The building and home improvement market
Rautakesko's building and home
improvement store chains K-rauta, Rautia,
Byggmakker and Senukai serve both
consumer and professional customers.
Consumer customers mainly comprise
home builders, renovators and interior
decorators. Important professional customers
include construction companies,
the manufacturing industry and public
institutions. Rautakesko aims to be the
leading service provider in the building
and home improvement trade.
In terms of its chains' sales, Rautakesko
is one of the five largest companies in
the European building and home
improvement market. The principal European
competitors operating in Rautakesko's
market area are Castorama (Kingfisher
Group), Leroy Merlin (Groupe Adeo),
OBI, DT Group (Wolseley Group), Bauhaus
and Hornbach.
The total retail market of this sector in
Rautakesko's operating area amounts to
some €17 billion. It is estimated that the
overall market change in the 2008 building
and home improvement trade in
Estonia and Latvia was -15%, and in
Norway, Sweden, Finland and Lithuania
between -5% and 0%. The increase in
the Russian market is estimated at over
15%. The main reason for the decrease in
demand has been the decline in construction.
Falling prices of wood materials
and basic construction supplies in particular
have also contributed negatively.
Retail sales of Rautakesko's chains
totalled €3,616.1 million (incl. VAT) in
2008.
Finland
The Finnish retail market in the building
and home improvement sector totals
some €4.0 billion (Finnish Hardware
Association, DIY) and declined by 0.9%
in 2008 (Finnish Hardware Association,
DIY). The
In Finland, Rautakesko operates the
K-rauta and Rautia retail chains and
Rautakesko B-to-B Service which serves
construction companies, the manufacturing
industry and other nationwide and
regional professional customers.
The K-rauta chain consists of 42 stores,
with some 66% of sales going to consumers.
The Rautia chain consists of 102
stores. The emphasis in the sales structure
of Rautia is more on basic building
products. Sales to consumers account for
about 64% of total sales. All Finnish
K-rauta and Rautia stores are run by
retailer entrepreneurs. 47 of Rautia stores
operate as combined Rautia-K-maatalous
stores, which are also engaged in the
agricultural trade.
The combined sales of the K-rauta and
Rautia chains, Rautakesko B-to-B Service
and
Sweden
The Swedish building and home
improvement market totals some €4.0
billion (SCB, HUI), down by 5% in 2008
(HUI).
At the end of 2008, Rautakesko had 19
K-rauta stores of its own and one
retailer-owned store in Sweden. Retail
sales of K-rauta stores in Sweden totalled
€233.5 million (incl. VAT). Rautakesko's
market share is about 4.5% (own estimate).
Private customers account for around
85% of K-rauta clientele. Principal competitors
are Bauhaus, Byggmax, DT Group
(Beijer, Silvan and Cheapy), and local
speciality stores.
Norway
The Norwegian building and home
improvement market totals some €5.2
billion (TBF), down by 0.1% in 2008 (TBF).
In Norway, Rautakesko owns Byggmakker
Norge AS, which manages the
Byggmakker chain of 120 building and
home improvement stores, 18 of which
are owned by Byggmakker. Other stores
within the chain are owned by retailer
entrepreneurs who have chain agreements
with Byggmakker. Retail sales of
the chain's stores totalled €1,117.9 million
(incl. VAT) in 2008. Rautakesko's market
share in Norway is about 18% (own estimate).
More than half of all sales are to
professional customers. Rautakesko's
competitors are Monter/Optimera (Saint
Gobain), Maxbo and Coop.
Estonia
The Estonian building and home
improvement market totals some €0.38
billion (own estimate) and in 2008 the
market decreased by 15% (own estimate).
Rautakesko has eight K-rauta stores and
a nationwide network of wholesale outlets
in Estonia. Retail sales of
Latvia
The Latvian building and home improvement market totals approximately €0.5 billion (CSB), a decrease of 15% in 2008 (CSB). Rautakesko has eight K-rauta stores of its own and two K-rauta partner stores in Latvia. Retail sales of K-rauta stores totalled €86.8 million (incl. VAT) in 2008. Professional customers account for some 43% of all customers. It is estimated that Rautakesko's market share in Latvia is 16% (own estimate). Rautakesko's competitors are Depo DIY, Tapeks/Aile and Kursi.
Lithuania
The Lithuanian building and home improvement market totals some €0.6 billion (own estimate) and it was at the same level as in the previous year (own estimate). In Lithuania, Rautakesko has the majority shareholding in UAB Senuku Prekybos centras, which is the market leader in Lithuania with a share of about 25%. The Senukai chain consists of 15 stores of its own and 76 partnershop stores. Senukai's retail sales totalled €532.5 million (incl. VAT) in 2008. Professional customers account for some 42% of all clientele. Senukai sells to both consumers and business customers. Senukai's competitors include local building supplies outlets and speciality stores.
Russia
The building and home improvement
market in the St. Petersburg area totals
some €1.0 billion (own estimate), an
increase of 15–20% in 2008 (Ros Business
Consulting and own estimate).
There are nine K-rauta stores in St.
Petersburg and their retail sales totalled
€239.8 million (incl. VAT) in 2008. Professional
customers account for some 36%
of all clientele. Rautakesko's market
share in the St. Petersburg area is about
15% (own estimate). Rautakesko's competitors
are Maxidom, Metrica, OBI, Castorama
and Leroy Merlin.
Belarus
The building and home improvement market in Belarus totals some €1.3 billion (own estimate). OMA, the company acquired by Senukai in Belarus in July 2007, has three stores. The market share of OMA is about 5% of the total market (own estimate) and its retail sales amounted to €84.3 million (incl. VAT) in 2008.
Strong chain concepts
Rautakesko's operations are based on
strong chain concepts, efficient sourcing,
and the best practices, which are duplicated
internationally. Rautakesko operates
in the background of the chains,
combining their category management,
purchasing, logistics, information system
control and network improvements. The
synergy benefits and economies of scale
achieved enable the company to offer
products and services to customers at
competitive prices.
K-rauta is Rautakesko's international
concept. K-rauta operates in Finland,
Sweden, Estonia, Latvia and St. Petersburg,
Russia. The renewed K-rauta concept
focuses on wide selections, total
solutions planned to make customers' life
easier and a good price-quality ratio. The
widening of the traditional building and
home improvement concept has also
expanded the clientele: about one third
of all customers are women. The concept
has succeeded in combining the service,
selections and business models for consumers,
builders and professional customers.
Overall, the K-rauta chain's competitive
advantages include larger indoor
and outdoor stores than those of its
competitors.
Rautia is the largest building and
home improvement store chain in Finland.
Its selections are targeted at builders,
renovators and building professionals
in particular. Key competitive advantages include comprehensive customer
service, knowledge of the local market
and the cooperation network. Many
Rautia stores also complement their
range with agricultural items.
Byggmakker is the largest building
and home improvement store chain in
Norway. The chain's principal business
model is retailer entrepreneurship. Special
strengths include sales of building
supplies and knowledge of professional
customers. The Norwegian concept has
undergone a reform and 25–30 Byggmakker
stores are annually refurbished
to comply with the new concept. The first
large full-service Byggmakker outlet of
the new type was opened in 2008.
The Senukai chain is the market leader
in Lithuania. The chain also incorporates
the Mega Store concept, which offers customers
just about every product related
to building and living at its stores of over
20,000 m2.
Rautakesko B-to-B Service operates
in Finland. Its customers include nationwide
construction companies, the manufacturing
industry and other professional
customers. Rautakesko B-to-B Service's
strengths include close cooperation with
the network of Finnish K-rauta and Rautia
stores through which a significant part
of deliveries are made.
Year 2008
Rautakesko's net sales totalled €2,518
million, representing a decrease of 0.8%.
Net sales in Finland amounted to €882
million, down by 3.0%. The net sales of
subsidiaries in other countries totalled
€1,636 million; the increase was 0.5%.
Foreign subsidiaries accounted for 65%
of Rautakesko's net sales.
Rautakesko's operating profit excluding
non-recurring items was €53.3 million,
down by €62.6 million. Rautakesko's
investments totalled €121 million, with
investments outside Finland accounting
for 80.1%.
Strong reforms in the store network
continued in 2008. In Finland, eight new
stores were opened, of which two were
replacement investments. In other countries,
a total of 13 new stores were opened,
of which one was a replacement investment.
In Finland, new
In Sweden, new K-rauta stores were
opened in Stockholm and Göteborg, in
Estonia in Võru, Rakvere and Kuressaare,
in Latvia in Rezekne, and in Lithuania in
Klaipeda. In Russia, a new store was
opened along the Peterhof Highway, in
the Krasnoselskiy district and in Norway
Byggmakker opened a new type large
full-service store in Trondheim.
In 2008, Rautakesko actively sought
synergy benefits in order to develop and
improve the efficiency of its international
operations. In October 2008, Rautakesko
signed a partnership agreement with
tooMax-x Handels GmbH, a DIY purchasing
alliance. Thanks to the expanding
international purchasing cooperation,
Rautakesko is able to provide an increasingly
comprehensive and competitively
priced selection of products for the customers
of its store chains. Rautakesko's
partnership in tooMax-x made it the
third largest European sourcing channel
for home building and interior decoration
items.
Building the international logistics
network is part of Rautakesko's strategic
development. Itella Logistics was chosen
as Rautakesko's international logistics
partner. The cooperation agreement
signed in November first extends the
operation to Norway and Sweden, and
subsequently to other Rautakesko's operating
countries in the Baltic countries
and Russia.
Best Practice Retail Solution (BPRS) is
Rautakesko's business harmonisation
project, which aims at introducing uniform
business models and retail store
information systems in the company's
various operating countries by the end
of 2011.
The Rautia store concept was renewed
in 2008. The aim is to renovate the current
store network to comply with the
new concept within the next five years.
A new kind of business model for professional
customers was piloted with the
help of Rautakesko's Cello. The online
service will improve the purchasing efficiency
and speed of construction companies
and widen the choice available to
customers. Cooperation targets with VVO
were set in 2008 and enhancement of electronic operations in the B-to-B business
will continue in 2009.
In September 2008, K-rauta and
Finndomo Oy signed an agreement on
starting the sale of Finndomo's one-family
houses at K-rauta stores in Russia. The
first point of sales was opened in K-rauta
Rustaveli in St. Petersburg. Finndomo
built twelve one-family houses on
Russia's first housing fair area in St.
Petersburg.
Responsibility
In 2008, Rautakesko focused strongly on
the implementation of the K-environmental
store system and made a decision
to incorporate the system into all
chains' business concept during the year
2009.
Rautakesko and its chains promote
energy-efficient and healthy living. Rautia
published a guidebook supporting
these targets to help builders and renovators
of one-family houses or holiday
homes.
Rautakesko has been cooperating with
the Pulmonary Association Heli since
2005. The K-rauta and Rautia chains have
supported the renovation of mouldaffected
one-family houses by providing
the required supplies for interior decoration,
sanitary areas and ventilation free
of charge. During the years 2009 and 2010
cooperation will focus on drawing up
renovation guidelines and training sales
people of the K-Group's building and
home improvement stores.
Fredrik Flygare, K-rauta AB's HR Manager,
was voted the Swedish HR Manager
of the Year. The recognition was given by
Market magazine, Svensk Handel (the
Swedish Trade Federation), which is the
trading sector interest group, and Retail
Knowledge.
Objectives
Rautakesko continues to strengthen the
present store network. In 2009, three
new stores will be opened in the Moscow
area. Two new stores will open in Sweden,
and one in Estonia, Latvia and
Lithuania each. Three new K-rauta stores
and one Rautia-K-maatalous store will
be opened in Finland.
Cooperation with tooMax-x will
increase Rautakesko's purchasing efficiency.
By the end of 2010, most of the
company's purchases from the Far East
will take place through this partnership.
In line with the cooperation agreement
made with Itella Logistics, Rautakesko's
international logistics network will first
expand to Norway and Sweden, and after
that to other Rautakesko's operating
countries in the Baltics and Russia.
During 2009, the Best Practice Retail
Solution, Rautakesko's most important
project that aims to a uniform business
model, will proceed to cover besides
Norway also Russia, Sweden, Estonia and
Latvia.
Customer purchasing behaviour and
consumption habits are becoming more
and more versatile. Besides traditional
shopping in physical stores, the use of
the Internet as a channel providing
information and shopping sites will be
emphasised. New international service
providers enter the market and new
business models arise. The importance
of energy efficiency, environmental values
and responsibility in consumers'
decision-making will increase.
Interior decoration, renovation and
building repair will gain more importance.
Growing product groups include
above all interior decoration, yard and
garden supplies. Demand for various
services, such as design, transport and
assembly, is expected to increase further.
The new K-rauta store concept focuses
on interior decoration and gardening.
Product groups and categories are presented
in a centralised display area close
to desks providing service and design
assistance. More comprehensive product
information and signage facilitate and
increase the efficiency of self-service.
Online services support the customers
looking for information and making decisions
in their planning and purchasing
process.
