Market Monitor: Home improvement sector

Market Monitor: Home improvement sector

The broader home improvement marketplace is experiencing a period of dramatic change, which is likely to have any number of knock-on effects for the builders’ merchant sector. PBM discusses the issues.

The calamitous failure of Wesfarmers, parent company of Australian DIY retail giant Bunnings, to crack the UK market has resulted in the sale of Homebase to ‘restructuring specialist’ Hilco for the nominal sum of £1. Wesfarmers’ initial purchase has been described as “the most disastrous retail acquisition in the UK ever” but the whole, sorry affair is perhaps indicative of a wider trend of change, transformation and uncertainty in the home improvement market.

Disparate examples include the continued advance of online sales (in both trade and retail segments), restructuring at B&Q through its ‘One Kingfisher’ rationalisation strategy tempered by the plc’s ongoing success with its Screwfix brand, and even increasing numbers of merchants making greater strides into ‘retail’ with bespoke kitchen and bathroom showrooms.

Uncertainty on the supply side is seemingly reflected by consumer attitudes, with recent research from visualisation software specialist DigitalBridge revealing that “almost three-quarters (71%) of UK homeowners wouldn’t know where to start if they wanted to complete a bathroom refurbishment”.

Just 5% of people said they are “extremely confident in knowing how to go about” the process of refitting their bathroom, and this ‘renovation uncertainty’ is argued to have a big impact on the market, as consumers hesitate to undertake home improvement projects and instead elect to spend their disposable income on less complex purchases (for example, cars and holidays).

Against this backdrop, the John Lewis Partnership has recently acquired Opun — a business which delivers an ‘end-to-end’ service to manage home improvement projects on behalf of customers and was formed three years ago with the explicit aim of “removing consumer pain” from renovation projects. The brand is to be retained and it will operate as a wholly-owned subsidiary to reinforce the retailer’s existing position in the home services market while also complementing its home product range.

Facilitating the process of kitchen and bathroom refurbs, loft conversions and extensions, Opun’s team ‘connects’ homeowners with a network of trusted ‘Trade Partners’, with the model claiming to offer advantages for both consumers and trade professionals alike. One such trade benefit is access to the ‘OPUN Club’ which is said to provide “a unique range of discounts negotiated with companies such as Travis Perkins, Trade Point, Northgate and many others — all to help you increase your margin.”

It is a move which must also be considered with the added context of the struggles facing High Street retailers — for example, John Lewis’ rival House of Fraser is scheduled to close 31 of its 59 department stores following a CVA arrangement with its creditors.

Whilst the Opun acquisition does rely on the ‘traditional’ supply chain to some extent, it is interesting to consider the impact of consumers making such large scale ‘purchases’ in this way. And as David Levine, CEO of DigitalBridge, says: “There is evidently work to do around educating homeowners on how straightforward the (renovation) process can be, so providing them with relevant channels for design, purchase and fit-out can be an invaluable way to reduce the purchasing cycle, build brand loyalty and ultimately grow sales.”

As ever, the question remains: How will the merchant channel respond?

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