1. Home & Garden Trends May 2011 Adam Goodman Vertical Insight Manager

2. Contents

3. Home & Garden Market Sizes Mintel estimate that the main markets they compete in were worth some £39 billion, including VAT in 2010. Sales by DIY retailers in 2010 were £10.9 billion, down 2% on 2009 Sales fell sharply in the final quarter because comparison was with the pre- VAT boom period of 2009. There seems to have been a minimal surge ahead of the VAT increase in January 2011 Estimating a total size for the market DIY retailers compete in is difficult because of the sheer breadth of their range “DIY retailers are faced with the prospect that not only are consumers suffering from an income squeeze but they are likely to want to increase their savings as well. However there is the argument that because people are spending more time at home and unable to take so many holidays, they will therefore do more DIY” Mintel, DIY Retailing Mintel, DIY Retailing Executive Summary February 2011

4. 4© 2010 Mintel International Group. All rights reserved. Confidential to Mintel. Home & Garden / DIY Issues Over the last five years there has been a fall of 4 percentage points to about 56% of the adult population, that's 2 million fewer people undertaking DIY projects. Those who have done DIY in last 12 months There are some anecdotal signs that the recession has encouraged more people to do jobs themselves. The economic outlook for consumers is the worst since the recession started. Mintel expects spending on DIY to be very weak in 2011. The ageing population is bad news for DIY retailers, but over the next five years the numbers in the key 25-55 age bracket actually increases.

5. © 2010 Mintel International Group. All rights reserved. Confidential to Mintel. Forecast: 2011 will be poor growth - less than all retail sales

6. Royal wedding bank holiday will boost entertaining in the garden The Easter period and Royal Wedding of 2011 presents people with a longer than usual holiday season during which they can relax, entertain and enjoy family life together. The garden will play a major role in this as family parties take place or friends and neighbours are invited round around to celebrate. As long as the weather holds the garden will become a party space over two long weekends, so garden products should benefit from this trend. Younger consumers could be encouraged to get ready to party in their gardens, not only buying barbeques, but also shaping up the planting and ambience with some fast, low maintenance planting. They would respond to quick gardening solutions that need little research and make the place look welcoming with minimum effort. Source: Mintel article, Feb 2011Mintel

7. 7 Retail & Online Retailers Spend For the most part, Retail advertisers tend to spend the most on advertising in the Press and on TV On average the industry currently spends around 5% on Internet advertising (not including search). 2010 expenditure has increased +1% from that of 2009 Source: NNR adDynanix : Jan – Nov 2010

8. Display Advertisement Publisher Location: Reach and Frequency (Retail – Home Furnishings) Microsoft sites delivered both the highest number of impressions and the highest number of unique visitors for Home Furnishing retailers in Dec 2010. Source: ComScore adMetrix ‘Home Furnishing’ : December 2010

9. Display Advertisement Publisher Location: Reach and Frequency (Retail – Home Furnishings) Microsoft sites also have the highest share of Home Furnishing retailers’ ad impressions. Average frequency is very competitive and far less than Glam Media and equal to eBay. Source: ComScore adMetrix : December 2010

10. Display Advertisement Publisher Location: Reach and Frequency (Retail – Home Furnishings) Microsoft sites delivered the second highest number of impressions and the second highest number of unique visitors for Home Furnishing retailers in March 2011 Source: ComScore adMetrix ‘Home Furnishing’ : December 2010

11. Display Advertisement Publisher Location: Reach and Frequency (Retail – Home Furnishings) Microsoft sites also have the second highest share of Home Furnishing retailers’ ad impressions. Average frequency is very competitive and less than eBay and Yahoo!’s. Source: ComScore adMetrix :March 2011

12. Source: ComScore AdMetrix – March 2011 Top Advertiser by Impression and UU by ComScore AdMetrix

13. Home & Garden Search Traffic KPIs Traffic Searches for home & garden generics increased by +37% between 2009 and 2010 Searches for home & garden generic increased by +15% Oct to Dec 2010 v Oct to Dec 2009. Insights: Sales by DIY retailers in 2010 were £10.9 billion, down 2% on 2009 (Mintel) Over the last five years there has been a fall of 4 percentage points to about 56% of the adult population, that's 2 million fewer people undertaking DIY projects (Mintel) 1.Microsoft Advertising Intelligence Tool

14. Home & Garden Demographics and Daily Trends 1.Microsoft Advertising Intelligence Tool – December 2010 to Feb 2011 data

15. Industry Insights

16. Home & Garden Sector This chart shows the growth of the Home & Garden sector between March 2009 and January 2011 Source: IMRG, Jan 2011IMRG The Home & Garden Index, year-on-year - the values are displayed from April to April Source: IMRG, Jan 2011IMRG

17. Home & Garden Sector Average Conversion Rates This chart shows the average conversion rate for the Home & Garden sector between January 2010 and January 2011 Source: IMRG, Jan 2011IMRG

18. Forecast for DIY Retailers The following chart the decline is exaggerated by the truncated scale, but on these forecasts over a period of just ten years the sector will have lost about a fifth of its share of retail sales. Sales by DIY retailers, 2005-15 DIY retailers sales as % all retail sales, 2005-15 Source: Mintel, DIY Sector Size & Forecast, Feb 2011Mintel, DIY Sector Size & Forecast

19. Home & Garden – Interest in Gardening People are reluctant to curtail their social lives and this has been positive news for eating and entertaining at home. A significant 44% of those cutting back switched to cooking more at home instead of eating out. According to Mintel’s Barbecue Foods report this shift has also supported barbecuing at home, benefiting from its popularity as a way to get together with friends and family. The trend towards domestic vacations and ‘staycations’ has also encouraged an interest in spending more time in the garden. Around 2.5 million adults, or 5% of the population, had stayed home for a holiday in the 12 months to October 2009, while 7% were planning to do so in the future. Interest in Gardening, April 2010 Source: Ipsos MORI/Mintel

20. © 2010 Mintel International Group. All rights reserved. Confidential to Mintel. Home & Garden / DIY Issues Incomes will be squeezed this year Inflation is running well ahead of wages growth The spending cuts are beginning to hurt Unemployment is rising Confidence is at a low ebb House prices are falling meaning this will encourage people to save more. And in the medium term there is the threat of rising interest rates. Weak Housing Market: Housing turnover is at a 30 year low. Prices are falling again. All the growth in the first half of 2010 was lost in the second. Houses are still less affordable to first time buyers than at any time between 1991 and 2004.

21. © 2010 Mintel International Group. All rights reserved. Confidential to Mintel. Home & Garden: Strengths and Weaknesses The recession may be encouraging people to stay at home and do DIY rather than going away. The key population group, 25 – 55, will grow over the next five years. DIY retailers have introduced more homewares to become ideas centres for Do it for me customers They have introduced installation services. But at the same time they have strengthened their appeal to trade customers. Spending will remain under pressure throughout 2011 and perhaps into 2012. The housing market will remain very weak. Negative factors will more than outweigh any positive impact of people spending more time at home. DIY seems to be out of fashion. The sector is mature, the expansion of the market through the opening of larger stores has come to an end.

22. © 2010 Mintel International Group. All rights reserved. Confidential to Mintel. The superstores dominate the middle ground It is a market for older, affluent people The young tend to go for the non-specialists Indicating a lack of expertise and confidence Profile of shoppers for DIY

23. The young have the most ambitious plans Older people seem more content with minor improvements Profile of those planning DIY in 2011 © 2010 Mintel International Group. All rights reserved. Confidential to Mintel.

24. 24© 2010 Mintel International Group. All rights reserved. Confidential to Mintel. B&Q dominates the sector B&Q bigger than the next three put together Straddles sector with strength across the board Homebase – successfully positioned at the softer end of the market Wickes – prospering as part of the Travis Perkins group Focus – still struggling for lack of cash 40% 16% 7% 5%

25. Future Opportunities Trend: Resilience Resilience is a consumer trend identified by Mintel’s Inspire that shows how cost cutting has developed into a desire for self-reliance, a need to learn lost skills and take pride in doing it ourselves. With the onset of recession there has been a return to a desire for consumers to do small DIY tasks themselves. There is a desire for increased expertise in DIY. Some 16% complained that they could never find staff to give advice and 12% said that they looked for advice on websites. There is definitely an underlying desire for greater expertise in DIY, a natural result from the failure, so often, for DIY skills to be passed on from generation to generation. This presents an opportunity for the retailers. At a time when retailers are having to fight ever harder for market share, this would be a good way to associate the brand with good advice and being trustworthy. Trend: Green Technology Green Technology is a consumer trend identified by Mintel’s Inspire that shows how the personal benefits of going green are proving as or more important than the planetary. Consumer enthusiasm for eco-friendly products is low. Just 8% of consumers said they wanted to see wider ranges of eco-friendly or energy saving products. Left to consumers the development of more ecologically aware attitudes would take a long time. Much of the pressure is coming from governments because of the commitments they have signed up to. At present eco-friendly items tend to be merchandised along with comparable but less eco-friendly goods. There should be scope to bring many of them together so that they could be displayed or promoted with the potential benefit from buying them. The potential saving against a more traditional product could then be spelt out. It should be marketed around the theme of common sense and saving cash rather than saving the environment. Source: Mintel, DIY Retailing February 2011Mintel, DIY Retailing