The common denominator

Kingfisher is gearing up to seize what international chief executive Peter Høgsted describes as one of the firm’s “biggest opportunities”, with a drive into group sourcing.

Former Ikea man Høgsted, who joined the DIY giant in 2008, is leading the charge on group sourcing, which will create efficiencies in the business. A key part of the plan was the launch last month of the retailer’s first major common range, a line of garden furniture that will hit the shopfloors of both B&Q in the UK and Castorama in France.

Høgsted, who is responsible for the individual markets of Poland, Spain, Russia, Turkey and Germany, as well as reversing declining sales in the retailer’s Chinese operation, points to group sourcing as “probably Kingfisher’s biggest opportunity”.

“We are questioning whether we need a screw that is red in one country and yellow in another,” says Høgsted. “What if it was blue in both?”

Kingfisher has produced a handful of common ranges in the past but, with the creation of a retail board, assembled by Kingfisher boss Ian Cheshire in 2008, came a hunger to increase group-wide collaboration. “There is a greater understanding and commitment to start looking at the similarities between territories now,” says Høgsted.

If half Kingfisher’s core range were common and own brand, he believes, “there would be massive benefits from an economical point of view but also, and more importantly, from a differentiation point of view”.

Høgsted points out that home improvement retailers have very similar product ranging and believes Kingfisher can differentiate itself through its own brand. “This is where our products can stand out,” he says.

Kingfisher’s aim is to have the separate arms of the business collaborate to design and produce new products, creating brands to be sold from Turkey to Poland with the same packaging.

“The ambition is to go through all our categories and ask ourselves where it would make sense to produce a common range,” says Høgsted.

Although he is spearheading the group sourcing initiative, Høgsted has not taken his eye off the ball when it comes to growing Kingfisher’s international business (excluding France), which accounts for about 20% of turnover. In the year to January 31, sales increased 5% to £1.8bn, while profits rocketed 78% to £125m.

Well-travelled Høgsted says he enjoys working in international retailers. “Any company benefits from having an international approach,” he says. “It helps you to balance risk but it also makes life more interesting. The variety of opinions, styles and upbringing results in a more exciting culture.”

But it can be tough too. China, for example, was beginning to look like an albatross around Kingfisher’s neck. But for Høgsted, China represented a “very exciting challenge”. His enthusiasm is starting to pay off. Losses almost halved to £34m in the year, while like-for-like decline was cut from 27.9% to 3.3% as the retailer closed a third of its stores and reappraised staffing and customer service. “China is going according to plan,” says Høgsted. “We always had the option to leave - but so far, so good.”

Høgsted is keen to get into the mindset of the customer. “We asked what makes the Chinese customer tick and are testing a number of insights while building new ranges,” he adds.

In Poland things have gone more smoothly. Trading from 56 stores, the chain made more than £1bn in the year and Høgsted sees room to double the portfolio over the next five years.

In Russia, sales jumped 18.6% to £163m and the retailer is developing a smaller store format in order to expand in Moscow. Sales are on the up in Spain, Turkey and Germany, too.

Høgsted has ruled out opening in other territories for the time being though, asking: “Wouldn’t it be better to build leadership positions in these countries, rather than start a new business in a new country?”

Høgsted is confident that still more gains can be made. “I’m optimistic we will have a good result this year but there is never a quarter when there is not a challenge. That is the beauty of a diverse company - it’s never boring.”