Homeware sector hit by superstores

THE financial collapse of Courts could be just the first of many in the £28bn homeware sector as Swedish giant Ikea and the supermarkets begin to squeeze the life out of their rivals.

A major new report warns of a 'significant shakeout' in the market as the furniture and bed retailers, who have struggled despite the retail boom of the past two years, face a downturn in the economy.

The report, due to be unveiled by Allegra Strategies, also pans the poor quality service of the traditional mass-market players and claims many simply do not know who they are targeting.

Ikea has a 3.3% share of the homeware market, but this is enough to top the sector. Allegra warns that if the Swedish player gets the expansion programme it wants, it could be curtains for its competition.

Project director Chris Garner said: 'There will be a shakeout and it will be significant. Imagine what could happen if Ikea got the same market share that Tesco has in food retail.'

Courts, the self-styled biggest furnishing and electricals specialist in Britain, called in the administrators on Monday after drowning in debts of around £280m.

Allegra's warning will spark fresh fears in the City about the likes of MFI, Homestyle and Airsprung, which are struggling for sales as customers cut back. MFI yesterday revealed that £30m worth of orders had been cancelled due to problems in its supply chain over the past nine months.

Allegra adds that the pressure on the poor performers could become intolerable as the housing market turns south, rents continue to rise and Tesco and Asda sell ever more soft furnishing and diningware. It claims that only John Lewis, DFS and Ikea, whose top three stores in the world are in Britain - Brent Cross, Croydon and Lakeside Thurrock - currently have the 'clarity of proposition' to succeed.

Garner said poor customer service and waits of up to 16 weeks for delivery were the main bugbears of homeware shoppers. He added that the vast majority of operators rely on the 'drug of discounting' - huge, seasonal price cuts - to pull shoppers into the retail parks.

'Courts was selling sofas at anything from £400 to £2300. It is the most obvious example of what is going on. Customers cannot make any sense of the brand and what is being made available to them,' he said.