News
Is the housing market "rigged"?
Buy a house, or rent and invest?
Hardware News Network
Price to income comparison for housing
Echange is telework based
Click to visit the HBT website for more information
As retail strategists, we all feel sometimes that looking 10 to 15 years ahead seems almost pretentious. This is particularly the case at the moment, when the retail sector looks set to experience some turmoil over the next three or four years, which could change just about every projection we've already made. The potential entry of Amazon to the Australian market, increased automation in manufacturing, and the opening up of parts of Africa as production centres will all have effects. That said, there are some types of strategic decisions that really need a long-term view. One obvious area is determining the location for a new store, especially when it's an expansion, and you are hoping for something that will be slightly contra-cyclic to existing stores. Retail locations can take up to five years to fully develop, and most would plan on an additional five years of returns following that.

For the complete article, please click on the Full Text link
Products
Tradie app offers more than price
Mr Tradie helps customers to not just focus on price
Fairfax Media
The app's flat fee for tradies is its point of difference
Mr Tradie is available as an iPhone app and also has an Android version
Click to visit the HBT website for more information
Another tradie app has been launched and was recently profiled in Fairfax newspapers. First launched on the iPhone in 2015, Mr Tradie makes it easy for Australians to find tradespeople in their area.

Rather than tradies simply undercutting each other to offer the lowest price, Mr Tradie also includes an Uber-style ratings system so users can take into account customer satisfaction. They can rate tradies but not vice versa, although that feature might be added down the track.

Competing services tend to charge tradespeople a fee every time they provide a quote, regardless of whether or not they win the work. However Mr Tradie charges tradespeople a flat fee of $10 per month or $100 per year. It's a model that works better for both tradespeople and customers, explains founder Ishan Dan. He told Fairfax Media:
When you rely on a cheapest quote system the good tradies tend to get beaten by the cut-price tradies who aren't necessarily qualified - which drives the good tradies away and can leave the end customer with a shoddy job. It becomes a race to the bottom on price which punishes the good tradies by forcing them to cut their prices to survive.
Mr Tradie lists a customer feedback score, a bit like Uber, which means tradespeople are relying more on their reputation to win work than on offering dirt-cheap prices - if tradies continue to get bad feedback scores I kick them off the system.

The idea for Mr Tradie was born from Mr Dan's conversation at the pub with several tradespeople friends who were struggling to find customers but were relying on word of mouth and referral networks rather than marketing and establishing an online presence.

Mr Dan has no background in app development, he's a stockbroker who works for a financial planning company but he studied both computing and finance at university. The hardest part of bringing the Mr Tradie idea to life was building the app, he explained, with disputes over the first version of the iPhone app almost going to court.

The search for a replacement developer forced Mr Dan to heed his own advice for hiring tradespeople: don't shop on price alone. He weighed up seven developers before going with Melbourne-based AppsCore.

Altogether Mr Dan and his investor have spent around $70,000 on app development, which includes two versions of the iPhone app as well as an Android version. His advice for people wanting to bring their app ideas to life is to invest lots of time and effort in the planning stage rather than making changes later that can cost thousands of extra dollars and delay the project by months.
News
HI News V3 No. 5: Sleeping tool giants wake up
Download the latest issue of HI News Vol. 3, issue no. 5
HI News
Bosch Easy Cut 12 is part of the power tools feature on page 35
Porters takes over four Woodman's Mitre 10 stores in Queensland
Click to visit the HBT website for more information
The latest edition of HI News takes a closer look at the innovation cycles at Stanley Black & Decker (SBD), and the power tools division of Bosch.

Simply click on the following link to download this edition:
HI News V3 No. 5: Which power tool company gets to own 2020

As impressive as SBD has been with its recent product developments, it is really Bosch Power Tools that has begun to show it can take advantage of the very big potential the company has, both with its stand-alone expertise and history, and through its association with the larger Bosch company, and its ongoing research into sensors.

This issue also includes our regular, in-depth look at the kitchen category. Freedom Kitchens is launching a flatpack range, IKEA has stopped advertising, while Kaboodle has refined its digital marketing approach.

For the first time, we have put together a guide to the HBT Conference that started on May 10.

In terms of retailer news, Mackay-based independent hardware business, Porters has acquired four Woodman's Mitre 10 stores in Queensland. Managing director Gavan Porter Snr said the company purchased the stores located in Sarina, Marian, Proserpine and Cannonvale (QLD).

Big box retailer Bunnings United Kingdom & Ireland has revealed its fifth store location and B&Q has finally found success in China through e-commerce.

Outdoor power equipment maker, Husqvarna has begun a pilot project in Stockholm, Sweden, for homeowners to access pay-per-use power tools for the garden.

Featured products in this edition include sustainable wallboard from USG Boral, Krylon's new spray paint for outdoor decor, and Kwikset's Z-wave enable locks, to name a few.
Editorial
Sleeping tool giants charge up
FLEXVolt is Stanley Black & Decker's main innovation
HNN Sources
Bosch Easy Cut 12 promises to make craft tasks simpler
Bosch has introduced professional connected grinders
Give to Amnesty International
This is an edited version of the story. For the full version, please go to the current issue of HI News PDF magazine:
http://hnn.bz/hinews-3-05.pdf

What is the big news in power tools for 2017? It might just surprise you.

US/Hong Kong company Techtronic Industries (TTI), makers of Milwaukee, Ryobi and AEG tools, continues to develop its niche product line, but as HNN described in our lengthy analysis last issue, it's likely on a tick-tock-tock cycle, with strong innovation coming every third year.

In fact, our take on TTI at the moment is that it seems that while the company's CEO, Joe Galli, is enthusiastic about more rapid future development, he's being "braked" a little by the company's investors, who don't have his appetite for innovation.

Makita, as always, has gone ahead down its path of quiet excellence. There is something very Makita-like about its launch of a compact 18-volt cordless line of tools, making use, of course, of its standard 18-volt battery, but with a tool body size close to that of 12-volt tools.

However, Makita is struggling with a very difficult problem: for a company renowned for its great designs and high standards of manufacture, how does it develop a less-expensive, "value" brand that doesn't cannibalise its main brand? The MT Series partially answered that question in 2016, but while parts of its range (for example, the corded routers) make sense, the cordless tools, in the Australian market, really do not. (HNN will be looking in more detail at both Makita and Hitachi in the next issue of HI News.)

That leaves us with two remaining large power tool companies, US company Stanley Black & Decker (SBD), and the power tools division of the vast German firm that is Bosch.

The two companies have much in common, in addition to their size. SBD seemed to emerge during the past year from a five-year process of digesting the merger between the two big companies (Stanley Tools and Black & Decker). Not only did it bring out some real innovations in its FLEXVolt range, but it has also gone on the acquisition path again, getting hold of the well-respected and familiar Sears Craftsman brand of tools.

Its DeWalt brand also "teased" details of network-connected tools, which appeared (by a remarkable coincidence) just as TTI was releasing its annual results. The teaser was largely images, with only one sentence that declared anything definitive:
Tool Connect[tm] updates are coming soon; including a new app, inventory management software, and 3 new ways to connect anything on your jobsite. Stay tuned for more details in the coming months.

That was three months ago, and there doesn't seem to have been any further information released. It will be interesting to see if we learn more over the coming three months.

As impressive as SBD has been with its developments, however, it's really Bosch Power Tools that has begun to show it can take advantage of the very big potential the company has, both with its stand-alone expertise and history, and through its association with the larger Bosch company, and its ongoing research into sensors. While it is likely that 2017 won't be an outstanding year for the company (only a good one), both 2018 and 2019 could turn out to be significant, not only for Bosch itself, but for the industry as well.
Stanley Black & Decker

SBD recently released its results for the first quarter of its FY2016/17. The company reported overall revenues of USD2,800 million, up by 5% over the previous corresponding period (pcp), which was the first quarter of FY2015/16.

SBD also noted that its operations had become more profitable, with an operating margin up by 1.1% on the pcp (excluding merger costs). Gross margin was 38%, up by 1.4% on the pcp. Excluding one-off items, earnings before interest and taxation (EBIT) were up by around 8.5%.

Australia did not perform especially well, with its revenues slipping by 3%, following a similar decline in the fourth quarter to FY2015/16. North America currently accounts for 65% of the company's overall revenues, while Europe accounts for 18%.
Tools and storage

The company's tools and storage division outperformed other divisions, returning a net revenue increase of 6%. SBD states that overall revenues increased by 9% over the pcp, lifted by volume expanding by 6%, and acquisitions adding a further 4%. Fluctuations in currency exchange rates reduced these gains by 1%.

Regionally, North America produced the highest level of growth at 8%, while Europe grew by 6% and emerging markets grew by 1%. The North American growth was boosting in particular by growth in the US market, with commercial (Pro/tradie) sales up by over 10%, and DIY sales up by between 7% and 9%.

Operating margin for the division grew by over 16% on the pcp, to reach 16.4%. In discussing this growth, chief financial officer Don Allan said that every region worldwide showed positive revenue growth for the quarter in this division. He said that:
New product introductions and successful field conversions drove growth in the commercial channel. Strong e-commerce volumes and continued momentum from the FlexVolt launch, field growth in the US retail channel as we did overcome some modest channel inventory tightening.
SBD's backstory and FLEXVolt

The merger between tool companies Stanley and Black & Decker was finalised in November 2009. This has been something of a vast undertaking, though also a proficiently managed one. It has also come at something of a cost, in terms of actively managing some aspects of the business, such as innovation in cordless power tools.

Some measure of that can be seen in DeWalt's 12-volt cordless drill range. A revised version was launched in 2010, ahead of its time in featuring slide-on Li-ion batteries, as opposed to the in-handle batteries that many manufacturers still produce. However, from that time until today, this product has changed little.

While Milwaukee, Bosch and Makita have moved to brushless motors on their 12-volt lines, DeWalt has persisted with its brushed motors. In a recent ranking of the top 10 12-volt drills by respected website Pro Tools Reviews, DeWalt came in fourth, behind the brushless tools of Makita, Bosch and Milwaukee. It's a seven year-old design.

Innovation had slipped so far as a priority in the cordless tool business that at one point SBD management, in response to an analyst's question at a results briefing, suggested that they didn't expect much innovation in the cordless tool area. They suggested development would largely consist of the spread and commodification of existing innovations, such as brushless motors as well as larger and better Li-ion batteries.

The focus at the company was mostly on commercial performance, which resulted in some interesting new product launches - the introduction of the Stanley FatMax range, for example, was a brilliant move in the market - but very few ground-breaking products.

By 2014, with Milwaukee in particular continuing to take marketshare from DeWalt, and evidently starting down the path of more radical innovations, SBD realised it needed to take action. The result was what the company calls the "Stanley Fullfilment System 2.0" (SFS 2.0), which works like an "operating system" for innovation. This was introduced in early 2015.

In its corporate financial filings, SBD describes SFS 2.0 like this:
Entitled "SFS 2.0" this refreshed and revitalized business system will continue the progress on core SFS, but importantly, provide resources and added focus into (1) commercial excellence, (2) breakthrough innovation, (3) digital excellence and (4) functional transformation.

SFS 2.0 is something that gets SBD executives very excited - which is great to see. It's also probably one of the few corporate innovation programs that sometimes gets marketed directly to shareholders. In a "letter to shareholders", the effort is described as "breakthrough innovation special forces teams", that
... have been assembled across core business units that are entirely focused on generating breakthrough ideas, beyond the incremental. These teams, modelled after the incubator approaches of standout innovators and startups across Silicon Valley and elsewhere, are delivering solutions to unmet user needs and creating disruptive, industry shaping ideas.
FLEXVolt

FLEXVolt, a cordless tool system from DeWalt that makes use of 54/60-volt batteries that can, through switching between serial and parallel connection, be stepped down to 18/20-volt for use on the rest of DeWalt's 18/20-volt line. This system is used to power tools such as table saws, grinders and circular saws, that would otherwise have to run off of mains power. The larger units actually run off of two of these batteries, or 120-volts of current. This is the same as mains current in the US, and the tools can also be directly plugged into the mains, where it is available.

On its launch, DeWalt released information about its considerable success that met with more than a few raised eyebrows in the industry. Really new product launches need quite a lot of what is called "sell-out" in the US, which refers to retailers stocking up on product for future sales, while "sell-through" is product that has reached the consumer.

SBD claimed a figure of USD100 million in combined sell-out and sell-through sales for the last four months of calendar 2016 (to the end of SBD's financial year). There were concerns voiced by industry commentators that much of the apparent sales success might have more to do with sell-out than real sell-through.

Asked about the prospects for FLEXVolt in calendar 2017, the normally quite staid executives at SBD often become very optimistic and enthusiastic. Here is the company's chief financial officer, Donald Allan, describing what he sees as the product's potential in response to an analyst's question at the company's announcement in January 2017 of its full-year FY2016 results:
Yes, I would just add that related to 2017 your comment is correct Nigel, we do see another USD100 million of incremental revenue that is included in our guidance. Jim however did discuss in his comments that we have capacity up to USD400 million. So, in total we have USD200 million in our numbers with incremental of a USD100 million next year so there's capacity to take on another USD100 million.

That enthusiasm has continued through to the most recent results for the first quarter of 2017. Jeff Ansell, the head of SBD's tools division, describes just how far ahead of some expectations the company sees FLEXVolt performing:
What tends to be in this marketplace competitors are violent and if your competitors don't have a response they tend to - they have a negative view on what you - what you're doing and how it's performing. The reality is we couldn't be happier with FlexVolt and if you think of 7% growth in this first quarter 8% in North America, 6% in Europe. We're very pleased with that. But half that growth came from the core, so what it says, our core business vibrant we comped a very big quarter from last year and grew the core at the same time while allowing FlexVolt to provide the other half of the growth.
Our retail execution of FlexVolt is now more than double-digits ahead of what the customer expectations were, which is fantastic. And the uptick and uptake in industrial channels is every bit as good if not better. So if you consider those things and you look to the fact that we are loading new flexible products as we speak in this quarter and we will continue to load new introductions throughout 2017. And as Jim said, in the next several years that has been the real, the real driver behind what you do with this breakthrough innovation team. We have to continue to keep this fresh and we feel that we are quite nicely doing that.
The last point I would tell you is, while it takes time to introduce new systems and power tools, the fact that this does leave the old system behind has led to a much faster adoption than most new power tool platforms. As such, our growth in FlexVolt, the ramp in FlexVolt is 10 times faster than the ramp in brushless as an example. So we couldn't be more pleased and we are we know it's a competitive advantage and the average of five stars. The average user rating of FlexVolt is 4.9, so if you get the product right for the user everything else takes care of itself. So we feel great.

Mr Ansell also explained elsewhere some of the future potential that SBD sees for the FLEXVolt line of tools:
Well, the beautiful thing about FlexVolt is we are able to develop 20 volt tools where they're appropriate, where the max watt outperformance is appropriate. At the same time, develop 60 volt tools where the max watt outperformance is required and obviously there is a cost difference because the 60 volt tool is a more expensive proposition for the user and for us that delivers unprecedented performance, at same time the user wants the right tool for the right job, at the right cost.
So all those things come together and what you'll see over the next 36 months we'll be presenting this to Jim and team in the next few weeks and then you'll see some of it at the May 16 session, you'll see fresh introductions of both 20 volt and 60 volt tools coming within the FlexVolt range and I will tell you that the users pick up on them has been equivalent. The user likes what they can do with FlexVolt batteries under 20 volt system but they really have also embraced the 60 volt performance. Circular saw in particular is absolutely killing it. The portable you mentioned 120 volt, the portable products like mitre saws which are 120 volt absolutely killing it. So the user has embraced all those various platforms and because it gives them the performance of corded in a cordless package. So more to follow but yes, we are very, very active in development of 20, 60 and even 120 volts going forward.

This point about possible future developments was also made by president and CEO Jim Loree at the full-year FY2016 results announcement:
It really is a market share gain mechanism that has enormous potential even at the voltage levels we are at today. And we haven't even talked about going up the voltage curve or the power curve, which we have the capability to do as we develop this technology. And that breakthrough innovation that we're working on will have some more surprises I'm sure, positive surprises in the future.

Mr Allan was also clear that, as optimistic as the forecasts for FLEXVolt have been, the company sees those goals as being largely met during the most recent quarter:
We expect the momentum surrounding FlexVolt, which by the way did meet expectations for the quarter, will be maintained and bolstered by our commercial team's launch strategy, which has a well-designed roadmap of promotions and new FlexVolt tool and accessory SKUs hitting the shelves regularly over the next few years.

Of course, a major concern for SBD overall is the extent to which the FLEXVolt range will be "cannibalising" its standard range of tools, through replacing sales rather than being completely a matter of new sales. Mr Allan commented on this:
The USD100 million makes sense to us right now based on it's too early to really know what the cannibalisation is going to be. And that's something we'll watch closely, but if the cannibalisation is not as high then there's certainly a possibility that we're somewhere between that USD200 million to USD400 million number as the year progresses, combined with some of the factors that that Jim just mentioned.
The FLEXVolt market

The success of FLEXVolt, which seems to be confirmed by the most recent results, was not that expected by most market observers. It's a product that has two "strikes" against it: it is very expensive, and it is close to being "ultra-niche", in that it appeals to a niche within a niche.

It's not only heavy construction builders that will use most of these tools, but those builders whose business would get a big boost from the convenience of very powerful cordless products. The DCS7485 cordless table saw costs $1300, complete with charger and two 6-amp batteries, or $1000 as bare tool.

At a guess, what is driving high levels of sales is a combination of three factors. In many world markets pressures on housing are continuing, driving up prices and pushing developers towards considering more multi-floored, multi-dwelling unit buildings. There is also an uptick in infrastructure construction projects, as government seek ways to support regions which previously relied on more outdated forms of production.

In both these cases, the need for high capacity tools which reduce logistics support problems through being cordless would be high. The third factor is the ongoing skills shortage. Tools which help the existing workforce get more done faster are bound to be popular.

That said, of course, there is little doubt why SBD was so enthusiastic in launching this particular product. Mr Loree explained this in presenting the fully-year 2016 results:
And where we are really trying to attack is at the competitor's install base. And so think of FLEXVolt as a battery system that is establishing an install base as aggressively and quickly as possible that requires DeWalt tools to operate and then think of every year a wave of new tools SKUs coming in that will enhance the substitution of corded products and the ability for us to substitute corded products in the higher voltage, higher power requirements, higher duty cycle type SKUs.
And if you think of it that way, I think it's helpful because then you will understand it really is, well there is going to be some cannibalisation of our own coated tools, it really is a market share gain mechanism that has enormous potential even at the voltage levels we are at today.

The competitor, of course, is Milwaukee. In terms of strategy, at its core FLEXVolt is also a mirror to the Milwaukee strategy of achieving market "lock-in" not only by making high-quality mainstream products, but also by making unique "can't do without" products, that help get customers - especially large customers - to go with one particular charger/battery system over another.
Other developments

As mentioned in the introduction to this article, DeWalt did send out press notices about a new networked tool system it had developed in late February 2017, but, three months later, there seems to be nothing happening with this. The notices suggested it would feature three different connecting systems.

The "Tag", which is similar to Milwaukee's "Tick", is a simple tracker that can be stuck onto any tool - power or hand - to provide tracking.

The "Connector" looks like an adapter that fits directly to the battery slot on a cordless DeWalt, then accepts a standard battery into it, and provides Bluetooth-enabled monitoring of the battery.

An image shows a row of four power tools, likely one impact wrench and three drill/drivers from the back, with a blue WiFi logo on the rear of the motor chassis. In front of the handgrip, on the battery connection plate is what seems like a row of four blue LEDs and a selector button. The text reads: "Tools: Integrated Bluetooth Technology".

To be generous, we could describe these evidently mocked-up images of tools as "artist's renditions of possible future products". The control panel featured, if actually produced, would be an ergonomic nightmare, as it would require reaching around the shaft of the tool to operate. To function, the panel would have to be rotated by 90 degrees, or a full 180 degrees, facing the front of the tool - the way the actual control panels on existing Milwaukee One-Key tools, which already offer this full functionality, are positioned.

HNN would be pretty certain both that SBD has some plans in place for developments such as these, and we also would suggest it will be very unlikely we'll see any of them before 2018. In large part that is because the efforts of the development team will be focused on building out the FLEXVolt line of tools, and SBD will likely not want anything to complicate, blur or distort its marketing messaging around FLEXVolt.

Additionally, of course, there is the matter of DeWalt's much promoted Bluetooth-connected battery, which these proposed tools relate to. In general, most commentators (including HNN, which has tested this device) agree that this particular approach, while not without its uses, is not the best starting point to a fully connected worksite. It provided DeWalt with a connected product that could be quickly launched before Milwaukee launched its far more extensive One-Key connected tool systems.

Given things as they currently stand, DeWalt might be better served by starting development on the next generation of connected tools. These are likely to rely on a central worksite "hub", such as a worklight or bluetooth speaker/radio, that is hooked into the internet via a 4G chipset when WiFi is not available.

Tools would connect with these hubs via WiFi, and provide full offsite monitoring without the need for intermediate connection through Bluetooth phones. It makes sense that this will be the end point both Milwaukee and Bosch will be working towards for 2020.
Stanley Black & Decker's DIY story

SBD had been represented in the DIY area largely by the dark orange and black Black & Decker brand. The company's recent acquisition of Craftsman Tools from failing US retailer Sears could indicate that it is considering reviving this sector of its business.

At the moment, Black & Decker is not competing well with brands such as TTI's Ryobi, and is constantly being encroached on by brands such as Worx, which offer innovative tools designed to make chores around the house and garden easier to perform.

One possibility that could emerge during 2018 is the formation of a division of SBD that is dedicated to the DIY product across a range of products. For the moment, however, it is clear that SBD's focus is more on the professional market and we will probably not see much development of the Black & Decker tools.
Analysis

The apparent success of SBD's FLEXVolt system is a reminder that tools succeed through the combination of two factors: the size of the market sector they go to, and the intensity of demand within that sector. SBD through some very good research has found a niche that is of a smaller size, but has a high intensity of demand - these tools have rapidly moved to the "must have" list.

As with many of the developments of its arch-rival, Milwaukee Tool, there is also the question of to what degree the FLEXVolt technology will create an effect on other tools in the range. For professionals who will never use any FLEXVolt tools, the only possible improvement is that they can, if they wish, buy a large, heavy battery and another expensive charger, and attach that battery to their drill or circular saw to get extended life.

This is starkly different from the approach that Bosch in particular has taken, which is based on developing new systems that benefit a broad range of users. That said, in the process of moving from a company that saw development strictly in terms of commercial excellence, to one that now evidently values the gains that can be made from new technologies, FLEXVolt is an excellent first step. HNN is sure most of us are eager to see what comes next.
Bosch

Robert Bosch Power Tools has reported its results for 2016, and these show an ongoing improvement. Sales were a record for the division of the vast German firm Bosch, reaching EUR4,500 million. In local currencies, the company states, it experienced 7% growth over the previous corresponding period (pcp), which was calendar 2015. Taking account of currency fluctuations, growth came in at 4% over the pcp.

To read more, please go to the current issue of HI News PDF magazine:

http://hnn.bz/hinews-3-05.pdf
Bigbox
Big box update
Woolworths can proceed with the sale of Masters sites after Lowe's is forced to sell back its stake
HNN Sources
Bunnings is looking at building a store in Edwardstown (SA)
Bunnings NZ has taken steps to accommodate misgivings associated with its Grey Lynn store
Click to visit the HBT website for more information
US home improvement retailer, Lowe's has been court-ordered to sell its shares in Masters; Bunnings lodges plans for $45 million store in Edwardstown (SA); Woolworths successfully appealed a Supreme Court judgement over a Masters store that was never built; the Bunnings Devenport store in Tasmania should be open in 2018; and a Bunnings NZ store in Grey Lynn is trying to blend into the local neighbourhood.
Lowe's to sell stake in Masters: arbitration

Woolworths recently announced that US retailer Lowe's is required to sell its 33% stake in joint venture vehicle Hydrox Holdings, the corporate entity that owns Masters Home Improvement, following court-ordered arbitration between the two parties.

The value of Lowe's stake in the failed Masters business will be determined by a third-party independent expert, then Woolworths will be required to pay that amount to its former partner.

The sale of Lowe's shares to Woolworths will enable the Australian retailer to then sell the business to Home Consortium. The statement from Woolworths said:
As a consequence of [the] award, Woolworths will be able to conclude the proposed transaction with Home Consortium without the consent of Lowe's, once the final valuation and share transfer processes have taken place.

In August last year, Woolworths announced that Home Consortium - which includes families behind Chemist Warehouse and Spotlight - would buy 40 Masters freehold sites, 21 Masters freehold development sites and 21 Masters leasehold sites.

In addition, it said it would sell inventory for about $500 million and sell the Home Timber and Hardware Group business for $165 million to Metcash.

Combined, Woolworths said it would reap $1.5 billion in gross proceeds from the three deals, but only $500 million after costs and prior to shareholder payments.
Lead up to arbitration

Woolworths and Lowe's have been arguing over the value of the latter's 33% stake. Experts hired by Woolwoths have judged the stake to be worth nothing, while Lowe's has said it is worth $654 million.

Lowe's also accused Woolworths of acting in bad faith when it offloaded 82 sites to the Home Consortium as part of its exit from its Masters hardware business.

The legal wrangling had delayed the completion of the $750m agreement as Lowe's was unwilling to sell its 33% stake in the joint venture.

Woolworths said the latest development would allow the conclusion of the proposed sale to Home Consortium without the approval of Lowe's.
Bunnings submits plans for Edwardstown

The inner suburb of Edwardstown located 6km southwest of Adelaide (SA) could be the location of a new Bunnings store. Developer Commercial & General has lodged plans for a $45 million Bunnings Warehouse at 1028-1042 South Road, Edwardstown, the site of a former Bridgestone factory.

Bunnings also continues to negotiate with Mitcham Council over a $42 million store proposed on Goodwood Road, Panorama. The big box retailer has not confirmed whether the latest plans are instead of or as well as those for Panorama. The two sites are 2km from each other.

However Southern Business Connections co-chairman Phil Ransome believes the site would be better used as a start-up business hub like the former Mitsubishi factory at Tonsley. He told Adelaide Now:
Bunnings will attract people to the area, but how many Bunnings can you go to?

He said the area was already congested with the Castle Plaza shopping centre just to the north and Melrose Plaza on the other side of South Road.

Mitcham Council's Development Assessment Panel rejected the Panorama proposal in August 2016 because of concerns about landscaping, paving and a lack of trees. A court appeal by local resident Neil Baron is on hold while Bunnings works out revised plans with the council.

The 4.3ha Edwardstown site is in the Marion Council region but the development application will be handled by the State Government's Development Assessment Commission. It is still owned by Bridgestone and car parts maker Toyoda Gosei, which ended operations there in 2015.

Mitcham mayor Glenn Spear said he would be disappointed if Bunnings did not go ahead with redeveloping the Panorama TAFE site, which was looking "shocking" because of vandalism. He said:
Bunnings has bent over backwards to appease residents' concerns about the site. They've been very good corporate citizens.

The Bridgestone site is still listed as for sale, and the Marion and Mile End stores will not be closing.

Related:
Big box update: Assessment for Bunnings Panorama - HNN
Woolies' wins appeal over Masters in Bendigo

The Court of Appeal has ruled in favour of Woolworths in its $14 million legal battle with a landowner over its failure to build a Masters Home Improvement store in Strathdale, Bendigo (VIC).

Woolworths successfully appealed a Supreme Court judgement that it pay $10 million in damages and $4 million interest to North East Solution Pty Ltd (NES).

The trial judge had initially found that both Woolworths and Masters had breached the terms of an agreement for lease of a property on the McIvor Highway on which a Masters store was to be built in 2010. The judge found that Woolworths had not acted in good faith and reasonably and ordered that it pay NES damages of more than $10 million and interest of over $4 million.

The Court of Appeal has set aside those orders and made orders dismissing the claim by NES.

The agreement for lease provided for Woolworths and NES to negotiate reasonably and in good faith the amount that Woolworths would contribute towards the construction costs of the Masters store. The trial judge found that Woolworths had failed to comply with the obligation in a number of respects.

In allowing the appeal, the Court of Appeal concluded that there was not sufficient evidence to prove Woolworths failed to negotiate in good faith.

The store was to be built on the McIvor Highway in Strathdale in 2010 on land owned by NES.

Woolworths ditched the deal with the company to chase a lease on another site in Bendigo being pursued by Bunnings.

Related:
Landlord sues Masters over lease - HNN
2018 opening for Bunnings Devonport

The construction of a Bunnings Warehouse in Devonport (TAS) is continuing. The store is taking over the K&D Warehouse site at the Devonport Homemaker Centre.

The Bunnings development was originally proposed for a site at Stony Rise Road next to the Devonport Homemaker Centre. Towards the end of 2015, $2 million was spent on site preparation for the warehouse chain and a smaller development.

Bunnings general manager - property, Andrew Marks has not provided an update on the future of Stony Rise Road site. He told The Advocate the $19 million store is expected to open in 2018. He said:
Construction works are currently underway and progressing as planned at the new Bunnings Warehouse Devonport site.

Fairbrother Construction has been contracted to build the store.

Related:
Big box update: Bunnings moving into Devonport - HNN
Bunnings NZ makes changes to Grey Lynn store

A controversial new Bunnings store that a group of Auckland residents fought hard to stop, has recently opened. However, the big box retailer says it will operate in a way that aims to make it less intrusive in the neighbourhood.

Jacqui Coombes, Bunnings NZ chief executive, showed the New Zealand Weekend Herald how the chain's first inner-city warehouse would have smaller delivery trucks, an internal truck turntable to ensure delivery vehicles did not back out on to the street and lower noise levels broadcast into the surrounding areas.

After a long battle, the Arch Hill Residents Association won concessions in the Environment Court: nearby houses must be checked for structural damage from the building work, summer trading hours are limited, loudspeaker use will be controlled and traffic slowed.

Ms Coombes said the three-level store is a NZD42 million (AUD39.2 million) investment by the Wesfarmers, which expects 3500 customers a day. She showed how trucks arriving at the city store could not be any more than 7m long because they would not fit on the turntable.

The nursery on the northern side has only two speakers and broadcast volumes would be controlled, she said.
We're very conscious we're operating in a high-residential-use area so we cut down on traffic flow and noise. People will come here and we'll continue to work with the local community. We want to be part of the community.

Ms Coombes also said the new store would be the 54th New Zealand Bunnings and the 349th Bunnings store in Australasia.

David Batten, a Grey Lynn Residents Association board member, said:
The store is what it is. Our views haven't changed at all, to be honest. This came out of mediation. Bunnings has showed themselves to have attempted to be good neighbours.
Retailers
Indie store update
Porters takes over four Woodman's Mitre 10 stores
HNN Sources
Starcom wins Home Timber and Hardware media account
J.A. Berry in Gunnedah (NSW) moves to HBT
Click to visit the HBT website for more information
Porters acquires Woodman's Mitre 10 stores; Home Timber & Hardware's media account has gone to a different agency; and Hardware & Building Traders gains Gunnedah store, J.A. Berry.
Store consolidation in Mackay

Prominent Mackay-based hardware business, Porters has acquired four Woodman's Mitre 10 stores.

Managing director Gavan Porter Snr said the company purchased the stores located in Sarina, Marian, Proserpine and Cannonvale (QLD). He and his brothers, director Paul Porter and chairman of the board Barry Porter, said their family would retain total control over all stores.

Woodman's Mitre 10 on Nebo Road in Mackay is not part of the deal and will close to customers on May 31, according to owner Kerry Woodman. But it will remain a head office for Mr Woodman's businesses.

Gavan Porter Snr said the company will now be part of Mitre 10's network of stores. Its existing Porters Building Supplies, Hardware and Lifestyle and Whitsunday stores will operate under the new Porter's Mitre 10 banner from June 1. He said Mitre 10 is "a buying and marketing group and they've got nothing to do with ownership". He told the Daily Mercury:
It's all still under the Charles Porter and Sons' banner.

Barry Porter said the trio still "want Porters to be family owned in 175 years".
We've got fifth and six generations working in the business now and we don't want that to change.

Gavan Porter said customers could expect "newly reinvigorated teams, wider product ranges, new loyalty programs and in-store services under the new Porter's Mitre 10 banner". He said:
We are excited to be joining the Mitre 10 group as Australia's largest independent home improvement and hardware wholesaler to the industry; this will allow the Porters business to continue to thrive and grow for many years to come.

The move to Mitre 10 could also see the establishment of dedicated Trade Centres in Mackay and Cannonvale.

The Porter brothers said their company and Woodman's Mitre 10 shared similar core values. Paul Porter said:
It's great to take over the Woodman's business, they've been a great business here in Mackay for so many years. They've decided to exit the market and we decided it was a great opportunity to take it on. It gives us a lot of strength in our buying. They (the stores) will all still be totally owned by the Porter family.

Established in 1883 by Charles Porter, originally as a timber yard, Porters is today run by fourth and fifth generation descendants.

Porters already employs 150 staff and once the acquisition is complete, there will be about 50 more.
Woodman exits

Mr Woodman said while it was "heart-wrenching" to reach the decision, he had "acted in the best interests of our staff".
They were primary in our consideration. Some staff (at Nebo Road) will transition to Porters, some will stay with the business. We've been in business here since 1939 and our family has a long association with the industry.

Other businesses owned by Mr Woodman will continue including the Bristol Decorator Centre, Mackay Timber and Truss, Mackay Glass & Aluminium, Woodman's Roofing Centre and Mackay Brick Sales. He said:
It's only a partial sale of some of our stores to the Porters organisation. It was an extensive negotiation. It wasn't a simple transaction because it was only part of our business.

Mr Woodman hopes to build up and invest in his other businesses, including his role as a distributor for Trailers 2000 and his paver and brick business.

Related:
Indie store update: Jobs to go at Porters - HNN
Indie store update: Mackay's Porters closes a store - HNN
Home Timber & Hardware changes media agency

The Home Timber & Hardware (HTH) media account has moved to Starcom Melbourne from Dentsu Aegis without the companies having to pitch for the business.

The account includes media buying and planning and follows the acquisition of HTH by Metcash, a Starcom client, last year.

Starcom has been the media agency of record for Metcash for more than a decade, which has Mitre10 since 2010. Metcash Independent Hardware Group general manager - marketing, Karen Fahey said:
We've had a great relationship with the Melbourne team for a number of years, and are looking forward to extending the relationship further. As Australia's leading independent home improvement and hardware wholesaler to the industry, the quality of our partners is paramount.

Starcom Melbourne managing director Peter Toone adds:
To be able to work with not one but two leading hardware brands is a rare opportunity, and one we are very excited to be able to fulfil. Both Mitre 10 and Home Timber & Hardware have a strong track record in building their brands and giving them a unique role in Australia's hardware landscape.
J.A. Berry changes to HBT

Catalogues are dead and the future is in direct sales, according to Dave Berry owner-operator of the J.A. Berry hardware store in Gunnedah (NSW). From June 2017, it will return to its independent retail roots and become a member of Hardware & Building Traders (HBT).

The store will no longer be part of Home Timber & Hardware (HTH) and deal directly with suppliers. Driving the change is a loss in faith in the catalogue industry. Mr Berry told the Namoi Valley Independent:
We don't feel there is a future in catalogues anymore. There's too many people in that game now. We don't think it's financially viable.

He said the overhead costs in the franchise were too great in today's market and the change in name will make life "a lot easier".
We're reinventing JA Berry as a true independent.

But it's not the first time the trader has run his own ship. The business was independent in the early days even before it was a Thrifty Link store that changed to HTH in 2011.
Careers
Seeking opportunities
Zenexus is a major supplier and distributor of major brand hardware products
HNN Sources
A.G. Pulie is seeking a WA-based account manager
A trade account manager role is available at Hardings Hardware in Queensland
Visit the Mecca Website
A forecast analyst position is available at Zenexus; a WA-based account management role at A.G. Pulie; and Hardings Hardware in Queensland requires a trade account manager.

Please click on the company logos for more information about each role.
Demand planning team

As one of the largest privately owned suppliers of major brand hardware products throughout Australia and New Zealand, Zenexus is looking for a forecast analyst to be located at its head office in Keysborough (VIC). Reporting to the group supply manager, the forecast analyst will provide information that will drive critical business decisions.
Join the demand planning team at Zenexus
Customer relations role

Construction and building tools, machinery and equipment supplier, A.G. Pulie is seeking the services of an account manager in Perth (WA). The position involves calling on independent hardware, trade and other retail stores. It will suit a keen individual who is enthusiastic about starting or developing a sales career.
A.G. Pulie will provide training and a company vehicle
Timber and hardware market knowledge

A trade account manager position at Hardings Hardware will suit an "enthusiastic self-starter with proven results in driving sales growth in a target driven environment". Reporting to the Queensland sales manager, Hardings Hadware is part of the Independent Hardware Group network of stores.
The trade account manager will represent the Home Timber & Hardware brand to key stakeholders
Companies
Supplier update
Jim Bindon is managing director of timber and steel building products supplier, Big River
HNN Sources
Renting garden tools could be the way ahead for some consumers, according to Husqvarna
Klika is bringing Ford Power Equipment back to Australia
Subscribe to HNN weekly e-newsletter
More acquisitions planned for Big River as it heads to the ASX feeling bullish about Australia's housing construction markets; Husqvarna sees future in garden equipment rental for consumers; Klika is bringing the Ford Power Equipment range to the Australian market exclusively; and PPG makes a third acquisition bid for Akzo Nobel.
Big River confident on detached housing

Jim Bindon, managing director of timber and steel building products supplier Big River, believes detached housing, commercial construction, civil engineering and infrastructure projects are all poised for solid growth in the next few years, with the only the apartment market likely to slow down.

Mr Bindon said the detached housing construction market was just running at long-term average levels, while the infrastructure projects planned by governments meant there was substantial activity.

Commercial building activity still hasn't recovered to levels seen before the GFC.

The renovations market was also set to strengthen as home owners, reluctant to shift, planned upgrades to their current residences. Dwelling approvals in Australia in 2016, however, were at their highest point in the past 15 years.

Big River timber and steel products are used by about 2700 professional builders and construction companies.

The NSW-based firm wants to wants to expand through the acquisition of privately owned timber yards and other operators in a sector where there are more than 2000 small players, as it headed towards an ASX listing.

Many of those businesses are family owned without clear succession plans. Mr Bindon told the Financial Review:
It's a very fragmented industry.

Stockbroker Taylor Collison has closed off a fully subscribed $17 million raising by Big River. The company has an indicative market capitalisation of $77 million at the issue price of $1.46 per share.

Sydney private equity firm Anacacia Capital, which acquired a controlling stake last year, isn't selling down any shares in the initial public offering, with major shareholders escrowed until late 2018.

Sales revenue is forecast to be $201 million on a pro-forma basis in 2016-17, rising to $207.3 million in 2017-18.

Net profit after tax is projected to increase from $5.99 million in 2016-17 to $6.9 million in the following financial year.

The company has manufacturing facilities at Grafton and Wagga Wagga in regional NSW and runs 12 sales and distribution centres, which cover the major capital cities in Australia.

Big River derives 31% of its revenue from customers building multi-residential housing, 29% from residential housing and 25% from commercial building projects. The remainder comes from civil infrastructure and industrial customers.

In early March it spent about $7.5 million buying the Adelaide Timber and Building Supplies business from home builder Rivergum Homes.

Rivergum Homes is a major customer of Big River, with the supply of building products to that firm representing about 7% of Big River's total annual sales.

Big River is chaired by Greg Laurie, who is also a director of furniture group Nick Scali. Other directors include Malcolm Jackman, a former managing director of agribusiness and pastoral company Elders.

A small part of Big River's timber and building products business competes against the trade part of Bunnings as well as Mitre 10, [and presumably independent retailers in the Hardware & Building Traders group and Natbuild.]
Consumers renting tools, says Husqvarna

Outdoor power equipment maker, Husqvarna has begun a pilot project in Stockholm (Sweden) for homeowners to access pay-per-use power tools for the garden. This eliminates the need to maintain and store hedge trimmers, chainsaws and other tools that are used less frequently.

The project is part of Husqvarna's plans for "sustainable solutions for taking care of gardens and green spaces".

Husqvarna Battery Box, is a "smart", 8m x 3m, unattended container with 30 electronic lockers that store battery powered garden care products. Through an iPhone app, homeowners can reserve tools, get instructions, pay, and open the locker to pick up their pre-booked power tool.

The Box will be placed at Bromma Blocks, a shopping centre 15 minutes west of Stockholm city. Renting a garden care product will cost SEK350 (AUD54) a day. Husqvarna division president, Pavel Hajman, said:
People are already sharing homes and cars. To share products that are only used occasionally, like a hedge-trimmer, makes a lot of sense for some users. Husqvarna Battery Box is proof of our commitment to explore new solutions that merge innovation and sustainability, benefitting the homeowner, the community and our distribution network.

Husqvarna wants to move from petrol powered products to silent battery products with no direct emissions in urban areas. The company hopes to collect insights on market maturity, customer behaviour, and potential future revenue streams. The test period runs from May 1 to October 31, 2017.

After completing registration in the iPhone app Husqvarna Battery Box, the customer can reserve one of the 30 available battery powered products (chainsaw, hedge trimmer, trimmer or blower). The app guides the user on how to open and close the door to the particular locker where the product they want to rent is kept.

The app also includes how-to videos to explain how the product works. The Box, powered by solar cells, will be serviced by Husqvarna staff daily, ensuring that products are in good condition and that the batteries are fully charged.

The connection between Husqvarna Battery Box and the customer is enabled via Bluetooth. For identification purposes, the customer uses the Swedish ID app BankID. Payments are charged to the registered credit card at the end of the month. During the pilot period, the app is only available on iOS.

The battery series in the Box is powered by a 36V Li-ion battery, and one battery fits all the available products (chainsaw, hedge trimmer, blower, trimmer).

UK retailers such as Homebase and Wickes offer garden tool hire services but the Husqvarna pilot takes renting tools into a new phase.
Klika brings Ford Power Equipment to Australia

Online retailer, Klika has been appointed Australia's exclusive distributor of Ford Power Equipment. The product range of pressure washers, portable generators, inverter generators and water pumps for both domestic and commercial applications.

The company explains that the partnership agreement will see it "expand beyond its traditional pure-play online presence and enter the Australian wholesale distribution chain". Leo Zaitsev, director of commercial operations, said:
Klika's partnership with one of the world's most iconic brands is true testament to the strength of our business and represents the next step in its evolution. We are now witnessing the merging of our local omnichannel offering between online retail and bricks and mortar, but rather than imitate our competitors by establishing physical pop-up stores, we will distribute directly via the national retail chains.
We are already in discussions with a number of them which are eager to gain access to the Ford brand, which Australians have loved for over 91 years.
The Ford power equipment range will meet the upcoming strict Australian National Clean Air Agreement standards. We were very particular during our negotiations, as stringent quality, reliability and durability requirements is paramount...

Klika operates out of its 15,000sqm central facility in South Oakleigh (VIC) with satellite offices in two other countries. It has its own range of private labels and offers other brands such as Sony, Breville, Apple, Huawei, Disney licensed toys and bedding, Uniden and Belkin, to name a few.

The company was founded in 2005, is Australian-owned and operated, and has been acknowledged in the list of "Top 20 Online Retailers in Australia" and Power Retail's Top 100 Retailers list.
Akzo Nobel considers latest PPG offer

Dutch paint maker Akzo Nobel's (Akzo) supervisory board is considering its options after deeming PPG Industries' latest USD29 billion (AUD39 billion) offer to be insufficient, according to a report in Reuters.

Akzo believes that PPG's third acquisition bid, which was unveiled on April 24, still does not value the company highly enough, especially in light of Akzo's plans to unlock value by exploring a spin-off or sale of its specialty chemicals business, and the risks it sees in the potential deal, sources told Reuters.

However, Akzo is studying several scenarios about how to move forward, mindful that several of its shareholders want it to engage with PPG in negotiations.

Among the options being considered by Akzo is talking to PPG only about some of the issues that would affect the deal, such as antitrust approval risk, or rejecting it outright without any engagement, the sources said.

This is because Akzo is concerned that engaging with PPG in comprehensive deal negotiations would weigh on its prospects of getting PPG to improve on its offer much more, according to the sources.

No timeline has been set for Akzo's response to PPG, the sources said.

PPG said its latest acquisition proposal was worth EUR96.75 (AUD143.46) per Akzo share, comprised of EUR61.50 (AUD91.19) in cash, 0.357 shares of PPG common stock and dividends worth EUR7.78 (AUD11.54).

That's a 50% premium to Akzo's closing price of EUR64.42 (AUD95.52) on March 8, the day before PPG confirmed it had made a proposal to buy Akzo at EUR80 (AUD118.62) per share. Akzo has been arguing this premium does not factor in the value of its announced intention to shed its specialty chemicals business.

PPG has said it has no plans to break up Akzo following an acquisition. It has also said it will submit a formal offer for Akzo to the Dutch financial markets regulator by June 1, regardless of whether Akzo chooses to engage.
Retailers
Europe update
A Homebase store in Folkestone, Kent (UK) will be transformed into a Bunnings store
HNN Sources
B&Q has delivered its first profit from its China operations
ManoMano refers to its first year in the UK as a success
Click to visit the HBT website for more information
A Bunnings Warehouse will replace a Homebase store in Folkestone; e-commerce delivers profit for B&Q in China; and ManoMano targets Kingfisher's home improvement sales in the UK.
Folkestone next location for Bunnings UK

Bunnings United Kingdom & Ireland (BUKI) is set to transform a Homebase store in Folkestone, a port town on the English Channel, in Kent, south-east England.

The Homebase store is currently located in the Park Farm Retail Park and will move just down the road, according to Kent Online. The site formerly housed B&Q which left Folkestone altogether earlier this year. It will be the fifth Bunnings store to open in the UK. A spokesperson for BUKI said:
We can confirm that the fifth Bunnings Warehouse pilot store will open in Folkestone. We expect [it] to open in July at a nearby site formally occupied by B&Q.

A planning application for the relevant signage has been submitted to Shepway District Council for approval. The new store will span 75,000sqft.

The Homebase store has been in Folkestone since the mid-80s, with planning permission first granted in May 1984. The spokesperson:
Our team in the existing Homebase store in Folkestone have been made aware and we will be shutting the doors in July. This is an exciting development for us as our pilot programme builds momentum extending the Bunnings Warehouse offer to a new area of the UK.

BUKI also has plans for store rebrands in Milton Keynes and Hemel Hempstead before 30 June.
Q1 results

Homebase/Bunnings stores in the UK saw transactions increase 2.2% in its first quarter in results.

Total sales for the quarter (a 12 week period from 2 January 2017 to 26 March 2017) were GBP245 million ((AUD428 million). On a like-for-like trading basis across the third quarter, customer participation, as measured by retail transactions (both in-store and online), increased by 2.2%.

For the financial year to date, total sales were GBP851 million (AUD1,489 million). Customer participation for the financial year to date increased by 6.9%.

BUKI managing director PJ Davis said trading during the quarter was negatively affected by the continued repositioning of the kitchen and bathroom offer, while the performance across other core home improvement and garden products was pleasing.

There were 254 Homebase stores as at the end of March 2017.
B&Q finds China sales through ecommerce

After operating in China for almost a decade and several strategic changes later, B&Q said it has turned a profit after nine years of losses. Home improvement sales are now largely driven through B&Q's storefront on Alibaba's Tmall online platform launched in late 2015. Shi Jun, director of strategy at B&Q China explains:
To be frank, we are already a little bit late to the Internet. Each offline store can typically only cover the adjoining 10kms, or 20kms, at most. Customers outside the coverage area aren't aware of the store at all. Tmall helps us reach many more customers, particularly the internet-savvy, post-80s generation.

B&Q simplified its offerings online, locking in three price points for the customer segments it was able to identify through Tmall.

Overall, the company believes the successful marriage of its online and offline operations is behind B&Q's reversal of fortune.

Tmall's "home" business unit includes home appliances and home improvement verticals and has partnered with 500 brands, connecting consumers with some 60,000 offline stores to facilitate omnichannel sales.
B&Q's Chinese history

Back in 1999, B&Q's China operations were very different when it opened shop in Shanghai. In addition to selling home building supplies, the retailer offered home decoration services.

That was the start of an on-again, off-again relationship with Chinese consumers, who wanted value-for-money DIY prices, but preferred that somebody else do the actual renovation project for them, leaving them as little work to do as possible. With a reliance on physical stores for sales, B&Q's growth was hindered by geography.

Traffic and sales in physical stores started to dwindle from 2007, and B&Q shut down 20 stores. In late 2014, B&Q's owner Kingfisher, sold 70% share of its Chinese business to a local partner, supermarket operator Wumart Stores Inc.

Seeking a way forward, the retailer turned onto Tmall, offering a RMB699 (AUD136.52) per-square-metre home improvement solution for young people on a tight budget. For RMB999 (AUD195.11) per-square-metre, customers can select from four home-decoration styles: modern, European, American country-style and modern Chinese.

At the high end, a RMB1799 (AUD351.36) per-square-metre solution targets more affluent, tech-savvy customers, providing options such as rooms equipped with smart devices.

B&Q's online storefront makes the ordering process easy and expands its reach to more customers and cities in China. It allows customers to make their selections online before driving them to brick-and-mortar stores to complete the sale.

Customers can view photos on the website, make their choices and pay a deposit as low as one yuan (20 cents). Then, they either head to nearby physical stores to finalise their purchases, or a B&Q store associate makes a house call. B&Q also offers Tmall shoppers an installment plan, and allows them to oversee the construction via the Tmall app.

Customers can leave reviews online after construction or answer questions from potential customers who are curious about B&Q's service. Mr Shi said:
...Online and offline channels play their roles, respectively. We communicate and acquire customers online, while offering physical experiences offline to reinforce customers' confidence to shop. There is no boundary between online and offline.

B&Q's Tmall storefront also provides a new business model for the company. Margins are tighter, but volume is higher. And, at least in its first year, it seems to be working.

Last year, B&Q sold over 10,000 of the RMB999 (AUD195.11) design solution. Online sales of home improvement services reached RMB600 million (AUD117 million), approximately 30% of its total business in China.

It helped B&Q's Chinese market to grow over 20% and achieve its first-ever annual profit in the country since 2007.

B&Q is now exploring a renovation service to meet the growing sales of "second hand" apartments in China. In addition, the company plans to meet the demand from consumers in smaller cities by opening 200sqm "studios" where homeowners can connect with B&Q designers who can handle their remodelling projects.

The company's Tmall store will be supported with physical mini-stores to display merchandise.

Related:
B&Q owner Kingfisher exits China - HNN
ManoMano hails successful first year in UK

France-based online DIY marketplace, ManoMano said its first year of trading in the UK has been a success. Since entering the UK market in April 2016, it has partnered with over 100 local DIY merchants with 185,000 new products entering its listings.

In the UK, total revenues for the year hit GBP4.4 million (AUD7.7 million), with sales volumes of over GBP214 million (AUD374 million) and over one million listings.

Since its launch three years ago, the pure-play online retailer believes it has begun to disrupt larger players such as Kingfisher.

ManoMano has laid out ambitious plans to triple its product offering and reach a turnover of GBP10 million (AUD17.5 million) by the end of 2017, and projecting a GBP85 million (AUD148 million) turnover by 2019. Co-founder Philippe de Chanville said:
To disrupt such a competitive market like the UK and build a community for the long term, you need to stand out by the quality of your offer, not just by the quantity of products available or the low prices advertised on the website.

Related:
DIY start-up ManoMano to challenge B&Q - HNN
Products
Z-Wave enabled locks
Kwikset Obsidian is the brand's newest deadbolt, and it doesn't use a key
Security Sales
The Kwikset Convert brings keyless entry and home automation to consumers
The Kwikset Contemporary SmartCode locks address the needs of style-conscious consumers
Click to visit the HBT website for more information
Kwikset showcased five of its latest residential lock products at ISC West, a trade show for the security industry, held each year in Las Vegas. They are expected to be released in the second half of 2017.

The locks are said to be among the first to market with the Z-Wave 500 Series chipset, which offers extended wireless range and security.

Among the latest offerings, the Obsidian is a smart lock that eliminates the need for traditional keys. It will be available with standalone and connected options, allowing users to lock and unlock their front doors using the touchscreen exterior or their smartphones.

The sleek touchpad of the Obsidian - just like the volcanic glass - is black and makes up nearly all of the deadbolt's exterior. The lock's all-metal interior has advanced mechanical and electronic security features. Eliminating the keyway takes away the threat of "lock picking" and "lock bumping" attacks using specially cut keys to defeat conventional pin and tumbler locks.

Kwikset's other offerings include the following:

SmartCode 888 Touchpad Electronic Deadbolt - A contemporary version of Kwikset's SmartCode five-button deadbolt, designed to integrate with select smart home systems. The device can hold up to 30 different user codes and delivers convenience to homeowners with remote locking/unlocking via smartphones and tablets, as well as total home control.

Kwikset Convert (Z-Wave Smart Lock Conversion Kit) - Replaces the interior half of an existing lock, and brings keyless entry and home automation to consumers. The new kit will appeal to design-driven homeowners who want a smarter lock but want to maintain the style of the front door or match the current handleset, and don't want to change the existing deadbolt. Available in brass, Venetian bronze and satin nickel. The kit can be used on Kwikset, Baldwin, Weiser and Schlage products.

Contemporary SmartCode 914 & 916 - These locks address the needs of style-conscious consumers with contemporary versions of the company's traditional deadbolts. The locks integrate with home security and automation systems with remote locking/unlocking via smartphones and tablets.
Products
Vanities blend form and function
The Lily Vanity Collection from Highgrove Bathrooms features natural timber
Highgrove Bathrooms
The Lily Vanity's wall-mount designs are an alternative to the heavy, weighed down vanities of the past
A longer vanity which is ideal for a family
Click to visit the HBT website for more information
The inclusion of natural timber accents and elements helps to break up the swathes of cool, hard surfaces that have typically dominated bathroom design. The new Lily Vanity Collection from Highgrove Bathrooms reflects this trend by combining modern sleek design with a timber accent.

The range is crafted using a seamless white gloss polymarble inset basin and a moisture resistant, medium-tone timber veneer face. The deep drawer offers generous storage and is accompanied by push-to-open technology.

Wall-mount vanity designs have recently been welcomed into bathroom design as an alternative to the heavy, weighed down vanities of the past. The Lily Vanity Collection brings the focus up off the ground and allows the flow of energy throughout the space, adding a light airy feeling to the room. It also features metal drawer runners and door hinges.

With two available vanity sizes, there is an option for most bathroom layouts - a longer vanity which is ideal for a family or master bathroom centrepiece, or a smaller vanity that can be doubled up to create a "his and her" vanity solution.
News
HI News V3 No. 4: Inverell H Hardware re-brand
Download the latest issue of HI News Vol. 3, issue no. 4
HI News
Leigh Muggleton is the owner and face of Inverell H Hardware
A transcript of TTI CEO Joe Galli's presentation is featured in this issue of HI News
Click to visit the HBT website for more information
This edition of HI News focuses on a major store in the Hardware & Building Traders (HBT) network that undergoes a re-brand to become an H Hardware store. We travel to the bucolic regional town of Inverell (NSW) to see how it came about.

Simply click on the following link to download this edition:
HI News V3 No. 4: Inverell H Hardware re-brand

On the global stage, we take a deep dive into the 2016 results of Techtronic Industries (TTI) and provide a transcript of CEO Joe Galli's presentation to analysts and investors.

We also look at the latest reports from international home improvement retailers, Kingfisher in the UK and US-based Home Depot and Lowe's. Kingfisher's results will be in two parts.

Local big box retailer, Bunnings continues its expansion both in Australia and the UK.

Other news stories include Adelaide-based online business, Monsta selling paint direct to consumers; Briggs & Stratton's exclusive distribution of Billy Goat products in Australia; Tasmania's independent retailer K&D losing its CEO; and Ikea's foray into smart lighting.

A Melbourne-made bin caddy is just one of the products featured in this issue, along with the Mirka dust-free sanding system which is new to the Australian market.
Companies
TTI results presentation 2016 transcript
Horst Pudwill and Joe Galli, chairman and CEO of TTI
HI News Vol.3 No. 4
Vertical markets serviced by TTI
Gross margin growth at TTI
Subscribe to HNN weekly e-newsletter
The following is an extract from the transcript of an address the CEO of Techtronic Industries (TTI), Joe Galli, gave to investment analysts on the release of TTI's results for 2016.

To read the complete transcript, please click on the link below, which will download the edition of HI News which includes this article:
TTI 2016 results presentation - HI News Vol. 3 No. 4
Transcript

We are delighted to share with you yet another record-breaking year. Sales are up 9.8% in a marketplace that is not going anywhere near that. We are totally outpacing our competitors in every geographic region. Sales of our power equipment business were up an amazing 13.3% [in local currency]. This is not just Milwaukee, this is our entire power equipment business. Our DIY business, our OEM business, our outdoor business. These results reflect just amazing performance in our local operations around the world.

Floorcare down 3.3%, but that is misleading when you consider that the future of our floorcare business [sales of cordless] was actually up 53% [in local currency]. So our overall floorcare business needs to be improved, we recognize that we are dedicated to that. But let us not lose sight of the progress our team has made launching a very exciting stream of cordless floorcare products.

You will see in a moment that we have an outstanding pipeline of new products in floorcare that will fuel the turnaround of the business and help it to catch up to the power tool progress that we've made. As Frank has pointed out, our sales are up double digits, gross margin up 50 basis points.

This is the eighth consecutive year of improvement in gross margin. The eighth consecutive year. Up 36.2%, and we were able to able to leverage our sales growth EBIT performance at 12.6% growth. Net profit is up 15%, which in the environment in which we are in, with the level of investment we're making we think is quite acceptable.

This is a chart we love to talk about. So for eight consecutive years we have driven gross margin up from a modest starting point of 30 .8% to a level now at 36.2%. As Horst pointed out at the start, we've basically doubled our output in China with the same headcount.

So think about that: we've doubled our output with the same head count. We are uniquely positioned to transition to any geographic region such as the USA, if the legal environment and the political environment creates an opportunity or a requirement to produce there, we can move at a very quick rate. And I'll show you that in a moment.

As Frank pointed out, working capital was better than last year at 16.4%, that's world-class, that still continues to be the best in the industry. And yet we do think there is room for improvement, in inventory as we go forward. But what we won't do is to compromise our service level to our customers.

If you were to look at Home Depot or Bunnings or any of our other major customers, what you would see is that we are routinely awarded vendor of the year recognition for outstanding service levels. We retain and exceed the levels of our competition and we are doing it with an acceptable level of inventory. While that may come down a bit as we go forward, but never at the expense of customer service. That is a hallmark of TTI.
Milwaukee

So, you know, look, the Milwaukee business is one of the growth engines of the company along with Ryobi. We were able to grow Milwaukee last year at 21%. Now think about that: 21% growth in the power tool industry. We are not in Silicon Valley here, we're talking about power tools, a GNP business for years and this significant part of the company is growing at 21%. As we have shared before, our plan is to grow at a 20% clip really for the next five years at Milwaukee as we continue to take market share and stimulate market growth with our cordless strategy. I'm going to share that with you here as we go.

The Milwaukee growth is extraordinary not only because it is at 21%, but because we are able to do it in every region that we are tracking around the world. So North America was really strong at 20.6%, but Europe was the star of the company last year with a 21% growth rate in Milwaukee.

As you know, the European theatre is in a state of contraction, there is all sorts of concern about the economic health of the region, and yet TTI was able to build Milwaukee at 21.3% growth. That is maybe the most exciting result we had last year. Of course, rest of world is paced by Australia and New Zealand, where we have become the number one pro supplier of power tools. But also we are beginning to focus on other countries in Asia, like Korea, like Taiwan, where we've had amazing success with their Milwaukee program. Not at a discounted level, we are going in with significant premium pricing, and we are finding users willing to pay up for the quality and the safety that we provide with Milwaukee.
Manufacturing in USA

Horst mentioned upfront and I think that it is important to point out now, that we have never put all your eggs in one basket when it comes to manufacturing. We have an outstanding manufacturing foundation in the US, this is not something that we reacted to, this has been in place for a long time. For a lot of reasons, we always felt we should have geographic diversity when it comes to manufacturing. We also have manufacturing in Europe by the way. These decisions are made based on a strategic plan that would allow TTI to flourish no matter what local laws are passed.

So if something happens in the US, and there's some sort of border tax, it is going to affect everyone equally, everybody manufacturers in Asia, it is not like we are the only company producing power tools in China. The great news is that we are positioned to ramp up fast in our manufacturing operations. We have two Milwaukee factories, we have a Ryobi operation, a floorcare operation, and a handtool operation. We have a lot of friendly [US state] governors that seem to be anxious to fund our decision to increase manufacturing.

So if you say what is going to happen to TTI if we do this? Well first of course the US has higher labour rates, but you save on freight. We have learned to automate our manufacturing and we have proven that over the last five years, and we have an amazing world-class manufacturing operation in China, that is a perfect operation to supply the rest of the world. The US is, everyone is speaking about today about the US, but we are growing like crazy in Canada and Europe and Australia and Korea, and Latin America, so we have China, China is ready to go to supply the rest of the world if the US focuses on production locally.

Again I think that you have to understand that the laws that may come across in the US will not discriminate, every manufacturer will be dealing with the same situation. It is just the winner will be the company that can move the most quickly, and I think that our execution track record speaks for itself.
Future leaders

Okay, so here's another interesting highlight of the company's success. We are continuing to be dedicated to hiring college graduates to provide manpower for our growth. So this year we will actually hire over 500 college graduates over 50 campuses in the US, and in another 12 countries around the world. This is a program that provides the future leadership for TTI.

It is an interesting group that we hire. These Millennials that we hire, they are 52% female they are 18% bi- or trilingual, we look at 100 resumes and we pick one, we do that 500 times and then the top 10% of those people are promoted into the company's opportunities or product management jobs etc. around the world.

There is no one in our industry that is remotely close to this kind of commitment to developing future leadership. It is one of the things about having so many Millennials around, the Millennials all want to save the world, but they also live on social media, and they think their iPhone should control everything. So you're going to see TTI blazing a trail when it comes to iPhone and Bluetooth capabilities on our products, whether it's in floorcare or power tools.

This is an enormous advantage that I think is underestimated. I think to have a group of 50-year-old executives sitting in a room trying to figure out how to turn the iPhone into a device on the jobsite might not be the best strategy. And I think that our campus recruiting program is going to bear fruit as we move forward.
Thinking about the market

I would like to introduce today, a way for you to think about our market over the next five years. Many people have said, what are you going to do next? Horst and I talk about this all the time. Milwaukee is growing like crazy, Ryobi is an amazing success story, what is going to happen next?

We wanted to share with you our vision about the marketplace over the next five years and to give you some confidence that we can continue to grow our company the way you have in the past and deliver outstanding financial results, in the businesses we serve today.

 And this growth we have will be fuelled by what one of the most prominent analysts of our company has coined the phrase "the growth drivers" to describe. We have Milwaukee, Ryobi are powerful growth drivers, soon to be joined by floorcare.

Let me show you how that growth will manifest itself in the market.

So first of all we we think in five years, we are talking about serving a market that could be USD35-USD36 billion plus. These are internal estimates, this relates to marketplace that we are in fact helping to create, and develop. So our vision is to stimulate and create a market, much in the way that Apple did with the iPhone and the iPad, and we want to be in a position to harvest the benefits of that creation.

We recognise that we are never going to control the whole market, and I think what people miss, none of our competitors have to lose for us to win. We have some very good competitors - Bosch, Mikita, Stanley, DeWalt - these are well-managed companies ,and they are very strong in many geographic regions. We intend to be real leaders in the market, particularly in cordless, where we already are exhibiting that leadership. What we create here will benefit everyone, and the key is that we want to be the Apple, we want to be in the vanguard, and to be the company that is creating the opportunity.
Network effects

The power tool market has changed dramatically. The reason this is so exciting, is because of what we call the network effect in cordless. In the old days power tools was called a "best of of breed" business. So you'd walk into a Home Depot and you would buy a Milwaukee Sawzall, a Bosch router, a Makita circular saw. And you were considered to be a smart user if you knew what brands to buy for what category. And there was no interconnectivity, so your truck looked like a rainbow of colours, and it did not have and it did not matter if one tool could talk to another, because there was no synergy, no connectivity.

That is all over now. The power tool market is going to go to cordless. In fact the whole power equipment market is going to go to cordless, including floorcare. And the opportunity for us is because we have the broadest network work the broadest range of products that work off the same battery platforms, we think that we can convince the user to buy our kits to start and lock them into our network over the long haul. And this is a way where you can build a much higher level of marketshare at a much higher level of growth than the old best-of-breed days.

Let's take a look at this cordless market potential. So the total power equipment market potential we think is USD36 billion.

To continue reading this transcript, please click on the link below, which will download the edition of HI News which includes this:
TTI 2016 results presentation - HI News Vol. 3 No. 4
Retailers
Inverell H Hardware: The big re-brand
Front entrance of re-branded store
HNN Sources
Leigh Muggleton, the managing director of the store operation
The New England region of NSW has its own unique history
Click to visit the HBT website for more information
One thing that HNN's visit to Inverell, New South Wales (NSW) for the re-branding of Inverell Building Supplies as an Hardware and Building Traders (HBT) "H" branded hardware store firmly brought home to us was the isolation of some rural regions. After much scrolling around Google Maps, and rattling of printouts of train and bus timetables, we ended up doing what probably most business travellers do - paying Rex Airways more than you might expect for a ride in a twin-propeller airplane (which, fortunately, remained a twin-propeller airplane, at least for the duration of that flight).

Yet, as it turned out, it was certainly worth it. Not just because Inverell is a lovely town well deserving of a visit for any reason, and the rebranded store - now Inverell H Hardware - is a good store, and that the owners, Leigh and Erin Muggleton, are one of those interesting, fun couples you meet in the hardware retail industry. That mattered, but what also showed up was a sense of what the future might really hold for regional areas and hardware.

It's a future where a sense of history, the community memory and community ties continue to matter, and where, rather than inhibiting change and adaptation, they enable it, helping to promote new growth, and better prospects.

Not, of course, that this is all a story of "plain sailing". As with almost all independent hardware retailers, the Muggleton's story is one of survival as well, getting through an event that almost certainly should have terminated their business, but ended up strengthening it instead. That's important for many reasons, not least because the store carries a staff of 16 floor reps, many of them under 30 years old.
Opening events

HNN had come to Inverell for the actual launch of the H branded store on 24 March 2017. The night before the launch, the store's owners, Leigh and Erin, hosted a dinner at a local Thai restaurant, mainly to thank suppliers for their support in making the changeover to the new branding. Steve Fatileh and Mike Loricco from HBT were there as well.

The next morning, bright and early, the real launch was held. There was a large amount of eggs and bacon cooked for the brekkie, and the major suppliers set up stands where they provided advice about their products to some of the store's key customers who attended. The local radio station, Star-FM was also there, giving away doughnuts.

Leigh made a speech to thank everyone who had participated in making the rebranding possible, and a local councillor, Dianna Baker, who was there coincidentally as a customer, gave a quick speech as well, speaking of the store's place in the community.

Steve also spoke, highlighting how important the store was to HBT itself, a prominent presence in the New England area, and how glad HBT was to see another large store added to its growing list of H branded hardware stores.
A little history

Inverell is in the fabled table highlands area of New England. New England is a region of New South Wales (NSW) that stretches north to the border with Queensland, and takes in the townships of Moree, Boggabilla, Tenterfield, Glen Innes, Armidale, Walcha, Tamworth, Gunnedah and Narrabri, with Inverell a little north and slightly east of its exact centre.

It is a region that has a long held belief in its own unique identity. In 1915, the New State Movement was launched, with the goal to separate this region from the rest of NSW. In 1934, a Royal Commission affirmed this region as distinct and separate from the rest of the state. This sentiment was revived after World War II, and a gathering in Armidale in 1948 clarified the boundaries of the region.

Events in the 1970s blurred much of this focus on division. The agricultural sector, on which New England heavily relied, found itself in trouble. Britain joined the European Economic Community in 1973, which saw, for example, Australian butter exports drop by 90%. A bumper wheat crop at the end of the 1960s destabilised world markets. Regional concerns were overridden by national - and even international - ones. Once responsible for 78% of Australia's exports in FY 1952/53, the share of agricultural goods fell to 21% by FY 1995/96.
The recent economy

Today, with Australia placing more importance on becoming a "creative" economy, through a focus on developing services as a centre of high growth, the prospects of regional areas such as New England might seem less than hopeful.

Yet this seems to not really be the case. US urban economists such as Richard Florida have pointed to how "creative cities" enable people from diverse fields to build temporary connections, and rapidly hook-up creative networks. In Australia, academics such as Chris Gibson, who lectures on economic geography at the University of Wollongong, have added to urban creativity the creative processes at work in regional areas.

The difference between the two is that where in cities businesses and other creative enterprises develop goals, then build networks which can realise these, in regional areas the order is reversed. People begin with networks that have been well-established between people - and between people and institutions - over decades and generations, then develop goals based on the capabilities those networks can provide.

Just how close the Inverell H Hardware business and Leigh are to the local community was brought home to us on our first afternoon in the town. It had been raining over the week before we got there, but the skies had mostly cleared, leaving a heavy humidity in the air.

Leigh stood for a moment in the doorway of his store, his eyes searching the heavens above the way only the eyes of country people who live in the drier areas can, as though questioning every single cloud.

"I like the rain," he told us. "For me, it is like liquid gold. When it rains, I know I will get paid."

It was a quiet comment, but it spoke volumes about the links between Leigh, the store, and the community around. That willingness to carry people through the tougher times, and the ability to share in the good fortune of all when hard work and simple, enduring toughness finally get their reward.
The Inverell story

The story of Leigh and his development of Inverell Building Supplies, now Inverell H Hardware, is one where the presence of these networks - professional, personal and regional - can be clearly seen.

Leigh's history with Inverell itself goes back close to 25 years ago, in the early 1990s, when he first came to the town. He was working at the time at BK Oliver Frames & Trusses, the Home Hardware store located in Inverell.

Whatever his ambitions might have been, he didn't have an opportunity to act on them immediately, as a family illness saw him take on a job with BBC Hardware as sales a rep, in the years immediately prior to its acquisition by Bunnings. In fact, during his time there, Leigh left to go work for Bunnings, but only lasted there for three months or so. Against the odds, he managed to get rehired afterwards by BBC. As Leigh explains:
Apparently I'm the only fella that John Reece who was state manager of BBC had taken back. You could go to work in a different industry but if you went to the opposition that was treason. That was the word he used.
He heard I wasn't happy [working at Bunnings] so he rang me and said "come back to see me". I spent 30 minutes in this sterile office, the table had to be 12ft long. He sat there and the whole time he spoke in a very quiet whisper so I had to lean forward. John told me succinctly, but not nastily, why he doesn't take people back. Jason O'Hagan, who was state trade manager and is now the managing director of Weathertex is also sitting there. He said, "What, do you want to come back? Talk to Jason." Then he leaves his office. It was the most incredible interview that I had in my life.

While Leigh was not fired in the general "cull" of BBC staff that took place in 2001 when Bunnings took over, he chose to leave in 2002.

Inverell, which he had first seen ten years or so before was still in his mind.
I thought, what can I do in Inverell? Because we wanted to come back. Then someone said, "Why don't you start a trade hardware?" Because 90% of [that business] was going out of town, and the local Home Hardware owner was very expensive. Funny how he came good when we started!
But that's what we chose to do. And the rest, as they say, is history.

Starting from scratch, with a minimal investment wasn't the easiest of beginnings.
We started in about September, 14 and-a-half years ago [end of 2002], and we didn't have a shop to sell stuff. There was just a bit of furniture in the corner. When I came in and looked, my wife said, I thought you are starting a hardware store, not a flipping warehouse!

Besides the selling space being quite bare, Leigh was also uncertain if the location was exactly right.
Apparently the space was always here, it was the furniture place in town and it sold out to someone else. They let us rent it and I thought "this is too far out of town". Inverell is funny in that from the Main Street, even for a slow person, it could take less than two minutes to get here, and this is considered a long way to come.

Leigh was not deterred by the lack of store fitout. In fact, he thought (at first) they might not need much.
I told my wife it was going to be trade, and you might not need [a lot of fitout], but within two-and-a-half years [the business] went through the roof and we needed more space. At the time, we put in an extension of 8m x 30m at the back, and that's where we are up to.

The store measures 2100sqm with another 1000sqm for land. And Leigh is pretty clear about why the store was such a success, from the very beginning.
People drive 30km to come into town, but once they come they know they can park, and there is someone here who can differentiate from a hex bolt and a cup head bolt. [That knowledge] makes a big difference.

Another critical element to the store's success was that it was one of the early members of the HBT buying group, from its inception. While the store was not able to meet the criteria for eligibility at the time, then HBT group manager, Tim Starkey, after "doing the numbers", realised the store had good potential.

It turned out, like many of Mr Starkey's "gut" decisions, to be a good one. The store went on to win HBT's coveted Store of the Year award for 2013.
Trouble

It wasn't until about six years after its founding, in 2008, when Inverell Building Supplies hit its first major obstacle. And it was a really big one. This is how Leigh tells it:
Like all things, we've had the good and bad. We had one builder who was a good friend that was buying from us. His word was his bond. But he rang me one day and said he was in a dark place, and he said, "I'll let you know soon".
In this town everybody knows if you change your shoes, and someone said did you hear that [the builder] had gone broke? I said "You're kidding!". Because they owed $290,000.

It was an enormous shock. Leigh faced some tough decisions.
If we had sold up and we would have received 10% on our goods, I could have come out with a couple of thousand, or maybe $10,000 down. I could go somewhere and get a decent job and just pay it off. Yes, that can level you for some time but I am very thankful that we are still here and still going. So you can either trip your lip and carry on about that or keep going.

In fact, what happened was a fairly astonishing series of events. The people of the town, including his bank, Westpac, and Leigh's customers, all rallied around to help support the business through its tough times.
At first, I just sat in the chair and thought, what do you do? I called the bank manager and I couldn't believe it. The bank covered the debt within a week.
You would not believe some of the builders. There were six of them that came in and said "Would you like us to take this to $100,000? And we'll just get that back whenever without interest." Then all the others started paying. Probably had two then 10% of them paying within 35 to 45 days. Now there were at 43% paying within about 40 days properly and 3% within about 30 days.

On the other end of the cash flow, many suppliers helped out, extending payment terms as much as they could. HBT, hearing of Leigh's troubles, also reached out to offer help and advice.
You know who helped us? That a fellow at Orange who is on the board, David Kent. He rang me and asked me how I was going. It was such a lovely thing that he reached out, and I think I can mention Tim [Starkey] who we obviously we miss dearly. That day, he rang and said you've got to have an "office Nazi".

Getting the "office Nazi", who was already a partner in the business, Robin Cameron (who is anything but a "Nazi"), turned out to be just what the business needed to not only get itself out of its problems, but also to increase its growth rate.
I am a softy although I've tightened a little bit but I didn't want to become a mongrel which is hard. We had to have Robin, our business partner who took over and since then its happy days, as they say.

As a result, Leigh is pretty sure that the business could weather a similar setback (not that they would let that happen) without having to draw much on outside resources.
Not a Nazi, business partner Robin Cameron looks after accounts
Becoming an "H" Hardware

Part of the store's ongoing growth has been its decision to rebrand itself as an H Hardware store. While Leigh and Erin had been considering the move for a number of years, the trigger was the 2016 HBT Conference in Townsville, Queensland.

For such a large store, the task of rebranding has absorbed a considerable amount of resources and taken longer than expected. According to Leigh:
We started at the end of January [2017] and we wanted it done by end of February but the amount of rain that we've had has made it really difficult. It's virtually done now with some paint on arrows that need to be done outside. The timeframe has been about six weeks but it's actually been about three months, to be fair. It's definitely getting there.

While it is an expensive undertaking, suppliers rallied around, with the encouragement of HBT.
It was really great to do even though we dragged our feet a bit but with the help of our suppliers, 17 of them really helped. You've got - just to name a few - Koala Nails, Fletchers, Macsim, Gunnersen's, Bluescope Lysaght, Soudal and at the 12th hour Romak came in.
Haymes really looked after us. They threw in $1000 and have given me the paint [for the store] at half price.
We got about $16,000 and it will probably cost us about $40,000. I'm just very thankful and we just need to sell a few bolts and nuts and tins of paint to get the other $25,000 back. But you wouldn't do it unless you think you could, and there are a lot of other benefits with the companies involved.
The store before opening

Leigh believes that the changes to the store with the rebranding have already had some positive results - though he is a bit bemused about some of them!
The merchandising is fantastic. It's really bought an awareness, and obviously I think that will just keep growing.
We had one fellow who came in and said "You're hardware store?" And I said, "Yeah, we've been here about 15 years." He said "You know what? I've never come in because I didn't see any signs or anything."
He said, "Do you know what made me come in because I didn't see any signs painted?" [The new H Hardware signs were not up yet.] He said, "I saw the wheelbarrows."
I thought "great" and we've seen him here for repeat business.
The only thing is that every day, we've always had the wheelbarrows out there. Always.
So he didn't pick up on the colour. Now we've got hardware in the name; I wasn't sure if it was a good move when we called it Inverell Building Supplies. We agonised over whether we should have hardware and timber in it. But we thought how long do you make the name? I'm glad now that we have H Hardware and Inverell in small because that is still our identity, as building suppliers.
Merchandising

Part of the move to the H brand includes a shift a little more towards the DIY enthusiast. As Leigh describes it:
We were once 90% trade but we are probably now whittling it that down to 80% trade and 20% retail or serious do-it-yourselfers. We are not going to get people who just want to buy one plant, and I don't want to do that. I don't want to compete with Bunnings or the Plants Plus down the road.

The store has also been constantly expanding how much stock it carries, though the increase sometimes gives Leigh pause.
We have 15,000 to 16,000 different items; we hit over a million [dollars in stock] the other day and it scared the heck out of me.
We usually average now $940,000 to $970,000 but we did over $1,000,000 of stock the other day because a new line of wood-fuelled heaters came in. We've been selling heaters almost from the beginning we had mainly the Eureka range from Melbourne. You try to sell to keep Australian made stuff but at the end of the day you have to play the game to keep up and a lot of the Chinese stuff is seriously good (and getting better). I'm not against them, you just have to go the flow. This is a retail business and now it's working well.

Leigh is particularly proud of the paint section.
The paint section is pretty good. We've just got to get our tradesmen be more prolific but the retail side is not bad. We're getting there, our rep keeps knocking on doors, so we are trying hard.

Leigh is particular keen to see suppliers at the upcoming HBT Conference in Sydney, especially those who will be launching new products.
Competition

Inverell is "blessed" by the presence of a Bunnings store, though at least it's not a Warehouse, but one of the smaller format units Bunnings has in some regional locations. The nearest full warehouse is a 90-minute drive away, in Armidale.

One of the biggest lessons other independents could take from Leigh is that he's not all that particularly concerned about competition from the Bunnings.
It's unbelievable how much [Bunnings] helps us. Every now and again, sure they are pain with gross profit. but overall that's the only way they can sell, they can only sell on price.
And I'll give you a great example. The other day, an older couple came in and said do you have 10mm ply? Bunnings said they'll have it up there but we said no sorry we haven't. But the boys - I've got the best crew in Australia but I'm a bit biased - they said we've got 9mm ply. The customers said, that would be fantastic. The order would have been worth about $200. And you know what was on Bunnings' shelves - 9mm ply, and they didn't know it.
I'm not knocking the people there but they just don't have people who know, the staff who have product knowledge. I say to my guys, try not to say no - unless they ask for a Mercedes-Benz! And, with confidence, we could say no then.
Analysis

When you look closely at Leigh's really inspirational story about Inverell H Hardware, and its origins, it's clear just how important a role networks have played in its development. On the surface, many of these networks might seem to be purely commercial, linking the business to banking facilities, the supply of goods, customers, and buying group activities through HBT. In fact, though, while there are commercial aspects to all of these networks, they also operate as deep community-based networks as well.

The main difference between commercial and community networks is that, while both work on something of a "quid pro quo" basis, when it comes to community networks the time between the "quid" and the "quo" - the length of a "pro" - can stretch out over a year, five years, or even, sometimes, 20 years. With commercial networks, the "pro" is generally about 65 days maximum.

The currency of the community network, in other words, is trust. The currency of a commercial network is utility.

This is clearly illustrated by Leigh's example of when his store was in trouble through a default. In this case the community network failed - a trusted member defaulted on an obligation. With a community network when that happens, most of the other members of that network are obligated to offer help and assistance, even if this means they end up "taking a hit" in the short term.

It's easy to see how that works in a regional area. With a comparatively low population, and low resident turnover, there is a finite number of people which a business can serve. Acting inappropriately, or taking a more commercial, short term view, can result in damage to future business and growth. Plus, quite frankly, it is part of the core social values of these regional areas that you just don't do that. You just don't.

The real question that is at the heart of the struggle of independent retailers in Australia, not only in hardware/home improvement, but also in sectors such as groceries, is whether in less regional areas, with more diverse networks, the benefits of developed community networks can outweigh those of developed commercial networks.

It seems likely the key to this kind of success will be finding ways to overtly enhance those community networks, to make them relevant in a modern setting, and also to develop the means to effectively package and market them. To the wise people of Inverell, who are no doubt very proud of their hardware store, the benefits of the "art of the local" are evident. That is less the case in modern, urban-based communities.
Bigbox
Big box update
The Bunnings store in Lilydale (VIC) at the site of the old Olive Tree Shopping Centre
HNN Sources
Tasmanian Premier Will Hodgman said he respected Bunnings' right to choose not to use timber from logged forests
The Bunnings Warwick store has been placed on the market
Click to visit the HBT website for more information
Bunnings to open a store in Lilydale in Melbourne's outer eastern suburbs; Dandenong store staff relocate to ex-Masters store in Dandenong South (VIC); Bunnings has ruled out sourcing timber from 356,000 hectares of forest the Tasmanian Government plans to open to logging; a new Bunnings store for Gatton in the Lockyer Valley (QLD); construction on East Albury store could start in mid-2017; a Bunnings store is planned for Westgate, New Zealand; a site in Jolimont (WA) has been purchased by Bunnings; the Palmerston warehouse in the Northern Territory will be replaced; and Bunnings puts Warwick (QLD) up for sale.
Lilydale gets its own Bunnings

Bunnings is building a $16 million store the outer eastern suburb of Lilydale (VIC), at the site of the old Olive Tree Shopping Centre on Main Street. The store is expected to open in mid-May.

Yarra Ranges Mayor Noel Cliff said the opening of the retail giant would be good for the shopping precinct. He told Leader Newspapers:
Lilydale needs to start filling that centre. It will hopefully bring activity into Lilydale and liven up the place.

The planning application, lodged by the big box retailer in July last year, met with controversy on Lilydale Leader's Facebook page, with more than 160 comments.

Local resident, James Head said he thought the local population was not big enough to support both small businesses and large chain stores. While Sandra Williams said plans could affect traffic congestion near the train station.

But others thought it was a great idea. Andrew Driscoll said: "Totally a great idea. Especially if it's combined with Dan Murphy's". And Lauren Jarvis said the store was closer to her home and had extended opening hours on weekends.
Ex-Masters Dandenong store

In the Melbourne south eastern suburb of Dandenong, the Bunnings store is relocating to Dandenong South (VIC), formerly a Masters store. Bunnings general manager - property, Andrew Marks said the company had entered into an agreement with the landlord of a site at South Gippsland Highway and Princes Highway to convert it into a new Bunnings store. He told Dandenong Journal:
Following necessary conversion and reformatting works, all team members from the current Bunnings Warehouse Dandenong, will relocate to the new store.

Mr Marks said works would start in the coming months, with the store set to open in the middle of the year.
Bunnings takes a stance on timber

Bunnings said it will not sell timber sourced from contentious Tasmanian forests that the State Government wants to re-open to logging earlier than planned.

Labor leader Rebecca White recently tabled a letter in State Parliament sent by Bunnings managing director Michael Schneider to Premier Will Hodgman and former Labor leader Bryan Green.

Mr Schneider wrote that Bunnings had "no desire" to be drawn into the debate over the government's forestry Bill, but that the company had been asked to confirm its position.
We have been consistent in stating publicly that we welcome an outcome that supports the timber industry, local communities and the environment. Our Tasmanian suppliers have advised us that they will not be sourcing our timber from outside their existing coupes.

Bunnings had a "long-standing commitment to pursue sustainability across our operations by striving to make them socially responsible and economically viable," Mr Schneider said.

The company had "committed a zero-tolerance approach to illegally logged timber almost two decades ago...and we can now state with confidence that more than 99% of our timber products are sourced from low-risk plantations or verified legal and sustainable forest operations".

"We recognise consumers are increasingly aware of issues relating to procurement and expect to know the source of timber they purchase," Mr Schneider said.

The government tabled legislation to open 356,000 hectares of forests that had been set aside under the former Tasmanian Forests Agreement, including forests on Bruny Island, Wielangta, the Tarkine and the Blue Tier, from July next year. It wants to allow logging on this land otherwise protected under a moratorium until 2020.

Premier Will Hodgman told Parliament that he respected Bunnings' right to choose not to use the wood, but said the legislation would help end subsidies to the industry and support jobs and regional areas.
Another Bunnings for Lockyer Valley

Planning for a new Bunnings store in Gatton (QLD) is going ahead following approval from the Lockyer Valley Regional Council. A council spokesperson told The Chronicle planning approval was given to Bunnings in December 2015 for 289 Eastern Drive, Gatton.

The Bunnings location sits just outside of the town, a few minutes from the CBD. The spokesperson said:
The property is 7.84ha in size, with Bunnings to occupy 2.14ha of the total area.

However, since the project was approved, no work has started at the site which would be the town's only hardware store after the closure of Mitre 10 in early 2016.

The Lockyer Valley has one other major hardware store, Plainland's Hardware and Rural Centre at Plainland about 10 minutes from Gatton. The spokesperson added:
A start date for construction is not known as there is no requirement for a developer to provide this information to council.

The spokesperson said the big box retailer had four years to commence construction, which could push the start date to December 2019 at the latest.

Bunnings property general manager Andrew Marks could not confirm a start date, but did confirm the approval for the new Bunnings store. He said:
The timing and details of the project have not been finalised at this stage.

The Bunnings Gatton store comes after the current construction of a second warehouse for Toowoomba and one for Dalby, which has yet to begin construction, but is set to be finished by the end of the year.

The Gatton location is part of Bunnings' expansion in Queensland announced in 2014.

Related:
Big box update: Bunnings $810m QLD expansion - HNN
Mid-year start for East Albury store

Bunnings is looking at a mid-2017 building date start on its East Albury (NSW) warehouse.

A former Kimberly Clark factory site is being cleared to make way for this store. Once complete, it will be one of the biggest in Australia and replace the existing store located on Young Street in Albury.

Bunnings' trade centre in Wodonga is also relocating to East Albury.

Demolition work on the factory, which shut nearly two years ago, where Bunnings will be built is nearing completion.

Ballarat-based construction firm, H. Troon, has been confirmed as the builder for the $20 million project. Troon has built Bunnings stores in Queensland, NSW, Victoria and Tasmania. Bunnings general manager - property, Andrew Marks said:
The new warehouse is expected to create approximately 70 new jobs once open, as well as continued employment for team members transferring over from the existing warehouse and trade centre.
Construction is due to commence in mid-2017...The new store is expected to open early 2018.

Bunnings gained development approval from Albury Council last year to build the 20,000sqm warehouse plus 400 car parks.

A 24-hour service station and convenience store is being built on the opposite side of Drome Street next door to the McDonalds restaurant. Plans have also been lodged recently with council for Total Tools to build next door to McDonalds.

Peards Garden Centre, located nearby received development consent for a reconfiguration of the business estimated to cost almost $1 million.
Bunnings Bendigo sold for $14.46m

The sale of a Bunnings Warehouse located in Kangaroo Flat, Bendigo (VIC) for $14.46 million was a highlight for real estate agents Burgess Rawson recently - and not just because it achieved the top result of the day.

The 8600sqm on the Calder Freeway looked set to be surprisingly passed in on a vendor bid of $14.4 million before the owner, 72-year-old Guiseppe Scaturchio, stood up and demanded that auctioneer David Scholes, who had been growing increasingly impatient, give him more time. Fairfax Media reports that Mr Scaturchio said:
You spent 30 minutes selling a service station, this is a Bunnings.

He then resumed whispered discussions with his selling agent Raoul Holderhead, who had been dashing back and forwards across the auction room at Crown casino between his vendor and the highest bidder, a local investor.

In the end, the Bunnings sold on a relatively high yield of 6% for the Wesfarmers-leased property.

A factor in the lacklustre bidding was the relative short length of the Bunnings lease of just five years (with renewal options) meaning an investor might be left with an empty warehouse in a few years.

A Bunnings in Bathurst in regional NSW underpinned by a 12-year Wesfarmers lease sold for $25.5 million last December on a yield of 5.35% while Bunnings warehouses in Osborne Park in WA and Swan Hill in Victoria transacted on yields recently of 4.65% and 5.09% respectively.
Bunnings being built in Westgate, NZ

The fast developing regional town of Westgate, north-west of Auckland in New Zealand is set to get a Bunnings store. Plans for this Bunnings Warehouse were announced in February 2016 with an opening date in the first half of the 2017 financial year.

Bunnings Warehouse in Westgate would be spread over a 17,000sqm site.

But the signs on the proposed store's site had been taken down. This prompted speculation on social media that Mitre 10 Mega in Westgate was the reason the Bunnings Warehouse signs had been taken down.

Theories included that rival Mitre 10 Mega had launched legal action to stop Bunnings operating in Westgate; an overspend at another store forced Bunnings to sell the land; that the company failed to obtain resource consent; and a rumour Bunnings had taken Auckland Council to court over proposed road changes.

However, Bunnings Group senior public relations co-ordinator, Veronica Castro, told Fairfax New Zealand the signs and mesh hoarding were taken down because they were damaged in a storm and needed to be replaced.

Bunnings Group general manager New Zealand, Jacqui Coombes said construction of the new store will begin in the coming months. Ms Coombes said the details of the project had not been finalised yet and an opening date would be announced as soon as possible.
Bunnings buys Jolimont site

Bunnings has bought a 9984sqm landmark development site on Hay Street, Jolimont (WA). Bunnings general manager - property Andrew Marks confirmed to Western Suburbs Weekly it had purchased the site. He said:
Plans for the development of a new store are in the early stages, and will be subject to development approval. If approved, it is expected that the new site would replace the current Homebase Subiaco store...

The City of Subiaco-owned land attracted multiple bidders at the onsite auction held by Colliers International. Agent Tory Packer said the site between Tighe and Bishop Streets had more of a commercial target market. She said:
There were a few commercial players involved in the enquiring and bidding. And there was quite a crowd; maybe 30 to 35 people.
Bunnings Palmerston is on the move

The big box retailer is planning a new development about 4km from its existing site which is close to the Palmerston CBD in the Northern Territory.

Bunnings general manager - property Andrew Marks said the company was in the process of preparing a development application for a new Bunnings Warehouse just off the Stuart Highway at Pierssene Road, Yarrawonga (NT). He said:
If approved, Bunnings will be investing approximately $58 million in the development. This includes the fitout and stock for the new store. [It] will be a bigger and better warehouse. It will replace the existing Palmerston Warehouse on the corner of Roystonea and University Avenues.

Mr Marks said the new Bunnings Warehouse Palmerston was expected to provide employment for more than 230 local residents, and create more than 250 jobs during construction.

Bunnings did not say what it would do with its current Palmerston site.
Bunnings Warwick property for sale

The Bunnings store in Warwick (QLD) has been offered to the market via expressions of interest which closed on April 12. Bunnings Group Limited has a five-year lease through to October 2018 and are paying an annual net rental of $172,096 per annum. In his pitch to potential buyers, Markus Eames from commercial real estate brokers, Cushman & Wakefield said:
The property offers excellent frontage in an established commercial precinct with principal centre zoning. Positioned in Warwick's CBD the property is in close proximity to other key retail and business premises...
Not only does this asset represent a great rental return from Australia's leading hardware retailer, there is also fantastic future upside with a prime land component of 6916sqm over 10 lots combined with a 2075sqm of building which will provide a number of future alternatives for redevelopment.
Careers
Seeking opportunities
An area & marketing communications manager is wanted at Adelaide Brighton Cement
HNN Sources
Austech Industries is seeking an experienced sales representative
A Melbourne-based business development manager is required for Sydney Tools
Visit the Mecca Website
Adelaide Brighton Cement seeks a marketing communications manager; experienced sales representative required at Austech; and an opportunity to join Sydney Tools' sales team.
Customer contact role

Reporting to the sales manager, the area & marketing communications manager at Adelaide Brighton Cement will work on direct sales activity, along with marketing and communications duties. This role is about developing strong, long-term relationships with both clients and cross-functional internal teams.
Marketing communications position at Adelaide Brighton
Driving territory sales

Austech Industries is seeking an experienced sales representative with a minimum of three years wholesale or retail experience in the industrial, hardware or automotive tool industry. The right candidate will be responsible for proactively driving the retention and growth of customers in the southern suburbs and western region of Sydney.
Austech needs an account manager in Sydney
Melbourne BDM for Sydney Tools

A Melbourne-based business development manager is required for the Sydney Tools business. The role is focused on developing and growing new business relationships, executing the company's long term strategy whilst supporting its Melbourne stores.
Sydney Tools searching for a Melbourne-based BDM
Companies
Supplier update
Briggs & Stratton has exclusive distribution of Billy Goat products in Australia
HNN Sources
Echo Power Tools' campaign takes a different approach
Newell Brands' tool divestment included Irwin Tools
Subscribe to HNN weekly e-newsletter
The Billy Goat range of turf equipment products can be found at Briggs & Stratton dealers in Australia; a new campaign from Echo Power Tools; Newell Brands' tool business divestment contributes to growth strategy; Locksmiths' Supply Company is using Epicor software to manage its supply chain; and AkzoNobel makes carbon neutrality a priority.
Billy Goat distribution in Australia

Briggs & Stratton has begun its exclusive Australian distributorship of products from Billy Goat Industries.

Billy Goat is a manufacturer of specialty turf equipment, used mainly by professional landscapers and gardeners. The range includes aerators, turf cutters, overseeders, power rakes, brush cutters, walk behind blowers, lawn vacuums and debris loaders.

The Billy Goat brand will now benefit from the support that Briggs & Stratton provides its dealer network and consumers, as well as the hire and rental industry. Dean Harriott, managing director - Australasia, said:
We are delighted to be taking on Billy Goat and the opportunity to accelerate the growth of the brand in Australia with the backing of Briggs & Stratton's resources, innovations in engines and extensive network.

Will Coates, president and CEO of Billy Goat Industries, adds:
It was clear to me and my brother, Drew, that partnering with Briggs & Stratton will give us the best opportunity to continue with the Billy Goat brand.

The Australian Hire and Rental Industry Association values the hire and rental market in Australia at $6 billion annually, with the equipment hire and rental market worth two thirds of that market. It is expected to enjoy annualised growth of 2.7% over the next five years, according to IBISWorld.

The gardening services industry in Australia is worth in excess of $3 billion annually and expected to experience growth of 2.2% over the next five years.
Echo Power Tools ad campaign

A new campaign from Cramer-Krasselt (C-K) pits the performance of Echo's range of power tools against forces in nature and machine, including hurricanes, muscle cars and combat choppers, instead of the typical comparisons to competitive brands. C-K creative director Nick Marrazza, explains:
Echo is all about power, always has been. But now they wanted to own the 'power' in outdoor power equipment. So, we needed to demonstrate the power of the tools, but we didn't want to get into a comparison war with other tool brands. Because that's just boring. Instead, we showed how Echo tools out-power some of the most powerful elements on earth.

Three TV spots for the North American market drive home the power. In one, an Echo backpack blower is shown as more powerful than the winds of a category five hurricane.

In a spot for the Echo chainsaw, it is compared to a muscle car. "A super-charged muscle car goes from zero to 60 in 3.1 seconds. The chain of an Echo chainsaw: zero to 60 in just 1.2 seconds."

Finally, an Echo trimmer is compared to the power of a helicopter. "The blades of a combat chopper spin at the rate of 380 RPM. Not even close to an Echo trimmer."

While the brand previously targeted the weekend warrior, Echo is now looking to improve its market share among professional landscapers, said Wayne Thomsen, vice-president - marketing at Echo.

While cordless battery powered equipment is growing, the professional landscaper still heavily relies on gas-powered equipment for its power and durability. Echo only makes gas-powered equipment. Mr Thomsen told Marketing Daily:
We want this audience to take us seriously. So, we made a departure from airport TSA and trolls to change how the brand is viewed in the category. Previous campaigns targeted that weekend warrior landscape, fixing up their backyards. We still want to target homeowners but we want to elevate the brand for professionals to take notice.

Echo will also promote this campaign through Facebook, Instagram and YouTube.

Tool sell off part of growth plan

Newell Brands' recent sale of its tools operations to Stanley Black & Decker realised nearly USD1.95 billion for the company, including the retention of accounts receivable.

As part of the deal - first announced in Oct 2016 - Newell sold the Irwin, Lenox and Hilmor brands of its tools business. However, the company decided to keep its Dymo Industrial labelling business.

The proceeds from this transaction will mainly be utilised in reducing the company's debt. This, in turn, will take Newell closer to its leverage ratio target of 3-3.5 times EBITDA (earnings before interest, tax, depreciation and amortisation) in two to three years from the merger with Jarden Corp. which concluded in April 2016.

The divestiture forms part of Newell's "Growth Game Plan" of transforming into an operating company from a holding company, along with fresh investment plans and ideas for its combined portfolio with Jarden. Accordingly, Newell announced plans to make its operating structure simpler, by reducing its 32 business units to 16 operating divisions. Additionally, this will include the establishment of an all-new e-commerce unit that operates internationally.

Newell has also unveiled plans to sell off its winter sports businesses; the heaters, humidifiers, and fans operations within the consumer solutions segment and the home solutions unit's consumer storage container business.

The company recently agreed to sell the Rubbermaid consumer storage totes business and also put up the Pine Mountain and part of Diamond brands, for sale. Notably, the company is on track with its plan of exiting product lines with annual sales in the range of USD200-300 million across its combined business with Jarden, over the next two to three years.

These changes reflect the company's focus on simplifying its operating structure, and highlights its commitment toward making prudent investments in areas with higher growth potential.

Related:
Supplier update: Stanley buying Irwin Tools - HNN
LSC chooses Epicor software for ERP

Locksmiths' Supply Company (LSC) is deploying Epicor Software's cloud resource planning solution to manage all supply chain and distribution tasks.

LSC selected Epicor ERP as part of its strategy to keep pace with the locksmithing industry as it moves from a mechanical environment to a digital one, with the company distributing over 30,000 hardware, software and service products. Paul Newton, LSC's project team leader, said:
Security is a growth industry and technological advancements are being made all the time. Our staff are used to seeing smart technology built into the products we sell, from the humble car key right up to home automation, commercial and automotive security.
In order to remain competitive and retain staff, the onus was on us as managers to provide modern software which is flexible, intuitive and instinctive rather than proprietary, complex and unwieldy.

Mr Newton said LSC wanted an ERP (enterprise resource planning) solution that in addition to supply and distribution functionality would also reduce the manual sharing of information between staff and could centralise access to this information for greater transparency. He said:
We knew we needed streamlined processes in terms of supply and distribution in order to continue to grow...We churn out huge volumes of orders and have to make sure we supply customers as efficiently as possible without introducing time delays into the supply chain. With Epicor ERP, staff will be able to complete more sophisticated demand forecasting, and also maintain the integrity of our stock and manage our national supply chain even more effectively.

Vince Randall, vice-president for Australia and New Zealand, Epicor, said:
The implementation of Epicor ERP will streamline functions such as sales and order management, warehouse management, inventory optimisation and forecasting. This will permit them to focus on bringing new technologies to market and training and servicing their customer base, growing even further.
AkzoNobel commits to carbon neutrality

AkzoNobel said it has become the first paint and coatings manufacturer to pledge to become carbon neutral and use 100% renewable energy by 2050.

The company aims to build on a sustainability agenda which has seen its share of renewable energy rise to 40%, with almost half of the firm's global sites having improved their energy footprint last year. Chief executive Ton Buchner said:
We continue to identify areas of opportunity which will drive us forward and help reduce our industry's dependence on fossil fuels. This new vision for 2050 will propel us further along that path, while enabling us to make a measurable contribution to the United Nations Sustainable Development Goals.

The commitment will be applied throughout the Netherlands-based firm's entire supply chain, helping AkzoNobel to continue to reduce its overall carbon emissions, which fell from 27 million tonnes in 2013 to 24 million tonnes in 2016.

In addition to its carbon reduction commitment, Akzonobel also pledges to sit at the forefront of the paint industry's transition to a circular economy. Late last year, the firm unveiled a not-for-profit paint remanufacturing facility in North West England, as part of a plan to produce 100,000 litres of remanufactured paint by the end of 2017.
Companies
Europe update
Bunnings UK has opened another store on Hatfield Road, St. Albans, Hertfordshire
HNN Sources
Wolseley will change its name to Ferguson but will maintain its name in the UK
Travauxlib is a French startup that matches users with construction companies in the renovations market
Subscribe to HNN weekly e-newsletter
Bunnings UK & Ireland launches another store in St. Albans, Hertfordshire; Wolseley will maintain its name in the UK but will be known as Ferguson in the rest of the world; and French startup company, Travauxlib matches companies and customers planning renovations.
Bunnings opens its second UK store

Customers have been welcomed to Bunnings' second store in the UK which has opened on Hatfield Road, St. Albans, Hertfordshire. It replaced a former Homebase store.

This 40,000 square feet (3,700sqm) outlet stocks more than 24,000 different home improvement and garden products. The store also features timber cutting, a garden centre, a tool shop, a "colour wall" with over 3,000 tiles - as well as paint from Johnstone's Trade, Crown and Dulux.

England rugby union legend, Kyran Bracken joined team members to celebrate the opening. Bunnings Warehouse Hatfield Road complex manager, Emma Wimble, said:
Our team members have worked really hard to prepare the store for opening and we are looking forward to helping customers and the community with their home and garden projects. We have already helped Sandridge School by tidying up an unused area of land by repainting flower beds and creating vegetable patches so the children can set up a gardening club. And we look forward to doing more with groups in the local area in the future.

Stores located in Hemel Hempstead and Milton Keynes are due to be converted by 30 June.
Wolseley will rebrand as Ferguson

FTSE listed plumbing and heating supplier, Wolseley, is to change its name to Ferguson, subject to shareholder approval, and exit the Nordic region.

The group will continue to use the Wolseley name in the UK market but its name will be changed to reflect the success of its US subsidiary, Ferguson. Group chief executive John Martin said:
Ferguson now accounts for 84% of group trading profit and we have decided to align the group's name with our most significant brand in our largest market.

It will henceforth report in US dollars.

The British company's announcement came as it reported trading profit rose 5% for the six months ending in January, and a change of leadership at its key US business.

Ferguson's current CEO, Frank Roach, is to be replaced by Kevin Murphy, the company's chief operating officer. Mr Roach is retiring after 40 years with Ferguson.

Overall, the group has struggled in tough market conditions in Europe, particularly in Scandinavia. Its US business continued to grow, with revenue up 5.5% compared to 4.5% for the rest of the group.

It faced price deflation and tough competition in the UK last year. In September, Wolseley announced it would spend GBP100 million (AUD165 million) closing 80 UK branches and one distribution centre, cutting around 800 jobs.

Wolseley revealed that profits for the six months ended January 31 this year fell to GBP328 million (AUD542 million), compared to GBP367 million (AUD607 million) in the previous year.

However, revenues were up nearly 7% on a constant currency basis. Changes in foreign exchange rates saw overall revenues increase by nearly 25%, rising from GBP6.8 billion (AUD11.2 billion) to GBP8.5 billion (AUD14 billion).

Despite a rise in sales and profits, the group continued with plans to restructure its UK and European business following a decline in like-for-like revenues in both regions.

It has now begun the process of leaving the Nordic region, having identified "few synergies with the rest of the group's plumbing and heating business", Mr Martin said.

But share prices have risen on expectations of continued momentum in Wolseley's US business.
Start up targets French home renos

Travauxlib is a French startup that matches users with construction companies so they can fix up their homes. The company has raised EUR1.8 million (AUD2.5 million) so far.

Travauxlib said it adds both transparency and a technology layer to speed up everything before and after the home renovation process.

The company usually works on complete home renovations, kitchen remodelling, bathroom work and home extensions. On average, Travauxlib's clients have been spending between EUR15,000 (AUD21,000) and EUR20,000 (AUD28,000) on their home renovations.

But the startup doesn't handle the construction work itself. It's a marketplace with construction partners paying to work with Travauxlib.

For construction companies, Travauxlib helps find new clients by showcasing their work on its website. They can generate a quote using Travauxlib and bill their clients directly on the platform. It can be a big time saver as the companies don't have to take care of all the paperwork. Travauxlib also works with photographers to take photos of the construction projects.

There are more than a thousand companies currently on Travauxlib's platform. The selection process is quite rigorous, according to the startup, as it only works with a selected and "most competent" construction businesses.

At the moment, Travauxlib is only available in and around Paris, but the company is thinking about opening new markets.
Products
Mobile tool storage
The GearWrench XL Series 11 Drawer Heavy Duty Cart Trolley & WorkStation in use
GearWrench Australia
Top view of the 11 Drawer Heavy Duty Cart Trolley & WorkStation
Front view of the 11 Drawer Heavy Duty Cart Trolley & WorkStation
Click to visit the HBT website for more information
The GearWrench XL Series 11 Drawer Heavy Duty Cart Trolley & WorkStation, topped by a sturdy stainless steel sheet and underlying MDF top-board, is made to withstand rough use across all manner of tasks, including tearing down heavy components such as transmissions and differentials.

At 1.2 metres wide, 79cm deep and weighing in at 143kg, this unit is suitable as both storage and workspace.

Each drawer features auto-return, which snaps the drawers closed within the final inches of operation. Lined with a liquid and grease resistant EVA 2.5mm liner, this will ensure easy compartment cleaning and product longevity. The open side space is capped with an 8mm anti-slip EVA mat, to ensure no sharp or awkwardly shaped tools damage the physical unit during movement.

The 11 drawers are supported by 45mm standard ball bearing slides and formed with rolled over drawer walls for added strength and rigidity.
Products
Dust-free sanding revolution
Mirka dust-free sanding systems is distributed in Australia by Tenaru
Mirka Australia
Mirka's products feature Abranet, a plastic-like net with thousands of holes providing effective dust extraction
The Mirka brand is based in Finland
Click to visit the HBT website for more information
Mirka provides dust-free sanding systems. Based in Finland, the brand develops and manufactures advanced sanding and polishing machines.

Mirka's dust-free solutions are achievable through its innovative Abranet, a plastic-like net with thousands of holes providing effective dust extraction. Constructed with a dense network of polyamide fabric threads onto which the abrasive grit is bonded, this open weave net structure means no dust particle is more than 0.5mm away from a dust extraction hole.

The use of Abranet also eliminates any clogging or dust build-up between the sanding disc and surface, providing a smoother finish more quickly and long-lasting sanding capacity.

Designed to be connected to a commercial vacuum cleaner such as the Mirka Dust Extractor, sanding with Abranet produces 6900 times less dust compared to sanding with traditional paper abrasives, and it can last up to five times longer.
News
HI News V3 No. 3: Is Metcash-IHG on the right track?
Download the latest issue of HI News Vol. 3, issue no. 3
HI News
Is Metcash-IHG on the right track?
Top independent stores are named and rewarded
Click to visit the HBT website for more information
This edition of HI News explores what the Metcash-owned Independent Hardware Group (IHG) might do with its retail brands and the potential breakaway groups that could come out of its plans.

Just click on the following link to download this edition:
HI News V3 No. 3: Is Metcash-IHG on the right track?

Bunnings invited some of Australia's top retail investment analysts to see its first store in the UK. We take a look at the big box retailer's presentation to them.

There is an extensive overview of major paint companies, PPG Industries, AkzoNobel, Sherwin-Williams and Valspar. In addition, we analyse the latest company results from Adelaide Brighton, Boral, Fletcher Building, GWA, Reece and Methven.

The best independent stores operating in 2016 are singled out and rewarded and a Queensland-based Mitre 10 store prepares to battle Bunnings.

In other news, the Master Builders Association appoints its first female CEO and tradies increasingly choose apps over cash.

In the UK, home improvement retailer B&Q opens a smaller format store in London and US-based Ace Hardware announces its latest results.

The latest outdoor power equipment from DeWalt and Greenworks Tools are also highlighted in this issue.
Editorial
Is Metcash-IHG on the right track?
Details from Metcash Strategy Day 2014 slide
HNN Sources
Another slide from Metcash Strategy Day 2014
Slide from Metcash Strategy Day 2014
Give to Amnesty International
Concern over what exactly Metcash's Independent Hardware Group (IHG) plans to do with its recently acquired Home Timber and Hardware Group (HTH) continues to grow. HNN has received reports of what appears to be two sub-groups planning to break away from IHG in the near future - though as this is rumour-based it could be one group described in two different ways.

One set of rumours identifies a group that has a primary focus on the DIY market, and the other group would seem to have a heavy trade focus. There is little doubt that, if we have become aware of one or two such groups, there are likely another two or three under development across Australia as well.

HNN hasn't been able to confirm any rumours by actually speaking directly to members of these groups, so we can only speculate about the reasons these groups have to break away. One possibility is that IHG, as HNN and others have suggested, may be planning to either eliminate the Home branding for home improvement stores, or at the very least to heavily de-emphasise the brand.

In a recent article in the Australian Financial Review (AFR), the CEO of IHG (formerly of Mitre 10), Mark Laidlaw, is reported as saying that Metcash has yet to decide what it will do with the HTH Home brand, but it should have some idea by the end of the current calendar year.
Brand equivalence

As HNN has said in the past, the difficulty is that the two brands at issue, Metcash's Mitre 10 and the former Woolworths Home Hardware brand, are nearly equivalent in terms of market regard. For example, while Mitre 10 has scored some major sponsorships, most notably of Channel 9's "reality" renovation show "The Block", and has the well-known Scott Cam as its brand spokesperson, Home Timber continues to rate very highly on consumer surveys, such as Roy Morgan's Single Source Survey, where it consistently scores as Australia's best hardware retailer.

It is no easy task for an individual store to switch from one brand to another. Aside from the cost of a new fitout - for which IHG would presumably offer some assistance - it also requires a deal of remarketing and repositioning. Stores that have used the brand difference to distinguish their offering from nearby Mitre 10 stores would be particularly affected.

That said, there is a relentless logic behind why IHG is most likely to move to a unified Mitre 10 brand. The single outstanding reason is that if the new entity is going to be able to hold onto share in a market dominated by the Wesfarmers-owned Bunnings, it will have to spend up on marketing. If it tries to spread its marketing spend across two similar, competing brands it will dilute the effectiveness of each campaign to around 40% of the effectiveness of getting behind a single, Mitre 10 campaign (40% instead of 50% because the brands will end up competing with each other in some regards).

Metcash's brand woes with HTH are actually even more considerable than this difficult situation suggests. There are some indications that Woolworths in selling HTH to Metcash really held the company's "feet over the fire" in extracting the maximum price.

Just on the numbers alone, Woolworths acquired Danks in July 2009 for a deal that was valued at $87.6 million. In 2016 dollars that would be the equivalent of $102 million (according to calculations by the Reserve Bank of Australia). Woolworths then added both Hudsons Build Supplies and Hardings to those stores, which, combined would have added another $46 million in 2016 dollars at most. There were other additional, smaller acquisitions along the way that would also have added value. Being generous, it might all add up to $155 million or so.

However, Metcash in the end paid $163 million for a property that is a fragment of a proposed hardware empire that didn't work out. It paid that money right on the cusp of the final collapse of Masters, a failure that would hand the major, dominant competitor in the market easily another 5% of market share, in a downtrending environment with substantial economic concerns on the horizon.

On top of that, for the deal to go ahead, Metcash had to enter into a fairly onerous undertaking with the Australian Competition and Consumer Commission (ACCC), a deal that effectively opens up most of the HTH stores to access by third-party suppliers, potentially cutting directly into Metcash's profit margin.

Further, of that $163 million, it is quite likely around $12 million to $14 million could be allocated to the value of the Home Hardware brand alone. This is value that will simply vanish from this deal if Metcash goes ahead and mothballs that brand.

And yet, it has to be said, that from a Metcash corporate perspective, there is little doubt that it did the right thing in acquiring HTH. To understand why that is the case, it is necessary to look into the recent history of Metcash itself, to understand the role that Mitre 10 has played in helping the corporation pursue its goals.
The inevitable

In the end, the reason Metcash was willing to pay as much for HTH as it did, despite all the negatives and upcoming management difficulties, was because the alternative would have been much worse. That alternative would have been the acquisition of HTH by Anchorage Capital, the firm that successfully acquired Dick Smith Electronics, then listed it on the stock exchange (followed by its collapse a few years later, after Anchorage had exited its position on the company).

If Metcash had not come up with the $163 million, it would have found its Mitre 10 division facing heavy competition from a brand that was not only just as well regarded, but was backed by enough capital to boost both its growth and its marketing.

While that would not have done Mitre 10 itself any favours, Metcash acted because it would potentially, through a flow-on effect, have endangered the entire company's operations. Since 2014, Metcash has been in a constant struggle to secure its place as a supplier of wholesale grocery products to its IGA brand, as well as to other independent grocery retailers throughout Australia. In an effort to try to gain market share, the company has invested heavily in attempting to match key prices offered by Australia's two major grocery retailers, Woolworths and the Wesfarmers-owned Coles.

With the collapse of Woolworths' efforts in hardware, and a subsequent shift by Woolworths to an everyday low prices (EDLP) pricing campaign to match that of Coles, this task has grown increasingly difficult, and more expensive. Added to its woes is the ongoing growth of German discount chain Aldi into areas such as South Australia, as well as US discount household bulk supplier Costco in metropolitan areas. It seems likely now that other discount grocery stores may also enter the Australian market, further intensifying the price war.

In its most recent results, for the first half of its FY 2016/17, released in late November 2016, Metcash showed an overall decline in earnings before interest and taxation (EBIT) of 4%. Food and grocery EBIT declined by 8%, while hardware (Mitre 10) EBIT increased by 8%, and liquor EBIT increased 5%. Excluding one-off items, profit after tax fell by 13.8%. Hardware contributed close to 10% of Metcash's EBIT, out of only 8.8% of its total revenue. Metcash needs hardware.

Put simply, Metcash could not afford to find itself fighting retail battles on two fronts, both in its grocery business and in its hardware business. Had Anchorage Capital purchased HTH, it would have faced at least three years of a hard fought battle against firstly considerable investment by Anchorage, followed, most likely, by further investment from a newly listed hardware entity. Aside from the direct competition in the market, this would also have moderated investor enthusiasm for Metcash shares, as the possible sale value of its hardware holding would have been negatively affected.
Legacy of underinvestment

Since the mid-2014 "reboot" of Metcash there is little doubt that the company has been underinvesting, in relative terms, in its hardware division. As HNN has stated repeatedly, what Mitre 10 has managed to do with limited marketing funds over the past two to three years has been quite amazing. It has carefully selected major, cut-through marketing channels, and capitalised on both the controversy around "The Block" TV show, and the Logie-winning success of its main spokesperson, Scott Cam.

However, at some point, the weak funding for its brand has had an effect. Had the brand received the kind of funding it really deserved from Metcash, given its great marketing team, it would likely have been considered very much a dominant brand as compared to HTH.

Instead, starved of marketing funds, and with HTH itself doing some innovative advertising both on TV and on the internet, the two brands have stayed close to being equivalent in terms of brand presence.

The result is that, for HTH members, there is no real "big boost" to come if they are required to re-identify themselves as Mitre 10 rather than HTH.
The end game

What happens next with Metcash's food businesses, and the impact this will have on its hardware business is difficult to forecast. When Metcash began its reinvestment program in mid-2014, a centrepiece to that was its "Diamond" programme which sought to, essentially, lift the standard of certain key IGA stores up to that of the new retail outlets from Woolworths and Coles. This could point to a possible future.

While Metcash may have found itself put under pressure by Woolworths over a potential sale of HTH to Anchorage Capital, Metcash may be planning to turn the tables on Woolworths - as well as Wesfarmers - in the future.

Its plan could be to develop its network of IGA stores to near-supermarket equivalents, then do a deal to offer them for sale. That could see Woolworths and Wesfarmers enter a bidding war, as each struggles for an advantage in a tight market.

That would require a complex deal, as most of these are wholly or majority owned by its members, but it's likely these members would be willing to exit what has become an increasingly difficult business with an unexpectedly big payout. It is also quite likely, given the ongoing, significant competition in this market, that the ACCC would be quite willing to sign off on such a deal as being, ultimately, the best bargain that could be made. The fate of Metcash's hardware operations in that eventuality would be difficult to assess.

Alternatively, Metcash may consider listing its hardware operations as an independent company on the Australian Stock Exchange. If it can build a successful business over the next three years, it could seek to capitalise on that investment, in order to continue funding its own participation in the grocery price wars.
The immediate situation

Even if IHG's statement that it is still considering its options as regards branding is taken at face value, it seems unlikely that Mitre 10 will benefit much from a delay in announcing what it intends to do with the HTH brand. Metcash would be well-advised to determine a strategy before releasing its full-year FY2016/17 results in June 2017.

If it does hold off on saying anything until the around the time of the FY 2017/18 half year results announcement in December 2017, it will likely see ongoing fragmentation of its membership, as more small groups of retailers form, as they opt for some kind of certainty so that they can plan their businesses.

If Metcash does choose to shut down the HTH brand, or to sideline it as a minor brand under the major Mitre 10 brand, members should expect to be informed about what the consequences will be for their businesses, and how the company intends to more effectively market its Mitre 10 brands to help them improve their sales in the future.

Out of all this, there is one issue that could, and perhaps should, help to unite many of the different owners of home improvement retail stores in both the Mitre 10 and the HTH groups. Over at least the past five years both groups have found themselves in situations where the corporate owners of their group have simply not reinvested in their businesses to the extent that the performance numbers they have produced would warrant.

Just imagine, for example, if Woolworths had invested as little as 5% of the funds that they lost investing in the Masters venture back into HTH - let alone 10%. Ironically, had they done so over only the past five years, they would likely have built a store network that could really bring something of a challenge to some aspects of Bunnings in the current market. It is a sadly wasted opportunity.

Something similar could be said about Mitre 10. Metcash did provide a good refuge for the group after the unfortunate years from 2006 to 2008 when it all but handed over a leading market share to Bunnings through a poorly planned effort to match the big retailer in the marketplace which did not shift quickly enough to a more modern method of sourcing supply. It is time to move past that, and time for Metcash to make some real investments in this business that are about something more than merely keeping IHG ticking over and delivering its tithe of EBIT every year.

Related:
Metcash half-year results for FY 2016-17 - HNN

From the archives:
Mitre 10: Great team that needs a voice - HNN

Until next time,

Betty

You can contact me directly via email betty@hnn.bz or Twitter @HNN_Australia

To receive a daily dose of HNN, download the free HNNBrowser app from the Apple store:
HNN iPad App
Bigbox
Big box update
Bunnings' new-look store in Brisbane will run over four levels
HNN Sources
A Warwick business owner takes the fight up to Bunnings
Bunnings moves into 11 former Masters stores
Click to visit the HBT website for more information
A Bunnings store in Brisbane will look like no other; Bunnings makes a move into 11 former Masters sites; the Berri store is being sold; Bunnings Horsham got an expansion; expressions of interest are called for Bunnings in South Mackay; Bunnings sets up temporary store in Taren Point; and construction has begun on Bunnings Doncaster.
Four-level Bunnings in Brisbane

Bunnings is building a store in Newstead, a suburb of Brisbane (QLD), that will span 17,000sqm over four levels. It will be more than double the size of a typical Bunnings Warehouse.

The mixed-use site will also feature six street-level tenancies for retail or office space, totalling just under 1600sqm in addition to a basement carpark, the main warehouse, outdoor nursery, bagged goods area, cafe and timber trade sales area.

The Courier Mail reports Bunnings initially paid $20.6 million for a 9400sqm site in 2011, but the development application (DA) was knocked back by Brisbane City Council. A year later it bought the remaining 10,400sqm for $16 million.

A revised DA for the new-look store was submitted in 2014 and approved last year. According to architects Thomson Adsett:
The design of Bunnings Warehouse at Newstead relates to the fine-grain and sawtooth form typical of the historic Newstead wool stores and industrial buildings...Pedestrian linkages along the northern facade will be activated by shipping-container style cafes and will adjoin a future residential development.

In 2012, then-Bunnings chief operating officer Peter Davis said the development "forms part of Bunnings' continuing investment and expansion in metropolitan and regional Queensland".

Retail expert and associate professor at Queensland University of Technology Business School Gary Mortimer told SmartCompany Bunnings' latest development will see success thanks to its identity as a "destination retailer". He said:
Bunnings is a destination retailer because shoppers are willing to take the effort to come in not just for products, but for the experience. It's for families on the weekend, wanting to have a shopping experience and a sausage sizzle.

Mr Mortimer believes Bunnings is similar to Swedish furniture retailer IKEA, which he says helps customers get "actively involved" in the shopping experience. And this store is unlikely to be the last, says Mr Mortimer, who maintains Bunnings will continue to "selectively" place these superstores in key suburban areas.
This store is interestingly placed, as it's right in the middle of the city, and there's a massive amount of high density and high-income living nearby. There's also not really any big hardware chain close to where they're putting it; they're tapping into the area's growth.
I think they'll look at other areas in Sydney and Melbourne where there's a high proportion of the population in one area, with high disposable income.

Mr Mortimer also believes Bunnings is the "clear" market leader with Masters out of the picture and does not see a local player being able to challenge its position. He said:
Metcash is the only other player, and they have a different offer with smaller stores aligned to tradespeople. A big global retailer could have a look at the market and enter, and there's no reason why Lowe's wouldn't have another look at the market.
Warwick local fights Bunnings' plans

The Warwick Daily News reports that real estate agent Helen Harm will continue to fight after Southern Downs Regional Council (SDRC) approved the development of a Bunnings store last year on a flood plain near her business.

Mrs Harm said she lodged a legal appeal against Bunnings Group and SDRC in the Planning and Environment Court of Queensland and has set up a GoFundMe page to help cover legal fees which she estimates could top $30,000.
I am looking at the first phase costing about $15,000 for an independent flood study and legal fees and so far residents and business owners have donated a few thousand dollars to the fund.

Bunnings plans to build its big box hardware store on a vacant block where Mrs Harm believes will put businesses and residents at risk during flood season. Mrs Harm's real estate business is located on the flood plain which she believes will be in jeopardy if the Bunnings complex is built.

The proposal would see the store be effectively built on an island stretching across two acres in the middle of the flood plain.

A hydraulic study by engineering group, Jacobs showed the development would have no major impact on water levels which SDRC based its approval on.

But Mrs Harm believed an independent study she is seeking will show the development could put businesses and residents in jeopardy during floods. She said:
Residents are worried the development could take up 20% of a major flood zone, and all the studies done since major floods in Queensland have said same thing,

Mrs Harm also told Daily Mail Australia:
There is a hardware store just down the road, we don't need this Bunnings at all.

The development was due to start in June but could not go ahead until the court outcome, according to Mrs Harm. She has the moral support of business owners in the area including Alan Olsen of Olsen's Home Timber and Hardware.

Mr Olsen said he backed Mrs Harm's move to take on Bunnings but did not want to risk throwing good money after bad.
We don't like the council decision but Bunnings has experience and size and we are too small to take on its bureaucracy and lawyers in something that could get very emotionally draining.
Bunnings expansion through Masters sites

Bunnings has taken on 11 former Masters Home Improvement stores and announced plans to open nine new stores across NSW, Victoria and Queensland.

The transformation of the Masters sites has piqued the interest of the competition watchdog but only in relation to the four Masters sites that represent new trading locations for the Bunnings network, Fairfax Media reports.

Seven of the Masters stores slated for transformation are in suburbs where there is already a Bunnings warehouse and the big box retailer is shutting these stores and moving into the revamped Masters premises.

Australian Competition and Consumer Commission chairman Rod Sims said there were only a handful of new stores, most of them were "swaps" from current Bunnings stores. He told Fairfax:
We've also got to assess how much interest there is in these stores from other hardware players. We are still looking at it but we are conscious there are only a small number of new stores and there ... aren't a lot of other people clamouring to take them over as hardware stores.

Mr Sims said the ACCC also made a distinction between somebody who gets dominance by outplaying everybody else on the field, versus someone who does it by mergers that shouldn't happen or any "anti-competitive behaviour". He said:
Bunnings are in the best place to buy them but they've really earned their way into that.

In a communication sent to suppliers, which Fairfax's BusinessDay columnist has seen, Bunnings said it would be embarking on a "very busy new store opening program" from April to September. Bunnings chief operating officer Clive Duncan is quoted as saying:
We ask that you [suppliers] plan ahead to ensure you have sufficient stock and representative coverage to support the current store network as well as the ... new locations.

Mr Duncan also said the Masters sites were subject to Home Consortium's agreement with Woolworths and Lowe's.

In addition to its planned makeover of the 11 Masters properties, Bunnings will open 21 new outlets by September, taking its total store network to about 335 stores.

It's not clear what Bunnings will do with the properties it is exiting, which include two that are held by the BWP Trust.

Related:
Bunnings re-brands ex-Masters sites in WA - HI News, page 10
Bunnings SA store to be sold

The Berri Bunnings store in South Australia is on the market.

Located at the corner of Hoskins Road and Sturt Highway, the hardware store opened in May 2016 and is the first stage of a master plan for The Riverland Complex site in Berri.

The 6,557sqm store was developed in a similar design as the Victorian Swan Hill Bunnings, and constructed with a long term view to accommodate the growing population of the Riverland region.

CBRE is selling the property on behalf of Adelaide-based developer Pat & Co Pty Ltd headed by Tony Moro. Mr Moro said the commitment of Bunnings as the property's anchor tenant was a vote of confidence for the developing precinct.

CBRE's Justin Dowers said the property marked the first Bunnings warehouse investment offered for sale in Australia for 2017.
Bunnings warehouse investment properties have been a highly sought after investment vehicle over the past two or so years - a factor that is helping compress yields to as low as 5% in some instances.
The continued lack of retail investment opportunities such as this is also driving investors to compete for assets in regional locations. Furthermore, the consistent performance and revenue growth of Bunnings has been a key attraction for private and institutional investors, along with the depreciation tax benefits associated with the new assets.

In late 2016, the Yarrawonga Bunnings in Victoria was sold off the plan for a record yield of 4.94%. It was the first Bunnings warehouse to be sold to a mainland Chinese investor. Mr Dowers said:
There is evidence that buyers are gaining more confidence in the performance of key regional locations, stemming from increased government expenditure in these regions, along with improved living conditions (mostly related to affordability) driving population growth.
Bunnings investments are always highly sought after, for a number of reasons. The net lease structure and fixed rental increases are favourable; along with the strength of the fundamental real estate given the strategic site allocations from Bunnings.

Related:
Big box update: Bunnings Yarrawonga has Chinese owner - HNN
Bunnings Horsham is bigger in size

Bunnings in Horsham (VIC) has celebrated its $1 million revamp. Store manager Campbell Ballinger told The Mail-Times:
The upgrade represents an investment of more than $1 million and will increase the store size by more than 1000sqm. All our product ranges will expand including a large, brand new lighting display.

Mr Ballinger and his team recently celebrated the store's expansion by holding family activities over a weekend. He said:
We've been part of the Horsham community for more than four years and we're looking forward to bringing an even better store with the latest home improvement and outdoor living products backed by the best service.
Team members continue to support a number of community groups, working together to assist in local projects including repairs made to Birchip Playgroup's playground and providing DIY workshops at Kurrajong Lodge.
Mackay Bunnings up for sale

Bunnings Warehouse in South Mackay (QLD) has been listed for sale via expressions of interest.

The 13,074sqm warehouse is promoted to have a net income of $1,697,440 a year, and has a 12-year net lease expiring in 2026 with options until 2056.

On a corner site near the airport, Bunnings South Mackay is on Maggiolo Drive off the Bruce Highway.

Properties leased to the Wesfarmers-owned hardware chain have become the darlings of the commercial real estate market, with buyers prepared to pay through the nose for a change to secure a piece of that green and red "big box" empire.

However Bunnings sales tend to come at a trickle, with the company's strategy to slowly divest some of the stores it owns across Australia. So when one does come to market, a lot of potential buyers tend to come from everywhere.

Stonebridge Property Group's Philip Gartland and William Blanch, who sold the Bathurst store, say Bunnings listings tend to attract investors who might not otherwise dip their toes into commercial property. Mr Gartland told the Daily Mercury:
It's the sort of asset that can appeal to people that are looking for more secure investments, often people who are 50-plus, that just want to put something into a blue chip covenant, effectively like a corporate bond.
It's set and forget, because you've got fixed annual uplift, so you're not having to worry about how the turnover of the store is performing, whereas a lot of supermarkets are based on percentage of turnover above a certain threshold.

Also adding to the attractiveness of the properties is the fact that Bunnings leases are usually long-term, triple net leases, meaning the tenant (Bunnings) agrees to pay for just about everything - real estate taxes, building insurance, maintenance and any other fees. Mr Gartland said:
Bunnings pretty much do everything, including even the way they define the premises - it's the whole entire land parcel rather than just a pocket of the building.

And with Bunnings' biggest competitor Masters now wiped out, the case for investing in a Bunnings has further weight, adds Mr Gartland.
I guess it's taken away that uncertainty of competitive threat, after the store closures. Obviously they dominated while Masters was still there, but now that's been closed, it'd be a fairly brave competitor that would come in now and try to take on Bunnings.
Recent Bunnings sales
  • Price undisclosed - Bathurst (NSW) November 2016
  • $11.59 million - Yarrawonga (VIC) September 2016
  • $6.425 million - Warragul (VIC) September 2016
  • $10.95 million - Swan Hill (VIC) August 2016
  • $7.05 million - Osborne Park (WA) June 2016
  • $43.5 million - Joondalup (WA) March 2016
  • $24 million - Eltham (VIC) March 2016
  • $40 million - Springfield (QLD) November 2015
  • Bunnings setting up temporary shop

    Bunnings has been given the go-ahead to establish a small-scale, temporary hardware shop while it undertakes a $38 million redevelopment of its Caringbah (NSW) site.

    Sutherland Shire Council approved the fitout and use of the former Cronulla Furniture store at 100-104 Parraweena Road, Taren Point, as a hardware and building supplies store for a maximum of three years.

    Among conditions placed on development consent is that Bunnings prepare a flood emergency response plan because the area is low-lying and has a history of flooding.

    Conversion of the former Cronulla Furniture store for Bunnings' use was estimated in the development application to cost $825,000. A statement of environmental effects said.
    The store will operate under the Bunnings brand [but] will be in effect more like a traditional small hardware store. There will be hardware, tools, paint, fixings, and plumbing, lighting, and garden care type products.
    The key differences [between the existing and temporary stores] are likely to be a minimal timber offer, no garden centre, and there will be a very small range of bagged goods...
    Building start for Doncaster Bunnings

    Work on Bunnings Doncaster in Victoria is set to start within weeks as the big box retailer finalises a contract to build a hardware and apartment complex next to Westfield. Local newspaper, Leader believes the building contract is likely to be finalised and signed off within a matter of weeks.

    The $73 million development will include 250 apartments - 99 flats on top of the 11,000sqm multi-level store as well as two apartment towers. There will be 350 car spaces for shoppers.

    Leader reported last year the plans were finally moving forward after a dispute between Bunnings and Westfield prevented Manningham Council from being able to sign off on permits.

    Initially the Bunnings development threatened to become a legal battle between the retail giants, with Westfield concerned it would affect future growth of its Doncaster complex after announcing a $500 million expansion.

    Andrew Marks, general manager - property for Bunnings, said recently it expected work to start in due course. He told Leader:
    We are currently in the process of appointing a builder for the development. The timing of the project has not been finalised at this stage and we will continue to update the local community as soon as timings are known...

    Bunnings first announced the plans back in 2013.

    Related:
    Big box update: Bunnings Doncaster will be built - HNN
    Products
    DeWalt extends FlexVolt to OPE
    DeWalt expands FlexVolt to its 60V Max outdoor power equipment range
    DeWalt
    Hand held blower from the FlexVolt 60V Max line
    The FlexVolt 60V Max string trimmer at work
    Click to visit the HBT website for more information
    Featuring batteries that automatically change voltage when the user changes tools, DeWalt's outdoor power equipment (OPE) lineup will incorporate the new FlexVolt 60V Max 3.0Ah battery (9.0Ah when used in 20V Max tools).

    The FlexVolt system is backwards compatible with most of the existing DeWalt 20V Max system, which now includes over 100 products. This means that the FlexVolt batteries operate both the DeWalt 60V Max outdoor power equipment as well as DeWalt 20V Max power tools.

    The 60V Max chainsaw (DCCS670X1) is equipped with a brushless motor delivering gas performance. The low kickback 16-inch Oregon(r) bar and chain has auto-oiling for continuous lubrication and a tool-free tensioning system for quick bar and chain adjustments.

    The chainsaw delivers smooth cuts, long chain life, and does not have the engine maintenance that is required with gas-powered chainsaws. With no more cold starts and carburettor issues, this chainsaw starts easily with the pull of the trigger.

    The 60V Max handheld blower (DCBL770X1) is also equipped with a brushless motor which generates gas performance to clear jobsite debris at up to 423 CFM and 129 MPH. The handheld blower also includes a flat concentrator nozzle to increase air speed to 175 MPH for heavy duty debris. A variable speed trigger and lock allow for full throttle control without having to constantly hold down the trigger.

    The 60V Max string trimmer (DCST970X1) has a15-inch cut swath accepting DeWalt 0.080-inch or 0.095-inch lines and a gear-drive transmission. It provides amplified torque that maintains cut speed under load. Ideal for construction cleanup and maintenance, the 60V Max outdoor power equipment allows users to leave the gas tank behind and expand their DeWalt power tool and battery systems.

    For professional landscapers, the DeWalt 40V Max system offers a battery solution for day-long, heavy-duty outdoor use.
    Products
    Greenworks Tools releases 60V OPE
    Greenworks Pro 60V 21-inch mower is part of the latest line
    Greenworks Tools
    The 60V 24-inch hedge trimmer in use
    The 60V cordless electric leaf blower is available at Lowe's
    Click to visit the HBT website for more information
    The Greenworks Pro 60V battery platform lies at the heart of its new cordless outdoor power equipment (OPE) range. It utilises lithium-ion technology in combination with brushless electric motors to provide power and torque, while reducing noise and vibration, and getting rid of emissions. President of Greenworks Tools, Chris Allen said:
    ...Each tool in the Greenworks Pro 60V line is engineered to improve the user experience. Push button start technology eliminates pull cords in every tool across the platform, while the 540 CFM Turbo Boost button provides added power on-demand in the backpack blower. Patented Smart Cut technology in the mower maximises run-time by keeping the blade speed at an optimal level based on the thickness of the turf...
    We aim to have the right tool for every consumer and by adding the 60V equipment to our 24, 40 and 80V consumer lines, and 82V commercial-grade equipment, we're one step closer to that goal.

    The core line includes the 60V mower, string trimmer, hand-held axial blower, hedge trimmer, chainsaw, and backpack blower. Additional 60V specialty tools - like the pole hedge trimmer - and other accessories will also be available.

    The same battery can power all of the products in Greenworks' 60V offering, allowing users to transition the battery between different tools in the line.

    The Greenworks Pro 60V equipment can be purchased as tool and battery combo kits or the bare tools and batteries may be purchased individually.
    Companies
    Workwear category dominated by UK player
    Australian-based Prime Mover Workwear is acquired by a major UK safety clothing company
    HNN Sources
    Prime Mover Workwear was founded by Australian entrepreneur, Brett Birkill and his wife Wandy
    Prime Mover also makes workwear for women
    Subscribe to HNN weekly e-newsletter
    The AUD1.4 billion workwear market in Australia and New Zealand has seen the entrance of a major UK safety clothing company.

    Prime Mover Workwear - founded by Australian entrepreneur, Brett Birkill and his wife Wandy as a small business above a fruit shop in Melbourne before becoming the largest privately owned workwear company in Australia - has been acquired by Irish firm, Portwest Limited, in a deal worth over 7.5 million euros (AUD10.5 million).

    Portwest is a family owned business and manufactures safety clothing, personal protective equipment (PPE), footwear and other protective gear. It employs over 2000 staff and distributes to over 100 countries worldwide.

    According to its most recent accounts, Portwest booked sales of more than 100 million euros (AUD140 million) during the financial year to the end of February 2016 and reported a profit of just over 12.5 million euros (AUD17.5 million).

    The acquisition of Prime Mover Workwear is a significant geographical expansion and marks the start of the biggest privately owned workwear brand in South East Asia. Portwest CEO, Harry Hughes said:
    We've been wanting to expand into Australasia for some time and have spent a lot of time looking for the best company in the region. We're confident we've found it and can't wait to see what the future holds for us in the territory.

    Mr Birkill will stay on with the company as CEO for Australia and New Zealand. He told Inside Retail that the workwear space is one that crosses over multiple industries.
    It's one of those industries where because it's not high fashion it often doesn't get a lot of press. But it touches pretty much every business around the country whether it's just a few hi-vis vests on the door or a full warehouse through to the general sector.
    The retail side, which services the end consumer business, is booming and has shifted a little bit in recent times by moving heavily into the construction side after housing booms, especially in Melbourne and Sydney...

    Mr Birkill said the new deal will mean a much larger range is on offer, with Portwest introducing a host of items. They include gloves, glasses, headwear and eyewear as well as more job specific items such as whites only for painters or heavy jackets for freezer workers.

    Portwest is owned by brothers Cathal, Harry and Owen Hughes. Harry Hughes said:
    As part of its expansion plans, Portwest has strategically positioned warehousing across five major global locations: USA, Dubai, UK, Poland and Ireland. The company has made considerable investment into factories in Bangladesh and there are plans for a manufacturing facility in Myanmar, where production will commence later this year.

    Portwest has been designing and manufacturing high visibility garments, flame resistant clothing, footwear and PPE for well over 100 years. It was founded in 1904 by Charles Hughes, son of a small farmer. He was determined to make better workwear and footwear when he started his first Portwest factory. His core principles of exceptional design quality, value, and service still apply at the company today.
    Deal making

    Mr Birkill told SmartCompany in a recent interview the deal came about fortuitously, thanks to a conversation that was overheard in a small Irish store. He explained:
    Portwest owns a number of smaller businesses in Ireland not related to workwear, and there was a gentleman from Australia visiting one in Westport last year. One of the owners of Portwest happened to be in that store at the same time, and was talking to a different man about expanding their workwear business into Australia.

    The conversation was overheard by an Australian who was involved in the workwear market, and this led to Prime Mover's first connection with Portwest. Mr Birkill said:
    The Australian guy overheard the conversation and mentioned he knew some people in the workwear industry in Australia, and that was our first connection.

    Both Portwest and Prime Mover Workwear were employing KPMG as consultants, and through that connection, the first talks of an acquisition were made. He said:
    Portwest wasn't actively flying to Australia and knocking on doors looking for connections, they had Australia firmly in their growth plan, but they didn't know where to start. That conversation really kicked it off.

    Along with Mr Birkill and his wife, Prime Mover's staff will keep working at the company.

    This also isn't the first time Prime Mover Workwear has fielded purchase offers from bigger companies, but Mr Birkill has previously turned them down, as they were never the "right fit". He said:
    We had other groups look at the business, but we started this business from scratch, so we wanted to pass it on to someone who could develop it and take it to the next stage.
    There have been a lot of brands bought by big public companies with models that just don't fit, like retail business buying wholesale brands. We wanted the right fit and we wanted the right people. If we had sold to one of the other offers, Prime Mover would not have succeeded.
    Retailers
    Indie store update
    Tenterfield Hardware & Garden Centre takes out the biggest prize in its banner group
    HNN Sources
    Loganholme Mitre 10 prepares to fight for its territory
    Busselton HTH store owners call it a day
    Click to visit the HBT website for more information
    Time for some independent stores to take a bow and receive awards; Bunnings moving into Loganholme Mitre 10 territory; and Home Timber and Hardware in Busselton (WA) is shutting its doors.
    Top stores named and rewarded

    A number of independent stores around the country have been singled out as some of the best in 2016. Here are just a few.
    Thrifty-Link Tenterfield

    Tenterfield Hardware & Garden Centre was awarded the 2016 National Thrifty-Link Store of the Year prize by the Independent Hardware Group (IHG). Co-owner John Roberts said it was an honour to receive the industry accolade and attributed it to the efforts of his passionate and dedicated staff. He told the Tenterfield Star:
    Winning the award is a credit to the tremendous people we have working here. It's a small group of six but we work together and all have a genuine passion for helping locals. The great culture we have plays a pivotal role in the success of our business.
    At the end of the day, it's our customers who are the ultimate judge of what we do, and we're very thankful to the extended Tenterfield community for supporting us over many years.

    The win follows a significant investment by Mr Roberts and his business partners, Geoff and Linda Nye. The store has a strong focus on camping supplies, nursery and outdoor furniture. Tenterfield Hardware & Garden Centre also won the state title.
    MacKenzies Home Timber and Hardware

    Goondiwindi business MacKenzies Home Timber and Hardware has won the 2016 Queensland Store of the Year (over 1,000sqm). The win comes after a period of significant growth, the result of a renewed focus on store presentation, customer service and range selection.

    Owner Clive Quartermaine was on hand to receive the award on behalf of his family and hard working staff at the IHG national awards dinner.
    Margaret River Home Timber and Hardware

    Store manager Paul Brown from Margaret River Home Timber and Hardware collected the trophy for Western Australian Store of the Year (over 1000sqm).

    The win is the latest in a line of successes for the store, which Mr Brown puts down to a solid group of employees working together as a team, with a genuine passion for helping locals. He told Margaret River Mail:
    We have people coming into the shop who have been coming in for twenty years, they come to know the faces and the expertise of the people who work here and rely on their advice.

    The store focuses heavily on local involvement in community groups, proudly displaying a banner above the retail counter listing the various associations and clubs they support. Owners Lloyd and Anne Shepherdson said the community support is reciprocated and represents how the business is run. Mrs Shepherdson said:
    I think it's the culture of the organisation that is important. It is what we hear consistently, that the organisation is well known for having such a strong culture and that's why people keep coming back.
    This is where Paul has been fantastic, he certainly has been a great team leader and together with general manager Noelene Wilcox we have a great leadership team here.
    Cowell Home Timber and Hardware

    Owners Buzz and Hayley Fiegert of Cowell Home Timer and Hardware received the

    SA and NT Store of the Year title, for stores less than 1000sqm. Mrs Fiegert told Eyre Tribune:
    It is an honour to be recognised for the hard work our team have put into growing and improving our business. We honestly had no idea that we would be heading up to the stage.

    The store offers a large variety of building materials and tools to the Eyre Peninsula community in South Australia. It supports the town's football, netball, cricket, bowling and lions clubs, the Franklin Harbour Tennis Association, and the Eastern Eyre Football League and Cricket Association.

    The Fiegerts have owned and operated the store for more than 10 years, and attribute success and growth to their employees. There are currently four staff employed at the store, in addition to the hours Buzz and Hayley put in. Mrs Fiegert added:
    We have a great team who work well together and do whatever needs to be done. We also have the family support to help out with the kids.
    Taree Produce

    Combined Rural Traders (CRT) have awarded Taree Produce as the 2016 NSW Business of the Year. Owner Craig Allport has praised the dedication shown by staff. He told the Manning River Times:
    Being able to service Taree and the surrounding communities over many years has been a privilege. Without the great staff we have at both our Wingham and Taree stores, these kind of awards are not possible.

    Head of the CRT network, on behalf of Ruralco Holdings Limited, Greg O'Neil said the business stood out ahead of other CRTs. He said:
    It has worked hard to ensure its diversified business model covers all rural markets in the region...They continually demonstrate a deep understanding of the needs of the local community.

    The business has won this award five times as well as taking out national honours once.
    Loganholme Mitre 10 prepares for battle

    Development plans revealed that a Bunnings store would open this July at the Hyperdome Home Centre in Loganholme (QLD), where Mitre 10 has been operating for 10 years.

    The news came after Bunnings pulled back from opening at the centre last year and shocked the centre's Mitre 10 owner Ian Gill, according to the Courier Mail.

    Mr Gill's concern followed the closure of two hardware stores in the centre since 2007 and a further five stores shutting shop between Springwood and Beenleigh.

    He said the Home Centre, owned by Queensland Investment Corporation, should support and protect longstanding tenants, in particular after proposals to relax Sunday trading. He told the Courier Mail:
    It's a real concern. We already have three Bunnings located within a 10km radium of us. A store of that size in this area will have big impacts for us and most of the other tenants in the centre. We've already seen so many small businesses struggle to survive when the larger corporates open in their backyard. I'm not against competition - it's a good thing - but a business such as Bunnings has a big leg up and when there's already market saturation.

    Hyperdome Home Centre centre manager Rob Mansfield said the "small-format" Bunnings was needed to cater for the growing demand in the community. He said:
    We are excited by what Bunnings can offer our community, not only in terms of retail but potential jobs, learning and social enterprise.

    Bunnings general manager property Andrew Marks said work would start soon on the new store in Loganholme, which had been an area of interest for some time. He said:
    This tenancy is an opportunity for us to provide local residents access to the latest home improvement and outdoor living products and the best service.
    Busselton store closing after long run

    Father and son team Nick and Brian Wallace are closing the doors of their Home Timber and Hardware business after 30 years of trading in Busselton (WA).

    For the last 13 years, it had been competing against Bunnings, and saw a dramatic loss of customers over the last year which no longer made it viable to run. Brian Wallace told the Busselton Mail:
    The line in the sand got crossed and we decided to call it a day.

    Brian said his father Nick bought the business around 1986. The original store was called Prince Street Hardware. He said the business was so successful that they outgrew the building and had to look for a new location so they could meet demand.
    My father spent two or three years looking for land where he could build a bigger store and ended up buying all the houses along here. He built the building and we had one very successful year trading out of here before Bunnings opened and it has not been easy since. Unfortunately it is the evolution of the industry.

    Brian said the employees at the store were feeling a bit down and that a number of employees had been there since the business started.
    It broke dad's heart, 30 years he has been doing this, I have been in the business for more than 10 years and it has not been an easy thing.

    They expect the store to remain open until mid-April while encouraging the local community to take advantage of the closing down sale.
    Bigbox
    Europe update
    An inside look at B&Q's new format store in London
    HNN Sources
    Bunnings is launching an online store in the UK
    Travis Perkins experiences profit slump
    Click to visit the HBT website for more information
    Inside Retail Group takes a tour of B&Q's small-sized London store; an online store is in the works for Bunnings UK & Ireland; DIY event is renamed for 2018; Travis Perkins reveals a profit slump; and Grafton Group looks at growing its presence in Europe.
    B&Q breaks away from big box format

    Steve Collinge, managing director, Insight Retail Group takes a closer look at the smaller format 3,000sqft (280sqm) B&Q store on Holloway Road, North London.

    The B&Q "City" store occupies a former post office, and its closest competitors include Screwfix in Kings Cross (1.9kms away), Homebase almost 2.6kms away in Haringey, a B&Q mini-warehouse, Wickes and Selco in Tottenham (around 5kms) and a B&Q Supercentre in Barnet (5.9kms). The nearest independent hardware store is Woodland Hardware located 1.6kms away on Highbury Park.

    The store carries the new, simplified B&Q branding originally seen in the B&Q Cribbs store and has now been rolled out to a further seven revamped stores including the Milton Keynes warehouse.

    The team consists of 15 full and part time staff, almost all of whom are new to B&Q, but with extensive high street retailing experience. They have all been through the B&Q training programmes, which is critical in a store of this size where you have to be multi-skilled and understand all departments.

    A lot of attention is paid on the added value propositions. In this store, there is key cutting, click 'n' collect, paint mixing, Hertz van hire and customers can get a kitchen designed by a professional kitchen consultant.

    Deciding on the range to squeeze into a 280sqm store, less than 2% of the size of a typical B&Q warehouse format is a challenge. Product categories represented including kitchens, wallpaper, timber, tiles and wooden flooring.

    The Kingfisher brands tend to dominate in-store. In the categories where brands still exist, hand tools for example, the offer is very simple with brand leader Stanley and B&Q's MACAllister. In painting and decorating accessories, it's Harris and B&Q's Diall.

    With the exception of the opening offers, which run for 10 days or until stocks are exhausted, all pricing is national, both for stores and B&Q's website DIY.com. Dulux white emulsion, DeWalt power drill, Karcher Window Vac and bistro garden furniture are part of the opening offers..

    To read more about Mr Collinge's views on B&Q's North London store, click here to see the full story:
    A tour of B&Q's new London store: Steve Collinge, Insight Retail Group - LinkedIn

    The smaller format is part of a trial by B&Q owner Kingfisher to adapt to changing shopping habits. The company said that the trial store would provide shoppers with an offer focused on home decoration, repair and maintenance as well as having a click and collect options which will allow them access to its range of 35,000 SKUs.

    As a trial store, a Kingfisher spokesman said that it wouldn't necessarily pave the way to hundreds of other similarly sized stores opening.

    Related:
    Europe update: B&Q signals a change in direction - HNN
    BUKI commits to online store

    Bunnings plans to launch a transactional online store in Britain within the next 18 months.

    In a presentation to analysts and investors ahead of store tours recently, managing director of Bunnings UK and Ireland (BUKI), Peter Davis said the retailer needed to offer customers the ability to buy online to succeed in the highly competitive GBP38 billion (AUD61 billion) UK home improvement market. He told the Financial Review:
    In this (UK) market we believe strongly we need to be transactional...We're working on that right now.

    Homebase - now owned by Wesfarmers -- already has a transactional website, which will transition to a new digital platform over the next few months.

    As Bunnings opens new-format stores under the Bunnings brand in the UK, the retailer will build out a digital eco-system that includes product information and how-to demos, mirroring its digital offer in Australia. Mr Davis said:
    We have a holding website for Bunnings UK, our next step is to really lift that and make sure it has strong pre-shop engagement for the UK. It should be transactional within 18 months, that's what I'm personally aiming for. We're not in a rush but we want to get it right.

    Mr Davis also told analysts that he recognised the UK market, unlike Australia, was not about "pergola, deck or pool'' but was "all about living inside''. He said:
    I don't pretend for one moment that outdoor living is as significant in the UK as in Australia but we have had more success with barbecue and garden furniture than we originally expected" over the "dark months" of the winter.

    Mr Davis said sales after October 1 had been good in outdoor living, suggesting Bunnings was seeing or bringing change to UK buying patterns.

    The UK hardware market is very fractured with the top two players only having less than a 15 per cent market share.

    The Australian reports Mr Davis unveiled his plans over the next five years to expand and enrich the Bunnings UK shopping experience. He said despite the uncertainties around Brexit the fundamentals of the hardware sector remained strong.

    To back up its expansion plans in the UK, Bunnings has invested GBP130 million in fresh stock and begun renovating dilapidated Homebase stores.
    DIY event rebrands for 2018

    Taking place on 3-4 June 2018, the National DIY Show will be held at the Ericsson Hall at the Ricoh Arena in Coventry (UK). The event will switch to running the show on a Sunday and Monday.

    Formerly known as Totally DIY & Tools, the show will have the same DIY and builders' merchant visitor base, with the Sunday opening day enabling hardware retailers to attend without taking valuable time out of the business. Lucyanne Matthews, event manager of the National DIY Show, said:
    Our focus over the last 20 years has been on providing innovative and international products for independent retailers. By returning to a Sunday show opening, we are responding to demands from this key section of our visitors. The show will feature various zones and plans are moving ahead towards a special new forum for the trade.

    This year's Totally DIY & Tools show held on 14-15 February featured 80 exhibitors with a wider national and global base than ever before.

    For more information, click on the following link:
    National DIY Show 2018
    Profits have slumped for Travis Perkins

    Britain's largest supplier of building materials and Wickes DIY chain owner, Travis Perkins has posted a 67% decline in annual profits after taking hefty charges from branch closures and its troubled plumbing and heating business.

    The group, which also owns Toolstation, revealed a GBP235 million (AUD377.5 million) impairment charge largely on its embattled heating and plumbing and tile businesses, which are under review.

    Its retail chains Wickes and Toolstation are not affected by the overhaul.

    It also took a GBP57 million (AUD91.5 million) hit to cover costs of its plan to shut more than 30 branches and a revamp of its supply chain. This left bottom line pre-tax profits down by more than two thirds, at GBP73 million (AUD117 million) against GBP224 million (AUD359.7 million) in 2015.

    Revenue increased 4.6% to GBP6.22 billion (AUD10 billion).

    Travis Perkins shares also came under pressure as it cautioned over challenges for the year ahead, with worries over the impact of the weak pound and a possible slowdown in the housing market. Chief executive, John Carter said:
    The sharp decline in the value of sterling since June 2016 has created cost pressures on imported goods and materials, and the expectations for secondary housing market transactions and growth in the repair, maintenance and improvement market have weakened.

    He cautioned that rising inflation was set to hit home buyer demand, which in turn could impact builder merchant sales. Mr Carter said:
    Pressure on consumer discretionary spending from rising inflation could impact secondary housing transactions in the second half of 2017.
    Any significant reduction in consumer confidence may have a more pronounced impact on big-ticket purchases such as kitchens and bathrooms which make up around 10% of the group's sales.

    But Travis Perkins is hoping that any knock to sales will be "broadly" offset by price increases.

    Results for 2016 showed underlying earnings slumped 21.7% to GBP36 million (AUD57.7 million) in its heating and plumbing division, but its Wickes and Toolstation division saw underlying operating profits rise 6.3% to GBP101 million (AUD162 million).

    The company said it will report back on its plans to transform the heating and plumbing division at the 2017 results.
    Grafton growing European presence

    Builders suppliers Grafton Group is looking at further expansion throughout Europe.

    Chief executive officer Gavin Slark recently said the company has a reasonably healthy pipeline of potential acquisitions and significant financial headroom for such activity.

    He said that the group could comfortably spend 200 million euros (AUD279 million) on acquisitions if it so wished but will be looking for "good businesses in good markets with good management at the right price".

    Grafton will, in the short-term, mainly continue to look at bolt-on buys in the UK and further acquisitions in the Netherlands where it has largely driven growth for the group since Grafton entered via acquisition in 2015. Its main Dutch business is specialist tools provider Isero. It contributed 10.4 million euros (AUD14.5 million) to group operating profit last year.

    Mr Slark said that the medium-term objective is to expand into other European areas.

    While acquisition opportunities are low in Ireland, the group will open three new Chadwicks building supply stores there this year. Mr Slark said the gradual growth Grafton is seeing in its Irish business is a good thing as it hints at more sustainable progress.

    It owns Woodie's DIY retail chain, as well as a merchanting business. The Irish merchanting division grew revenue by 12%, last year.

    While he sees some uncertainty in the UK market, Mr Slark said that he remains largely unworried about Brexit. Grafton's main exposure in that regard is via the repair, maintenance and improvement market.

    Key to that sector's growth is consumer confidence and Mr Slark said that will only be properly gauged later in the year when there is more clarity and visibility around what a post-Brexit UK will look like.

    However, he said management anticipates further modest growth in the British market this year.
    Overall prospects for the current year remain favourable with continued growth in Ireland and the Netherlands expected to support an increase in profit in the year ahead.

    Belgium remains the only underperforming market for Grafton, with revenues falling 11%.

    Mr Slark said that the Selco merchanting business in the UK, the exposure to a recovering Irish market and having a leading position in the Dutch market are the three characteristics differentiating Grafton from its peers at present.

    Related:
    Grafton's multiple markets boost revenues - HI News, page 42
    Retailers
    USA update
    Ace revenues top USD1 billion
    HNN Sources
    BuildDirect launches supply chain platform for heavyweight goods
    Lowe's is trialling a virtual reality service
    Click to visit the HBT website for more information
    Ace Hardware passes the USD1 billion mark; BuildDirect's supply chain platform is suitable for heavyweight goods; and virtual reality is available in a Lowe's store.
    Record revenues, profit for Ace

    Ace Hardware Corp. reported fourth quarter revenues of USD1.2 billion (AUD1.5 billion), an increase of USD67.6 million (USD87.8 million) or 5.8% from the fourth quarter of 2015.

    Net income was USD21.5 million (AUD27.9 million) for the fourth quarter 2016, an increase of USD9.4 million (AUD12.2 million) or 77.7% from the fourth quarter of 2015.

    For the full year, consolidated fiscal 2016 revenues were USD5.1 billion (AUD6.6 billion), an increase of USD80.5 million (AUD104.6 million) or 1.6% compared to the prior year. Fiscal 2016 net income was USD161.2 million (AUD209.5 million), an increase of USD5.0 million (AUD6.5 million) or 3.2% compared to the prior year.

    The 4.4% increase in retail same-store-sales during the fourth quarter of 2016 reported by the approximately 3,000 Ace retailers who share daily retail sales data was the result of increased customer count and average transaction size.

    Same-store-sales at these stores were up 2.5% for the full year. John Venhuizen, president and CEO, said:
    To give you an idea of the success of our retail strategy, we have seen increases in same-store-sales for seven consecutive years, increases in new store growth for five consecutive years and increases in customer transactions for four consecutive years.

    Retail revenues from Ace Retail Holdings - the corporate-owned Westlake Ace Hardware chain - were USD64.4 million (AUD83.7 million) in the fourth quarter of 2016. This is an increase of 7.7% from the fourth quarter of 2015. Same-store-sales were up 3% versus the prior year with outdoor living and lawn and garden showing the largest increases.

    Ace added 152 new domestic stores in fiscal 2016 and cancelled 100 stores. This brought the company's total domestic store count to 4,363 at the end of fiscal 2016, an increase of 52 stores from the end of fiscal 2015.

    On a worldwide basis, Ace added 207 stores in fiscal 2016 and cancelled 103, bringing the global store count to 4,994 at the end of fiscal 2016.
    Platform for heavyweight goods delivery

    Canadian company, BuildDirect, announced it has become the first in the home improvement industry to open its global supply chain platform for heavyweight goods.

    The BuildDirect Gateway gives any third party the ability to access its network of warehousing services, ground and ocean logistics for any part of the shipping journey, from point of manufacture to last-mile delivery. The scalable platform ensures that parties involved in the order fulfillment process can use the most efficient and affordable options for delivering heavyweight products from anywhere in the world, to homes across North America.

    Gateway was specifically designed to accommodate the needs associated with moving heavyweight products that cause significant issues for traditional shipping providers. The platform has been tested and honed in the past several years. Currently, more than 8.2 million pounds (3.7 million kilograms) of products ship through its platform each month, travelling over 5.9 million miles (9.4 million kilometres). BuildDirect co-founder, president, and CEO, Jeff Booth said:
    The system for shipping heavyweight products has always been complex and overly fragmented, which is why it has taken BuildDirect more than 15 years to completely reinvent it.
    Our global supply chain platform and its scope of services has been rigorously refined by managing imports and exports across 35+ countries...

    Gateway offers end-to-end solutions for heavyweight shipping resulting in fewer touchpoints and less damage to the delivered product. The average consolidated BuildDirect shipment is handled 50% less than those in other heavyweight supply chain networks.

    Suppliers in the network get access to varying levels of data depending on how they have engaged with the platform. At the highest level, suppliers gain real-time access to a dashboard that leverages predictive analytics to show where demand for their products are. Products in the network are easily moved around the country to ensure they are close to customers, which closes the gap on shipping costs and offers more reliable delivery windows.

    Customers are able to choose how they would like their products delivered: white glove (ie. room of choice), first threshold (ie. inside a garage), light or heavy assembly and removal of old product, or garbage. Manufacturers and distributors can select how to manage the movement of their products (ocean and ground logistics, or warehousing services).

    Once a delivery is complete, customers provide feedback on their experiences. These ratings and reviews are funnelled back through the system, and carriers that perform well will get more business while those that receive consistently poor feedback are removed.

    All supply chain services are available to any retailer. Gateway offers flexibility for companies to enter the North American market. Alexandre Decarie, CEO of Power Dekor North America, said:
    With minimal investment, no long-term contracts, and a turn-key infrastructure, BuildDirect's Gateway offers tremendous value, convenience and savings.
    BDPros

    BuildDirect also launched BDPros, a service that offers home improvement professionals access to a personal concierge to help find their ideal products at the best price and ensure that goods arrive where they're needed, on time.

    When users sign up, they are connected with a personal concierge who assists them with product sourcing, special orders, partial and full returns, and more. This service allows BDPros members to benefit from delivery via the company's heavyweight shipping network. BDPros members also earn a rebate on purchases throughout the year. Mr Booth said:
    As a former builder, I know the pressure home improvement professionals are under to deliver superior quality on time for a great price, and so much of that process is completely beyond their control. We want to shift that power, putting it back into the builder's hands, so that they can truly delight homeowners.

    To get started with BDPros, professionals simply establish a customer profile that will enable them to track orders and manage projects. Through an online portal, they can shop a wide selection of products sourced from all over the world and have their concierge work directly with suppliers. This enables BDPros members to benefit from lower prices. BuildDirect is not limited by shelf space so suppliers can add products at any time, which allows it to showcase a large array of styles, materials, and price points.

    Members can compare products, view side-by-side reviews, and receive free, unlimited product samples overnight to help manage customer product expectations.
    Lowe's in-store virtual reality

    The US home improvement retailer is launching a virtual reality experience in one of its stores to give customers hands-on practice with a home improvement project. Lowe's may eventually create more VR tutorials and roll them out to more locations.

    Initially, customers at a Massachusetts store will get a lesson in how to tile a bathroom. A customer will put on a VR headset, be placed in a virtual room, and use an HTC Vive hand controller to simulate mixing mortar and placing tile. Eventually, a broader range of tutorials may be offered in all Lowe's stores.

    In a trial run, Lowe's found that customers had a 36% better recall of how to complete the project when compared with people who watched a YouTube how-to video.

    Kyle Nel, director of Lowe's Innovation Labs, told CNNTech about the advantages of VR as a teaching medium. He pointed to the tactile, immersive nature of virtual reality as allowing for better learning.

    Mr Nel noted the limitations of offering in-store clinics taught by an employee. Such classes have to be given at set times, which may be inconvenient for customers. The virtual reality experience is available anytime the store is open. He said:
    Virtual reality just happens to be the best way to give people what they want, when they want it. This is meant to be available to the entire country and Canada, not just those on the bleeding, cutting edge of tech.

    The VR experience also lends itself to improvement. Lowe's will monitor customers and see where they may be getting stuck. Improvements in the teaching process can be made. If Lowe's scales the experience to all of its stores, updates to the teaching process could be made overnight.

    Lowe's trends team has found that millennials are forgoing DIY projects because they lack home improvement confidence and the free time for a project. For Lowe's, virtual reality might be a way to reverse that trend because it can act as a digital tutorial for customers who want to learn basic do-it-yourself skills.
    News
    HI News V3 No. 2: The new Bunnings
    Download the latest issue of HI News Vol. 3, issue no. 2
    HI News
    A look at Wesfarmers-Bunnings first half results
    (l&r) Tom Rugg and Dean Harriott from Briggs & Stratton
    Click to visit the HBT website for more information
    The latest issue of HI News is about the new leadership team at Bunnings and its half year results. We also look at whether the big box retailer has raised its prices compared to 12 months ago and drop into its Geelong (VIC) store.

    Just click on the following link to download this edition:
    HI News V3 No. 2: The new Bunnings

    Data from the Australian Bureau of Statistics indicates that building is slowing down but renovations are not.

    A round up of Bunnings store developments around the country seems to highlight the fact that not all communities are in favour of a warehouse store in their backyard.

    In Queensland, the owner of Craig's Highfields Hardware speaks out against the changes to retail hours in that state. Agribusiness Ruralco also gets the go-ahead to acquire TP Jones in Tasmania.

    Briggs & Stratton Australasia announces it has a new managing director and in the US, home improvement retailer TreeHouse will be selling the Tesla battery.

    Stihl's latest product releases and the innovative, hybrid padlock BenjiLock that uses fingerprints are profiled in this issue.
    Editorial
    Wesfarmers-Bunnings results 2016-17 H1
    Bunnings results for FY2016/17H1
    Wesfarmers
    Peter Davis, left, runs Bunnings UK & Ireland. Michael Schneider, right, runs Bunnings Australia & New Zealand
    Video shot from drone flying through Bunnings UK pilot store
    Give to Amnesty International
    Australian-based retail and natural resources conglomerate Wesfarmers has reported positive results for the first half of FY 2016/17. Revenue came in at $34,917 million, up by 4.35% on the previous corresponding period (pcp), which was the first half of FY 2015/16. Earnings before tax and interest (EBIT) rose more sharply, up by 15.12% on the pcp, coming in at $2429 million. This produced a net profit after tax (NPAT) of $1577 million, an increase of 13.21% on the pcp.

    The managing director (MD) for Wesfarmers, Richard Goyder stated in a press release that the high level of earnings was largely due to "very strong results reported for Bunnings Australia and New Zealand, Kmart and Officeworks". He added that "The continued momentum in these businesses was particularly pleasing and reflects the strong market positions they have each established".

    Mr Goyder also called out the performance of Wesfarmers' non-retail divisions.
    Earnings for the Industrials division were significantly above the prior corresponding period, with Resources benefitting from higher coal prices and strong production in the second quarter. The Chemicals, Energy and Fertilisers business delivered a strong result for the half, primarily driven by higher chemicals earnings and growth in natural gas retailing, while earnings for Industrial and Safety also improved, benefitting from lower costs following "Fit for Growth" restructuring activities.

    The results from Wesfarmers were somewhat overshadowed by the announcement the day before their release that Mr Goyder has set a final date for relinquishing his role. A press release stated he would be stepping down from his role after the company's annual general meeting (AGM) in November 2017. Mr Goyder will be replaced by Rob Scott, who currently heads up Wesfarmers' Industrials division. Mr Scott has taken up the position of deputy MD. He will be stepping down from his Industrials position on 30 June 2017.

    This announcement followed the news released in late 2016 that then Bunnings CEO, John Gillam, would be leaving Wesfarmers before the end of calendar 2017. He has already stepped down from his role as overall CEO of Bunnings.

    In remarks made in response to an analyst's questions near the end of the presentation of these results, Mr Goyder appeared to introduce some additional flexibility into this suggested schedule. He said:
    The arrangements with John Gillam, he and I'll sit down now with Rob later in the year and determine whether they continue or not. So there's no definitive timeframe around that.... As I said yesterday one of my regrets about moving on is I'm not going to be around to see the success of this business [Bunnings UK & Ireland] directly, but I'll be around indirectly.

    Mr Goyder, meanwhile, has accepted a role as chairman of the Australian Football League (AFL) Commission. While concerns have been raised about his ability to manage both roles, he has stated that Mr Scott would be able to step in should the AFL position need a greater than expected amount of attention for any reason.

    Mr Gillam did not participate in delivering these earnings results for Bunnings. It is unclear if he will participate in the Wesfarmers Strategy Day taking place in June 2017.

    Wesfarmers has also announced it is considering the sale of its Officeworks office supplies division.
     Peter Davis, left, runs Bunnings UK & Ireland. Michael Schneider, right, runs Bunnings Australia & New Zealand
    Bunnings

    The home improvement division of Wesfarmers, Bunnings, contributed substantially to Wesfarmers' good results. Bunnings now operates as two semi-independent sub-divisions, Bunnings Australia and New Zealand (BANZ), and Bunnings UK and Ireland (BUKI).

    Combined revenue for the Bunnings division overall was $6995 million, and EBIT was $722 million.
    Bunnings Australia and New Zealand

    BANZ reported sales revenue of $5957 million, up 8.31% on the pcp, with EBIT of $770 million, up 9.84% on the pcp.
    Bunnings results for FY2016/17H1

    Masters

    The big news for Bunnings in the coming half will be the effect on sales caused by the exit of Masters Home Improvement from the market. The MD of BANZ, Michael Schneider, advised caution in predicting the outcome of this:
    It's really clear that our competitive landscape is dynamic and active. I don't think we've yet been able to clearly understand all the impacts from the Masters' liquidation but what is clear, however, is our continued strong focus on investing both our offer, in terms of network development and value creation for our customers.

    Bunnings has obtained an agreement to purchase 15 properties formerly allocated to Masters. Mr Schneider indicated that 11 of these properties would be used to upgrade and replace existing Bunnings Warehouses.

    However, as the Lowe's/Woolworths joint venture Hydrox Holdings, which operated Masters, remains bogged down in arbitration over its exit plans, it's unclear as to when this property will actually be placed under the control of Wesfarmers. In the past Bunnings has indicated that there will be a further five months of work to turn completed ex-Masters stores into Bunnings Warehouses.

    As HNN has mentioned previously, our speculation would be that the Hydrox situation is resolved sometime in June to July 2017. That would possibly give Bunnings enough time to bring extra capacity online just before Christmas 2017.
    Growth

    Overall growth fell moderately when compared with the pcp, with total store sales slipping by negative 2.6% to 8.4%, and store-on-store (comp) sales growth down by negative 1.4% to 6.5%. However, figures from the Australian Bureau of Statistics indicate that the background number for growth in hardware was 5.9%, while for the overall household goods category (where much of BANZ's revenue is generated) the growth was only 2.4%.

    Mr Schneider suggested some possible influences which may have reduced revenue growth for BANZ:
    We were pleased with the store-on-store sales growth of 6.5% for the half given that we were cycling strong numbers from the last year, in addition to the Masters' liquidation and wet weather impacts in the current period.

    Mr Schneider also pointed to areas of investment in growth:
    Good work is being done in product innovation, range enhancements and ongoing improvements in service and services. These are providing us with ongoing positive customer engagement trends. All of these activities, of course, span across our consumer and commercial customers.
    Outlook

    Mr Schneider added some comments at the end of his introduction to BANZ's results which hint at the paths BANZ will pursue for growth over the coming 12 months:
    We're pleased with the progress across the agenda and more is expected here in the year ahead. I also thought it was worth noting just how strong our commercial performance continues to be. The opportunities in widening our addressable markets through range innovation, leveraging our digital platforms and customer engagement, is providing solid growth opportunities and coupling this with network redevelopment, is ensuring we're able to constantly improve and innovate our offer.
    Bunnings United Kingdom and Ireland

    BUKI reported revenue of $1038 million, and an EBIT loss of negative $48 million. It also reported that the number of transactions had increased by 9.1% over the pcp. The MD of BUKI, Peter Davis, did suggest this last number had been boosted by sales activities related to the closing out of some product lines.

    It's worth noting that the acquisition of Homebase by Wesfarmers was completed on 27 February 2016. Thus the company has owned this operation for less than a year at this point. As Mr Davis reminded the investment analysts at the presentation, Wesfarmers has planned for a two-year phase for building the basics of the business, followed by a further three years of expansion.

    The acquisition and transformation of Homebase into Bunnings might best be looked at as a long checklist of things that need to be completed. We can summarise what Mr Davis had to say by listing what has been completed, and what remains to be done:
    Completed
  • Stocking: higher stock weights, wider range
  • Ranging: reduced "soft" homewares, increased core hardware offering
  • Pricing: introduced everyday low prices (EDLP) under its "Always Low Prices" branding
  • Training: heavy investment in training 10,000 employees
  • Regeared the "Bunnings approach" for a more seasonal market
  • Terminated many transitional services held over from Homebase, reintegration into Wesfarmers based services
  • First pilot Bunnings Warehouse opened in early February 2017
  • To be completed
  • Transitional services need to be moved to Wesfarmers, including home delivery, which requires development of both a call centre and IT systems
  • Ongoing removal of concession holders from Homebase
  • Continuing negotiations with suppliers
  • Completion of additional three pilot Bunnings Warehouse before July 2017

  • The completed list is well within the bounds of what Wesfarmers announced as its goal for the first 12 months of Homebase redevelopment. The pilot stores are a strong priority, as Mr Davis pointed out:
    Proof of pilot is obviously a critical step to further investment and we will take our time to get this right. The first of these stores open on February 2 as part of the plan to have at least four pilot stores opened by the end of June. We have had great customer feedback and the early results are pleasing.

    Though it was not mentioned by Wesfarmers, details of the next three pilot stores have emerged. In addition to the initial pilot store in St Albans, a second St Albans store will be opened, 5kms from the first. The third location will be at the Apsley Mills Retail Park, which is located in Hemel Hempstead. This is just West of St Albans, to the North-West of London.

    The fourth location will replace a larger Homebase store about the size of a regular Bunnings Warehouse in Australia, located in Milton Keynes, close to the UK offices of Bunnings. This is some distance North from the other three store locations.

    Mr Davis concluded his remarks by stating:
    We've talked about our long term ambitions; we've talked about the three-phase plan and we're still in phase one. This is a period of consolidation and trial. As we reset Homebase, we're working hard to establish market leading Bunnings Warehouse stores and the success of these stores, it is an absolute precursor to any further investment in the roll-out of our network development plan.
    I think in summary we've seen a solid start.
    Analyst commentary

    While several half-year reports have gone past with nothing more than a couple simple questions asked of Bunnings, at this presentation both BANZ and BUKI received some more serious questioning.
    BUKI EBIT loss

    David Errington, a senior analyst with Bank of America Merrill Lynch, asked some tough questions about the BUKI business. In the past Mr Errington has been especially forceful in expressing some negative opinions regarding this enterprise. Mr Errington began his questioning by asking:
    But UK home improvement, a loss of $48 million in the first half. Clearly that has to be a concern to you or probably given that you're [Mr Goyder] going to be leaving in six months and John Gillam's going to be leaving in six months I'd like to know whose concern that's going to be. That's probably a cheeky shot.

    He expanded on this question by asking:
    But a AUD48 million first half loss and $29 million of that, trading loss. Can you give a bit of colour as to why that is? Because the full year earnings of Homebase was AUD40 million profit. How -- where did that loss come from? That sort of like came out of the blue for me.

    Mr Davis responded by saying:
    Look, we previously advised that as we rebase the sales we'd lose about GBP200 million turnover on the old business. We also did foreshadow that this acquisition -- during the acquisition and transition there was going to be a lot of disruption as we fundamentally repositioned the business.... We've always said, early part will be significant transitional costs and swings.

    Mr Errington persisted with his question:
    But a AUD50 million loss in the first half when you've done one store and you've got another 254 to go and in a market that's really slowing and in a lot of trouble -- I mean Treasury Wines' result yesterday, they highlighted the UK as in real trouble. What's the risk that this loss just doesn't blow out of control?

    When Mr Davis explained that the $48 million loss was driven by transitional rather than foundational costs, Mr Errington expanded on his question:
    Very low prices. So transaction growth's immaterial really. It's a non-number. I'm just worried about the $50 million loss in one half that I'm worried about could blow out significantly as you really do have to transition this business in a weak market.

    Mr Davis denied that the home improvement market was weakening, and provided further detail on the costs:
    We're just resetting the cost base at the moment. We won't finish the transitional services agreement until August. They're quite a drag on earnings at the moment and we've got to re-set up -- as you know set up new IT systems, new delivery platform and we're rebasing the costs around our call centre right at the very moment. So this is a pretty big transition that we're going through.

    Mr Goyder added an additional comment to this:
    Sorry, just one other thing on Homebase. There is a seasonality to it so we would expect the half we're in now as [Mr Davis] alluded to in his comments going through the slides, going into spring and summer we'd expect that to be a stronger performing season than the half we've just been in.

    The reference to previous Homebase's earnings Mr Errington makes was for the year to 31 January 2016, in which the company earned GBP24 million on revenue of GBP1433 million, or $41.7 million on revenue of $2455 million (using current exchange rates). The point Mr Goyder introduces is that the half year being considered does not include the spring season, from March to May, which is typically the period of highest revenue for retail home improvement in the UK and Ireland.

    Mr Errington's reference to Treasury Wines is to an Australian wine company. The company has had good results in the EU and Britain, but has forecast a drop off in demand for 2017. There are mixed views as to what 2017 will do to UK retail, as Britain's impending exit from the European Union (Brexit) introduces random factors. Recent statistics for hardware indicate overall growth for the past five years. While there are signals of a slowdown in many retail sectors, it is unclear if home improvement will be affected.
    UK Office of National Statistics figures for % change volume sales in the hardware industry

    Mr Errington's line of questioning was continued later in the presentation by Grant Saligari, an analyst with Credit Suisse. He asked:
    I just wanted to explore a bit further the line of questioning that David raised earlier on Bunnings UK if I could. I mean, my take on it is that as you put through the EDLP changes in the first half, it obviously caused a trading profit drop. I would have assumed that any of the stock liquidation would have been provisioned for in the acquisition accounting, so I can't see how that would have actually exacerbated the loss.
    As you move into the second half, it looks to me actually like a lot of the concession revenue is still there, based on the GBP600 million of revenue in the first half. So I would have thought even with the seasonal swing revenue falls in the second half, as the concessions come out and then you annualize the EDLP changes. So we're going to be left with a business at the end of fiscal 2017 that could be losing GBP50 million or more before obviously you start to put the Bunning stores in or see how they trade.
    But I'd just be interested in your take on the drivers and how that's likely to evolve through the period and where we may be incorrect or too bearish on those sort of assumptions and outlook for the Homebase side of the business please.

    Mr Davis responded:
    There's a lot of seasonality as Richard has touched on. We're going through some significant changes as we went through the first quarter of this year. And obviously losing Habitat and Argos sales had a pretty big impact on the overall business.... A lot of the products sold in the previous business were very seasonal themselves. So as we moved into November and December, without the furniture and other products to offset those losses in sales, it did have a bigger impact.
    BANZ operating margin

    The questions aimed at Mr Schneider were indirectly about whether BANZ was considering an increase in margins after the departure of Masters. Andrew McLennan, a senior analyst with Macquarie, began by asking about a $30 million provision for restructuring related to store refurbishment that Mr Schneider had called out earlier. Mr McLennan asked:
    I think during the presentation there was mention of a $30 million restructuring charge. Can you confirm that was actually incurred in the half for the ANZ business? Because if that is the case then it will just effectively imply that excluding property sales your margins increased by about 50 basis points. Can you comment on that?

    What Mr McLennan is referring to is that if the $30 million is added back into the $770 million of declared EBIT it produces an operating margin (EBIT over revenue) with is more than 0.5% higher than the operating margin for the pcp.

    Mr Schneider replied:
    As I said in my comments the really pleasing thing for us in the half was also the ability to drive some very strong cost disciplines and productivity improvements as well.

    In other words, he's identifying any margin gain as coming from cost savings.

    This theme was picked up later by Ben Gilbert, an analyst with UBS, who asked:
    I understand you don't manage the business for margin, but surely that must be pushing towards the upper end of what you guys want to achieve in that business. And how do you think about that long term in terms of the trade-off in investment and price versus margin?

    Mr Schneider replied:
    Margin, we manage it for customer value and that's what we keep focusing on. So that's driving the strategic agenda to create our value, grow the market and innovate on range and other things we're focused on. And that just becomes an outcome of good work.

    Mr Gilbert asked if, with Masters' exit, margins might rise. Mr Schneider stated:
    I think it's always one of the big misconceptions that one player is going to dominate the market one way or another. We compete every day with a range of players, traditional and online and the market's competitive. So we just keep driving that agenda as hard as we can.
    EBIT margin for Bunnings
    Analysis
    BUKI

    One of the problems Bunnings has experienced with its move into the UK and Irish market is that it has not performed well in explaining to investment analysts what it is doing. For example, it is very important that the company has secured distribution of Techtronic Industries' (TTI) Ryobi and AEG brands in the UK, which are also distributed by one of its main competitors there, the Kingfisher-owned B&Q.

    In addition to that, though, Bunnings has also brought with it two of its key captive brands, Kaboodle for kitchens and Ozito for lower-end cordless power tools. It has introduced a depth and variety of ranging that has not been seen before in the UK market. As Steve Collinge, the managing director of Insight Retail Group wrote in a review of the first Bunnings pilot store:
    In terms of individual product categories, they have without doubt delivered a tool category or carale of note. A barn stormer of a department with more power and hand tools than I've ever seen under one roof. Total and utter category credibility. When the manager opens the store on a Monday morning, he'll be finding random middle aged males fast asleep in this department with their heads resting on angle grinders and big smiles on their faces.
    Commentary from Insight Retail Group

    Mr Collinge also commented on the turnaround in staff attitudes, not just at the pilot Bunnings, but throughout the Homebase store chain. This indicates the money that has been invested so far in Bunnings operations in the UK has not been wasted. Given that, it is questionable whether having BUKI run over budget by $150 million or so in the initial three years really matters so much.

    What really does matter, however, is how BUKI responds to the major competitive forces it faces. HNN has identified two key areas.

    Bunnings will need to learn how to adapt to real competition. One way the company won out over Masters was that it changed, and upped its game in a way that was unexpected. Bunnings has to realise that its competition in the UK is capable of doing the same thing to it. Already, for example, Wickes has found out about BUKI's ambition to open its fourth pilot store in Milton Keynes, close to one of its stores. It has moved to upgrade that location to one of its more premium fitouts.

    Likewise, Kingfisher's B&Q is not going to sit idly by and watch while Bunnings takes market share away from it. The company has developed its own new offering, based on making it much easier for renovators to complete their projects. This (European) spring will be its first test in the market.

    The UK is also a much more sophisticated market than Australia. Bunnings has already launched its first TV ad campaign, copying the format it used in Australia. Will that really work? Has it been tested? How is response being monitored? What mechanisms are in place to develop a more sophisticated approach if that proves necessary? Compared to B&Q's advertising campaigns, which is more effective?

    Secondly, there is ecommerce. Ecommerce for home improvement just does not make sense to Bunnings management -- and yet it makes a lot of sense to UK homeowners. It is something Bunnings may need to rethink as it grows in the UK market.

    Few retailers understand their customers as well as Bunnings understands its Australian customers. The danger is that it will assume this understanding is more universal than it really is. That relates to ecommerce features such as click & collect, and to the issue of ethnic diversity in its TV ads.
    Vulnerabilities

    In Australia, if there is one area where Bunnings could be vulnerable, that would be in outdoor living. A retailer that combined outdoor furniture, barbecues, gardening, and deck/outdoor room construction all together, could have a real impact on Bunnings.

    Of course, as Woolworths learned, Bunnings is a very nimble and agile competitor, and Mr Schneider was a key player in Bunnings' strategic response to Masters. It is very likely, though, that one of the key lessons he learned in that engagement is that scale, in modern retail, does not always guarantee success, not in the long term.

    Until next time,

    Betty

    You can contact me directly via email betty@hnn.bz or Twitter @HNN_Australia

    To receive a daily dose of HNN, download the free HNNBrowser app from the Apple store:
    HNN iPad App
    Reports
    Seeking opportunities
    Makita is seeking a BDM for its power garden unit
    HNN Sources
    Adelaide-based sales role for E.D. Oates
    Head of store development position at Winning Appliances
    Subscribe to HNN weekly e-newsletter
    Makita's business development manager for its power garden unit must focus on large business; managing a territory for E.D. Oates in South Australia; and a senior strategic retail role at Winning Appliances.
    OPE industry professional

    Makita Australia is looking to recruit a highly motivated and proficient national outdoor power equipment (OPE) business development manager to join its team. Reporting to the national marketing manager, it is seeking an experienced professional who can source and develop new business via direct channels, with an emphasis on large business.
    Makita is seeking a BDM for its power garden unit
    Territory sales in SA

    E.D. Oates has an opportunity to manage a portfolio of customers within a defined "territory" that includes industrial, wholesale, commercial, retail, and independent hardware accounts. The territory sales manager must also be able to service South Australian regional customers.
    Adelaide-based sales role for E.D. Oates
    Developing appliance stores

    The head of store development at Winning Appliances reports directly to the company's CEO and is both strategic and operational in nature, across 20,000sqm of retail real estate. The ideal candidate will work across functions to "drive the required outcome of delivering the world's best shopping experience from a store visual merchandise, planning and operational perspective".
    Head of store development position at Winning Appliances
    Bigbox
    Big box update
    The proposed Bunnings site is opposite the White Bay Power Station in Rozelle (NSW)
    HNN Sources
    Four ex-Masters buildings in WA will be turned into Bunnings stores
    Domain Mitre 10 owner has applied to join the fight against Bunnings in Panorama
    Click to visit the HBT website for more information
    A local council in inner western Sydney has rebuffed Bunnings' advances; four ex-Masters sites in WA will turn into Bunnings stores; Mitre 10 store owner applies to join fight against a Bunnings store in Panorama (SA); Bunnings Rockhampton staff are moving into former Masters site; Bunnings asks for a review of the Tura Beach site in NSW; a smaller format Bunnings store will open in Dalby (QLD); Bunnings Shepparton scheduled to open mid-2017; and Bunnings ads in New Zealand in court dispute.
  • Rozelle says no to Bunnings

  • A proposed Bunnings store in the inner Sydney suburb of Rozelle has been rejected by Inner West Council because of "multiple" flaws in planning documents, reports the Inner West Courier.

    The council gave developers until February 10 to withdraw its proposal for the $11.8 million hardware outlet on an existing industrial site opposite the White Bay Power Station.

    In a letter sent to developers, the council raised 11 objections to the proposal including increased local traffic. The council also found the development plans did not assess noise impacts on nearby homes, failed to use correct flood analysis modelling, and lacked waste management plans.

    Other objections raised by the council included a proposed loading dock and ramp that doesn't adequately service the development, impacts on heritage conservation and a "signification breach of the zoned floor space ratio."

    In the letter, the council said the application would be "refused without further notice" if developers did not respond within the three-week cut-off date.

    The proposal - which was lodged to the council in October - was developed by site owner John Lethlean in an agreement with Bunnings.

    The council said it would defend its position if Mr Lethlean appeals the council's decision in the Land and Environment Court. The proposal was also met with opposition from existing independent retailers on the peninsula, including the Hardware Store which operates 600 metres from the site.

    Bunnings general manager of property Andrew Marks said the company would continue to work with Mr Lethlean and the council to "resolve the matters raised".

    Related:
    Bunnings' micro-warehouse in Balmain - HNN
    Bunnings re-brands ex-Masters sites in WA

    Bunnings has received local council approval to modify four of the nine ex-Masters buildings in Baldivis, Landsdale, Bayswater and Mandurah in WA.

    Bunnings general manager - property Andrew Marks said the WA stores were four of 15 old Masters stores it was interested in acquiring nationally. He said:
    The conversion of these sites into Bunnings Warehouses is pending the Home Consortium agreement with Woolworths Limited which is subject to the consent of Lowe's Companies, Inc..

    BWP Trust also said the Bunnings Warehouse outlets in Morley and Mandurah were among seven BWP-owned properties the big box retailer planned to vacate. These moves will see Bunnings take over the former Masters stores in Bayswater and Mandurah.

    Three other BWP sites to be vacated were in Victoria and NSW, while two others were still being kept confidential.

    The trust - 25% owned by Wesfarmers - reported a $55.5 million distributable profit for the first half, up 4%. Revenue rose 1.5% to $76 million.
    Battle for Panorama builds up

    Bunnings' plans to construct a $42 million store in Panorama (SA) has seen a Mitre 10 store owner attempting to join court action to block the development.

    Domain Mitre 10 owner Chris Wauchope believes his business will be forced to close if the big box retailer is allowed to open at the former TAFE campus site on Goodwood Road.

    Mitcham Council's Development Assessment Panel (DAP) rejected Bunnings' plans for the site in August last year, arguing the store was too big for the area and would create traffic issues.

    Mr Wauchope has applied to join the council as a defendant in the case. But the council argued his objections were based on commercial reasons, not planning issues, and should not be heard in the Environment, Resources and Development (ERD) Court.

    Panorama resident Neil Baron is appealing that decision in the ERD Court because he thinks the store is well designed and will create jobs.

    The case has been adjourned until March 7 so a judge can decide whether Mr Wauchope can join the case.

    Mr Wauchope was pleased his bid to stop Bunnings opening would be considered. He told the HillsValley Weekly:
    I am however disappointed that Mitcham Council would formally oppose our involvement, given we are ratepayers who lodged a representation in respect of Bunnings original application.

    To further complicate matters, Bunnings is working on new designs for the Goodwood Rd site which will be assessed by the council's DAP in March.

    Mitcham chief executive Matthew Pears said even if the council approved the latest plans, because of the ongoing legal action, they would need to be assessed by a court before a final decision was made.

    Mitcham mayor Glenn Spear has supported Bunnings, saying the good outweighs the bad.

    Say No to Bunnings Panorama spokesman Peter Bryant criticised Mr Spear for "barracking" in favour of the proposal. He said:
    The community spoke very loudly about the lack of transparency, and it seems that Bunnings has been given a private ear to the council process. The only time the community finds out about the next step is when it is almost too late.

    Related:
    Big box update: Bunnings Panorama back on the agenda - HNN
    Bunnings relocates Rockhampton

    The Morning Bulletin has revealed that Bunnings received development approval from Rockhampton Regional Council for the Masters Rockhampton site to become a Bunnings Warehouse. Bunnings general manager - property, Andrew Marks said:
    Following the reformatting works, our intention is to relocate our existing Rockhampton warehouse, including all current Bunnings team members...We do note that the Home Consortium agreement with Woolworths Limited is subject to the consent of Lowe's Companies, Inc.

    The Masters Rockhampton site is located in close vicinity to the current Bunnings store. Mr Marks added:
    We also intend to ensure our existing location is re-purposed, which will hopefully support bulky goods retailers entering the region and creating new jobs in Rockhampton.
    Tura Beach may still get a Bunnings store

    The door has not been closed on the possibility that a Bunnings outlet may be built at Tura Beach (NSW).

    According to the Merimbula News Weekly, the Southern Joint Regional Planning Panel has refused an application to rezone two parcels of land at Tura Beach to a B5 zone, to allow bulky goods or other retailing uses.

    The rezoning issue for lots 33 and 34 DP243029 has been on council's agenda multiple times since 2012 and more recently after the land was purchased by Bunnings' parent company, Wesfarmers who have shown interest in the site for some time.

    Despite council's support for rezoning the site from 1C Rural Small Holdings to a B5 Business Development Zone on two occasions, NSW Planning refused it saying it would not fit in with the "village" community of Tura and that any such development was better suited to Bega.

    More recently, Wesfarmers asked for a gateway review of the NSW Planning decision.

    The five person panel included local councillors Jo Dodds and Robyn Bain. It received presentations from the mayor Kristy McBain and representatives of the Department of Planning and Environment and Bunnings.

    Although the panel unanimously agreed that the proposal should not proceed, it recommended that the site be rezoned to R5. This zoning would still allow a small format Bunnings to be built, subject to height restrictions and building footprint.

    The panel said in its view, there was an economic and strategic benefit in allowing the use of the site for a Bunnings facility and added that it was not dissimilar to other uses such as landscape material supplies and plant nurseries that were permitted in the R5 Large Lot Residential zoning just north of the site.

    Both Crs Bain and Dodds were pleased with the outcome and stressed it was a decision about whether the zoning was correct for the area, not about the owner of the land.

    Some of the rezoning issues have come about because the strategic plan for the area was last published in 2006 when Tura Beach was far smaller. Both councillors agreed that strategic planning for the area needed reviewing.

    For the time being though the zoning issue for the two blocks is back in Bunnings' hands and the company, as the owner, will have to reapply to council for an R5 zoning.

    Related:
    Big box update: Bunnings' rezoning request - HNN
    Dalby to get smaller format store

    Bunnings has been given approval for a $12 million store in Dalby (QLD). The store is expected to be completed later this year.

    McNab Constructions has been named as the contractor. Project manager Ryan Smith said the team was keen to get started on the development. He said:
    We're very excited to get under way on this Bunnings warehouse, especially considering it is so close to our head office in Toowoomba.

    Bunnings property general manager Andrew Marks said it was an exciting time. He said:
    We will continue to update the Dalby community as development progresses ahead.
    Mid-2017 opening for Bunnings Shepparton

    The Bunnings building in Shepparton (VIC) is on schedule to be completed mid-year. The store will replace the existing Bunnings Warehouse in the area.

    Intersection works at the entry to the site and the service road, including new traffic signals, are progressing well and all team members will transfer to the new premises. General manager - property, Andrew Marks told the Shepparton Adviser:
    The development of the $53 million Bunnings Warehouse Shepparton is currently on schedule for opening in the middle of this year. On-site, the construction of structural steel for the warehouse and nursery is almost complete with roof sheeting underway. Erection of the concrete wall panels is nearing completion.

    The new-look Bunnings in Shepparton will have an approximate total store size of over 18,000sqm.

    Related:
    Big box update: Shepparton will be second largest in VIC - HNN
    Bunnings NZ in court over ad campaign

    The Commerce Commission has filed 45 charges in the Auckland District Court against Bunnings New Zealand, alleging the big box retailer misled consumers by advertising the prices of its goods as being the lowest in the market.

    Bunnings' advertising at its stores across New Zealand has given an overall impression it offered the lowest prices for its products when this was not true, according to the regulator.

    Some of the taglines named by the Commission as being "false or misleading" were:
  • "Lowest prices are just the beginning ..."
  • "Bunnings has the lowest price on everything you need."
  • "Everything is at the lowest price guaranteed."
  • "We've got the widest range and the lowest prices."

  • Each of the 45 offences is punishable by a fine of up to NZD600,000.

    The investigation focused on the period from July 1, 2014, to February 28, 2016.

    Bunnings said it is "disappointed" with the Commerce Commission's decision to file charges. Jacqui Coombes, NZ general manager in an emailed statement said:
    We disagree with the Commerce Commission's view of our lowest prices policy and will defend our highly competitive price guarantee.

    Ms Coombes said the company would continue the policy, backed up by "behind the scenes" processes and procedures.
    We remain absolutely committed to creating more value for New Zealand consumers and believe in the right of all businesses to compete on price.

    The case is being called to the district court for the first time on March 7.
    Retailers
    Indie store update
    Craig's Highfields Hardware is not in favour of changes to retail hours in Queensland
    HNN Sources
    Juncken Home Timber and Hardware is closing its doors
    Mackay-based Porters is making changes to its business
    Click to visit the HBT website for more information
    Craig's Highfields Hardware owner speaks out against changes to QLD's revised retail opening hours; Juncken Home Timber and Hardware is shutting its doors after the owners sell the property; Porters in Mackay (QLD) restructures for growth; and Combined Rural Traders names its top business.
    Changes to QLD retail hours affects independents

    Craig Stibbard, owner of Craig's Highfields Hardware in Toowoomba (QLD), believes any reforms to Queensland's hardware store trading hours will be an another advantage for chains like Bunnings and potentially hurt independent stores.

    Mr Stibbard's store opens from 7am on week days and 8am on weekends. He said Bunnings had already claimed a number of smaller stores and deregulating opening hours would only benefit big business. He told The Chronicle:
    ...Whatever advantage we had on them would go with these changes. There're 12 of our Home Hardware group stores that have closed over 18 months and we're getting squeezed out.

    Under the changes, hardware stores would be able to open from 6am Monday to Sunday as part of an initiative to reduce Queensland's 99 trading hour zones to just six. Bunnings currently only opens at 9am on a Sunday.

    Mr Stibbard said this put small operators at a disadvantage if they could not afford to open earlier. He said:
    We would feel obligated (to open earlier) to compete...The council and both levels of government need to offer incentives. There's nothing out there for us. They should make it a fairer playing field for us.

    Mr Stibbard added there were certain things a store like his could do that Bunnings could not.
    We employ the local kids here. If we're not around, who's going to employ them? We do work experience with kids and Bunnings doesn't offer that. Bunnings won't go and run a local canteen or coach the junior sporting clubs.

    The changes to hardware store hours was among recommendations handed down from an inquiry into the trading hour issue led by former parliamentary speaker John Mickel.

    Premier Annastacia Palaszczuk announced more standardised trading hours across the state as part of the government's implementation of the Mickel Report into trading hours.

    She said the reforms would create jobs, help businesses and modernise trading hours.
    Store closure confirmed

    The owners Juncken Home Timber and Hardware in Nuriootpa (SA) said it will close after the sale of the property. The store will continue to trade as normal for now, as the directors of CO Juncken Builders Pty Ltd push through with the site sale to an undisclosed party. Managing director James Gerhardy told the Barossa Herald:
    The decision to close has certainly not been an easy one, but as major shareholders are wishing to scale back their business interests, we really have no alternative. This exit has been planned for a number of years.

    It was not known what the site would be used for under the new purchaser, with Mr Gerhardy hopeful the buyer may retain "some elements" of the hardware store.

    The move comes after years of unsuccessful attempts to sell the business.
    Porters appoints new COO

    Mackay-based hardware and building supplies company, Porters has undergone a management restructure. Peter Newman, previously general manager of wholesaler P & R Electrical in South Australia, has taken on the new role of chief operating officer. He told the Whitsunday Coast Guardian:
    The whole idea is that I'm doing all the operations for the business unit - the branches that Porters owns, whether it be the building supplies, the trade supplies, the plumbing, the glass manufacturing all the rest of it - those managers are reporting to me from an operational viewpoint.
    It's all about growing those businesses further and focusing more on them and driving them.

    Previously, all operational matters were handled by managing director Gavan Porter. Mr Newman will now report to him. It is hoped the restructure will allow the company to expand and move forward.

    The company employs more than 180 people, but Mr Newman expects this number to increase, although the time-frame will depend on the market. He said:
    We're not going to go out and employ 100 people tomorrow, but obviously we want to grow that as the market allows us to.

    Mr Newman said it was exciting to be joining a company that has been in the hands of a family for five generations.
    One of the reasons I was attracted to the role was from the length and longevity of this business - 130 years old. That's a pleasing thing - that they've gone obviously through the ups and downs of business cycles, but plus also, because of what they're trying to do moving forward as a business.

    Related:
    Indie store update: Jobs to go at Porters - HNN
    CRT acknowledges best business

    Dalby Rural Supplies, based in Darling Downs (QLD), took out the Combined Rural Traders (CRT) National Business of the Year award recently.

    It won the national award for having high ratings with customers, suppliers and staff members, according to CRT general manager Greg O'Neil. He told The Chronicle:
    Dalby Rural Supplies is an exceptional business...It has impressed with their wide-ranging technical expertise, their constant drive to improve the business and their deep understanding of the needs of the local community.

    Dalby Rural Supplies principal John Cullen said the award came as a pleasant surprise for everyone who worked at the store.
    Being recognised for the way we have serviced the Dalby region over many years is humbling, but it has been our privilege to work with the people here. Our focus has always been to be experts on our region, the advice we give is specific to the unique challenges of farming here.
    The extensive range of services and resources we can provide as a CRT business means we can help our clients with everything from rural merchandise to insurance, but we never stop learning.

    Independent rural retail group CRT has nearly 400 stores across Australia.
    Retailers
    Europe update
    Bunnings managing director for UK and Ireland, Peter "PJ" Davis
    HNN Sources
    Fast and precise delivery is a priority at Wickes
    B&Q trials smaller-format store in London. Image from John Ryan Twitter @newstores.
    Click to visit the HBT website for more information
    Insights behind Bunnings St Albans (UK) from PJ Davis; upgraded logistics for Wickes customers; a different-look urban store from B&Q; and Kingspan reports a rise in sales.
    Bunnings' entry into UK becomes real

    During a pre-opening tour for its first UK store in St Albans for mainstream media, Bunnings managing director for UK and Ireland, Peter "PJ" Davis told the Australian Financial Review:
    The format is the same. But don't think for a moment we've duplicated the range from Australia.

    He explains the range has been tweaked to take into account British tastes. For example, there is more space devoted to storage products because houses are smaller in Britain. The plumbing, lighting and kitchen sections are given greater emphasis while a "significant amount" of space is devoted to bird seed. He said:
    We will have a much bigger range of bird feed than in Australia. We'll have four stacks of shelves full of it - that is a big deal.

    The unpredictable British summer has meant there is less of a focus on outdoor living, but there is, of course, a vast range of barbecues, from small coal-fuelled cookers to full outdoor kitchens complete with a sink.

    A substantial proportion of tools at rival retailers, B&Q and Wickes come from homebrand products - the opposite approach from Bunnings, which is offering a wide range predominantly made by manufacturers such as Ryobi and Bosch. Mr Davis explains:
    We've done a lot of research...and we believe very strongly that the research shows people are after a wide choice of leading brands.
    And we also believe that innovation leads to people wanting to do [DIY] things. If you are in this market you don't just compete with other home improvement retailers...people make choices about whether they go out to dinner on a Saturday night or paint their lounge rooms.
    That's a lifestyle choice that people have got to make based on income and we are making these lifestyle choices easier and better for a customer.

    According to Mr Davis, getting people to spend money on their homes instead of going out for dinner is the biggest challenge. He added:
    We're getting to those customers by getting them excited by the choice of products.
    Customer demographics

    The St Albans store is one of four planned prototypes for the DIY chain that will replace Homebase over the next five years. The Homebase of old sought to attract female DIY shoppers with "personalised mood boards" and attractive displays of cushions, throws and other nicknacks from brands including Laura Ashley and Habitat.

    But Mr Davis has removed the chintz, bringing in a new era of basic warehouse chic, where special offers at the checkouts include incinerator bins and disposable boiler suits. He said:
    We've made the decision to be a home improvement and garden retailer and have got rid of the duvets, cushions and coffee cups. We're going back to the core of home improvement and garden. We don't want to sell the soft side. There are plenty of other retailers, like Dunelm, Ikea and Next, doing a good job of that.

    It will also hold DIY workshops for "the whole family". Mr Davis said:
    Our very first store [in Australia] had a children's playground and a cafe...because we had a belief one of our biggest customer segments are the growing family.

    In the UK, it has a similar approach towards target customers. He explains:
    People who have had their first child, bought their first home and want to improve their lifestyle.

    Unlike Australia, UK shoppers will be able to buy Bunnings goods online. It is selling online in the UK, because it has to, but Mr Davis said it won't do click and collect or "any of that rubbish". He said:
    The most obvious thing is to have products on the shelf and to come and pick them up. I think click and collect is borne from retailers not being reliable or out of stock.
    Staffing

    Bunnings hopes better service will help differentiate it from the competition. It has almost doubled the number of staff at St Albans to 68 - a number that includes former carpenters, plumbers and landscape gardeners.

    It has also agreed to pay all staff, including those under 25, the national living wage of at least GBP7.20 (AUD11.70) an hour.

    The Bunnings UK management team has told local media that Bunnings will axe the controversial zero-hour work contracts that leave many employees across the retail sector with no guaranteed hours of work from one week to the next. It has been blamed for the rise of insecure employment in Britain and stagnant wages.

    The decision is expected to add AUD10 million to the annual pay packets of the British staff it inherited with the acquisition of Homebase, which hired hundreds of staff on these contracts.

    Mr Davis said the decision was made in order to "build a strong culture within the company".
    It's costing us more but we thought it was a fairer way of distinguishing between staff.

    Mr Davis said that Bunnings was also overhauling Homebase staff holiday entitlements to end a so-called "use it or lose it" restrictions for a more favourable option.

    The move will add pressure of rival B&Q owner Kingfisher which has come under criticism for axing staff overtime pay and benefits in order to offset the costs of the national living wage.
    Business environment

    Industry observers see a downturn in the British home improvement market. Factors impacting the change include the availability of cheap tradesmen from eastern Europe which has created a "do it for me" culture, a lack of interest among young people in tackling home improvement projects and relatively weak wages growth since the financial crisis.

    Mr Davis agrees these factors exist but argues they should not hamper sales.
    Yeah, tradesmen are a lot cheaper here...but we want to sell to tradesmen too. They still buy home improvement [products].

    According to Mr Davis, many "do it for me" customers still purchase home improvement products such as paint or plumbing supplies themselves before paying the tradesmen to finish the job. He said:
    [Tradesman] won't often want to shop for you...'Buy it yourself and I'll put it in' is one of the bigger markets everyone forgets about. That's a market that is very strong here.

    Bunnings sees a chance to take on market leader B&Q. Mr Davis also views Wickes, Screwfix and Selco Builders Warehouse as threats. He told The Guardian:
    We think there's a real opportunity to grow in the UK. The housing stock in this country is reasonably old compared with what we are used to in Australia and the British are keen gardeners. No one has a market share of more than 15%...We think the large amount of players is an opportunity.

    Bunnings has been set a three-year target to break-even in the UK. He said:
    We hope to do better but this is a long-term investment. I plan to be here between three and five years.

    Related:
    Bunnings opens first UK store for business - HNN
    Bunnings opens first UK store - The Guardian
    Wickes focuses on fast and precise delivery

    DIY and building retailer, Wickes describes the reasons for upgrading its customer logistics options including one-hour click & collect, along with same-day and scheduled delivery. Duncan Kendal, supply chain director at Wickes, said:
    Generally speaking Wickes is not at the forefront of innovation.

    Despite this, the company is moving ahead when it comes to logistics and delivery options. Mr Kendal explains:
    We're a truly multichannel business - we still have people on the end of telephones because some of the things our customers are doing are quite complex.

    Speaking at the Metapack Delivery Conference in London recently, Mr Kendal also noted how Wickes customers require more diverse delivery options than the typical retailer, from tins of paint to a 150-part kitchen.

    But while Wickes offers one-hour click & collect, day-of-choice delivery and even same-day delivery, compared to the speed of the rest of the retail industry he doesn't believe this is a huge achievement. Mr Kendal said:
    Everyone else is moving much quicker even if we're good in this sector. The unfortunate truth is all those consumers are being trained by what 'good' looks like - there's Amazon's relentless delivery achievement, Argos with its same-day delivery at a ridiculously low price, and even carriers like DPD are doing a great job with precise technology.
    It would be dead easy if we thought we had to service just our consumers in our shops - we wouldn't do anything.

    Mr Kendal described how Wickes customers are becoming increasingly specific with their delivery requirements.
    'I can't get it in my car', 'I need it tomorrow for when the job starts' or 'I want to pick it up when I'm out and about shopping' - speed and precision is the new norm.

    He said the retailer at first did not think a building materials company would need to offer the same delivery options as the rest of the retail industry. "But if you build it, they will come," he said, noting how click & collect is significantly Wickes' fastest growing channel.

    Wickes has partnered with On The Dot to provide same-day or nominated-hour delivery for 70% of its product ranges. Instead of customers coming into store within an hour to pick up a product using click & collect, On The Dot picks up the product and couriers it to the customers instead for a charge of GBP9.95. Mr Kendal said:
    We've got one process driving more than one fulfilment option. You need to take time looking at what you have, rather than looking at drones - you need to utilise your existing assets.

    He noted how a customer spent GBP1.59 on a plug and paid the additional GBP9.95 for same-day delivery when they lived less than 1.5km away, while another customer ordered GBP2,000 worth of goods for delivery in four days time.
    It's not just about speed, but precision - time is money. It would be great if we could sustain charging GBP9.95, but I expect it to be eroded away over time.

    Related:
    Europe update: Wickes' DIY deliveries - HNN
    B&Q tries on a smaller size

    Home improvement retailer B&Q has confirmed it will trial its first small-format store in North London.

    Officially opening in early March 2017, the new smaller 3,000sq ft store will be situated on Holloway Road and will feature a downsized product offering, as well as delivering a focus on supporting services. A B&Q spokesperson said:
    On Friday 10 March, B&Q will open a smaller format store in Central London at 482-488 Holloway Road. The trial store will be just over 3,000sq ft in size, and will provide customers with an offer focused on home decor, repair and maintenance, with a suite of supporting services. B&Q will also enable customers access to its full range of over 35,000 products via Home Delivery and Click & Collect, all at the same great national prices.

    The DIY chain has recently reopened 10 revamped stores in areas including Milton Keynes, Bristol and New Malden, as it steps up its efforts to compete with Bunnings UK.
    Kingspan says sales up since Brexit

    Sales of building supplies in Britain have improved since it voted to leave the European Union last June and there is no evidence yet that Brexit's impact will ultimately be negative for the sector, according to Irish firm Kingspan.

    Kingspan is the largest producer of building insulation in Britain, Ireland, Canada and Australasia. It beat analyst expectations to report profits up 33% for 2016, buoyed by a strengthening of UK sales in the second half of the year.

    Trading profit was 341 million euros for the year, compared to an average forecast of 330 million in a Reuters poll of seven analysts. Chief executive Gene Murtagh told Reuters:
    Bizarrely activity has been better since June 23 than it was before. We had a particularly strong finish to the year. The foregone conclusion is it's going to be negative, but I don't know enough to say that. We've no idea what Brexit actually means.

    Kingspan's order book for 2017 is "solidly ahead" of the same point last year, he said.

    But the company is seeing evidence of a shift in economic growth patterns in continental Europe, with Germany flat and activity in Belgium and the Netherlands improving, and particularly strong growth in France.

    There is no sign yet of a boost to the US construction sector following the election of President Donald Trump, he added.

    A key challenge for Kingspan this year will be passing on recent rapid rises in cost inflation in steel and chemical, Mr Murtagh said. While the company is confident it can pass it on, it may take some time, he said.

    Related:
    Supplier update: Kingspan looks to acquisitions - HNN
    Companies
    Supplier update
    (l&r) Tom Rugg and Dean Harriott
    HNN Sources
    Decor has been sold to a South African company, Marlin Home
    A new technology has been developed by Vesta exclusively for HBT
    Subscribe to HNN weekly e-newsletter
    There is a change at the head of Briggs & Stratton Australasia; Decor is now South-African owned; and Vesta has customised technology for Hardware & Building Traders.
    Briggs & Stratton Australasia gets new MD

    Outdoor power equipment manufacturer, Briggs & Stratton Corporation, has appointed a new managing director for Australasia, Dean Harriott.

    Having worked for over 25 years at companies such as Milliken (Ontera), Borg Group and Alesco Corporation (B&D Doors, Parbury and Parchem), Mr Harriott brings with him vast experience with dealer networks, integration efforts, process development, operational optimisation and strategic vision. He said:
    I am excited to be stepping into this role and joining such a fantastic team at Briggs & Stratton. The Australasian team has experienced tremendous growth over the past few years and I look forward to continuing that success well into the future.

    Outgoing managing director, Tom Rugg is moving into new role as vice president -corporate development with Briggs & Stratton in the US. He said:
    Dean joins us with impressive credentials, a highly successful history of general management and great experience in leading teams in his previous roles, including heading up sales and marketing departments.

    Briggs & Stratton's senior vice president & president - turf & consumer products, Harold Redman, extends his appreciation to Mr Rugg for his leadership and vision. He said:
    I would like to take this opportunity to thank Tom, for his commitment to the business and for supporting our needs while balancing his new responsibilities with Briggs & Stratton.
    Decor brand no longer Aussie owned

    Container maker Decor has been sold to a South African company for an undisclosed sum. The homewares brand best known for its food storage boxes and drink bottles has changed hands for just the second time in its 59-year history.

    Approximately 80% of Decor's range is designed and made in Australia, with the company to retain a manufacturing plant in Dandenong (VIC).

    The company's new owner, Marlin Home, said it has its eyes on acquiring at least four more Australian brands this year, and plans to list on the Australian Stock Exchange within the next few years.

    Marlin Home managing director Greg Kerr said Decor was a staple of almost every Australian kitchen. He told the Herald Sun:
    Decor is an iconic brand, with a strong history of innovation and is a perfect strategic fit for Marlin Home, which will build a strong portfolio of Australian brands for both inside and outside the home.

    He said Marlin planned to add more products to the Decor range and grow sales here and overseas.
    Vesta creates tech product for HBT

    A new technology has been developed by Vesta Timber and Hardware exclusively for Hardware & Building Traders (HBT), and will be known as "Product Directory".

    It will be powered by the Vesta Central Data Distribution platform. The company said it will be the first of its kind in the Australian hardware industry, offering significant benefits to suppliers and members.

    Phase 1 of the project commenced early February with over 400 suppliers to the HBT group being sent an introductory email explaining the project.

    Suppliers on the Vesta Central platform can track, maintain and update product data all in one place. HBT and its Industrial Tool Traders (ITT) members will be able to seamlessly access their supplier's information for use in setting up a Vesta ecommerce site.

    Vesta is a SaaS company providing its ecommerce solutions for the industry on a subscription basis, and counts many HBT/ITT members and suppliers already as customers. Specifically suited to independent stores, the ecommerce and data distribution platform from Vesta is affordable and easy for suppliers and retailers to set up and can be adapted to suit other industries. Justin Newman, Vesta CEO, said:
    The Product Directory powered by the Vesta Central Data Distribution Platform will revolutionise how HBT suppliers share and distribute information and content with HBT members. We are very excited about this opportunity to showcase the platform and develop it for other industries outside of the hardware industry.

    Aimee Innes, HBT marketing manager sees the Vesta alliance as a competitive advantage for the group. She said:
    HBT will effectively be showcasing the group's strength like never before. The Vesta platform will show members just how much they can purchase through our group. We see this building volume for our suppliers and truly supporting a healthy ecosystem for the group, its members and suppliers.
    Retailers
    Ruralco can acquire TP Jones: ACCC
    TP Jones in Tasmania is just one of Ruralco's planned acquisitions
    The Land
    Ruralco managing director, Travis Dillon has donated his 2015-15 bonus to Lifeline
    Irrigation Tasmania is another business that Ruralco is buying
    Click to visit the HBT website for more information
    Listed agribusiness, Ruralco, has won the Australian Competition and Consumer Commission (ACCC) approval to buy rural merchandise retailer, TP Jones.

    Tasmanian-based TP Jones is a Combined Rural Traders (CRT) member with three other retail outlets at Longford, Campbell Town, and Latrobe. It will be absorbed into the Ruralco's Roberts livestock agency and merchandising network.

    The ACCC was required to scrutinise the deal, announced in November, because both Tasmanian businesses sell products such as fertiliser, agricultural chemicals, animal health products, and farm merchandise.

    Roberts, a wholly-owned Ruralco subsidiary with 14 outlets in Tasmania, has operations spanning merchandise retailing, wool and livestock marketing, real estate, irrigation and financial services.

    ACCC Commissioner, Roger Featherston, said while Roberts and TP Jones directly competed in all of the affected local areas, farmers in those areas had other market alternatives.

    The ACCC had spoken to farmers, wholesale buying groups, and manufacturers of rural merchandise. Mr Featherston:
    In Campbell Town where Roberts and TP Jones are the only two with retail outlets, the ACCC concluded farmers would likely be able to buy rural merchandise from other retailers located near Launceston. Farmers could also arrange to have merchandise delivered to their farms.

    Other rural merchandise retailers operating in the relevant local areas include Elders, farm services firm Serve-Ag, and various independent rural merchandisers associated with wholesale buying groups such as AIRR and NRI.
    Investment in water and merchandise

    Ruralco said it will raise up to $65 million to pay for about $60.8 million in new water businesses and farm services acquisitions.

    The company is buying Irrigation Tasmania for $19.9 million, Mildura Irrigation Centre in Victoria, and River Rain Irrigation in Renmark, South Australia. The water equipment and advisory services additions to Ruralco's stable follow deals recently locked in for Riverland Irrigation in SA and Hunter Irrigation in NSW.

    The company's retail division will expand with the purchase of CRT business, Sid Newham Rural Supplies, in Bathurst (NSW). Ruralco also recently announced it was buying Great Northern Rural Services in Western Australia.

    Its CRT wholesale business is already a supplier to the CRT member stores being acquired.

    Managing director, Travis Dillon, said by buying existing independent CRT members, Ruralco earnings from each geography would grow from purely wholesale revenue to a vertical margin encompassing wholesale and retail. He told Farm Online:
    We've identified specific geographic gaps in our rural services footprint and aligned growth initiatives to fill these.
    Investment in water business has potential to reduce the cyclical impact of rainfall and drought events on earnings, allowing Ruralco to capture a greater share of wallet in a higher margin category. It represents a significant competitive advantage between us and our peers.

    Related:
    Turnaround quarter for Ruralco - HI News, page 20
    Retailers
    USA update
    Tesla has authorised home TreeHouse to sell the Powerwall battery
    HNN Sources
    The Home Depot is revving up its delivery options to pro customers
    Lowe's Canada said it is investing resources to support Ace retailers. Image from Hardlines.ca
    Click to visit the HBT website for more information
    The Tesla battery for homes will sold at TreeHouse; more deliveries to pros from The Home Depot; Ace retailers will benefit from additional resources at Lowe's Canada; and a number of Home Depot stores are using renewable energy.
    Tesla battery selling through TreeHouse

    Eco-friendly, home improvement store TreeHouse in Austin, Texas is the first retailer that Tesla has authorised to sell the Powerwall, its battery for residential homes. Co-founder Jason Ballard said:
    We want to show off the Tesla power packs as the beating heart of TreeHouse, and we'll be selling a residential version.

    TreeHouse plans to open its second store in Dallas by June 2017. Its energy-efficient features are a complement to the store's mix of environmentally-friendly and healthy-living products, designs and services.

    More than 500 solar panels on a pitched, saw-toothed roof will store energy in two giant Tesla power packs that will be displayed as a feature behind glass inside the 25,000 square-foot store.

    Tesla is also opening a Supercharger station, the only one inside the city of Dallas, next to TreeHouse's outdoor living display area. Tesla's Superchargers, which are mostly located on major highways for long-distance travellers, recharge its electric car models in minutes rather than hours.

    The almost completed store and another one built inside an existing building will give the five-year-old company a footprint for how it plans to expand to other markets, Mr Ballard said.

    At the new TreeHouse store, windows in the stair-step roof will provide natural light during the day. The walls were made onsite of concrete, which Mr Ballard said, has a high thermal coefficient and holds the cool air inside when it's hot outside.

    The store will have a working kitchen in a healthy home area that will feature cooking, sleeping and lighting products. A mezzanine will house classrooms and a reading lounge area. Non-toxic paints get their own showroom. Mr Ballard said:
    The days of a retail warehouse full of products are over. I think people want a place where they can go dream and consult and create a wish list. We're not your mom's big box store.

    TreeHouse is trying to disrupt home improvement retailing dominated by big box retailers Home Depot and Lowe's. Ballard added:
    There are 100 million homes in America, and we eventually want to be within striking distance of all of them.

    Related:
    TreeHouse, green home improvement retailer - HNN
    Pro delivery service expanded at HD

    The Home Depot expects to offer pros (tradies) delivery service in almost all its markets in early 2017 as it beefs up its outside sales and online capabilities following last year's acquisition of Interline.

    The plan calls for delivery promises to be phased in; first offering same-day service and a four-hour window, and eventually service within a two-hour window. In addition, "hotshot couriers" continue to be offered at 500 Home Depot stores nationwide, according to J.T. Rieves, vice president of The Home Depot's pro business said:

    He also noted that when he used to meet with customers, their number one complaint was delivery.

    Just 4% of Home Depot's customers account for roughly 40% of its USD88.5 billion in annual sales. This group is Mr Rieves' focus, and historically it has focused on maintenance crews, painters, repairmen, and small remodellers (light commercial) more than on the kinds of builders that timber and building materials operations serve.

    Very few get products delivered currently, he said. In fact, even as the delivery service gets ramped up, Home Depot continues to promote a service it calls BOPUS - Buy Online, Pick Up in Store. This system saves time for remodellers, small builders as well as maintenance and repair crews. Mr Rieves said:
    If I can get the average pro to come three more times a year, that's a billion dollars in revenue.

    The Home Depot's efforts to rev up its delivery capabilities got turbocharged in 2015 when it bought Interline Brands for USD1.63 billion and merged it into Mr Rieves' operation. He mentioned four things Interline brought to The Home Depot:
  • Interline's 700 outside sales reps will more than triple the 200-member OSR (Open Space Ratio) team that The Home Depot had been using to sell to pros.
  • Interline has 900 trucks, thus making it easier for The Home Depot to deliver goods to a job site. One of Interline's claims to fame was speed of delivery, Mr Rieves said, and its pricing was based partly on how fast it could deliver goods.
  • Products that Interline had sold via catalogue and the web will be available for order at the Pro desk inside Home Depot stores; heating and ventilation systems is one example.
  • Interline's web offerings are being merged into The Home Depot's online system.

  • The Home Depot also plans to continue the 60-day payment terms on house accounts that it implemented last year. But for the most part, Mr Rieves said, his focus is on getting Interline's staff fully integrated into The Home Depot.

    Related:
    Home Depot buys Interline Brands - HNN
    Lowe's Canada to grow Ace network

    Ace Hardware retailers in Canada are poised to receive more attractive product pricing, marketing support, a dedicated website with a platform for online sales and a broader offering.

    Lowe's Canada said it is investing resources to support and grow the entire independent retailer network and to further leverage the Ace dealer support program.

    After a detailed business review that included customers, products, programs and facilities, a decision has been reached to integrate the Ace Canada distribution and business centres into existing Lowe's Canada facilities. This will allow Ace dealers to benefit from lower cost of goods and to connect to Lowe's Canada retail intelligence. Alain Brisebois, executive vice president of Affiliated Dealers, said:
    The Ace brand has a strong reputation for quality products and services. The purpose of this transition is to drive growth throughout the Ace Canada dealer network. Integrating these operations in the Lowe's Canada facilities and systems is a pre-requisite to offering dealers a dedicated website with a platform for online sales and allowing them to take advantage of an omni-channel strategy.

    Lowe's Canada said it will make every effort to ensure a smooth transition with resources that actively supports employees, dealers, vendors and customers. It will also continue to recruit and grow the Ace dealer network across the country.
    Wind energy project

    The Home Depot has made its first major investment in a wind-powered renewable energy project. The energy purchased from the wind farm is enough to power 100 Home Depot stores for a year while also providing USD150,000 in local community benefits.

    The Los Mirasoles Wind Farm, owned and operated by EDP Renewables North America, is located in Texas. Through a 20-year power purchase agreement (PPA), The Home Depot's annual purchase of 50 megawatts (MW) is a fifth of the wind farm's 250 MW capacity.

    The farm utilises Vestas V110 2.0 MW wind turbines and produces enough power to provide more than 70,000 average US homes with clean electricity each year.

    As a part of its renewable energy initiative, The Home Depot's goal is to procure 135 MW of various renewable energy sources, including solar and wind, by the end of 2020.

    In addition to the wind farm, it also procures energy from solar farms in Delaware and Massachusetts with a combined annual output of 14.5 million kilowatt hours (kWh). More than 150 stores and distribution centre use on-site fuel cells that produce roughly 85% of the electricity each store needs to operate.
    Products
    Padlock uses fingerprints
    The Benjilock can be unlocked using fingerprints
    The Business Journals
    The company is preparing for a September 2017 launch
    BenjiLock was a 2017 CES Innovation Awards honouree in the smart home category
    Click to visit the HBT website for more information
    BenjiLock is not a traditional padlock. A key can be used to open it but it's a lock that can also be opened using one's fingerprint. It was unveiled at this year's Consumer Electronics Show (CES) in Las Vegas.

    BenjiLock was developed by the Los Angeles-based company of the same name, which was founded in 2013 by CEO Robbie Cabral.

    The lock features a 7-pin cylinder and will come with a built-in rechargeable Lithium-ion battery, charging cable and set of keys when it ships later this year at USD79.99 (AUD103.64), the company said. Consumers will be able to choose between sky white, jet black, stainless steel, copper and brass SKUs.

    There have been similar products on the market, Mr Cabral conceded. Tapplock is another padlock using fingerprint sensors. But competing devices don't tend to have a tough, stainless steel body, he said. BenjiLock also has a boron alloy shackle.

    Rival products also don't tend to provide the same "hybrid" solution for unlocking as BenjiLock. Mr Cabral notes that a key can come in handy when the fingerprint sensor isn't working for some reason.

    BenjiLock was named a 2017 CES Innovation Awards honouree in the smart home category. The Innovation Awards program is run by CES producer the Consumer Technology Association (CTA).

    But it's open to debate whether BenjiLock is a true smart-home product. Smart, yes. The device is clearly designed to be used just about anywhere - from the home to the office to school to the gym. However smart-home products are also typically controlled by a smartphone or tablet app, or via a computer.

    Tapplock, in comparison, works in conjunction with a mobile app that can be used to grant access to family and friends and control the date and time the lock can be accessed. Unlike BenjiLock, the Canadian makers of that device turned to crowdfunding to help reach the market. Tapplock was successfully funded March 12 after raising USD328,959 (AUD426,397) via Indiegogo.

    The BenjiLock fingerprint sensor's ambient LED light is what makes the device smart once the user records his or her scan, according to Mr Cabral. Although the smart functionality is minimal, he said, his goal is to "build a relationship with the consumer of security," adding later versions of the device will "include apps and much more."

    The lock is charged via a Micro-USB cable and the charge "lasts a whole year with one single charge" based on tests in which it was used four times per day, he said.
    Products
    Gas-powered products for pros
    The FC 91 curved shaft edger comes with high blade speed and a low-emission engine
    PR Newswire: Stihl
    The HL 94 K extended reach hedge trimmer features a reduced-weight gearbox
    The KombiMotor has a low-emission engine that delivers 30% longer run times
    Click to visit the HBT website for more information
    The latest professional models from Stihl will come with a host of enhancements. The string trimmers, edgers, KombiMotors and bed redefiner are designed with larger fuel tanks, providing 30% longer run times than the previous models.

    These units boast a simplified three-step start procedure enabled by the semi-automatic choke lever, saving users time on the job and reducing the chance of flooding the engine. Each product's vertical pleated paper air filter allows for better filtration, extended replacement intervals and long service life.

    In addition, the redesigned and lighter gearbox on the pole pruners and extended-reach hedge trimmers shift weight to the powerhead of the unit for balance and maneuverability. It can help users work for longer periods with less fatigue.

    The introduction of these new professional products is part of one of the largest product launches in company history. Other Stihl products to be introduced in 2017 include nine battery products, as part of the new Stihl Lightning Battery System[tm] and nine additional gas-powered models, featuring a line of Stihl pressure washers.
    News
    HI News V3 No. 1: The retail industry in 2017
    Download the latest issue of HI News Vol. 3, issue no. 1
    HI News
    What to expect from Mitre 10 and other major retail groups in 2017
    The latest hardware retail statistics reveals the influential role of the weather
    Click to visit the HBT website for more information
    The first issue of HI News for 2017 focuses on what can be expected in 2017 from major retail groups, Mitre 10, Home Timber & Hardware (HTH) Group, Hardware Building Traders (HBT), and Bunnings.

    Just click on the following link to download this edition:
    HI News V3 No. 1: The retail industry in 2017

    The latest data on hardware retail sales from the Australian Bureau of Statistics undergoes scrutiny. Although most mainstream media outlets have seen the closure of Masters Home Improvement as casting a shadow over hardware sales in December, it's likely the weather also had an effect.

    Bunnings opens its first UK trial store in St Albans. In Australia, the big box retailer is moving into Devonport (TAS). It is taking over an ex-Masters site in Mount Gambier (SA) and undergoing negotiations for another former Masters location in Gregory Hills (NSW).

    Tasmania-based independent retail group, Kemp & Denning announced that it is closing two of its warehouse stores.

    We take a brief look at GUD Group's half yearly results, and AMES' purchase of the Hills Home Living brands that includes the iconic Hills Hoist. In other supplier developments, the Hitachi power tools unit has been sold to private equity and Stanley Black & Decker acquires Craftsman in the US.

    This edition features updates on the Grafton Group, Screwfix and Travis Perkins in the UK, and as well as US retailers, The Home Depot and Lowe's Home Improvement.

    Products from EGO outdoor equipment, Fiskars, Lufkin, Rover lawnmowers and Kwikset are also highlighted in this issue.
    Editorial
    Retail industry development in 2017
    Will The Block still define Mitre 10's advertising reach?
    HNN Sources
    J.K. Galbraith's "The New Industrial State" remains a classic of modern economics
    Milwaukee's One-Key product deliver information
    Give to Amnesty International
    Forecasting has always been something of a difficult task. Generally speaking, forecasts either look at the immediate past and draw a direct line through recent events to predict the future, or they concentrate on one or two emerging forces that will take place, and use those as a basis for prediction. We've divided the forecast into these two parts, beginning with some direct consequences of 2016 on 2017, then detailing a more theoretical outlook on how retail in evolving.
    From 2016 to 2017

    There is no denying that a number of events that took place in 2016 will have a strong influence on 2017. The best news for independents is that the collapse of Masters Home Improvement will definitely improve the amount of revenue flowing into other hardware stores. It remains to be seen exactly how much of that revenue is captured by Bunnings and how much goes to independents, but it is in general a good news story.

    Equally, with the threat of Masters removed from the market, it is likely there will be more of an easing in price competition by Bunnings. It may not be much, and it won't extend across all categories, but it will create a little breathing room for many retailers.
    Independent Hardware Group

    Of course, the biggest news for independents remains the acquisition of the Home Timber and Hardware Group (HTH) by Metcash to form the Independent Hardware Group (IHG). Coming on the heels of over a year of uncertainty about what would happen to HTH, most store owners feel that this has simply created yet more uncertainty for them to deal with during 2017.

    It is also something of a case of going from frying pan to fire. The situation when HTH was majority owned by Woolworths was that its fate hinged on the performance of the Woolworths supermarket business. With Metcash that situation is repeated.

    As Metcash showed through the sale of its automotive business to Bursons, it is quite willing to divest even well-performing assets to protect its core business. If Metcash cannot defend itself in the price war between Wesfarmers' Coles, Woolworths, and the ever-growing Aldi, HTH store owners could find themselves contracted with yet another wholesaler in another two or three years time.

    In terms of what happens in 2017, this acquisition would seem to raise two critical questions: How does this benefit HTH store owners, and how does it benefit the end customer?

    IHG's answer to the first question would likely be that the company will be able to get better prices from suppliers through its superior buying power, which would enable both IHG and its stores to get higher margins on sales. However, to obtain those benefits, the stores would need to buy from a narrow range of products identified by IHG. The question that independent store owners then have to ask is whether this will affect the volume of sales (and even customer retention in some cases), and if the improved margin will offset these potential losses.

    Additionally, there is also the issue of service. Independents always place a very high value on service, both given to customers and received from suppliers. If suppliers are being forced to crunch their own margins, will smaller HTH stores find themselves in a good situation when they set aside long-established relationships with familiar suppliers and move to new ones?

    There is a similar problem, really, when it comes to marketing. Mitre 10 has had a slightly bigger advertising budget than HTH, but with IHG operating no fewer than four separate brands (Mitre 10, Home, Thrifty-Link and True Value -- as well as Hardings and Hudson Building Supplies), it will be difficult to establish a "cut through" marketing presence.

    If the rumours HNN has heard (repeatedly) prove true, then IHG may move to eliminate all trading brands except for Mitre 10 and True Value. That will help to restore focus to marketing efforts, but it also brings additional risk to store owners. Switching branding is always a tricky and difficult business, and a little unsettling as well.

    It would, of course, make a whole lot more sense, if Metcash had not radically underinvested in Mitre 10 marketing for the past three years. The fact is that Metcash has used Mitre 10 as an efficient source of growth in earnings before interest and taxation (EBIT), without adequately reinvesting in the business. Given that underinvestment, the team at Mitre 10 has worked near-miracles in producing the EBIT it has. Despite these efforts, as a brand Mitre 10 is in radical need of a refresh.

    Added to that is the fact that Home Hardware has won many of the Roy Morgan Customer Satisfaction Awards for 2016, beating out Mitre 10. HTH owners could be asked to surrender their identification with the leading hardware brand in Australia.

    This leads us to the other question, about how customers will benefit from the acquisition. At a guess, IHG would see this as being delivered by the slow rollout of its premium "Sapphire" store design -- which is exclusive to Mitre 10 branded stores. As HNN has remarked in the past, this is quite a good store design, with good implementation of the paint area, good signage, and a "neat and tidy" appearance.

    However, it does not come close to some existing store designs in HTH. In particular, the Hume & Iser Home Hardware in Bendigo, VIC, would serve as a far better model for store development. Aside from having a very good garden section, it also has a very workable kitchen display area, something that is quite rare in Mitre 10 stores. (Though, equally, HNN is sure there are Mitre 10 stores that are as good, and easily exceed the Sapphire standard.)

    In the end, the process being followed by IHG would seem to be overly product-centric, rather than customer-centric. Instead of seeking to engage customers so as to understand their needs, they are instead providing a familiar list of products, with improved margins for the retailer (and themselves).

    What needs to be heard from IHG is whether they will resolve the marketing issues, and drive investment in a new, innovative approach to hardware retail. That would make it worthwhile for store owners to invest in the brand change process. A simple retread of Sapphire, and some lower wholesale prices, will not.
    Bunnings

    Meanwhile, even as it benefits from the exit of Masters and perhaps looks to improve some of its thinner margins, there is no doubt that Bunnings remains the single most significant competitive factor facing independent hardware retailers in Australia. One of the concerns that HNN voiced in the past regarding the merger of Mitre 10 and HTH was that this would create conditions where Bunnings would feel less restrained in competing with independents, as gained market share would be less likely to raise concerns from the Australian Competition and Consumer Commission (ACCC) and others.

    At the moment, IHG is likely looking at around $1.9 billion in revenue for its FY 2017/18 (next financial year). HNN would not be surprised to see Bunnings gear up to shave $100 million off of that, and $150 million off in the subsequent year.

    One factor with Bunnings that has received inadequate attention is its acquisition of a total of 15 ex-Masters sites from the Home Investment Consortium Company Pty Ltd. Two of these are development sites, for future building, which will be leased directly from Home Consortium. A normal development process must be undertaken, including permissions, before these sites can be used.

    Six of the locations will be leased directly from Home Consortium. Once the arrangement has been completed, Bunnings estimates it will take a further five months to convert these to Bunnings Warehouses.

    Of the six building leases and two development leases, Bunnings says seven will be used to replace what it refers to as "under-scoped Bunnings locations".

    The remaining seven of the 15 sites are leasehold trading locations, where arrangements with other landlords must be reached. Four of these sites will be replacements for existing "under-scoped" Bunnings stores.

    So, to summarise, 11 of the fifteen sites will be used to consolidate existing regions for Bunnings, while four of the sites will be expansions into new trading areas.

    This will enable Bunnings to ramp up its competition in a highly efficient and quick way, likely before December 2017, once Woolworths' negotiations with Lowe's Companies over their joint venture, Hydrox Holdings concludes -- which will likely be in June 2017.

    It's worth noting that the ex-Masters stores Bunnings will be moving into will not only be much bigger than the stores they replace, but also have been built to provide a higher level of amenity, costing something around 20% more to build than comparable standard Bunnings Warehouses.

    This improved amenity is significant. As HNN has noted over the past two years, one of the challenges facing Bunnings in expanding its market share is how to retain its "Aussie battler" core customer base, while also moving upmarket to embrace more affluent customers. Bunnings already sells quite expensive outdoor furniture, and it has added expensive "designer" barbecues to its range over December 2016. The higher amenity stores might provide a better platform to integrate these ranges more fully with its overall offering.

    The other vector for Bunnings to grow its market share may also make use of higher amenity. While the retailer's ultra-compact, ultra-dense urban stores, such as in Collingwood (VIC), have proved successful, it is seeking to diversify its metro offerings. Recent planning documents have revealed the design of a new "mini-warehouse" Bunnings. Instead of fitting as much as they can into a compact space, these seem set to focus on more premium lines in an airy, spacious layout.

    This might also be part of a larger strategy to finally launch a transactional Bunnings website. The first such operation has already launched in the UK, where an ecommerce presence is virtually mandatory for shoppers these days. As HNN has mentioned in the past, the real challenge for Bunnings in ecommerce is delivery logistics. One possibility is that, as Wesfarmers becomes used to the idea that it might be becoming less of a conglomerate and more of a retail specialist, it could merge some operations between Coles and Bunnings. Coles already has a delivery network for home-delivered groceries.

    Once Bunnings has ecommerce underway, these new mini-warehouses could become showrooms for goods that are ordered online for delivery or click and collect. This solves the "touch/feel" the product problem, and enables more stock to be handled in a limited space.
    Innovation

    In short, even though the end of Masters has released some of the pressure from Bunnings, and it is likely to ease up margins slightly, the retailer will not halt its drive for more innovation. That would seem to be in stark contrast to IHG. While Mitre 10 did launch its Sapphire store program some years ago, this has been not only quite slow to roll-out, but also not very ambitious. It delivers a better store, but the company's initial claims that this was "the store of the future" are somewhat overblown.

    In the independent sector, the biggest innovator at the moment is likely Hardware & Building Traders (HBT). With over 600 members this is growing to be one of the more significant forces in independent hardware in Australia. The recent, sad passing of its dynamic leader, Tim Starkey, in late 2016 has been a setback. However, like all good leaders, Mr Starkey had built a solid team, and when it comes to executive power, HBT has something of a very deep bench, consisting of long-term members who operate very successful hardware stores.

    In contrast with IHG, HBT has introduced a number of innovative program during 2016, including high quality own-branded products in important categories such as paint. It's also working to expand its "H" branded hardware stores.

    If IHG is to meet its expected growth targets, it's likely it will have to learn from some of the management choices HBT has made over the years. The most important lesson is that HBT regards its first aim as making sure its members are happy with it, and with each other. That means providing certainty, and reducing stress wherever possible.

    The second lesson from HBT is that it doesn't see suppliers as an opposing force that needs to be browbeaten down to the lowest possible price. Instead, HBT sees suppliers as part of an overall hardware "ecosystem". When that ecosystem is managed well and fairly for all, it will produce good results. Shifting risk from one group to another within the ecosystem might bring short-term gains, but simply destabilises the system in the longer term.
    Industry developments

    The coming two years, 2017 and 2018, are likely to see some of the most significant changes to the overall Australian retail industry for the past 20 years. While the Australian home improvement retail industry is not central to these changes, it will be one of the more affected retail sectors.

    For home improvement, it is likely the full force of these changes will be felt in 2018 rather than 2017. 2017 is important from a strategic perspective, and 2018 will see developed strategies play out in the marketplace.

    Broadly, changes will come from two sources: the internal restructuring of the Australian retail industry, and a shift in market power away from retailers and towards suppliers.
    Internal restructuring

    In terms of the internal restructuring of retail in Australia, 2016 has already given us some clues as to what to expect. The failure of Dick Smith, the inability of Wesfarmers to find a market fit for its Target mid-price department store, the acquisition of The Good Guys by JB Hi-Fi, and the ongoing repositioning of department stores Myer and David Jones are indications of change.
    Dick Smith

    Much has been written about Dick Smith. There is much to be said about its management, the structure of its IPO and other factors. However, the issue of why, really, it did fail is something that seems to have eluded most commentators.

    To HNN, it seems clear there were two movements to its failure. To understand the first, you need only know two datapoints. In 2012 when Anchorage Capital first acquired Dick Smith, smartphones had a penetration rate of 43.7% in Australia. By 2016, when Dick Smith failed, this had grown to over 66%. In 2015 the number of smartphone users in Australia exceeded 15 million.

    You can see the significance of this if you consider the stock Dick Smith carried. Cameras, video cameras, alarm clock radios, TVs, voice recorders, landline phones, phone answering systems, DVD players and portable stereos. Every one of those items could be replaced by a smartphone for users in the retailer's core customer demographic.

    To counter this rapid change, Dick Smith introduced its Move brand, which was really an attempt to utilise the popularity of the smartphone. This product line consisted of smartphone peripherals, such as charging cables and cases. The product build was standard Chinese commodity, but the items were produced in bright colours, and a considerable margin was added. There was advertising, and Dick Smith leased some of the most expensive commercial space in Australia, at airports, to sell these products.

    It failed, of course, and Dick Smith's final strategy was a "pivot" into selling home appliances, which also failed, and Dick Smith entered into receivership.
    JB Hi-Fi

    The inspiration behind that pivot was a similar move by entertainment and technology retailer JB Hi-Fi, though JB had started this pivot much earlier, in late 2012. It began with the opening of four JB stores carrying a new "Home" brand, which sold appliances as well as consumer electronics.

    This was one of a series of pivots that JB had put in place since 2005. The first such pivot was a move into gaming, including sales of game consoles and game software. This was accompanied by the introduction of the computer category. By far the best move the company made, however, was to introduce the telecommunications category in 2007.

    As sales of what JB refers to as "software" -- which includes music CDs, movie DVDs, games and PC apps -- declined by 9% per year for 2009 through to 2012, telecommunications, particularly the sale of mobile phones and service plans, have filled that gap.

    The final part of this pivot has been JB's acquisition of appliance and consumer electronic company The Good Guys. Post acquisition, the retailer now has only 9% revenue exposure to software, where previously it was 14%.

    While it is easy to see what the attraction for JB to buy Good Guys was, what was the attraction for Good Guys to sell itself? Why a sale, in fact, instead of a listing on the Australian Stock Exchange?

    Again, this was an astute business call by Good Guys. The outcome of a listing would have been uncertain, and the indications are it might not have gone so well. The pro forma operating margin for Good Guys was only 3.6% for FY2015/16 (JB's was 5.6% -- 56% higher than Good Guys). As importantly, it relied on appliances for 66% of its revenue, and which is a highly cyclical business, with serious competitors such as Harvey Norman in the market.

    More than that, though, what JB brought to Good Guys was the ability to focus more on customers rather than products, not just in what it sells to them, but also in the information it collects about them.
    Suppliers gain more power

    The past 15 years have been marked by a retail culture that has become increasingly reliant on the supply of essentially duplicative products. This has been brought about by a combination of technological advances, supply chains built on the availability of low-cost labour, and cultural factors which transformed "copies" from being a "cheap" option to a "smart" option instead.

    Whether it is women's fashion, cordless power tools, smartphones, or even bathroom fittings, virtually every "name brand" product today has its shadow, either quasi-legal or outright counterfeit.
    Protection against copying - Plumbing Connection

    This has created a market paradox. Never before has original design been so valued by the market, and never before has it been quite so difficult to get a full return on the investment put into new product development.

    In response, mainline brands have adopted three basic strategies to ensure better returns. Some have opted for more extreme innovation (such as power tool maker DeWalt's 20v/60v FlexVolt cordless system, designed to create a design "safe haven"). Others are relying on "network effects", through producing products that interlink with other products in their range. Another tactic is to make products that connect the manufacturer directly with the end customer. (It's interesting to note that Milwaukee Tool's One-Key feature does all three -- as will, most likely, Bosch's equivalent, launching this quarter.)

    The success of these tactics, along with some other factors, has contributed to a shift in retail that is only beginning to show its effects recently. To really understand that shift, it's necessary to first take a look at the retail market models that have existed since the end of World War II. There have been roughly three such models: consumer sovereignty, the revised sequence, and the duplication.

    The first of these models is in some ways more theoretical than actual, but provides a baseline for looking at consumer markets. Post World War II, up until the mid-1960s (and beyond), most economists held that in modern, capitalist economies, consumers were "sovereign", in that they created the demand to which retailers and manufacturers would respond.

    It was the US economist J.K. Galbraith writing in his landmark work "The New Industrial State" who first popularised a different model. He called it "the revised sequence", and he described it like this:
    The mature corporation has readily at hand the means for controlling the prices at which it sells as well as the those at which it buys. Similarly, it has means for managing what the consumer buys at the prices which it controls.

    Further, Galbraith follows that up with:
    ...the producing firm reaches forward to control its markets and on beyond to manage the market behaviour and to shape the social attitudes of those, ostensibly, that it serves.

    In the revised sequence, far from being sovereign, the consumer was shaped and moulded by advertising and other means to conform to the requirements of the market. Prices were not set (for the most part) collusively, but there was an understanding that getting into a "price war" would be detrimental to all participants in a market, and this was to be avoided.

    The duplication stage emerged from a combination of access to low-cost labour (in China and elsewhere), and new technologies that increased the reliability of products. It began, really, in the late 1990s, but started to have a significant effect in the early 2000s.

    In mid-2015 the then managing director of the Wesfarmers-owned Bunnings big box home improvement chain, John Gillam, summarised the strategic changes this brought to the retail industry by stating that "The margin is the outcome".

    A lot can be read into that one pithy statement. One aspect of modern retail it highlights is the difference in the way new products are developed. Under the revised sequence, a new product would be designed, production costs estimated, and pricing determined by modelling volume versus margin to deliver the greatest overall profit -- at the least risk.

    In the duplication sequence, the goal was to introduce products that duplicated existing products, though they might not have all the features, at a price that was irresistible. The cheaper product might not have the same quality as the original, but it had a known degree of quality.
    Suppliers strike back

    If "the margin is the outcome" is a good signpost for the recent retail economy, there is another, quite chilling, signpost for the retail economy that is to come. This originates with one of retail's all-time greatest strategists, the head of US online retailer Amazon, Jeff Bezos. It is something of a personal motto of his: "Your margin is our opportunity".

    "The margin is the outcome" is a product-based strategy. "Your margin is our opportunity" is a sales-based strategy. The first is based on disrupting markets by offering products with fewer features, but also "just enough" features, at an attractive price-point. The latter is based on direct competition through efficiencies gained post-supply chain, in the sales process itself.

    To give that some context, Bunnings (as an example) is adept at knowing which features its customers want in a particular product. For example it might suggest a cordless brushless hammer drill kit with two batteries and a charger at a price point under $160.

    Amazon is adept at knowing exactly which customers are likely to want a particular product, and what will trigger a purchase for them. For example, the purchase of a mitre saw, and a book on how to build decks might trigger a suggested purchase of a cordless impact driver, of the same brand as the mitre saw.

    The first models general purchasing behaviour, and it could be likened to casting a net into waters where you are fairly sure the fish will be. The second models specific customer buying patterns, and is more like dangling a hook with just the right kind of bait in front of a small school of fish.

    At the moment, Amazon is close to being the only retailer in the world that can utilise this post supply chain model. That's because it has a very rich set of longitudinal (taking place over time) data to work with.

    However, there is a midway point to this kind of modelling, and that is represented by the approach Kingfisher is using for its home improvement businesses. By engaging in what is likely to become a longitudinal study of customer behaviour around projects such as bathroom renovation, it can closely predict choices and needs for the associated range of product lines.

    Outside of retailers, however, there are other companies that are now collecting data that can be used in this modelling. One of the aspects of Milwaukee Tool's One-Key Bluetooth-enabled tool networking is that it means the company is now collecting very precise data about tool use by clearly identified customers.

    Milwaukee will be able to tell, for example, when a tool is close to wearing out, and will need to be replaced, or if a tool is being over-stressed, meaning its owner really needs to upgrade to something better. This means that, in a sense, Milwaukee now "owns" these customers more closely than the retailer which sold the tool ever could.

    What develops from this, and from a similar system being developed by Bosch Power Tools, is not known at this time. It does, however, seem likely that this is a sign that the role of the retailer will be further changing in the near future.
    Conclusion

    If there remains a single mystery about the development of home improvement retail in Australia, it has to do with the role that the internet and ecommerce will eventually play in its success.

    Bunnings does not have an ecommerce website in Australia (except for gift cards), but it has built out its web presence to be quite considerable, with very high site traffic. Aside from offering a comprehensive catalogue of its stock, the site also offers guides to a wide variety of maintenance, renovation and woodwork activities.

    Its attempt at a social media style site, "Workshop", seems either not to have worked too well, or simply not received much backing. While it continues to be run, its membership and posts are quite low.
    Bunnings goes social with Workshop website - HI News, page 6

    The Mitre 10 website is functional, but it's evident that not much has been spent on its development. That is really not a criticism: the question of how you would go about developing a web presence that will work for independents is a major one.

    It's likely that the answer will lay in not directly pursuing so much a hardware/home improvement angle on this, as looking at a more general "home ownership" angle. Two of the most successful websites in this area, Houzz and the US-only Porch.com (which has Lowe's as a major investor) have taken that approach with a great deal of success.

    Houzz has become an "idea book" for home design, with access both to products, professionals such as architects, and tradies as well. Porch began life as site that aspired to be a kind of "log book" for houses, providing owners (and prospective buyers) with a record of what work has been done on a house and by whom.

    It seems likely that this is one area where real development will not take place for another two years or so, and that the answer will emerge from new technological developments that are not as yet evident.

    Related:
    Will Sapphire save Mitre 10? - HI News, page 3
    Powerhouse independents: Hume & Iser HTH, page 44
    Statistics
    ABS hardware retail statistics
    Hardware retail sales trend, seasonal and original data
    HNN Sources
    Year to date per cent change in hardware retail sales Australia wide
    Cumulative retail sales Australia-wide
    Click to visit the HBT website for more information
    Mainstream media has recently seized on the Australian Bureau of Statistics sales numbers for hardware retail to suggest that the closing down sale of Woolworths' Masters Home Improvement big box stores has had an impact on performance during December 2016. In fact, a number of articles have suggested that this has pulled down the numbers for Australian retail sales overall.

    The declining number that the media point to is that for seasonally adjusted sales. For overall Australian retail this fell by 0.1% for December 2016. For household goods retailing, the seasonally adjusted estimate fell by 2.3%. In that category by far the highest seasonally adjusted fall was for hardware, which was down 6.6%.

    This might seem quite discouraging, but a very different tale is told by the trend estimate statistics. The trend estimate indicates that retail turnover in Australia rose by 0.3% in December 2016, following similar increases in both October and November 2016. The trend estimate for household goods also increased by 0.3%, with the trend estimate for hardware flat at 0%.

    So, what does all this mean? We need to start by understanding what the difference is between seasonally adjusted and trend estimate numbers. The thinking behind both of these statistics is to help to provide statistical numbers which enable a direct comparison between two consecutive time periods (usually months).

    We all know that if you were to just compare the original retail sales numbers for the consecutive months of, say, August and September in any one year, you could mistakenly conclude that the industry had undergone a big surge -- as September is always going to be more active than August.

    By using moving averages in a clever mathematical way, it is possible for statisticians to work out what the seasonal component of the increase between August and September would be. When they remove or adjust for that component, they provide numbers for August and September that can be bettered compared, and will provide a forecast estimate as to whether demand is increasing or falling.

    However, there are even more factors that distort statistics when comparing months. Some months have five Saturdays in them, others only have four. Some months have 31 days in them, others only 30, or 28, or even 29. Holidays such as Easter move around, and so forth. The trend estimate takes factors such as these into account, and attempts to deliver statistics that have as little of this kind of "noise" as possible.

    Given all that, what should you do when confronted with statistics where the seasonally adjusted and the trend estimate numbers seem to be at odds?

    In general, the first thing to look at, particularly for hardware statistics, is what has made up "the season", especially the weather. Seasonal adjustment relies on specific weather patterns, and if these have shifted, that might be something that is contributing to the difference.
    Hardware retail sales trend, seasonal and original data
    Weather for December 2016

    Australia's Bureau of Meteorology publishes a very useful report which summarises weather conditions by month for all of Australia. The report for December 2016 can be found at:
    Report from the Australian Bureau of Meteorology

    According to this report, weather for December 2016 was unusual in a number of regards. First, as far as temperature is concerned:
    Mean temperatures were above average across most of the eastern half of Australia as well as through an area extending from southern South Australia through to northwest Western Australia. Large parts of these regions experienced mean temperatures in the warmest 10% of historical records for December, with record-high temperatures on the south coast of New South Wales, in eastern Gippsland, and parts of southwest Queensland. In New South Wales it was the second-warmest December on record behind December 1990, 2.21 °C above average, while Queensland recorded its equal sixth-warmest December (1.29 °C above average).
    ...

    Daytime temperatures were well above average across most of eastern and northern New South Wales, southern Queensland and the Cape York Peninsula, and the Gippsland region of Victoria, as well as in parts of southern South Australia. The statewide average maximum temperature in New South Wales was 2.37 °C above average, the seventh-warmest on record and the warmest December since 2005.
    ...
    Above-average temperatures were also observed across most of South Australia, Victoria, southern and eastern Tasmania, and in parts of the Top End of the northern Territory and northwest Western Australia.

    Rainfall also followed an unusual pattern.
    Nationally, December rainfall was 76% above average, and the fifth-wettest December on record. South Australia had its wettest December on record; Western Australia and the Northern Territory had their third-wettest December on record; and all other States, apart from Queensland and Victoria, had above average December rainfall.
    Masters' influence

    While it seems highly likely that weather has contributed to this result, that doesn't mean that Masters didn't have a role as well. The logic behind the Masters sale having an effect would be that it pulled sales forward into October and November, inflating the sales numbers for those months, then dwindled during December, deflating the sales numbers for that month.

    What partially argues against this is that the sale did continue until 12 December, and those 12 days likely accounted for 50% of all sales during that month, giving that they would have fallen off steeply for hardware after Christmas. It's also fairly likely that the sales volume, as the sale discounts reached their peak, would have been quite high. However, without a month-by-month breakout of sales (which we will never get) it's impossible to say.

    It is interesting to speculate about the overall effect of the Masters sale. It looks like Masters managed to sell around $700 million worth of stock for something like $550 million, in a sale lasting from mid-September up until 12 December 2016. At an estimate that would be around $510 million in the final calendar quarter of the year, when under normal circumstances sales would have been around $260 million. However, due to its discounted nature, that $510 million would have displaced $660 million or so in undiscounted sales, meaning that there was a net additional effect of $300 million or so.
    HNN statistics

    Though we've mentioned this in the past in this column, it's worth repeating that at HNN we tend to focus on the original data, rather than seasonally adjusted or estimated trend data. The reason for this is that we see ourselves as providing information for store owners and retail managers.

    The original data is the best source to use for getting a good idea of how a retail operation is performing in comparison with the market. If such an operation seems to be having a great month, with sales up 5%, but the overall market for that region grew by 6%, its likely that it is in some risk of losing market share -- just as conversely what might seem like a bad month, with sales down 3%, might actually be pretty good, if the overall market went down by 4%.

    In terms of forecasting, of course, the actual retail stats are generally not as good an indicator as the broad range of other statistics that are available, such as building permits issued, expenditure on construction, house prices and renovation statistics from the ABS and other sources.
    Current retail statistics

    So, what do the current retail statistics reveal? The following chart shows the percentage change in retail sales for calendar years going back to 2008.
    Year to date per cent change in hardware retail sales Australia wide

    As has been shown in previous charts of this nature we've published, there has been an increasing consolidation of growth percentages for all states and territories into a narrow band. This is a trend that begins with the calendar 2015 year, and intensifies for 2016.

    What this indicates is that the drivers for spending on hardware have become more national and general in nature, rather than being specific to individual states and territories. Prior to that, there was quite strong variance in hardware retail revenue growth between states and territories.

    One reason for this is that natural resources, in particular minerals, have declined as a source of economic growth for most states and territories. These tend to provide economic stimulus that is highly regional in nature. In terms of housing construction, and construction in general, while this continues at very different levels in different regions, there would seem to be no truly "break away" regions that are accelerating past other regions by a wide margin.

    It is also likely that national economic drivers, such as interest rates, bank loan regulations, budget decisions, the rate of inflation, and industry assistance packages, have come to have a stronger influence than many regional forces.

    In general, the trends reflected are mildly positive. The only region to show negative growth (shrinkage) is the Northern Territory, at a relatively mild 5%. The other states and territories show grow in the range of 3% to 12%. This is in contrast to many previous years where, while some states and territories would show strong gains, usually two would show negative growth, with at least one losing more than 5%.

    That said, the results for calendar 2016 are not as positive as those for calendar 2015. The results for the earlier year showed higher overall percentage gains, and no states or territories were in the negative growth part of the chart.

    The following chart indicates the numbers for each calendar year since 2008, gives a clear indication of just how strong the contribution from NSW, VIC and QLD has been, making up over 70% of the national revenue total.
    Cumulative retail sales Australia-wide

    The following chart shows the cumulative contribution of states and territories to hardware retail revenue for the month of December, going back to 2008.
    Cumulative hardware revenue for the month of December alone

    As indicated by the numbers in Chart 1, for 2016 there has been more limited growth, after particularly strong growth in December 2015 as contrasted to December 2014.

    The following chart is in some ways a counterpoint to the previous chart, showing the cumulative contribution of states and territories to the final calendar quarter. The growth for the 2016 quarter is similar to that for the 2015 quarter, with strongest growth clearly coming from NSW.
    Cumulative hardware revenue for the last calendar quarter
    Conclusions

    It is important for us to remember that the numbers reflected here are those for only the revenue coming into hardware retail. The real effect of the closing out discounts at Masters will be on earnings before interest and taxation (EBIT). Not only will the Masters discounts have diverted dollars to Woolworths, but other hardware retailers will have been driven into deeper discounts just to keep pace.

    In looking ahead to the results the industry will produce through 2017, it is most likely that these results will be similar to 2016. While concerns about the boom/bust cycle in residential housing will continue, there are few events on the horizon that will cause substantial change over its current rates of growth. Renovation is set to coast slightly lower through the year, according to several forecasts, and this will be driven slightly lower for hardware as many renovations focus more expenditure on technology offerings, such as "smart" kitchen appliances and whitegoods.

    In the industry itself, Metcash's Independent Hardware Group will be spending most of its energy on consolidation activities, such as matching up the retail technologies of Mitre 10 and Home Hardware. Bunnings may see this as an opportunity to take some additional market share, but it will be for the most part consolidating its position in areas where it has yet to build a substantial presence.

    One area of more rapid expansion open to Bunnings is through the ready-made ex-Masters leaseholds it has acquired. With the resolution of the sale of Hydrox Holdings still ongoing between Woolworths and Lowe's Companies, it's unlikely this will be resolved before June 2017. Bunnings has flagged that it will take around five months to refit those leaseholds and new Bunnings Warehouses, so their impact will be delayed until 2018.
    Bigbox
    Bunnings opens first UK store for business
    Bunnings first UK store from the front
    HNN Sources
    Bunnings UK tool range - including Ryobi
    A familiar look to the Bunnings UK aisles
    Click to visit the HBT website for more information
    The first Bunnings UK store opened its doors to the general public following a "pre-opening team member event" for around 600 store employees and their families and friends on 2 February 2016. This is some four months after the original October 2016 deadline Bunnings had announced.

    Richard Goyder, the managing director of Bunnings' corporate owner, Wesfarmers, is predictably enthusiastic about the store, telling Fairfax Media that he thought the new store "looks terrific". Bunnings plans to open at least four of these "test bed" stores before even considering a broader rollout. This follows the same pattern Bunnings followed when introducing its first warehouse stores in Australia, and gives the retailer the chance to fine-tune its offerings. According to Peter (PJ) Davis, who is managing director of Bunnings UK & Ireland:
    A second Bunnings Warehouse store in Hatfield Road, St. Albans will open in April and we are on track to have at least four pilots up and running by the summer. We are laying strong foundations on which to build the Bunnings Warehouse business in the UK and Ireland for generations to come.

    This initial trial store is a converted Homebase outlet, and measures around 70,000 square feet, or 6500 square metres. This is less than half the size of Bunnings' Australian warehouse-style stores, most of which range between 15,000 and 20,000 square metres. Obviously, the smaller store footprint limits the number of products and categories. This means Bunnings UK stores will never be exact replicas of those in Australia.

    That said, the new-format stores will hold around 40% more products or stock keeping units than former Homebase stores, with more space dedicated to garden products and tools and less space for kitchens, bathrooms and homewares. In total, this adds up to more than 30,000 items. Bunnings has already honed its skills in designing smaller stores with its inner-metro offerings in Australia.

    It has also widened and deepened the product range, introducing more DIY and light commercial products such as tools and plumbing supplies. One of the first moves that Bunnings made when taking over the Homebase stores was to close homewares concessions such as Habitat and Laura Ashley.

    That's not the only improvement that Bunnings has made to the former Homebase way of operating. The new-format stores will employ more staff (68 people in the case of this store) and include cafes, children's playgrounds and has already hosted a sausage sizzle. A new feature not yet found in Australian Bunnings stores is a dedicated DIY workshop area, where both adults and younger people can hone their DIY skills with help from staff.

    A Bunnings UK website has also launched, complementing the existing Homebase site. In keeping with the demands of the British public, this is going to be Bunnings' first full ecommerce website.

    The Bunnings UK team has already reduced prices at existing stores and moved to an everyday low-pricing model to draw customers through the door, rather than high/low pricing. Mr Davis said:
    The St Albans store will be instantly recognisable as a Bunnings to anyone who has ever shopped with us. We're bringing the widest range of home improvement and garden products to the UK market. And as we've said all along, ranges will be tailored for the UK market.
    Products

    The launch of this store has provided a number of surprises as regards the products it will feature. HNN had previously speculated about how Bunnings would fill the gap in its power tool line, if it were not able to stock leading brands from Techtronic Industries, specifically Ryobi and AEG.

    At the time, we had assumed that Kingfisher's B&Q home improvement store held exclusive access to those tool lines, in a similar deal to the one Bunnings has in Australia, and Home Depot has in the US.

    It turns out this must be wrong -- as Bunnings UK is stocking both Ryobi and AEG tools.
    Local market conditions

    The St Albans Bunnings store will test the GBP20 billion (AUD33.3 billion) British DIY and gardening market. According to a report in the Australian Financial Review, the UK home improvement sector has been mostly sluggish since the global financial crisis despite solid housing construction activity. Analysts suggest many factors to explain this, including relatively weak wages growth, an abundance of tradespeople from eastern Europe willing to work for lower cost that has created a "do it for me" culture as well as a lack of interest among young people in tackling home improvement projects.

    Nevertheless, the UK economy remains in reasonable shape and there is some executive talk of "green shoots" for DIY, particularly in the London market. Brexit has so far failed to dent consumer confidence. And the British love of gardening shows no signs of weakening, with suppliers reporting strong demand for their products.

    For the St Albans Bunnings, which is situated in the middle-class "green belt" that encircles London, garden products should account for a big part of its business. The British reliance on external handymen means the store must make sure it appeals to trade customers.

    Bunnings' move to an "everyday low prices" model at the traditionally expensive Homebase stores indicates a confident belief that it can do home improvement better than the established players. Soon after it acquired Homebase, Bunnings management aggressively undercut B&Q and its other main competitor, Wickes, on the price of Dulux paint (sourced from the European Dulux company, which is not associated with Australia's DuluxGroup).

    These sort of bold moves are necessary to not just change the perception about Homebase being pricey, but to spread the word about Bunnings. Although the ubiquitous national advertising campaigns have helped Bunnings in Australia, they remain uneconomic in the UK until the chain achieves genuine scale.
    Additional UK stores

    Bunnings is also scouting for sites for greenfield Bunnings stores, which would be cheaper than converting existing Homebase stores.

    However Mr Goyder said the conversion of Homebase's entire fleet would depend on whether the new format was embraced by consumers. He said:
    Conversion will depend on how the first handful go - when we're happy with how they go well move relatively quickly. It will take some time because there are 270 stores, but if we need to make tweaks we'll do that before we do a fast rollout.

    Mr Goyder also played down former Bunnings CEO John Gillam's decision to resign from the Homebase board, saying that, as planned, he remained chairman of the Bunnings Group Council and the Bunnings UK and Ireland advisory board. He said:
    He has stepped down from all the boards - it was all part of the plan - but he is still on the Bunnings Council and advisory group. Both businesses are working together and he is still heavily involved in the UK.

    Wesfarmers plans to invest an additional AUD1 billion over the next few years improving and expanding the UK and Ireland businesses and does not expect the acquisition to be earnings accretive until 2018 or 2019.

    Mr Goyder is confident Bunnings will eventually achieve an 18% return on capital within three to five years. Many analysts, however, believe Wesfarmers will struggle to achieve its return targets. Citigroup said in a recent note:
    We expect return on capital to improve at Homebase, but believe it will settle at 11% return on invested capital, not the 18% targeted by Wesfarmers because the store sizes and locations will be challenging.

    Related:
    Homebase acquired by Wesfarmers - HNN

    Sources:
    Bunnings readies for its big bet on Britain - Australian Financial Review
    Bunnings first UK pilot looks terrific says Wesfarmers MD - Australian Financial Review
    Bigbox
    Big box update
    Bunnings will take over the soon-to-be-vacant K&D Warehouse site at the Devonport Regional Homemaker Centre
    HNN Sources
    Bunnings will be another anchor store for the Mount Gambier Marketplace in South Australia
    The prospect of Bunnings store in Panorama (SA) has received support from the local mayor
    Click to visit the HBT website for more information
    Bunnings will occupy a site in Devonport (TAS) that K&D Warehouse will vacate; Bunnings will also move into an ex-Masters site in Mount Gambier (SA) and is undergoing negotiations for another former Masters location in Gregory Hills (NSW). The prospect of a Bunnings store in Panorama (SA) has also attracted support from the local mayor.
    Bunnings moving into Devonport

    The Advocate reports that Bunnings will take over the soon-to-be-vacant K&D Warehouse site at the Devonport Regional Homemaker Centre in Tasmania.

    After the announcement that K&D Warehouse will close, Bunnings general manager - property, Andrew Marks said it was approached to take over the land. He said:
    Following K&D's decision to close their Devonport store, we were approached to consider a potential tenancy instead of undertaking our own development on adjoining land. We can confirm we have now entered into an agreement with the land owner.

    Mr Marks confirmed Bunnings would lease the property where K&D stands, which will be expanded. He said:
    The development represents an investment over $19 million and is expected to create over 80 employment opportunities for local residents.

    The lease takeover date is unknown. Mr Marks said he would inform the Devonport community when a date was established.

    Bunnings was strongly rumoured to open a store at the Devonport Regional Homemaker Centre for some time. Devonport Mayor Steve Martin said with K&D closing in March, the rumours became stronger recently and it was expected Bunnings would move in.
    Bunnings takes over ex-Masters location

    Bunnings in Mount Gambier (SA) will relocate its warehouse to the former Masters site, according to The Border Watch. It will be another anchor store for the Mount Gambier Marketplace located close to the region's residential growth corridor.

    The Bunnings store will join Big W, Woolworths and smaller speciality stores at the Marketplace.

    The big box retailer has yet to release when it will begin the development works at the site. Bunnings general manager - property Andrew Marks welcomed the looming relocation of the Jubilee Highway West Bunnings store to the new site. He said:
    We can confirm a development application has been lodged and approved for the conversion of the Masters Mount Gambier site into a Bunnings Warehouse. Our intention for Mount Gambier is to relocate our existing store, including all current Bunnings team members.

    But Mr Marks was unable to release a relocation date as planning was still under way.

    Bunnings also intends to ensure its existing Jubilee Highway location is leased. The company spokesperson said:
    Hopefully this will support bulky goods retailers entering the region and create new jobs in Mount Gambier. The new store will continue to actively contribute to and participate in the local community through hands-on support of local community groups and hosting the famous Bunnings sausage sizzles.

    Mount Gambier Marketplace is owned by SCA Property Group. Operations general manager, Sid Sharma said:
    This partnership with Bunnings ensures that the customers of Mount Gambier Marketplace will continue to have access to their groceries, home improvement, general merchandise, fashion and dining needs in one convenient location.
    Bunnings Panorama back on the agenda

    The possibility of a $42 million Bunnings store in Panorama (SA) is being discussed again after it received support from the local mayor.

    Bunnings general manager - property, Andrew Marks said Bunnings is working with Mitcham Council to address concerns about designs for the former TAFE site, centred around landscaping, paving and a lack of trees. He told Adelaide Now:
    Bunnings will continue to work collaboratively with the relevant authorities throughout the application process and is looking forward to bringing investment and jobs to Panorama.

    However, the council's Development Assessment Panel rejected a second application to build a warehouse store on Goodwood Road, also calling for better fencing and a review of rubbish collection hours.

    In August 2016, almost 100 residents turned up to a development panel meeting to protest the plans. Their main concerns centred around the belief that the building would be out of character for the area and create traffic problems.

    The Say No to Bunnings Panorama resident group has also collected more than 2000 signatures against the development since October 2015.

    However, Mitcham mayor Glenn Spear said he hoped the development would be now be approved as soon as possible. He believes the site is an "eyesore". He said:
    If we say no to everything then we become a council known to be anti-development and anti-progressive. It's time for Mitcham to move out of this retrograde position.

    Mr Spear said Bunnings had been "fabulously responsive to council and addressed most of our demands and it is council's opinion it should be approved".

    Meanwhile, Panorama resident Neil Baron has lodged proceedings in the Environment, Resources and Development Court, to appeal the development panel's decision to reject the application.

    Mr Baron said locals had been worried about traffic heading to the back of the site. He said:
    We were very concerned with the rear access that we would have tradies and all these people short-cutting through the area. We discussed that with Bunnings and they decided to block it and we were happy with that. If someone else were to go there, there would be no certainty that would happen.

    The big box retailer has had the site earmarked for a store since purchasing the former TAFE site in 2014. If the plans are approved, it said the store would create 340 construction jobs and 190 permanent roles.

    Related:
    Big box update: Bunnings could rethink Panorama store - HNN
    Bunnings considers Gregory Hills site

    Bunnings is looking at a location in Gregory Hills (NSW) vacated by Masters. Bunnings general manager - property, Andrew Marks, told the Wollondilly Advertiser the company is working with the owner of the site. In a statement, he said:
    We can confirm that we have agreed conditional terms with the landlord at the former Masters Gregory Hills site. If the conditions are satisfied, there will be necessary conversion works that need to be undertaken to reformat the store ahead of Bunnings moving into the site.

    Bunnings lodged an application with Camden Council on January 12 to "amend the layout and description of an approved development to facilitate [a] new operator of the premises".

    Mr Marks said the new store would bring more than 100 new jobs to the region. He said:
    Our intentions are to open a new store, employing approximately 120 team members.
    Companies
    AMES new owner of Hills Hoist
    AMES is bringing in the Hills Home Living products into its portfolio
    HNN Sources
    The iconic Hills Hoist will no longer be owned by Hills
    Hills' licensing deal with Masters ended when Woolworths closed down its stores
    Subscribe to HNN weekly e-newsletter
    Hills is selling its gardening and laundry products business, Hills Home Living (HHL) to AMES Australasia, the local subsidiary of US-based Griffon Corporation. It has sold the right to make and sell Hills Hoist clotheslines after concluding it could not make money from the iconic Australian household product.

    AMES will acquire tooling equipment and trademarks not used by Hills and has undertaken to invest in the HHL brand that extends across laundry products, ironing boards, garden sprayers, watering systems, as well as clotheslines.

    Hills chief executive David Lenz said AMES with its established export markets, local infrastructure and retail distribution networks, offered the best future for HHL.

    AMES has indicated that it intends to revitalise HHL's product portfolio as well as introduce a wide range of solution-focused products on the home and garden sectors. Simon Hupfeld, AMES Australasia chief executive, said:
    We consider this a tremendous development for our business, and have great confidence that the many customers, employees and suppliers of Hills will enjoy the benefits of this new ownership structure. As now part of our global AMES team, Hills will be very well positioned to serve its customers better through our established capabilities in design, marketing, customer service, procurement and distribution.

    Under the deal AMES will distribute HHL products through hardware retail channels including Bunnings, Home Timber and Hardware, Mitre10 and Thrifty-Link.

    Bunnings does not currently stock the brand following Hills' licensing deal with the now defunct Masters chain.

    In 2014, the Hills brand was licensed to Woolworths's Masters chain for seven years to generate a new revenue stream for the business. That deal fell apart less than two years later with Woolworths's move to exit its home improvement business and close its Masters stores. But Hills received a severance payment worth AUD6 million.

    Mr Lenz said AMES was essentially taking over the business operated by Woolworths under its licensing arrangement from Hills.

    Mr Lenz also said a recent strategic review found it was no longer feasible to make and sell home living products.
    The Hills of today is a value added distributor of technology products and services and the company is focused on delivering security and surveillance solutions, audio visual, IT, communications and health solutions. It is important that we remain focused on our core business activities.

    Hills did not disclose the sale price but said it would maximise value for its shareholders and improve earnings for the first half of the 2017 financial year, more than offsetting the weaker trading results of its Hills Building Technologies (HBT) business. Mr Lenz said:
    Even with an improved second quarter for the HBT business, this has not made up for the underperformance of the HBT business in the first quarter of FY17 as outlined at our AGM in November.
    History

    Harold Hill-Ling took what was known as Hills Industries public 58 years ago with his business partner, brother-in-law and Hills hoist inventor Lance Hill.

    Hill-Ling's son Bob subsequently took over the business and in 2007 Bob Hill-Ling's daughter, Sydney lawyer Jennifer Hill-Ling, became Hills chairman. The Hill-Ling family remains Hills' biggest single shareholder.

    Hills Hoists were originally produced out of Hills' Adelaide factory, but more than a decade ago Hills transferred some of its manufacturing to China.

    Related:
    Supplier update: Hills' Masters deal ends early - HNN
    Hills hitches its future with Woolies - HNN

    Sources:
    Hills sells right to make and sell hills hoist clotheslines - Fairfax Media
    Hills finally parts with iconic clotheslines for good - Gold Coast Bulletin
    Hills sale deal with AMES follows Woolworths' Masters collapse - The Australian
    AMES pulls off Hills Hoist heist takes over ownership of icon - The Australian
    Companies
    Hitachi power tools sold off
    Hitachi is divesting majority ownership of its power tools unit, Hitachi Koki
    HNN Sources
    Hitachi Power Tools has been sold to US private equity firm Kohlberg Kravis Roberts
    Hitachi's appliance business may be on the chopping block in the future
    Subscribe to HNN weekly e-newsletter
    US private equity firm Kohlberg Kravis Roberts (KKR) has agreed to buy Hitachi's power tools unit, Hitachi Koki for about USD1.3 billion (AUD1.69 billion).

    KKR will launch a tender offer running from January 30 to March 22 to acquire Hitachi's holdings, which amount to a little over 40% of the unit's outstanding shares, or 51% of voting rights. Hitachi Koki will be delisted and will eventually drop the Hitachi brand. CEO of KKR Japan, Hiro Hirano said:
    Hitachi Koki is well-positioned for further organic and inorganic growth given the high quality of its products, its high-calibre team and the attractive environment for power tools through cordless and digital trends. Looking ahead, we are fully committed to leveraging our global network and resources to provide full support to Hitachi Koki in pursuing its growth strategy.
    Background

    Hitachi has weighed various options for the future of its power tools unit as the conglomerate becomes increasingly focused on infrastructure and information systems. In the end, it decided to strike a clear blow against what it perceives is Hitachi Koki's culture of dependence on the parent company, according to the Nikkei Asian Review.

    The deal marks Hitachi's first complete sale of a major subsidiary since the 2012 divestment of a hard-drive unit, a move made under former president and current chairman Hiroaki Nakanishi. The transaction is also unusual for the group in that the buyer is a private equity firm.

    Since Toshiaki Higashihara took the helm as president in April 2014, Hitachi's efforts to reorganise have been limited mostly to reducing its stakes in Hitachi Transport System and Hitachi Capital from roughly 60% each to about 30%. But these partial sales appeared half-hearted to some investors and analysts.

    Things changed in 2016, when the parent company told Hitachi Koki executives to hammer out a growth strategy, including "a possible departure from the group," an executive told the Nikkei Asian Review. The unit had just acquired German power tool company Metabo and was in the middle of drafting a new medium-term plan, looking at overseas expansion.

    Hitachi had two decisions to make: whether to choose an industrial company or an investment fund as the buyer, and whether to keep the unit. Discussions ensued, with some arguing that private equity has a negative reputation and that taking the Hitachi brand away from the subsidiary would undermine its business.

    Hitachi also received a bid for the unit from Kyoto-based Kyocera, which said it would create an all-around tool manufacturer.

    Against this negotiations, KKR offered a higher price, along with plans to beef up the Hitachi Koki's foreign operations and support a relisting.

    Mr Higashihara showed little hesitation in selling the unit even though Hitachi Koki is profitable, with a projected operating margin of more than 4% for the fiscal year ending in March.

    Part of Mr Higashihara's determination to sell appears to stem from a desire to root out a perceived tendency in Hitachi Koki to rely on the parent company. Hitachi's choice for a complete sale seems to be an emphasis on discipline in group management.

    But critics could still point to other non-core businesses such as Hitachi's chipmaking equipment and appliance businesses.

    Hitachi has made no progress on plans to spend 1 trillion yen (AUD11.5 billion) on acquisitions in the three years through fiscal 2018. It remains to be seen whether the group's latest divestment will lead to bolder growth moves similar to those of General Electric and Siemens. These conglomerates have proven more willing to make clean breaks when exiting business and have used the proceeds for acquisitions in their focus areas.

    Related:
    Hitachi to sell power tool unit - HNN

    Sources:
    Hitachi practices tough love on dependent group - Nikkei Asian Review
    US investment fund buys Hitachi unit - Japan Times
    KKR to buy Hitachi Power Tools - Torque Expo
    Companies
    Craftsman sold to Stanley Black & Decker
    US retailer Sears sells the Craftsman brand to Stanley Black & Decker
    HNN Sources
    Craftsman will be added to Stanley Black & Decker's product portfolio
    Sears is selling assets to raise cash
    Subscribe to HNN weekly e-newsletter
    Stanley Black & Decker (Stanley) has struck a deal to buy the 90-year-old Craftsman brand from troubled US-based retailer Sears.

    The USD900 million (AUD1.23 billion) acquisition will also add Sears' signature lifetime warranty to Stanley's portfolio of hand and power tools.

    The company will pay USD525 million (AUD694 million) at closing and USD250 million (AUD330 million) after three years. It will also make annual payments on new Craftsman sales for 15 years.

    Sears will continue to offer Craftsman-branded products at Sears and Kmart stores through a perpetual license from Stanley Black & Decker.

    The Craftsman line includes power tools such as saws, drills and hand tools such as wrenches and screwdrivers as well as lawn mowers, barbecue grills and other gardening equipment.

    The acquisition gives the company an entry into the lawn and garden equipment market, estimated by Stanley to be worth USD12 billion (AUD15 billion).

    Just 35% of Craftsman sales come from tools so the deal also represents a significant expansion into other business lines.

    In a statement, Stanley CEO James Loree said his company will increase the availability of Craftsman products through other retailers (brick and mortar and online) as well as industrial partners. The agreement allows Stanley to increase Craftsman sales in these untapped channels.

    Currently, about 90% of Craftsman products are sold through Sears, Kmart and Sears Hometown stores, according to Mr Loree. Much of the 10% sold outside Sears-related channels is sold through Ace Hardware stores.

    Craftsman's appeal might be slightly stronger with older customers who remember it from decades ago, when the Sears catalogue's role was similar to that of e-commerce today, Mr Loree said. But he estimated the brand could add about USD100 million (AUD132 million) of revenue growth per year for the next 10 years, in part by making Craftsman products more widely available. He said:
    The world has changed, but Craftsman is still an incredibly strong brand.

    Stanley is working on plans to begin expanding Craftsman's distribution but currently sells Stanley and Black & Decker brands to some of the biggest home and hardware retailers, including Home Depot, Lowe's and Amazon.
    America First

    After announcing an agreement to purchase Craftsman from Sears, Stanley said it will construct a new USD35 million (AUD46 million) hi-tech factory in the US to broaden the Craftsman tool line.

    The decision is considered a move to prevent Stanley from a "border tax" or tariff that has been threatened by President Donald Trump. Mr Trump has warned a tax could be imposed on companies that relocate to other countries to make products and then sell those products back in the US.

    Mr Loree said that US manufacturing capacity made "business sense" and was close to his company's philosophy "to make where we sell whenever possible" whether that is in the US or any other country where Stanley has a presence. He believes many end users prefer to buy products that are produced in their own countries.

    He also called the Craftsman deal an opportunity to "re-Americanise and revitalise" the brand.

    Stanley, which already has around 30 manufacturing plants in the US, has increased the number of manufacturing employees by 40% in the past three years. It currently has about 3,000 domestic production workers. Mr Loree said:
    We already manufactured many products cost-effectively in the US and in some cases, we've been able to bring manufacturing back to the US at a lower cost than producing overseas.

    In addition to the threat of trade policies that could damage imports, manufacturing products in the US to sell to American consumers reduces logistics and distribution costs and lowers the company's environmental footprint, Loree said.
    It makes good business sense for us.
    Acquisition trail

    Mr Loree pointed out that the tool market is "incredibly fragmented and the competition, particularly the hand tool market is brutal," noting that "there is a lot of room for acquisitions in the tool business."

    Stanley has been one of the most active acquirers of companies for many years. The company, which dedicates half of its excess capital to acquisitions, has made more than 100 acquisitions in the past 15 years.

    Its biggest purchase came in In 2009 when Stanley Works acquired Black & Decker Corp. for USD4.5 billion (AUD5.9 billion) in stock. After that purchase, Stanley had been in a self imposed hiatus from further acquisitions.

    But Mr Loree has made it clear that era is over. Five years ago, Stanley bought Hong Kong-based fastener manufacturer Infastech for USD850 million (AUD1.1 billion) in cash. Last October, Stanley paid USD1.95 billion (AUD2.5 billion) for Newell Brands' tools business that includes Irwin and Lenox. Those moves marked significant bids for Stanley's growth in the global tools industry.

    Mr Loree emphasised that Stanley intends on growing as a "diversified industrial company," not just a tool company noting that its recent tool acquisitions have occurred because of their value and opportunity for growth.

    Craftsman remains an icon in the tool industry. Sears bought Craftsman in 1927 for USD500 (AUD661) and the company is known for its lifetime warranty of products.

    [In the US] Craftsman still accounts for the largest share of the hand tools and accessories market by dollar share as of September, with about 26.6%, and accounts for about 8.3% of portable power tool sales, according to Stevenson TraQline, a market research firm. But its share in both categories declined nearly 6% over the last four years, shrinking alongside Sears' sales.
    Struggling Sears

    Sears first announced last May that it was considering the sale of its so-called KCD line up of in-store brands -- Kenmore, Craftsman and DieHard -- in an effort to raise cash. The company said at that time it was looking at strategic alternatives for its Home Services installation and repair businesses as well.

    The Craftsman sale is part of a broader strategy Sears has to boost its liquidity. That plan includes the closure of 150 unprofitable Sears and Kmart stores, among other steps.

    Rumours of Stanley Black & Decker's interest in Craftsman first began to circulate last October.

    Related:
    HI News Vol. 2 Issue no. 19: Stanley Black & Decker Q3 2016 results, page 28
    HI News Vol. 2 Issue no. 16: Stanley buying Irwin Tools, page 21
    HI News Vol. 2 Issue no. 11: Sears expands its brands, page 24

    Sources:
    Stanley to buy Craftsman - Bloomberg
    Sears sells Craftsman brand to Stanley - Chicago Tribune
    Stanley Black & Decker builds on tool empire - The Australian
    Stanley adds US factory following Craftsman deal - Industrial Distribution
    Companies
    Supplier update
    The Dulux dog makes his thoughts known in the latest campaign
    HNN Sources
    CEVA Logistics is working with Arlec to enter the UK market
    MiTek Industries acquires DIY Technologies
    Subscribe to HNN weekly e-newsletter
    The Dulux dog expresses his thoughts in the latest campaign; Arlec is supplying Bunnings UK stores with the help of CEVA Logistics; and MiTek expands into technologies for the DIY sector.
    Dulux dog in starring role

    The old English sheepdog has been synonymous with the Dulux brand for over 65 years. For the first time, people will be able to hear his thoughts in a new advertising campaign.

    A focus on consumer-centric marketing at DuluxGroup is being spearheaded by marketing director Helen Fitzpatrick. She explains:
    We wanted to tell our consumers that in the future, you'll know why it's worth using Dulux; and we knew we had to do it in an emotional way. Consumers love the Dulux dog, so we thought what better way to gain a powerful, emotional connection to the brand than to make him the star of the campaign.

    The latest Dulux campaign is about educating consumers about the risks of using inferior paints. It does so by highlighting the most important quality test: the test of time.

    On his travels, audiences can hear the Dulux dog's musings on the future, and the importance of protecting homes with the right quality paint. The dog will become a consumer champion and lend a paw to anyone who needs advice on painting their home. Dan Lacaze, client services director at BMF, the agency that created the advertisement, said:
    It's with great responsibility and pride that we have given the Dulux dog a personality, and a bigger and more important role in the communications mix. He's seen it all and there's no one better placed to explain why Dulux is worth it.

    The integrated campaign includes short films for social media, online video, TV and cinema. It will be supported by outdoor, print, online and instore marketing.

    You can watch the ad here:

    Arlec enters UK market

    Australian electronic and electrical products supplier, Arlec will be able to serve Bunnings UK stores through its relationship with CEVA Logistics.

    Under the deal, CEVA will provide warehousing, storage and relabeling services to Arlec from its site at Mendlesham in Suffolk (UK).

    CEVA said it has a long-established tailored approach for companies in the global DIY industry, and has wide experience in managing inbound electronic and electrical products requiring a range of added value services. Arlec Australia managing director, Balu Jega said:
    We are delighted to have partnered with CEVA for our entry into the UK market. The Mendlesham facility is ideally located to manage both our inbound air and ocean product lines. CEVA's ability to provide storage solutions combined with their experience in managing ranges of Far East imported products means that our entry into this new market couldn't have gone more smoothly.

    Of the inbound traffic to be handled under the contract, 95% will be brought to the UK via ocean freight with 5% coming in by air for CEVA to then store and distribute. CEVA's executive vice president, Michael O'Donoghue, said:
    CEVA's implementation of this supply chain solution demonstrates our commitment to new customers in an area where we have considerable experience and expertise. Arlec's product range is constantly developing and we have put in place a range of flexible options to ensure we can meet their future development.
    MiTek secures DIY Technologies

    MiTek Industries has acquired DIY Technologies (DIY) based in Tucson, Arizona (USA). DIY creates web-based design software for a wide range of home improvement and renovation projects. Tom Manenti, MiTek

    chairman and CEO, said:
    DIY has established long-term relationships with some of the nation's largest and most-respected retailers and building products manufacturers. The combination of MiTek's software and capital resources, along with DIY's comprehensive web-based software, will provide unparalleled technology tools that will enhance our customers' value proposition.

    Founded in 1998, DIY provides web-based software focused on do-it-yourself home improvement projects, including decking, fencing and other outside living projects. DIY's software provides its users a wide range of capabilities, from generating project layout sheets, to creating cut sheets and material lists, to identifying and locating specific manufacturer's products at local retail and building material stores.
    Retailers
    Indie store update
    The closure of K&D's Devonport was not a total surprise to the local mayor
    HNN Sources
    The Glenorchy store building has been sold
    The K&D Devonport store opened in 2013
    Click to visit the HBT website for more information
    Tasmania's Kemp and Denning (K&D) has announced it will close its Devonport and Glenorchy locations.

    According to a report in The Advocate, a trade customer of the Devonport store said he received an email from K&D Warehouse chief executive Nick Fazzolari saying the branch would close on March 3. The email said despite its best efforts, K&D could not make its Devonport outlet viable.

    K&D confirmed the three other businesses in the state's south were not affected and operating as normal. The email also said the company's financial position remained strong and the affected staff would receive full entitlements and additional assistance as well.

    Devonport Chamber of Commerce and Industry president Stacey Sheehan said the closure of K&D was devastating for workers but was optimistic for the future of the North-West. She said:
    There does appear to be a lot of positive sentiment about the local economy. People are hiring and hopefully this has not come as a complete shock, because I know a lot of people have been looking at it and questioning whether it would stay open or not.

    To Ms Sheehan, the closure of the store was not unexpected. She said:
    There is a lot of choice for hardware on the North-West Coast and obviously what they were providing was not meeting with what the market wanted.

    Devonport Mayor Steve Martin said his sympathies were with the K&D workers that were out of a job.
    I do think this is specific to K&D having to close when it pretty much has a large portion of the hardware market in Devonport perhaps the business model is wrong.

    It's believed a development application for K&D to extend it's nursery area at the homemaker centre had been lodged with the council recently and was in the process of being assessed.

    However, instead of an expansion plan K&D staff, shareholders and trade customers were informed of the Devonport store's closure.

    The closure of K&D's Devonport store and loss of almost 40 jobs was a blow to the city. Mr Martin said:
    Yes it is a blow because we don't like anybody losing their jobs in our city.

    However, it also created the opportunity for Bunnings or another large retailer of bulky goods to move into the vacant hardware site, he said.
    Sale of Glenorchy site

    K&D chairman Greg Goodman said the Glenorchy store was closing because the building, on Derwent Park Road, had been sold.

    Jackson Motor Company managing director and entrepreneur Errol Stewart has confirmed his company purchased the K&D building late last year.

    Mr Stewart said his company bought the store just before Christmas for close to $6 million. He said he had not yet decided what the site would be used for, but that it was possible he would expand the nearby motor company or install a tenant.

    Mr Stewart - whose latest projects include a $16 million hotel development on a prime Tamar River site - said the K&D store was in a "strategically great location". He expected jobs to be created at the site after K&D's closure.

    K&D opened its first warehouse store in Hobart in 1986. The Glenorchy store opened in 1996, followed by Cambridge in 2008 and Devonport in 2013.

    Related:
    Indie store update: Kemp & Denning exits Mitre 10 - HNN
    K&D continues to trade, remains unsold - HNN

    Sources:
    About 40 jobs to go as K&D sells Glenorchy store building - The Mercury
    Devonport business to close doors - The Advocate
    Jackson Motor Company buys Derwent Park K&D store - The Mercury
    Retailers
    Europe update
    Grafton Group's Woodies business sees a solid increase in volumes
    HNN Sources
    Screwfix is set to open 4th distribution centre and additional stores in 2017
    Travis Perkins has collaborated with a team of designers on a new method of construction
    Click to visit the HBT website for more information
    Grafton Group delivers improved performance; a new distribution centre and more stores for Screwfix; and Travis Perkins has been involved in a Circular Building project.
    Grafton's multiple markets boost revenues

    UK builders merchanting and DIY group, Grafton said it ended 2016 strongly with revenues rising 13.4% to GBP2.51 billion (AUD4.1 billion) from GBP2.21 billion (AUD3.6 billion) in 2015.

    In a trading statement issued in advance of the company's final results in March, the group said turnover was up 10.4% on a constant currency basis.

    Grafton operates the Woodie's DIY chain across Ireland and also has operations in the UK, the Netherlands and Belgium. It trades from 650 branches and has 11,000 employees.

    The company said revenues from its merchanting division, which accounts for 92% of group revenue, were particularly strong. Chief executive Gavin Slark told the Irish Times:
    The group finished the year on a more positive note and saw the benefit during 2016 of its exposure to multiple markets.

    Like-for-like revenue grew by 5.3% for the final quarter, the strongest pace of growth since the first quarter of 2016.

    In the UK, full-year merchanting turnover was up 6.6% on both an actual and constant currency basis.

    Grafton said its Selco Builders Warehouse outlets outperformed the UK merchanting market with good revenue gains in established branches and growth from new branches. It said expansion of the branch network gathered pace with the opening of seven branches, increasing the network to 47 in 2016. The group plans to open at least 10 more Selco stores in 2017.

    Revenue also picked up in the last quarter for its other merchanting retail brands, Buildbase and Plumbase, although the market remained very price competitive.

    The group's merchanting business in Ireland outperformed a recovering construction market, driven primarily by growth in residential RMI (Remodelling Market Index) activity. It reported a double digit like-for-like revenue increase for the third successive year. Turnover was up 11.9% on a constant currency basis.

    The Woodie's DIY business, which accounts for 6% of group revenues, reported a "solid increase in volumes," the group said. It is "benefitting from the initiatives undertaken in recent years to improve the customer proposition and a more favourable retail market". Overall, retail revenues were up 5.6% on a constant currency basis last year.

    The Netherlands merchanting business, acquired in November 2015, performed well, supported by good economic growth and a strong recovery in the residential new build and RMI markets. However, the Belgian business continued to experience "difficult market conditions with softening demand".

    Grafton said its UK mortar manufacturing business experienced stronger demand in the second-half of the year from its house builder customer base. It also increased revenue from the acquisition in 2015 of a packaged mortar products business.
    Screwfix growth plan

    UK trade tools and hardware retailer Screwfix will get a new warehouse for its expanding store network. It recently notched up store number 490 and has self-stated plans to open "one store per week".

    Set to open later this year, the warehouse will be built in Prologis Park Fradley, near Lichfield, on a site the size of seven football pitches (562,000sq ft.).

    The Screwfix brand is part of the Kingfisher Group and has been a star performer. Kingfisher's latest financials revealed Screwfix's sales growth hit 23.1% in Q3 2016. Supply chain, logistics and IT director, Martin Lee said:
    The decision to construct a warehouse near Lichfield was taken to ensure we have the logistics infrastructure to support the needs of our expanding business. Adding one store per week to our network means we need to make sure we have the stock distribution in place to enable our busy trade customers to get what they want, when they need it from the nearest Screwfix, so they can get back to the job as quickly as possible.

    The building has taken sustainability into account with use of technology including solar PV panels, LED lighting and rainwater harvesting planned to minimise the environmental impact of the site.
    Travis Perkins participates in Circular Building

    British builders' merchant and home improvement retailer, Travis Perkins has collaborated with a team of designers on a new method of construction; where materials are sourced, built then recycled and reused as part of a process aimed at improving quality of living in the future.

    Travis Perkins partnered with Arup - an independent firm of designers, planners, engineers, consultants and technical specialists - alongside facade supplier, Frener & Reifer, construction design company, BAM and The Built Environment at London Design Week in late 2016.

    Together they designed and developed a Circular Building prototype, which allowed the participants to investigate how the circular economy can benefit the industry and the built environment. Jez Cutler, head of environment at Travis Perkins, said:
    The project provided Travis Perkins with a unique opportunity to understand what distribution challenges exist in a circular economy for example, in routine building materials like timber cladding and flooring joists.
    We supplied the new material and, once the event had come to a close, the house was disassembled and we took all the materials back. This was followed by an examination of the condition, its presentation and value before determining possible reuse or recovery options. Distributors have a crucial role to play in the circular economy and it's clear that strong collaborative linkages with solid supply chain support are essentials to a circular economy model.

    The Circular Building tests the maturity of circular economy thinking in the supply chain and examines what it means for building design. It asks questions that alter design and construction priorities, such as can buildings be designed where all of its components and materials can be reused, remanufactured or recycled?
    Products
    Control shock hammers
    Fiskars' hammer range incorporate the patented IsoCore[tm] Shock Control System
    HNN Sources
    These product have proved popular with professional end-users
    The hammer are suitable for major framing jobs to small interior tasks
    Click to visit the HBT website for more information
    Fiskars' IsoCore[tm] Shock Control System hammers have a patented technology that captures the kinetic energy and vibration of every strike, reducing the impact felt by the user up to four times compared to a traditional hammer.

    The range features two claw hammers, one framing hammer, a club hammer, a sledge hammer, a maul and a mattock that are all endowed with the vibration control system.

    The claw hammers are ideal to remove and pull out nails easily and allow for more precision work. The framing hammers are longer, and are designed to be used for longer periods of time. The longer shafts allows more swing and therefore efficiency. Each hammer head is fitted with magnetic technology that holds the first nail in place, and eradicates the age old problem of whacking a finger on the first hit.

    The club, sledge and maul use the IsoCore system to reduce the vibration that comes from the shock of the strike in the joints. A common problem amongst users of heavy duty demolition hammers is that inaccurate strikes weaken the shaft, so Fiskars has reinforced the demolition head with an overstrike protection to strengthen the shaft.

    It has added a sloped head to push debris away from the user and towards the sides after each hit. The sledge hammer, in particular, can generate five times more power on each strike.

    For added safety due to heavy use, each hammer is fitted with a retention bolt that ensures the head won't separate from the body.

    Fiskars trademark ergonomic design also helps to absorb shock and protects joints.

    Related:
    Fiskars' Striking Tools wins at NHS - HNN
    Products
    Rover adds to Duracut range
    The Duracut 420 has a mulching option that is ideal for smaller yards
    HNN Sources
    The Duracut 820 is equipped with a 159cc Rover OHV 800 engine
    The Duracut 820 also has a 46cm (18-inch), 1.8mm steel deck
    Click to visit the HBT website for more information
    Rover's Duracut Series has four new models. The company says the18" Steel Deck Pedestrian mowers start the first time, every time.

    Built with a159cc Rover 800 engine that punches out 8.04ft-lbs of torque, the four swing back blades featured on the Duracut 820 and 850SP can cut easily through any length of grass.

    On the other hand the 410 and 420 models pump out almost 5ft-lbs, making either series an ideal domestic and commercial product. An extra-wide 46cm high quality steel deck on all models with ten different height adjustment settings will shave time off mowing time.

    Rover's Safe Stop technology all four new models will stop the mower automatically if the user is not in control, minimising injury and providing peace of mind for the user.

    Durability is a core attribute of the Pedestrian series. They feature a 1.8mm thick steel deck that offers increased strength on component contact and wear points. In addition, they are fitted with full 8-inch ball bearing wheels matched with a Zag 2-grip pattern for top performance in rugged conditions.

    Each mower and engine is backed by a five year warranty domestically and 90-day warranty commercially.
    News
    HI News V2 No. 19: Next Gen DIY
    Download the latest issue of HI News Vol. 2, issue no. 19
    HI News
    Younger DIYers need different products
    Millennials want technology in their homes
    Click to visit the HBT website for more information
    The final edition of HI News for the year is mainly about the next generation of DIYers. As baby-boomers age out of DIY, home improvement retailers and suppliers need to revise the kinds of products they sell to younger generations.

    Technology remains very important for the millennial demographic when it comes to their homes.

    Just click on the following link to download this edition:
    HI News V2 No. 19: Next Gen DIY

    Also in this issue, we analyse the strategies that may have led to the demise of Masters and look back at some of its merchandising highlights.

    We take a further look at Metcash-Mitre 10 results and reveal its independent hardware brand. Other company results include tool companies, Stanley Black & Decker, Hitachi Koki and Makita. US home improvement retailer also reports disappointing third quarter results.

    The biggest news in the big box retail sector is the surprise resignation of Bunnings CEO John Gillam. We note some of the major achievements during his storied career at Wesfarmers.

    In statistics, we discover another set of data on renovations that may be helpful.

    Products featured in this issue include the latest range from Briggs & Stratton; a charging surface from Corian; the Danco toilet seal; and a Kickstarter-funded shovel.

    As the last issue for the 2016 and to celebrate Christmas and the holiday season, we take the opportunity to thank our readers, advertisers and supporters.
    Editorial
    Next Gen DIY
    The Sutton Tools lock jig
    HNN Sources
    The Irwin lock jig
    Ryobi faceplate recess maker
    Give to Amnesty International
    It's likely that 2017 will be a year of considerable changes for the Australian home improvement retail industry, as well as the larger economy. Ford Australia has already halted production of locally made vehicles, and late in 2017 both General Motor's Holden and Toyota will do the same.

    In the retail world, there is a high probability that US ecommerce company Amazon will open up local distribution for its products. This will eliminate high shipping costs from the US, and open up a new era of discounting on products ranging from power tools to washing machines. Amazon is also likely to launch an array of high-tech products that help it push its products, and has already extended its video content streaming services to include Australia.

    If that is not enough, the home improvement industry, over the next four to five years, is going to encounter cultural shifts that will change one of the key areas of its business, the DIY home-owner. Up until recently, the sheer size of the baby-boomer generation, and the increasing difficulty most people under 30 experience in buying a house due to high prices and a lacklustre job market, has protected retailers from this demographic shift.

    The population, of course, is always ageing out, with younger people replacing older people in the demographic areas that buy more DIY and other items. What makes this shift more important is that, without being conscious of it, many retailers have been tailoring what they sell to the baby-boomer generation. Even as it ages its way out of prime demographics, it represents such a large group, that it has managed to remain a prime marketing target. Retailers have, as a consequence, grown a little less sensitive to the need for constant change.

    Over 27% of the population is now aged between 25 and 40, with a significant chunk of the baby-boomers shifting into the lower-spending and less DIY-prone over-60 group. Ageing-in-place conversions might be one of the next booming markets, but you can be pretty sure most of that work is going to be done by trades, and not the older people who are the target market.

    There is another, really crucial factor that many commentators tend to ignore. As the crucial baby-boomer population does age, what else happens? That situation is summed up by demographics researcher Mark McCrindle like this:
    The Baby Boomers currently comprise 25% of the population yet they own 55% of the nation's private wealth. And in 2020, when the oldest Boomers hit their mid 70's, we will witness the biggest intergenerational wealth transfer in history.

    Inheritance, or in many cases simple generosity, will see a very delayed shift of wealth from an older, highly invested generation to a struggling younger generation.

    How will this affect DIY? The baby-boomer generation may be the last generation to be provided with generally applicable DIY skills. Some see this as a lamentable state brought about by inattentive parenting, or a lack of training at school. One major contributor, however, is simply that things tend not to break down so often, and when they do break down they require complex repairs.

    Few of the Millennial generation, for example, know how to start a car with a flooded carburettor - because just about every vehicle is fuel-injected now. Not to mention that twelve years from now, probably half of all cars sold will be electric.

    Even a simple skill like changing a flat tyre is becoming more rare, simply because, where you could once count on getting a flat at least once every two years, roads and tyres have improved to make flats far less common. Many cars use run-flat tyres as well, making it more convenient just to drive to a garage. In short, car maintenance, as it was 30 years ago, is simply no longer a valued skill.

    You can extend that to a range of other DIY activities. Why would you build your own bookcase, for example, when you can pick up one that is so much better from IKEA for $70? (Not to mention that you probably don't own that many printed books anymore.)

    Plus, with the block sizes for houses getting ever smaller, and a confirmed move to multi-dwelling residences, that icon of male adulthood, the shed, is fast disappearing. It's hard to even find a spare corner of a garage for a workshop these days.

    We're as little as five years away from the point where many households will likely find a 3-D printer to be more useful than a power saw.
    What to do?

    If home improvement retailers (and their suppliers) are going to have any hope of retaining the profitable DIY market for the next ten years or so, they will need to change their approach to this market. This means new and different products, different ways of selling in-store, and promotional activities that are more attractive to younger people.

    One way to determine how to latch onto better growth in the future is to observe what other industries are doing as they struggle with similar problems. There is some inspiration to be found in a slightly surprising source: the laptop computer industry, and in particular the changes that Apple is bringing to its products and marketing in that area.
    The MacBook Pro situation

    Recently there has been a backlash towards Apple over the release of its latest MacBook Pro laptop computers. People who consider themselves to be "professional" users have complained that, for a "pro" computer, it's a bit lacking in features and power.

    The addition of a "touchbar" in place of function keys has attracted as much bewilderment as criticism amongst this same set of critics. The touchbar is a touch-sensitive graphics display system that responds to whatever software is running front-most and provides quick access to the most commonly used features and commands.

    Most truly "professional" users have not found this to be a very useful feature. After all, after years of intensively using specific software, they already know most of the key commands they need. Even its display of suggested phrases to ease the task of typing is relatively useless. If you touch-type at a speed over 30 words per minute, you really don't need that kind of feature.

    Look beneath the surface of this apparent stress and rejection, however, and you can see the shape of a clever strategy that is being implemented by Apple. What seems like a few not-so-clever product tweaks is actually a vast shift in product design, and a realignment in the market place.

    One indication of how seriously Apple is taking this change can be seen in its use of one of the "sacred phrases" of Apple lore when introducing the product line: the "Hello, again" message that was contained in the media invitations to the event. Famously, when Steve Jobs introduced the first Macintosh computer, the screen showed the "Hello" message in a styled font, then a first for any personal computer. Later, when Mr Jobs returned to company and revitalised its product line with the colourful iMac, the message "Hello, again" appeared.

    What is the purpose of this "third-coming" of the Macintosh? In the past, Apple has done what almost every PC maker has done with its product line. They began at the pinnacle of their user pyramid, the high-end, pro users who really stress out their machines, as designers, software engineers, web developers, video editors and photographers. The laptops in particular, which started out as a very premium line, were designed for their use, and then "de-featured" for less intense users as the standard MacBook. Diagram 1 shows roughly how this market approach maps out.
    Diagram 1: Old market approach

    With the new MacBook Pro, however, that approach has been almost reversed. Instead of appealing to the highest level of users, these laptops are designed with less proficient users in mind. The goal of these laptops is not to make the top users happy, but to take less proficient users and make them more proficient, through the addition of features such as the touchbar. Diagram 2 shows how this approach works.
    Diagram 1: New market approach

    Why? There are really two, interlocked reasons. First, those less proficient users who want to be more proficient make up a much larger market than the fully proficient users. Secondly, the fact is that there is now a gap between less proficient and fully proficient users. The market has actually split. It has split for a variety of reasons, but one of the main ones is that much of the market is now made up of people whose main experience with computing has to do with their smartphones rather than computers.

    This is a very big change to the way Apple markets its products. It really is about reinventing the Macintosh.
    The DIY situation

    Similar market forces are at work in the DIY hardware world. There is a considerable prize that will become available over the next three to five years for retailers and suppliers who manage to crack the code, and actually make DIY products that are suited to this changing market.

    The initial problem for suppliers and retailers is identifying what needs to change. Many of us have had the experience of asking a computer expert of some sort how to perform a certain task, and getting back a stream of what sounds almost like gibberish instructions. For many DIY users, the DIY world is treating them in a similar manner.

    That's a little hard to believe, so let's take a very simple example, and walk our way through it to show how confusing and difficult DIY can be.
    Fitting the lock

    As our relatively simple task, let's consider the steps you need to go through to fit a deadbolt lock to a door that hasn't been pre-drilled for it. That is the kind of task that many DIYers would take on. A typical case might be a door that leads from an attached garage into the house. It's currently fitted with a knob, and has a button lock on the knob, but the homeowner decides it might be a good idea to fit a deadbolt before going away on holidays, just to make it a bit more difficult for any prospective thief to get in. To make things a little easier, we'll only look at fitting the lock in the door, and not the steps necessary to fit the receiver for the bolt into the door jamb.

    Let's just go through the steps necessary to perform this task.

    1/ Measure place where lock will be inserted.

    2/ Drill large hole through door for the body of the lock.

    3/ Drill smaller hole along the plane of the door for the bolt to go through.

    4/ Chisel out a recess for the faceplate to be screwed in.

    5/ Insert the bolt.

    6/ Fit the faceplate, and screw it in place.

    7/ Fit the lock onto the bolt.

    8/ Secure the lock with screws.

    9/ Add the rose plate to the lock to hide the screws.

    Think for a moment about where you believe the real "pain points" will be for an inexperienced DIYer attempting this task for the first time.

    Most people would focus on the "big tasks", drilling the two holes as being the most difficult to get right. That could be the case if you relied on the paper templates provided with most locks. Fortunately, several companies have come along and produced special jig kits specifically for this task. HNN bought two of these kits, one made under the Irwin brand, and one made under the Sutton Tools brand, to test out.

    As it turns out, these kits, for the most part, work very well. There are some significant differences in the approaches each takes. The Sutton Tools kit provides a one-sided jig for the door holes, while the Irwin kit provides a two-sided jig. As it turns out, this doesn't really matter all that much.

    The process involves using a hole saw with a pilot drill to cut through the door from one side about two-thirds of the way through, then reversing the drill and completing the cut from the other side of the door. While the two-sided jig was a little bit of a help, it turned out that using the Sutton one-sided jig was just as easy. Cleverly, the jig can be attached to the door edge using the screws that go into the faceplate, making it very secure. Drilling in from the opposite side wasn't difficult, as the pilot hole made alignment simple.

    However, where the Irwin jig did have a big advantage over the Sutton jig was in the latitudinal adjustment for the length of the bolt. The Sutton jig takes care of this with a plastic-on-plastic slider which, in the jig HNN purchased, was somewhat jammed. It seemed at first as though some fault had occurred in manufacturing, fusing the two parts of the slide. It was only after giving the slide an almighty tug that the slider worked. It's possible that some DIYers would actually give up at this point.

    On the Irwin jig there is a simple push together and slide mechanism, that is also conveniently notched for the two most common sizes of backset.

    The hole saws provided in the kits for drilling the large lock hole were tested out on solid pine, and both performed very well. The jigs really made what could have been a difficult task very easy to perform.

    In order to save costs, both kits came with two hole saws, one for the main lock and one for the barrel of the bar, but only one arbor. So, after drilling the main lock hole, the next task was to remove the arbor from the larger hole saw and fit this to the smaller hole saw.

    Which is where the real problems, for an amateur DIYer, begin. Any amateur DIYer using a hole saw is going to do what? They will either push the drill too hard, or tilt it a bit too much, making the bit jam, the drill torque -- and when the drill torques it is going to set the arbor good and solid into the drill body.

    If you have a workshop vice handy, it takes about six seconds to free the arbor from the drill body. Just set it in the vice, grab a spanner, apply a bit of elbow grease and it comes off easily. If you have a G-clamp handy, it takes about 30 seconds to secure the drill body and get a grip on the arbor. But what if you have neither? What if the only tool to hand is a single, fairly wimpy adjustable spanner? What do you do then?

    The real answer to that is -- as is the case with so many things -- not what you do then, but what you should have done before. An old trick is to take a bit of thin fence wire, and wrap it once or twice around the arbor where it meets the drill body (you can dab a bit of WD-40 on it as well, if you want to be fancy). Drill the hole, and if the arbor has bound, it pretty easy to work the wire out (a pair of needle-nose pliers can help). Once the wire is removed, the arbor can be spun off by hand.

    If you don't know that, if you don't have either a vice or a G-clamp available, it's likely your door DIY project has just come to a halt. Unless, of course, you find some way to get ingenious about jamming the body of the hole saw in a door or something or (dangerously) try jamming the hole saw with the drill set in reverse to torque your way out.

    The problem is, of course, with an inexperienced DIYer, it's likely providing instructions to use the wire trick probably wouldn't work either. That's because people new to DIY really do expect clean, simple solutions. Twisting a bit of wire around the arbor just seems clumsy, and makeshift.

    So, there are really only two solutions. One is simply to either supply two arbors in the kit, one fitted into each hole saw. The other is to use the kind of click-on arbor you can find in Starrett kits. There is no reason, after all, that the arbor should attach via a threaded coupling. The major force is torque, not pressure.

    So that is the first point of absolute failure with these kits. What is the second point? What task remains that a novice DIYer is going to find really hard to complete?

    It is what is required by the deceptively simple requirement to "chisel out a recess for the faceplate". If you have never used a chisel before, how are you going to do that? Bear in mind this is a very shallow recess, about 2mm deep. It's also highly visible, and affects the entire fit and finish of the lock.

    Irwin did actually think about this problem, while Sutton did not. Irwin includes in its lock kit a small router bit that can be fitted to a drill, and small plastic template to use with it. The template enables the user to cut around the edges of where the faceplate goes, then chisel out the remaining wood.

    It's not a bad idea, except for one thing: unless you are very careful when you are using the router bit, you are going to chew right through the thin plastic template, making it almost worthless for someone who is not experienced.

    As it turns out, this is such a considerable problem, that there are kits you can buy to help you perform this task. The one HNN purchased is made by Ryobi. It consists of a plastic device, with a metal ring in the shape of the faceplate sticking out. The user bangs on the plastic handle, embedding the metal ring in the wood, then pulls it out. The device has a built-in chisel that can then be used to chip the wood inside the indentation out.

    It's not bad to use -- except that the built-in chisel is close to worthless. But you can bang in the metal ring, and then effectively use a real chisel to chip out the wood to form the recess.

    So, to make this kind of kit effective for the real novice DIY market, you would need to solve the arbor problem, and include some simple tool to make fashioning the recess much easier. Of course, the objection most tool designers would have to these changes is that they will increase the cost of the kit.

    That's true, but the core thing to understand is that, in this market, price is not nearly as important as providing all the ingredients needed for success. There is no point in being a novice DIYer and buying a lock kit that ends up not working.
    The new market

    The point of the above example is not so much a review of two particular lock jig sets, or identification of the problems they don't quite manage to resolve. What it is really about is investigating a certain frame of mind. Can we look at typical DIY tasks and see all the obstacles they present to people with limited experience? Can we find our way to solutions for most of those problems, or at least bring those solutions within the reach of people with a low level of skills?

    One of the core values involved in this that it is important to get right is that cost is far less of a consideration than might normally be thought. For someone with some experience, the cost of a jig for fitting a lock might matter a lot. For someone whose only alternative would be spending money on a tradesperson to do the work, cost is far less of a concern.

    It is a difficult set of adaptations for the industry to make, but looking into the mid-term future, it is a crucial adjustment to make.
    Other cultures

    In addition to adapting to people with fewer skills, the other task that faces hardware retailers and suppliers is adapting to people with widely different skills. There are two sets of cultures that while they not strictly about DIY, come very close and could offer effective DIY-like markets in the future.

    The first of these is something that has become known as "maker culture". Here is one definition of what that maker culture is:
    Maker culture emphasises learning-through-doing (active learning) in a social environment. Maker culture emphasises informal, networked, peer-led, and shared learning motivated by fun and self-fulfilment. Maker culture encourages novel applications of technologies, and the exploration of intersections between traditionally separate domains and ways of working including metal-working, calligraphy, film making, and computer programming.
    Community interaction and knowledge sharing are often mediated through networked technologies, with websites and social media tools forming the basis of knowledge repositories and a central channel for information sharing and exchange of ideas, and focused through social meetings in shared spaces such as hackspaces.

    Typical maker culture activities consist of everything from simple electro-mechanical home automation (remote controlled solenoids connected to wi-fi that mechanically turn on/off light switches, for example) to robots that perform basic tasks. Some of this has a practical bent, and some is purely playful or exploratory.

    The second is the world of "craft", but not quite craft as we have known it. It is often just as much about a form of "hacking" traditional forms of craft to produce startling and different results. Much of this is about repurposing both found and purchased objects to suit new needs.

    For example, there is a whole sub-culture of this kind of craft that is dedicated to reconfiguring and repurposing IKEA furniture so as to make it serve radically new purposes. This includes people using IKEA to subdivide new rooms in their apartments, and create entire new categories of furniture, often combining the functions of two or three pieces into one.
    Analysis

    It is necessary to emphasise that, while some of the above might seem a little negative, in fact the future for DIY is a very bright one. One reason car manufacturing is ending in Australia, is that there is simply too much capacity worldwide, and much of that capacity is in nations where labour costs are lower. There is little doubt that, over the next 15 years, private ownership of vehicles is set to diminish. Autonomous vehicles, even if they provide only limited transit areas, will make owning a car less vital to everyday life. At the very least, two-car families will likely transition to one-car families, and in the inner cities in particular, the number of no-car families will increase.

    What is also set to increase is the amount that families and individuals spend on fixing up their houses. That money is less likely to go into expensive leather lounge suites and marble countertops in vast bathrooms. Where it will go is into home technology. The modern home, with solar energy roof tiling, a complex battery system to store off-peak power on sunny days, comprehensive energy monitoring, water recycling, and, most likely, a central computer that runs all these and many other systems, is going to become even more a focus for spending.

    The thing to grasp, for retailers and suppliers that really want to benefit from these coming changes, is that the spending will be on areas that are today only just beginning to become viable. There really is a new era coming to the home improvement industry, and it will reward those companies and retailers that understand it early, and being preparing for the change soon.
    Bigbox
    Big box update
    The Shepparton Bunnings store will be the second largest in Victoria
    HNN Sources
    Bunnings has flagged plans to move into the former Masters site at Albion Park (NSW)
    Woolworths has found new jobs for more than 1500 of its former Masters workers in its supermarket chain
    Click to visit the HBT website for more information
    The Shepparton Bunnings store will be the second largest in Victoria; there are plans for Bunnings to move into the former Masters site at Albion Park (NSW); Bunnings' head office site has been sold; and several ex-Masters staff have transferred over to Woolworths supermarket stores.
    Shepparton will be second largest in VIC

    The $53 million Bunnings store being built in the regional area of Shepparton (VIC) is on schedule to open in mid-2017, according to the Shepp Adviser. It is set to become the second largest Bunnings Warehouse in Victoria.

    Currently under construction at 90 Benalla Road in Shepparton, the new Bunnings' will see approximately 50 new jobs created following its opening, taking the team to approximately 180. Bunnings property - general manager, Andrew Marks said:
    On-site, the majority of ground works are complete with construction progressing to the erection of structural steel and concrete wall panels. Bunnings Warehouse Shepparton will have an approximate total store size of 18,000sqm...The development will include a main warehouse, indoor timber trade sales area, building materials and landscape supplies yard and outdoor nursery, as well as an indoor playground and cafe and parking for over 410 cars...
    Bunnings has been part of the Shepparton community for over 15 years and is looking forward to bringing a bigger and brighter offer with the new store.
    Masters Albion site for Bunnings

    Bunnings has flagged plans to move into the former Masters site at Albion Park (NSW). The Advertiser Lake Times reports that Bunnings has lodged a development application with Shellharbour council, seeking to modify the Masters consent.

    Instead of being a classed as a "home improvement centre" Bunnings wants to create a "hardware and buildings supplies" store, and make a series of minor design modifications.

    If approved, the Albion Park location would add a growing stable of Illawarra Bunnings outlets. A $30 million development is planned at Kembla Grange, and a store is underway at Russell Vale in addition to the three others in the region.
    Bunnings' HQ sold off

    The Bunnings head office based in Hawthorn East (VIC) has been sold for $24.7 million to a private syndicate. It was purchased on a yield of 6% in a deal negotiated by Colliers International's Peter Bremner and Rob Joyes, according to the Urban Developer.

    Despite the sale, Bunnings' staff will continue to operate from the same location, having commenced another six-year lease in August, with an additional six-year option to renew.

    Mr Bremner said the buyer recognised the property, which has a net lettable area of 5295sqm, as an "outstanding" opportunity to secure strong-performing real estate with a solid income stream in a prime location. He said:
    Bunnings is Australia's largest private employer and largest company in terms of revenue and has been a long-term tenant since the building was specifically constructed in 2004. The building offered a predictable and secure cash flow stream until at least August 2022, as it continues to be Bunnings' national headquarters, plus significant future rent reversion in a thriving inner-east suburban location.

    The off-market campaign achieved a quick turnaround, selling to the syndicate within two weeks of the first inspection.
    Ex-Masters staff deployed to Woolies

    Woolworths has found new jobs for more than 1500 of its former Masters workers in its supermarket chain, according to a report in Fairfax Media.

    Approximately 1650 Masters staff of a workforce that used to total 6000, have accepted new roles at Woolworths. This represents a take-up rate that equates to just under half the number of people who were offered alternative jobs.

    An additional 600 workers have taken roles at other, mainly hardware-aligned businesses through Woolworths' outplacement program implemented when the retailer announced plans to shut down the store network.

    Woolworths home improvement human resources director Gillian Davie said workers who didn't take up alternative employment offers were able to gain redundancy payments, which included access to a job placement program. She said:
    We are proud to say that every Masters store employee who wanted a job in Woolworths was given a job offer as per the commitment made by Brad Banducci at the time of the announcement of the home improvement exit.

    Matthew Dickson was working as an assistant store manager at Masters but has moved from Newcastle (NSW) to take a store manager role with Woolworths at Coonabarabran, two hours from Tamworth.

    Mr Dickson said it was quite a transition, moving from hardware to grocery but he said there was also a lot of similarities.
    The main difference between hardware or home improvement and a supermarket is the product you are selling, you are still in a role where you are looking after a team and leading a team and making decisions based on the customers and that doesn't really change no matter what retailer you are working for.

    Retail analyst Steve Kulmar said the high number of Masters staff moving across to the Woolworths chain reflected just how tough it was in the retail sector and he warned the outlook was uncertain for retailers that hadn't kept up with the shopping habits of the millennials. He said:
    Millennials are now the dominant group and they have a very different approach to retail, which is more considered and they do a lot more research. They are inclined to shop less but they make very considered purchases and in-store or brand experiences play a massive role. A lot of retail businesses just don't know how to do that and I think they're secretly wishing they were still selling to impulsive baby boomers out of average stores.
    Companies
    Supplier update
    Dulux chief executive Patrick Houlihan addressed shareholders at its AGM recently
    HNN Sources
    Stanley Black & Decker has extended its deal with IkeGPS Group for its Smart Measure Pro product
    Taubmans features snow globes in its latest print advertisements
    Subscribe to HNN weekly e-newsletter
    Dulux chief executive Patrick Houlihan remains positive about the company's future; Stanley Black & Decker has extended its deal with IkeGPS Group for its Smart Measure Pro product; and Taubmans Endure Exterior paint features snow globes in its latest print advertisements.
    The future is profitable: Dulux chief

    At Dulux's annual general meeting recently, chief executive Patrick Houlihan told shareholders he expects the company's core home renovation and maintenance markets, which account for two thirds of revenue, to drive sustainable profitable growth this year as the sector returns to long-term average growth rates in 2017.

    Mr Houlihan confirmed that subject to economic conditions and excluding non-recurring items, Dulux expected overall net profit after tax in fiscal 2017 to be higher than the 2016 equivalent of $130.4 million.

    He also noted that the company should not be affected by the closure of the Masters hardware chain. Mr Houlihan said lead indicators in the company's key markets remained largely positive. He said:
    Our core existing home renovation and maintenance markets...are expected to continue to provide resilient, profitable growth. The new housing market segment accounts for approximately 15% of group revenue and we tend to focus on the higher-margin, premium end of this market. Although new housing approvals have peaked, we expect this market to remain strong in 2017, given the solid pipeline of work yet to be commenced and completed.

    He said commercial construction markets were expected to remain solid, but resources infrastructure markets would continue to struggle while markets in China and PNG were tipped to stay weak in the immediate term.
    However, we are confident our core, renovation and repair markets in Australia and New Zealand are on track to revert to normal, resilient growth rates.

    Related:
    DuluxGroup FY2016 results - HI News, page 22
    IkeGPS expands Stanley deal

    New Zealand-based IkeGPS Group has struck a new deal with Stanley Black & Decker.

    The tool company has extended its supply, branding and distribution agreement for Ike's Stanley Smart Measure Pro product that targets the construction industry and professional contractors. The agreement term runs to the last quarter of 2018.

    Ike executives said sales channels contemplated under the agreement are Stanley Black & Decker's big-box retail and specialty distribution partners spanning Europe, North America, Asia, Australia and New Zealand where partners include Bunnings.

    To facilitate sales into these different markets, the product has now been translated into 15 different languages and customised for 25 different geographic territories.

    The Stanley Smart Measure Pro product was launched in December 2015. About 25,000 units were sold into the US market in FY16 through Lowe's stores. The FY17 unit volume forecasts have been upgraded twice in the first half of the financial year, from 26,000 units to 39,500 units, as a result of three new European markets. Ike chief executive Glenn Milnes said:
    Given the extremely positive customer and market response to the product since its launch into North America and now into the UK, France and Germany, the extension of our agreement with Stanley Black & Decker is an exciting long term development for this product.
    We have already seen the power of big-box retail distribution and anticipate follow-on orders from each of the aforementioned markets as well as launch orders for numerous new territories and channels through FY17, FY18 and beyond.

    This renewed agreement has been concluded on improved commercial terms and the sale of units will generate material gross margins for Ike.

    Related:
    Kiwi tech in US home improvement market - HNN
    Snow globes star in paint ads

    Taubmans and its creative agency Naked Communications have launched a print campaign to inspire consumers to make the most of their festive free time by painting the exterior of their home.

    The campaign focuses on Taubmans Endure Exterior, a premium paint designed for maximum protection against all weather conditions. It dramatises the effectiveness of Taubmans paint by showing a range of different regional-style Australian homes, each encased in a snow globe. Fiona King, senior brand manager at Taubmans, said:
    Our customers can sometimes struggle to find the time to paint, but with the great weather and time off, the holidays are an excellent time to finally get around to it. Taubmans Endure is the perfect choice because it has Nanoguard Technology, which provides maximum all weather protection. We felt this idea brought this to life in a fantastically simple way.

    Jon Burden, Naked's executive creative director explains:
    Leading up to the holidays many brands are shouting for people's attention, especially in print format. We wanted to stand out from the Christmas crowd by creating something simple and pure. I believe the mark of a good product ad is being able to explain the product benefit without explanation or a list of claims, and this concept does just that.

    The campaign is running across national magazines and press.
    Products
    Briggs & Stratton industry showcase
    The 8,000 watt Elite Series portable generator is suitable for serious do-it-yourself projects
    Briggs & Stratton
    Vanguard's Oil Guard System offers savings for commercial landscapers
    EASYflex high-pressure washer hoses are designed to make pressure washer set-up and storage easier
    Click to visit the HBT website for more information
    This year's Green Industry and Equipment Expo (GIE+EXPO), the outdoor power equipment industry's largest gathering in Kentucky (USA), provided a showcase for Briggs & Stratton. Dealers and retailers had the opportunity to see and test out the latest products.

    The 8,0002-Watt Elite Series[tm] Portable Generator with StatStation Wireless Bluetooth allows homeowners to monitor the generator from a smart device. They will be able to see the remaining fuel levels or capacity of the generator at a glance. The app also provides maintenance reminders and a store locator.

    The Vanguard[tm] brand launched Vanguard Oil, a 100% synthetic 15W-50 small engine oil designed for demanding commercial engine applications. Vanguard Oil is ideal for commercial-focused turf-cutters who push their small engines to the limits.

    Vanguard's Oil Guard System allows for 500 hours between oil changes. The system continuously exchanges oil between the engine and a large remote oil reservoir external to the engine. It protects the engine oil from thermal breakdown, extending maintenance intervals and producing a cooler running engine.

    The Mow N' Stow(r) + Just Check & Add[tm] walk mower engine combines two of Briggs & Stratton's most recent innovations. The engine never needs an oil change; owners need only check oil levels and add when necessary. This mower can be folded and stored upright even with gas and oil in the tanks, taking up 70% less space in the garage.

    EASYflex[tm] high-pressure washer hoses are designed to make pressure washer set-up and storage more manageable. At 30-feet long and more flexible than a standard pressure washer hose, it helps improve the pressure-washing experience.

    The Briggs & Stratton Protection Pack for pressure washer maintenance includes the exclusive pump saver formula to protect piston and seals from damage; O-ring replacement kit; and advanced formula fuel treatment and stabiliser to help prevent damage caused by ethanol.

    The third pressure washer innovation introduced at the expo is a rotating surface cleaner with detergent tank, which allows users to clean large outdoor areas such as driveways and decks. It comes in a 16-inch size designed for gas-model pressure washers and a 14-inch size for electric pressure washers. Both come with an integrated detergent tank.
    Products
    The shovel that's badass
    DMOS has had another successful Kickstarter campaign for its Alpha Shovel
    DMOS Collective
    The Alpha Shovel can be used for shovelling and cutting through hard surfaces
    In 2015, DMOS introduced the Stealth Shovel on Kickstarter
    Click to visit the HBT website for more information
    Portable tools innovator DMOS has launched a second campaign on crowdfunding site Kickstarter to debut its new shovel for the active outdoorsman or DIYer. Supporters can pre-order discounts on the Alpha Shovel and its accompanying accessories: the T-handle saw and interchangeable T-grip.

    Last year on Kickstarter, DMOS introduced the Stealth Shovel, a pro-quality, packable tool for shovelling, raking, and biting through hard surfaces like ice and hard-pack snow. The Stealth Shovel went on to win the 2016 ISPO Brand New Hardware Award. (ISPO is a sporting goods agency.)

    DMOS out-performed its funding goals on its original Kickstarter campaign for the Stealth Shovel and received rave reviews from media outlets such as ESPN, Outside Online, and Freeskier Magazine.

    Using customer feedback to build the latest products, DMOS returns to the Kickstarter platform for further dialogue with the company's most supportive consumers. Founder and CEO, Susan Pieper said:
    The response to the original Stealth Shovel Kickstarter campaign was stellar; fans loved it and called for more. We listened and are very excited to return to Kickstarter with the Alpha Shovel and its accompanying accessories. Backers and early adopters demanded a shovel with a larger blade be added to the assortment, but it had to be as indestructible, well-designed and portable as the Stealth Shovel. We built the Alpha Shovel to be the top shovel of the pack...

    The Alpha Shovel campaign will enable DMOS to secure funding to complete production of the Alpha Shovel. The company will also offer add-on accessories of the saw and the T-grip as rewards for its Kickstarter backers.
    Retailers
    Retail update
    IKEA customers in Canberra will have e-commerce before the rest of the country
    HNN Sources
    Kennards Hire has opened outlets in Werribee (VIC) and Tauranga (New Zealand)
    Mitre 10 New Zealand has opened another MEGA store in Ruakura
    Click to visit the HBT website for more information
    IKEA customers in the nation's capital are the first in Australia to have an e-commerce option; Kennards Hire adds to its retail network; and Mitre 10 New Zealand has established another MEGA store.
    IKEA goes online in ACT

    IKEA has launched online shopping and Canberra customers are the first in the country to get it. They can shop, order and pay online 24/7 and have goods delivered the next day.

    There is also a new click and collect option - where items are collected and available ready for pick up. Click and collect was recently trialled at IKEA in Tasmania, but Canberra is the first store to have both click and collect and home delivery. IKEA spokesman Michael Donath told the Canberra Times:
    We've been shown a lot of love from the Canberrans, I think we've had 1.5 million visitors since we opened. And I guess Canberra's a really good opportunity to test and try as well and learn from the market, understand how the customer experience should be where we have a store and online offering, and really see how we can support the customer best before we produce e-commerce for the rest of the country.

    Almost the entire IKEA range is available for delivery. Costs starts at $79 and is currently available throughout the ACT and Queanbeyan. Mr Donath said:
    In the new year we will look at other regional areas surrounding or a bit further from the ACT, so everywhere from Wagga Wagga through to places like Albury, Wodonga etc..

    The existing loading bay area near the store's exit will become the click and collect area, with the service attracting a $20 fee. Mr Donath explained:
    You come in straight through the exit and your goods will be ready to pick up. When you do order online you can select your day that you prefer and the time slot, so you can actually come in when it suits you. You won't have to wait there and wait for it to be picked, it'll be all ready for you.

    There are future plans is for IKEA to roll online shopping out nationally over the coming years.
    Kennards Hire opens new branches

    Equipment and tool rental company Kennards Hire recently opened its 23rd branch in Victoria following the acquisition of family-owned business, Werribee Trade Hire.

    Kennards Hire is retaining the expert staff from Werribee Trade Hire. Neil Masterson, general manager of Kennards Hire - Victoria identified its local expertise as being crucial to Kennards' success in the area. He said the owners, Miro and Roberta Strmecki have built a great business with their equipment fleet and customer base almost identical to Kennards' core market.

    According to Mr Masterson, the western suburbs are a rapidly expanding part of Melbourne and in growing need of housing and infrastructure development. Though Kennards' branches at Brooklyn and Geelong have been servicing this market, the company thought it necessary to be closer to the action to provide quicker service and a wide range of reliable hire equipment.

    Kennards also opened its 17th branch in New Zealand when it took over Tauranga Hire. Tom Kimber, general manager of Kennards Hire New Zealand said:
    Being the largest city in the Bay of Plenty, Tauranga is an exciting step for our network of hire equipment branches...Infrastructure projects, housing and commercial construction are all projected to see strong growth over the next few years. This is a great opportunity for us to invest in and grow our brand and equipment hire service offering in one of the fastest growing population areas in New Zealand.

    The current staff at Tauranga Hire will join the Kennards Hire team, providing a seamless service for customers.

    Kennards Hire operates almost 170 branches across New Zealand and Australia. Prior to the branch in Tauranga, it opened one in Hamilton in August this year. Tauranga is the neighbouring suburb to Hamilton in New Zealand.
    Mitre 10 NZ launches in Ruakura

    The recent opening of Mitre 10 MEGA Ruakura will serve tradies and DIY enthusiasts in Hamilton, a populous city of the Waikato region, in the North Island of New Zealand.

    Store owner-operators, Terry and Lynne Wilson, have been eager to complete this four-year project for their South-East Hamilton based customers, who previously had to make the journey to the Wilson's other Mitre 10 MEGA store at The Base, Te Rapa. Mr Wilson said:
    The new store will operate as a satellite of our Te Rapa store - offering the same range and store features and allowing our trade customers to use one account across both stores.

    The Mitre 10 MEGA Ruakura store encompasses almost 8,000sqm of retail space, garden area, drive-thru, trade yard with trade supply bulk bins, and a Columbus Cafe.

    The store has been designed with sustainability and efficiency in mind, including new wireless mobile devices that will enable team members to be more productive and responsive to customer requests. Mr Wilson adds:
    Whether they're in the garden area, the drive-thru, trade yard or anywhere else in the store, our team members will be able to check stock location and availability on the spot, as well as process orders without the need for paper, which allows them to deliver a more efficient service for our customers.
    Reports
    What millennial renters want
    When it comes to a place to live, what millennials value most is technology
    Building Design + Construction Network
    Understanding what millennials want from apartment design
    Australia can benefit from multi-family passive housing
    Subscribe to HNN weekly e-newsletter
    Recently, millennials have supplanted baby boomers as the largest generation on the planet. With such a huge number of people, many of who are 20-somethings beginning to get a little spending power, companies are doing everything they can to try and crack the enigma that is the millennial buyer and figure out what they value most (beyond ironic t-shirts, protesting, and coffee shops).

    Perhaps unsurprisingly, when it comes to a place to live, what millennials value most is technology. A recent survey from Wakefield Research and lock maker Schlage of 1,000 American renters in multifamily dwellings revealed that 86% of millennial renters would pay higher rent for a "smart" apartment.

    For comparison, only 65% of baby boomers would pay more for an apartment packed with automated or remote-controlled devices.

    The survey also found that over 61% of millennial renters would rent an place specifically for electronic access features, such as keyless entry doors, and 55% would pay more for an apartment with high-tech door locks compared to traditional door locks.

    Another 44% of millennials said they would sacrifice having a parking spot if it meant they could live in a high-tech apartment. Overall, millennials would pay about one-fifth more for smart home features than other generations.

    It isn't just technology millennial renters are after, however. Convenience and security are also important. 63% of millennial respondents said they would move out of a flat or apartment because of poor security. Additionally, 64% of millennials feel it is more important for their place to be closer to work than friends and family.

    At least according to this survey, the average millennial renter is more concerned with technology and convenience than anything else in an apartment, and are willing to pay for the things they desire.

    The Schlage survey was conducted in October 2016 via email and an online survey.
    News
    HI News V2 No. 18: Is housing "rigged"?
    Download the latest issue of HI News Vol. 2, issue no. 18
    HI News
    Bunnings' micro-warehouse in Balmain
    Metcash-Mitre 10 half-year results for FY 2016-17
    Click to visit the HBT website for more information
    The Australian housing market and its implications for the home improvement retail industry gets a lot of attention in the latest issue of HI News.

    Just click on the following link to download this edition:
    HI News V2 No. 18: Is housing "rigged"?

    We take a close look at the future of retail, based on the findings from strategic survey data company Roy Morgan. Its statistics indicate a strong increase in customer visits to physical ("bricks and mortar") retail outlets. However it has also detected a fall in overall actual spending.

    Overall revenue grew slightly for Mitre 10 owner, Metcash in its first half results. However EBIT continued to decline. Diversified agribusiness Ruralco is in growth mode after a restructure. The group includes merchandise group, Combined Rural Traders.

    We also put forth an alternative theory on why Bunnings may be building a micro-warehouse in the inner-suburb of Balmain in Sydney.

    Australian bathroom retailer, The Blue Space is experimenting with virtual reality for its customers. Local tradie app, Mr Tradie moves the focus away from just cheap pricing.

    Featured new products include battery driven outdoor power equipment from Greenworks Commercial; latest Honda mowers; and a home security range.
    Retailers
    Indie store update
    Ruralco is the parent company of merchandise group Combined Rural Traders (CRT)
    Farm Online
    It is set to acquire TP Jones in Tasmania
    Hunter Irrigation is being integrated into Ruralco's Eden water equipment stable
    Click to visit the HBT website for more information
    After a $14.1 million management restructure to strip out excess costs, Ruralco plans to make up ground on the back of reporting a 70% net profit slump recently. The farm supplies, agency and water equipment group added 19 new businesses to its network during the past year.

    Ruralco is the parent agribusiness for a host of rural livestock and property agencies, plus the 38-branch Total Eden network and merchandise group Combined Rural Traders (CRT). It has 270 business outlets Australia-wide, many owned in partnership with their operators.

    The group is set to launch a generic line of drench and lice treatments under the Covine brand by mid-2017 following this year's successful private label release of the Relyon farm chemical range.

    Ruralco has also teamed up with the ASX-listed Steadfast group to merge its insurance broking business into a joint venture with Ausure Consolidated Brokers (ACB). This more than doubles its insurance footprint and provides better back office support and underwriting capabilities.

    In Tasmania, Ruralco's agency subsidiary, Roberts is set to absorb the TP Jones and Company rural retail businesses in Launceston, Longford, Latrobe and Campbell Town in February 2017. It will sell its Kubota and Agco machinery dealership, Tasmania Farm Equipment, in Devonport, Launceston, Smithton and Hobart.

    At the same time, Ruralco has been incorporating the recent purchase of three additions to its Total Eden water equipment stable in the NSW Lower Hunter Valley (Hunter Irrigation) and two in South Australia's Riverland. They are part of the 19 businesses added to the network in the past year.

    However, tight margins in the livestock export business and the cancellation of an export licence for its southern Frontier International operation in July became the trigger for a big cost cutting drive and management revamp.

    Live export and water business restructuring alone cost the company more than $8 million, with redundancies, six store closures and the divestment of the machinery business costing a further $4.4 million.

    The restructure, and an $8.7 million slide in live export gross profits, eroded Ruralco's 2015-16 after-tax net profit to just $4.2 million.

    However the group still posted strong results in its core traditional business, with rural supplies' gross profits up 16% to $118 million and agency gross profits up 3% to $105 million. The company has spent $14 million on restructuring and divestment costs.

    Managing director, Travis Dillon, has not released estimates on the value of the cost savings to Ruralco's bottom line, but he said the "strategic cost out benefits will more than cover the expenses we've incurred". He told Farm Online:
    We've taken action which needed to be taken; we've got a very engaged workforce; we're very comfortable with our platform, and we're very optimistic about the business outlook for the next six months.

    Despite the lean 2015-16 net profit result, the company's underlying performance was solid with revenue up 10% to $1.8 billion and gross profit lifting from last year's $297.7 million to $304.9 million.
    Companies
    Supplier update
    Boral buys US company Headwaters
    HNN Sources
    A consumer survey from Husqvarna shows the popularity of eco-friendly equipment
    James Hardie has downgraded expectations for its full-year profit
    Subscribe to HNN weekly e-newsletter
    Boral acquires Utah-based building products group Headwaters in AUD3.5 billion deal; Husqvarna survey shows support for eco-friendly equipment; and James Hardie's half year profit dropped 24%.
    Boral's US acquisition

    Boral, Australia's biggest supplier of construction materials and building products, has agreed to buy Utah-based firm Headwaters for USD2.6 billion (AUD3.5 billion) in a deal that will double the size of Boral's US business.

    It will be funded by a AUD2 billion share issue, as well as borrowing and Boral's existing cash, according to the company's announcement to the Australian stock exchange.

    Chief executive Mike Kane said the deal would provide cost savings of around USD100 million per annum within four years of closing. He said in the statement:
    The businesses of Headwaters are highly complementary with Boral's existing US operations - in fly ash, roofing, stone and light building products.

    Headwaters chief executive and chairman Kirk Benson said the combined group would be one of the "leading manufacturers and distributors of building products and construction materials for infrastructure, new residential, repair and remodel, commercial and institutional construction".
    American dream

    The market was quick to connect Boral's big bet on the US with the election of Donald Trump, who has promised to launch a USD1 trillion (AUD1.35 trillion) infrastructure investment program via tax breaks for the private sector to boost economic growth.

    Headwaters' fly ash business (a waste product from coal-fired power plants that is used as a cement substitute in heavy construction) would be a big beneficiary of what Mr Kane called a "Trump bump", although he insisted this would be "gravy" for Boral and hadn't been built into its due diligence projections.

    So when Mr Kane told AFR Weekend "this was the time to buy this business in this cycle" he was talking less about infrastructure and more about the recovery in the US housing market.

    The huge US housing crash a decade ago caused new housing starts to slump from more than 2 million in 2005 to just 646,000 in fiscal 2009.

    The bursting of the US housing bubble sparked the global financial crisis and led to millions of home foreclosures. Property prices plunged more than 20% and many gave up on the great American dream of owning or building a home.

    As a major manufacturer of bricks, other cladding like stone, roofing, tiles and building materials in the US, Boral was already leveraged to the US housing market and badly hurt by the downturn.

    Today, Mr Kane's theory is simple. Due to years of under-building since the crisis and strong pent-up demand, the housing market has bottomed and is now in a five-to-seven year upswing that will see housing starts move back to their long-term annual average of 1.5 million, from around 1.2 million in 2015.

    Mr Kane says the market is now largely controlled by so-called "production" home builders who own huge land banks. Prior to the GFC, when the economy was awash with money, these groups were in a building frenzy but today they are being much more cautious.

    The result, Mr Kane said drawing on his 42 years of experience in the US market, could actually be a more sustainable market. He said:
    It's a housing market that's been characterised by violent swings every seven to eight years. And now we are probably going to be in a 10 to 12-year recovery.

    While the Headwaters deal will help diversify Boral's US operations away from the new-home market - the proportion of revenue from new homes in the US business will fall from 66% to 45% after the deal - housing will remain the key to Boral's American dream. Around USD810 million (AUD1.1 billion) of its revenue in the US will remain exposed to the sector.

    Beyond the macroeconomic and political forces influencing the success of the takeover, a benefit to Boral is that Headwaters can sell its products through Home Depot and Lowe's stores.
    Eco-friendly equipment finds favour

    A recent survey conducted by Husqvarna shows that its US-based customers prefer eco-friendly equipment and are willing to pay more for it.

    The Green Spaces Survey was conducted in August of this year. Of the 1,579 consumers polled, 65% stated they would choose a landscaper who uses eco-friendly outdoor power equipment over one who doesn't.

    Companies that choose to be eco-friendly are also more likely to receive ongoing customer support, as 72% of the survey respondents said they would support eco-friendly companies over those that do not use battery-powered equipment. Jeff Dewosky, vice president and general manager for Husqvarna North America, said:
    Husqvarna is committed to keeping a pulse on the future of public green spaces so we can best advise both consumers and professionals on sustainable, efficient ways to maintain parks, as well as commercial and residential properties. This report demonstrates that there's a demand for more eco-friendly outdoor power equipment and the benefits that the technology provides.

    Along with being eco-friendly, the consumers polled also had an interest in quieter outdoor power equipment, with 57% saying they would pay more for a landscaper who uses quieter equipment. A strong majority of respondents (71%) felt that companies that choose eco-friendly equipment should receive tax benefits.

    At GIE+EXPO, the largest industry event for outdoor power equipment held each year in Louisville, Kentucky (USA), Husqvarna revealed additions to its 500 Series battery lineup, including the 536LiPT5 and 536LiP4 pole saws. Both saws have an intuitive keypad and a 10-inch bar, but the 536LiPT5 comes with a telescopic tube and weighs slightly more at 10.8lbs (almost 5kgs); the 536LiP4 weighs 7.4lbs (3.6kgs).

    The 536LiLX trimmer is another addition and features a two-way rotation head, enabling users to operate the product in both a forward and backward direction. The 536LiHD60X hedge trimmer, meanwhile, has been upgraded with a new proprietary motor that maximises its working time, and the tool's rear handle can pivot to enable both vertical and horizontal trimming.

    As with all of Husqvarna's battery-powered equipment, each model can share the same type of battery.

    On the more traditional gas-powered side of things, Husqvarna has two new trimmers and edgers.

    Husqvarna said the 522L trimmer is an affordable option for landscapers who don't want to forfeit the manufacturer's durable design. The 525LK trimmer features a detachable shaft that allows it to be a jack-of-all-trades, swapping out attachments such as a dethatcher, brushcutter and edger.

    The 525ES edger has a steel shaft drive while the 525ECS edger comes with a curved shaft and flex drive.
    James Hardie cuts FY expectations

    Building products supplier James Hardie has downgraded expectations for its full-year adjusted net operating profit, saying production constraints are affecting its ability to meet US demand.

    The company noted that analysts' forecasts for net operating profit excluding asbestos-related adjustments for the year ending March 31, 2017, ranged from USD256 million to USD285 million (AUD342 million to AUD381 million).

    But management expects full-year adjusted net operating profit to be between USD250 million and USD270 million. The comparable adjusted net operating profit for fiscal 2016 was USD242.9 million.

    Chief financial officer Matt Marsh said in a briefing for market analysts that James Hardie was taking steps to increase manufacturing capacity to meet strong demand now and in the future. Mr Marsh said the downgrade was driven by a combination of start-up costs and the company not being able to ship everything it had orders for. He said:
    So a combination of those two is really the driver of the adjustment down to USD250 million to $US270 million.

    Chief executive Louis Gries said it would be another two or three quarters (six to nine months) to get James Hardie's manufacturing network up to targeted performance levels.

    James Hardie expects the US housing market to grow steadily in fiscal 2017. But although US housing activity was improving, market conditions were uncertain and some input costs were volatile.

    In Australia, net sales are expected to trend in line with the average growth of the renovation and single detached housing markets in the eastern states.

    James Hardie recently booked a 24% fall in first-half profit to USD144.1 million, mainly due to greater asbestos-related adjustments in the prior corresponding period.

    Excluding asbestos-related adjustments, net operating profit was up 10% to USD141.4 million, from USD128.7 million a year earlier.

    Net sales rose by 11% to USD973.5 million, driven by higher sales volumes in the North American fibre cement business and a higher average net sales price in the international fibre cement segment, which includes Australia.

    Although demand in the renovation and new housing markets grew in the US, James Hardie's production costs increased because of unfavourable plant performance and higher start-up costs associated with lifting the production capacity of the US plants.

    In Australia, net sales for the half-year lifted due to a higher average net sales price and greater volumes. But the guidance pointed to a transition year for the company, where good volume growth does not provide the upside that the market may have anticipated.
    Bigbox
    Bunnings' micro-warehouse in Balmain
    A rendering of what the completed store would look like
    HNN Sources
    A map of the area around the proposed Bunnings
    The site of the building
    Click to visit the HBT website for more information
    Bunnings' proposed store at the inner-Sydney location of Parsons St, Rozelle is no ordinary Bunnings store. With a selling floor space of just 4,100 square metres, including 500 square metres of outdoor garden space, it is one of the smaller Bunnings stores in the big-box retailer's fleet.

    While Bunnings has made great strides with its "medium" format stores, such as the one at Collingwood, on the outskirts of the Melbourne CBD, this store would appear from the plan diagrams to be quite different. Rather than concentrating on fitting the maximum amount of selected stock into a "compact" space, the Balmain store follows the design layout of the larger warehouse stores. As the planning documents state:
    The Bunnings "small format warehouse" is a new venture for the company which currently develops contemporary large formats of some 17,000m2 to 20,000m2 and medium formats of some 12,000m2 to 16,000m2.

    The documents go on to characterise the purpose of this kind of retail layout:
    It is relevant that the large contemporary hardware outlets are "destination" sites whereas the small outlets are more "convenience" sites for local residents and trades persons.

    The store has two floors of selling space, with the upper floor apparently having an open area for garden plants and supplies. The two floors are connected by a travellator. It has a number of other unique features, including a turntable in its shipping dock for trucks.

    This store is likely aimed at the weekend quick stop market, as well as the weekend/weekday drive-by/drop-in traffic, predominantly by DIYers, but also, in this inner-urban location, tradespeople as well.

    To put it simply, this Bunnings store could well be the trial prototype for a rollout of smaller format stores that are directly aimed at taking market share from smaller independent stores in urban locations. It is considerable effort, too, with the store predicted to cost $11.8 million to construct.

    From a location standpoint, looking at the map, it's easy to see why Bunnings is attracted to this location. It is virtually triangulated by the three existing Bunnings in the general area, Ataramon, Ashfield and Alexandria.

    HNN will cover in more detail at a later date the retail characteristics of this new store layout. What is of most interest at the moment is how Bunnings is working the planning the system so as to get this type of store approved.
    Planning approvals

    Given the style of the store, local small hardware stores see it as a direct threat to their businesses. The Hardware Store has its Balmain branch located a few minutes drive from the proposed site, and its owner, Grant Crowle, has been vocal in his view the store should not be allowed to go ahead. Not only will the store likely directly impact his own operations (which have been ongoing since 2003), but he says it has the potential to worsen traffic congestion in an area that is already highly congested.

    There is also the matter of parking. The planning documents that only 74 car parking spaces will be provided in a basement car park.

    Protests have reached a state where an online petition has been organised to provide a focal point for objections, and a sign appeared for a brief time, lashed to the fence around the site (currently an unused warehouse) protesting the development.

    However, as usual, Bunnings' property team have developed a clever approach to getting approval for what could turn out to a controversial store location. To begin with, the site had been granted planning approval in 2012 for a three-level building with industrial establishments on the ground and mezzanine level, and a fitness gym on the top level. This will tend to make protesting the building itself a more difficult task.

    That plan (which never went beyond planning approval) called for 94 parking spaces. How, then, can Bunnings, as a retailer, get away with providing only 74 spaces?

    The answer is in the way Bunnings has positioned this store in the planning documents. The planning documents provide this analysis of the likely traffic that would be generated by the store:
  • the projected traffic generation of the previously approved development for the site were significantly greater than that projected for the proposed Bunnings development during the weekday peak periods
  • the projected weekend peak for the proposed Bunnings development may be higher than the potential for the approved development, however the flows on Robert Street and Mullens Street are significantly lower at these times (i.e. than the weekday AM and PM peaks).

  • Essentially what is going on is that Bunnings is "fitting" the store into the congestion patterns of the area. It is claimed that the store will generate less traffic during times when the traffic is at its highest, that is, on weekdays, and reach peak traffic loads only on weekends, when general traffic is at its lowest.

    Just to add to the picture, Bunnings is also claiming that another new, full-size Bunnings warehouse it has underway, at Victoria Road in Gladesville, will also divert some traffic away from the Balmain Bunnings.

    The calculations regarding parking spaces are just as interesting. There is an existing standard for the number of parkings spaces that must be provided for a retail floor areas. In this case, that standard calls for 1.78 spaces per 100 square metres of floorspace. In this case, that would work out to 73, and Bunnings is supplying 74 spaces.
    Analysis

    While it is evident that the new Bunnings would affect trade at the long-established The Hardware Store nearby, it seems quite likely that this is not the primary target of this venture. Just 15 minutes away down the Western Distributor is one of Mitre 10's most praised retail outlets, the Sunlite Mitre 10 store in Paddington.

    When Mitre 10 began to suggest it would consider acquiring the operations of the Home Timber and Hardware Group (HTH), HNN did suggest that this could alter the competitive situation between Bunnings and Metcash's hardware operations. This could be one of the first moves in that direction by Bunnings.

    If so, the company may be planning to adopt a quite unique approach. Rather than -- as it has done in the more blue-collar Collingwood store -- seek to produce a compact, as fully-stocked as possible store, Bunnings may select profitable, more upmarket locations to expand into. The stores it builds in these locations may be, instead of small and compact, scaled down warehouses, with more of a sense of space, and a more limited stock. It wouldn't be surprising if many of these locations turned out to be near stores that are fully-owned by Metcash.

    There are a number of other intriguing possibilities to this as well. There are signs that Bunnings could well launch an ecommerce site in calendar 2017. Having more urban, smaller stores, could open the way for it to facilitate ecommerce, by offering click-and-collect, or an online expansion of its special ordering services.

    Another possibility is that these stores in more upmarket suburbs might end up being the primary distribution points for some Bunnings products that continue to seem slightly out of place in its standard suburban warehouse stores. Chief amongst these is the company's range of outdoor furniture, which competes favourably with some of the furniture offered by Harvey Norman and even Domayne.

    If that did prove the case, it would be likely these small warehouses have less of an impact on retailers such as The Hardware Store, as the stock overlap would be smaller.

    In the meantime, Inner West Council is accepting public submissions on the proposal until December 19. The development application can be found here:
    Development application
    Retailers
    Metcash half-year results for FY 2016-17
    Results for Mitre 10 FY2017H1
    Metcash
    Results for Metcash overall, FY 2017H1
    Slide from Metcash analyst presentation
    Click to visit the HBT website for more information
    Australian supermarket and hardware wholesaler Metcash has released its results for the first half of its FY 2017, to 31 October 2016. Sales revenue was reported as $6629 million, up by 0.35% on the previous corresponding period (pcp), which was the first half of FY 2016. Earnings before income tax (EBIT) was reported as $82.8 million, down by 4.72% on the pcp. Net profit after taxes was $74.9 million, down by 38.61% on the pcp.

    Net profit was affected by several non-recurring items. The pcp comparative profit included profits of $35.1 million, relating to the sale of Metcash's automotive operations to Bursons. The current results include the acquisition costs for the Home Timber & Hardware Group (HTH) of $4.5 million, and an additional $3.4 million spent on Metcash's "Working Smarter" program aimed at reducing operational costs.

    Metcash reported that while the hardware and liquor divisions had performed well, the results had been impaired by a dip in the performance of the company's food and grocery operations. For the latter revenue fell by 1.16% and profit before tax fell by 8.05%.

    In a comment presented in Metcash's earnings press release, the company's CEO, Ian Morrice, is reported as stating:
    Despite difficult market conditions in the Supermarket sector, Independent Retailers are continuing to invest in growing their businesses, including new stores and refurbishments, and we remain focused on supporting this growth. The acquisition of HTH broadens our footprint in the hardware sector and, along with smaller acquisitions in the Liquor business, have diversified the Group's earnings base.
    The Group's strong underlying cash flows have further strengthened our financial position. Metcash is well placed to invest in growth opportunities, as well as in further operational cost and efficiency improvements.
    Hardware

    The company reported sales revenue for its hardware operations of $581.6 million, up by 9.59% on the pcp. Profit before tax was $12.5 million, an increase of 7.76% on the pcp. The company reported that sales on a like-for-like (comp) basis increased by 1.7%, up from the pcp's number of 1.3%.

    The newly acquired HTH operations did not materially contribute to EBIT, according to Metcash. However, HTH did contribute $51.5 million to revenue.

    In its presentation to investment analysts, Metcash stated that its EBIT percentage of sales fell to 2.1% for the reporting period, down from 2.2% in the pcp, noting a decline, however, of just 4 basis points or 0.04%. Based on the non-contribution to EBIT by the HTH revenue, HNN believes a more representative EBIT margin for Mitre 10 operations would be 2.36% (or as Metcash would present that number, 2.4%) an increase of 17.2 basis points.

    Metcash said the increase in EBIT came despite pressure from Masters' liquidation sale, and the unseasonal cool weather on Australia's eastern seaboard.

    The company noted that it completed a further four Sapphire store transformations during the half, bringing the total to 16. It claims an average sales increase of 17% across these revised stores.
    Acquisition

    Adjusting for cash already held by HTH, balanced against adjustments to working capital, the $165 million acquisition cost for HTH works out to $163.2 million. Assets acquired included trade receivables and loads amounting to $171.1 million, and inventories amounting to $125.6 million. These and other assets balanced against trade payables and provisions of $168.1 million balance the acquisition out at $163.2 million. No goodwill was included in the transaction. Total transaction costs amounted to $6.4 million.

    Metcash noted that the 2% retention rebate provided by HTH was discontinued in October 2016. Integration of HTH and Mitre 10 is expected to be completed by the end of FY 2018. The company states that it expects HTH to contribute more than $10m to EBIT during the second half of FY 2017, exclusive of integration costs.
    Analysis

    The food & grocery division of Metcash continues to struggle in what has become a highly competitive retail sector. Roy Morgan holds that IGA's market share, at around 10%, is now less than that of Aldi, which it believes has 12% Australia-wide.

    One possibly hopeful event on the horizon would be the entry of US online retailer Amazon into Australia, as Amazon has suggested it might make use of Metcash's supply chain. Even should this occur, Metcash and other grocery retailers could be hard-hit by the entry of Amazon, which could take market share in profitable staples such as laundry detergent.

    HNN has suggested in the past that Metcash has used Mitre 10 largely as a means of financing its ambitious goals in the grocery sector, making the minimum investment required to secure a good return, rather than making longer-term investments to grow the business into the future. The addition of HTH to the hardware division may change that equation somewhat, but it is difficult to see Metcash taking on much more risk over the next two years.

    The long-term question that remains is whether Metcash will become a diversified retailer, moving to make its grocery business a smaller contributor overall, or if the company will instead spin-off its hardware division at the end of FY 2018 so as to finance further expansion in its grocery business.

    HNN notes that, as has become the case over the past 18 months, Metcash has delayed making the recording of its presentation results to analysts available. HNN will be providing separate analysis of this when it does become available.
    Retailers
    Bathroom retailer using virtual reality
    The Blue Space has introduced virtual reality in bathroom, kitchen and laundry retail
    Power Retail
    It can display all the fixtures and fittings in the space
    The Blue Space is an Australian online retailer
    Click to visit the HBT website for more information
    Australian online retailer The Blue Space will launch its virtual reality (VR) technology in early 2017 to enable shoppers to choose and buy bathroom designs.

    The technology will replicate the customer's own kitchen or bathrooms (including dimensions), which will allow them to see what a range of packages would look like in their own space. Managing director, Josh Mammoliti told Power Retail:
    It simply takes the hassle out of shopping for a kitchen, bathroom or laundry. You can really see what each choice you make will look like in your house. You can 'live in it' before you buy. It helps with choice, saves time and reduces the risk of buying something you don't actually like.

    The virtual reality technology also shows real lighting and reflections, from the exact position of the sun as it moves through the day, based on the customer's home specifications. This can create a more accurate ambiance of lighting when they are viewing their virtual bathroom design.

    The retailer said its VR technology is within 99.9% dimensionally accurate, to correctly display all the fixtures and fittings in the space including all hardware and surfaces. Mr Mammoliti said:
    Bathrooms are quite complicated, especially when people are sinking usually $5,000 or a lot more into one. I wanted to build a business that looks at everything that makes it difficult for a customer to build a bathroom or kitchen, and do everything to take down those barriers.

    As the former digital strategist for Caroma, Mr Mammoliti saw a gap in the marketplace, and decided to start a company that takes the stress and hassle out of building a bathroom.

    The company primarily operates online but it has recently developed a bricks-and-mortar presence, with showrooms in Brisbane and Victoria. A few more have opened in New South Wales where customers can book for a virtual reality consultation or have their bathrooms built online in 3D. He said:
    The showrooms will be about the virtual reality and consultancy side of things - it's not really about the traditional showcasing of physical products.
    We're aiming for people to come in, do a 3D bathroom or experience it via virtual reality and for us to do the specifications. We can design the bathroom for them. We give them a code. They then load it up on their computer when they go home and play with it, show their family, chop and change things and then buy from home.

    The technology is in its first generation and Mammoliti said his vision for The Blue Space is that people can do this in their homes, with their own virtual reality systems.

    Developers of the technology, Situ, are currently refining the design, with a virtual colour palette to be implemented into the system at a later stage.

    The Blue Space is looking to install more pop-up stores in high traffic locations. Mr Mammaloti said:
    We're currently testing it out to making sure it all works. Customers will also eventually be able to buy through the VR technology, which is also being tested for its future generation models.
    Retailers
    USA update
    Ace Hardware has reported a third quarter revenue decline
    HNN Sources
    Pergo Outlast+ flooring has won The Home Depot's 2016 Innovation Award
    Lowe's is working with start-up B8ta to sell smart home products
    Click to visit the HBT website for more information
    Ace Hardware misses sales targets in its third quarter; The Home Depot hands out awards to the most innovative products and suppliers; and Lowe's works with start-up to offer smart home gadgets.
    Sales decline at Ace Hardware

    US hardware co-operative, Ace Hardware has reported third quarter 2016 revenues of USD1.2 billion, a decrease of USD46.5 million or 3.6%, from the third quarter of 2015.

    Net income was USD50.2 million for the third quarter of 2016, a decrease of USD4.1 million from the third quarter of 2015. John Venhuizen, president and CEO, said:
    Our expectation for the third quarter of this year was modest sales growth and lower net income as a result of last year's strong 13.2% consolidated revenue growth and 45.3% net income growth.
    We missed on sales in our Ace domestic business, but exceeded our net income budget. The Ace domestic sales shortfall was largely driven by last year's sell-in of LED lights and the lowering of wholesale selling prices to our retailers. For our shareholders, these wholesale price reductions were positive as over three-quarters of our wholesale price changes were decreases, resulting in less margin for the corporation, but more margin for our retailers.

    The 0.8% increase in retail same-store-sales during the third quarter reported by the approximately 3,000 Ace retailers who share daily retail sales data was the result of a 2.2% increase in average transaction size. For the first nine months of 2016, retail same-store-sales are up 1.9%.
    Revenues

    Total wholesale revenues were USD1.17 billion, a decrease of USD46.2 million, or 3.8%, as compared to the prior year third quarter. Decreases were noted across several departments with electrical, paint and plumbing showing the largest declines.

    Wholesale merchandise revenues to comparable stores decreased USD39.1 million in the third quarter of 2016. A significant portion of that decline was the result of significant sales of LED bulbs in the third quarter of last year as part of store resets and to support an October 2015 LED promotion.

    The company's Ace Wholesale Holdings subsidiary contributed USD1.9 million of incremental revenue in the third quarter of 2016, which was an increase of 2.1% from the prior year third quarter.

    Retail revenues from Ace Retail Holdings were USD59.9 million in the third quarter of 2016. This was a decrease of USD0.3 million, or 0.5%, from the third quarter of 2015. Same-store-sales decreased 3.4% compared to the prior year with the largest decreases in paint, lawn and garden and hardware.

    Ace added 36 new domestic stores in the third quarter of 2016 and cancelled 16 stores. This brought the company's total domestic store count to 4,335 at the end of the third quarter of 2016, an increase of 60 stores from the third quarter of 2015.
    Flooring innovation recognised

    The Home Depot recently announced that Pergo Outlast+ has won the retailer's 2016 Innovation Award. The company was selected because its new laminate flooring provides 24 hours of defence against liquid spills - something no other laminate offers at the moment.

    The annual award acknowledges the most innovative new products that provide genuine benefits to consumers and the suppliers that exceeded expectations in sales, service and program execution.

    Runner-up honours were awarded to Milwaukee Tools for its Milwaukee M18 FUEL with ONE-KEY. ONE-KEY allows users to connect to the tool with a smartphone for unlimited customisation and control. And honours went to Heath Zenith lighting for its Defiant LED BLADE motion activated security lights that has seamless light coverage.

    Additionally, Trex Enhance Composite Decking, made from 95% recycled materials, won Environmental Partner of the Year and PPG won the Marketing Innovation award for its Glidden Diamond Launch campaign.

    In addition to the top three award winners, The Home Depot endorsed the companies that round out the top 10 product innovations.

    Ryobi Ultra Quiet Garage Door Opener is the ultra-powerful motor that will quietly open and close large doors with ease, and comes with a multifunctional wall control, wireless keypad, two remotes, safety sensor and can be controlled via smart device.

    Mohawk Industries Lifeproof Carpet has lifetime stain protection, superior softness, exceptional durability and environmentally friendly attributes.

    FEIT LED Edge-Lit Flat Panel Lighting integrates the latest in LED technology with a low profile design that directs the light downward, creating uniform light distribution without hot spots, flicker or glare.

    Masterbrand's Thomasville Studio 1904 cabinets offer 12 unique door styles with modern, simple and straight lines.

    Nexgrill Evolution Plus 5-Burner Gas Grill with Side Burner provides the flexibility of choosing between direct heat and infrared cooking, and also has a smoker for smouldering wood chips.

    Apex Tool Group Husky 100 (Black) Mechanics Hand Tools includes multi-purpose alloy steel tools, heat-treated for added strength, suitable for small jobs around the house or the DIY mechanic.

    Freud Diablo Carbide-Tipped Hole Saws are the industry's first carbide-tipped hole saws to cut both wood and metal, with a design to simplify the attachment process for mounting.
    Lowe's selling tech gadgets

    US big box home improvement retailer, Lowe's has struck a deal to showcase technology products sold by San Fransisco-based B8ta within its stores.

    The Lowe's outlet in Livermore, California (USA) has installed a 400-square-foot section that lets customers get their hands on B8ta's still-unfamiliar home technology devices, including smart doorbells, light bulbs, security cameras, garage door openers and lawn sprinklers.

    It's one of three SmartSpot Powered by B8ta sections Lowe's has installed. The others are opening in Lowe's Burbank, Los Angeles and Aliso Viejo, Orange County locations.

    Details about the partnership were not revealed, but it would be a big boost for B8ta if Lowe's were to eventually decide to expand across its chain. B8ta, which started with a single store that opened two years ago in Palo Alto, California recently announced a USD19.5 million round of financing that will let it open outlets in Seattle and Santa Monica. Co-founder Phillip Raub said:
    For us, it was important to be able to broaden the horizons of B8ta.

    The Lowe's section sells about 40 products, less than half the number sold in B8ta stores. Manufacturers include Amazon, Lutron, Nest, August, Ring and Chamberlain, as well as tech startups.

    The display devices are placed on tables and not boxed up, so customers can play with them. Crucially, each product has an iPad next to it, to demonstrate how the device works and what colours are available, and to explain why it might benefit the customer.

    B8ta monitors the type of information shoppers look for on the iPads and whether changes in how the product is displayed - in terms of colour, for example - increase or decrease sales. Collecting continuous data on customer preferences, a core methodology of B8ta, is increasingly crucial to retailers.

    The SmartSpots feature a new generation of smart home devices that are more popular with early tech adopters than the typical Lowe's customer. But Ruth Crowley, Lowe's vice president of customer experience design, said the chain hopes the section helps demystify smart-home products.
    One of the keys is that all of these products are out of the box. We wanted to make sure to take away the intimidation in a market that's saturated with these kinds of products and allow the customer the ability to touch and feel and experience.

    Cutting-edge tech products that lure more consumers could be key to Lowe's future. Lowe's lags behind Home Depot in luring customers who are home improvement professionals, which "puts Lowe's at a disadvantage, especially if growth in the consumer segment starts to wane," according to a note from the retail research and consulting firm Conlumino.
    Products
    Battery-powered OPE for pros
    Greenworks Commercial has a new line of tools designed for professional landscapers
    Total Landscape Care
    Greenworks Pro 3-in-1 battery-powered lawn mower with 21-inch deck
    Starting in early 2017, Greenworks Commercial will offer three models of zero-turn mowers
    Click to visit the HBT website for more information
    Greenworks Commercial has launched a line of tools specifically engineered to meet the needs of professional landscapers. Powered by 82-volt battery technology, the range of commercial grade equipment delivers power and run-time equivalent to comparable gas-powered models.

    The latest equipment line that Greenworks has produced comes with four main benefits, according to the company. The products are quiet, easy to operate, give off no fumes, and are low maintenance.

    All Greenworks Commercial battery-powered products use push button start technology, removing the need for pull cords. This is especially appreciated with its chainsaw. Gray Abercrombie, director of global marketing for Greenworks told Total Landscape Care:
    Arborists love the saws. All they have to do is push the button to start and safety comes into play a lot with chainsaws.

    They also no longer need to leave their elevated position and return to the ground to restart their equipment.

    The push button start on the GBB600 Backpack Blower allows the user to go from full power to completely off, and back to full power without ever removing the backpack.

    By using lithium-ion batteries, landscapers do not need to worry about the memory effect commonly found with nickel cadmium batteries, where they lose their maximum charge over time if continually recharged.

    These battery-powered tools have been designed for those who work in cities with strict decibel ordinances. Most US cities with ordinances limit anything above 79 dB and Greenworks' 82-volt brushless axial blower ranges from 60 to 72 dB. Mr Abercrombie said:
    Commercial landscapers can start earlier and work later with this quieter equipment.

    Greenworks' string trimmer produces 50% less noise than its gas counterpart while its power is equivalent to a 32cc gas engine.

    The brushless hedge trimmer comes with a 180-degree rotating rear handle and features a die-cast magnesium gear box to endure heavy use.

    Greenworks has a walk-behind mower that is battery-powered as well. It features a 21-inch deck and comes with seven cutting heights that can be adjusted with a lever.

    Starting in early 2017, Greenworks Commercial will offer three models of zero-turn mowers, the GZM 33W Walk-Behind Zero Turn Mower, the GZM 48S Stand-On 48" Zero Turn Mower, and the GZM 52R Ride-On 52" Zero Turn Mower.

    Run times depend on the amp hour battery used. The products come standard with a 2.5 Ah battery, but they can be upgraded to a 4.0 Ah battery, 5.0 Ah battery or a 900W battery backpack.
    Products
    Home security offering for tradies
    Uniden's Guardian Hybrid digital video recorder (DVR) range is ideal for tradies
    Uniden
    This security system can be used to monitor the interiors and exteriors of a property
    It is suitable for both home and small to medium sized business owners
    Click to visit the HBT website for more information
    Home maintenance professionals and electricians looking to expand their services can consider home security systems as an opportunity to help customers who prefer the Do It For Me (DIFM) approach to home improvements. Uniden's Guardian Hybrid digital video recorder (DVR) range of security systems is best installed by those proficient in home handiwork.

    The Uniden home security system - with wired and wireless capabilities in one device - is ideal for home and small to medium sized business (SMB) owners who want a cost-effective solution to keeping an eye on their property.

    Whether it is introduced as an ad-hoc job or an extension to existing projects, handypersons and electricians can add value with a simple hardwiring camera installation. This type of work requires approximately one to two hours of labour. (Installation time will vary based on the complexity of the property. For example, multiple storeys or large premises may require additional cables to be run through.)

    The system can provide peace of mind to home and business owners lacking the confidence to carry this out independently.

    They can choose a combination of wired internet IP cameras, which rely on an Ethernet cable for internet connectivity, as well as wireless IP cameras which connect to the local wi-fi network via an app. Hardwiring the cameras calls for drilling holes into wall and ceiling surfaces and running cables for power and internet connectivity.

    Relying on a power connection only, the wireless cameras are practical for locations where it's difficult to extend a video cable, such as a garage or deck.

    This security system can be used to monitor the interiors and exteriors of a property, and can be scaled up as needs change. Home and SMB owners have the ability to monitor their premises remotely via a dedicated app on smartphone or tablet devices. The app also sends alerts to connected devices whenever the security system detects movement.

    All Guardian wired and wireless cameras are weatherproof to withstand the harsh Australian elements. Key features include:
  • Expandable with up to 16 wired cameras and up to eight optional wireless cameras
  • Full HD 1080p resolution for clear picture quality
  • Guardian Live Pro app for iOS/Android smartphones and tablets
  • Up to 2TB internal storage
  • Up to 20 metres of night vision, from dawn to dusk
  • USB backup
  • Connect to a large screen TV or monitor via an HDMI port
  • Remote viewing capabilities via smartphone or tablet


  • User Name:Password: