Following a couple of months of economic turbulence and forecasts of inflation, recession and growing unemployment, we have taken a look at two emerging retail market trends and how they could impact on the Home and Garden market.
Online vs traditional retail
There have been a few stories recently of online retailers running into difficulty. When Eve Sleep the specialist online bed retailer went into administration and was then acquired by Bensons, it was another example in an emerging trend of online-only retailers struggling to stay solvent. Made.com the online furniture retailer entered administration earlier this month with Next expressing interest in the brand name and intellectual property but not any stock. There are some well-documented reasons why these kinds of businesses have found life difficult. One is the rapidly increasing cost of acquiring new customers. The financial impact of customers returning goods has started to hit online retailers hard along with the requirement for ongoing investment in the ”last mile” of delivery.
Will the trend continue? Many retail experts think so, and it’s hard to disagree. The factors highlighted above are not going to diminish in the near term, and the rising cost of living, coupled with increasing interest rates is highly likely to result in a softening of the Home and Garden retail market, which will put further pressure on all retailers and probably driving prices down, at least in real terms, squeezing margins even further.
Consumers’ attitude to price
The cost of living crisis is driving some consumers to change their purchasing habits already. In the grocery sector, Kantar research recorded a growth in own brand sales at the expense of branded goods in September. This isn’t a surprise; it’s a behaviour change that has been observed in many previous periods of economic difficulty. Consumers’ first reaction when their budgets come under pressure is to try to continue buying the same things (at least when it comes to essentials like food), but to seek better value, either by purchasing on promotions (e.g., price discounts or multibuys), or by switching to cheaper alternatives. This could involve either switching retailer to a less premium proposition or selecting no frills or own brand products rather than mainstream or premium brands.
Will we see this behaviour in the Home and Garden Improvement market? Almost certainly in our view. While some consumers may decide to postpone purchases, others may look for lower price or value offerings. In the HIG sector, retailers who want to maximise share of their customers’ wallets will need to make sure they have either a strong value brand of their own, or an unbranded, no-frills offering in key product ranges.
Winster provide a range of strong selling unbranded hoses and accessories, tailored to match the customer profile of our resellers. For more information on what we offer and how it could benefit your business, see our article on unbranded hoses or call us on 01902 606010.