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Homebase closes 42 stores – blame Australians not the internet?

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Will the CVA move help Homebase regain its former status?
Will the CVA move help Homebase regain its former status?
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Homebase - the real reasons why it has closed 42 stores... and why it may not be dead yet

Homebase has announced plans to close 42 stores, putting 1,500 jobs at risk as part of a CVA plan. But, will the move help the retailer to regain its former status in the DIY market?

 

The moves mark another eddy in a turbulent few years for Homebase and these latest closures are a subsequent measure to revive the struggling DIY retailer after it was bought for £1 in May by Hilco, a restructuring company.

 

The CVA – a business position increasingly adopted by ailing High Street retailers struggling to survive – will see the Homebase store closures over the next 16 month.

 

But what does the closure mean for Homebase and the wider retail industry?

 

Sheila Kearney, UK retail expert, at Qualtrics comments on this news: "Faced with the news that Homebase is closing 42 of its stores, retailers have once again been left wondering about the future of the UK high street. Certainly, bricks and mortar stores are at a disadvantage compared to online retailers – they have shops to heat, rising rents, business rates and a comparatively large workforce… and that’s before you compare the cost and convenience of online versus High Street shopping."


Kearney continues: "So retailers need to think differently when it comes to their stores and start to narrow that gap by focussing on providing shoppers with an experience that online retailers simply can’t. That could be through the in-store atmosphere, giving shoppers new ways to try products before they buy them or by staff really going the extra mile with personal touches like expertise and recommendations which online retailers can’t replicate."


"We know consumers are willing to compromise on convenience and cost for those brands that give them a great shopping experience — the key for high street retailers now is finding out what ‘great’ really means," Kearney adds. "It’s no longer enough to assume what consumers want or to follow the same model retailers have been using for decades. Consumers have changed, and retailers need to change with them. To survive in today’s climate, high-street brands must base their strategies on understanding their customers’ behaviours and emotions better than ever before and adapt their own models to how people really want to shop today."

 

Where it went wrong

While Homebase appears to be yet another High Street store in trouble because of the web, it is slightly different. Back in 2016, Homebase was thriving, reporting sale growth of 6.8% and operating profit of 10.7% financial year ending February 2016. At that point, however, it was bought by Australian DIY chain Wesfarmers, owners of the Bunnings Warehouse chain down under.

 

Wesfarmers, however, totally misread the UK DIY market, rebranding many Homebase stores as Bunnings and changing them from increasingly focussing on homewares and DIY to attract more female and family ’day out’ shoppers to hardcore, Screwfix obsessed heavy DIY-ers.

 

The plan failed. This year, its sales declined to 4.8% on the like-for-like (LFL) basis, and Wesfarmer gave up and sold the chain for a £1.

Homebase sales saw a significant year-on-year decline
Homebase sales saw a significant year-on-year decline


According to Emily Stella, lead analysts at global data: "In years before Wesfarmers’ acquisition, Homebase was streaming its store state and introducing more homewares lines to appeal to female shoppers, giving it a point of reference and an appeal to an underserved market. But, Wesfarmers undid this work and refocused the business on harder DIY lines, Homebase sales suffered terribly."

 

She adds: "New Homebase owner Hilco plans to rebrand all 24 Bunnings stores back to Homebase by autumn 2018, reduce the estate to around 200 stores. Hilco has had success in failing businesses in difficult sectors, HMV being a prime example, but Homebase needs to claw back those female shoppers it worked so hard to capture to differentiate itself."

 

Emily Stella concludes: "Over the period, rising competition from discounted B&M, Home Bargains and The Range is taking speed from female shoppers-B&M has already taken four of seven recently closes Homebase stores. And, of course, there is Amazon. Against this backdrop, Homebase is unlikely to regain its former position in the DIY market."

 

Felicia Rosenzweig, partner at brand and marketing consultancy, Prophet comments: “Homebase is clearly under some serious pressure despite being bought in May for £1 by restructuring company, Hilco. The business has already cut 17 stores earlier this year and this announcement is reflective of high street retailers increasingly struggling to connect with consumers."

"The Prophet Brand Relevance Index (BRI), which is the only survey-led barometer to rank the most relevant brands in consumers’ lives, positioned Homebase as 178 in its 2017 index in its first appearance initially showing signs that the brand held some relevance to consumers. However, according to the BRI, it seems to have struggled to connect with consumers."

 

She adds: "There are some distinct factors clearly contributing to Homebase’s recent shortcomings. Success in selling a product or service in one market sure doesn’t guarantee the same return in the another. So, Homebase’s Aussie owners failure to acknowledge the stark differences between the UK DIY retail market and that of Australia and adapt to cultural preferences and local differences accordingly have been part of the undoing. For instance, UK consumers are less driven by low prices (a model which had been rolled out in recent times by Homebase) and instead consumers are more influenced by product availability and convenience – something Homebase fell short in providing with items being out of stock at key times.

 

As it appears poor customer-centric strategy contributed to the destructive beginning of Homebase, then, faced with an increasingly online competition the unprepared retailer couldn’t compete to the required standard with other players in the market.

 

And, evidently, the retailer not only lagged behind other retailers but, it also failed to listen to its customers and innovate at a new level to differentiate itself. But, what does its online performance tell us about how Homebase arrived to its present state?

 

Online concerns

The findings from the e-retail performance report by Visualsoft suggest that 17% of leading retailers including Homebase failed to optimise their online search with functions like relevant product suggestions, and 61% haven’t adopted live chats, despite the 83% of consumers wanting this service.

 

The study analysed 240 leading UK ecommerce retailers against 17 criteria to understand how hard retailers were pushing to reach their full growth potential.

 

The report goes on to say that 54% of the retailers’ sites take more than 9 seconds to load, 12% takes 15 seconds to load and only 2% were rated as ’excellent’ with a site speed taking 2 seconds to load. Google estimates that these retailers will be loosing as a minimum of 29% of all potential visitors through slow load times.

 

"If you treat online shoppers as you would those who come in-store, it’s quite easy to understand user journey, and how you can then provide the optimum online shopping experience," says Tim Johnson, chief sales officer at Visualsoft.

 

David Duke, chief operations officer at Visualsoft says: “This research has yielded some incredibly
interesting results, illuminating just how many top household-name retail brands could be doing more to improve their e-commerce offering."


“Customer needs are evolving all the time and, if online retailers are to flourish and reach their full
growth potential, they must explore all potential avenues for improvement. This presents a particularly strong opportunity for emerging e-retailers who are looking to gain market share and grow their online brand."

 

 

Image credit: Headland

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