DIY and Home Improvement Retail in Europe: Market Size, Retailer Strategies and Competitor Performance

Summary 1
Executive Summary 2
Europe's economy is emerging from the aftermath of a brutal recession 2
Naturally, the DIY market was in no position to escape this malaise 2
Hard DIY is suffering, while the homing trend and gardening are offering some respite 2
Despite the significant headwinds, DIY retailers continued to expand their store estates 2
2010 should be a better year for the sector and the whole industry 3
What to do now - private label provides an opportunity to improve margins 3
A flexible supply chain would help retailers sell the right products at the right time 3
Online is growing right through the recession; the next step is applications 3
Environmental targets and trends are presenting numerous growth opportunities 4
Table of Contents 5
Table of figures 6
Table of tables 7
DIY Market Structure 8
The European DIY market is in its second year of decline 8
Specialist sales are following the downward trend 12
Specialists' selling space is showing a much slower pace of contraction 15
Sales densities are also continuing to fall 17
Store numbers are continuing to show long-term decline 19
The DIY Market in France 21
The French market is down by 3.0% for the first time in 15 years 21
Recent key developments - major players are growing sales through store openings 24
In March 2010 Bricorama reported growth, mainly driven by new space 24
Q4 sales at Kingfisher were down 24
In February 2010, Mr Bricolage reported stagnating sales 24
In October 2009, Mr Bricolage acquired Le Club-les Briconauts in France 24
Shares of DIY retailers in France - Leroy Merlin is the dominant DIY retailer 25
Leroy Merlin France now has an annual turnover of more than €4.5bn 25
Kingfisher France saw a reversal of fortunes for its two fascias 25
Outlook for DIY retailing in France - poor consumer spend will restrict organic growth 26
The French DIY market's fortunes will be sharply influenced by the macroeconomic picture in the country 26
Unemployment is too high, the housing market is weak, and overall consumer confidence is down 26
There is no easy alternative into growth, as opening new DIY sheds remains difficult 26
The outlook for trade specialists remains grim in the short term 27
More consolidation is on the cards, especially from smaller operators 27
The DIY Market in Germany 28
The German market has enjoyed a good year despite the crisis 28
A greater focus on smaller ticket items would work well 29
Gardening is growing strongly 29
Consumers are saving energy through renovation 29
Recent key developments - performance was mixed among the key players 29
In March 2010, Praktiker announced its results for 2009, showing a decline of 6.2% to €3.7bn 29
Also in March, Hornbach announced that it continued to grow through the recession 30
Shares of DIY retailers in Germany - the main players continue to invest in expansion 30
OBI remains the market leader in Germany 30
The challenge from Praktiker is faltering-for now 31
Bauhaus' store proposition is ideally suited to tradesmen 31
Outlook for DIY retailing in Germany - although 2010 will be weak, the future is promising 31
Macroeconomic recovery is on shaky ground, but the DIY outlook appears to be relatively benign 31
Short timing has kept unemployment on an even keel 31
The savings rate is high, the residential market is down, and confidence recovery is on shaky ground 32
The DIY market got off to a slow start to 2010 32
Sales densities are under pressure 32
Environment stimulus is promising for future growth 32
The DIY Market in Italy 33
The crisis has caused a standstill in the Italian market 33
Recent key developments - Groupe Adeo is making gains in the market 34
In April 2010, Leroy Merlin reported double digit growth 34
In May 2009, the second Bricoman store opened in Italy 34
Shares of DIY retailers in Italy - Groupe Adeo dominates the market 35
Outlook for DIY retailing in Italy - expenditure is being hampered by entry of discounters 35
Italy's economy is on shaky ground 35
Disposable income is falling, unemployment is getting worse, and savings are down 35
House prices are coming under pressure 36
A rise in discounting is posing a threat to DIY specialists 36
Developing an upmarket positioning will help DIY retailers to boost sales 36
Offering a good service will also contribute to increasing sales per store 36
The DIY Market in Spain 37
The DIY market is collapsing as the recession is taking hold 37
Recent key developments - value DIY players are expanding in the market 38
In March 2010, El Corte Inglés announced its intentions to accelerate the roll out of Bricor 38
In March 2009, Leroy Merlin reported a sales decline for 2008, a portent of things to come for Spanish DIY 38
Brico Depot is seeing signs of improvement 38
DIY groups are laying out their expansion plans 39
Leroy Merlin is seeing long-term potential in Spain, and is planning further expansion 39
Shares of DIY retailers in Spain - new entrants are gaining share 39
Outlook for DIY retailing in Spain - the economic climate remains gloomy 40
Spain is still in recession, but inflation is slowly rising 40
A rise in VAT is imminent and unemployment remains exceptionally high 40
The property market has tanked 40
Relying on a booming housing market is a thing of the past for DIY retailers 40
The DIY Market in the UK 42
The UK market is suffering a brutal decline 42
UK DIY is being saved by gardening 43
DIY retailers are benefiting from the difficulties faced by furniture specialists 43
Competition is intensifying 43
This is being heightened as grocers and general merchandisers gain market share 43
Recent key developments - the main players have reported positive results 44
In March 2010, Kingfisher reported positive results, but warned of tough times ahead 44
In 2009, Home Retail Group announced that Argos and Homebase increased total sales 44
In August 2009, Focus secured the backing of creditors for its proposed company voluntary arrangement 45
Shares of DIY retailers in the UK - B&Q commands over a quarter of the market 46
Outlook for DIY retailing in the UK - value and green issues will take greater precedence 47
DIY demand is unlikely to rebound in the short term 47
The Big Four are responding to a changed consumer mindset 47
DIY will remain price competitive and value driven, but will gain some impetus from the eco theme 47
Strategic Issues 49
The downturn has resulted in a changed retail landscape for the DIY sector 49
Housing market growth across the EU has slowed to a crawl and in some cases started to retrench 49
Most DIY specialists are reacting well to the changed consumer 49
Energy efficiency will have a major impact on the future development of the European DIY market 49
The online channel has clearly outperformed for retailing all the way through the recession 49
The housing market is going south, the first synchronised fall in the EU 50
The solution is to focus on smaller projects... 51
...and on gardens, as barbecue sales growth continues across most EU markets 52
Energy efficiency and carbon footprint reduction are other growth drivers 52
Depending on incentives, solar panels could achieve mass take-off in UK 52
Consumers are demanding green products and services 52
Europe's largest DIY players have already begun to incorporate the green agenda into their offers 53
B&Q is pledging a carbon emissions cut in 2010 53
B&Q still needs to give its One Planet Home range greater focus 53
Groupe Adeo has developed its Kbane banner 53
Rautakesko, Hornbach and Bauhaus all offer guidance on saving energy in the home 53
Online, from click and collect to apps, has been outperforming 54
B&Q has developed an online proposition... 54
...and has also rolled out a reserve and collect service 54
Homebase has also rolled out reserve and collect... 54
...and is developing online marketing campaigns 54
Praktiker aims to become a multichannel retailer 54
Apps present the next step in the internet evolution 55
Kingfisher 56
Retailer summary - Kingfisher is the world's third largest DIY retailer 56
Europe's biggest DIY retailer has a strong presence in UK and France 56
Recent key events - Kingfisher is focusing on strengthening its existing store networks 57
Kingfisher has exited Italy 57
Showrooms have become a key feature for B&Q 57
B&Q is targeting trade customers through new TradePoint store-in-stores 58
Kingfisher has launched an Eco Shop 58
Staff can gain a green qualification from B&Q 58
Eco brands are being increasingly promoted in-store 58
Castorama has developed an iPhone app 59
The inner-city store format on the Continent is now being launched in the UK 59
Financials - strong growth is continuing, despite the crisis 60
Stores - growth in emerging markets is picking up 62
Outlook - multichannel and improved customer service will help to maintain sales growth 65
Kingfisher is focusing on becoming more of a specialist in the DIY field 65
Multichannel is becoming a greater focus for Kingfisher 65
Groupe Adeo 66
Retailer summary - Leroy Merlin is the core fascia of Europe's second largest DIY retailer 66
Groupe Adeo operates eight DIY and homeware store brands 66
The retailer offers a range of services in its stores 67
Recent key events - the Leroy Merlin concept continues to be diversified 67
New Leroy Merlin eco store formats have been launched in France and Spain 67
Leroy Merlin stores are being downsized 68
In-store services have been improved in Leroy Merlin's stores in Italy 68
Leroy Merlin has launched its own blog 69
Groupe Adeo has acquired Kingfisher's store estate in Italy 69
Financials - the group is maintaining double-digit sales growth 70
Stores - continued expansion has taken place across all markets 71
Outlook - Groupe Adeo will continue to diversify away from its core DIY categories 72
Homewares and decorative products will become an increasingly prominent category 72
Continued format and product diversification is key to Group Adeo's growth 72
OBI (Tengelmann) 73
Retailer summary - OBI is Germany's leading DIY retailer 73
OBI is expanding rapidly in the CEE 73
OBI stores take the form of large out-of-town warehouses 74
OBI is a hard DIY retailer focusing on renovation and home maintenance products 74
Services on offer at OBI include floor fitting and tool rental services 76
Recent key events - OBI is driving spend by enhancing in-store products and services 77
180 ATMs have been installed in OBI stores in Germany 77
OBI is no longer expanding into Greece 77
OBI's gardening assortment is being expanded across Germany 77
Financials - OBI's stores in CEE outperformed its domestic network 78
Stores - Romania and Ukraine are the newest markets for OBI 80
Outlook - OBI will benefit from targeting growth markets, but mustn't forget its core market 81
OBI is continuing to target growth markets 81
OBI's hard DIY focus in Germany is resulting in weak sales growth 81
Praktiker 82
Retailer summary - Praktiker holds an 8.5% share of the DIY market in Germany 82
Praktiker positions itself in both the value and high-end price segment 82
Praktiker operates from two store formats 82
Private label will account for 30.0% of sales in 2010 83
Praktiker is gearing itself toward an EDLP proposition 83
Max Bahr's higher prices are justified by a variety of specialist DIY services 83
Praktiker hopes to become a multichannel retailer 84
Recent key events - online and private label are being further developed abroad 84
Praktiker entered Albania in 2009 84
Private label ranges are being expanded outside of Germany 84
Loyalty cards are being enhanced at both Praktiker and Max Bahr 84
Praktiker is trialling online in Hungary 84
Max Bahr is extending its partnership with Küche&Co 85
Financials - the Max Bahr store format is outperforming Praktiker 85
Stores - store expansion is continuing despite the poor financial performance 87
Outlook - Praktiker will continue to enhance its existing store network 87
Store consolidation has become the name of the game 87
Bauhaus 88
Retailer summary - Bauhaus is Germany's third largest DIY retailer 88
Bauhaus is mainly present in Germany, but is growing strongly in Scandinavia 88
Bauhaus operates from a large store format 89
In-store products are very much geared toward the hard DIYer 89
Gardening centres and drive-in arenas are being extended to more Bauhaus stores in Germany 90
Recent key events - Bauhaus is continuing its store and network expansion 91
Bauhaus entered Estonia in April 2010 91
A new large format store has opened in Kalk, Germany 91
Financials - sales have been squeezed by strong price competition in Germany 91
Stores - 60% of Bauhaus' store network is situated in Germany 92
Outlook - Scandinavia will make increasingly larger contributions to total revenues 93
Scandinavia will become a core region for the retailer 93
Appendix 95
Definitions 95
Abbreviations 95
Methodology 95
Ask the analyst 96
Verdict Research Consulting 96
Disclaimer 96
List of Tables
Table 1: Expenditure on DIY (€m), by country, 2004-2009e 8
Table 2: EU DIY expenditure growth rates (%), by country, 2004-2009e 9
Table 3: EU27 DIY expenditure ranking matrix, 2009 10
Table 4: EU27 specialist DIY retailers sales (€m), 2004-2009e 12
Table 5: EU27 DIY specialists sales growth rates (%), by country, 2004-2009e 13
Table 6: EU27 DIY specialists sales ranking matrix, 2009 14
Table 7: Estimated DIY specialists selling space (000 sq m), by country, 2004-2009e 15
Table 8: DIY specialists space growth (%), by country, 2004-2009e 16
Table 9: Estimated EU27 DIY specialists store numbers, by country, 2004-2009e 19
Table 10: Changes in estimated EU27 DIY specialist store numbers (%), by country, 2004-2009e 20
Table 11: French DIY expenditure and specialist sales, 2004-2009 21
Table 12: French DIY specialists, 2004-2009 21
Table 13: French DIY market shares, 2009e 25
Table 14: German DIY expenditure and specialist sales, 2004-2009 28
Table 15: German DIY specialists, 2004-2009 28
Table 16: German DIY market shares, 2009e 30
Table 17: Italian DIY expenditure and specialist sales, 2004-2009e 33
Table 18: Italian DIY specialists, 2004-2009e 33
Table 19: Italian DIY market shares, 2009e 35
Table 20: Spanish DIY expenditure and specialist sales, 2004-2009 37
Table 21: Spanish DIY specialists, 2004-2009 37
Table 22: Spanish DIY market shares, 2009e 39
Table 23: UK DIY expenditure and specialist sales, 2005-2009 42
Table 24: UK DIY specialists, 2005-2009 42
Table 25: UK DIY market shares, 2009 46
Table 26: Kingfisher company overview 56
Table 27: Kingfisher turnover, 2004-2010 60
Table 28: Kingfisher store portfolio, 2008-2010 62
Table 29: Kingfisher selling space development, 2008-2010 64
Table 30: Groupe Adeo company overview 66
Table 31: Groupe Adeo turnover, 2004-2009 70
Table 32: Groupe Adeo store portfolio, 2007-2009 71
Table 33: Groupe Adeo store portfolio, 2007-2009 71
Table 34: OBI company overview 73
Table 35: OBI trading record, 2004-2008 78
Table 36: OBI turnover (€m), by country, May to December 2008 79
Table 37: OBI store portfolio, 2007-2008 and 2008-2010 80
Table 38: Praktiker company overview 82
Table 39: Praktiker trading record, 2004-2009 85
Table 40: Praktiker sales, by country, 2008-2009 86
Table 41: Praktiker store portfolio, 2007-2009 87
Table 42: Bauhaus company overview, 2009 88
Table 43: Bauhaus estimated trading record, 2004-2009 91
Table 44: Bauhaus store portfolio, 2007-2010 92
List of Figures
Figure 1: DIY specialists sales densities in the EU (€/sq m), 2009e 17
Figure 2: Leroy Merlin on the high street, Paris, 2010 23
Figure 3: Y-o-Y house price changes (%), 2008-2009 51
Figure 4: Kingfisher's Castorama app 59
Figure 5: Poster for Leroy Merlin's eco-store in Gandía, 2008 68
Figure 6: Leroy Merlin's blogging site logo 69
Figure 7: Exterior of an OBI store in Germany 74
Figure 8: Interior of an OBI store in Germany 75
Figure 9: OBI's five branded labels each correspond to different product groups 76
Figure 10: Some of Bauhaus' private label brands 89
Figure 11: Bauhaus' drive-in area 90
Figure 12: Bauhaus' single store in Reykjavík, Iceland, standing empty 93

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