Overview of the Market; CHIC Routes to Market
Due to many factors, not least of which was Covid and the increase in import costs to the UK, the material supply sector has been hit with unprecedented hikes in the cost of raw materials. These increased costs have caused uncertainty in the merchant market as purchase prices have been known to vary significantly from one day to the next. Whilst the volatility in raw material costs has stabilised in recent months and for some products returned to pre 2021 prices, the sector has been compelled to respond to these external forces and fundamentally transform the way it operates.
Over the past two years the merchant market has been in a state of flux with many of the main merchants adapting their business models through mergers to create a new, larger merchant or consolidating their business becoming a more focused specialist merchant. This market transformation has revised the CHIC Merchant Framework by consolidating the total number of merchants available to our members from 15 to 10 but has strengthened our ability to offer more specialised merchant solutions.
Members are now, more than ever, conscious of their catalogue pricing and the volume of ‘specials’ purchased. In response to the market volatility, operatives have often been allowed to purchase products outside of their core catalogue (‘specials’), to help reduce tenant waiting times and reduce ‘work in progress’.
The net result, in some cases, has seen the value and quantity of ‘specials’ purchased by operatives increase by 50% or more.
To help address these changes CHIC has engaged more directly with suppliers and manufacturers, generating a better variety of supported rates that members can now utilise, demonstrating increased savings and efficiencies. We continue to review all our catalogues quarterly as part of CHIC’s managed service offer.
Through a combination of our framework and DPSs’, CHIC is still able to offer our members a comprehensive merchant solution that continues to be an integral part of our service provisions.
The framework offers four lots including the use of multiple merchants, branch networks or managed stores. The CHIC DPS covers fourteen lots, including the same lots as the merchant framework, with specialist supplier lots included from glazing through to roofing. Find our full Merchant Framework and Merchant DPS.
CHIC’s Head of Merchant Services, Giles Newman said “Throughout my tenure at CHIC, I have encountered numerous hurdles and external influences altering market demands for materials and merchants. Despite these challenges, I maintain a positive outlook in terms of price stability and efficiency increases in 2024 and beyond. I eagerly anticipate delivering substantial savings for our members.”
Future Outlook
CHIC is aware that during 2024, many of the main merchants will be scaling back their operations both in terms of number of staff and the number of branches they currently operate from. The merchant social housing market, however, is still very strong, continuing to grow and is an integral part of their future business plans. It is anticipated that over the next 12 months several merchants will consolidate their branches, moving away from smaller local stores to larger, more regional ones.
Managed stores still work very well for members who have housing stock in a condensed area and require their operatives to be serviced quickly with their day to day material requirements.
However, with a shift in sector thinking, some organisations see dedicated managed stores as an excessive expenditure, with members now looking to separate their supply chain into more specialist suppliers, lowering their overhead costs and reducing the amount of specialist products purchased from a non-specialist merchant.
The CHIC merchant solution is still in a strong position and can offer bespoke routes to market for CHIC’s members. The framework is not due to expire until 2027, however due to the transformation in the market in recent years, CHIC will be reaching out to members and merchants using the current framework to request feedback on the new ways of working to help influence the development of an alternative framework that will address changing, current and future market requirements.
To find out more about how CHIC can help you deliver your merchant programmes, please contact Giles Newman, Head of Merchant Services at gnewman@chicltd.co.uk
