Opportunity and Innovation - Kingfisher plc

1

Opportunity and Innovation

1st Feb 2008

2

Market & Strategy

Spotting Customer Trends

Converting Trends To Commercial Opportunities

3

The Home Improvement Market Is Worth Over £60bn

Source: B&Q Research & Analysis, AMA, Mintel, Verdict

2007 Home Related Market

Size

£64.0bn

ELECTROSPARES£1,218Mn

HARDWARE£966Mn

HAND TOOLS £259Mn

POWER TOOLS£1,327Mn

TIMBER/JOINERY£3,850Mn

BUILDING£998Mn

HEATING & COOLING£654Mn

PLUMBING£2,314Mn

XMAS & FUN£252Mn

LEISURE£523Mn

GARDEN BUILDINGS£1,507Mn

LANDSCAPING£707Mn

GARDEN TOOLS£726Mn

GARDEN CARE

£505Mn

HORTI£1,617Mn

PAINT£1,131Mn

DEC SUNDRIES

£587Mn

WALL COVERINGS

£299Mn

WINDOW DÉCOR

£1,402Mn

LIGHTING£690Mn

LIGHTBULBS£246Mn

KITCHENS£1,673Mn

APPLIANCES£4065Mn

BATHROOM£2,267Mn

BEDROOM£2,896Mn

SHELVING £279MnCERAMICS £569Mn

FLOORING£2,035Mn

SERVICE£5,853Mn

BBQ ACCESORIES £85MnCOMPUTERS

£1,957Mn

CROCKERY/GLASSWARE/ETC.£3,579Mn

AUDIO/TV/ETC.£4,496Mn

GYM EQUIPMENT £162MnHOME OFFICE £441MnMATTRESSES £297Mn

MISC HOUSEHOLD ITEMS£1,753Mn

PONDS £72MnTELEPHONE/FAX £722Mn

UPHOLSTERED FURNITURE£3,811Mn

VACUUM CLEANERS £581Mn

BEDDING£1,887Mn

OTHER HOUSEHOLD TEXTILES £729MnALL DINING £160Mn

ALL STORAGE£1,846Mn

OTHER HOME RELATED

£11.6Bn £5.8Bn £4.4Bn £5.9Bn£13.8Bn £22.6Bn

BUILDING SEASONAL DECOR SHOWROOM LABOUR

4

With Huge Amount Of Room To Grow – Need To Consider Opportunities Beyond Our “Traditional” Space

Core Home Improvement£35.6bn

Other ‘Home Improvement’ Markets£22.6bn

Installation

£5.9bn

Trade RMI£13.8bn

Consumer RMI£13.2bn

DIY & Gardening Market

DIY Leader Market

DIY Shed

MarketB&Q; Homebase;

Focus Wickes

Plus . . . Grocers, Argos, Wilkinsons, Woolworths, Robert Dyas

Major Mail Order, Screwfix, Amazon

Plus . . . Smaller & Niche DIY retailers

& Garden centres, exc Furniture & soft textiles

DIY & Gardening

market plus . . . Trade materials, Extra Showroom, Extra Flooring, Appliances

Plus . . . Other

Furniture, Flooring, Appliances, Soft

Furnishings & Finishings

Consumer Electronics

£6.8bn

£14.7bn

£27.0bn

£64.0bn

£18.5b

59%

22%

15%

6%

B&Q Share

Source: B&Q Research & Analysis, GFK (exc VAT), AMA, Mintel, Verdict

27%

5

DIY & Gardening Forecast Growth

-3.5

-2.4

-0.8

0.3

2.2

3.2 3.32.9 3.1

1.7 1.8

2.6 2.8 2.7 2.9 2.9

2005Q4

2006Q1

2006Q2

2006Q3

2006Q4

2007Q1

2007Q2

2007Q3

2007Q4

2008Q1

2008Q2

2008Q3

2008Q4

2009Q1

2009Q2

2009Q3

%

The Market Is Set To Continue Growing

Source: Verdict Retail Futures Q4 2007

6

Market is fragmented and highly competitive

BuildingDIY Home

Improvement Home

DecorationFurniture Home

Entertainment

Com

peti

tors

Fashion

Supermarkets

Highly Competitive market

7

21 20 17 2013

79 80 83 8087

Disloyal Spend

Loyal Spend

Loyalty to Retailer Throughout Project Value of consumer purchases %

B&Q Homebase Focus Wickes Argos

Therefore, B&Q Has Relatively Low Share of Home Improvement Projects

Source: ProjectScope

8

14

5

3

3

23

10

6

5

6

7

6

8

57

78

85

85

B&Q

Homebase

Focus

Wickes

1st & only 1st, not only Not 1st but only Not 1st nor only

Question: Q6a & Q13 & Q17Base: All respondents buying Home Improvement Products in last 6 months

How First & Only are B&Q versus the competition - Overall

However, B&Q is ahead of the competition and does particularly well for being rated 1st

% First

37%

15%

9%

8%

% Only

20%

12%

9%

11%

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Increasing Our Focus Upon Competitors at SWAS Level

7© Ipsos MORI 2007

A great rangeAlways have the latest products

Good range of branded products

Good range of own label products

They are the only place I need to go to

Store I’d prefer to buy from

Likelihood to use in the future

First store visited

The best retailerGreat place to find ideas

New & interesting products

Provide all the info I need

There are staff available

There are staff who can help

Staff are very knowledgeable

Prices for every budget

Really good value for money

Great deals

Trust them to give best price

30

40

50

60

20

80

70

90

10

0

100

Their products are generally in stock

Question: Q13Base: All respondents buying Ceramic Tiles in last 6 months

Proposition outcomes by retailer – Window décor

B&Q

Dunelm

Homebase

John Lew is

LauraAshley

B&Q is behind on all Proposition Outcomes, particularly in terms of price, range & staff issues. Dunelm lead on all measures except for being the first store visited, with Laura Ashley & John Lewis also performing ahead of B&Q on staff & a place to find ideas

12© Ipsos MORI 2007

10

24

2

5

2

0

4

2

2

11

2

72

72

65

61

47

46

45

44

38

35

32

B&Q

Argos

Homebase

IKEA

LauraAshley

Habitat

Focus

JohnLewis

Next

Dunelm

Wickes

Conversion from aware to first

21%

39%

6%

10%

6%

0%

9%

7%

5%

31%

6%

Awareness & Conversion scores - Window décor

Question: Q3, Q5a, Q6b, Q7aBase: All respondents buying Window décor in last 6 months

Aware Consider First visited

34

51

17

19

5

3

9

7

9

21

5

15

28

4

6

3

0

4

3

2

11

2

Bought fromConversion from

consider to bought

B&Q has the highest level of awareness for Window Décor alongside Argos and the 2nd highest level of being the first store visited. Argos lead on store visited first

29%

47%

12%

26%

40%

0%

44%

29%

22%

52%

40%

10

Delivering First and Only

Product Stores People

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Market & Strategy



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Our Changing Customer Needs

The Drivers of Consumer ChangeThe Drivers of Consumer Change

Economic Growth Environmental Change

Demographic Time Bombs

GlobalisationRapid

Technological Advancement

DRIVERS

CONSUMER TRENDS

Ageing Population

Changing Role of the

Home

Changing Households

Rapid Technological Convergence

Changing Gender Roles

The Rise of Online

Wealthier Consumers My Time

Government’s Green

Agenda

Responsible Consumers

Fear for the Future

Global Impact

Health Matters

Ageing PopulationAgeing PopulationExamplesExamples Opportunities for B&QOpportunities for B&Q

Daily Living Made Easier Daily Living Made Easier rangesranges

Build upon over 60’s Build upon over 60’s community through Diamond community through Diamond ClubClub

Demand for DFY services Demand for DFY services (Could link to Diamond Club)(Could link to Diamond Club)

Ranges must not alienate older Ranges must not alienate older stylesstyles

Employment OpportunitiesEmployment Opportunities

B2B with caring sectorB2B with caring sector

Granny annexe solutionsGranny annexe solutions

Tap into Nostalgia Tap into Nostalgia

Power of ‘Grandparent’ Power of ‘Grandparent’ relationship e.g. ‘Get your relationship e.g. ‘Get your home ready for the home ready for the Grandchildren’Grandchildren’

Companies Embracing TrendCompanies Embracing TrendDove Dove -- Pro Age campaignPro Age campaign

Saga Saga -- Emphasis on enjoying the later Emphasis on enjoying the later years years -- luxury holidaysluxury holidays

Wyevale, Focus, Specsavers Wyevale, Focus, Specsavers -- All All offer over 60s discountsoffer over 60s discounts

OdeonOdeon -- Senior ScreenSenior Screen

Silver Surfers.comSilver Surfers.com -- Website Website designed help over 50s get the most designed help over 50s get the most from the webfrom the web

Abbey Abbey -- New 50+ current accountNew 50+ current account

Dolphin Dolphin -- Special care bathroomsSpecial care bathrooms

HowdensHowdens -- Launch of Inclusive Launch of Inclusive kitchen rangeskitchen ranges

M&SM&S -- Ageless models, Twiggy, Ageless models, Twiggy, Bryan FerryBryan Ferry

NintendoNintendo -- Brain Training GameBrain Training Game

Growth of the Ageing PopulationGrowth of the Ageing Population -- 19.2% of the UK 19.2% of the UK population will be over 65 by 2021 compared with 16% in 2005 population will be over 65 by 2021 compared with 16% in 2005 and 10.5% in 1948and 10.5% in 194822

Longer Working LivesLonger Working Lives -- October 2006 saw the default October 2006 saw the default retirement age set at 65. Currently an estimated 1.2 million retirement age set at 65. Currently an estimated 1.2 million pensioners still workingpensioners still working33

More ActiveMore Active -- 8 in 10 grandparents actively look after their 8 in 10 grandparents actively look after their grandchildren compared to 1 in 3 in the 1930sgrandchildren compared to 1 in 3 in the 1930s11

Disposable IncomeDisposable Income -- The over 50s population currently holds The over 50s population currently holds 80% of the country's wealth80% of the country's wealth6 6

HousingHousing -- 3.5 m older people in the UK live alone3.5 m older people in the UK live alone44

Older but YoungerOlder but Younger -- 70% of over 50s say they are more 70% of over 50s say they are more adventurous with their trips than they were ten years agoadventurous with their trips than they were ten years ago They They represent 35% of people who travel abroadrepresent 35% of people who travel abroad55

Pension Time BombPension Time Bomb -- The total shortfall in FTSE 100 pension The total shortfall in FTSE 100 pension funds currently stands at funds currently stands at ££53.7billion53.7billion77

Silver SurfersSilver Surfers -- 28% of over 65s in the UK have internet 28% of over 65s in the UK have internet accessaccess88

Two thirds of the people who have ever been 65 in the history ofTwo thirds of the people who have ever been 65 in the history of the world are alive todaythe world are alive today11

Source: 1Millennium Research Bureau, 2ONS, 3Employment and Equality Regulations, 4Age Concern, 5Foreign & Commonwealth Office, 6Emerald Insight, 7 UBS, 8 Oftel

DRIVER = DRIVER = Demographic Demographic Time BombsTime Bombs

Some Of The Key Trends

• Wealthier consumers (paradox)

• Changing Gender Roles

• Environmental & Social Changes

• Growth of DFY (& therefore Trade)

Ongoing Future Customer Trends Programme

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Converting The Trends To Growth Opportunities

Wealthier Consumers

Importance of DFY

Environmental & Social Changes

Increase Premium Ranges

Daily Living Made Easier & One Planet Living

Installation & Trade Focus

Increasing Fashion, Innovation &

NewnessChanging Gender

Roles

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Increase Premium Ranges - Rationale





Newness

• Consumers are increasingly wealthy – on average 50% better off than 1990. However, there is an increasing polarisation between the generations

• Wealthier customers are willing to pay for premium products where they are ‘important to them’ – although will equally be savvy in other areas

• Increases the opportunity to trade up existing customers while extending appeal to new customer groups

• To ensure we have a strong ‘good – better – best’ architecture in place we need to increase focus on ‘best’ ranges while ensuring we maintain our strength in ‘good and better’

• This is essential if we are to be perceived as a ‘Multi-Specialist’

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Increasing Fashion, Innovation, Newness Focus - Rationale

• Home Décor is today strongly female driven and is going to become a “woman’s business” – with 72% of home improvement projects driven by females

• The average ‘room replacement’ cycle is relatively long at 4.7 years

• Therefore, driving a greater frequency of projects is key to thelong term growth of the Home Improvement industry

• With homes increasingly seen as a reflection of our personality,this offers an opportunity to grow the market through Fashion & Newness

• This is an area where B&Q needs to grow credentials. Still leader in DIY, but need to starting building stronger credentials in Home Improvement, particularly Home Décor

• B&Q are uniquely place to offer a cross category co-ordinated offer





Newness

16

Daily Living Made Easier / One Planet Living - RationaleDaily Living Made Easier• There are currently 9.8 million people aged 65+ in the UK, this is set to

grow by over 20% in the next 10 years • 38% (5m) of over 60’s in the UK have a disability• This group hold 80% of the UK’s assets, 60% of savings and 40% of

Disposable Income• B&Q have a great base to build upon with 70% of over 65’s choosing

B&Q over other Home Improvement stores • Enabling these customers to continue to enjoy their Homes & Gardens

offers B&Q a unique opportunity

One Planet Living• Increasing awareness and concern about environmental issues – with

70% of consumers worried about climate change• Spend on green energy increased 135% between 2005 and 2006• Significant opportunity to make a difference through homes. An example

being that 1/3rd of households have insufficient insulation• HIP’s will increase awareness of Home Energy Efficiency• People perceive that there is a triangle of responsibility Government,

Business & Personal• B&Q has a significant opportunity to build upon a strong heritage in this

area





Newness

17

Installations & Trade - Rationale

Installations• Opportunity is already large with 2/3rds of major projects using

Tradesmen (reducing to ¼ for Decorating projects)• Future market growth driven by changing consumer

• Time & Energy Poor / Cash Rich consumers• Lower levels of DIY Skills (driven by more singles households &

a less manual Workforce)• Competition for consumers time from leisure• Stricter government legislation e.g. Part P

• Opportunity for B&Q to meet customer needs for ‘full solutions’ for their projects

Trade• Already an important source of revenue for B&Q• Although we have relatively low share – with only 3% of the destination

market and 13% of the convenience market• Growth will accelerate as DFY market grows: they will play an

increasingly important role both directly and indirectly. (indirectly through their influence on product selection for DFY customers)

• Trade customers also create ‘halo’ for our Handy Innovator customer • Increasing our focus on Trade customers offers good growth potential





Newness

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Supporting The Opportunities With Brand Development

TM

19

Market & Strategy



20

Developing the Principles

Developing The Right Team

21

What do our customers think about us today?

22

We are a multi-specialist all under one roof

23

There’s always something new and tempting at B&Q

24

We help to make One Planet Homes possible

25

Our services are so good, you’d recommend them to your friends

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What do we want them to think about us?

27

More diversity in our teams

Decorative

Showroom

Internal - Commercial Internal – Cross-functional

External Internal – Cross-Opco

Kitchens & Appliances

Bathrooms

Bedroom & Storage

Ceramics & Flooring

Decorative

Paint & Sundries

Wall & Window

Lighting

Seasonal

Horticulture & Garden Care

Garden Power & Landscaping

Leisure & Fun

Building

Electrospares & Hardware

Power & Hand Tools

Timber & Building

Heat/Cooling & Plumbing

Merchandising

Building

Seasonal

Showroom

Space Planning

Commercial Planning

Supplier Strategy

Commercial Systems

QA

Trading Planning

ProgramOffice

28

Better engagement

3.913.44

Nov 2005 Nov 2006

4.20

June 2007

29


What do we want them to think about us?

30

Opportunity and Innovation

1st Feb 2008

31

Q&A

32

And now… 4 show and tell groups (15 minutes each)

Dave Elliott(Director of Showroom)





NewnessBenoit Nicolas

(Director of Decorative)

Jo Kenrick (Director of Marketing & Customer

Proposition)

Diarmuid Walsh (Director of Building)

33

Farnborough store tour visit… same 4 groups

Matt Sexton (Director of Seasonal)Seasonal

Showroom

Building

Decorative Regis Schultz (Commercial Director)

Dave Elliott(Director of Showroom)

Diarmuid Walsh(Director of Building)

Documents

Opportunity and Innovation - Kingfisher plc