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Introduction (396KB) REVIEW OF THE BUSINESS Who we are and what we do —— We are the UK’s leading home and general merchandise retailer. Through investing in multi-channel initiatives, expanding choice and developing both product ranges and services, the Group continues to shape the future of shopping for our customers, ensuring that we continue to build successful businesses that bring unrivalled convenience and value to customers’ every day lives, whether shopping at home or on the move. 53,000 1,092 60,000 195 million colleagues are the foundation stores in the UK and Republic products available across customer transactions of our success of Ireland (ROI) across the Argos and Homebase last year Argos and Homebase formats Argos, the UK’s largest general merchandise Homebase is the UK’s leading home enhancement retailer, has an unrivalled offer of choice, value retailer and offers a growing range of home and convenience to meet customer needs. improvement products and services in a differentiated store environment. 751 400m 341 7m stores in UK and ROI website visits during the year stores in UK and ROI active Nectar customers 35,000 46% 38,000 51% catalogue and of sales are multi-channel branded, own-brand and growth in sales via internet-only products exclusive products Reserve & Collect 4 Home Retail Group Annual Report 2011 RREEVVIIEEWW OOFF TTHHE BE BUUSSIINNEESSSS We have maintained our market share and leadership We have an effi cient and integrated approach position throughout these challenging times Our clear scale advantage comes from our well-invested infrastructure Despite the reduction of around 4% in the home and general merchandise market which has been built up over a period of many years. in 2010, Home Retail Group remains the market leader with approximately 10% of the £56bn market. We therefore have signifi cant opportunity for growth. Naturally, there has been some movement within individual product categories and you can read more about this on pages 10 to 13. Multi-channel shopping Our highly-successful £56bn 10 % internet and mobile UK home and general Home Retail Group’s channels help us meet merchandise market share of this market consumer demand and make us the market leader in multi-channel retailing. We have leadership in our main product categories Home Retail Group holds leading positions in each of our ten main product categories, holding fi rst position in four of these (homewares, small domestic UK-wide coverage appliances, toys and jewellery) and second in another fi ve. We use the Our store network and strength of our retail brands to drive leadership in these markets and grow extensive home delivery market share through expanding our product ranges. operation bring our multi­ channel convenience within easy reach of our customers. Our consumers know our brands With over 60 years of market heritage, Argos and Homebase are two of the UK’s leading retail brands. Our own-brand and exclusive brand products have resonance with customers and provide them with confi dence when they shop with us. Our own-brands include Bush and Alba in consumer electronics and, Integrated in toys, Chad Valley, which has become one of the largest toy brands in the infrastructure UK as well as being the top toy brand within Argos. Our recently acquired Our scale and infrastructure Schreiber and Hygena brands, which offer quality and stylish furniture at enables us to leverage affordable prices, are also proving very popular with customers in both Argos financial benefits and and Homebase. synergies to give a competitive advantage which is diffi cult to replicate. Financial Services Our Financial Services business works in conjunction with Argos and Homebase to provide our customers with the most appropriate credit offers to drive product sales. International sourcing Our Group sourcing operations import products which account for more than a third of our sales. This provides benefi ts to both businesses and across all major product groups. Home Retail Group Annual Report 2011 5 REVIEW OF THE BUSINESS Our product markets —— Home Retail Group operates in the home and general merchandise market, worth approximately £56 billion in terms of UK retail sales. We are the leader in this market, with an The total furniture market was estimated to approximate 10% market share. The overall have experienced a mid single-digit decline market, which declined by around 4% in calendar in total retail sales, with several major year 2010, can be analysed into various product sub-categories continuing to decline by categories. A summary of these, including where double-digit rates. products are sold at Argos or Homebase, the Group’s overall share position, and the market Home improvement size of each product category during the 2010 The largest part of the home improvement calendar year, is as follows: market is the DIY category (excluding furniture and homewares). During the year, there were Homewares four national retailers (B&Q, Homebase, Wickes The homewares market is relatively fragmented, and Focus) accounting for over 40% of the according to analysis by Verdict Research, with market according to Verdict Research, with other the ten largest retailers accounting for over 40% national operators selling products in this of the market. Home Retail Group is the market category being Argos, Wilkinson, Robert Dyas, leader in this category, with Argos holding the The Garden Centre Group, Topps Tiles and overall third position and Homebase adding Dobbies. Approximately 50% of the DIY market further Group scale. The competition base is very is estimated to be accounted for by specialist broad across the department stores (John Lewis, independents. Home Retail Group is the second Marks & Spencer, Debenhams, Bhs and House in this market, with Homebase holding overall of Fraser) as well as fashion and home retailer second position and Argos adding further Group Next, some national specialists (IKEA, Dunelm), scale. The home improvement market also the supermarkets (Tesco, Asda, Sainsbury’s) and includes the kitchens, bathrooms and some broader generalists (Wilkinson, Matalan, fl oorcoverings (excluding carpets) categories, TK Maxx). Specialist independents are estimated with additional national competitors in these to account for around one-third of the market. areas including Magnet, Howden, IKEA and The homewares market was estimated Homeform. to have experienced a mid single-digit decline The home improvement market was in total retail sales according to Verdict Research. estimated to have experienced a mid single- digit decline in total retail sales according to Furniture Verdict Research. The structure of the furniture market shows a fairly close resemblance to the homewares market according to analysis by Verdict Research, with the ten largest retailers accounting for approaching 40% of the market. Home Retail Group is second in this market, with Argos holding the overall third position and Homebase adding further Group scale. The competition base has a number of national specialists (DFS, IKEA, Homestyle Group, Magnet, Furniture Village, Dreams), with other signifi cant players being B&Q, Marks & Spencer, John Lewis and Next. 10 Home Retail Group Annual Report 2011 REVIEW OF THE BUSINESS Horticulture, garden furniture and outdoor living PRODUCT MARKETS This market, according to Verdict Research, Group Market Argos Homebase position size (£bn) was mainly dominated by the four national DIY specialists, with Argos, Wilkinson and the two Homewares ✓ ✓ 1 8.7 garden centre retailers, The Garden Centre Furniture ✓ ✓ 2 7.4 Group and Dobbies, also being signifi cant Home improvement (DIY/fi tted kitchens/bathrooms) ✓ ✓ 2 10.5 retailers of products in this category. Horticulture, garden furniture and outdoor living ✓ ✓ 2 3.4 Home Retail Group is second in this market, Small domestic appliances ✓ ✓ 1 1.3 with Homebase holding the overall second Consumer electronics ✓ ✓ 2 14.2 position and Argos adding further Group Large domestic appliances ✓ ✓ 3 3.3 scale. Approximately one-third of this Toys ✓ 1 1.8 market is estimated to be accounted for Jewellery ✓ 1 4.0 by specialist independents. Sports and leisure equipment ✓ 2 1.8 The horticulture, garden furniture and outdoor living market was estimated to have Total 56.4 experienced a low single-digit decline in total retail sales according to Verdict Research. Note: All market positions are for calendar year 2010 and by retail sales except for jewellery, which is measured by volume. The market sizes and positions quoted above are taken from reports provided by Verdict, Mintel, GFK, and internal management assumptions. These reports are subject to prior year restatements upon more current data becoming available. Small domestic appliances This market is relatively concentrated according to GfK. Home Retail Group is the clear market leader in this market, with Argos holding the number one position with a substantial market The consumer electronics market was estimated share and Homebase adding further Group to have experienced a mid single-digit decline in scale. Competition is mainly in the form of the total retail sales, according to Verdict Research. electrical specialists (Currys and Comet), Boots This was largely driven by the video gaming in terms of personal care appliances, the category and photography, as well as the offi ce supermarkets, and department stores such as and telecoms categories, with a marginal increase John Lewis. A relatively small proportion of the in the other major areas of consumer electronics. market would be accounted for by specialist independents. The small domestic appliances market was estimated to have experienced a low single-digit decline in total retail sales, according to Verdict Research. Consumer electronics This market is also relatively concentrated according to GfK. Home Retail Group is second in this market, with Argos holding overall second position and Homebase adding further Group scale. Currys and Comet are the main competitors, with other competition in the form of John Lewis and other department stores, Tesco and other supermarkets, and national specialists in certain sub-categories such as Game in video gaming, Apple in smartphone and tablet technology and Jessops in photography.
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