German DIY stores are under pressure to change. ‘The coronavirus pandemic has brought people into DIY stores, but in the recent past, economic uncertainty has also spread to DIY stores,’ says Michael Karrenberg, Regional Director Risk Services Germany, Central and Eastern Europe at international credit insurer Atradius. According to Handelsverband Heimwerken, Bau und Garten e. V., DIY stores recorded a 4.4 per cent increase in sales in the first quarter of 2024, but Atradius expects zero growth for the year as a whole after adjusting for inflation.
During the pandemic, many companies have added DIY products such as tools, paint and garden equipment to their range. They are now making business increasingly difficult for established providers and increasing the intensity of competition through cheaper products and online trading. ‘The new competitors are likely to remain in the market in the long term. It would be good for many DIY stores to react to this and develop further – from a pure provider of products to a provider of products and associated services,’ explains Michael Karrenberg. ‘DIY store products can now be purchased on many platforms, and services could make the difference in future.’
One measure could be the expansion of assembly and installation services. Customers are increasingly reliant on assistance, especially against the backdrop of ongoing digitalisation. More practical instructions and workshops, for example on material processing and appliance use, as well as mediation between customers and tradespeople, should also offer potential.
Industry stable overall – but increasing risks are noticeable in some cases
2020 was a successful year for DIY stores. In the pre-coronavirus period, annual sales growth was two per cent; in 2020, sales rose by 14 per cent to €22.1 billion. However, sales have fluctuated greatly in recent years. The war in Ukraine, persistent inflation and the Building Energy Act are causing consumers to hold back. The legal requirements for the energy quality of buildings are also having an impact on DIY stores. “In 2023, demand focused on heating and thermal insulation issues,” says Michael Karrenberg, “DIY stores are not necessarily the focus here.” In the first quarter of this year, demand for construction-related product groups fell significantly and the focus was on the garden and plant sector. Although sales are expected to increase in 2024 due to inflation, the Atradius manager estimates that there will be no real growth when adjusted for inflation.
Declining consumption in Germany and the migration to companies outside the sector are affecting all DIY stores. “The liquidity situation has deteriorated noticeably for some market participants in recent months,” says Michael Karrenberg. ‘However, the overall risk of default remains moderate.’ With a total turnover of over 25 billion euros for all DIY stores, the two largest providers alone account for one third. “In the future, it is quite possible that smaller DIY stores will merge in order to reduce costs and realise synergies,” estimates Michael Karrenberg. A change in the availability of materials is also conceivable in order to reduce capital commitments, for example for products such as garden furniture, ponds or barbecues. Goods would be stored centrally and delivered to order. Foreign competitors are not expected to enter the market. ‘The market is clearly divided between the domestic suppliers – international competitors could only enter the German market by taking over one of the existing suppliers,’ the Atradius expert continued.
According to Atradius, the decision on the ECB’s key interest rate in June could have a positive impact on the situation on the DIY markets. If the interest rate is lowered, this will benefit the DIY stores. The sector could also benefit from wage developments. “Customers are then more likely to invest their money in their homes again,” says Michael Karrenberg.
