Nailing down a DIY omni-retail future - how Kingfisher plans to build on its COVID wins in the Vaccine Economy

Profile picture for user slauchlan By Stuart Lauchlan March 24, 2021 Audio mode
Summary:
Kingfisher has had a 'good war' in the shift to online, but can its victories be maintained in the Vaccine Economy?

DIY

One year on from the onset of the COVID crisis and it’s possible to identify those sectors of the retail industry that have had the proverbial ‘good war’ - online groceries, for example, and those that haven’t - such as fashion and apparel. Into the first camp, we can comfortably place DIY and home improvement retailers as thousands of locked down individuals decided that their unexpected house arrest was the perfect opportunity finally to get around to that long-planned, and equally-long postponed, home upgrade. 

But as the Vaccine Economy starts to take shape, a new question emerges, namely whether the beneficiaries of COVID’s online shift can expect the move to digital engagement to stick in place long term? It’s a fair bet, for example, that online grocery shopping and delivery is a genie that’s not going back in its bottle, but can the same be said for the DIY sector? Or will there be a retreat back to visiting the superstore on a boring Sunday afternoon? 

Last year diginomica noted the omni-channel acceleration that has taken place at Kingfisher, owner of brands such as B&Q and Screwfix. CEO Thierry Garnier is keen to ensure that this progress doesn’t slip away and is planning for the future accordingly, anticipating that macro-economic and societal shifts will play in his favor: 

Over the course of the COVID crisis, we have seen the development of new longer-term trends that are clearly supportive of our industry. During lockdown, our homes have effectively been transforming to hubs, where we work, exercise, entertain and rest. Longer term, we believe that more working from home is here to stay. There is no doubt that the trend of flexible working arrangements has accelerated forward many years. Over time, these factors will lead to material changes, such as more wear and tear on the home and the need to organize living space differently, thereby creating a structurally supportive shift for home improvement.

The ‘driven to DIY by boredom’ factor of lockdown has also opened up expanded demographics, he adds:

One of the most interesting things we have seen in the last year is also the emergence of new cohorts of young DIY-ers, with a big increase in motivation, new skills and enthusiasm for DIY. Recent surveys we undertook across our market highlight that 18-to-34-year-olds have done more home improvement than any other age group, with 20% doing DIY for the first time, 55% doing more than they have previously done and 65% more confident to take on home improvement and learn new DIY skills. 

Do It Online

To cement these benefits in place, the retailer is looking to accelerate aspects of its wider Powered By Kingfisher overhaul strategy, building on the surge in e-commerce that’s been seen, with Garnier stating: 

The crisis has pushed us to be bolder and several elements of our strategy are ahead of schedule. We believe we have seen at least two years worth of acceleration in e-commerce, supported by our stores and rapid changes to our operating model. We have met an extraordinary surge in demand, with group e-commerce sales of nearly £2.3 billion up 158% in 2020 and now 18% of our sales…We saw a step change in digital adoption across our banners, with 10 million new customers shopping with us online. The acceleration of our capabilities in this area, heavily leveraging our stores, has facilitated significant online growth across our retail banners. Moreover, the digital customer adoption we have seen makes us even more confident in the growth opportunities that lie ahead. 

Such opportunities include exploiting more fulfillment channels, he explains: 

Back in mid-2019, online sales penetration was seven percent and we had limited capacity of 40,000 Click & Collect per week across B&Q and Castorama [in France]. Store-to-Home delivery was more or less non-existent. This has been completely transformed over the course of 2020, with penetration now at 18%. Click & Collect sales have become the largest and fastest-growing fulfillment channel at group level, with 226% growth. Supported by our newly implemented group digital stack, our platform has scaled rapidly and is now supporting 500,000 Click & Collect orders per week across B&Q and Castorama France. 

Stores now sit firmly at the center of our e-commerce proposition, providing support for a very significant proportion of retail online orders. We have now rolled out digitally-enabled picking for all fulfillment goods for B&Q and Castorama France, and introduce a digital hub model at B&Q, where 56 stores service the vast majority of our home delivery orders. We expanded our last-mile delivery options. Our partnership with DPD has enabled next-day delivery by B&Q, with 98% of the U.K. population. B&Q, Castorama France and Poland are trialing Click & Collect lockers, and we have implemented drive-thru and car park collections in France. Looking ahead, we remain committed to delivering strong growth in e-commerce sales through providing speed, convenience and choice to our customers.

Progress

Across the Kingfisher brands, there has been consistent digital progress, albeit at differing scales. B&Q saw a 117% increase in e-commerce sales in 2020, for example, while Screwfix has seen online customer numbers soar by 146%. The latter brand has seen perhaps the most dramatic change during the COVID crisis: 

The team adjusted its operating model overnight during the first lockdown, shifting to nearly 100% online. And mobile is now the biggest channel in the business, accounting for 62% of online transactions.

Mobile in general is now pitched as “the center of our customers' home improvement journey”, with Garnier explaining: 

Mobile is our fastest-growing order channel, up by over 200% last year, now accounting for 56% of our online orders. We made good progress during the year in optimizing the user experience.

The brand that needed the most work done was Castorama in France, where an SAP rollout had caused issues that needed to be addressed - 18 key pain points, according to Garner - and there was a strongly de-motivated team in place, which assumed the banner had no long-term future. That’s turning around now he says: 

The group next-gen digital stack has been fully implemented, allowing us to enhance Click & Collect and delivery from store services. We launched a new website with visual search functionality and a new mobile app while strengthening our partnership with NeedHelp…We decided to stop non-critical IT projects to focus on SAP.. It has been fully implemented. We have implemented a new e-commerce group digital stack into Castorama with very good feedback on the customer NPS [Net Promoter Score]. We have [done] a lot of innovation on e-commerce, store picking, click & collect, drive thru, home delivery on the range.

And the work goes on. For example, B&Q set up a virtual sales model during the pandemic for kitchen and bathroom offerings. This looks set to stick, with thousands of sessions conducted in January, while a new 3D tool for kitchen and bathroom design is currently being trialed in a number of group brands. In addition, work has begun on trialing new self-check out terminals at B&Q.

As to those DIY retail warehouses of pre-COVID days, these still have a part to play, says Garnier: 

Our 1,400 stores play a central role in our industry, providing our customers with inspiration, visualization, expertise, projects and customized services. They also play a crucial role in meeting the customer demand for convenience and speed. These customer needs drive both the shift online and the need for smaller stores. Over the next few years, we plan to increase our overall store count, while in parallel reducing their average size.

He concludes:

Our key focus this year will be implementing a new IT and digital operating model to increase our agility and lower costs…We have a clear vision for our customer proposition based on e-commerce, with stores at the center, a mobile-first experience and a compelling services offer. We will power our banners through Kingfisher scale, resources and expertise, enabling them to serve their customers better and will become simpler and leaner, doing less, lending it faster and reducing our cost and inventory.

My take

As noted above, it has been a ‘good war’ for the DIY and home improvement sector overall and much of what Kingfisher has experienced has also been seen at the likes of Lowes and Home Depot in the US. What will be interesting now is to see how the ‘Do It For Me’ sector kicks back into place as lockdowns lift and social distancing rules ease up. It’s all very well deciding that this weekend is the perfect time to re-do the bathroom when there’s nothing else to do; it’s another matter when you could be at a football match or down the pub rather than knee-deep in paint pots and grouting.