1 A Service HOME, GARDEN, AUTO Retail sector overview and key trends June 2013 NIKLAS REINECKE Associate Analyst

2 1.Sector Overview 2.Key Trends 3.Outlook and Implications 4.Further Reading Contents

1. Sector Overview

4 Source: Planet Retail The Home Depot has retained its position as the global market leader in the Home, Garden & Auto (HG&A) sector, although sales have been stagnant since 2007 as a result of the weakness of the US housing market. Source: Planet Retail

5 The top HG&A retailers are to invest in IT and multi-channel retailing in Given the economic backdrop, particularly in parts of Europe, retailers are becoming more experimental with their store concepts. The long-term target is 50% of SKUs being common to all retail operations. By end of 2011/2012 only 8% of SKUs were common to more than one business and sourced from a common supplier. Upgraded B&Q online offer, including 20,000 extra products for home delivery, while B&Q’s UK store estate is to be right-sized. Open 68 new stores (including 50 Screwfix outlets in the UK) with internationalisation to be re-evaluated. The long-term target is 50% of SKUs being common to all retail operations. By end of 2011/2012 only 8% of SKUs were common to more than one business and sourced from a common supplier. Upgraded B&Q online offer, including 20,000 extra products for home delivery, while B&Q’s UK store estate is to be right-sized. Open 68 new stores (including 50 Screwfix outlets in the UK) with internationalisation to be re-evaluated. Home Depot to improve customer service, setting a 60% target of payroll spend to be allocated to customer-facing store roles. Investments in information technology and supply chain (such as through the integration of online and instore data, pricing and assortment planning processes). Investments in multi-channel retailing, e.g. “Buy Online Pickup In-Store” (BOPIS) capability in 2011, which was extended with the Buy Online Return In Store (BORIS) and Buy Online Ship to Store (BOSS) initiatives in Home Depot to improve customer service, setting a 60% target of payroll spend to be allocated to customer-facing store roles. Investments in information technology and supply chain (such as through the integration of online and instore data, pricing and assortment planning processes). Investments in multi-channel retailing, e.g. “Buy Online Pickup In-Store” (BOPIS) capability in 2011, which was extended with the Buy Online Return In Store (BORIS) and Buy Online Ship to Store (BOSS) initiatives in Lowe’s plans to reduce the number of future store opening plans and consolidate the store network. Focus is on smaller outlets in underpenetrated communities. Expansion of online offering, with potential for e-commerce to account for 5-10% of sales by the end of Lowe's is aiming to invest in instore technology to improve customer experience and drive its multi-channel approach. The IT initiatives will include assortment optimisation on store level as well as mobile POS with e-receipts. Lowe’s plans to reduce the number of future store opening plans and consolidate the store network. Focus is on smaller outlets in underpenetrated communities. Expansion of online offering, with potential for e-commerce to account for 5-10% of sales by the end of Lowe's is aiming to invest in instore technology to improve customer experience and drive its multi-channel approach. The IT initiatives will include assortment optimisation on store level as well as mobile POS with e-receipts. 1. Sector Overview: Investments in IT and multi-channel key IKEA IKEA is to accelerate its store opening plan to drive growth, starting in fiscal 2014/2015. The retailer will increase the pace of new openings to per year, first and foremost in existing markets. Expansion in Asia, especially China, has high priority, as IKEA sees this region as holding high future growth potential. IKEA is to make a renewed push into online shopping with more products and cheaper distribution. IKEA IKEA is to accelerate its store opening plan to drive growth, starting in fiscal 2014/2015. The retailer will increase the pace of new openings to per year, first and foremost in existing markets. Expansion in Asia, especially China, has high priority, as IKEA sees this region as holding high future growth potential. IKEA is to make a renewed push into online shopping with more products and cheaper distribution.