The home improvement market for consumer and trade sales in our key geographies is worth approximately £150 billion. Growth in customer expenditure on hardware and DIY goods over the past decade has outperformed total customer expenditure and has also proved to be robust during periods of economic weakness.
In Europe, this market is significant and caters for a variety of customer needs from maintenance to repair or decoration tasks and heavy renovation projects. These needs are met by a wide range of private label and branded product categories and corresponding installation, design, and consumer finance services. Larger format home improvement stores and trade channels are among the key distribution channels. However, generalist and specialist online ‘pure-players’, online marketplaces, home improvement specialist stores and discounters also play a role.
Structural drivers are expected to remain supportive of growth in our industry in the medium term despite softening of demand due to the cost of living crisis. Although we’ve recently seen a slowdown in housing constructions and transactions within the current uncertain environment, the housing market is still dynamic, with moving or buying a first house still high on consumers’ agenda. Further, increased renovation is anticipated in response to the growing heavy maintenance and improvement burden associated with ageing housing stock in our markets. We also expect to see increased demand for energy efficiency in homes as governments intensify efforts around net zero; in the UK and France where 60% to 75% of housing stock is deemed energy inefficient.
Customers are increasingly passionate about improving their homes and we have seen new positive longer-term trends for the industry being established. Customers across our markets are spending more time living and working at home. They are placing a greater emphasis on improving the practicality and comfort of their surroundings and in turn are spending more in the home improvement market. We expect further demand for home improvement longer term to address the resulting ‘wear and tear’ on the home through increased use and the need to organise living space differently.
During the pandemic we have also seen the emergence of a younger generation of ‘DIYers’ with interest, skills, and enthusiasm. This allows us to capture a diverse range of customers. The more home improvement projects people undertake, the more DIY skills they learn – building confidence and ultimately increasing their interest and appetite for the activity.
While the overall home improvement market is growing, other clear longer-term shifts in customer behaviours and trends provide us with further opportunities. Our ‘Powered by Kingfisher’ strategy is closely aligned with these trends and allows the business to respond appropriately.
Over the last two years, the trend towards online has rapidly accelerated and all our key banners have experienced significant e-commerce growth. Pre-pandemic, Screwfix had been the exception amongst our banners with 33% e-commerce sales penetration. However, with our stores at the centre of our e-commerce proposition, online sales now make up 16.3% of Group sales. Stores provide support for the significant proportion of online orders fulfilled through Click & Collect, in-person returns, and faster home delivery. In addition, retailers with omnichannel strategies such as Kingfisher provide customers with the option to visualise and design projects, seek advice, and choose from a wider range of fulfilment options.
ncreased customer demand for speed and convenience is driving the need for a wider network of smaller and more easily accessible stores, and so we believe compact stores unlock the opportunity for rapid expansion into smaller cities and geographic ‘white spaces’.
In more mature European markets, a rising focus on value for money and pricing transparency has seen discounter format stores grow and expand their home improvement ranges. With our renowned Brico Dépôt discounter banners in France and Iberia, as well as our competitive own exclusive brand (OEB) products and overall Group-wide focus on attractive price positioning, we are well placed to respond in this area.
Kingfisher has balanced exposure to the DIY and Do-it-For-Me (DIFM)/trade trends with an approximately equal revenue split and healthy growth across both segments. Alongside the well-documented increase in DIY during the pandemic, which is increasingly seen as a hobby and an activity that contributes to wellbeing, the DIFM trade category has also continued to grow. This has been supported by the development of service platforms connecting offer and demand in an easier way. Kingfisher acquired NeedHelp, one of Europe’s leading home improvement online services marketplaces, in November 2020.
Finally, being a responsible business is more relevant and important than ever before. As the ‘green homes’ agenda accelerates, we see considerable potential for our Sustainable Home Products, in particular in the UK and France where the governments have made net zero commitments. The ongoing energy crisis adds weight to the urgent need for governments to increase their support of greener homes and energy efficiency. This provides us with opportunities to build on our strong sustainability credentials.