Home improvement

As we've had to spend so much time at home since March, it will come as no surprise that home and furniture retailers have benefited, with people increasingly prepared to spend money on improving their living spaces.

As a result, the major UK players have seen their share prices enjoy significant hikes between April and October with Kingfisher's (B&Q's owner) increasing by 133%, Dunelm by 127%, and DFS by 69%. The stamp duty holiday until 31st March 2021 is also fuelling the housing market - with buyer enquiries, agreed sales and new listings performing well in September.

Which categories are benefiting?
In early lockdown, Garden & DIY was the most searched retail category, with Q2 searches increasing 141% YoY (pi-datametrics), helped by garden centres and DIY stores being the first retailers to be allowed to open in May.

From June onwards, furniture became the most searched category. This was driven by a high demand for home office furniture (as well as the required computing equipment) as people accepted the new way of working, with premium lifestyle brands like Alessi accelerating their new product development around home office products.

Living room and bedroom furniture sales have also enjoyed growth although the increasing economic downturn, has reduced demand for big ticket items with only a quarter of consumers spending over £500 (Mintel). This has benefited home accessories and home furnishings retailers who provide a cost-effective way to refresh the look and feel of a home. For example, Diptyque, who reported a 536% increase in sales of their scented candles in the first weeks of lockdown.

Prerequisites for success
Whilst this sector looks optimistic, retailers need to consider five main market trends to thrive:

E-commerce
Online homewares is outperforming the overall market by a factor of four, and online furniture is one of the fastest growing online retail markets, with share of sales generated from online at 30% (up from c.20% in 2019). With its below market average share of online sales, Ikea saw an overall global sales decline of 4%, despite online sales increasing 60% to 18% over total sales. Ikea's CEO said that "online saved it" during the coronavirus crisis, as three quarters of stores were shut for over six months, highlighting how vitally important it is to have a strong online presence.

Social channels
Within the homewares market, `share of voice' is not just driven by retailers’ websites, but social platforms like Pinterest and Instagram. Whilst the top 5 companies in the UK Homeware Leaderboard are expected operators like Wayfair, Amazon, Argos, Dunelm and Ikea, Pinterest takes a surprisingly high position at 12th.

Technology
As covered in a previous Pragmatist, the market for home technology is growing quickly. This continues to influence the homeware market as consumers want furniture that `does more'. Smart white goods are increasingly becoming commonplace, with hygiene-focussed homeware emerging as a new trend. Products with antiviral properties are sought-after, with towels and bedding an obvious place to start, but innovative retailers like D'Decor (see image above) are already investigating ways to integrate anti-virus technology into sofa covers and other pieces of furniture.

Sustainability
Younger consumers are placing increasing importance on sustainable choices, with successful retailers offering credible propositions such as IKEA's furniture buy-back or Homebase's green aisles offering key points of difference.

Well-being
As physical and mental health have been moved into the spotlight, consumers are turning their homes into oases of calm, with accessories like indoor plants and scented candles or oil diffusers tapping into this. This led to wellness brand Neom Organics enjoying significant increases in sales across all their product ranges.

Christina Roseler