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Verdict view: Homebase needs to maintain multichannel strategy despite store closures

While Home Retail Group has been under pressure to reduce stores at Argos, it is at Homebase that the retailer has decided to slash numbers. It will reduce Homebase’s current store estate of 323 by 25% as part of a three-year plan to improve store productivity, strengthen its customer proposition and accelerate its digital capabilities.

As more retail sales go online and stores become collection points as well as shopping environments, there is less need for so much physical space. B&Q has already recognised this and is reducing the size of selected stores. Highlighting this trend further, we are seeing strong growth coming from the smaller DIY formats like Screwfix and Toolstation.

While this highlights that the amount of space out there is not needed, it does not directly correlate to needing fewer stores. And, by closing stores, Homebase is at risk of losing its presence in some geographical areas; yes, shoppers can still buy online nationwide, but the retailer will not benefit from the halo effect of having a store in the local area and consumers will be without a close collection point for click & collect orders.

While store closures in some locations are no doubt fully justified, in others Homebase would still benefit from some kind of a presence, just in a smaller way. However, Homebase does not have a smaller format to achieve this, like Kingfisher has with Screwfix. While attempts to reduce space have been made by introducing Argos and Habitat concessions into Homebase stores, this obviously has not been enough to reduce costs and improve profitability. Using Argos’s large 747 store estate as collection points would be one way of keeping a multichannel strategy in place on a national scale, but this would involve heavy marketing, and could affect Argos’s current brand repositioning.

Source : Carly Syme - Verdict

30 October 2014

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