Our Marketplace

Our Motoring and Cycling products segments remain core but we have a greater market opportunity in growing our existing services business. We will evolve into a consumer and B2B services-focused business, with a greater emphasis on motoring.

Market Opportunity

COVID-19 affected our markets in the short term however the resilient services markets remain the best growth opportunity for our business, particularly motoring services which are delivered through Retail stores, Autocentres or via our Mobile Expert vans. The past year has shown that, whatever the circumstances, these services are an essential part of life in the UK and our status as an essential provider highlights our role in keeping the UK moving. Even during the pandemic, the opportunity for us to take further share in this market remains significant, with no clear market-leader and no single equivalent competitor.

The cycling market saw strong growth over the last 12 months and also gave us the opportunity to take share. Cycling services has seen a boost as customers dusted-off their old bikes rather than buying new ones when stock was limited and buying big-ticket items was financially more challenging. We are leading the market in electric mobility and are excited about the future of E-bikes and E-scooters which, when coupled with the booming mechanical bike market, shows how exciting the cycling market is for us. Along with the increased market opportunity, we have had significant success improving the returns of our cycling business, by rationalising our ranges, negotiating better buying terms and promoting more effectively.

Despite growth prospects being relatively lower in Motoring Products, this segment still contributes a high return and represents a significant part of the Halfords Group. We are excited about the new market opportunities, particularly those surrounding the UK shift to electric vehicles, and look forward to invigorating the markets in which we operate.

Retail Macro-Customer Trends

DIY to DIFM

Whilst the shift from 'Do It Yourself' to 'Do It For Me' is continuing to progress over time, with more people spending time at home and less able to go out, over the last year we have seen an increase in people searching for DIY solutions and 'having a go' at home. As the shift to electric mobility accelerates and technology continues to advance; however, DIY solutions will be increasingly difficult to manage at home and DIFM will become the norm.

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Omnichannel Shopping

Modern consumers expect a seamless shopping experience across all channels and touchpoints. Our mission is to provide a best-in-class digital-led customer journey, that leverages all our digital and physical assets. Our locations are an important differentiator from online competitors, providing a convenient Click & Collect proposition and the delivery of services and expertise by our colleagues in stores and garages.

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Sustainability

The requirement for sustainable practices is now impacting all businesses in the UK, with COVID-19 bringing this to the forefront of consumers' thoughts. Consumers are increasingly expecting proactive policies on climate change, clean air, reduction of plastic waste and ethical recycling, and wanting to shop with a clean conscience. The impact that we are having on the world and the footprint we are leaving behind is starting to shape the markets of the future.

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Moving from Owning to Using

Economic, political and health crises have reduced consumer willingness to purchase 'big ticket' items. Particularly apparent among younger people, there is an increasing trend towards short and long-term renting rather than owning, evidenced by the increase in PCP schemes, car sharing initiatives and bike rental.

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Experiential Shopping

The popularity of experiential shopping is continuing to increase. Retailers and retail parks are building non-core concessions and entertainment concepts, turning one-off 'impulse' visits into 'destination' shopping experiences.

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Convenience

Consumers' lifestyles are getting busier, free time is becoming more valuable, and consumers expect retailers and service-providers to fit around their routines with on-demand services and friction-free interactions as standard. Convenience to them is not just about speed but about making their lives easier, even if this comes at an increased price. Our customers want their car or bike fixed as quickly as possible, at a time and place that suits them.

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Less Brand Loyalty

Online searching and comparison is challenging traditional notions of brand loyalty. Alternative products offering better value or convenience can be identified within seconds, making brand loyalty harder to earn and maintain without possessing a compelling unique selling point.

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Personalisation

Personalisation is an important way of standing out from the vast array of competitors. Enabling customers to feel valued through personalised communications or products is a good way to build strong relationships and drive loyalty.

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New Post-COVID-19 Trends

Healthy Living and Exercise

Maintaining a healthy lifestyle – both physically and mentally – has been brought to the forefront of consumers' minds over the last year with self-care, healthy eating and exercise being key ways in which people have coped during the pandemic. Outdoor exercise such as walking and cycling has been encouraged by the Government and health experts alike. We expect this trend to continue as we move out of the pandemic and into the new norm.

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Human Encounters

Customers are becoming more familiar with digital customer service interactions but want them to feel like in-person interactions. While customers understand many experiences will be digital, the in-person service with a smile will be essential to help brands stand out and be memorable.

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Key

  1. Inspire
  2. Support
  3. Lifetime

Motoring Market

Halfords Group addresses two distinct areas of the UK's highly-fragmented motoring market: Car Parts, Accessories, Consumables and Technology, and Car Servicing and Aftercare. From the perspective of the former, there is no single equivalent competitor selling all of our product ranges in physical locations, with many specialists and generalists now online only. In respect of the latter, there are over 30,000 garages in the UK, an estimated two-thirds of which are small independents.

Key:

  • Motoring products
  • Motoring services
  • Autocentres

>£3.5bn

Market size

20–25%

Our share

Forecasted Market Growth

Our Approach

Our strong heritage and brand mean that Halfords is a destination for consumers who want inspiration and support with their vehicles. We continue to make progress in our markets through investment in our stores and colleagues to help deliver innovative products and services to our customers when and where they want them. Whilst some of the traditional motoring product markets are in decline, there is opportunity for innovative, unique and differentiated products to be brought to market. Halfords is also seeing an increase in service-related sales as more people are preferring to have an expert fit or install products as opposed to performing it themselves.

Competitor Landscape

  • Limited number of specialists but a highly diverse and competitive set of retailers (e.g. Amazon) selling generalist product ranges.
  • Limited bricks and mortar competition.
  • Wholesalers and generalists moving into specialist retail markets with strong omnichannel offer.
  • Supermarkets and garage forecourts continue to sell a limited range of high-volume, high-margin products.
  • Independent garages offering car parts and associated fitting.

How We Differentiate Ourselves

Our heritage of over 125 years has established Halfords as a household name, with 90% of the UK population living within 20 minutes of a Halfords store. We have many outstanding strengths that differentiate us, notably our exclusive product ranges and our colleague expertise. Significantly, we have an established and growing ability to provide services on demand in-store.

>£9bn

Market size

2%

Our share

Forecasted Market Growth

Our Approach

The automotive servicing market is large and highly fragmented with no clear leader, and with only 2% share, there is significant opportunity for Halfords to grow. Increasing car complexity, accelerated by the transition to electric, is expected to drive growth in this market. Our goal is, by 2025, to operate from over 1,000 service locations in the UK and ROI, whether a Retail store, a garage or a mobile van. This will enable us to deliver customers the services they want at a location convenient to them. We will continue to invest in equipment and colleague training in order to remain at the forefront of technological changes. This will give us a competitive advantage in this fragmented market dominated by independent operators. Specifically, we have made significant progress in providing industry-accredited training to Autocentres colleagues in the servicing and maintenance of hybrid and electric vehicles, with most of our centres now capable of servicing these vehicles.

Competitor Landscape

  • Technological advancements limit scope for effective delivery by small independent garages.
  • Car dealerships expanding into used car servicing.
  • Some evidence of sales aggregation (e.g. My Car Needs A…) and mobile services entrants.

How We Differentiate Ourselves

Halfords has a unique ability to offer automotive services from a variety of locations – our Retail stores, garages and mobile vans. In our accelerated strategy, we announced an ambition to increase our services footprint to over 1,000 locations in the medium term, including 550 garages, 200 vans and our existing Retail stores. Via our Autocentres, Halfords Group offers great value and convenience for UK consumers of car servicing, repairs and MOT compliance. The strength of our brand and the scale of our store, garage and mobile van estate enables us to invest in the most up-to-date equipment and technology with the majority of centres now equipped to deal with electric and hybrid vehicle servicing. Our Halfords Mobile Expert vans deliver elements of car fitting and servicing, such as battery replacement, tyres and diagnostic checks, direct to the customer at their home or workplace. In addition, we pride ourselves on our B2B proposition in this market, having developed a strong Fleet business over a number of years and recent acquisitions mean we have an ever-growing presence in the commercial tyre market.

Market Trends Affecting the Motoring Market

COVID-19

Time horizon:

The number of cars on the road dropped to record levels as the first lockdown began with large swathes of the nation ordered to stay at home, impacting demand for motoring products and services. Conversely, the restriction of international travel has led to significant demand for Staycation products and services, such as roof racks, boxes and camping equipment.

Increasing Complexity

Time horizon:

Comparing a vehicle from even the turn of the century to now would show just how quickly technology has evolved in the automotive world. In the next 10 years, we see this trend accelerating to a point where maintaining vehicles is something that only those with access to specialist knowledge and equipment are able to do. Adding to this, the generation of DIY'ers is in decline and therefore the motoring market will shift even further away from selling car parts to selling services and solutions.

Electric Vehicles

Time horizon:

The shift to electric has accelerated in the last 12 months and we believe this will continue at pace, driven by Government policy, investment in charging infrastructure, and vehicle manufacturers' pledges to reduce their indirect emissions. Manufacturers have been investing in this technology for several years and will continue to do so as countries around the globe shift away from fossil fuels to a cleaner method of transport. New products and services will come to the aftermarket following the rise in Electric Vehicles ("EVs") on the roads.

Autonomous Vehicles

Time horizon:

Thinking further ahead, vehicles are likely to become autonomous with many trials already taking place around the globe. Companies such as Tesla are investing significant sums into autonomous vehicles and believe this to be the future of transportation. When technology advances sufficiently, and trials make it feasible to change Government legislation, these vehicles will change the motoring market and who the customer is, with subscription schemes replacing ownership as vehicles become too expensive for individual ownership.

Cycling Market

The cycling market is highly fragmented, with an estimated 2,500 bike shops in the UK, the majority of which are independently owned. Halfords Group is the market leader, with strong brand awareness in bicycles, parts, accessories and clothing.

Key:

  • Cycling products
  • Performance cycling
  • Retail cycling services

>£2bn

Market size

22-27%

Our share

Forecasted Market Growth

Our Approach

As the market-leading retailer in mainstream cycling, we are well positioned to serve the needs of the consumer. We do this by continuing to monitor market trends to keep up with customer demand, whilst also providing great value and convenience to customers. As an example, Halfords was the first major stockist of E-scooters and is leading the market with product range and nationwide service capabilities, this year having expanded our ranges to include own-brand E-scooters.

Competitor Landscape

  • Predominantly generalist competitors with own-label bikes (e.g. Decathlon, Argos).
  • Online penetration in mainstream bikes boosted significantly by COVID-19.
  • Physical service locations are important.
  • Cycle-to-Work continues to be an important driver.
  • Major sports retailers have diversified into cycling in recent years (e.g. JD Sports, Go Outdoors).

How We Differentiate Ourselves

Halfords Group boasts the biggest and most popular cycle brands in the UK – Carrera and Apollo. In total, approximately 80% of our bikes are own-brand, covering both children and adults at a wide range of price points. Our stores are conveniently located, and our online platform provides support and information to help customers choose the products and services they want. Our bike build proposition is leading the market with free 6-week checks and bike care plans to make sure our customers continue to stay safe whilst enjoying the great outdoors. Many customers take advantage of our Click & Collect offer, placing orders online via our website and picking up from a designated store at a time which is convenient to them. This also drives positive store footfall. Additionally, we are the market leader in the UK's Cycle-to-Work scheme, supporting sales and introducing new customers to our brand.

£1.1bn

Market size

6-7%

Our share

Forecasted Market Growth

Our Approach

From our top-end Boardman bikes to brands such as Specialized and Giant, we offer customers higher specification products via Halfords Retail and Tredz brands. Demand has been exceptionally high in the last year, boosted by COVID-19 impacts, and we worked hard to serve our customers with the products and services they needed. Tredz complements Halfords Retail well, giving access to a wider customer base and bringing even more brands into the Group proposition, with our passionate colleagues, across both retail brands, offering expert knowledge and advice to customers.

We are one of the UK's leading retailers in the E-bike market and our colleagues, both in-store and our customer support functions, are highly trained to help customers with advice, support and in-store servicing. Cycle-to-Work schemes continue to be important and Halfords, as the market leader, can help consumers get to work in a healthy and sustainable way, whether that's on a mechanical bike, E-bike or E-scooter – with the Tredz brand position complementing the strong own-brand offering within Halfords Retail.

Competitor Landscape

  • Predominantly branded bikes.
  • Traditional specialists and independents struggling but supported more recently with the increase in cycling awareness and participation.
  • Big brands selling directly to customers.
  • Online pure-play continuing to grow.
  • Physical service locations are important.
  • Cycle-to-Work is an important driver.

How We Differentiate Ourselves

Through Tredz, Halfords has a strong and increasing foothold in the performance cycling market. Offering products and services appealing to performance cyclists has contributed to growth in the overall number of customers and provided many with bikes and exercise equipment during the COVID-19 pandemic. Cycle-to-Work vouchers can also be redeemed through Tredz, which contributes significantly to the ongoing success of that partnership through offering a wide range of recognised cycling brands. Tredz has a strong online presence which differentiates it from the independent cycle shop community and helps the brand to stay relevant and competitive in a challenging market environment.

Market Trends Affecting the Motoring Market

COVID-19

Time horizon:

The cycling market boom over the last 12 months has been driven primarily by COVID-19 and the increase in people taking up cycling as a way of exercise, days out with the family or as an alternative means of commuting. As we look to the future and move out of the pandemic, we anticipate a proportion of those who have taken up cycling will continue, leading to sustained demand for replacement bikes, accessories and servicing.

E-mobility

Time horizon:

Electric mobility was an area of the cycling market already seeing significant growth before the pandemic. Over the last year, E-bikes have continued to be in demand, either as a new and exciting way of travelling, an alternative to public transport or car, or a way for those who are unable to cycle a mechanical bike to access the benefits of cycling. We firmly believe that E-scooters will revolutionise urban mobility and we continue to lobby the Government to change the laws around this mode of transport.

Sustainability

Time horizon:

From second-hand bikes and bikes made using recycled parts, to 'Green' living and clean air zones, we know the importance of cycling to people who are conscious about their environmental impact. As even greater focus is placed on reducing our environmental footprint, we expect consumers to look to cycling and eco-friendly solutions even more.

Government Investment

Long term

Time horizon:

The Government's £2bn Cycling and Walking Plan for England announced in the summer of 2020 is a bold vision that, if implemented, will have a material impact on the cycling market. Examples of initiatives include investment in infrastructure to improve safety and the convenience of cycling, the Cycle-to-Work scheme expanding to accommodate E-bikes, and the creation of clean air zones in many cities across the UK. Over time, this investment will be critical in creating sustainable growth in the cycling market.