December 01 2006

SEO for B&Q as DIY market shrinks

DIY retailer B&Q is working with search agency Tamar to improve diy.com's positioning in the search engines. The appointment is part of B&Q's increased focus on its multi-channel offering - a necessity since the DIY sector is expected to shrink for a second year and is not likely to return to the boom time when it was the fastest growing sector in retail.

The UK DIY and gardening sector is set to record a second consecutive year of declining sales, and be one of only two retail sectors (alongside music and video) to report negative growth this year, according to retail analysts Verdict Research. B&Q has just reported third quarter sales of £954.6m (a 0.2% increase over 2005 but -1.1% LFL. Retail profit was £46.6 million (2005/06: £50.3 million).

Verdict Research says that only those retailers that can adapt to a changed consumer psyche and new competitive challenges can expect to prosper - especially with the increasing popularity of 'Done for You'.

While the DIY market may not be as buoyant as other sectors, focussing on multi-channel, rather than individual channel retailing has been showing financial returns for other companies and, by making its site more visible in the search engines, B&Q is moving one step towards increasing sales through diy.com.

Verdict Research press release follows:

A new report* published this week by retail analysts Verdict Research, part of the Datamonitor Group, finds that the UK DIY & Gardening market is set to record a second year of declining sales after many years as the fastest growing sector in retail. The dismal performance is prompting many DIY retailers to reengineer their businesses. With no possibility of a return to the boom days, only those retailers that can adapt to a changed consumer psyche and new competitive challenges can expect to prosper.

The research shows that in 2006 the UK DIY & gardening sector is set to record a second consecutive year of declining sales. At -0.2% the fall will not be as drastic as 2005 (-3.2%), but it will still make the market one of only two retail sectors (alongside music & video) to report negative growth this year. The decline in sales reduces the market value to £16.1bn, £600m below its 2004 high.

Looking ahead the prospects for the sector are mixed. Nick Gladding, author of the report comments, "though the market will recover in 2007, a re-run to the boom days of double digit sales growth it achieved in the late 1990s is not realistic." But he warns "only retailers that adapt to a changing consumer psyche and new competitive challenges can expect to prosper."

In a sector hard hit by uncertainty in the housing market, margin recovery, rather than space growth, is now the key priority for DIY retailers. Over the past five years the leading operators have engaged in substantial expansion as the popularity of DIY soared - bolstered by a booming housing market. However in 2006, DIY retailers have struggled to attract customers - despite widespread promotions that have severely battered margins. With a weaker set of background drivers, the key objective for operators is now to drive recovery of their margins - primarily through boosting the productivity of their existing stores.

Retailers recognise they must raise their game in a changed retailing landscape, according to Verdict. They cannot rely on consumers to resume spending again and must do more to entice them back to stores. Besides wooing back lapsed shoppers, retailers must do more to make stores welcoming to non-DIY shoppers and adopt a more proactive stance to grow the market and reignite demand among consumers.

To do this, DIY retailers must overcome several challenges. Besides a weaker housing market and fewer opportunities for physical expansion, DIY now has to battle harder with a host of other areas to maintain its share of consumers' expenditure. Growing demand for overseas travel and 'must have' electricals are two key areas which have benefited from greater consumer interest and heightened spending. DIY retailers will need to communicate the features and benefits of home improvement more effectively to achieve this.

In addition to competition from other channels, DIY is no longer in fashion. In contrast to previous years the sector has received much less media attention over the past 12 months. Home improvement programmes are no longer a staple of prime time TV, rather DIY horror stories have become much more prevalent, causing consumers to think twice before embarking on major home improvement projects. DIY retailers therefore need to take a more proactive role in driving demand themselves.

Verdict believes the increasing popularity of getting home improvement work 'Done for You' has also suppressed DIY market growth. The influx of skilled tradesmen from new EU member states prepared to work for lower wages than British workers has reduced the cost of home improvement projects to consumers. It has made Done For You a much more affordable option and explains why builders merchants and trade-orientated specialists have outperformed. But for retailers that are not designed for trade needs such as Focus and Homebase, this shift limits their growth potential.

To raise profitability, Verdict urges DIY retailers to take action on four fronts:

Firstly, pricing strategies. Blanket promotional activity is a firmly established trademark of the DIY sector, often resulting in competitors running identical promotions at the same time. This, aligned with a range of other price related activity, leads to a mixed, incoherent price message to consumers. DIY retailers need to engage in more selective, targeted promotional campaigns, while reinforcing their focus on maintaining value. Developing transparent price architectures which can be easily adapted to capitalise on various events and make it easier to encourage shoppers to trade up, will be instrumental in thwarting the growing threat posed by non-specialists such as grocers. B&Q typifies the move towards more sophisticated pricing strategies. It operates an everyday low prices strategy on popular lines, but supplements this with multi-buy promotions in categories that are volume price elastic while targeted promotional events are used as a call to action for infrequent big ticket projects such as kitchens and bathrooms refurbishments.

Secondly, advertising. As price can no longer be relied on exclusively to drive footfall to stores, DIY retailers need to adopt a more product-centric stance to their advertising. While there have been some initiatives to adopt a softer stance, DIY retailers need to capitalise more on their specialist strengths and communicate the authority of their ranges and make bolder statements regarding fashionability. Advertising expenditure needs to be spread through a broader range of media - such as the Internet and home improvement magazines - to bolster both brand image and fashion credentials.

Thirdly, retailers should intensify range development with premium lines. While DIY retailers have developed comprehensive coverage across many ranges at low to mid market price points, there remains scope to stretch range architectures by introducing more premium products. The opportunities are strongest in kitchens, bathrooms and bedroom furniture categories and such initiatives can help DIY retailers to differentiate from the swathe of competitors active in these areas. Higher ticket lines can also attract a new, more affluent set of shoppers, which will be conducive to boosting transaction sizes and sales densities.

Finally, encouraging consumers to buy into higher price product will be challenging unless investments are made in new formats which master the retail basics - an area where many DIY retailers have scope to improve. Investing in better segmentation of product in-store, improved merchandising techniques and stronger customer service can create a more aspirational store atmosphere - which should enable customers to engage better with products and can foster a climate more conducive to selling higher ticket items.

Emma Herrod