In the midst of cooling property growth in the UK, the carpet market is one to watch.

The Royal Institute of Chartered Surveyors recently reported that since Brexit homeowners are currently looking to carry out work on their properties rather than sell up and buy a new home.

This will lead to growth in medium-value cosmetic improvements as property owners consider their options. Our consumer research indicates that carpets and flooring are one of the most important elements driving positive disposition to one’s home. With 10% of the population stating that they have had a carpet fitted in their home in the last year, it is also one of the most frequent improvements made (compared to 5% for windows and 6% for a bathroom). Carpets have also had something of a revival since the 1990s and outsell hard floorings.

Like many of the UK’s home improvement sectors, the carpet market is relatively fragmented. Market leader Carpetright has a c.16% share, and the next largest player, United Carpets, has just 3%.

So, why do more people go to independents rather than established brands?  We believe there are four main reasons:

  1. Independents are often more competitive on price in the home improvement market
  2. Many consumers report wanting to support local businesses (provided they are satisfied with those local businesses’ levels of trustworthiness)
  3. Large home improvement companies often suffer from negative customer reviews online, which can deter other consumers
  4. There are no new operators which have disrupted the carpet market (unlike the mattress market, which we covered last week) and provided a compelling reason to shop elsewhere

So where is the opportunity in this market?

  • Building trust is a significant opportunity in this market. The burden is on larger and smaller players to reassure consumers that they consistently deliver a high quality finish at a fair price – this drives recommendations, which are fundamental to consumers’ choice of provider
  • Consolidation: In the medium term, consolidation of well managed regional players could create cost efficiencies and quasi-national coverage. Similarly, regional players could look to hoover up smaller independents to extend their reach beyond their regional hubs.  Pimlico Plumbers has managed this in its market by creating a London focussed business as a platform for national growth
  • Vertical Integration: There is further opportunity for cost reduction in vertical integration of the supply chain. This will lead to margin improvement and the option of passing some of this gain to the consumer, thus increasing competitiveness
  • Disruption: How long will it be before a new entrant offers a new way of buying carpets and creates a buzz in this market?

The replacement cycle and average spend show the importance of this purchase to consumers. As is consistently the case in the markets we encounter, long term success rests on consistent execution of a proposition that meets consumers’ requirements which drives brand advocacy and loyalty.

Aakash Patel