With the Covid-19 pandemic forcing most Americans to stay home for the better part of last year, all that time spent indoors inspired many to spend money upgrading their homes, creating home offices or making other improvements—to the tune of $420 billion last year, Harvard University researchers found.
However, with 60 percent of adults now vaccinated against the coronavirus, and many workers returning to the office, how much longer will this home spending trend continue? Market research company Earnest took a look at the current state of home retail to see where and how consumers are shopping, as well as which brands have won new customers during the pandemic.
With growth climbing five-fold from pre-Covid levels, up to 50 percent in the second quarter of 2020, the most recent quarter saw the start of a meaningful slowdown to 33 percent—though still above pre-Covid growth levels of 10 percent vs. two years prior.
Pandemic shopping shifted more home purchases online, but most sales still happen in-store.
Prior to the pandemic, 80 percent of all home purchases were made in brick-and-mortar locations. Naturally, Covid propelled a shift to digital shopping, resulting in the online channel grabbing 5 percent more share (to just under 25 percent). At its peak in the second quarter of 2020, online spending grew to over 130 percent relative to 2019.
In the second quarter of 2021, online growth slowed to 70 percent and in-store growth to 25 percent relative to 2019, and the overall channel mix began trending back to normal levels. Importantly, though, even if online growth supercharges again, the majority of home goods sales remain in traditional brick-and-mortar stores, highlighting the sector’s reliance on consumer foot traffic. In fact, Earnest foot traffic data shows that consumer visits to home retailers reached just below the levels they were at this time two years ago, at -1 percent, up from its 15 percent year-over-year decline when the pandemic began.
Looking at the growth of the number of shoppers in the second quarter this year and last year relative to two years prior, Earnest analyzed its mix of new versus existing shoppers to assess the main drivers of growth.
Several home furnishing retailers, including Ashley Furniture, Floor & Decor, Overstock.com, and West Elm, saw healthy shopper growth this year and last, where around 40-70 percent of purchases were made by new shoppers (“new” defined as shoppers who have not patronized that particular retailer since Jan. 1, 2016).
Bed Bath & Beyond, Ikea, Tuesday Morning, and Restoration Hardware saw the total number of new shoppers decline, with 10-30 percent new shoppers. Home Improvement retailers like Home Depot, Lowe’s, Menards, and Ace continue to see healthy shopper growth of around 7-20 percent, albeit slower than last year’s 10-35 percent pace. The sector’s main drivers continue to be retaining existing customers versus acquiring new ones.
Online-only furnishing leader Wayfair has slowed considerably from its 200 precent-plus growth pop last year, where 43 percent of shoppers were new. Wayfair is now growing 30 percent versus 2019, 27 percent of which are new shoppers.
About 15 percent of Wayfair customers also shop at HomeGoods, Bed Bath & Beyond, and Ikea, up from 10 percent. Given Wayfair’s extreme swings in performance over the past year, Earnest looked at where else Wayfair customers shopped in 2021. In the second quarter, 17 percent of Wayfair customers also shopped at HomeGoods, 16 percent at Bed Bath & Beyond, and 12 percent at Ikea—all up from the 8 percent, 12 percent, and 7 percent overlapping figures, respectively, last year. Additional retailers in this analysis like Crate & Barrel, Pottery Barn, and The Container Store have the same level of overlap as they did in last year’s second quarter, although the majority only constitute 4 percent or less of Wayfair shoppers.
The data suggests that even though growth has continued, the pace has slowed from last year’s explosive gains. And while vaccines continue to roll out, a new surge in cases from the Delta variant is driving the reintroduction of mask mandates and other restrictions, painting an uncertain close to 2021.