Electrical Goods Retailing - UK - February 2019

OVERVIEW
What you need to know
Products covered in this Report
EXECUTIVE SUMMARY
The market
Spending grows strongly driven by household appliances
Figure 1: Consumer spending on all electrical products: market size and forecast (including VAT), 2013-23
Real incomes grow but uncertainty remains
Figure 2: Real wage growth: wages growth vs inflation, January 2014-December 2018
Specialists have continued to see their share of spending fall
Figure 3: Electrical goods specialists sector sales (including VAT), 2013-18
Online-only retailers the main benefactors to specialists’ troubles
Figure 4: Estimated distribution of spending on electrical goods, 2017 and 2018
Leading retailers
Dixons Carphone the market leader, but Amazon is gaining share
Figure 5: Estimated market shares of the leading specialist and non-specialist retailers of electrical goods, 2018
Over half of spending comes online, and the share continues to grow
Figure 6: Estimated online share of all consumer spending on electrical goods, 2014-18
Amazon brand scores high on trust
Figure 7: Attitudes towards and usage of selected brands, December 2018
The consumer
Three quarters purchased electricals in the past year
Figure 8: Types of electrical products purchased in the past 12 months, November 2018
More purchased electricals online in the last year than in-store
Figure 9: How consumers purchased electrical goods, November 2016-18
Most online purchases still come through desktops
Figure 10: How consumers purchased electrical goods online, November 2018
Specialists just edge out online-only retailers overall, but Amazon is most popular
Figure 11: Retailers used to purchase electrical goods in the last 12 months, November 2018
Satisfaction levels are high, but there are concerns for store-based players
Figure 12: Satisfaction with the retailer last used to purchase electrical goods, November 2018
In-store service still key despite the shift to online
Figure 13: Attitudes towards in-store service at electrical retailers, November 2018
Electricals most purchased category during Black Friday 2018
Figure 14: Products purchased during Black Friday 2018, December 2018
What we think
ISSUES AND INSIGHTS
Does Alex Baldock’s future for Dixons stack up?
The facts
The implications
Is there a ceiling for online penetration in the market?
The facts
The implications
THE MARKET – WHAT YOU NEED TO KNOW
Real incomes grow but uncertainty remains
Spending grows strongly driven by household appliances
Specialists have continued to see their share of spending fall
Online-only retailers the main benefactors to specialists’ troubles
MARKET DRIVERS
Collapsing specialist computer and telecoms retail sales value growth
Figure 15: Annual % change in all retail sales, electrical household appliance specialists and computers & telecoms equipment specialists, non-seasonally adjusted value series, January 2017-December 2018
Electrical household appliances retail sales volume holding steady
Figure 16: Annual % change in all retail sales, electrical household appliance specialists and computers & telecoms equipment specialists, non-seasonally adjusted volume series, January 2017-December 2018
Headline inflation at its lowest level in two years, but electrical prices remain volatile
Figure 17: Price inflation: annual rate of change in core electrical categories, by month, 2018
Household appliances prices up 5.5% in 2018
Figure 18: Price inflation: annual rate of change in core electrical categories, 2012-18
Pay growth outstripping inflation
Figure 19: Real wage growth: wages growth vs inflation, January 2016-January 2019
Willingness from consumers to take on retail credit
Figure 20: Value of retail store and online credit, 2012-17
Economic uncertainty impacting the property market
Figure 21: Number of property residential transactions with a value of over £40,000 completed in the UK, July 2017-December 2018
Property transactions at their lowest level for five years
Figure 22: Number of property residential transactions with a value of over £40,000 completed in the UK, 2006-18
Own outright and private renting both rising
Figure 23: UK households, by tenure, 2012-17
MARKET SIZE AND FORECAST
Consumer spending on electricals continues to grow in double digits
Figure 24: Consumer spending on all electrical products: market size and forecast (including VAT), 2013-23
Figure 25: Consumer spending on all electrical products: market size and forecast (including VAT), in current and constant prices, 2013-23
Segment forecasts
Figure 26: Core electrical goods segments as a percentage of the total market, 2013-18
Household appliances
Figure 27: Household appliances: segment size and forecast (including VAT), 2013-23
Figure 28: Household appliances: segment size and forecast (including VAT), in current and constant prices, 2013-23
Computing and telecoms
Figure 29: Computing and telecoms goods: segment size and forecast (including VAT), 2013-23
Figure 30: Computing and telecoms goods: segment size and forecast (including VAT), in current and constant prices, 2013-23
Audio-visual and photographic goods
Figure 31: Audio-visual and photographic goods: segment size and forecast (including VAT), 2013-23
Figure 32: Audio-visual and photographic goods: segment size and forecast (including VAT), in current and constant prices, 2013-23
Personal care appliances
Figure 33: Personal care appliances: segment size and forecast (including VAT), 2013-23
Figure 34: Personal care appliances: segment size and forecast (including VAT), in current and constant prices, 2013-23
Forecast methodology
SPECIALIST SECTOR SIZE
Specialist share of spending continues to slide
Figure 35: Electrical goods specialists sector sales (including VAT), 2013-18
Figure 36: Electrical goods specialist sector sales (including and excluding VAT), 2014-19
Sales peak around Black Friday
Figure 37: Average weekly retail sales in the electrical household appliance specialists and computers and telecommunications specialists categories, October 2017-December 2018
Specialist sector much reduced over the past decade, but still alive
Figure 38: Electrical specialists enterprise numbers, 2008-17
Figure 39: Number of retail outlets, 2013-18
CHANNELS OF DISTRIBUTION 
Online-only retailers continue to grow their share of the market
Figure 40: Estimated distribution of spending on electrical goods, 2017 and 2018
THE CONSUMER – WHAT YOU NEED TO KNOW
Three quarters purchased electricals in the past year
More purchased electricals online in the last year than in-store
Most online purchases still come through desktops
Specialist edge out online-only retailers overall, but Amazon is most popular
Satisfaction levels are high, but there are concerns for store-based players
In-store service still key despite the shift to online
Electricals most purchased category during Black Friday 2018
ELECTRICALS PURCHASED
Figure 41: Types of electrical products purchased in the past 12 months, November 2018
Changes in purchasing
Figure 42: Types of electrical products purchased in the past 12 months, November 2016-18
Repertoire of products purchased in the last year
Figure 43: Repertoire of products purchased in the past 12 months, November 2018
ONLINE VS IN-STORE PURCHASING
Online the dominant channel in the purchase of electricals...
Figure 44: How consumers purchased electrical goods, November 2018
….and this is a trend that is only increasing
Figure 45: How consumers purchased electrical goods, November 2016-18
Opportunity for physical retailers to better engage with younger consumers
Figure 46: How consumers purchased electrical goods, by age, November 2018
HOW THEY PURCHASE ELECTRICALS ONLINE 
Most online purchases still come through laptops/desktops…
Figure 47: How consumers purchased electrical goods online, November 2018
Younger consumers far more comfortable purchasing electricals via mobile
Figure 48: How consumers purchased electrical goods online, November 2018
Most mobile purchases come through websites
Figure 49: How electrical buyers shopped via mobile devices in the last 12 months, November 2018
RETAILERS USED
Specialists remain the most popular destination overall to buy electricals
Figure 50: Types of retailers used to purchase electrical goods in-store/online in the last 12 months, November 2018
However it is Amazon that comes out on top
Figure 51: Retailers used to purchase electrical goods in the last 12 months, November 2018
As a group, Dixons Carphone speaks to a wide audience
Figure 52: Average age and socio-economic group of leading electrical retailer’s customer bases, November 2018
Currys dominates physical whilst Amazon leads digital
Figure 53: Retailers used to purchase electrical goods in-store in the last 12 months, November 2018
Figure 54: Retailers used to purchase electrical goods online in the last 12 months, November 2018
Most shop with a single retailer, irrespective of channel
Figure 55: Repertoire of retailers used to purchase electrical goods in the past year, by in-store and online, November 2018
SATISFACTION WITH THE RETAIL EXPERIENCE
95% of buyers at least satisfied with their last shopping experience
Figure 56: Satisfaction with the retailer last used to purchase electrical goods, November 2018
Concerns exist around key store USPs
Figure 57: Key drivers of overall satisfaction with the retailer used to make the last purchase of electrical/electronic products, November 2018
Figure 58: Overall satisfaction with the retailer used to make the last purchase of electrical/electronic products – Key driver output, November 2018
Satisfaction levels in general high among the leading players…
Figure 59: Overall satisfaction with the retailer last used to purchase electrical goods, by leading retailer, November 2018
Currys performs well in terms of service interaction, but lags on delivery
Figure 60: Satisfaction levels with aspects of the electrical buying process, by leading retailer, November 2018
Methodology
THE IMPACT OF ONLINE, PROMOTIONS AND SERVICE ON THE SECTOR
In-store service still crucial despite the shift towards online
Figure 61: Attitudes towards in-store service at electrical retailers, November 2018
Younger consumers far more likely to learn about new products via social
Figure 62: ‘Yes’ responses to attitudes towards in-store service at electrical retailers, by age, November 2018
Credit could encourage some to upgrade
Figure 63: Attitudes towards promotions, guarantees and credit, November 2018
Higher earning households more swayed by guarantees and BNPL
Figure 64: Attitudes towards promotions, guarantees and credit, by household income, November 2018
BLACK FRIDAY 2018
Two in five purchased items during Black Friday 2018
Figure 65: Methods of purchasing items during Black Friday 2018, December 2018
Purchasing on Black Friday skews younger
Figure 66: Methods of purchasing items during Black Friday 2018, by age, December 2018
Electricals most popular overall for purchases
Figure 67: Products purchased during Black Friday 2018, December 2018
Figure 68: Electrical products purchased during Black Friday 2018, by age, December 2018
Amazon the dominant player during the event
Figure 69: Retailers shopped with in-store/online during Black Friday 2018, December 2018
Christmas purchasing key during Black Friday
Figure 70: Behaviours of Black Friday shoppers, December 2018
LEADING RETAILERS – WHAT YOU NEED TO KNOW
Dixons Carphone sales slow…
…whilst Maplin fails
Amazon continues to grow its electricals sales
Amazon the only leading player adding share
Over half of spending comes online, and the share continues to grow
Amazon brand scores high on trust
LEADING SPECIALISTS
Dixons Carphone continues to put on growth despite a tough mobiles market
Figure 71: Leading specialist retailers of electrical goods: total net revenues; 2014/15-2018/19
Figure 72: Leading specialists, CAGR of net revenues, 2014/15-2017/18
Dixons Carphone continues to consolidate its stores following merger
Figure 73: Leading retailers of electrical goods, outlet numbers, 2014/15-2018/19
Figure 74: Leading specialist retailers of electrical goods, annual sales per outlet, 2014/15-2018/19
Pressure on the specialist sector has squeezed margins across the board
Figure 75: Leading specialist retailers of electrical goods, operating profits, 2014/15-2017/18
Figure 76: Leading specialist retailers of electrical goods, operating margins, 2014/15-2017/18
Sales areas and sales densities
Figure 77: Leading specialist retailers of electrical goods, estimated sales area, 2014/15-2017/18
Figure 78: Leading specialist retailers of electrical goods, sales per square metre, 2014/15-2017/18
LEADING NON-SPECIALISTS 
Amazon the leading non-specialist
Figure 79: Leading non-specialists retailers’ estimated sales of electronic goods (excluding VAT), 2014-18
Figure 80: Leading non-specialist retailers, CAGR in estimated electrical goods sales, 2014-18
Figure 81: Estimated Amazon and eBay total GTV/GMV electrical sales, 2015-18
Consolidation of Argos stores impacting sales
Figure 82: Leading non-specialist retailers of electrical goods, outlet numbers, 2014-18
MARKET SHARE
Dixons Carphone the market leader, but Amazon is gaining share
Figure 83: Estimated market shares of the leading specialist and non-specialist retailers of electrical goods, 2018
Figure 84: Estimated market shares of the leading specialist and non-specialist retailers of electrical goods, 2016-18
MOBILE PHONE SPECIALISTS 
The market
Mobile network connections
Figure 85: Value of mobile network connections, 2013-18
Figure 86: Phone payment types, October 2018
EE the single largest network
Figure 87: Mobile network service providers, October 2018
Network providers – Key retail metrics
Figure 88: Estimated store numbers of the big four network providers, 2017
Figure 89: Leading network providers: Financials, 2015-17
Carphone Warehouse
Figure 90: Dixons Carphone interim 18/19 financial results, by trading segment, October 2018
Figure 91: Carphone Warehouse: Key Metrics, 2014-19
ONLINE 
Electricals the only category that over half comes through online
Figure 92: Estimated online sales of electrical goods (Including VAT), 2014-18
Figure 93: How consumers purchased electrical goods, November 2018
Amazon the dominant player online
Figure 94: Leading online retailers’ estimated share of online spending on electrical goods, 2018
SPACE ALLOCATION SUMMARY 
Figure 95: Leading electricals retailers, summary space allocation estimates, January 2019
Detailed space allocation
Figure 96: Leading electricals retailers, detailed space allocation estimates, January 2019
Electrical departments in non-specialists
Figure 97: Non-specialists: estimated electricals space as a percentage of total floor space, January 2019
RETAIL PRODUCT MIX 
Space allocation
Figure 98: UK electricals retailers, space allocation, 2018
Figure 99: Leading electricals retailers, electrical space, 2017/18
Sales density
Figure 100: Leading electricals retailers, estimated sales densities by broad product area, 2017/18
Sales by broad product category
Figure 101: Leading electricals retailers, estimated sales by broad product area, 2017/18
Market shares
Figure 102: Leading electrical retailers, estimated market share by broad product area, 2017/18
LAUNCH ACTIVITY AND INNOVATION
Speeding up the checkout process
‘See before you buy’
Figure 103: Currys PC World Point and Place at the Mintel Offices, February 2019
Same-day electricals home delivery service
Jessops new store format aimed at the selfie generation
ADVERTISING AND MARKETING ACTIVITY
Total advertising spend down 3.5% year-on-year in 2018
Figure 104: Recorded above-the-line, online display and direct mail total advertising expenditure by UK retail advertisers of electrical products, 2014-18
DSG Retail by far and away the sector’s biggest advertising spender
Figure 105: Leading UK retail advertisers of electrical products: recorded above-the-line, online display and direct mail total advertising expenditure, 2014-18
TV attracts the biggest chunk of total sector advertising spend
Figure 106: Recorded above-the-line, online display and direct mail total advertising expenditure by UK retail advertisers of electrical products, by media type, 2014-18
Campaign highlights
Carphone Warehouse Mowbli campaign reboot
Currys PC World multi-million-pound ‘Get Your TV For Free’ advertising campaign
Currys PC World ‘The magic of Christmas, upgraded’ advert
Leading advertisers in 2018 by media type
Figure 107: Leading UK retail advertisers of electrical products: recorded above-the-line, online display and direct mail total advertising expenditure, by media type, 2018
Nielsen Ad Intel coverage
BRAND RESEARCH
What you need to know
Brand map
Figure 108: Attitudes towards and usage of selected brands, December 2018
Key brand metrics
Figure 109: Key metrics for selected brands, December 2018
Brand attitudes: Amazon and AO.com provide the best online experience
Figure 110: Attitudes, by brand, December 2018
Brand personality: multichannel brand Argos very accessible
Figure 111: Brand personality – Macro image, December 2018
John Lewis style over substance
Figure 112: Brand personality – Micro image, December 2018
Brand analysis
Amazon: a brand at the top of its game
Figure 113: User profile of Amazon, December 2018
AO.com: lower brand awareness and usage compared to rivals, but highly recommended by those that use it
Figure 114: User profile of ao.com, December 2018
Argos: universal brand awareness, but uninspiring and lacks cutting edge
Figure 115: User profile of Argos, December 2018
Apple Store: innovative, exclusive and expensive
Figure 116: User profile of Apple Store, December 2018
John Lewis: stylish and pricey
Figure 117: User profile of John Lewis, December 2018
Currys PC World: accessible and trustworthy, but lacks innovativeness
Figure 118: User profile of Currys PC World, December 2018
Carphone Warehouse: enjoys strong brand awareness, but ranks lowest in key attitudinal criteria
Figure 119: User profile of Carphone Warehouse, December 2018
AMAZON INTERNATIONAL
What we think
Prime
Marketplace
And what does that mean for electricals?
Where next?
Company background
Company performance
Figure 120: Amazon: Sales by activity, 2018
Mintel estimates
GTV vs Consolidated vs Direct sales
Recent performance
Figure 121: Amazon Group: Group financial performance, 2014-18
Figure 122: Amazon International: Estimated retail sales performance, 2015-18
Sales of electrical goods
Figure 123: Amazon Europe:  estimated sales of electrical products, 2018
Retail offering
Consumer profile
Product mix
Figure 124: Amazon UK:  Estimated sales by product, 2017
Marketing
AO WORLD PLC
What we think
New products in audio-visual and computing categories driving sales
Scaling up existing proposition with complementary services
New brand campaign delivering encouraging brand awareness metrics
Developing B2B offering
Exploring third-party logistics opportunities
Company background
Company performance
Figure 125: AO World Plc: Group financial performance, 2013/14-2017/18
Retail offering
APPLE RETAIL (EUROPE)
What we think
iPhone remains crucial to Apple’s performance
Growth in new products fast but still too small
Creating reasons to visit stores through experiences and architecture
Company background
Company performance
Figure 126: Apple Retail (Europe): group financial performance, 2013/14-2017/18
Figure 127: Apple Retail (Europe): outlet data, 2013/14-2018/19
Figure 128: Apple Retail UK and Apple Retail Germany: outlet data, 2014-18
Retail offering
ARGOS
What we think
‘Voice shopping’ service via the Google Assistant platform
‘See before you buy’ tool to make TV buying easier
Pay@Browse speeding up the checkout process
Experimenting with pop-up shops
Company background
Company performance
Figure 129: Argos: Group financial performance, 2013/14-2017/18
Figure 130: Argos: outlet data, 2013/14-2017/18
Retail offering
DIXONS CARPHONE (UK & IRELAND)
What we think
Shift in ownership habits hurting mobile phone sales
Enhanced assisted sale initiative to improve in-store service
Investment in online offering to further grow e-commerce
Augmented reality shopping to assist decision making
Making tech more affordable
Tackling the problem of e-waste
Company background
Company performance
Figure 131: Dixons Carphone: group financial performance, 2013/14-2017/18
Figure 132: Dixons Carphone: group sales performance, by new reporting segments, 2016/17-2017/18
Figure 133: Dixons Carphone: outlet data, 2013/14-2017/18
Retail offering
E-SQUARE
Company background
Key figures
Members
Figure 134: E-Square: membership, 2019
EURONICS INTERNATIONAL
What we think
Company background
Company performance
Figure 135: Euronics International: estimated group financial performance, 2013-17
Figure 136: Euronics International: estimated outlet data, 2013-17
Retail offering
APPENDIX – DATA SOURCES, ABBREVIATIONS AND SUPPORTING INFORMATION
Data sources
Financial definitions
Sales per store, sales per square metre
Exchange rates
Abbreviations
Consumer research methodology
Brand research
APPENDIX – KEY DRIVER ANALYSIS
Figure 137: Overall satisfaction with the retailer used to make the last purchase of electrical/electronic products – Key driver output, November 2018
Figure 138: Satisfaction with the retailer used to make the last purchase of electrical/electronic products, November 2018
APPENDIX – MARKET SIZE AND FORECAST
Forecast methodology
Market size definitions
Specialist sector size