Our product markets
Home Retail Group operates in the home and general merchandise market, worth approximately £58 billion in terms of UK retail sales. We are the market leader in this market, with an approximate 10% share.
The overall market declined by around 3% in calendar year 2009. The market can be analysed into various product categories. A summary of these, including where products are sold at Argos, Homebase or both, the Group’s overall share position, and the market size of each product category, is as follows:
| Product markets |
Argos |
Homebase |
Group position |
Market size £(bn) |
| Home enhancement |
|
|
|
|
| Housewares |
√ |
√ |
1 |
9.0 |
| Furniture |
√ |
√ |
1 |
7.7 |
| Home improvement (DIY/fitted kitchens/bathrooms) |
√ |
√ |
2 |
11.1 |
| Horticulture, garden furniture and outdoor living |
√ |
√ |
2 |
3.5 |
| Sub total |
|
|
|
31.3 |
| |
|
|
|
|
| General merchandise |
|
|
|
|
| Small domestic appliances |
√ |
√ |
1 |
1.3 |
| Consumer electronics |
√ |
√ |
2 |
15.1 |
| Large domestic appliances |
√ |
√ |
3 |
3.6 |
| Toys |
√ |
|
1 |
2.3 |
| Jewellery |
√ |
|
1 |
3.6 |
| Sports and leisure equipment |
√ |
|
1 |
1.1 |
| Sub total |
|
|
|
27.0 |
| |
|
|
|
|
| Total |
|
|
|
58.3 |
Note: All market positions are for calendar year 2009 and by retail sales except jewellery, which is measured by volume. The market sizes and positions quoted above are taken from reports provided by Verdict, Mintel, NPD Gfk and the EPOS tracked markets. These reports are subject to prior year restatements upon more current data becoming available.
The housewares market is relatively fragmented according to analysis by Verdict Research, with the ten largest retailers accounting for around 40% of the market. Argos is market leader, with Homebase adding further Group scale. The competition base is very broad across the department stores (John Lewis, Marks & Spencer, House of Fraser, Debenhams and Bhs, as well as fashion and home retailer Next), some national specialists (IKEA, Dunelm), the supermarkets (Tesco, Asda, Sainsbury) and some broader generalists (Wilkinson, Matalan, TK Maxx). Specialist independents are estimated to account for around one-third of the market.
The housewares market in calendar year 2009 was estimated to have experienced a low single-digit decrease in retail sales.
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The structure of the furniture market shows fairly close resemblance to the housewares market according to analysis by Verdict Research, with the ten largest retailers accounting for approaching 40% of the market. Argos is market leader, with Homebase again adding further Group scale. The competition base has a number of national specialists (DFS, IKEA, Homestyle Group, Magnet, Furniture Village and Dreams), with other significant players being B&Q, John Lewis and Next.
The total furniture market in calendar year 2009 was estimated to have experienced a mid single-digit decline in total retail sales, with several major sub-categories declining by double-digit rates.
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The largest part of the home improvement market is the DIY category (excluding furniture and housewares). There are four national specialists (B&Q, Homebase, Wickes and Focus) accounting for 45% of the market according to Verdict Research, with other national operators selling products in this category being Argos, Wilkinson, Robert Dyas, Wyevale, Topps, and Dobbies. Approximately 50% of the DIY market is estimated to be accounted for by specialist independents. The home improvement market also includes the kitchens, bathrooms and floorcoverings (excluding carpets) categories, with additional national competitors in these areas including Magnet, Howden, IKEA and HomeForm.
The home improvement market in calendar year 2009 was estimated to have experienced a low single-digit decline in total retail sales.
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This market according to Verdict Research, is mainly dominated by the four national DIY specialists, with Argos and the two garden centre specialists Wyevale and Dobbies also being significant retailers of products in this category. Approximately one-third of this market is estimated to be accounted for by specialist independents.
The horticulture, garden furniture and outdoor living market in calendar year 2009 was estimated to have experienced a low double-digit increase in total retail sales, benefiting from significantly better weather conditions in Spring 2009.
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This market is relatively concentrated according to GfK, with Argos being the clear market leader with a substantial market share. Competition is mainly in the form of the electrical specialists (Currys and Comet), Boots in terms of personal care appliances, the supermarkets, and the department stores. A relatively small proportion of the market would be accounted for by specialist independents.
The small domestic appliances market in calendar year 2009 was estimated to have experienced a low single-digit decline in total retail sales, according to Verdict Research.
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This market is also relatively concentrated according to GfK, with Currys being the market leader, followed by Argos and then Comet. Other competition is mainly in the form of John Lewis and other department stores, the supermarkets, and national specialists in certain sub-categories such as Game in video gaming and Jessops in photography. Around one fifth of the consumer electronics market would be accounted for by specialist independents, while other online retailers represent a small but growing share of this market.
The consumer electronics market in calendar year 2009 was estimated to have experienced a mid single-digit decline in total retail sales, according to Verdict Research. This was largely driven by the video gaming category as well as the office and telecoms categories, with a more marginal decline in the other major areas of consumer electronics.
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This market is again relatively concentrated according to GfK, with the two major electrical specialists being then followed by Argos. Department stores such as John Lewis, DIY and kitchen specialists (including Homebase), and to a lesser extent the supermarkets and home shopping businesses represent other significant retailers in this category. Approximately one-third of the large domestic appliances market would be accounted for by specialist independents.
The large domestic appliances market in calendar year 2009 was estimated to have experienced a low single-digit decline in total retail sales, according to EPOS tracked markets.
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The toy market is relatively concentrated, according to analysis by NPD, with the eight largest retailers accounting for over 60% of the market. Argos is the market leader, with Toys ‘R’ Us as the other major national specialist, following the demise of Woolworths. The Early Learning Centre, Toymaster, The Entertainer and the Disney Store are other significant specialists, with the supermarkets also being significant toy retailers.
The toy market in calendar year 2009 was estimated to have experienced a mid single-digit decline in total retail sales.
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Market competitor analysis on the jewellery market is based on volume sold rather than total retail sales value. According to research by Keynote, this is a highly concentrated market with Argos being the market leader by volume, followed by H. Samuel. Other major retailers of jewellery volumes include fashion jewellery shops, department stores and specialist jewelers selling a greater proportion of precious metal jewellery such as Ernest Jones/Leslie Davis and Goldsmith.
The jewellery market in calendar year 2009 was estimated to have experienced a low single-digit decline in total retail sales, according to Keynote.
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This market is relatively fragmented according to analysis by Verdict Research, with Argos being the market leader. Other sellers of equipment include the predominantly sports clothing retailers (Sports Direct, JJB Sports and JD Sports), the department stores, and retailers such as Halfords and Blacks in sub-categories such as cycles and camping. The majority of the market is estimated to be made up of specialist independents.
The sports and leisure equipment market in calendar year 2009 was estimated to have experienced a low single-digit decline in total retail sales.
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We expect our product markets to remain highly competitive in the future. Supermarkets 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, currently represent a small but growing share of certain product categories. However, in categories undergoing a sharper slowdown in consumer spending, many specialist retailers, often with some significant market shares, are experiencing financial difficulties. In most categories, the independent specialists will face even greater pressures on the ability to weather the challenging economic environment.
Although retail conditions are likely to remain tough in the near term, the longer term outlook for market growth remains positive. A return to long term growth in the general merchandise and home enhancement markets would be expected on account of population growth and an increasing number of households, a reversion back to the general trend of rising overall household disposable income, technology changes and other new product developments, as well as the need to replace many existing household items.
Home Retail Group’s key strengths mean we are well equipped for the future. Our strong retail brands, multi-channel offering, extensive product choice and competitive pricing, together with a strong financial position, mean we are relatively well placed to trade through the downturn and benefit from renewed consumer confidence later in the cycle. While we have leading positions in multiple product markets, there remains substantial headroom for growth in many categories. The more fragmented markets provide growth opportunities, and we expect to take market share from weaker competitors and to benefit from any capacity withdrawal that ensues.
Our businesses are well established but continue to evolve to meet changing customer preferences. Our product range is constantly expanding. Our supply chain is highly efficient and cost effective. With all the key determinants for success in place, we expect to emerge in the long run as a stronger competitor in a more consolidated market.
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