DIY, the dying sector
The popularity of DIY has fallen severely. Retailers must tailor their services to tempt consumers away from their holidays and back to their tool boxes. By Richard Perks
Focus DIY is heavily in debt and facing bankruptcy, but it looks as if a mystery US DIY business is prepared to come to its rescue and buy it from private equity owners Duke Street and Apax. There have been other interested parties, but the group could still be broken up or taken into administration. DIY has been one of the worst-performing retail sectors for about three years – the question is why.
The last year the sector reported consistent growth was 2004. Since then it has usually taken exceptional circumstances for growth to have occurred in the previous year. But what is all the more remarkable is that this decline has happened when consumer confidence is strong, and mortgage equity withdrawal booming.
DIY has been a growth sector since at least the mid-1970s and there have been two major drivers of growth. The first was the arrival of warehouse-style stores – bigger outlets have tended to expand the market. Wider ranges and better displays helped demystify DIY and make it more accessible. But that growth has now come to an end. There is little scope for opening more large stores, though there is a lot to be done to improve the appearance of smaller ones. The second driver was growing interest in the appearance of the home – TV programmes on makeovers and so on seem to be the best guide here. But they no longer excite interest in the way they used to.
Mintel’s consumer research bears this out. Three years ago home improvements, extensions and makeovers came top of the list of spending priorities. But by this year it has dropped to fifth place, only just ahead of paying back debt, while first and second places are occupied by taking major holidays and short breaks.
The changes are too big to be dismissed as a statistical glitch. There is a fundamental shift in attitudes taking place, a result of an ageing population and the feelings of security, even complacency, which have come with the UK’s 15-year consumer boom.
We’ve known that the UK population has been ageing for the past 30 years, but the baby boom has been a great driver of DIY growth. As that peak in the birth profile has aged it has distorted demand at every stage. Over the past decade the baby-boomers were in their 50s – the prime age to do DIY. But the baby-boomers were 60 last year and are now less physically able to do DIY and are losing interest in it anyway. On the whole “third-agers” prefer to take holidays.
But this is not just a function of age – the biggest fall of all comes in the 25to 34-year-old age range and this suggests another cause. We are seeing the rise of a rented housing sector. Increasingly young people are finding they can’t afford to get on the housing ladder at all and when they do, they may have fewer funds available for home improvements. In fact the proportion of owner-occupied housing fell in 2005 for the first time, even though the absolute number of dwellings owned rose slightly.
Meanwhile, when baby-boomers want to have work done on the home, they pay someone else to do it – perhaps one of the many highly skilled Eastern Europeans that have entered the country recently. But tradesmen tend to use builders merchants rather than DIY stores so that demand is not reflected in retail channels.
Again, this is not just a matter of age, it is also a function of the consumer boom. The boom may be said to have ended in 2004, but consumer confidence has remained high, underpinned by a rising housing market and high levels of employment. Retail sales growth may have been more sluggish since then, but consumers have become increasingly demanding and there has been a clear tendency to trade.
So everything seems to be wrong for the DIY retailers. The housing boom that should have played into their hands now seems to be working the other way and ageing, more affluent consumers are losing interest.
It seems to us that the Homebase strategy is the best way forward – change the DIY store into a centre for home improvement ideas and at the same time muscle in on the highly fragmented furniture and homeware sectors. Perhaps the time has come for B&Q to abandon the severe, functional warehouse look and become a home improvement department store.
One thing is certain – DIY retailers cannot afford to stand still. They have to provide new reasons for people to visit their stores. DIY is not enough.
Richard Perks is director of retail research at Mintel