Consultancy mdj2 has analysed UK DIY in a report, Big Bets Placed - Who Will Win?, showing large investments by big DIY/garden centre retailers are set to transform the market. The report is relevant to garden retailers because it talks about the changes at B&Q, Homebase/Bunnings and Wickes.
Director Neil Munz-Jones presented the report at the recent European DIY Retail Association Global DIY Summit in Stockholm. It says: "The next three-to-five years will see radical change that will impact consumers, retailers and suppliers."
Using consensus forecasts of 2-2.5 per cent per annum applied to GfK's £16bn market size implies that the market will grow by £1.05bn in 2018, the report states. "We estimate that the three traditional DIY retailers will add £0.7bn of sales, based on market growth plus stated store expansion/reduction plans as well as known additional self-help initiatives." However, retailer growth forecasts add up to in excess of £1.8bn and "unless the market grows approximately 75 per cent faster than forecast not everybody will achieve their growth aspirations", the analysis warns.
On Bunnings, the report says: "The scale of change is significant because there are major differences between the customer propositions of Bunnings in Australia and Homebase. While Bunnings targets both trade and DIY customers, Homebase's primary target has been a more premium, female customer."
This will go in favour of "everything you want under one roof", "everyday lowest prices", and "best service", which is "significantly different to Homebase" and has "more in common with B&Q (and even Wickes) than it does with Homebase. We believe that what is now the Homebase business will be unrecognisable in five years. The Bunnings management team have moved quickly with changes in pricing and new ranges already evident in stores."
According to mdj2, store numbers may grow from 265, retail basics will be a focus and trade buyers will be targeted, as will e-commerce buyers. The report adds: "It is probable that retailer plans (especially at Bunnings and the discounters) will stimulate growth above the natural market but we believe that the intensifying price competition will result in this additional growth coming in volume rather than value terms. Price competition is intensifying and will become less of a differentiator. Product range and service will be key to winning propositions."
On garden centres, the report states: "Taking into account the stated aims of the big DIY retailers, garden centres will continue to promote their specialist credentials as a point of difference, as well as the restaurants that have turned many centres into a true destination visit."
Investment - Retailers’ strategies emerge following Homebase sale
- Bunnings’ £340m acquisition of Homebase has led to a £500m investment to rebrand Homebase stores to Bunnings over the next five years.
- Kingfisher has announced an £800m investment to develop ONE Kingfisher, an "Ikea across Europe", which has seen garden buyers Tim Clapp promoted and Steve Pitcher departing. There could be more own brand and a rationalisation of stock-keeping units.
- Wickes has been working on its own transformation plan, investing in new stores, revamps, improved ranges and a better multi-channel proposition. The retailer has identified 60 potential new locations, targeting 10-15 new stores per annum.