Engaging the next generation.
Halfords has a unique role to play for UK and Irish consumers. Through its Retail and Autocentres businesses the Group can exploit a number of diverse growth opportunities. With a special place in the heart of consumers, Halfords is a powerful brand with a great heritage and strong brand equity.
Halfords Retail differentiates itself in the markets of automotive, cycling and outdoor leisure across its three strategic pillars of Supporting Drivers of Every Car, Inspiring Cyclists of Every Age and Equipping Families for their Leisure Time.
Through its retail and autocentres businesses the group can exploit a number of diverse growth opportunities.
With 465 locations, Halfords Retail has a significantly favourable market position with stores being located less than 20 minutes driving distance away from 90% of the UK population. Unique offers such as wefit create convenient local solutions. Halfords.com, in combination with the stores, their expert colleagues and specialist product ranges, creates a true omnichannel advantage for the business.
Over the past year Halfords' markets have been either relatively flat or, in categories such as cycling, in strong growth. It's difficult to segregate how much of the market performance was down to changing consumer behaviour, an improving economy or even the weather; however, the sustained growth in the popularity of cycling and advantageous technological changes in the Auto Aftercare category have and will benefit Halfords in the future.
Supporting drivers of every car
After a number of years of decline, UK car mileage rose in 2013, coinciding with the highest number of new-car registrations for five years. According to the SMMT, 2,264,737 cars were registered in 2013, up 10.8% on 2012. The UK is consistently Europe's second-largest car market and was the only one to grow continually throughout 2013.
The number of cars on Britain's roads also continued to grow whilst the average age of a UK car increases each year. Technology changes progressed with around 50% of new cars coming fitted with stop-start batteries. Although the Sat Nav market remains in structural decline, technological and regulatory factors have favourably impacted the Auto Aftercare market. For instance, European Union directives regarding CO2 emissions and road safety mean that more and more cars will come fitted with daylight and automatic lights, along with flat wiper-blade functionality.
With bulbs, blades and batteries ("3Bs") becoming increasingly complex to fit on new vehicles and the DIY approach to fixing cars shrinking with each generation of new drivers, the 3Bs fitting market presents Halfords with a unique opportunity to grow its current low market share. Fitting services were in significant demand throughout FY14, augmented by an enhanced marketing approach and expert service with Halfords uniquely placed to provide a value and hassle-free Do It For Me ("DIFM") level of service that more and more drivers are set to need.
Since the acquisition of Autocentres, Halfords has also consolidated and strengthened its position in the c.£9bn servicing market. That market was made up of nearly 40,000 outlets in 2008, dropping to less than 37,000 in 2013 as the market continues to consolidate. Halfords can and does exploit this opportunity using its scale-based business model, expanding its number of Autocentres each year.
In the Car Enhancement category the Sat Nav market shows no signs of slowing its sharp decline. However the Government remains committed to a digital future for radio with a potential switchover in the medium term. With Halfords occupying most of the in-car digital-radio market in 2013, this could have a material impact on the category for the business, though not in the short term. Halfords also made gains in audio equipment thanks to reduced competition on the high street and with the digital switchover on the horizon, this looks set to continue. In fact no other UK-wide business can match Halfords' skillset and price on either Audio fitting or Sat Nav set-up and demonstration.
Matching product presentation to customer segment.
Inspiring cyclists of every age
Halfords is the largest player in the UK cycling market, reflecting its scale positioning and also the successful extension of its ranges into the premium segment of the cycle market in recent years. This included the introduction of the Pinarello brand to the range alongside a successful complete refresh of the Boardman series. The business also materially expanded its offer in the fast-growing Cycling Parts, Accessories and Clothing ("PACs") market during the year.
Within a rapidly growing cycle market halfords has strengthened its core position whilst penetrating key opportunities.
The summer of 2013 saw better weather conditions year on year, despite the fact that the October 2013 to February 2014 period was one of the wettest on record. According to Mintel, road bikes saw the strongest growth in the past year, reflecting the success of British riders in the Tour de France and the growth of UK road-riding events, known as sportives. Before Sir Bradley Wiggins' famous win in Paris in 2012, the British Cycling Association had around 42,500 members; by November 2013, it had grown to 84,250.
The number of people cycling keeps growing against a continuing trend of declining participation for other major sports. As a result, Mintel expects up to 46% growth in the value of the Cycle market between 2013 and 2018 (as a best-case scenario).
In 2013, a record number of certificates were issued by the Cycle To Work Alliance, a group of leading providers of the scheme, including Halfords. Around 100,000 new users were recruited to the scheme in 2013.
Road safety remains the greatest concern for potential UK cyclists. However, public bodies are increasingly looking to invest in Cycling infrastructure, particularly given the benefits greater participation can bring in terms of not only public health but also reduced congestion and pollution.
It is clear that smartphones and wearable technology play an increasingly important role for cyclists; this trend will only accelerate. In the year Halfords introduced a compelling range of wearable-fitness products from brands such as Jawbone and Garmin. A new Halfords Bikes Miles app allows cyclists to earn points for offers online and in-store, join teams, log rides and reach milestones.
Within a rapidly growing cycle market Halfords has strengthened its core position whilst penetrating key opportunities across premium, PACs, female, junior and a host of others. With a strong brand, increasingly-skilled expert colleagues, a growing range of products and brands, an extensive national network of stores being refreshed and a true omnichannel offer, Halfords' credibility as a place for Inspiring Cyclists of Every Age is beyond doubt.
Equipping Families For Their Leisure Time
This third category pillar occupies the smallest element of Halfords Retail sales. It is spread across several fragmented markets, which can be grouped under the umbrella of camping and outdoor leisure, while also encompassing a wide variety of strategically chosen impulse products. The range changes throughout the year build in a vital element of seasonality.
Own brand Urban Escape tents.