Groupe SEB Leads the Way on Direct-to-Consumer, Reacting to Inflationary Pressure

Groupe SEB is the leading player in the homewares sector, with Tefal, Imusa, and All-Clad, amongst other brands. This French heritage company is a staple of consumers’ kitchens around the world, bridging both cookware and appliances as a pioneer on healthy eating technologies and sustainability initiatives.

USD4.2 billion – Groupe SEB’s global consumer sales in cookware, utensils and food storage in 2023

^{Source: Euromonitor International, Passport Home and Garden, 2024 edition}

Brands investing more in direct-to-consumer (DTC) and retailers investing in more private label products are reactions to extreme inflation, which shook even the most established players to rethink their strategies on value chains and how to win. Groupe SEB provides a leading DTC example.

Power replaces trust within value chains, as brands and retailers both seek more control to reduce their exposure to risk

Since the pandemic, Groupe SEB has embarked on a business model transformation, growing operations around having a direct relationship to consumers both online and in physical shops, where message curation and product fulfilment are scaled internal competencies rather than retail dependencies.

One reason why value chain control matters more today than in 2019 is the increase in raw material, labour, and shipping costs creating a 20-percentage-point inflationary pressure for the cookware sector to cope with, with inflation from running shops cumulative over this.

The need to be less dependent on other parties within value chains grows when not everyone can win in the negotiations. 2023-2024 balance sheets (and bankruptcies) across the sector show plenty of evidence of broken value chains and those which lost, especially in US retail.

One consistent reaction seen across regions and industries is investment to achieve risk reduction; the sentiment is to never be that vulnerable again either to store closures or to brinkmanship negotiating tactics. Discovering barriers to passing costs forward to the retail shelf changed everything.

Retailers reduce brand power and their exposure to brand inflationary pressure by increasing private label range depth. Brands secure their ability to reach the market and pass costs forward through bypassing retailers and building DTC business models. Both strategies gain momentum.

Groupe SEB’s digital transformation and retail shop growth solidify its DTC strength

With the e-commerce boom that changed so many dynamics from 2020-2021, Groupe SEB’s partnerships with external companies like Artefact helped it understand channel preference movements and how to win across marketplaces, but also the need to build its own operations (beyond dependencies).

This focused on connecting with consumers, from the ability to create experiences digitally and in stores, to becoming a platform for recipes and healthy living tips, partnering with TV personalities and chefs.

37% of global respondents make online purchases of products or services almost every day

^{Source: Euromonitor International Voice of the Consumer: Lifestyles Survey, fielded Jan-Feb 2024 (n=27,962)}

Groupe SEB has online shops for each core brand, with direct fulfilment and data accumulation around shopping behaviours feeding into marketing campaigns and product development, operating 1,250 experience centre stores across 40 countries, split almost equally between owned and franchised stores.

According to the survey mentioned above, 41% of global respondents agree that seeing or trying products in person and pre-purchase is the main reason to visit stores. Groupe SEB understands this, and by investing in traditional retail, e-commerce DTC and its own DTC store network, this business model increasingly depends on no third parties in the go-to-market strategy.

IKEA also owns both manufacturing and retail, but emulating this via acquisition is not without peril

IKEA is another long-established business model that straddles both manufacturing (with Inter IKEA Holding BV) and retail (with INGKA Holding BV), with INGKA owning 77% of the global store footprint outright, while all other IKEA stores are controlled by Inter IKEA via franchise and pricing contracts. The ability to pass costs (and savings) forward quickly meant IKEA was well placed, once deflation set in.

IKEA picked up two percentage points in share of home furnishings in Western Europe over 2019-2023, reaching 12%, enjoying a stable 6% profit margin, in large part due to its hybrid business model

^{Source: Euromonitor International, Home and Garden, 2024 edition}

If, however, you decide you need power over retail pricing immediately, this is more acquisition than organic, and vertical integration under those conditions has serious (possibly legal) complications.

Manufacturer Tempur Sealy made a USD4 billion offer to purchase the largest US specialist retailer, Mattress Firm. If successful, it would achieve this hybrid model and have the pricing controls to cope with inflationary pressures.

However, in July 2024, the Federal Trade Commission authorised a lawsuit to block the acquisition under anti-competitive concerns (next stage expected in November 2024); the ability of brands to dictate consumer pricing is the very thing monopolies and mergers regulation was created to block.

Note that IKEA and Groupe SEB have been building store networks incrementally over years without falling foul of laws – a DTC store operation is something you create proactively ahead of dire need.

Read our report, Groupe SEB in Home and Garden (World), for more about Groupe SEB’s cookware strategy. For more about reactions to inflation, challenges to the value chain and broader strategic themes in the industry, you will want to check out our Top Industry Trends in Home and Garden.