Essential reading for retailers and suppliers in the home improvement market

Q2: Smaller projects on the rise says GfK

Published: 6 August 2008
GfK's barometer finds the winners and losers from April to June in the DIY market. Speaking to DIY Week, GfK outlines what's going on in the market at the moment.
Q2: Smaller projects on the rise says GfK
In the previous barometer article, we looked at the DIY market slowdown in the first quarter of 2008 when the market was down by 2% in value. We considered all the factors behind that decline - the slowdown in the housing market, the late start of the gardening season due to bad weather, and the price rises in food and energy.

As you are all aware, the economic situation hasn't improved - in fact, it has worsened and there are fears that we may be heading for recession. The price of fuel keeps rising, with the cost of a barrel reaching an all-time record of $147 on July 11. We have been warned over the past months that gas bills could go up by as much as 40% this winter, with the latest estimates mentioning 70%.

The Retail Price Index, already up from 4.3% in May, reached 4.6% in June with the Consumer Price Index reaching 3.8% during the same period. Food showed the strongest increase, with its price index reaching 118.5 in June 2008. As one could expect, the performance of the DIY market has also been affected by all the developments previously mentioned, with quarter two down by 7.7% in value year-on-year.

We ended the previous article wondering which way customers would turn - either towards smaller projects or by improving their property with a bigger venture. By looking at the performance of the different segments, we now have a better idea of the customer's frame of mind. Room specific is down by 11% in quarter two year on year - a good indicator that big projects are being put on hold as this sector includes all fitted kitchen, bathroom, living/dining and bedroom sales.

The decorative segment is actually out-performing the market, with a decline in value of 6.8% in quarter two. This could be interpreted as consumers turning towards smaller projects. Within the decorative sector, the best performing markets are wallpaper (+2.2%) and tiles (stable year-on-year).

The worst performance goes to the gardening market, with a decline of 12% in quarter two year-on-year. The key driver in the garden sector is the weather. The early season weather, coupled with an early Easter, delayed sales until May. Although we have seen growth in sales in May and June, it has not been enough to recover from the March-April losses.

The strongest declines have come from the garden buildings, structures and leisure segments. As mentioned in the previous barometer, a late start doesn't necessarily mean a bad gardening season. Let's remember that last year we enjoyed quite a late end of season, still seeing strong sales in August and September.

It looks like bigger projects are on hold and that smaller projects could be the way forward for the market. With the right conditions, we still have enough time to turn around the gardening season. However, with such an increasing pressure on their finances, are customers more likely to become price sensitive?

For further information on the DIY Market, please contact Stephan Lamouroux, Senior Account Manager at GfK on 0870 603 8287 or email: stephan.lamouroux@gfk.com.

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