Changing rooms: Why H&M, Next and Joules are making over the homewares sector

The pandemic ushered in a number of shifts in how people live, work and shop, creating renewed demand for homewares, furniture and associated categories.

From a macroeconomic perspective, the housing market has slowed in terms of the number of transactions and prices have risen, meaning people are more inclined to “stay put”, according to Retail Economics chief executive Richard Lim.

“Lots of people can’t afford or find what they need and are deciding to stay put and take on bigger DIY projects and home extensions, which supports this environment for homewares, furniture and flooring,” he says. 

“A lot of this has also been realised because we’ve got this boost in savings because we’ve cancelled holidays, been doing less commuting and have not been eating out.”

As consumer spend has shifted from other discretionary categories such as clothing and leisure to focus on the home, so too have retailer’s strategies.

The pandemic saw some newer entrants to the market thrive, with the likes of fashion retailers Next, H&M, Zara and Boohoo all honing in on this side of their business.

More established players, including Ikea, Dunelm and Made, also recorded rising sales but, as competition increases, Retail Week examines what the homewares sector might look like going forward.

From fashion to lifestyle

Throughout the pandemic, the fashion sector has been hampered by slowing sales as consumers went out less and switched to more casual dressing. 

For some retailers the solution has been to turn their attention to homewares, pivoting to become “lifestyle” brands instead. 

“Retailers such as H&M, Zara, Next and, more recently, PrettyLittleThing and Boohoo, have been central to a newer market in homewares, characterised by trend-driven, fashion-forward product ranges,” says Mintel retail analyst Marco Amasanti.

“Our customer base has broadened. Younger customers who are perhaps renting or living at home with their parents are investing in small changes to improve their living spaces”

Sinead McDonagh, Primark

Applying the same principles as they do to their clothing ranges in terms of reacting to key trends, such fashion brands are able to appeal to a different, often younger and more cash-strapped demographic who want to spruce up their home spaces.

“For the fashion retailers, they’ve got an advantage in the fact that the market is shifting towards customers wanting to invest in a ‘new look’ with a more trend-led focus,” says Global Data senior data analyst Matt Walton.

Primark is one such retailer to make this shift. Its head of design for lifestyle and home Sinead McDonagh says: “At Primark, we have always prided ourselves on staying close to our customers, how they are living their lives and how this changes: this includes their lifestyles as much as their style.

“While we have offered homewares for a long time now, in the last five years it’s become a key growth category. This means customers can find our take on current interior trends – our now famous gold bar cart is perhaps still the best example – and more premium ranges, such as 400-thread-count bed linen and newer categories such as the wooden toys in our nursery collection, through to everyday essentials ranges such as towels, blankets and cushions.”

McDonagh believes that Primark’s customer base has broadened throughout the pandemic.

“While traditionally the homewares market appealed to a more mature or family customer, our customer base has certainly broadened,” she says.

“Younger customers who are perhaps renting or living at home with their parents are investing in small changes to improve their living spaces. Equally, as both of these generations grow up, our expanded parenthood and kids’ homewares collections we believe will grow with them.”

Expanding into this category is certainly in vogue for many fashion retailers, applying their strengths in clothing in a new sector and increasing the competition against less trend-led players.

“Apparel on its own has been declining over the past few years; even before the pandemic there has been stagnant growth,” says Lim.

“Retailers are reaching out and realising where they can create additional revenue streams.”

Threatening the status quo

As fashion retailers shift their attention to the home, the pressure is on established players such as Dunelm, Ikea, John Lewis and Made to ensure that they’re offering the best combination of value, design and quality.

“The newer market has fed overall engagement in homewares, driving sales at a total-market level, but the wave of new entrants has ultimately boosted competition and seen share fall to non-specialists,” says Mintel’s Amasanti.

While new entrants have the potential to steal market share, there are some measures that established homewares retailers can take – and have taken – to protect their speciality and retain customer loyalty.

Amasanti suggests that homewares retailers could collaborate with fashion retailers or celebrities to drive more trend-led sales, such as singer Rita Ora’s bedding lines at Next and House of Fraser, presenter Holly Willoughby’s range with Dunelm and actress Michelle Keegan’s collaboration with Very – all three of which “lend themselves well to social media”.

A partnership between fashion brand Joules and sofa specialist DFS leveraged the best of both brands to appeal to customers, which Joules chief executive Nick Jones says has been “really successful”.

The collaboration, which began in 2017, features a range of sofas and cushions in Joules’ signature colours and prints, available both in store and online at DFS. 

Jones believes the success of the partnership lies in the “point of difference” Joules already has in the fashion market and providing its customers with the designs they love in a new category.

Where some players may look to collaborate, others are tapping into key differentiators such as price, design and sustainable materials.

An example of this is John Lewis’ Anyday range – a lower-priced collection targeting younger shoppers and first-time homeowners.

Dunelm and Argos have sought to widen their mass-market appeal in the opposite direction, extending their ranges to include the more luxury label Dorma and selling wares from stablemate Habitat respectively. 

Where some players may look to collaborate, others are tapping into key differentiators such as price, design and sustainable materials

In terms of sustainability, Ikea has carved out a niche in this area, offering a buy-back scheme, a second-hand corner and a wealth of sustainable products for shoppers to purchase.

Made, meanwhile, has launched a curated marketplace that combines products from more than 100 third-party artisan brands alongside its own homewares range, which chief executive Nicola Thompson believes will elevate its position in the market.

The overarching lesson for established homewares retailers is to play to their strengths and tap into the data, insight and knowledge they already have about their customers to get the best results, whether that means broadening their product range, creating better value or shifting to different priorities such as trends or sustainability.

Online and offline

As with other sectors, the pandemic has facilitated a shift to online, impacting how homewares shoppers search for and purchase products, and allowing pureplays and fashion retailers with a greater online presence to take market share.

Lim says that retailers wishing to compete in the homewares market will need a “much more sophisticated digital journey” from start to finish, including social-media marketing to raise awareness and technologies such as AI and AR on their apps.

While established bricks-and-mortar players may need to play catch-up with their digital strategies, fashion retailers entering the space that already have a significant online presence, such as Zara and H&M, will need to use their physical store estate to “create something that is impossible to recreate online” – namely, beautiful room sets and inspirations.

“There’s an element of impulse in this category – you see it in the store, you like it, you get it”

Matt Walton, Global Data

Global Data’s Walton says fashion retailers’ visual merchandising skills set them apart from their competitors.

“You walk into the home area and it stands out, it looks very impressive and customers want to spend time there and really buy into the whole look. The way it’s laid out is a lot more appealing,” he says.

On the other hand, Walton says driving shoppers into stores to specifically shop for homewares is harder for fashion brands than it is for the likes of Ikea and Dunelm, who offer destination shopping locations.

“A challenge fashion retailers face is boosting awareness of the fact that they actually sell homewares now,” he says.

“When it’s displayed in stores, you need to get customers to think of them first when shopping for homewares without already being a customer.

“These stores don’t have the national coverage either for customers to come into stores and discover these ranges. There’s a convenience to it – because it’s a smaller ticket, it’s not something you’re going to go out of your way to find.

“There’s also an element of impulse in this category – you see it in the store, you like it, you get it.”

A fragmented market

Homewares is one of the most fragmented markets in retail, with established players and newer entrants, including fashion retailers and specialist pureplays, all battling for their piece of the pie.

It’s clear that each retailer is attempting to build on its existing customer base but this will inherently cause overlaps.

Walton believes newer entrants will begin to chip away at the market share of more established players, especially as a new generation of homeowners and homewares shoppers make their mark in the sector and build loyalty with retailers they may previously have only shopped for clothing with.

“I do think the fashion players are a threat”

Matt Walton, Global Data

“I do think the fashion players are a threat,” he says. “Although it’s a growing market, we’re going to get back to more normal levels of growth and the fashion players are really taking homewares as a serious category and investing in it. It’s certainly a disruptive force in the market.”

Walton suggests that if H&M leans in on its growing homewares division, itself and Next could become the next big players in this sector – leveraging their stores and online capabilities, too.

“H&M has the design credentials to resonate with shoppers, as well as the price focus and a loyal customer base,” he adds.

“It has the potential to incorporate its home offer in more stores. The standalone stores are also on to a winner if they put them in the right locations.”

H&M Home is currently available in 54 markets with 397 shop-in-shops and 27 standalone stores, with scope to grow this in future.

Lim agrees that Next is a good example of a retailer that has made the most of homewares during the lull in apparel, but he also flags specialist pureplays such as Eve and Simba as potential threats to the established players. 

Retailers and analysts alike agree that, while the homewares boom may normalise in the coming months, customers’ renewed interest in their homes is here to stay. With high streets, retail parks and the internet flooded with options, the competition is not going to slow down anytime soon. 

An influx of younger, more trend-led and more digitally savvy homewares shoppers also means newer entrants to the market are likely to continue taking market share from more established players – and those without a solid digital strategy could soon be left behind.

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