It comes as no surprise that there was a surge of consumer spending on home improvement in the UK throughout the COVID-19 pandemic as long periods of lockdowns and the widespread furlough scheme resulted in extended periods of time at home for much of the population with plenty of time to spare. Additionally, those who had jobs which were not at threat likely had increased disposable income, subsequently it was the ideal opportunity to invest in decorating and renovating homes. As we are now settling into post restriction lifestyles, will this home improvement trend continue or will it be short-lived?
It seems the immediate impact of the end of restrictions shifted consumer spending somewhat away from DIY and increasingly more to leisure activities such as travel and dining out. This is evident in the decline of home improvement stock prices, for example Wickes stocks dropped by 18%, Kingfisher by 8.5% and Travel Perkins by 6% in July 2022. Additionally, the US giant Walmart issued profit warnings, expecting a decline as high as 13% in profits this year, which spread concern amongst the global home improvement market.
Despite the immediate drop in sales and stock prices, J.P Morgan attribute this period to a normalisation of the customer base post pandemic, which does not necessarily mean a sustainable sales decline. In fact, Bloomberg predicts that the global do-it-yourself retailing market will reach $1,278.0 Billion, growing at 4.37% CAGR from 2022 to 2030. And DIY giant, Kingfisher, claims that although some decline in profits is expected in 2022, Kingfisher predicts the long-term demand to remain resilient and for the DIY momentum to continue.
What are the potential trends for a continued sustainable growth in DIY?
Firstly, the introduction of long-term remote and hybrid working models is a key contributor to a number of new habits; including a surge in creating dedicated office spaces within homes, a growth of families moving outside of city centres as commuting requirements reduce, and an overall increase in making the home more comfortable as more time is spent there. Secondly, there is a new emerging generation of DIYers in their 20s and 30s, who are increasingly keen to learn home improvement skills and get stuck in, particularly as the cost of labour has significantly increased. Subsequently a new market opportunity has emerged for brands such as B&Q, Homebase and Wickes, who provide home improvement solutions for non-specialists.
Of course, there is also the immense increase in inflation rates, increasing energy prices and the predicted upcoming recession, which may favour DIY as an economical alternative to paying for home improvement services. Easy access to DIY tutorials, such as on YouTube and social media, has already proven to enhance the adoption of DIY as a cost saving opportunity.
Consequently, it seems the DIY home improvement trend is likely to stick around for the foreseeable future, however can home improvement retailers cope with the demands as supply chain complexities prevail and logistics costs continue to sour? To name a few, there are significant shortages in key materials and personnel, such us lumber, shipping containers and truck drivers. Furthermore, forecasting demand for stock against a backdrop of periodically fluctuating sales is increasingly challenging – get it wrong and it is empty shelves or overstocked warehouses! And not to forget suppliers progressively passing on the increasing costs upstream in the supply chain.
Subsequently, although there is likely to be resilient demand in the medium to longer-term horizon, DIY home improvement retailers will need to focus on addressing the crucial supply chain challenges in the present temperamental global trading landscape. In particular a focus on finding solutions for securing reliable supply whilst maintaining competitive prices, finding alternative resources to non-available materials and services, and forecasting the right balance of stock levels.