Dunelm Mill - Unfolding the Mystery_20130311

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Dunelm Mill - Unfolding the Mystery March, 2013


Dunelm Mill - Unfolding the Mystery The depressed state of the UK economy which shrank by 0.3% in the last quarter of 2012 has fuelled the fears of the country moving towards another round of recession. Consumer confidence which has been stagnant at -26 for the first two months of 2013 has further restricted the consumer spending. This has not only impacted the top line of the many wellknown retailers, but has also led to closure of their stores. According to the industry estimates, 54 retailers went into administration in 2012, including Peacocks, Comet, Clintons and JJB Sports, resulting in 3,951 stores closures and affecting 48,000 employees. Moreover, another 140 retailers are reported to be in a critical condition (as of December 2012) and will probably follow the same route into administration. Retailers across all sub-sectors are facing the heat of the bad economy, the UK homewares market being no exception. The homewares market, which is valued at GBP 10.7 Bn (2012), has been stagnating or decreasing over past five years. Despite the bad shape of the UK homewares market; there has been a player who has been outperforming its competitors, quite surprisingly: Dunelm Mill - the country’s leading home furnishings retailer (2012 market share of 6.9% in UK’s homeware market) which has 133 stores nationwide and sells a range of 20,000 products for the home has been consistently registering an average sales growth of 13.4% since FY 2010, at the time when the overall fragmented homewares market has managed to only stay stable. The company also registered a like-for-like sales growth of 3.4% during this period, suggesting its ability to reap more from the same investment outlay. Dunelm Mill has gained c. 2.9% market shares since 2008, in comparison to its nearest competitors – John Lewis with +1.7% and Argos with -0.4% of market share changes. So, what has been the core-competency of Dunelm Mill that has helped it to outperform its competitors? Dunelm Mill has registered continuous growth because of its consistent strategy execution and disciplined operational management. The company has been committed to a specialist proposition with an objective to maintain and grow the competitive edge in customer ‘choice’ and ‘value proposition’. It has not only launched evolved product ranges continuously, but also has developed knowledge-based customer services as a point of differentiation. For instance, the company offers a one stop homewares destination with 21 departments (hard & soft lines) and as many as 105 bedding collections. The company has also developed value-added services such as ‘made to measure’ (customized products as per the customer need) and ‘Dunelm At Home’ (at home consultation), making an attempt to please all strata of customers. Portfolio growth has been the other strategic focus of Dunelm Mill. The company’s idea is to increase the market share and market reach by opening more superstores (up to 200 superstores) across UK. The company has opened 10 stores, including 2 relocations (relocations included shifting of Wellington store to Telford for more space and re-opening of Coventry store after fire damage in 2011) during July-December 2012. Along with expansion, Dunelm Mill also focuses into the opportunity to showcase into multi-channel operations. The objective is to increase customer engagement and develop new customer touch points. For instance, Dunelm Mill – Unfolding the Mystery

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Dunelm Mill operates in smaller format (smaller town centre stores in the form of high street shops) as well as online (www.dunelm-mill.com) in order to learn more about the possibilities to earn profits by operating smaller scale units and to learn more about the reactions of online customers. Moreover, the presence of Pausa coffee shops within the stores serves as an additional reason for customers to visit and increase their engagement too. To move forward on the growth curve, Dunelm Mill also focuses on developing and exploiting its infrastructure resources. For instance, the companies possess a strong IT backbone with its head office running on ‘SAP’, stores on ‘Retail J’ and the online functionalities being provided by IBM. One can thus realize that Dunelm Mill has been a frontrunner on many critical functions for it to be successful: it has been oriented towards customers giving them value and choice, listening to them for feedback, and being present across channels for their ease; having an excellent infrastructural backbone at the backend for all store and corporate functions; and lastly developing and deploying its growth strategy with great precision. It is little surprise that it is a frontrunner given all of this. Source: All data from secondary sources; Sutherland analysis

Dunelm Mill – Unfolding the Mystery

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