Author: Ashton Wenborn

For a product so heavily relied upon the world over, technological innovation in the car industry has moved at an almost glacial pace over the last century. Car manufacturers have made small and superficial changes to the capabilities of their vehicles every few years, but ultimately the product has always been the same: a gas-guzzling, manually operated form of private transportation.

However, many observers think that the next decade could see it change beyond all recognition. New technology, changing user habits, and a swathe of new entrants could dramatically change the face of an industry that has been dominated by a small number of firms for around a century.

In 1914, Henry Ford revolutionised the car industry by creating an assembly line that dramatically reduced the cost of vehicle production, and the market became mainstream. Suddenly cars became an essential part of everyday life throughout the world, revolutionising mass-transport. However, since then there has been little in the way of innovation, save for a few superficial concessions to comfort and speed. At the same time, cars have continued to spew toxic fumes into the atmosphere. With the world slowly coming round to the idea of cleaning itself up, the car industry has been challenged to develop a more sustainable method of operating.

Unprecedented challenges
The slow reaction to innovation by the industry comes at a time of considerable breakthroughs in technology. Many feel that it is outside influences that will really shake up the auto industry, and that the next few years could see a dramatically different market to what exists now.

New entrants into the market are sure to make waves in the auto industry

A number of recent reports have predicted how the car industry will look in the not-too-distant future, and what challenges there are for the industry’s leading manufacturers. In a report by global accountancy firm PwC published last year, the company said that despite recent years of record growth – not least in China and the US – the automotive industry was facing “unprecedented challenges”.

“New technologies are dramatically changing vehicles, from the advent of the ‘connected car’ and enhanced driver support to better fuel efficiency and new or improved powertrains. Automotive manufacturers and suppliers are confronted with ever-greater complexity as a result of increasing numbers of products and options, shorter technology cycles, increasing pressure to innovate and global supply networks. And at the same time they need to balance the needs and demands of customers, investors, regulators, non-governmental organisations and even the general public.”

In October last year, management consultants McKinsey published a note on the future of the auto industry, explaining the various challenges that manufacturers will face in the coming years. Alongside predictions of further geographical shifts in production and demand towards China, the company suggests there will be a number of technological innovations that will radically change the industry.

Electric avenues
Cutting the emissions of the industry and slashing the cost of powering cars has been the leading concern for many manufacturers. While Toyota’s Prius range of hybrids have proven popular in some markets, other manufacturers have been slow to adopt sustainable technologies. However, many see fully electric cars that don’t rely on petrol as the future of the industry.

The leading proponent of electric car technology has been Tesla, the firm founded by US entrepreneur Elon Musk. Such has been his determination to see the technology take off that he has even offered his company’s patents to rivals for free in order to speed up adoption of electric cars.

Electric cars have been discussed for a number of years as being an extremely attractive, low carbon emitting form of personal transportation. But for a number of reasons the technology has taken longer to take off than many had expected, with existing car manufacturers not taking electric cars seriously. Musk lamented last year, “I was hoping other companies would engage more in serious electric car programmes.”

As a result, Musk announced in June last year that all of the company’s patents would be made freely available. In a statement, Musk said his ultimate goal was to speed up the adoption of sustainable transportation, rather than make a profit. “Tesla Motors was created to accelerate the advent of sustainable transport. If we clear a path to the creation of compelling electric vehicles, but then lay intellectual property landmines behind us to inhibit others, we are acting in a manner contrary to that goal. Tesla will not initiate patent lawsuits against anyone who, in good faith, wants to use our technology.”

He added that while Tesla had initially created patents for its technology because they worried rival manufacturers would see the potential of the electric car; in reality few of the big carmakers had invested in developing their own versions. “We felt compelled to create patents out of concern that the big car companies would copy our technology and then use their massive manufacturing, sales and marketing power to overwhelm Tesla. We couldn’t have been more wrong. The unfortunate reality is the opposite: electric car programmes (or programmes for any vehicle that doesn’t burn hydrocarbons) at the major manufacturers are small to non-existent, constituting an average of far less than one percent of their total vehicle sales.”

The technology Musk has been particularly eager to see manufacturers adopt is his Supercharger system that powers the vehicles. The main criticism of electric cars is the necessity to charge them far more frequently than a traditional car would require refuelling. Musk hopes that as adoption of the technology increases, other manufacturers might be able to help develop better performance and a wider network of charging stations. A lack of infrastructure for the technology means that remote parts of the world would be off limits for electric cars that need to be charged regularly.

Power problems
Speaking to our sister publication The New Economy last year, John Gartner, Research Director for Smart Transportation at Navigant Research, said that the lack of a standard for charging was holding the electric car industry back. “The electric vehicle industry has thus far developed two competing fast direct current (DC) charging standards, through the Society of Automotive Engineers and the CHAdeMO standard originating from the Tokyo Electric Power Company (TEPCO). The Supercharger technology, while providing faster charging than has currently implemented by these standards, would have to be evaluated for its impact on the battery performance of competing electric vehicles, and this would take several years to determine if it is compatible.”

He added that an offer like Tesla’s could prove attractive to other car manufacturers that have yet to settle on a charging technology. “Automakers and electric vehicle charging companies would likely would be hesitant to support a third charging technology given the additional vehicle equipment cost, infrastructure cost in deploying more chargers, and potential for confusion in the marketplace for consumers from adding a third option for public electric vehicle charging. A single charging standard would be optimal to grow the electric vehicle market, but this will take many years given how fractured the market is today with hundreds of public DC chargers already in place.”

While Tesla has been leading the way in the electric car market, traditional manufacturers have finally started to look at the technology themselves. General Motors is the leading manufacturer of plug-in hybrid cars, with its Chevrolet Volt particularly popular in the US. Toyota continues to offer its popular Prius range, while Nissan is the biggest manufacturer of pure electric cars. Ford has also launched its own cross-over brands of electric and hybrid cars.

BMW launched its electric car range – BMWi – in 2011 and has gone on to offer a couple of vehicles. By the end of last year, the company had sold short of 18,000 models, with the US as the biggest market. However, critics have derided BMW’s electric car efforts, hailing them as the ugliest vehicles the company has ever made. While it has been the first major high-end car manufacturer to delve into the electric car market, other firms have also been looking to take the leap into using the technology.

Luxury car manufacturer Porsche – owned by Germany’s Volkswagen – was in March said to be developing its own form of sustainable, electric car. It’s thought to have targeted 2020 as the year in which it wants to debut a new model to its car line-up, and CEO Matthias Mueller has recently been effusive with his praise for Tesla, telling a conference in Stuttgart: “Tesla has built an exceptional car. They have a pragmatic approach and set the standard, where we have to follow up now.”

Connected cars
While relatively small firms like Tesla have carved out a niche for themselves in the auto industry, it is the potential for much bigger new entrants like Apple and Google that could turn electric cars into a mass-market proposition. Google has been experimenting with driverless cars for a number of years, and has been testing its technology on the streets of California recently.

Apple, however, is the company that many think could act as the biggest disruptor in the car industry. The extremely secretive tech giant has not made any official confirmation of its plans to make its own car, but rumours began to swirl in January when a number of mysterious cars fitted with cameras and sensors took to the streets of Cupertino, where Apple is based.

There then emerged reports that Apple had put together a team of more than 1,000 employees dedicated to its electric car project. These included a number of key figures poached from the likes of Mercedes and BMW. There were even rumours, in the last 12 months, that Apple executives had met with Elon Musk over a potential acquisition of Tesla.

Nobody quite knows what Apple plans to offer with its new car – whether it is a self-driving vehicle or just an electric car. However, a company with such financial clout is undoubtedly going to create waves in the industry.

It would not be Apple’s first foray into the auto-industry, although it would be the company’s first attempt at actually building a car. Apple currently offers its CarPlay service to manufactures that helps drivers connect their iPhones to their vehicles and enabling a wide range of services. Such innovations aren’t new, but are a step towards simplifying how cars are connected to the web and people’s other digital devices.

McKinsey says that soon cars will be far ‘smarter’ than currently. They will be aware of their surroundings, able to communicate with other cars, and able to seamlessly work with a users’ other digital devices. “The car of the future will be connected – able not only to monitor, in real time, its own working parts and the safety of conditions around it but also to communicate with other vehicles and with an increasingly intelligent roadway infrastructure. These features will be must-haves for all cars, which will become less like metal boxes and more like integrators of multiple technologies, productive data centres – and, ultimately, components of a larger mobility network.”

Another direction the industry will likely head is towards autonomous cars. Google has long been experimenting with self-driving cars, with the ultimate goal of removing the need for a user to drive the vehicle, freeing them up to use their time more productively. While this might prove attractive to people unable to currently drive or busy workers trying to cram in an extra bit of productivity to their day, persuading driving enthusiasts might be harder. And there will be substantial safety issues around the use of such cars.

It’s not just Google that has been researching the technology, however. Mobile taxi firm Uber recently announced it would be investing in a robotic research facility in Pittsburgh that would help it built its own self-driving cars. The company’s move into the area is an interesting proposition, particularly for people who believe the days when people owned their own cars are numbered.

According to some, people will likely rent vehicles or share them with other users in the future, instead of owning their own cars. McKinsey believe that so-called millennials have far less attachment to ownership of cars as services like Uber and Lyft increase in popularity.

Driving innovation
New entrants into the market are sure to make waves in the auto industry. Companies like Tesla, Apple and Google could seriously disrupt an industry that has for years been dominated by the same sprawling international companies, by innovating at a rate traditional manufacturers have seemed reluctant to match before. In order for these manufacturers to stay on top, they need to speed up their research and development into new technologies.

PwC says investing in future technologies is an essential strategy for all car manufacturers if they want to remain relevant. “To avoid being innovated out of relevance, all suppliers – even those currently leading their markets – need to continually look ahead to future developments. New powertrains, new materials, new vehicle concepts or architectures – all of these trends are already changing the structure of the supplier industry. That’s a big opportunity for suppliers – but a risk too. New market entrants could threaten growth. The innovation playing field in automotive has gotten bigger than ever – and suppliers need to find their place on it.”

However, while the likes of Apple and Google can certainly bring a fresh approach to a somewhat staid industry, traditional manufacturers are still better placed to hold onto their market share in the future. They already have the manufacturing infrastructure and capabilities required for the mass production of cars, while such an undertaking could prove incredibly difficult for a tech firm. Building and shipping cars on a mass scale is somewhat different to developing web services or selling smartphones.

What may prove the most likely course is one of collaboration between tech firms and car giants. Indeed, such a situation has been rumoured recently in Germany with reports that Apple and BMW were discussing partnering up to build a potential Apple Car to challenge Tesla and remodel the German firms unpopular i series of cars.

Some in the industry have even welcomed the entry of tech giants. Fiat-Chrysler’s CEO Sergio Marchionne told the BBC in March that both Apple and Google were “incredibly serious” with their car intentions, and that it would shake up the industry. He added that such a disruption should be welcomed. “I think their interest is exactly what this industry needed. We needed a disruptive interloper to shake things up.”

Marchionne added that despite the news of tech giants looking to enter the auto industry, traditional manufacturers are more than capable of remaining relevant. “Don’t underestimate carmakers’ ability to respond and adapt to new competitive challenges.”

The three main websites of Alibaba are Taobao, Tmall and Alibaba.com, and they dominate the online shopping market in China with an 80 percent share, collectively handling more business than any other e-commerce firm. But it doesn’t stop there for the Hong Kong-based firm, as the ambitious founder, Jack Ma, would have the business stretching far further afield.

Alibaba’s rapid expansion over a relatively short period has been a phenomenal success and a testament to Ma’s perseverance. There have been occasional setbacks along the way, some significant, but this has not stopped the group’s expansion; with the-sky’s-the-limit aspirations, a tactical strategy and growing diversification, the world appears to be Alibaba’s oyster.

David vs. Goliath
Ma’s pioneering plans to bring the internet revolution to his home nation began in 1995 with the country’s first internet firm, China Pages. At the time it was still too early to get the government and public on board with an internet company, and so the project was destined to fail. While working in the government’s e-commerce division, Ma gave the dream another go. In 1999, the online business marketplace Alibaba.com was launched from his apartment with the help of 17 friends.

The dynamic entrepreneur set off on domestic tours to persuade businesses to use the internet – this time around the environment was a little more open to what he had to offer. By October of that year, Ma had successfully raised $20m in funding from SoftBank and $5m from Goldman Sachs. “In the early 1990s, there were no markets to efficiently match both sides [buyers and sellers], other than annual trade shows. Alibaba’s online platform appeared at the right time and filled the void”, says Dr Chiang Jeongwen, Professor at China Europe International Business School.

After five turbulent years Alibaba officially began earning revenue, but then came the biggest battle in the group’s history to date – defeating eBay, which at the time ruled the industry in China with an 85 percent share of the market. Alibaba launched its consumer-to-consumer sales site, Taobao, and Ma declared war, announcing that sellers could list their goods for free for three years and even had his team don army gear in an orchestrated stunt for free publicity.

“eBay is a shark in the ocean. We are a crocodile in the Yangtze River. If we fight in the ocean, we will lose. But if we fight in the river, we will win”, Ma famously said at the time. Although Alibaba was the underdog in terms of resources, Ma knew the market far better than his US counterpart. The website was made more appealing to Chinese users and a softer approach was implemented in order to gain consumer trust.

It worked, and by 2005, Alibaba and eBay had equal market shares. “Alibaba cultivated Chinese consumers’ online purchasing habits. Before the emerging of Taobao, Chinese consumers seldom shopped online”, says Ivy Jiang, China-based Research Analyst at Mintel. In an indication of his epic aspirations, overtaking the biggest competitor was simply not enough; Ma announced another three-year period for free services, forcing eBay to exit the market completely.

Supporting growth
Years later, Ma’s ambitions have magnified. In 2014, Alibaba.com partnered with the San Francisco-based peer-to-peer financing company Lending Club, to provide an e-credit line that allows buyers in the US to apply for funding of $5,000 to $300,000. In line with Ma’s global ambitions, the service is also due to expand to other markets. As well as capital, the e-credit line provides trade assurance, which allows refunds for purchases that are received late or are different from the online description.

This is an important feature that was implemented as a result of criticism for facilitating the sale of counterfeit products. “Recent fake product issues have caused its stock price [to drop] like a rock, which angered shareholders and promoted multiple lawsuits”, says Dr Jeongwen. In another concerted effort to clamp down on the issue and squash rumours of its dealings with counterfeit traders, last year Alibaba purged around 90 million suspicious listings from its sites.

With the intention of augmenting its already commanding domestic presence, Alibaba is also bolstering its logistical framework in China, particularly in small villages and isolated areas. In order to achieve this operational feat, last year Alibaba formed a partnership with China Post, the world’s largest postal network.

New storage facilities, processing centres and delivery outputs will be established for mutual use, while the two colossal organisations are also collaborating on business ventures, e-commerce, finance and information security.

In addition, China Post is due to open around 100,000 service points, which will provide delivery and pick up services for both buyers and sellers. “People there have less pressure from high housing prices and tight work schedules compared with those who live in mega-cities in China, so the consumption power in lower-tier cites cannot be underestimated”, said Ma at the signing ceremony.

By reaching all corners of a population boasting 1.35 billion potential customers, there is still room for unprecedented growth. Last December, the group invested $240m in a Haier Electronics subsidiary that has an extensive network of warehouses and distribution sites in 2,800 counties, as well as over 17,000 service points. “China will see the emergence of online platforms that can handle transactions of more than 10 trillion yuan ($1.6trn) a year. We need to make sure that the development of a logistics system in China can support the surging development of e-commerce”, Ma said during his speech.

Threat to the West
As the eBay vs. Alibaba battle illustrated, the home advantage often wins; as such, an in-depth knowledge of the market and consumer behaviour is invaluable, particularly as trends continue to evolve. “The success of Alibaba is attributed to its understanding of the local market and consumer needs, as Alibaba is associated with the attribute, ‘relevant to me’ by Chinese consumers”, says Jiang.

The online market therefore seems impenetrable to Western firms attempting to weigh in on the growing action (see Fig. 1). Furthermore, China’s push for greater internet balkanisation, in which the internet is splintered into smaller closed nation networks, could be the final nail in the coffin for Western tech companies looking to expand in the East.

Ma is also boosting the group’s presence in Western markets, with a particular focus on the US market. When Alibaba was listed on the New York Stock Exchange late last year, the announcement captivated Wall Street – at $25bn, it was the largest tech IPO of all time.

Investors saw this as an opportunity not merely to invest in the biggest online marketplace in the world, but to invest in Jack Ma – the man who made it happen against all odds. The group offers the US market something unique; a chance to reach out to every trader in China, no matter the size. The variety of products on sale, as well as their competitive prices, makes Alibaba an enviable platform.

The group is also broadening its portfolio and enhancing its overseas business with investments in US companies, such as the messaging and free-calling app, Tango, and the mobile-app transportation network, Lyft. “Alibaba can invest or buy companies just like Apple or Google. In that sense, they compete against each other for those companies wanted by all of them”, says Dr Jeongwen.

In this respect, the size and therefore level of manoeuvrability that the group is capable of is astounding. If this pattern continues, Western tech companies may soon find themselves overshadowed by Alibaba’s global network.

Potential pitfalls
It is important to note that Alibaba’s previous endeavour to go public in 2007 was unsuccessful; Alibaba.com lasted on the Hong Kong Stock Exchange for just five years before the company bought back its shares. This setback highlights the vulnerability of the firm to slowing growth, and its fallibility despite its size.

In addition, even those who dominate the market face competition, and this is also true for Alibaba. Namely, domestic rival JD.com has recently gained traction in the market and is also targeting lower-city penetration, having teamed up with more than 10,000 convenience stores across western and central China.

There are various other challenges that also exist for Alibaba, particularly in terms of its plans to expand further into new markets and industries. “They can duplicate this model only in developing countries like Indonesia or India. They would not have a chance in the developed countries like US where law and order is much [more] strict”, says Dr Jeongwen. The regulations for business in China compared with the West are markedly different, making China-based companies vulnerable to inconsistencies that are not relevant in the domestic market.

For this reason it is vital for the group to ‘over-disclose’ everything – complete transparency will keep it from pitfalls and misunderstandings – and so is key when operating in foreign markets. The business recently suffered such a setback, when in March Taiwanese authorities announced that Alibaba had to exit the market after discovering that the firm was listed as a Singaporean company. Although this is currently a small market for the group, the move is a slippery slope within the international arena.

Competitors may very well look for opportunities to force the corporation out of various markets. Having the right staff on board can eliminate such risks; internal auditors, accounting personnel and an apt risk management team can help to avoid major errors, which are bound to happen given the company’s rate of growth.

There still exists an unprecedented scope for expansion for Alibaba Group. Indications of continued growth are rife, from recent investments into new industries, to creating the infrastructure for full market penetration in China, and opening revenue outlets in untapped markets. Tactical approaches and dubious manoeuvres have been used before, thereby illustrating a Machiavellian approach to business, which could be used to reach even greater heights for the company.

Considering the group’s history so far, it’s clear that Ma’s ambitions are not to be underestimated. Alibaba’s astonishing success shows the potential for Chinese entrepreneurship; Western firms do indeed have reason to fear the group’s continued expansion and, as such, better suit up for battle.

Home improvement, decorating and DIY were once all the rage in the US and beyond. The mid-20th century brought with it a craze for wacky wallpaper and do-it-yourself shelf jobs, as American baby-boomers capitalised on new, affordable housing, leaping onto the property ladder without looking down.

Then in the early noughties the home furnishings industry grew yet further, with US retailers witnessing consistent sales growth year after year, according to Euromonitor. But when the financial crisis hit in 2007 the industry was dealt a blow, with consumers cutting back on big purchases and house moves coming to a near halt – meaning fewer people looking to do up their homes. “Home furnishings has been one of the most affected sectors on the back of the housing market and people’s discretionary spend”, says Matthew Walton, home and DIY analyst at UK-based consultancy Verdict Retail.

In the UK some of the biggest names went under – including TJ Hughes, Woolworths, Homeform group and Focus DIY – while in the US the number of retailers in the sector tumbled 21 percent between 2007 and 2012, according to Business Wire. The industry there also shrunk from $315.3bn to $273.5bn in the space of two years, and sales plummeted 15 percent.

Ikea’s success has stemmed from its focus on stores in China, where the home furnishings industry has boomed over recent years on the back of a surge in the number of homeowners

Housing slump
Given the fact the housing market was one of the recession’s biggest victims, it’s little surprise home retailers have found themselves struggling. “People weren’t really moving house, which is such a big stimulus in the market”, says Walton. “Discretionary spend was under pressure so people were prioritising things like clothing, food and so on.”

Now that the housing market is recovering, many predict a revival for the furnishings industry. But the figures suggest a variety of obstacles are still holding it back. In the UK it grew just 0.7 percent in 2013, according to the Home Furnishings 2014 report, despite house purchases being bolstered that year after the UK Government introduced its Help to Buy scheme. In the US sales grew eight percent between 2009 and 2012, according to Euromonitor, but the industry is still struggling to reach its pre-recession highs. In France, meanwhile, sales from the home improvement market fell in the third quarter of 2014 by around three percent, according to Banc de France, with Brico Depot, Castorama and Kingfisher sales all taking a hit.

Keynote projected growth of just 1.9 percent between 2014 and 2018 for the UK, as the market is forecast to continue feeling the strain of economic circumstances, a decline in popularity of certain home goods and, importantly, an increase in the number of people renting. “The number of UK consumers that are renting accommodation remains extremely high, which is not conducive to a healthy home furnishings market”, wrote the research firm.

Indeed the number of renters soared by around 6.2 million in the US between 2007 and 2013, according to Zillow – while the number of homeowners rose by a comparatively measly 208,000, as house prices and unemployment soared. More people renting means lower demand for expensive furniture and decorating products, with clauses usually ruling out overhauling the interior design, as Walton recognises. “There’s a restriction as to how much people renting can actually do”, he says. With so much renting going on, it’s little wonder retailers have been suffering.

Deep-rooted culture shift
It’s not just the surge in renting that’s dealing a blow to home improvement retailers; as widely noted, millennials, nicknamed the ‘boomerang’ crowd, are, on average, living with their parents for longer than previous generations. In the UK last year, one in four 22- to 30-year-olds said they were still living at home, while in the US the figure was even higher at 31 percent (up from 27 percent before the crisis), according to a report by Warren Shoulberg, Editorial Director of Home and Textiles Today.

As with renting, house prices and lack of money are partly behind the trend; according to data by the Federal Reserve Bank, student debt is one of the key reasons millennials aren’t purchasing as many homes, cars and other big products as their predecessors, and Managing Editor of Interest.com Mike Sante agrees: “Millennials, in particular, are struggling to overcome their student loans and save enough money for a down payment”, he said in a statement.

Like renting, that limits the need for furniture shopping and DIY jobs – and it’s happening on a huge scale, with 2.3 million fewer new households in the US than there would have been if millennials had followed the buying trends of former generations, according to Shoulberg. Walton agrees it’s having a notable effect: “I think [this trend] is definitely impacting home furnishings because people aren’t looking to buy if they aren’t moving house.”

If this trend were solely a result of economic influences holding Generation Y back from jumping on the property ladder, home furnishings and DIY retailers would likely make a full recovery (in line with that of the housing market). But the figures, at least in the UK, have already suggested that this is not the case. What’s arguably even more powerful than the financial driver, therefore, is an apparent cultural shift – a fundamental change in attitude that’s driving what Jason Dorsey of Generational Kinetics calls “delayed adulthood” – and which might prove harder to overcome. “[Millennials] are entering into many adult decisions later than ever before”, Dorsey told Yahoo! Finance.

Indeed, Generation Y are starting families later than their parents did (for a woman in the UK the average age is 30, up from 26 in the 1970s). That’s little surprise given that more people are going to university and so joining the career ladder at a later date. “There used to be an order in life: finish your education, go find a job, buy a house”, Sandy Thompson of Young and Rubicam advertising agency told Faw. “This generation really mixes it up.” Taking longer to grow up and settle down, means feeling ready to buy a house at a later stage than previous generations. Industries relying on that move are likely to feel the effects for some time.

It’s not just home furnishings being affected; millennial lifestyle changes are dealing an even bigger blow to the DIY industry, according to Walton, who says it’s been the slowest sector to recover from the recession. “As a lot of people are staying at home they’re not getting the skills of being able to put up shelves, redecorate and so on”, he says.

He adds that consumers are therefore shifting towards buying DIY services rather than products, and DIY stores are suffering as a result. First-half profits in 2014 for UK retailer Homebase, for example, were below forecasts, and a quarter of its stores are being closed over the next few years to help turn the retailer’s fortune around. A number of other retailers are considering similar steps in reaction to the decline, including rival B&Q.

Adapting for survival
Not all retailers in the sector are struggling; Ikea posted its highest profits to date in the financial year 2013, at £2.7bn ($4.06bn). By offering contemporary products at a reasonable price, the Swedish flat-pack retailer is catering to a growing hunger in the retail industry for good value, and it seems to be working.

Ikea’s success has stemmed from its focus on stores in China, where the home furnishings industry has boomed over recent years on the back of a surge in the number of homeowners. It seems then that if home retailers are to succeed, they would do well to follow in Ikea’s footsteps, capitalising on opportunities in emerging markets, focusing on value for money, and undergoing a fundamental shift to cater to new consumer tastes, demands and trends.

Shoulberg doesn’t believe the millennial change will be a lasting one and argues that the home industry could make a full recovery if Generation Y behaviour doesn’t line up with predictions: “As a Baby Boomer, I remember all the reports about how my generation was going to be different and not get caught up in conspicuous consumption and not adapting the attributes of our parents”, he says. “We turned out to be the most all-consuming generation in the history of mankind. Let’s see what happens to the millennials.”

But this trend towards “delayed adulthood” seems to be the result of fundamental, deeply rooted lifestyle changes, including an apparent preference for flexibility – hence renting over buying, smaller commitments over lifetime ones – that might not be so easily overcome. That cultural change could deal a more permanent blow to the home, DIY and other related industries than the more temporary, recession-induced austerity. Retailers will have to find new ways of capturing those consumers if they are to protect themselves from the unfortunate fate to which a significant number in the industry have already fallen prey.