Following July’s news that Carpetright had fallen into administration, Retail Systems news editor Alexandra Leonards investigates what is driving a dip in the UK homewares market and whether there was anything the retailer could have done to fend off the administrators in such a challenging trading environment.

After 36 years in business, Carpetright last month brought in the administrators. The company had been materially loss making for several years, with its owner accruing significant debt over this time. Once one of the largest British retailers of carpets and other floor coverings, the business has left its customers, suppliers, and landlords hundreds of millions out of pocket.

While Tapi Carpets and Floors Limited – set up by Carpetright founder Lord Philip Harris and his son Martin as a rival to the company – later announced it would rescue the brand and IP along with 54 stores, the majority of locations will see their doors permanently closed, with over one thousands jobs lost.

The company’s failure marks the latest sign of trouble in the homewares market, with the knock-on impact of its collapse evident in early August when The Floor Room, which traded through concessions in 34 John Lewis stores and was historically operationally reliant on Carpetright, also fell into administration.

Carpetright’s demise is one of many such high-profile collapses in the UK homewares retail sector in recent years, underlined by the story of the nearly 94-year-old Wilko entering administration last year – putting over 12,000 jobs at risk – as well as recent figures showing a dip in sales for home improvements staple Wickes.

This is not a phenomenon exclusive to the UK. Across the Atlantic, big-box retailer Bed, Bath & Beyond – previously a household name among US shoppers and a one-time meme stock for traders – shuttered its stores across the country in July 2023 after filing for Chapter 11 bankruptcy two months prior.

A market in crisis?

The latest homewares figures from BDO show total like-for-like sales were down by 0.3 per cent in July 2024 compared to a positive base of 0.9 per cent during the same period 12 months prior. Lower demand for homewares, particularly big-ticket items, has been an ongoing trend, largely driven by the cost-of-living crisis, high inflation, and the burst bubble of inflated sales during the height of the Covid-19 pandemic. But whether the collapse of Carpetright was always a foregone conclusion, driven only by the market’s current difficulties, is up for debate.

“I wouldn’t necessarily say that the market is in crisis, but it is certainly going through a challenging trading period,” Peter Ahye, chief executive of retail consultancy Hexagon Consultants tells Retail Systems. “While ups and downs are typical of the market, the massive spike in home improvement spending during the Covid-19 pandemic, which has since diminished, has meant that brands within the sector are experiencing a more significant downturn post-pandemic than experienced previously.”

He says that the ongoing cost of living crisis in the UK had a detrimental impact on Carpetright, resulting in much slower customer demand.
“Consumers are being wiser and more considered when it comes to spending, meaning home improvements are now often at the bottom of the list in terms of spending priorities, and I wouldn’t expect this to change until consumer confidence in the economy improves,” continues Ahye.

Carpetright’s cyber-attack

But the consultant also points to the cyber-attack experienced by Carpetright in April, which put the company’s online ordering system out of action. He says that this created massive challenges for the brand in terms of its online security protocols, with the company unable to trade across its 400 UK stores for nearly a week.

“In light of the tough trading period, it appears that Carpetright wasn’t well enough prepared for the challenge,” says Ahye. “It operated in a difficult market and will have secured funding as part of its capital structure that it has defaulted on, meaning lender confidence has been compromised, so the funding will have been withdrawn.”

When Carpetright was subsequently forced into administration, Tapi Carpets, which managed to preserve 350 of the retailer’s jobs, expressed that it was “desperately sad” not to have been able to save more of the business and customer orders. But the company said that it had “quickly established that buying the entire business was unviable” due to the company’s loss-making and the high debt accumulated in recent years.

Adapting to market conditions

Guy Utley, founder and executive creative director at digital brand experience agency TALL Guy Utley, which works with the likes of Lego and SharkNinja, says that Carpetright would have benefited from being more agile and adapting to changing market conditions.

He suggests that homewares companies that are struggling in the current market could expand, enhance customer service, increase online shopping experience, and improve the overall digital experience.

“Retailers must be more willing to respond to consumer trends while keeping a recognisable and attractive brand,” he continues.

Utley says that companies that invest in understanding and adapting to consumer needs, whilst also embracing digital innovation, are more likely to thrive, even in volatile markets.

Dunelm: bucking the homewares trend

Dunelm, for example, is one UK homewares and furniture brand that has been successful despite the more difficult trading environment. The British home furnishings retailer announced in February a sales jump of 4.5 per cent across a six-month period, with total sales increasing to £872 million.

The company said that it had maintained a “tight grip” on costs which meant it could offset the impact of inflation against efficiency gains.

At the time, Dunelm’s chief executive Nick Wilkinson said that to address the period of difficult trading in the market, it was particularly important for the retailer to keep its customers front of mind by expanding its ranges, introducing new styles, and improving the experience across its store and digital channels.

TALL’s Guy Utley argues that Dunelm has been more successful compared to Wickes, for example – which posted an almost four per cent sales decline in its half year sales at the end of last month – is down to its strong market positioning, effective branding, digital strategy, and ability to adapt to consumer trends.

“Wickes' struggles may be tied to a less effective digital transformation, a product offering that does not follow trends, and challenges in brand differentiation,” continues Utley.

However, Ahye says that the main reason for this disparity is ultimately down to consumer spending.

“Brands like Dunelm have an attractive offering and value proposition that is currently favoured by consumers, while the average ticket price is going to be significantly less than at the likes of Carpetright,” he continues.

Was Carpetright’s collapse inevitable?

Though the relentless pace of inflation seems to be slowing down, the cost-of-living crisis is continuing to bite and consumers are far more likely to spend less in stores on smaller purchases, rather than splashing out on bigger, higher-value ticket items.

While Carpetright's collapse may have seemed inevitable given the challenging market conditions, a closer examination reveals that its fate was not solely determined by external factors. The contrasting fortunes of retailers like Dunelm highlight that success in the homewares sector is still attainable with the right strategies. Carpetright's downfall serves as a cautionary tale, emphasising the critical importance of digital transformation, agile response to consumer trends, and robust crisis management.

As the industry continues to evolve, retailers must prioritise adaptability, customer-centric approaches, and operational resilience to weather economic storms and thrive in an increasingly competitive landscape.

Ultimately, Carpetright's story underscores that in today's retail environment, complacency can be as dangerous as market headwinds, and innovation and adaptability are not just advantages, but necessities for survival.

Image credit: Lauraewart11

---