Carpet shop sector trends

(last updated July 2019)

What has been happening in the carpet sector

The amount of money that people spend on carpets and floor coverings is affected by the state of the economy and the housing market. According to government statistics, consumer spending on carpets and other floor coverings increased steadily throughout the first half of the 2000s, driven by the booming housing market, and peaked in 2007. The slowdown in the economy and slump in the housing market following the financial crisis in 2008 meant that expenditure then fell throughout the rest of the decade and remained stagnant in the opening years of the 2010s. Sales of carpets, which had been falling steadily since the mid-1990s, fell during the recession from £1.2bn in 2008 to £968m by 2011. There were no real signs of the market picking up until mid-2015 as consumers gained confidence and household incomes returned to pre-crisis levels. That, and a more buoyant housing market, led to expectations that carpet sales would grow. However, the financial recovery slowed in the second half of 2015 and into 2016, and a great deal of economic uncertainty followed the vote in June 2016 to leave the EU.

Despite the economic uncertainty, figures for the second, third and fourth quarters of 2016 indicated that consumer spending held up. However, confidence in the economy, which started to decline towards the end of 2016, continued to fall in 2017 and was given a further knock by the election in June resulting in a hung parliament. Inflation increased during 2017, putting pressure on consumers' disposable income, and property transactions, which were reduced during the second half of 2016, weakened further during 2017 due to increasing inflation and uncertainty about the economy. The size of the floor covering market fell again in 2017. In January 2018 Carpetright issued a profit warning after what they described as a dismal start to the year because of the squeeze on people's incomes and a dip in consumer confidence and activity. As a result, their shares plunged. There was little or no growth in the sector during 2018, and 2019 is forecast to remain the same as consumers continue to be reluctant to commit to purchases of big ticket items.

In recent years, the large carpet chains such as Carpetright made it difficult for independent retailers to compete at the cheaper end of the market. As a result, many independent carpet retailers moved upmarket, hoping to attract more affluent customers (often older people) looking to upgrade their interiors. This turned out to be a wise choice as Carpetright itself got into difficulties when its 'pile it high and sell it cheap' strategy failed to recover from the 2008 recession, with consumers finding cheaper deals online. Their turnaround strategy has been to improve the customer experience by modernising its shops and improving its range of carpets and floor coverings. As a result, profits started to recover, with sales of premium carpets and laminate flooring performing particularly well. Poor trading results in the period after Christmas 2017/18 were followed by the announcement in June 2018 of a £71m loss for the latest year. To some extent this was due to profitability for the year being affected by the poor post Christmas results since the weeks following Christmas are usually the busiest trading period of the year. Along with many other retailers, including House of Fraser and Mothercare, Carpetright had to agree a company voluntary arrangement with its landlords under which rents were reduced on less profitable stores and loss making stores were closed.

Carpet shops report that several factors affect their performance including:

  • reduced consumer confidence due to political and economic uncertainty so that customers look for cheaper ranges and spend less overall
  • the state of the housing market
  • anything that reduces footfall, such as bad weather, competition from online retailers and so on
  • increasing business rates

Total expenditure on carpets has been restricted by falling store prices in recent years and there's also some speculation that because property prices have gone up so much, new house buyers are putting all their money into the purchase and don't have any left over for improvements. Due to the fall in the value of the pound after the vote in June 2016 to leave the EU, the cost of imported goods, including floor coverings, increased. Since expenditure on floor coverings is likely to fall as inflation reduces consumers' spending power, these increases may have to be absorbed, putting further pressure on margins.

Alternative floor coverings

Until relatively recently, carpet was the standard floor covering for almost every room in the house and although it's still widely used, with carpet accounting for 57% of all floor covering sales, other floor coverings have gained in popularity. Stripped floorboards with rugs are a popular choice for many, as is laminate or wood-strip flooring. Tiles are now a common choice for kitchens and bathrooms and high traffic areas like hallways.

Although these trends have eroded sales of carpets to a certain extent, they present new opportunities for retailers who are prepared to keep up to date with developments and offer a range of alternative floor coverings.

Keep up to date with the carpet retailing sector

The National Institute of Carpet and Floorlayers (NICF) and the Contract Flooring Association (CFA) are the main organisations representing the floor coverings supply and fitting industry in the UK. Visit their websites for more information about the services they offer to members.

Useful trade journals include Contract Flooring Journal.

Trade shows

You will be able to get a lot of useful information at trade fairs such as The Flooring Show. You will be able to meet manufacturers, suppliers and importers and plan your future stock buying.

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