Furniture Retailing - UK - August 2011

INTRODUCTION
Definitions
Abbreviations
EXECUTIVE SUMMARY
The market
Figure 1: UK retail sales of furniture, 2006-16
Slow recovery in the furniture market
Replacement furniture under pins the market
Market factors
Companies, brands and innovation
More failures likely but profitable opportunities for strong brands
Specialists under pressure
Figure 2: UK retail sales of furniture*, by channel of distribution, 2010
Looking overseas
The consumer
Major brands strongly attractive to consumers
Purchasing activity constrained by financial worries and limitations
Consumers are promotionally driven
Figure 3: Factors considered important when choosing to buy furniture, June 2011
Multi-channel research becoming widespread
Figure 4: Shopping behaviour for furniture, June 2011
What we think
ISSUES IN THE MARKET
Who’s purchasing ‘big ticket’ furniture and what do they want?
How should retailers adapt to changing demand?
How can specialists survive encroachment from non-specialists?
Is there a need to improve credibility of promotional activity?
What’s the future for retail selling space?
FUTURE OPPORTUNITIES
Trend: Greeninfluencers
Trend: Slow It All Down
INTERNAL MARKET ENVIRONMENT
Key points
Purchasing activity continuing to decline
Figure 5: Penetration and purchasing of furniture, by major furniture categories, 2006-10
Figure 6: Consumer Price Indices for furniture and furnishings, Jan 2009-May 2011
Failures continue
Company failures since mid-2010:
Companies reporting losses in 2009/10:
Companies closing stores since mid-2010:
End of an era for several independents
Plenty of evidence of profit recovery
New opportunities and expansion
Green shoots at grass roots
Anyway back for MFI?
Imports dominate UK wooden furniture market
Figure 7: Overseas trade in wooden furniture for the kitchen and bedroom, 2006-10
Figure 8: Source of imports of wooden furniture for the kitchen and bedroom, by country, 2006-10
Sustainability rising up consumers’ agenda
BROADER MARKET ENVIRONMENT
Key points
Furniture underperformed in 2010
Sluggish housing market stifling demand
Figure 9: Housing Transactions – Q1 2008-Q1 2011
Figure 10: House Prices – Jan 2008-June 2011
Smaller homes affecting demand
Figure 11: Number of different types of room in the home, 2006-10
Debt reduction means no equity withdrawal
Figure 12: Housing equity withdrawal, 2008 Q1-2010 Q4
Exposure to weak Pound
Figure 13: Trends in exchange rate between the US Dollar and euro and Sterling, Monthly Average – Jan 2008-May 2011
Growth in household numbers a boost
Figure 14: UK households, by size, 2006-16
Population trends favourable
Figure 15: Trends in the age structure of the UK population, 2006-16
Aspirational ABs a prime market
Figure 16: Forecast adult population trends, by socio-economic group, 2006-16
Stimulating demand through inspiring ideas
Figure 17: Agreement with selected lifestyle statements, 2006-10
COMPETITIVE CONTEXT
Key points
Big ticket household purchases struggling
Figure 18: Comparison of sales of furniture with other household markets, 2006-11
Furniture not a high spending priority
Figure 19: Expenditure priorities, 2007-11
STRENGTHS AND WEAKNESSES IN THE MARKET
Strengths
Weaknesses
WHO’S INNOVATING?
Pop-up for profit
Design credibility
Aspirational products need aspirational selling space
Laura Ashley looking to become a leader in home interior design
Fold-out flexibility
Cluster power
Keep talking
Looking overseas
MARKET SIZE AND SEGMENTATION
Key points
Furniture badly affected in last two years
Figure 20: UK retail sales of furniture, 2006-11
Living rooms a priority
Consumers looking for greater flexibility
Kitchens expected to grow
Installed furniture is a potential growth area
Home office declining
Trends and forecast
Figure 21: UK retail sales of furniture* at current and constant prices, 2006-16
No significant improvement forecast for 2011
Period of sustained uncertainty
Figure 22: UK retail sales of furniture, 2006-16
RETAIL COMPETITOR ANALYSIS
Key points
IKEA aims to extend its lead
DFS and ScS both gaining share in upholstery
Expanding multi-brand Steinhoff offers complete furnishing package
Not all fitted furniture retailers benefited from the demise of MFI
Bed specialist Dreams expanding range and stores
Furniture Village growth based on improving its offer
Bathstore restructuring pays off
Figure 23: Leading UK furniture retailers, 2010/11
Non-specialists striving for better returns from furniture and homewares
DIY stores share gains driven by sales of fitted kitchens
Major specialist multiples gained share in a depressed market
Figure 24: Estimated market shares, by value of leading retailers in UK furniture market, 2006-10
Mixed performance among smaller specialists
CHANNELS OF DISTRIBUTION
Key points
Specialists losing share
Figure 25: UK Retail sales of furniture, by channel of distribution, 2006-10
Non-specialists gaining share
DIY stores kitchen business driving share growth
Home shopping of growing importance
‘Others’ benefiting from weakness among specialists
RETAILER PROFILES
DFS
Figure 26: DFS, financial performance, 2006-10
Figure 27: DFS: Outlet data, 2006-10
Dreams
Figure 28: Dreams, financial performance, 2006-10
Figure 29: Dreams Plc: Outlet data, 2006-10
HomeForm Group
Figure 30: HomeForm Group, financial performance, 2008-10
Figure 31: HomeForm Group Ltd: Outlet data, 2005/06-2009/10
IKEA
Figure 32: IKEA Limited, financial performance, 2006-10
Figure 33: IKEA UK: Outlet data, 2006-10
Nobia (UK) (inc Magnet)
Figure 34: Nobia (UK): Group financial performance, 2006-10
Figure 35: Nobia (UK): Outlet data, 2006-10
Furniture Village
Figure 36: Furniture Village, financial performance, 2006-10
Figure 37: Furniture Village Plc: Outlet data, 2006-10
ScS
Figure 38: ScS, financial performance, 2006-10
Figure 39: ScS Upholstery Plc: Outlet data, 2006-10
Steinhoff UK
Figure 40: Steinhoff (Homestyle Group), financial performance, 2006-10
Figure 41: Steinhoff UK: Outlet data, 2006/07-2009/10
Figure 42: Retail offering and store portfolio of Steinhoff UK, June 2011
RETAIL ADVERTISING AND PROMOTION
Key points
Sector advertising expenditure
Figure 43: Main media advertising expenditure on furniture and furnishings, 2006-10
Leading advertisers
Figure 44: Main media advertising expenditure on furniture and furnishings, by top 25 advertisers, 2006-10
Expenditure relative to turnover
Figure 45: Selected retailers’ advertising spending as % of sales, 2010
Expenditure by media
Figure 46: Main media advertising expenditure on furniture and furnishings, by media type, 2006-10
Expenditure by month
Figure 47: Topline spend, by month, 2007-10
Figure 48: Main media advertising expenditure on furniture and furnishings, by month, 2010
Recent advertising campaigns
BRAND RESEARCH
Brand map
Figure 49: Attitudes towards and usage of furniture retailer brands, May 2011
Brand attitudes
Figure 50: Attitudes, by furniture retailer brand, May 2011
Brand personality
Figure 51: Furniture retailer brand personality – macro image, May 2011
Figure 52: Furniture retailer brand personality – micro image, May 2011
Correspondence analysis
Brand experience
Figure 53: furniture retailer brand usage, May 2011
Figure 54: Satisfaction with various furniture retailer brands, May 2011
Figure 55: Consideration of furniture retailer brands, May 2011
Figure 56: Consumer perceptions of current furniture retailer brand performance, May 2011
Figure 57: Furniture retailer brand recommendation – Net Promoter Score, May 2011
Brand index
Figure 58: Furniture retailer brand index, May 2011
Figure 59: Furniture retailer brand index vs. recommendation, May 2011
Target group analysis
Figure 60: Target groups, May 2011
Figure 61: Furniture retailer brand usage, by target groups, May 2011
Group One – The Conformists
Group Two – Simply the Best
Group Three – Shelf Stalkers
Group Four – Habitual Shoppers
Group Five – The Individualists
THE CONSUMER – WHERE DO WE SHOP FOR FURNITURE?
Key points
IKEA and Argos are the most used stores but market is fragmented
Figure 62: Outlets used to purchase furniture in the last three years, June 2011
Trend shows purchasing activity down sharply
Figure 63: Outlets used to purchase any furniture in the last three years, 2006-11
Home shopping the only winner
Department stores and small chains and independents retaining relevance
DIY stores outperform kitchen specialists but both suffering from reduced purchasing activity
Large furniture chains suffering from lack of footfall
IKEA has strong appeal to young and affluent adults
Argos achieves broad appeal
DIY doing well among ABC1 families
Small/regional furniture chains and independents reliant on older and affluent consumers
Repertoire use in a fragmented market
Figure 64: Repertoire of number of outlets used to purchase furniture in the last three years, June 2011
THE CONSUMER – ATTITUDES TOWARDS SPENDING ON FURNITURE
Key points
Risk-averse consumers are hard to motivate
Figure 65: Consumer attitudes towards spending on furniture, June 2011
Purchasing being deferred, even when replacement is needed
Value important to all
Affordability a big issue for younger adults
Credit deals to act as a lever
The influence of attitude to spending on stores
THE CONSUMER – FACTORS INFLUENCING CHOICE OF STORE
Key points
Consumers are highly receptive to promotions
Figure 66: Factors considered important when choosing to buy furniture, June 2011
Strong need to emphasise and variety of designs
Quality assurance and sustainability have credence among affluent consumers
Contemporary, exclusive and custom-made designs are an influence on high spending customers
Immediate availability a key attribute
Unlocking demand with credit and flexible payment terms
Help from staff and past experience more important to older consumers
Branded and British-made furniture of secondary importance
Factors influencing choice and use of stores
THE CONSUMER – FURNITURE SHOPPING BEHAVIOUR
Key points
Promotions drive footfall, especially among younger shoppers
Figure 67: Shopping behaviour for furniture, June 2011
Older shoppers looking for value rather than cheapness
Retailer loyalty strongest among older people
Ineffectual advertising
Shopping around takes time and multi-channel touch points can help
But non-store shopping is still fairly limited
Service issues more important to older consumers
Convenient and flexible home delivery has wide appeal
Multi-category stores appeal to younger shoppers
Furniture buying behaviour and use of stores
APPENDIX – INTERNAL MARKET ENVIRONMENT
Figure 68: List of furniture retailers gone into administration since August 2010
Figure 69: List of new entrants/expansions by existing players since August 2010
Figure 70: Consumer Price Indices for furniture and furnishings, Jan 2009-May 2011
Figure 71: Penetration and purchasing of lounge/living room furniture, by type of purchaser, by demographics, 2010
Figure 72: Penetration and purchasing of dining room furniture, by type of purchaser, by demographics, 2010
Figure 73: Penetration and purchasing of kitchen furniture (including fitted kitchens), by type of purchaser, by demographics, 2010
Figure 74: Penetration and purchasing of bedroom furniture (excluding beds), by type of purchaser, by demographics, 2010
Figure 75: Penetration and purchasing of beds, by type of purchaser, by demographics, 2010
Figure 76: Agreement with selected lifestyle statements, by demographics, 2010
APPENDIX – BROADER MARKET ENVIRONMENT
Figure 77: Housing Transactions – Q1 2008-Q1 2011
Figure 78: Housing equity withdrawal, 2008 Q1-2010 Q4
Figure 79: Trends in exchange rate between the US Dollar and euro and Sterling, Monthly Average – Jan 2008-May 2011
APPENDIX – BRAND RESEARCH
Figure 80: Brand usage, May 2011
Figure 81: Store commitment, May 2011
Figure 82: Brand momentum, May 2011
Figure 83: Brand diversity, May 2011
Figure 84: Store satisfaction, May 2011
Figure 85: Store recommendation, May 2011
Figure 86: Brand attitude, May 2011
Figure 87: Store image – macro image, May 2011
Figure 88: Brand image – micro image, May 2011
Psychographic Segmentation
Figure 89: Profile of target groups by demographic, May 2011
Figure 90: Psychographic segmentation, by target group, May 2011
Figure 91: Store usage, by target group, May 2011
Brand index
Figure 92: Store index, May 2011
APPENDIX – THE CONSUMER – WHERE DO WE SHOP FOR FURNITURE?
Figure 93: Most popular outlets used to purchase furniture in the last three years, by demographics, June 2011
Figure 94: Next most popular outlets used to purchase furniture in the last three years, by demographics, June 2011
Figure 95: Other outlets used to purchase furniture in the last three years, by demographics, June 2011
APPENDIX – THE CONSUMER – ATTITUDES TOWARDS SPENDING ON FURNITURE
Figure 96: Most popular consumer attitudes towards spending on furniture, by demographics, June 2011
Figure 97: Next most popular consumer attitudes towards spending on furniture, by demographics, June 2011
Figure 98: Outlets used to purchase furniture in the last three years, by most popular consumer attitudes towards spending on furniture, June 2011
Figure 99: Outlets used to purchase furniture in the last three years, by next most popular consumer attitudes towards spending on furniture, June 2011
APPENDIX – THE CONSUMER – FACTORS INFLUENCING CHOICE OF STORE
Figure 100: Most popular factors considered important when choosing to buy furniture, by demographics, June 2011
Figure 101: Next most popular factors considered important when choosing to buy furniture, by demographics, June 2011
Figure 102: Other factors considered important when choosing to buy furniture, by demographics, June 2011
Figure 103: Least popular factors considered important when choosing to buy furniture, by demographics, June 2011
Figure 104: Outlets used to purchase furniture in the last three years, by most popular factors considered important when choosing to buy furniture, June 2011
Figure 105: Outlets used to purchase furniture in the last three years, by next most popular factors considered important when choosing to buy furniture, June 2011
Figure 106: Outlets used to purchase furniture in the last three years, by other factors considered important when choosing to buy furniture, June 2011
Figure 107: Outlets used to purchase furniture in the last three years, by least popular factors considered important when choosing to buy furniture, June 2011
APPENDIX – THE CONSUMER – FURNITURE SHOPPING BEHAVIOUR
Figure 108: Most popular shopping behaviour for furniture, by demographics, June 2011
Figure 109: Next most popular shopping behaviour for furniture, by demographics, June 2011
Figure 110: Other shopping behaviour for furniture, by demographics, June 2011
Figure 111: Outlets used to purchase furniture in the last three years, by most popular shopping behaviour for furniture, June 2011
Figure 112: Outlets used to purchase furniture in the last three years, by next most popular shopping behaviour for furniture, June 2011
Figure 113: Outlets used to purchase furniture in the last three years, by other shopping behaviour for furniture, June 2011