All-round monitoring. This basically sums up our latest analysis, which traces the events of a year, 2018, but also the state of a retail channel that, over the past two years, has changed its look and is now about to experience a profound and complex evolution.
We start by taking remarking briefly on the performance of the DIY & garden market. After all, before looking at the situation of the DIY superstore sector, it is perhaps worth clarifying the scenario to which this sector belongs, and in which it operates. Despite the considerable variety of product categories represented and the seasonal trends that, taken together, can result in highly fluctuating performances in this market, 2018 ended, overall, by recording positive results, in the order of a few percentage points. This, at least, is the message received by www.diyandgarden.com. Nevertheless, it is worth advancing some considerations, also stemming from a closer examination of the complexity of our particular world.
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First of all, the DIY superstores. Overall, the situation is positive, but with some shadows. In the course of the year, there were reports, from producers, of longer payment terms, also as an effect of some considerably negative periods, March and September in particular, that saw sales shrinking significantly. In addition to seasonal ups and downs, it is also necessary to consider (we hardly need say this) the channel’s performance excluding the new openings or new entries that are a feature of this particular sector. Bricomarket, with its four outlets in Sicily, for example, only officially entered our survey in the second half of 2018.
Alongside this situation, there also emerge some negative notes concerning the performance of traditional markets. In this regard, we can take, as an example, the “Home tools and hardware” retail sector that, surveyed by Istat, showed a negative trend for the year as a whole, with the exception of June (the most positive month, +1.8%), July, August and November. This channel, too, fared particularly badly in March, when sales were down by 4.3%.
This is a situation that also seems to have had some repercussions on certain intermediate players, specifically wholesalers, who, as shown by instances of delayed payment or lower volumes of purchases, seem to have been hit by the effects of this fluctuating trend. With regard to the lower volumes of purchases, it would be interesting to understand whether the opinions and views expressed, mainly by producers, are purely a reflection of a slowing down of the market or stem (and here, it would probably be better to add “also”) from a gradual increase in the business generated by private labels at the expense of branded products.
Let’s not forget that, when it comes to branded products, the internet, by offering products more cheaply than traditional brick & mortar stores are able to do, is certainly mixing up the cards on the table; as a result, traditional stores are being “forced” to rethink their ranges, perhaps moving away, as far as possible, from branded products in order to be able to offer less costly ones. My own view is that this process is still far from over; I think it will revolutionise the offer, with private label products standing to benefit. In the food sector, this process is already under way, while several non-food operators, Decathlon first and foremost, are already working in this direction.
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So, is the market growing? And what about the retail chains?
According to our estimates, it is not growing particularly; it is not shrinking, but neither is it achieving significant growth rates — indeed, our estimates indicate that these are below the two-percent level. DIY superstores seem to represent the best performing retail channel, but in this case, Bricoman played a primary role that cannot be excluded from the analysis. We would also add that the results need to be considered after excluding the data referring to new stores (newly opened ones, franchises, new entries, etc.), which were quite numerous in 2018, as many as 15, and this number rose to 19 with the inclusion of Bricomarket in the survey.
Overall, the latest diyandgarden.com survey includes 757 DIY centres (561 directly managed and 196 franchise stores), covering a total floor area of more than 2 million square metres.
More specifically, the number of outlets grew by 2.5% compared with December 2017. A very small increase was recorded in the number of directly managed ones (+0.7%), whereas there was a hefty increase (+8.8%) in the number of franchise stores. The performance of this latter category emerges as somewhat fluctuating if we consider that in December 2017 it recorded a decrease of more than 7 percentage points and in 2016 growth of 16.6%, and these results came after two considerably negative years (−12% both in 2015 and in 2012). What can be seen, however, is that the overall trend for the last three years is characterised by substantial stability, which notwithstanding these fluctuations, sees franchise stores accounting for an average of 25.6% of total outlets.
Conversely, as mentioned, there was a marked reduction in the number of directly managed stores opened in 2018, considering that 2017 and 2016 ended with results of +4.7% and +6% respectively. The positive trend regarding overall floor area was more sustained, with this parameter found to increase by 4.2% in 2018. The average floor area also increased, from 3,001 to 3,058 square metres.
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The Who’s Who of DIY retailers in 2018
To say that 2018 was, once again, Bricofer’s year might seem to be stating the obvious, but it is, of course, true. The past year saw all the major developments announced by the Group in 2017 coming to fruition, with the result that it now includes: Self Italia (Bricoself), Adamante, Gruppo TEC, as well as three new stores opened under the Bricofer label. In addition, there were store extensions and conversions, such as the ones involving Ottimax in San Giuliano and in Reana del Rojale, as well as the unveiling of two new brands, namely Dhomus Pet and Dhomus Fantasia per la Casa. Finally, as a last shot, 2018 ended with the announcement of the purchase offer concerning the Bricorama stores in Spain, an operation expected to be finalised by the end of February. This veritable whirlwind of activity has reshaped the market and continues to attract the attention of the entire sector, in particular the producers (note that the closing of the Self operation has been recently announced along with the payment of the agreed purchase price). The level of attention certainly remains high, not least because, it must be said, in this sector, we are not used to such operations, and the fears of a slowing market do not help.
Whereas the big names kept a low profile, with Leroy Merlin confining itself to opening a show room in Abruzzo and Obi to undertaking a restyling project in Curno, Bricoman, on the other hand, opened an impressive three stores in 2018, in Ragusa, San Fior and Altavilla Vicentina, thereby continuing its seemingly unstoppable growth trend. Suffice it to say that in 2017 it closed its balance sheet with revenues of over 782 million and profits of over 17 million. A veritable fighting machine that already has another four openings coming up — in Pero in June — as well as a planned extension of its Elmas store, the chain’s first in Italy.
Going back to the Italian retailers, the top performing one was undoubtedly Brico OK, which opened eight additional stores, followed by Bricolife with seven, including both new franchises and new openings. Brico io, on the other hand, lost ten (Gruppo TEC and Adamante) but opened in Parma and in Montesilvano, and in January 2019 also in Milan; Bricocenter, too, opened new stores, in Casoria and Viareggio, the latter with an updated format, similar to what is offered by Leroy Merlin (e.g. with areas set aside for consulting); Evoluzione Brico lost seven members in 2018 and two franchises: Colore & Pittura and Micolucci with the brand Brico Ikasa (three stores), a firm that has just opened in Chieti under another sign, Dr. Brico. FDT celebrated the arrival of a new member, Bricoval, and its franchise Ecobrico opened a fourth outlet. Mondobrico opened a store in Alessandria, as well as moving and extending its Pavia store, while Brigros opened in Surbo (Lecce). Self, now Bricoself, closed in Udine, while Ottimax closed its Afragola store.
Breaking news: our next survey will also include Bricocasa, the brand owned by the Deodato family which operates in Puglia where it has now opened its third store,.
With regard to the garden superstores, there has been little action within the network to report. The only real change is of a methodological nature. Up until our last survey we always considered only the TuttoGiardino outlets. But from now on, including this survey, we are also considering operators not using a brand name, but who have a contract with IFS srl, the company that owns TuttoGiardino.
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Geography and size of the retail chains
Although the geography of the DIY network changed little, in percentage terms, in 2018, it is nevertheless worth highlighting slight dips in the market shares held by the North (−0.3%) and Centre (−0.5%), in favour of the South, which increased its share from 16.7% to 17.2%. A stable situation was recorded in the islands, where the share of DIY remained at 9.1%.
Instead, some more marked differences were recorded in terms of format sizes, with large stores, those measuring over 8,000 square metres, increasing their share by 6%, an improvement on 2017 when it fell by 2%. Conversely, neighbourhood stores of up to 1,000 square metres, which in 2017 led the way with a two-digit (13%) increase, this year had to settle for a much more modest result (+4%), which saw them giving ground to an intermediate category, stores measuring between 2,000 and 4,000 square metres, which in 2018 recorded a 7% increase.
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What’s the outlook for 2019?
There have been various announcements. What we know for sure is that Bricoman is opening four new stores; what is not clear is whether these will all opened this year. That said, this is the average rate for this brand and there is every reason to think it will be respected this year, too. Leroy Merlin has made important announcements regarding openings (most recently, ones planned in Tuscany), and then there is the Brico Center question to be resolved. If its conversion is confirmed, a considerable amount of resources will be necessary.
Little information has been forthcoming from Obi, and after the umpteenth takeover, it will perhaps be clearer what direction it intends to take; it may even decide to extend, to Italy, the experiments carried out by Obi Next in Austria. As for the Bricofer Group, there are probably many people hoping that this will be a year that sees it consolidating what it has achieved in the past. We are certainly intrigued by its sortie in Spain and curious about the reasons behind it. We will just have to see what happens.
There could in fact be a many developments on the horizon. In addition to what we have listed above, we might see an strengthening of the DIY department in Mercatone Uno, following its agreement with Brico io, or of the “passion” for furnishings now seen among certain retail store owners, a trend illustrated, in particular, by the Kestile corner shops in Brico io, by the CasaTua areas in Eurobrico stores, owned by the Paterno family — the soon-to-open Carpi store will be the thirteenth —, by the three Casamata (Brigros) stores in Puglia, and by Bricomarket, which has just opened its second Bricoarredo space in Caltanissetta.
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