Retail Furniture Insights_March 2011_external

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Retail: FurnitureInsightsMarch 2011


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Contents


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Total furniture sales are estimated to have declined by 3% in 2008 and 5% in 2009

to a value of just under 11.1 million.

Sales were hit badly by the economic downturn over the last few years and

slump in the housing market.

There have been some major casualties in the sector, including MFI, Land of

Leather and The Pier, which left a sizable market share for other retailers to pick up.

Furniture is an infrequent purchase, with the biggest reasons for buying furniture

being to replace worn out items(38%) or following the redecoration of a room

(33%).

IKEA is the most popular choice for furniture over the last three years (31%),

followed by the DIY stores collectively (20%) andArgos(18%).

Furniture retailers have big advertising budgets, with 384 millionbeing spent on

advertisingin 2009 alone, some 26%of it by DFS.

Special offers and discountsinfluence the choice of stores of just over a third of

adults (35%) and 28% wait for the sales before buying.

Just under half of adults (49%) say their choice of store is influenced by it havinggood quality ranges that will last and 38% want knowledgeable and helpful staff.

A considered approach is taken to purchasing, with 38% visiting a number of stores

in person before buying and big use of the internet as part of the buying process.

Home Furniture Summary

Source: Mintel, Furniture Retailing Report, 2011


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Furniture Market Size and Forecast Mintel predicts the market will continue to grow YoY, however not reaching levels of

2007 in the next 4 years Late 2009 saw a recovery in furniture sales, but confidence remains fragile and the

incomes squeeze is likely to have a further impact on furniture spending in late 2010and 2011, although the VAT increase will mean some growth in value in 2011.

UK retail sales of furniture*, 2005-15 Mintel forecast

* Includes living, dining, bedroom, kitchen, bathroom and home office furniture

10,600

10,800

11,000

11,200

11,400

11,600

11,800

12,000

12,200

2005 2006 2007 2008 2009 2010

(est)

2011

(fore)

2012

(fore)

2013

(proj)

2014

(proj)

2015

(proj)

m



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Home & Garden Furnishing Search Traffic KPIs

Traffic

Searches for home & garden generics increased

by +37% between 2009 and 2010

Searches for home & garden generic increased by

+15% Oct to Dec 2010 v Oct to Dec 2009.

Insights:

Sales by DIY retailers in 2010 were 10.9 billion,

down 2% on 2009 (Mintel)

Over the last five years there has been a fall of 4

percentage points to about 56% of the adult

population, that's 2 million fewer people

undertaking DIY projects (Mintel)

1.Microsoft Advertising Intelligence Tool


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Home & Garden Demographics and Daily Trends

Sunday has been the largest traffic driving

day over the last 2 months, followed by

Monday (Boxing Day fell on a Monday)

Potential incremental targeting opportunities

would include up-weighting between Sunday

to Wednesday

The 35-49 age brackets are the main age

groups for traffic with 32% . 25-34 year olds

are slightly higher than the 50-64 age

bracket with 24% of Search traffic coming

from this age group

Gender breakdown slightly favors females

(52%), however 2% of searches the gender

is unknown.

1.Microsoft Advertising Intelligence ToolDecember 2010 to Feb 2011 data


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Display Advertisement Publisher Location: Reach

and Frequency (RetailHome Furnishings)

Microsoft sites delivered the second highest number of unique visitors for Home Furnishing retailers

despite having significantly less ad impressions compared to eBay! Microsoft sites delivered 7m+ unique users, more than Glam Media and Facebook combined

Source: ComScore adMetrix Home Furnishing : January 2011


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Display Advertisement Publisher Location: Reach

and Frequency (RetailHome Furnishings)

Microsoft sites also had a very competitive share of Home Furnishing retailers ad

impressions in January Average frequency is less than eBay, Yahoo! and Glam Media.

Source: ComScore adMetrix Home Furnishing : January 2011


9/20Source: ComScore AdMetrixJanuary 2011

Top Advertiser by Impressions and Unique Users -

ComScore AdMetrix

Advertiser classification is based off comScore adMetrix category classification


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Industry Insights


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Furniture Marketits piece of the retail puzzle

There has been a decline in the number of people buying new furniture over the last five years, largely

due to replacement purchases being delayed.

Prices have increased as retailers have moved to protect margins from rising raw material costs,

increased shipping costs and the impact of exchange rate fluctuations.

There is a lot of volatility in consumer prices throughout the year due to furniture sales.

Late 2008 and early 2009 was the worst period for company failures in the sector, with MFI being the

biggest casualty in November 2008.

Retail sales through furniture retailers fared much worse than overall retail sales, as consumerconfidence was hit by the economic downturn and subsequent recession.

Although house prices have recovered considerably, which

will help confidence, the number of housing transactions

remains a long way short of volumes seen in 2006 and 2007.

The incomes squeeze and threat of higher interest rates to

deal with inflation mean the trading environment will remainchallenging.

Margins remain vulnerable to the rising cost of imports as a

result of currency fluctuations.

The projected increase in the number of households will help

to expand the customer base for furniture retailers to target.



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Strengths and Weaknesses

Need for replacementThis assures acertain level of furniture buying.

Number of householdsGrowth over thenext five years means more demand.

Home formation group More 25-34ssetting up home should benefit the market.

Growing affluenceShould help increasespending on big-ticket furniture items.

Fashion and style Interest in improving thelook/style of the home helps to drive sales.

Home as venue More focus on the homeshould help stimulate furniture sales.

Desire for qualityA recognition that findingquality furniture that will last is important.

Housing marketThe number of transactionsremains low, impacting on furniture sales.

Incomes squeezeInflation exceeding wagerises and austerity measures on the way.

Interest ratesWith inflation above targetinterest rates may have to rise.

Cost of importsCurrency fluctuations andrising raw production and shipping costs.

Ageing population

Over-65s growing innumbers but less likely to buy furniture.

Focus on the salesThe heavy emphasis onprice does not help the image of furnitureretailers.

Infrequency of purchasingFurniture notbought very often, so less scope to build loyalty.

Strengths Weaknesses


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Furniture Channels of Distribution

Large furniture multiples account for a third of the market in 2009 (not shown), but there is also a

large share accounted for by smaller chains and independents. DIY stores and supermarkets have both increased sales, while online purchasing has grown in

importance.

UK retail sales of furniture*, by channel of distribution, 2005-15

* Includes living, dining, bedroom, kitchen, bathroom and home office furniture

Furniture

specialists

61%

Argos

6%

Department and

variety stores

11%

DIY stores

9%

Home shopping

(including online)7%

Other

6%



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Sources of Purchasing for FurnitureOutlets used to buy any furniture in the last three years (2007 2010), May 2010

Source: BMRB-Omnibus, a division of TNS-RI/Mintel

IKEA has retained its positionas the most popular choice forfurniture.

DFS is the next most visitedindividual specialist retailer.

DIY chains and Argos havethe biggest presence afterIKEA in the overall furnituremarket.

Other non-specialists such asJohn Lewis, Next, M&S andsupermarkets are alsoimportant.

Base: 1,497 adults aged 15+

4

4

4

5

5

6

6

6

8

8

9

11

13

18

20

31

0 5 10 15 20 25 30 35

Other department store

M&S

Kitchen specialistOther sofa specialist

Next

John Lewis

Mail order/internet

Other home furnishings store

Other large furniture chain

Supermarket (for example, Tesco, Asda)

DFS

Bed specialist

Small/regional furniture chain/independent

Argos

DIY chain

IKEA

%


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Factors Influencing Choice of StorePrice and Product

Ranges

Influence of price and product ranges on choice of store, May 2010


For half of adults the choice of

retailer is influenced by the outlet

offering good quality ranges that

will last, showing recognition that

better quality furniture can be aninvestment.

Special offers and discounts are

more important than just finding

the cheapest priced furniture, as

consumers look for retailers that

give them more for their budget.


7

12

28

32

35

49

0 10 20 30 40 50 60

Can buy other home

furnishings there

Something a little

more unusual

Cheap/low prices

Large range to

choose from

Special

offers/discounts

Good quality ranges

that will last

%


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Factors Influencing Choice of StoreService and

Other Factors

Influence of service and other factors on choice of store, May 2010


Customer service isimportant to furnitureshoppers, with the choice ofretailer of nearly four in tenadults being influenced by

the store havingknowledgeable and helpfulstaff.

Items being availableimmediately and havingbought there before areother important factors

influencing choice of store.


6

10

16

16

20

23

26

38

0 5 10 15 20 25 30 35 40

Available flat packed

Interest-free credit

Delivered ready

assembled

Company won't go bust

before delivery

Not too far to travel

Have bought goods

there before

Available immediately

Knowledgeable and

helpful staff

%


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Shopping Behaviour When Buying Furniture

Agreement with statements on buying behaviour when purchasing furniture, May 2010


In common with most big-ticketpurchase items, shoppers forfurniture carry out a lot of researchbefore making their final purchasedecision.

Four in ten adults visit a number offurniture outlets in person beforebuying, emphasising the continuedimportance of showrooms as part ofmultichannel retailing offer.

The internet is a key part of thebuying process, mostly forcomparing products and prices, butcatalogues still also have their placefor getting ideas of what to buy.


12

13

20

21

28

36

38

0 5 10 15 20 25 30 35 40

Be prepared to travel some distance to get

what I want

Look around the shops and then buy online

Compare products and prices online and

then buy online

Look through catalogues before visiting

shops

Go back to a store I have used before

Use the internet to compare prices and then

buy in a store

Visit a number of furniture outlets in person

before buying

%


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Importance of Price, Advice and Ideas When Buying

Furniture

Agreement with statements relating to price, advice and ideas when buying furniture, May 2010


The search for value for moneyrather than cheapest price iscentral to the process of

browsing and comparingvarious items of furniture.

Although shoppers havealready been shown to wantknowledgeable and helpfulstaff available, only one in fiveare likely to discuss products

with sales staff before buying.


3

3

12

17

19

28

37

0 5 10 15 20 25 30 35 40

Like a home assembly service for self-

assembly furniture

Like advice from style advisors for a complete

room look

Pay more for furniture for certain rooms than

others

Like to see room sets to give me ideas

Talk to sales staff about the products before

buying

Wait for the sales before buying

Look for value for money rather than cheapest

price

%


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Reasons for Buying FurnitureReasons for buying furniture in the last three years, May 2010


Furniture is largely a replacement

purchase, with the biggest reason for

buying being to replace worn out items.

Redecorating a room is also a major

trigger for buying.

The desire for a new look or style is also

important, emphasising how changing

fashions in home furnishings can act as a

big driver of sales.

Practical considerations also come into

play, including the need for more storage,

changing family needs or a move to a

different size or style of home.

Base: 1,051 adults aged 15+ who bought furniture in the last three months

5

8

14

15

15

16

18

30

33

38

0 5 10 15 20 25 30 35 40

Built extension

(including conservatory)

Bought home for the first

time

Just saw something I

liked in store

Changing family needs

(for example, new baby)

Saw a good

sale/special offer

Moved to different

size/style of home

Needed more furniturefor storage

Wanted a new look/style

Wanted new furniture for

a redecorated room

Old furniture was

soiled/damaged/broken

%


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Identifying TargetsTarget buying groups for furniture, May 2010


Furniture EnthusiastsHighly engaged in thefurniture buying process and very interested in theproduct, including visiting a lot of shops, lookingthrough catalogues and talking to sales staff aboutproducts.

Sales ShoppersSignificantly more likely thanaverage to wait for the sales before buying andmore likely than average to visit a number of stores,but do not have much interest in furniture.

Online FocusedThe overwhelming majority usethe internet to compare prices and then buy in astore. They are also the most likely to browse andbuy online, and look around the shops and then buyonline.

Apathetic Very little interest in furniture buyingand show a lower than average response to everystatement.


Sales

Shoppers

31%

Furniture

Enthusiasts

18%

Apasthetic

30%

Online

Focused

21%

Documents

Retail Furniture Insights_March 2011_external