Studie - UK Retail Futures 2012: Furniture & Floorcoverings

Introduction
Comprehensive forecasts for the UK retail market over the next five years, including a full explanation of macroeconomic, consumer and sector specific factors influencing market performance.

Scope
Value data, growth rates and forecasts broken down by subsector and detail for nine subcategories

Coverage of key market issues and growth drivers, including inflationary trends, multichannel development and non-specialist participation.

Furniture & floorcoverings market expenditure, inflation and volume growth (1997-2007), plus full five-year forecasts for each of the categories.

Market shares for 2002-2007 and eforecasts for 2008.

Report Highlights
Weak consumer sentiment towards big ticket purchases will negatively affect market performance, particularly of furniture and floorcoverings specialists. Consumers’ discretionary spending will be limited over the next two years as disposable incomes are eroded by rising living costs, increased taxation, higher borrowing costs, and slow wage growth.

We expect space growth to slow as a result of the challenging trading conditions. Many leading furniture specialists have downgraded previously ambitious expansion plans for the next five years amid the downturn in consumer spending and pessimistic sales growth predictions.

With non-specialists enhancing their furniture offer, specialist retailers will need to compete on more than just price to survive. As consumers have more choice, competing on price alone will not be sufficient.

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CHAPTER 1 EXECUTIVE SUMMARY 6

Key Findings 6

Main Conclusions 7

CHAPTER 2 FORECAST SUMMARY 11

Expenditure Summary 11

Specialists Summaries 13

CHAPTER 3 KEY MARKET ISSUES 16

Overview 16

External Drivers 18

Housing Market 18

Housing Equity Withdrawal 20

Cost of Borrowing 21

Disposable Income 23

Retailer-led Drivers 26

Expansion of Furniture Specialists 26

Impact of Non-specialists on the Market 28

Expansion of Specialists vs Non-specialists 29

Specialist Survival 30

Creating Growth in a Difficult Market 32

Keep Ahead of Trends 33

Compete on More Than Price 33

Replicating Non-specialist Advantages 34

Manage Cost Structure to Ensure it is Competitive 35

Differentiate Proposition 37

Increase Multichannel Offer 38

Customer & Service Initiatives 39

Increasing Multichannel Development 42

Impact of e-Retail 45

CHAPTER 4 FURNITURE & FLOORCOVERINGS SPECIALISTS OUTLOOK 49

Retail Sales 49

Share of Total Sales 53

CHAPTER 5 FURNITURE SPECIALISTS OUTLOOK 54

Retail Sales 54

Sources of Sales Growth 56

Share of Total Sales 57

Store Numbers 58

Space Growth 59

Sales Densities 61

CHAPTER 6 FLOORCOVERINGS SPECIALISTS OUTLOOK 63

Retail Sales 63

Sources of Sales Growth 65

Share of Total Sales 66

Store Numbers 67

Space Growth 68

Sales Densities 70

CHAPTER 7 CHANNELS OF DISTRIBUTION 72

Sales & Spending 72

Furniture - Sales & Spending 74

Furniture - Forecast Changes for Major Sectors 75

Furniture - Market Shares 77

Floorcoverings - Sales & Spending 78

Floorcoverings - Forecast Changes for Major Sectors 79

Floorcoverings - Market Shares 81

CHAPTER 8 FURNITURE & FLOORCOVERINGS CATEGORY FORECASTS 82

Expenditure Summary 82

Principal Components 84

Principal Components 84

Expenditure Analysis 85

Expenditure Growth 88

Furniture 91

Floorcoverings 94

CHAPTER 9 UK ECONOMIC FORECASTS 96

Key Messages 96

Gross Domestic Product - GDP 101

How does it affect retail? 101

What's happened? 101

What will happen? 102

Earnings Growth 103

How does it affect retail? 104

What's happened? 105

What will happen? 106

Real Household Disposable Income 107

How does it affect retail? 107

What's happened? 108

What will happen? 108

Employment 109

How does it affect retail? 110

What's happened? 110

What will happen? 111

Inflation 112

How does it affect retail? 113

What's happened? 113

What will happen? 114

Exchange Rates 115

How do they affect retail? 115

What's happened? 116

What will happen? 116

Interest Rates 117

How do they affect retail? 117

What's happened? 118

What will happen? 119

Savings Ratio 120

How does it affect retail? 120

What's happened? 121

What will happen? 121

Consumer Debt 122

How does it affect retail? 123

What's happened? 123

What will happen? 124

Equities 125

How does it affect retail? 125

What's happened? 126

What will happen? 126

House Price Inflation 127

How does it affect retail? 127

What's happened? 128

What will happen? 128

Housing Equity Withdrawal 129

How does it affect retail? 129

What's happened? 130

What will happen? 131

Housing Transactions 132

How does it affect retail? 132

What's happened? 133

What will happen? 134

CHAPTER 10 UK RETAILING FORECASTS 135

Key Indicators 135

Retail Expenditure 1997-2012 137

Sales by Location 2007-2012 143

Sources of Growth 1997-2012 147

Store Numbers by Location 1997-2012 149

Space by Location 1997-2012 152

Sales Density by Location 1997-2012 155

Average Store Size 1997-2012 157

Average Store Sales 1997-2012 158

Online Retail Spending 160

CHAPTER 11 GLOSSARY 162

Terminology 162

Market Definition 163

Location Definitions 163

Town Centre 163

Out-of-town 164

Neighbourhood 164

Non-store Retail 164

Forecasting Methodology 164

Abbreviations 167

List of Tables

Table 1: Furniture & floorcoverings expenditure summary 1997, 2002, 2007 and 2012e 11

Table 2: Furniture & floorcoverings specialists summaries 2002, 2007 and 2012e 13

Table 3: Online furniture & floorcoverings sales forecast 2007-2012 45

Table 4: Furniture & floorcoverings specialists sales 1997-2007 and forecast to 2012 49

Table 5: Sources of growth for UK furniture & floorcoverings specialists 1997-2007 and forecast to 2012 51

Table 6: Furniture specialists sales 1997-2007 and forecast to 2012 54

Table 7: Sources of growth for UK furniture specialists 1997-2007 and forecast to 2012 56

Table 8: Total selling space for furniture specialists 1997-2007 and forecast to 2012 60

Table 9: Floorcoverings specialists sales 1997-2007 and forecast to 2012 63

Table 10: Sources of growth for UK floorcoverings specialists 1997-2007 and forecast to 2012 65

Table 11: Total selling space for floorcoverings specialists 1997-2007 and forecast to 2012 69

Table 12: Leading furniture retailers market shares 2002-2007 and 2008e 77

Table 13: Leading floorcoverings retailers market shares 2002-2007 and 2008e 81

Table 14: Furniture spend - principal components 2006, 2007 & 2012 84

Table 15: Floorcoverings spend - principal components 2006, 2007 & 2012 84

Table 16: Furniture expenditure analysis 2007-2012 85

Table 17: Floorcoverings expenditure analysis 2007-2012 87

Table 18: Total furniture & floorcoverings expenditure 1997-2012e 88

Table 19: Total furniture expenditure 1997-2012e 91

Table 20: Floorcoverings expenditure 1997-2012e 94

Table 21: Economic drivers for retail 2008 96

Table 22: Measures of inflation 2008 112

Table 23: UK retailing forecasts summary 2007-2012 135

Table 24: Forecast chronology 2008-2012 136

Table 25: Total consumer retail expenditure 1997-2012 137

Table 26: Sales by location 1997-2012 144

Table 27: Total UK physical store sales & selling space 1997-2012 147

Table 28: Sources of sales growth for physical stores 1997-2012 148

Table 29: Store numbers 1997-2012 149

Table 30: Space by location 1997-2012 152

Table 31: Sales densities by location at current prices 1997-2012 155

Table 32: Average store size by location 1997-2012 157

Table 33: Average sales per store by location at current prices 1997-2012 159

Table 34: Furniture & floorcoverings market definition 2008 163

List of Figures

Figure 1: Furniture & floorcoverings expenditure growth 1997-2007and forecast to 2012 12

Figure 2: Furniture & floorcoverings specialists sources of growth 1997-2007 and forecast to 2012 15

Figure 3: Comparing current economic climate with recession in 1991 and the effect on furniture & floorcoverings market 200 16

Figure 4: External drivers of furniture & floorcoverings market 2008 18

Figure 5: Housing transactions 1997-2007 and forecast to 2012e 19

Figure 6: Housing Equity Withdrawal (England & Wales) 1996-2007 and forecast to 2012 21

Figure 7: Variance between BoE Official Interest Rate and the LIBOR Rate ( An indication of true cost of borrowing) 1997-2008 22

Figure 8: Disposable income 1997-2007 and forecast to 2012 23

Figure 9: Estimated space expansion of key existing furniture specialists 2007 and 2008e, 2012e 26

Figure 10: Impact of non-specialists on the furniture market 2008 28

Figure 11: Main factors affecting specialist survival 2008 30

Figure 12: Key issues and implications for furniture & floorcoverings retailers 2007-2012 32

Figure 13: Customer service matrix 2008 40

Figure 14: Multichannel offers 2008 42

Figure 15: Reasons consumers are drawn to e-retail when purchasing furniture & floorcoverings 2008 47

Figure 16: Furniture & floorcoverings specialists sales as a % of total UK retail consumer spending 1997-2007 and forecast to 2012 53

Figure 17: Furniture specialists sales as a % of total UK furniture & floorcoverings specialists sales 1997-2007 and forecast to 2012 57

Figure 18: Total furniture specialists store numbers (000) 1997-2007 and forecast to 2012 58

Figure 19: Space growth for furniture specialists 1997-2007 and forecast to 2012 59

Figure 20: Furniture specialists sales densities at current prices 1997-2007 and forecast to 2012 61

Figure 21: Furniture specialists sales densities at constant (2003) prices 1997-2007 and forecast to 2012 62

Figure 22: Floorcoverings specialists sales as a % of total furniture & floorcoverings specialists sales 1997-2007 and forecast to 2012 66

Figure 23: Total floorcoverings specialists store numbers (000) 1997-2007 and forecast to 2012 67

Figure 24: Space growth for floorcoverings specialists 1997-2007 and forecast to 2012 68

Figure 25: Floorcoverings specialists sales densities at current prices 1997-2007 and forecast to 2012 70

Figure 26: Floorcoverings specialists sales densities at constant (2003) prices 1997-2007 and forecast to 2012 71

Figure 27: Channels of distribution - furniture & floorcoverings 2006, 2007 & 2012 73

Figure 28: Channels of distribution - furniture 2006, 2007 & 2012e 74

Figure 29: Changes in shares of major channels in the furniture market 2012e on 2007 75

Figure 30: Channels of distribution - floorcoverings 2006, 2007 & 2012 78

Figure 31: Changes in shares of major channels in the floorcoverings market 2012e on 2007 79

Figure 32: Furniture expenditure 1997, 2002, 2007 & 2012e and five-year growth rates 82

Figure 33: Floorcoverings expenditure 1997, 2002, 2007 & 2012e and five-year growth rates 83

Figure 34: Furniture & floorcoverings expenditure as a % of total retail spending 1997-2012e 89

Figure 35: Furniture & floorcoverings growth at constant (2003) prices 1997-2012e 90

Figure 36: Furniture expenditure as a % of furniture & floorcoverings spending 1997-2012e 92

Figure 37: Furniture expenditure growth at constant (2003) prices 1997-2012e 93

Figure 38: Floorcoverings expenditure as a % of furniture & floorcoverings spending 1997-2012e 95

Figure 39: Floorcoverings expenditure growth at constant (2003) prices 1997-2012e 95

Figure 40: Real gross domestic product (GDP) at constant (2003) prices 1997-2007 and forecast to 2012 101

Figure 41: Inflation vs average earnings growth 1997-2007 and forecast to 2012 103

Figure 42: Tax & Prices vs Average Earnings 1997-2007 and forecast to 2012 104

Figure 43: Real household disposable income at constant (2003) prices 1997-2007 and forecast to 2012 107

Figure 44: UK employment 1997-2007 and forecast to 2012 109

Figure 45: UK unemployment 1997-2007 and forecast to 2012 109

Figure 46: Inflation rates Y-o-Y 1997-2007 and forecast to 2012 112

Figure 47: Sterling, dollar and euro exchange rates 1997-2007 and forecast to 2012 115

Figure 48: UK average base rates 1997-2007 and forecast by quarter for 2008 117

Figure 49: UK average base rates 1997-2007 and forecast to 2012 118

Figure 50: Savings ratio 1997-2007 and forecast to 2012 120

Figure 51: Growth in consumer debt 1997-2007 and forecast to 2012 122

Figure 52: FTSE 100 Index 1997-2007 and forecast to 2012 125

Figure 53: UK house price inflation 1997-2007 and forecast to 2012 127

Figure 54: Housing Equity Withdrawal (England & Wales) 1996-2007 and forecast to 2012 129

Figure 55: Housing transactions (England & Wales) 1997-2007 and forecast to 2012 132

Figure 56: Retail spending value, volume and inflation/deflation trends 1997-2007 and forecast to 2012 139

Figure 57: Retail spending as percentage of total consumer spending 1997-2007 and forecast to 2012 140

Figure 58: Consumer, retail and non-retail spending trends % 1997-2007 and forecast to 2012 142

Figure 59: Retail sales by location 2007 and 2012 143

Figure 60: Share of turnover by location 1997, 2002, 2007 & 2012 146

Figure 61: % share of store numbers by location 1997, 2002, 2007 & 2012 150

Figure 62: % share of space by location 1997, 2002, 2007 & 2012 153

Figure 63: Online retail spending 1997-2012 160

Figure 64: Verdict forecasting methodology 2008 166

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