Carpetright, Dealing with a Downturn and Competiti
Birmingham, England, July 13, 2006--Already hit by a housing downturn, Carpetright is suffering from rivals competing on style and price, according to Europe Intelligence Wire.
Lord Harris of Peckham launched Carpetright in 1990 from a warehouse in Essex. In the intervening years, he has built the company up to about 500 stores and a turnover of pounds 450m. Growth is slowing, however, and the company recently announced a 2.4% fall in sales and a 7.8% drop in pre-tax profit.
Among the chief reasons behind this decline cited by Carpetright are fickle tastes driven by a glut of home-improvement programs. Carpetright was big in laminated floors, and several years ago viewers rushed out to buy them, but soon discovered they are noisy to walk on once finally laid. Demand for laminate flooring has fallen by 38% on last year.
While Carpetright can address its product offering, it doesn't have control over slowdowns in the housing market or weak consumer confidence. When consumers look to rein in their spending and consolidate loans, no area on the high street is hit harder than the home-improvement sector. Both DIY stores such as Homebase and furniture retailers have been struggling.
While retailing in the high street has undergone much change in recent years, carpet stores have been one of the least-changed retail formats. The stores that were around in the early-90s are similar to the majority today. But that is likely to change.
Rising rents are forcing a decline in large-scale stores and giving rise to smaller formats. This is something Carpetright has been dealing with as it looks to expand its number of smaller outlets and add further concessions within department stores such as House of Fraser and Co-ops, although it had a setback on this front when all but one Allders department stores were closed.
But there are positive signs. Carpets are a priority for house buyers, and a miniature surge in the housing market in the second half of the year saved Carpetright's figures from being worse than expected. The firm is looking at new product ranges to cover for the fall in popularity of laminate flooring.
Can Carpetright cope with a changing retail landscape and consumer tastes? Dominic Margetson, former head of Asda events and commercial planning director at Inferno, and Caroline Wilde, head of retail at Arc, explained what they believe Carpetright's next move should be.
In the flooring market, consumers still rely heavily on the specialist. Carpetright is the leading retailer and therefore benefits from a 'number one' self-fulfilling-prophecy status. As carpets and flooring are usually purchased for a new house or a revamp of an existing home, the housing market is a good barometer of sales and a recent surge looks to have helped sales.
But there is still a lot for Carpetright to do to maintain retail dominance. Fierce price competition from DIY sheds on laminates continue to erode sales. Consumers tend to rely on continuous cut-price deals that add little value to the overall brand. So can Carpetright become the consumer-value champion?
Often the experience of shopping in these specialist sheds can be tarnished by lack of clarity on the final price. The specialist shed has clearly been overtaken by the IKEA shopping experience and needs to be more customer-centric.
Overall, the retail experience languishes in the 70s and the market remains highly fragmented, with many consumers relying on local recommendations.
Remedy
- Eradicate the hidden costs-market the 'honest price' and take a consumer champion price position.
- Concentrate on viral and word-of-mouth campaigns linked to consumers moving house, and reposition the brand to stand for value clarity and service authority.
- Develop the in-store experience and provide solutions such as design matching.
- Use third parties to offer carpet-fitting services.
