not worried about Amazon.
Shareholders in Home Depot shouldn't worry either.
Should you invest $1,000 in The Home Depot, Inc. right now?
Before you consider The Home Depot, Inc., you'll want to hear this.
Investing legends and Motley Fool Co-founders David and Tom Gardner just revealed what they believe are the 10 best stocks for investors to buy right now... and The Home Depot, Inc. wasn't one of them.
The online investing service they've run for nearly two decades, Motley Fool Stock Advisor, has beaten the stock market by over 4X.* And right now, they think there are 10 stocks that are better buys.
See the 10 stocks
*Stock Advisor returns as of February 24, 2021
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Neil Patel has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon and Home Depot. The Motley Fool recommends the following options: long January 2022 $1920.0 calls on Amazon and short January 2022 $1940.0 calls on Amazon. The Motley Fool has a disclosure policy.
