Key strengths
The following strengths show how Home Retail Group is well positioned as one of the leaders in the UK retail market.
With sales of nearly £6bn in the past financial year, we are the leading home and general merchandise retailer in the UK.
Although we are already number one in many of our product categories, there is still potential to increase our market share. Our combined position accounts for just 10% of a market valued at £60bn. As many of these markets are fragmented and our market share has built quickly, there are further opportunities for growth.
We are using our retail knowledge and experience to maximise our operational efficiency and strengthen our competitive position. Initiatives in this area include trials of different store formats and ongoing programmes of store improvements.
As we offer multiple product categories via store and non-store channels, we are well placed to serve the changing needs of consumers.
As the UK’s leading general merchandise retailer and an icon among consumers, Argos is known for offering choice, value and convenience across a broad range of product categories.
Homebase is the UK’s second largest home improvement retailer, increasingly known for providing an extensive, more style-led range of merchandise across the broader home enhancement market.
Both retail brands are well placed to meet changes in customer preferences because of their emphasis on customer service and product choice. They are also extending their reach into under-penetrated customer areas and developing tailored formats to serve specific local catchments.
Our Financial Services business drives sales and customer loyalty for both Argos and Homebase. A range of credit and insurance products are available to customers in-store, by telephone and online, making our retail products more affordable and providing customers with additional peace of mind. With more than 1.1 million active store card customers, we are one of the largest store card providers in the UK.
Customers of Argos and Homebase have access to a massive range of goods at competitive prices.
The breadth and diversity of our product range, across multiple categories and with significant overlap between Argos and Homebase, should help to support sales in the event of a consumer slowdown. While some markets may contract, certain product categories should grow due to technological advances and replacement cycles.
The choice and value of our product range continues to expand for both retail brands. As a multi-channel retailer, Argos is able to offer its customers a level of choice within each product category that is hard to beat. Homebase also offers a wide choice within the product ranges that it sells.
As the leader in multi–channel retailing, we are well placed to respond to future consumer and retail trends. Consumers are changing how they order and buy goods. We offer many ways to meet their needs through our two retail brands, from in-store to shopping at home using catalogues and the internet. We are continually looking at new opportunities for innovation to enhance the retail experience.
Group operations provide our retail brands with significant competitive advantages.
Due to the size of our procurement operation, the scale efficiencies we can generate and our long-term relationships with suppliers, we can deliver value for money to consumers across a broad range of products while improving profitability in a very competitive market place.
We have one of the largest UK sourcing offices in the Far East. Products we buy from overseas account for over £1.8bn of Group sales, more than half of which are now sourced directly from factories, generating significant savings by eliminating agents and other intermediaries.
Our supplier and stock management structure in the UK and overseas allows us to source low-cost products in sufficient quantities while containing our stock exposure risk. Argos customers in particular, value our ability to locate exclusive products and advantageous quantities of in-demand items, especially at peak shopping periods.
The Group’s investment in a shared infrastructure and our logistics expertise for both retail brands makes our business efficient and resilient in challenging market conditions.
Argos and Homebase derive significant competitive advantage from their ability to leverage a shared infrastructure that supports their brand propositions, improves cost efficiency and accelerates profitable routes to growth. This strength allows both brands to enter new product categories quickly and cost effectively and build market share more rapidly than their peers.
Over a number of years we have made significant investment in home delivery and believe that this gives us a unique advantage over competitors who do not have our scale or expertise.
The heart of our business is our 53,000 colleagues, all of whom are focused on meeting the needs of our customers. At every level of our business, they share a common commitment to getting things right first time, being friendly and efficient and providing good customer service in our stores, over the telephone, online and in customers' homes.
The Group is led by a strong management team that combines long–term experience of the organisation with service in the wider retail sector. The high levels of retail expertise within our retail brands and Group operations contribute to the Group's consistently high levels of performance relative to the rest of the UK retail sector. We encourage professional skills and the career progress of our colleagues through targeted learning and development to ensure that the Group is always well equipped to deal with change.
The Group faces competition from many sources. Our competitors include:
- Established national specialists, such as B&Q, Wickes and Focus in home improvement; Currys and Comet in consumer electronics and domestic appliances; MFI and IKEA in furniture; Woolworths and Toys R Us in toys; H. Samuel in jewellery and Woolworths and Wilkinsons across broader general merchandise
- Supermarkets, such as Tesco, J Sainsbury and ASDA, who have been growing share in certain parts of the non-food, non-clothing market, building on their regular footfall and the increased space given to these ranges
- Online retailers such as Amazon.co.uk, who represent a small but growing share of the non-food, non-clothing market
- Specialist independents, such as regional and local chains selling single product ranges such as toys and jewellery
We expect our markets to remain highly competitive in the future. Yet the barriers to entry for new market entrants are high, particularly in relation to establishing sourcing and distribution operations on the scale required to be competitive in the long term. As we have demonstrated at Argos and Homebase, economies of scale are key to generating attractive customer propositions, as well as operational cost benefits for the Group.
The categories and the overlap between the Argos and Homebase businesses are summarised in the following table:
| Product markets | Argos | Homebase | Group position | Market size |
|---|---|---|---|---|
| Home enhancement | ||||
| Housewares | Yes | Yes | 1 | £9.1bn |
| Furniture | Yes | Yes | 1 | £8.6bn |
| Home improvement (DIY/fitted kitchens/bathrooms) | Yes | Yes | 2 | £11.5bn |
| Horticulture, garden furniture and outdoor living | Yes | Yes | 2 | £3.2bn |
| General merchandise | ||||
| Small domestic appliances | Yes | Yes | 1 | £1.4bn |
| Consumer electronics | Yes | Yes | 2 | £15.5bn |
| Large domestic appliances | Yes | Yes | 3 | £4.0bn |
| Toys | Yes | No | 1 | £1.9bn |
| Jewellery | Yes | No | 1 | £3.4bn |
| Sports and leisure equipment | Yes | No | 1 | £1.2bn |
