Having already disrupted food retail, discount players are increasingly impinging on the grocers’ share of non-food retail sectors, with homewares becoming the next battle ground.
Discounters and value general merchandisers such as Home Bargains, Poundland, Aldi, B&M, The Range and HEMA are growing their share of the homewares market.
Timeline for Aldi
- September 19, 2017
- September 19, 2017
And the grocers and department stores are the groups most under threat, particularly Asda, Tesco, Debenhams and Marks & Spencer.
From 2015 to 2016 homewares volume growth declined from 1.4 percent to 0.2 percent and the total increase in value of the homewares market to decline from 2.1 percent in 2015 to 1.3 percent in 2016.
This was primarily due to increased inflation, falling consumer confidence and a reduction in the number of housing transactions.
Value retailers have a track record of performing well in times of economic uncertainty.
From 2008 to 2009, during the recession, B&M doubled its sales in the UK and Aldi grew its UK sales by 30.9 percent.
As volumes in the homewares market suffer, competition for consumer spend is ever more fierce, and offering value in such periods is one way retailers can stay competitive.
This is particularly true of subsectors not so driven by functional and replacement needs such as home decor and accessories.
As currency hedging begins to unwind in 2017, home retailers such as Next and Dunelm have increased prices, and value players have to carefully consider whether to follow suit or not.
Some decided to take a hit to margins in order to stay competitive on price such as HEMA, and others chose to provide opportunity for shoppers to trade up, for example Poundland which has introduced multiple prices enabling it to offer shoppers a greater range and increase average basket spend.
Still, as consumers look for ways to save in periods of economic uncertainty, value retailers will continue to benefit, especially those with growth strategies that combine low price with quality.
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In an attempt to steal share from home specialists, the discounters sought ways to increase loyalty, mainly through increased choice.
Aldi launched a budget designer living room range with products strongly emulating items sold at John Lewis and IKEA, and in March, Poundland added new products to its stock portfolio such as bedroom textiles.
The Range, B&M and HEMA are aggressively expanding their physical presence opening in retail parks, shopping centres and on high streets. B&M is opening 50 stores a year to improve accessibility and spread awareness of the offer among a larger shopper base.
Dutch retailer HEMA only has seven stores in the UK but is also a threat to the likes of grocers and department stores as well as market-leading retailers IKEA and Dunelm.
This is due to its convenient, high footfall locations as well as its ability to offer a large amount of product in small spaces.
However, there are several shortcomings many value homewares players have in common.
One of these is the development of multichannel.
Neither B&M, nor Poundland, nor Lidl offer a transactional website, significantly limiting channel choice for shoppers to instore purchases.
Though B&M operates from over 533 stores, the absence of a home delivery channel restricts the number of shoppers who are able to access its products.
The establishment of online ordering and home delivery in the short term and the launch of channels such as click & collect to improve convenience for customers in the long term should be on the agendas of these retailers, particularly general merchandisers.
Recent research by GlobalData found that 28.9 percent of living room textile shoppers, 37 percent of bedroom textile shoppers and 32.5 percent of tableware shoppers bought items for a new look or design.
However, retailers such as Poundland and B&M lack design credentials and fashion authority and must find a way to tap into the latest homewares trends and update stock regularly to capture spend from design-motivated consumers.
This will be key to competing with clothing specialists who have branched out into homewares such as Urban Outfitters, Zara, Primark and H&M.