DIY stores: Price increases and supply chain problems are depressing the industry

business Rising prices in the hardware store

“We don’t know how far customers are willing to go”

The number of monthly price adjustments in hardware stores has increased tenfold The number of monthly price adjustments in hardware stores has increased tenfold

The number of monthly price adjustments in hardware stores has increased tenfold

Source: pa / dpa / Jonas Güttler

In the first year of Corona, Germans flocked to the hardware stores. In 2021, the picture changed: sales collapsed, consumers now have to prepare for massive price increases. There are two main reasons for this.

WWhen publicly traded companies report balance sheet news outside of the regular schedule, it often bodes ill. Because mostly it is about profit warnings. At the hardware store chain Hornbach, however, it was quite different recently.

Because the business development of the industry giant from Bornheim in the Palatinate is above expectations, in December the Management Board raised the forecast for sales and operating profit in the 2021/2022 financial year, which runs until the end of next month.

That’s amazing – the industry as a whole leaves Hornbach far behind. Because the big hardware store boom after the start of the pandemic, loosely based on the Hornbach slogan: “There’s always something to do”, has evaporated in this country.

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Bad summer weather, a lack of materials, delivery problems and the long lockdown last spring, which, unlike in 2020, also paralyzed the hardware stores in most federal states, have caused the industry to crash.

The trade association for DIY, building and gardening (BHB) reported that sales in the first three quarters fell by almost twelve percent to 15.4 billion euros compared to the previous year. According to the industry, the months of October to December were not exactly rosy either, with reference to noticeable frequency losses due to the 2G access rules in individual federal states.

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“2020 went very, very well. In 2021 the situation changed,” says BHB CEO Peter Wüst in an interview with WELT. Still, he is not dissatisfied.

“You can’t look to 2020. That was a completely exceptional year,” explains Wüst. The comparison with the pre-crisis level is decisive. “And in 2021, despite all the adversities, we are still above that. So the development is positive, even if it doesn’t look like it at first glance.”

No good omens for 2022

But does it stay that way? The signs are not particularly good for 2022. At least that is what the forecast by Klaus Peter Teipel, the managing director of the management consultancy of the same name, which specializes in the DIY sector, says. He sees a “difficult year with ups and downs” coming for the industry.

“Rising energy prices and high price increases for everyday products are significantly reducing household budgets,” says Teipel. This will also have a significant impact on the consumer climate overall. At the same time, he sees ongoing major problems due to disrupted supply chains. And that will result in corresponding price adjustments.

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BHB boss Wüst does not contradict this either. “It’s getting more expensive in the hardware store, consumers have to adjust to that,” announces the association representative. And at high frequency. “There are currently 30,000 to 40,000 price adjustments per month,” says Wüst. In normal times, at most 3000 are usual.

This worries the hardware store operators. “We are currently seeing a high level of price dynamics, and we do not know how far customers are willing to go,” René Haßfeld, CEO of the DIY chain Toom from Cologne, had to admit at the last online industry conference.

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Advisor Teipel encourages at least in one respect. “A further increase in larger DIY projects in the context of energy saving and modernization measures can be expected for 2022.” DIY stands for “do it yourself”, i.e. production and work at home. This is also shown by the consistently high demand for craftsmen, according to Teipel. All in all, he forecasts a slight minus for the hardware stores in the current year.

Invest early

Industry heavyweight Hornbach wants to do better than the market again. The chain draws the necessary confidence from its online activities. The company prides itself on having invested early and heavily – we are talking about around half a billion euros – in online retail and at the same time in linking online and brick-and-mortar business.

This is now paying off in digital sales and market shares, not least driven by the pandemic. Around 20 percent of Hornbach’s global group sales of EUR 5.5 billion in the past financial year came from online business, including the “reserve and collect” option.

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