Our Motoring and Cycling products segments remain core but we have a greater market opportunity in growing our existing services business. We will evolve into a consumer and B2B services-focused business, with a greater emphasis on motoring.
The Market Opportunity
The UK car servicing market is highly fragmented with no clear market leader – with just 2% market share we have significant opportunity for growth and an ambition to become the UK's largest independent provider of automotive service, maintenance and repairs.
Our highest value-creating opportunities are in motoring services, which are delivered through Retail stores, Autocentres garages and Mobile Expert vans. In Retail, the vast majority of our service-related sales are in motoring, which provide good returns on invested capital and significant market opportunity, especially when services are sold with motoring products.
Autocentres has a good return on invested capital (“ROIC”), through low capital intensity and an improving profit margin. We only have 2% market share of a highly fragmented market where there is no clear market leader in the UK and Ireland. This presents an interesting and very real opportunity.
Cycling products and services, despite offering lower returns than motoring, will remain a key part of Halfords’ future. Our cycling offer is now even more important as we help the UK public respond to the challenges of COVID-19.
Retail Macro-Customer Trends
DIY to DIFM
Consumers are increasingly moving from a 'Do It Yourself' to a 'Do It For Me' mindset. Our research shows that 70% of people are too time-poor or lack the necessary skills to carry out DIY tasks. As cars become increasingly complex, we expect this attitudinal shift to intensify further, resulting in increased demand for specialist knowledge and equipment.
Modern consumers expect a seamless shopping experience across all channels and touchpoints. Our mission is to provide a best-in-class digital-led customer journey, that leverages all our digital and physical assets. Our locations are an important differentiator from online competitors, providing a convenient Click & Collect proposition and the delivery of services and expertise by our in-store colleagues.
The requirement for sustainable practices is now impacting all retailers in the UK, with consumers increasingly expecting proactive policies on climate change, clean air, reduction of plastic waste and ethical recycling. The impact that we are having on the world and the footprint we are leaving behind is set to shape markets in the future.
Move from Owning to Using
Economic, political and health crises have reduced consumer willingness to purchase 'big ticket' items. Particularly apparent among younger people, there is an increasing trend towards short and long-term renting rather than owning, evidenced by the increase in PCP schemes, car-sharing initiatives and bike rental.
Experiences over Product
The popularity of experiential shopping is continuing to increase. Retailers and retail parks are building non-core concessions and entertainment concepts, turning one-off 'impulse' visits into 'destination' shopping experiences.
Consumers' lifestyles are getting busier, free time is becoming more valuable, and consumers expect retailers to fit around their routines. Our customers want their car or bike fixed as quickly as possible, at a time and place that suits them.
Less Brand Loyalty
Online searching and comparison is challenging traditional notions of brand loyalty. Alternative products offering better value or convenience can be identified within seconds, making brand loyalty harder to earn and maintain without possessing a compelling unique selling point.
Personalisation is an important way of standing out from the vast array of competitors. Enabling customers to feel valued through personalised communications or products is a good way to build strong relationships and drive loyalty.
New Post-COVID-19 Trends
Healthy Living and Exercise
During the COVID-19 lockdown, maintaining a healthy lifestyle was encouraged via healthy eating and daily exercise, in particular walking, running and cycling outside, along with home workouts. UK consumers are likely to continue this trend, continuing to put their health first.
Whilst the presence of COVID-19 continues, the public will likely carry on avoiding busy places such as restaurants, pubs and forms of public transport. As the UK's largest provider of cycling and motoring products and services, Halfords is well placed to help the UK public move around in the most safe, clean and economical way possible.