COVID's digital DIY boom - has it taken a pandemic to focus Kingfisher's omni-channel retail thinking?

With entire populations locked down in their homes with too much time on their hands, the excuses for not doing that fixing up or makeover that you’ve been putting off for ages are ever thinner. And if the shift to remote working becomes permanent, making a comfortable home environment in which you end up spending more hours of the day will become even more of a priority.

It’s hardly surprising then that one sector of the retail industry that has enjoyed a significant boost from the ongoing COVID-19 crisis is that of DIY and home improvement. Retailers in this space were declared essential services in a number of countries, with click-and-collect becoming the primary go-to-market model for the larger brands.

Kingfisher, owner of brands such as B&Q and Screwfix, is one beneficiary and the digitally-driven uptick that it’s seen in recent months is set to lead to a much wider digital transformation effort across the group, one that is decidedly late, but perhaps better late than never. 

Online sales across Kingfisher’s businesses have shot up four-fold since March, resulting in the firm now declaring e-commerce capabilities a medium-term - ie 2021 onwards - priority. (The short term priority is keeping going during 2020!)

Chief Executive Thierry Garnier, in situ since last September with a brief to execute the latest corporate turnaround, concedes that Kingfisher has been been too product-led as opposed to what he calls retail-led and that this imbalance has resulted in a lack of progress around digital. 

All of that has to change, he says, to create “a more digital and service-orientated company” - and he makes no bones about it being the COVID DIY uptick that’s validating this ambition:

When the various lockdowns began, we rapidly transformed our operations to meet a sharp increase in e-commerce while adapting our retail space and processes to ensure a safe re-opening of stores. Our clear intent is to become a more digital and services-orientated company, using our strong store assets as a platform. We will continue to develop our own exclusive brands as a differentiator, cater for diverse local customer needs and each retail banner will have its own positioning and plan. We will ‘power’ these banners as a group. This is our new strategic direction, ‘Powered by Kingfisher’.

Catch-up

This is a shift not unique to Kingfisher of course. As diginomica has tracked over the years, the likes of Home Depot and Lowe’s in the US have been trailblazers in omni-channel digital transformation and must be ‘North Stars’ for the likes of Kingfisher to play catch-up with. Garnier says:

The shift towards online is clear in home improvement. Our [global] markets are different stages, but all are experiencing the impact of this change. And of course, there has been a further acceleration of this trend during COVID-19. We have a clear vision for how we will build tomorrow's customer proposition. This vision is informed by the shift that we see in the market and customer needs.

There’s a lot at stake here. New market analysis from Technavio suggests that the global DIY retail market is set to grow by $143.3 billion between now and 2024 and it’s e-commerce that’s the enabler for that. For Kingfisher at present, e-commerce makes up around 8% of total group sales, with 62% of that activity coming from click-and-collect, while some 46% of online orders come from mobile devices.

There’s now a stated objective to grow all of those numbers as the group executes on a more robust omni-channel approach that re-invents the role of the store. Garnier says:

We do have growing online competition, but home improvement is partly insulated versus online pureplays because of the specific nature of DIY, the importance of [human] advice and design expertise and the bulky nature of many of our products. We have a clear role for stores. As we have seen during COVID-19, stores are an asset to enable e-commerce.

The key priority is to grow e-commerce sales fast, he says, To that end:

We [will] leverage our stores as a primary way of picking and fulfilling orders, including click-and-collect, drive-thru and same day/next day home deliveries. The past couple of months, we have made a rapid progress on this front and we need to sustain it. I have been lucky to spend several years in China. Something we learned in China in food retail is that you can go very far with a stock picking proposition in e-commerce and that's probably what helped us so much doing the [COVID-19] crisis season. From day one, we decided to accelerate our stock picking proposition because you have all the inventories,  you have all the range,  so you can do very efficient click and collect.

In the medium term you will have more trends around home delivery, same day delivery, a few hours [delivery].  I was totally convinced that what you see in China. in the United States ,what we have been doing a Kingfisher the past weeks, you can go very far in the in the stock picking proposition. Today we are  above 50% of orders today [being] done with click-and-collect.

The second strategic plank is to prioritise the rollout and building out of the group e-commerce technology stack, starting with mobile. Garner says:

It is about building your mobile service for customer experience. Services are another reason why stores will remain key in our sector and our offer must be compelling. This includes making sure we are market leading in services just  to keep competing, but also evolving our offer to a full suite of design planning, visualisation and installation services. So, lead with mobile and leverage customer data analytics to implement.

And longer term, there are Amazon-ian aspirations on the table, including new relationship building outreach to link Pros - professional home improvement specialists - with prospects:

Looking to the future, we are also beginning to explore the potential for a marketplace offering, but it is very early days….Another area that is interesting where we see interesting development is what I call Service Platforms. You have internet platforms that can put [you into a] relationship with shoppers or trades people with customers. I think Kingfisher is well positioned with Screwfix and with B&Q, for example, to think about how we can bring together those two populations [Pros and prospects] and i think that's that's to do with the service platform on which we will do some work in the future.

There’s a very long way to go for Kingfisher’s brands. Despite the COVID-fuelled jump in sales, the organization has a lot of work to do to turn itself around into an enduring omni-channel retail contender on a par with the likes of Home Depot or Lowe’s. But in its favor, it has some strong European brands in its portfolio and the pandemic experience has finally focused attention on the need to accelerate its own digital makeover.

Moreover, argues Garnier, it operates in a retail sector where there is always demand:

Customers remain passionate about improving their homes and demand indicators are stable. In retail this is a good situation to be in. Given the specific nature of the COVID-19 crisis, home improvement is proving resilient, And home improvement has higher profit margins than many other retail sectors, such as grocery.

My take

No makeover can be fully assessed until the final nail is banged in and the last of the paint is dry, but Kingfisher’s new strategy for recovery - too cruel to call it, Kingfisher’s latest strategy for recovery? - does at least have working exemplars of how to succeed, in the form of Home Depot and Lowe’s in the US, both of which have also been benefiting from the lockdown DIY boom as seen here.