Provide an insight in the home industry, including competitor landscape, the assortment complexity, and corresponding segment trends

Introduction to home

The global market for Furniture & DIY is growing and the share of online spend keeps increasing as well, resulting in a double impact growth of the online home business

Complexity of Home Industry

The traditional DIY and Furniture retail landscape is being disrupted. New competitors are entering the market, putting pressure on the sector. The new competitive landscape includes international brick-and-click players leveraging economies of scale to enable excellent service for low prices, manufacturing brands going direct to consumer in niche products segments, and online pure players / tech giants leveraging data and prioritizing growth over profit”.

International B&C players: Economies of Scale

  • Large international players expanding to other markets
  • Leverage of economies of scale to offer low prices and increased convenience
  • Heavy offline footprint, competing with traditional stores

Online pure play & tech giants: Data & Scale

  • Pure online players and tech giants leveraging data to optimize price and service
  • Excel in online convenience and customer experience
  • Not always have Home or even retail as prime focus

Manufacturing brands: Niche players

  • Pure online players and tech giants leveraging data to optimize price and service
  • Excel in online convenience and customer experience
  • Not always have Home or even retail as prime focus

In addition to the evolving competitor landscape, the DIY and furniture industry has a large variety of product characteristics to deal with. Consumers want simplicity, but a one size fits all solution for the Home segment is infeasible due to a highly complex assortment setup. Margin protection is a challenge

The Home industry is a highly competitive market with a complex assortment. Retailers face different strategic challenges per product segment and key is to achieve profitability over all segments

  • Each product segment has a distinct competitive landscape (including Niche players and tech giants) and requires a different customer engagement (e.g. project based)
  • The role of the store in the online strategy has to be determined per product segment – e.g. showroom for high value product, the potential role as online distribution point
  • The online assortment and offline assortment needs to be aligned to ensure seamless experience, but each product segment shows different (profitability) dynamics
  • Segmented supply chain requirements for each product segment needs to be designed to ensure a profitable online proposition per product segment
  • A trade-off needs to be made to tailor the supply chain to the specific product segments versus the economies of scale required to ensure profitability

Margin dilutive home delivery – The basis

Retail used to be based on the consumer doing the fulfillment themselves, coming into the store, doing ‘the pick’, and doing the ‘last-mile logistics’ themselves. Yet now we’re all increasingly setting the expectation that this massively value-adding activity can be owned by the retailer without getting fully reimbursed for this service. And this expectation of service keeps growing: shorter lead times, smaller delivery windows, etc.

Margin dilutive home delivery – The transactional costs

Every transaction that moves from store to home delivery tends to be margin dilutive. Typically DIY and Furniture retailers can reach an indicative profit margin of approximately 10 - 14% on a store basket, while home delivery typically entails an extra 8 - 12% of costs for small products and even 11% - 19% for large products. It does not take a mathematician to conclude this has a significant impact.

Offline transaction

10 – 14%

Online transaction

2 – 6%

Online transaction

-5 – -1%

Sources: Deloitte analysis, company P&L data, annual reports, desk search, expert interviews