The European home improvement market is large and attractive, with long-term growth supported by structural demand drivers. The market caters for a wide range of customer needs, ranging from maintenance, to repair or decoration tasks, and to heavy renovation projects. Kingfisher’s total addressable market, based on the key countries in which it operates, is approximately £130 billion. This is comprised primarily of sales to private consumers and tradespeople. Consumer needs are met by a wide range of product categories (consisting of private label and branded products), from decoration to building materials, to garden and outdoor. Services, such as installation and design, complement these product categories and help customers complete their projects. Larger format home improvement stores and trade channels are the key distribution channels, but generalist and specialist online ‘pure-players’, online marketplaces, home improvement specialist stores and discounters also play a role.
Long-term structural market drivers are healthy due to continuing population growth, the gradual trend of urbanisation, stable home ownership levels (often supported by government initiatives) and an ageing housing stock. Within our markets, housing demand on average tends to exceed housing supply, which in turn supports house prices and secondary housing market transaction volumes. The housing stock in our markets is typically 50-60 years old, regularly requiring heavy maintenance and improvement.
As a result, most of our markets are expected to experience a moderate increase in housing construction over the next three years. This new housing supply leads to a more dynamic housing market, with more house moves and increased demand for home improvement. As a core consumer spending area, home improvement has grown steadily over time, and proven to be robust even during periods of economic weakness. For example, according to data from national statistical offices, between 2009 and 2019 the growth of expenditure on hardware and DIY goods outperformed total consumer expenditure growth across most of our markets.
Customers continue to be passionate about improving their homes, and current market trends and demand indicators are positive. In particular, the COVID crisis has established longer-term trends that are clearly supportive for our industry. Customers are placing a greater focus on improving comfort and wellness at home, resulting in a larger share of their income being allocated to home and garden spend. In addition, our homes are being transformed into ‘hubs’, where we work, exercise, entertain and rest. Longer term, we expect that people will spend more time working from home than they did before the crisis, resulting in more ‘wear and tear’ on the home, and the need to organise living space differently, thereby creating further demand for home improvement.
During the COVID crisis we’ve seen the emergence of a younger generation of ‘DIY’ers’, where interest, new skills and enthusiasm for DIY has grown considerably. While this accelerated trend is still emerging, it is encouraging and enables us to capture a broader range of customer segments. More generally, 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, which is seen as a ‘hobby’ by some.
In summary, structural market drivers together with the establishment of longer-term trends following the COVID crisis, are clearly supportive for the overall growth prospects of our industry.
While the overall home improvement market is growing, there are also clear longer-term shifts within the market which provide us with opportunities. Our ‘Powered by Kingfisher’ strategy is closely aligned with, and seeks to address, these trends.
Before the COVID crisis, the overall shift towards online in our industry was gradual. Screwfix, our trade-focused retail banner, was the exception to this with 33% e-commerce sales penetration even before the crisis. However, the online trend has rapidly accelerated over the last year due to the COVID crisis, with all our key markets experiencing significant e-commerce growth. Stores are at the centre of our e-commerce proposition, providing support for the significant proportion of retail online orders picked in stores and fulfilled through click & collect (C&C), in-person returns, and fast delivery.
Customers’ increased demand for speed and convenience, along with demographic trends, are also driving a shift towards smaller and more localised compact stores. While the Screwfix format is already addressing this shift, the trend provides our other retail banners with the opportunity to widen their customer reach. B&Q, Screwfix and Castorama France are in the process of trialling more compact store formats, which are showing encouraging early signs.
In more mature markets across Europe, discounter format stores are growing and expanding their home improvement ranges. This growth has been supported by the trend of a rising focus on value for money and pricing transparency, which we are able to capture through offering competitively priced own exclusive brands (OEB) products, which represent 44% of total Group sales. In addition, we are well placed in this area of the market with our renowned Brico Dépôt discounter banners in France and Iberia, as well as our overall Group-wide focus on attractive price positioning.
Before the COVID crisis, we saw a gradual shift in customer preference towards Do-it-For-Me (‘DIFM’) versus DIY. To a certain extent, this shift is linked to new generations of consumers having fewer DIY skills, and a shift in spending priorities – but is partly constrained by the limited supply of tradespeople and DIFM being more costly. More recently, the COVID crisis has favoured the DIY trend, which is seen as allowing better ‘social distancing’, cheaper, a hobby, and an activity that contributes to wellbeing. We expect the DIFM shift to remain gradual. New trends and innovations in DIFM provide us with opportunities. For example, in November 2020, we acquired NeedHelp, one of Europe's leading home improvement online services marketplaces.
Being a responsible business is more relevant and important than ever before. Customers are increasingly aware of the environmental and societal impact of their purchasing choices, providing us with tangible opportunities to build on our strong sustainability credentials.