DIY retailers have responded to the slowdown in the housing market by tailoring their products towards home owners looking to improve, rather than move, according to research seen exclusively by Marketing Week.
The demise of DIY retail chain Focus last month is an unfortunate, yet apt, way to illustrate the difficult times the sector faces.
Rivals B&Q and Wickes, as well as discount chain B&M Retail, demonstrated their resilience by taking over 55 of the 178 Focus shops due to be closed, saving just 900 jobs out of 3,920.
According to forecasts from retail consultancy Verdict, the DIY sector is set to grow 0.9% in 2011, increasing its sales to £9.37bn. However, this is in sharp contrast to the fortunes of Homebase owner Home Retail Group, which reported a 9.5% drop in pre-tax profits in its latest results and appointed former B&Q marketer Jo Kenrick as marketing director of Homebase last month.
Verdict has shown Marketing Week exclusive data from two of its recent reports, which have been compiled from market data and surveys of 2,396 UK consumers.
Verdict senior retail analyst Matt Piners says retailers in the DIY sector are being affected by the recessionary housing market. Fewer younger people are becoming property owners and are therefore less likely to invest in making high-level improvements to their homes.
The number of DIY consumers aged 16 to 24 has decreased from 7% in 2007 to 6% in 2011, while those aged 25 to 34 have decreased from 18.2% to 15.8% in the same period.
Meanwhile, older consumers are investing more on home improvements, with the number of DIY consumers aged 45 to 54 going up from 19.4% in 2007 to 21.8% in 2011. And for those aged over 65, it has risen from 13.9% to 16.3%.
“These older age groups are more likely to find the money to be moving house and improving, or doing up houses to increase their value. As things have been squeezed more, these are the people who still have more disposable income,” explains Piners.
Gender breakdowns show a perhaps self-explanatory bias towards men in 2007, 60.1% of DIY shoppers were men, and this figure rose to 62.2% in 2011. Piners says the slight decline in female shoppers could be down to the tendency for men and women to go for ’hard DIY’, such as tools, and ’soft DIY’, such as homewares, respectively, with the latter being generally easier to cut back on.
“From 2009 and beyond you can see that drop-off in women. That was when Homebase was really struggling, whereas more ’heavy’ DIY retailers like B&Q held up a bit better,” Piner notes (see The Frontline, below). “The products B&Q offers tend to be more male and necessity driven, whereas Homebase has a stronger link to homewares and casual projects, so female customers may have found it easier to cut back on that sort of spending.”
Socioeconomic breakdowns have remained relatively consistent since 2007, with a small rise in spend from the AB and C1 groups and a small fall in spend by C2 and DE groups.
Other key trends having an impact on retailers in the sector include the extension and improvement of product offerings to counteract the economic downturn, such as a movement into gardening products and high-end equipment such as fitted kitchens, bathrooms and bedrooms.
“I think it’s about trying to convince consumers of the benefits of working on their homes and trying to instigate the spending, rather than waiting for people to decide they want to do some DIY,” says Piner.
“Big-ticket items are an area where the DIY retailers have been able to prop up their businesses. Some capacity was freed up with the collapse of kitchen retailer MFI in 2008 and we’ve seen Homebase, Wickes and B&Q well placed to develop their own offers. They might not necessarily be high growth markets but there is still spending to play for.”
The DIY sector is also having to contend with the continuing expansion of grocery and other non-specialist retailers into the category, coupled with rising commodity prices. Piner says that the grocers and non-specialists are forecast to take a 7% share of the DIY market this year, up from 4% in 2006.
Improved service offering
As marketing directors at B&Q and Wickes note below, making improvements in the levels of customer service and expert advice, offered both in-store and through social media, is a tactical move to attract customers away from non-specialist competitors.
“The grocers are well placed to compete on price and convenience, which is forcing the specialists to think about how they can differentiate themselves,” Piner reasons.
Further trends to look out for in the year ahead, according to Piner, are a decline in the recent tendency towards price promotions and a shift towards smaller store formats. He says that straying further from discounting strategies will protect shrinking margins, while changing store formats taps into a consumer demand for greater convenience.
“Originally it was very much about big box, out-of-town stores, but more retailers are now looking at smaller, town centre outlets and more edited ranges,” Piner notes.
“That comes back to the convenience factor to entice new shoppers who might not necessarily have considered DIY, because it is easier to target those casual shoppers from a high street location.
“The edited ranges also work for older shoppers because, when people say that they want range, they don’t necessarily mean that they want a huge range, but rather one that matches their needs.”
the front line
WE ASK MARKETERS ON THE FRONTLINE WHETHER OUR ’TRENDS’ RESEARCH MATCHES THEIR EXPERIENCE ON THE GROUND
Our strategy is all about selfhelp and home improvement because, as the research indicates, we can’t really expect any help right now from the market, which has become very competitive.
We are looking to grow by making it easier for customers to do DIY through launching classes, more online tutorials, weekend instoredemonstrations and new products designed to make DIY easier. We also recently announced a £35m investment in improving our multichannel offer.
We recognise there is a generational skills gap in the market, as the research also indicates, and that’s why we have launched kids classes in selected stores. We have also launched a Job Done schools programme and are working with national youth clubs to engage the younger generation in DIY.
As the Verdict statistics show, most retailers are trying to move into space they didn’t previously occupy so they can continue to increase turnover. In some of our product ranges we will feel an element of risk, but being a specialist gives us a degree of comfort that the advice and information we offer is appreciated by our customers.
We have seen a strong trend towards “improve rather than move”. Where people are still doing projects, we are seeing that they are moving up in terms of product quality and price category.
Our customers are doing more smaller projects, so instead of building a whole house they are doing extension and conversion work.
As the report also shows, we have noticed product price increases from our suppliers, which we have absorbed where possible. Our trade customers are being squeezed by the consumer, so they are looking for the supply chain to stay competitive. Getting these customers to keep coming back and spending is a major focus for us, whether through price or service offerings, such as next-day delivery.
Brand marketing director
Our home improvement report from March shows a similar trend to this research. There is certainly a clear trend for improving a home, rather than moving.
Our research shows that two-thirds of homeowners are looking to do up their homes to add value to it for them personally. That compares with just 9% who say they are doing it up to prepare it for a sale.
We are making it easier for customers to shop with us, whether it’s on the phone, instore or on our website. We are also offering more own-brand ranges to keep prices down.
We found that, when it comes to doing a project at home, 47% of people decide to do it themselves, and we are well-placed to give the right advice on how to tackle a project with our in-store guides and online tutorials.
A key category that is driving up average transaction value, as Verdict’s report shows, is our kitchen and bathroom ranges, which have been updated to include premium quality Odina, Schreiber and Hulsta kitchens.
We have also launched an online social community for gardening enthusiasts. Customers are invited to set up a community profile, where they can view ’How To’ articles and instructional videos. The site also includes monthly trend features and blog entries from celebrity gardeners.
We recently launched a Jamie Oliver collection, the first partnership of its kind for a home enhancement retailer. It is a range of grow-your-own fruit, vegetables and herbs, as well as outdoor cooking equipment.
This partnership builds on Homebase’s strategy to develop exclusive products that give a more differentiated offer. We have also extended our exclusive Qualcast brand licence across a range of garden and power tools.
Homebase continues to improve its value proposition, with a range of more than 500 budget essentials covering DIY, gardening, home and decorating.