Business review

Group buying programme

Major growth in direct sourcing

In recent years Kingfisher has worked hard to create an infrastructure through which our Group businesses can source greater volumes of products directly from suppliers. The advantages of such an approach are clear: it gives more control of the sourcing process, reduces time to market and – crucially – enables our businesses to share ranges that offer the greatest value and purchasing appeal to our customers.

Last year saw a genuine step-change in our Group buying performance, with the value of direct shipments reaching $1.3 billion, up 66% on the previous year and significantly ahead of our $1 billion target. Growth was seen across all Group businesses with notably strong results achieved by Brico Dépôt France, which more than doubled its direct shipments, while Castorama Poland achieved an increase of 88%, Castorama France 60% and B&Q UK 49%.

From a product perspective the ranges that saw biggest increases in direct shipments were bathroom and kitchen (94%), electrical products (86%), lighting (100%) and garden tools (72%).

The Kingfisher Sourcing Organisation (KSO) has further enlarged its global footprint, with a new sourcing presence now established in Israel. Elsewhere, the KSO's Vietnamese office, which opened in 2009, continues to extend its reach into South East Asia, while the Warsaw office is sourcing from other eastern European territories including Ukraine, Turkey, Romania and the Czech Republic. Products manufactured outside Poland now generate 45% of the Warsaw team's total buying volumes, which are up 150% year-on-year.

Optimising our supplier base

We recognise that our suppliers hold the key to us achieving our future Group sourcing ambitions. Finding the best manufacturers to meet our exacting standards for quality, innovation, exclusivity and value, then developing strong and mutually beneficial relationships with them, is a prerequisite if we are to make the most of our combined buying scale.

Last year 86% of the $1.3bn we spent on direct shipments was placed with vendors who supply at least two Kingfisher businesses. In addition, while China remains our most important sourcing market we have worked to establish a truly global supplier base: 25% of our direct sourcing vendors are now located outside China across 32 different countries.

Developing an outstanding portfolio of global Group brands

The more efficiently we can source and market own-brand products to our customers, the greater the benefits we can drive from our Group buying strategy. During the past year a project has been completed to create a streamlined portfolio of 10 exclusive Kingfisher own-brands covering our key product categories. Some are established names; others have been newly-created to meet a particular need.

Each brand is available to all our home improvement formats, with multi-lingual packaging as standard to minimise production lead times. The first common ranges to be delivered under this new strategy were seasonal garden products under the Blooma brand, which went on sale in B&Q UK, Castorama France, Castorama Poland, Castorama Russia and Koçtas¸ in early 2011.

Taking common ranging to the next level

Our two largest Group businesses, B&Q UK and Castorama France, are now aligning their product sourcing strategies more closely than ever before.

In the seasonal category, a product roadshow was held in Hong Kong in March 2010 where the buying teams worked together on creating more common ranges of barbecues and garden furniture. This resulted in 60% of this season's barbecue range, and 35% of the garden furniture range, being common between B&Q UK and Castorama France. We now place 80% of our total garden leisure purchasing through common suppliers. By working together with our suppliers, our combined scale allows us to achieve better commercial terms as well as enabling us to create better designed products which will help us drive sales. To facilitate more cross-Group common sourcing, we have recently created core range catalogues containing 3,000 best selling direct sourced products. This core range is available across the Group, helping us drive more volume through common products.

Ethical sourcing

Kingfisher continues to work with suppliers to improve labour and environmental conditions throughout its supply chain and monitor compliance with the Kingfisher Code of Conduct for Factory Working Conditions. Over 1,000 supplier/factory ethical assessments were conducted during the year.

The Kingfisher Sourcing Organisation works in collaboration with factories to improve standards through factory action plans, partnership projects and training, such as ethical sourcing workshops for factories in India.

Kingfisher's 10 new own-brand logos

New own-brand launch

In 2010, Kingfisher unveiled a range of 10 own-brands. They are being rolled out across the Group and replace the previous collection of around 150 own-brands.

Verve hose reel

Multi-lingual packaging

The new own-brands feature multi-lingual packaging, as shown on this hose reel.