Future tool
The Ryobi Quiet Strike is one of the new breed of specialised tools
HNN Sources
Milwaukee has launched a new 18-volt tablesaw
The Bosch EasyCut50 uses NanoBlade technology
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What are the major trends we have seen emerging in power tools, and what do these trends indicate about the direction of the industry? The established trends that we can see today are:
  • The further development of the "connected tool", as pioneered by Techtronic Industry's (TTI's) One-Key system.
  • An increasing diversity in tool voltages, as manufacturers seek to create more powerful alternatives to corded tools.
  • An expansion in range and functionality of tools, as manufacturers seek to enter more niche markets.
  • An increasing interest in and servicing of the outdoor power equipment (OPE) market, which is a special case of combining the two trends listed immediately above.
  • Further development in batteries, including higher amp-hours, coupled with more compact battery units.

  • Each of the four major power tool companies - Stanley Black & Decker (SBD), TTI, Bosch and Makita - are typically engaged in three of these four trends.

    TTI has a particular emphasis on the connected tool, range expansion into niche areas, and further battery development, for example, but only a small program for tools featuring motors with voltages above 18 volts. Makita does not have a connected tool program, SBD arguably does less niche expansion than the others, and Bosch does have an OPE program, but it is very different from that of the other three.

    A shared consequence of these general trends, however, has been something of a massive range expansion by each of the manufacturers, and it seems this expansion is set to continue. This has consequences in particular for the retail channels that service these brands. While the manufacturers are free to continue to produce new models that split familiar categories into several sub-niches, retailers have limited shelf space, limited warehouse/stock space, limited funds to allocate to stock, and, quite frankly, less expertise than they might really need to effectively sell many of these different variants of cordless power tool.
    A prime example

    One tool in particular has stood out for HNN as a prime example of how these product range expansions have come to affect retailers, even large retailers with a great deal of resources to make use of. This single power tool has been sitting on the desk of one of HNN's editors. There is nothing all that spectacular about the tool - in fact, as it was purchased used on eBay, it is somewhat the worse for wear.

    It's a Ryobi. It performs a function that is very common. It uses the conventional Ryobi battery system. It is well-liked - according to online reviews - by those who use it, but it is not, in any way, really a "game changer" - though it does have some notable and interesting innovations.

    There is one outstanding quality it does have, however: despite being a mainstream Ryobi product, it is not sold by Bunnings. That could have something to do with supply issues, but given the outstanding sales growth that Ryobi has experienced in Australia, it seems unlikely that Ryobi parent company Techtronic Industries (TTI) would be inclined to deny Bunnings access to the tool.

    This tool is probably not sold by Bunnings because Australia's largest hardware retailer would likely struggle to find a place in the market for it - even as a non-stocked "special order". Bunnings may boast a very wide range of power tools, but it is no secret that even the swath of space allocated in its largest warehouse stores is no longer sufficient to display even a significant portion of what the power tool industry has served up over the past five years.

    The tool in question is the Ryobi Quiet Strike (pictured on the opening page of this article). The Quiet Strike is an unusual tool, even for Ryobi, which does have some unusual tools. This tool is based on a different take on a Milwaukee/AEG tool, the oil-pulse impact driver. Where most impact drivers rely on a tensioning spring to deliver the rapid pulses of power that help drive self-tapping screws into wood very quickly, oil-pulse impact drivers instead rely on a more complex hydraulic system to deliver similar results.

    The hydraulic systems are, ultimately, more effective, and they give tool designers a great deal of freedom in terms of how they are setup to perform. In the AEG oil-pulse driver, the system is oriented to deliver the maximum bang (literally) for the buck, resulting in surprisingly quick screw drives. The Quiet Strike, as the name implies, has taken a different approach. It is designed to perform at around the same level as a standard Ryobi impact driver - but at a sound level that is close to half that of most impact drivers.

    It isn't just the design that makes this Ryobi so interesting. People who pay close attention to the types of tools being used for common tasks have probably spotted the same trend that HNN has: far from being, as Ryobi modestly describes its products, designed strictly for DIY, these tools have become more accepted by certain types of tradies and handymen. Though still rare on construction sites, they've become very common among those primarily concerned with different types of standard maintenance work.

    So, while Ryobi may claim the advantage of the Quiet Strike is that a cross neighbour may not drop over at 8am on a Saturday morning to complain about the deck you are building in your backyard, the "real" purpose of this tool is to make life easier for maintenance workers in commercial premises such as schools and hospitals, where noise containment is essential.

    Which illustrates just exactly why Bunnings likely does not sell the tool: we're not talking just about a niche use here, we're talking about a niche within a niche. And Bunnings, as HNN has frequently suggested, just doesn't do segmentation. There are two reasons for that (as far as we can determine). Segmentation can be appealing, but it nearly always ends up saying both "yes" and "no" at the same time - and Bunnings goes out of its way to not say "no", under any circumstances.

    Secondly, segmentation often requires explanation and genuine salesmanship. Bunnings offers some guidance to customers, but it doesn't always match up to the more sophisticated products.

    What is highlighted here is an inefficiency in the way Bunnings is able to service some newly developed markets: it is a new, innovative product, with an evident, and perhaps eager, market - but Bunnings lacks a legitimate, assured path to that market.

    HNN would argue that it isn't just Bunnings that finds itself in this kind of curious situation - it's actually large segments of the power tool industry, both retailers and manufacturers, that find themselves facing similar contradictions. While these forces have been present for around the past decade or so, recently they have come increasingly into focus, to the point where they are starting to exert a dominant force on some market sectors.
    The Bosch paradox

    While it might be tempting to see this situation as having to do mostly with the professional, tradie end of the market, in fact it has come to affect the consumer range of tools as well, though with a slightly different inflection. We can see this mostly clearly with the new range of consumer-oriented tools that Bosch has released in 2018. These tools are relatively unique, in that they are aimed not just at the consumer market, but at the lower-skilled end of DIYers, with the explicit purpose of enabling them to do more in a better, less stressful way.

    Some of these changes are useful tweaks to existing product types. Thus the new AdvancedDrill 18 and AdvancedImpact 18 take the conventional drill and impact driver and make them a little easier to use for DIYers, with a low unit weight of one kilogram, an electronic switch to handle forward/reverse, and a way to preset the drilling speed. The same is true of Bosch's PushDrive screwdriver, which is a battery screwdriver that responds to a push against a screwhead by starting its motor and driving in the screw. Similarly the Gluey hot glue pen is a reformatting of the standard trigger-based hot glue gun to a pen-like shape, which makes it work more like a standard adhesive applicator.

    Stepping away from the standard, Bosch has also expanded its range of NanoBlade cutting tools, adding both corded models and an 18-volt alternative to the range of what seem like micro-chainsaws, with 4mm cutting blades. These are designed to make cutting material such as wood as simple as possible, and are suited to areas such as gardening and crafts.

    Perhaps the most interesting DIYer product, though one which is simpler than the rest, is Bosch's SystemBox. These are containers designed to hold the tools associated with a specific task - such as sawing, or screwdriving and drilling - as well as providing a suitable work surface. Bosch describes this product:
    In the future, DIY enthusiasts will also be able to implement projects simpler and faster with our SystemBox range. What's behind this? With the SystemBox from Bosch, you have your tools, accessories and any materials you need to hand at all times. The new stackable storage and transport system clearly organises everything that is required to carry out preparatory and follow-up work for projects while saving time. The SystemBox is available empty or already equipped for the three most common DIY tasks: Sawing, drilling and screwdriving as well as working with multifunction tools.

    These are innovative tools, and this shows Bosch is moving in a very useful direction, by helping to equip the less-skilled with the resources to achieve some basic tasks. At the same time, however, the same range-expansion problems that we've seen with the tradie end of the market are now likely to affect the consumer end as well. In addition to the standard range of "green" drills and impact drivers, there is now an additional number of tools, some with new and unfamiliar uses.

    More than that, though, Bosch is likely to find itself engaging with an interesting paradox in launching these tools. In the past, less-skilled DIYers would tend to buy the cheapest tools on the market, on the basis that they would not get value from more expensive tools. These new tools from Bosch, however, are quite expensive. For example, the corded version of the NanoBlade-equipped EasyCut 50 sells for GBP74 (about AUD135) on Amazon UK and the cordless EasyCut 12 sells for GBP106 (about AUD190). That's far more than the equivalent jigsaws would sell for - and justifiably so, given the new technology.
    A coming change?

    What we are beginning to see develop in the power tool industry is a mismatch between the tools that are being developed by the manufacturers and the channels to market that are offered by retailers. While product ranges have dramatically increased in size over the past six to seven years, retailers continue to rely on the same sales process they were using 15 years ago.

    Online selling has taken up some of the slack in the system. Notably Bunnings offers a "special orders" service, where customers can buy products such as Makita's extensive 12-volt range, and it has recently enabled ecommerce on those transactions. However, even retailers that are predominantly online, such as Sydney Tools, struggle to represent the breadth and depth of products available, and typically fall back on providing only the more popular products.

    It has become a familiar recitation to mention that 20 years ago if you had to get someplace and didn't have your car with you, you hailed a taxi. You rented your entertainment from stores that stocked racks of DVDs. And if you went on holiday anywhere, your choice of a place to stay was limited to hotels, motels, and possibly dodgy bed-and-breakfast places. All that has changed now.

    Individually, innovations such as Uber, Lyft, Netflix and Airbnb seem fairly innocuous. Taken together, they don't so much signal the rise of technology (in particular of the social interactions that get privileged by what mobile phones make possible), as a deeper understanding by consumers of what it is they really need and are willing to spend money on. Consumers don't want taxies, they want to get from A to B with the least possible inconvenience. They don't want the "convenience" of digital media stored on physical media, they want vast selection, and immediate, spur-of-the-moment access. Nor do they actually need or want the stuffy rituals of hotels. They want a place to sleep and to perhaps eat a meal, and having direct contact with "real" locals, rather than hotel staff, seems a particular plus.

    A good question to ask is what happens when we begin to apply that same kind of thinking to the power tool industry. How much do consumers really benefit from owning, say, a cordless power drill? They may be cheaper, more powerful than ever, and so forth, but all that has not altered the use pattern that most follow, where the drill is used a maximum of 50 hours a year, and for the rest of the time sits fallow in a toolbox or drawer somewhere, becoming rapidly outdated, its Lithium-ion batteries ageing into oblivion.

    Of course, there is the argument that, try as you might, power tools remain a very physical product that requires a very physical presence - you can't simply choose to download them. But, unlike movies and Netflix, but very much like Uber and cars, it is likely that consumers will be able to plan and anticipate when they want and need this kind of service/tool. It's very rare that today the average homeowner manages to avert disaster because they have, waiting in a drawer somewhere, just the right kind of impact driver.
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    This is only an introduction to this article. To read the full article, please download the PDF of HI News Vol. 4, No. 3 at:
    HI News 4-03: Future tool
    HI News V.4 No.6: High-heels and Hi-Viz
    Download the latest issue of HI News Vol. 4, issue no. 6
    HI News 4.6
    Jacinta Colley from Simmonds Lumber is profiled in the Women in Hardware feature
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    Click to visit the HBT website for more information
    The Women in Hardware feature is about what companies in the hardware retail industry have done in terms of gender equality. The data we present shows that while most major companies have made some progress, there is still far to go. As part of this feature, we profile Jacinta Colley, national account manager at Simmonds Lumber.

    In many ways her story is emblematic. It is not just about setbacks, and real difficulties overcome. It's also about a woman who developed a talent for taking advantage of any opportunity, no matter how small, that offered itself.

    Simply click on the following link to download this edition:
    HI News Vol.4 No.6: High-hells and Hi-Viz

    In this issue, we write about how bricks-and-mortar retailers can gain in-depth insights to their customers through digital merchandising displays.

    We also explore how "Home Automation" has been replaced by the idea of the "smarthome". At the centre of this new idea is an array of devices that combine decent speakers with great microphones linked into speech processing on the cloud.

    The edition is also about how kitchens are just starting to move away from the wave of white that swept through over the past two years. That is being replaced by three leading trends: black kitchens, technical kitchens (for cooks), and smaller, open kitchens.

    In addition to our regular update on Australian big box stores and independents, international retailers in this issue include Homebase, B&Q, Travis Perkins, Home Depot, Lowe's and Ace Hardware. Suppliers include Methven, Stanley Black & Decker, Sika, Hilti and Imex Lasers.
    High-heels and Hi-Viz
    Jacinta Colley, national account manager, Simmonds Lumber
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    Jacinta Colley at the Simmonds stand, HBT 2018
    Jacinta Colley delivering her speech
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    "Having it all" was once a glamorous cliche from the 1990s, but today women like Jacinta see it as another item on the to do list

    At the Hardware & Building Traders (HBT) annual conference in May 2018, the Women in Hardware held an event, where Jacinta Colley was the main speaker. National account manager for the respected timber supplier Simmonds Lumber, Ms Colley told some of the story of her journey through the ranks to her present position.

    It was, to most of us who attended, a really enrapturing experience. Both because it was quite a story, and also because Ms Colley was able to share some of the more extreme moments she had gone through.

    It is a story that is not just about setbacks, and real difficulties overcome. It's also about a woman who developed a talent for taking advantage of any opportunity, no matter how small, that offered itself. Who conformed when it was necessary to go on, but who also blazed back when she could.

    The following is the speech that Jacinta Colley gave. HNN has edited the original speech for the purposes of brevity and clarity.

    In year 10 when I was doing work experience at a hairdresser's, sweeping the floor. I often wonder where I would be today if I had gone down that track. Because, I am here today in an amazing industry, full of amazing people.

    When I was 20, I had moved in and out of my parents' home, and I was kind of annoying my folks a bit. They said to me, "What are you going to do Jacinta? Have you decided?" Well, I didn't know what I wanted to do.

    My father was working for Carter Holt Harvey at the time. One day he came home and said, "There's a job going at Carter Holt as an internal sales representative and we think you should apply."

    I'm like, "Are you kicking me out?" And he said, no no, you don't have the job yet.

    I thought, okay cool. And he said, "You are going to move to Melbourne."

    I said, "I don't have the job yet."

    He said "You are going to do what I tell you. You are going to sell yourself and get that job."

    In the end he won, and in two weeks I was gone.

    Only now, in my late 30s, do I thank him and then only after a couple of wines! Because I would never admit that to him.
    Meyer Timber

    After 18 months with Carter Holt Harvey, I was approached to work at Meyer Timber in Melbourne, which is a timber wholesaler. I got to work beside a man named Frank Assisi and he became a mentor to me. He was absolutely instrumental in me getting into the wholesale world. And really understanding the ins and outs of a house [timber company] because when I was at Carter Holt all I knew about was pine fascia and flooring. So he really helped me along. No question was ever too hard. He always gave me the time of day, and we are still very close to this day.
    Brisbane: Carter Holt, then Simmonds

    Carter Holt Harvey kept coming back to me and saying, "We want you to be a rep, we actually think you would do a pretty good job, but you have to move to Brisbane."

    I thought, why not? I don't know anyone but I will meet people. So I did that. And if I hadn't taken a leap of faith, I certainly wouldn't be where I am today.

    My time at Carter Holt actually turned out to be quite short. Roger Healy who was state manager for Simmonds Lumber at the time, said to me, "You need to come and work for us."

    I said, "Why would I want to do that?" And he said, "We're fun and there is more for you to learn in the real world." So I decided to accept that invitation, and I moved over to Simmonds.

    I would moved away from a corporate world of red tape, of being told what I can sell at what price and under restrictions. That move to Simmonds would be the best decision of my life.
    The first day

    I will never forget the first day I started Simmonds. I walked in wearing heels, and the whole bloody place was tiled. It was absolutely hilarious. I am click-clacking along, and one of the boys said, "Are you going to be wearing those every frigging day?"

    I replied straight back: "Hell yes!" And when they all laughed, I knew I would fit right in.

    I remember Roger taking me for a walk to the sheds and he pointed to different products. I asked him, can I sell anything in the shed? And he said, yes that is what you were employed to do.

    So I asked, do I need to know the cost as well? He said, yes you have to make a margin. And I said, am I going to understand that? He said, "Absolutely."

    So these were very instrumental lessons for me.
    The dumb email

    Roger would also be, as it turns out, the first person I would tell that I would be taking maternity leave. He was thrilled, but my CEO at the time was not.

    My then-CEO would send me an email in capital letters, in all RED TEXT and it said, "Jacinta, I have received your news that you are expecting. Do you know that company cars are not to have car seats fitted to them? Do you know that this is why I was reluctant to hire a young female in sales?

    He added that the next female he would hire would be over 50 years old.

    I stayed at my desk for some time, and I really pondered over this email. I thought, "this could be fun!" But instead, I deleted it, and I moved on.

    Now I'm sure that hasn't happened to all of you but maybe you have had similar experiences. That happened nine years ago and today I think I would be much stronger fighting back. But at the time, I didn't have the confidence that I have today. And I'm really fortunate now that where I work I have a bit more flexibility, and Simmonds are very family-supportive.
    After Roger

    About two and a half years ago, Roger made the decision to leave Simmonds Lumber. He had been a real advocate for me, supporting me in being a mum, and juggling work, which can be very tough. I was very pissed off at him for leaving because it was going to get harder.

    But his decision to leave and we are still very close to this day would open the door for me to go beyond being a sales rep, and to step up and become a sales manager in Brisbane. And that meant having grown men in their 50s report to me.

    After I had managed to do that, another door opened, and I was able to take the position of national account manager at Simmonds. This would be a first in Simmonds, having a female international role, reporting to the CEO. I was also the first female at Simmonds to take maternity leave. So I have experienced a lot of firsts at Simmonds Lumber.

    There are some tough things that can happen in the wholesale game. There are some tough things you are confronted with in a very male dominated industry. What is quite unique about Women in Hardware is that there are a lot of you in hardware. There are not a lot of us in my part of the business [timber wholesale]. So I'm amazed at the turnout today [in Adelaide]. It is phenomenal.
    Industry awards

    I have worked very hard to gain respect in the timber and hardware industry, and that is something I have been recognised for.

    After a year at Simmonds, I received my first Timber & Building Materials Association (Australia) (TABMA) award in 2005.

    I remember when I had been nominated and someone at the time said, "Does she really have to attend?" The day of the award was Simmonds' annual golf day. But he was told it was important that I attend. It was hot that day and I had to hire a dress because I didn't have one. I was extremely sunburnt. I remember being so nervous that I almost fell off the stairs, it was absolutely hilarious.

    In my ninth year at Simmonds, I was very fortunate to win sales representative of the year again.

    This slide was in 2015 when I won the national representative of the year in my 10th year at Simmonds. So I am really honoured and proud people in my "game" respect me and feel confident that they can talk to me and ask questions.

    I've also lucky that I have a multitude of people who I can look up to in our industry. There is Kirsten Gentle from TMA, Fiona Lucky who is based out of Brisbane, who is another woman who has defied odds and is right up there in the industry. And Tamika Smith, who I've recently just got to know, she is founding director of TSR Property Solutions and Aspiring Young Businesswoman of the Year in 2017 from the Women in Business Awards of Australia (Gold Coast).

    I am also close to a group of women who are part of this amazing industry, Women in Forest and Timber Networks (WTFN). They comprise about 5% of the workforce. It is a forum for women to meet and exchange ideas, similar to Women in Hardware, and it was formed to ensure that our voices are heard. We aim to recognise contributions, we celebrate achievements and we support each other.
    Looking back

    I feel very fortunate to work in such an amazing industry. I don't have a university degree. I am pretty much self-taught by learning from people in my sector and believing in myself.

    I was really nervous when I put my hand up and applied for the national role. Not because I didn't think I could do it, I knew I could but because I would be the first female in Simmonds in a national role in a very male dominated business. There are 89 staff at Simmonds nationally and I'm one of 11 women. There are two women in Brisbane.

    So reporting to a male CEO, and every other senior manager is male, could that be scary? No. I actually think they are more scared of me, to be honest. In fact, I have a bit of a reputation in the office that if you want something done, then give it to Jacinta.
    "Having it all"

    Often people ask me how I balance it all how do I "have it all" wife, mum, big job, fitness etc. how have I done it?

    My reply is often "You need to know what you want and what you are willing to do for it."

    And, of course, make sure you are aware that in our game there are gender differences, because there are. Make sure you're not talking too much women tend to talk a lot, men less. Look for non-verbal clues, and don't fight everything. Sometimes it is best to pick your battles.

    Also, be selfless, don't think about the next promotion or next job you are doing, think about what it is that you want to drive for the shareholder and the customer and your employee, rather than your self-interest.

    I then back it up by saying be authentic to yourself. Don't wear a mask, it is far too exhausting. I think that is the main thing, be authentic because that is what has got me this far and I'm not going to change now!
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    The next two to three years could be some of the most transformative for independent hardware retailers since the 1980s. Just as the first point of sale (POS) systems and barcodes changed forever the operational aspects of retail, so now there is an informational change under way.

    On the face of it, however, there has seldom been a time when things have looked tougher for non-corporate independents (NCIs) in hardware retail than today. The rise of Metcash's Independent Hardware Group (IHG) has created a division within independent retail itself, and one that is set to get wider over the next couple of years. Wesfarmers is backing a strong push by Bunnings, with the trade sector as its main target. All that adds up to a lot of internal industry stress on the NCIs that are outside of those groups.

    Added to this is the more general stress from the current Australian economy that is affecting all of retail. Even as the numbers we currently use to measure the economy are pointing up, the economy itself has been very slow to respond. Business investment remains low, growth in wages is low, and this has been generally reflected in low growth for most sectors of retail. As HNN has suggested in the economics part of this series on the Future of Retail, it's very possible Australia has just barely escaped from entering a deflationary spiral. It is a close call that has come with some costs, and will take the economy some time to fully recover from.

    Where hardware retail has been partially shielded from factors that affect retail in general over the five years from FY2011/12 to FY2016/17, buoyed by rising dwelling prices, which have driven the increase home-building and renovation activities, that is set to end, and the market will likely go slightly negative during calendar 2019.

    Just to add to all of this, recent changes in retail technology also seem set to advantage larger retail operations over smaller ones. Data analytics, which makes use of broad and deep datasets to deliver market and customer insights which can drive bigger profits and increased customer engagements, requires size, which smaller retailers cannot deliver. Also, though the costs of these techniques have fallen steeply over the past 10 years, they require specialised knowledge, and remain relatively pricey for smaller companies.
    The upside

    Yet, despite all of these seeming difficulties, HNN remains very optimistic about the prospects for most NCI hardware retailers. It is our belief that both the economy and retail itself are undergoing transitions, and that what emerges will rebalance a part of the market in favour of NCIs.

    One key factor in this is that HNN sees the Australian government as being forced into making some kind of economic stimulus spending in FY2019/20. This will follow on from some of the usual pre-election populist stimulus spending, which will likely land in February/March 2019.

    Given that small businesses - and especially retail businesses - have tended to miss out on most government stimulus packages, there is a special obligation on the hardware retail industry, and particularly its NCI sector, to present the best possible target for any stimulus spending that might come along.

    The key to garnering a deservedly large share of this likely stimulus boost is the combination of a "heartland", high-employing industry (such as retail) with technologies which are at least as much about software as they are about hardware. This can create what we might call a really enticing "three-fer", in terms of representing overlapping business minorities: the type of business the Reserve Bank of Australia (RBA) has identified as being in the highest growth category; a boost to a "traditional" business (as opposed to "scarier" high-tech software development); and a way to deliver funding in a visible, accountable, results-oriented way directly to a large number of small businesses.
    Under investment

    Of course, making these technological changes is not just about seeking government funding. Few sectors of Australian business have underinvested in the technological opportunities of the past 15 years as much as "traditional", physical retail. It's an area which is ripe for improvement, and where investment is likely to deliver immediate rewards.

    This lag in development is a little surprising, as retail in general (and hardware retail in particular) made significant investments and undertook major risks during the 1980s and 1990s as they first adopted barcodes and basic POS cash-register based systems, then switched to complex retail software which, at the upper end, is really a form of enterprise resource planning (ERP).

    One big difference is simply that the previous systems that were implemented were very much "replacement" technologies. Just as the spreadsheet was the technology that really encouraged the revolution in personal computing, because it represented simply an electronic form of the familiar ledger, so barcodes and POS systems were a way of doing something familiar faster and better.

    The other problem is simply that most of the tech solutions being offered today are the same solutions offered four or five years ago, warmed over to make them look new. Even as part of the tech world (especially anything related to mobile, but cloud computing as well) has accelerated its development, retail technology has pretty much stayed the same.

    What is especially lacking is any kind of "architecture" to the solutions, a commonality of purpose and implementation that ties together the many possibilities. However, at the present time that commonality is beginning to emerge, and at its heart is the need and the possibility of moving beyond what has come to be called the "omnichannel" strategy - as the blending of ecommerce and physical retail is often called - to a more unified approach.
    The situation

    Before we start to look at these new potentials, it is a good idea to get a better idea of the forces that are coming to bear on retailers today. While these are familiar, what is less familiar is how they combine to produce the modern industry.

    The most recent industry change has been the combination of Mitre 10 and the Home Timber & Hardware Group (HTH) into the Metcash-owned IHG at the end of 2016. This has created a market that consists - broadly - of three groups: Bunnings, which has majority control over some sectors such as DIY power tools, and a strong influence in many other sectors; IHG, which is using a combination of corporate-owned and independently-owned stores to try to gain control over the "local" hardware market; and stores that are unaffiliated, which we might call the non-corporate independents (NCIs).

    IHG has plans to expand both its trade and DIY businesses, primarily by providing unique tools and other products at low price points, driven by higher volumes and the use of its centralised warehouse distribution platform. Even those members of IHG not directly part-owned by Metcash will find benefits in more closely integrating - through data exchange and product lines - with the company's corporate-owned stores. This is turn should, according to the company's strategy, lead to more stores joining IHG, expanding its market reach.

    Over the coming three years, Bunnings intends to grow its share of the trade-based market on top of its already high growth rate in DIY. It will do this by expanding the range of services and products aimed at trades, possibly including the introduction of more Bunnings Trade stores across Australia. HNN projects that Bunnings could take as much as $2 billion out of the trade market over the next three years.

    As a result of this market consolidation, NCIs stand to come under pressure by the combined forces of Bunnings and Mitre 10 on at least four different fronts.
    Retail brand promotions

    Both Bunnings and IHG's Mitre 10 brand have the advantage of a strongly identifiable brand name that is backed by a range of advertising, including TV commercials, print ads, regular catalogues, electronic direct marketing (emails), online marketing, and outdoor advertising.
    Brand product pricing

    Bunnings and IHG pursue a similar strategy based on suppliers lowering their wholesale prices in exchange for guaranteed volumes. Bunnings, of course, has a considerable advantage in this area, both because it has higher volumes, and because it has complete control over its entire store network.
    Home and captive brands

    Allied with lower brand prices, both Bunnings and IHG continue to expand their offering of home and captive brands. The partnership between Bunnings and Stanley Black & Decker to redevelop the Irwin brand as a captive brand for Bunnings is a good example of this. Irwin is at a near-perfect price/quality/reputation point to aid Bunnings in growing its marketshare for trades.

    Meanwhile, IHG continues to produce home-brand items. While these are at the moment, in general, at the lower end of the DIY market with offerings such as its Buy Right brand, there's little doubt that over the coming years these home brands will enter the low-end of the trade market as well.

    One of the big changes in recent years has been IHG's revitalising of its Mitre 10 Sapphire store program. While early Sapphire stores were not very good from a customer perspective, more recent efforts have introduced new and innovative merchandising solutions. The Sapphire team now works closely with store owners, is flexible about requirements, and keen to learn and improve how best to equip stores.

    The result is not only stores which deliver superior customer experience, but also stores that are clearly similar, making it easier for customers to identify with the brand, and to shop more conveniently at a range of stores.

    Bunnings, of course, has long been a quiet master at merchandising. While their stores can seem almost causally laid-out, there is a lot of experimentation and expertise behind what they do. To name just one simple element, the dark-red base colour of their shelving creates a slightly festive and welcoming element to their stores (something that became evident when contrasted the colder blue of the warehouse stores built by Masters Home Improvement).

    The drop palettes in the the broad aisles, and the seemingly accidental kick-boxes of helpful products that intrude into product category aisles, are all merchandising fine-tuning techniques that many other retailers have yet to really understand.
    Digital transformation

    Up until recently, digital has seemed to many Australian retailers to be as much a problem as it is a solution. That is in contrast to the US hardware retail market, where retailers have advanced quite far ahead of the Australian market in terms of digital experimentation and development. The Home Depot stopped building physical stores for a number of years, concentrating instead on building out the technical and logistical infrastructure needed to make online/digital work well for it.

    Lowe's Companies has similarly invested in digital, including headline-grabbing store "robots" and virtual reality (VR) active displays. Nonetheless, Lowe's new CEO, Marvin Ellison, who comes from turning around discount clothing retailer JC Penney, after a history as a top executive at Home Depot, is expected to further boost the company's online presence.

    Ace Hardware, which relies on independent member stores, has made strong moves into online, most recently through its acquisition of The Grommet. This company operates an e-commerce website that markets and sells new and innovative products created by independent entrepreneurs. Brands it has helped to launch include FitBit, IdeaPaint, OtterBox, SimpliSafe and SodaStream. Ace has taken The Grommet's online presence, and brought that into the physical stores of Ace members.

    While it is true that going online is a good strategy in the US (and even the EU) hardware retail sector, it's probably right to be a bit doubtful about duplicating this in Australia. As Wesfarmers so recently found out when it attempted to export the Bunnings business model directly into remodelled UK Homebase stores, Australian hardware retail is something quite unique in the world, and deserves its own strategies.

    To read the rest of this article, please download the free, complete edition of HI News at:
    HI News 4.6: Digital merchandising
    Kitchens 2018-19
    Ikea kitchens taken to a new level
    HI News 4.6
    Alterations and additions
    Takeaway food statistics
    Subscribe to HNN weekly e-newsletter
    Kitchens are approaching a new inflection point in their development. As HNN has remarked in the past, it's quite common for a phase when all-white kitchen styling dominate the market to be followed by a period of innovation and change.

    While that relates mostly to the interior design dynamics of Australian households, kitchens are also one place where wider social changes that affect families are going to show up in terms both of style and function. Kitchens are one of the most functional rooms in a house, and as families see their needs and requirements change, they begin to seek different kinds of solutions from their kitchens as well.
    Future trends

    Two of those social changes are the increase in workforce participation by women, and an increase in takeaway food consumption over the past five years -- though the latter varies widely by state and territory.

    Chart 1 shows the increase in workforce participation by women, which has accelerated over the past three years. Chart 2 shows the gap in participation rates between men and women (ABS statistics, trend estimates), which came in at an average of 10.5% for FY2017/18 (men 70.8%, women 60.3%), versus 19% for FY1997/98 (men 72.5%, women 53.5%).

    Chart 3 is an interesting chart produced by the Reserve Bank of Australia (RBA) which shows the participation rates for men and women in different age ranges. Its two surprises are the increased rate for middle-aged women, and that the participation rate for those under 25 years-old is nearly equal for men and women.

    Chart 4 shows percentage change in expenditure on take-away food across Australia. Chart 5 shows the increase for New South Wales (NSW), and Chart 6 shows the increase for Victoria (VIC). Table 1 shows the rankings for per capita expenditure on take-away food for all states and territories. It's no surprise that NSW tops that table, but it is somewhat surprising that VIC is at the bottom.

    It's worth noting that according to the 2016 Australian Census, the average Australian woman spends between five and 14 hours a week doing unpaid domestic housework, while men typically do less than five hours a week. Studies indicate that when married, time spent on housework by men declines, while that of women increases. This trend accelerates (on average) after children are added to a family.

    This is particularly important as regards kitchens, as women continue to be viewed as "responsible" for the majority of food related tasks, including planning, shopping, preparation, cooking, serving and cleaning up. Families typically have 16 shared meals (a number which excludes weekday lunches). Of those 16, however, the five weekday evening meals carry a larger burden of importance, lack of time for preparation, and a higher stress level. Many families would agree that out of the 100% total effort for food during the week, each of those evening meals account for about 10%. Given this, having take-away food for family dinners six or seven times a month makes a lot of sense.

    Just as important is that, globally, the kitchen (and dining-room) is ceasing to be the place where people regularly eat their meals. In a survey conducted by IKEA in 2017, it found that 54% of Berliners and 47% of Londoners do not eat in the kitchen or dining room during weekdays, with a global average of 36% - a trend that is growing in Australia as well.

    This range of changes - more women working, more stress related to families getting household tasks done, reliance on outside services (such as take-away food) to solve that stress, and a de-emphasis on the kitchen as a place to eat - will have an impact on kitchens, in particular when it comes to renovation.

    One of the first effects is likely to be a slowing down in terms of when kitchen renovations get done. The number of kitchens that are renovated in the range of 16 to 20 years of age will likely increase, while those renovated in the range of 11 to 15 years of age will decline. Figures from the Housing Industry Association (HIA) in Australia broadly support this shift.

    In terms of the renovations that do take place, we're likely to see a series of slightly conflicting changes. Kitchens could grow smaller and more compact, consuming less of the overall space of the house. (This will be boosted by the ongoing reduction in overall dwelling size, with even multi-dwelling living spaces growing smaller, as well as the majority of detached housing.)

    With changing household interactions, rather than the "kitchen as living-room" we will see the kitchen continue to move towards becoming part of the living area. This means kitchens which provide easy access to the refrigerator and coffee/tea making facilities, but less workspace. There will likely be a move towards smaller in-kitchen eating surfaces, along with the provision of larger eating surfaces (counters and tables) nearby, that can be re-tasked for other household purposes.

    While those changes indicate less expensive kitchen renovations and a diminished market, the other big change is going in the other direction. That is the move towards more "technical" kitchens. These are kitchens that will make use of more advanced cooking technologies. For example, the top range oven models released by Miele in August 2017 use a range of combined cooking technologies: electromagnetic waves, radiant heat from the top and bottom of the oven, and a convection fan, to produce better results than conventional-only ovens in a fraction of the time.

    One part of that trend will be the "smart-kitchen". In brief, kitchen appliance manufacturers are conflicted about whether they need to fit into the home intelligence systems offered by Google, Amazon and Apple, or if they should develop their own. Developing their own would enable them to promote network lock-in, where you want to buy a Samsung oven to go with your Samsung refrigerator, for example. However, this would preclude other forms of interconnection.
    Immediate trends
    White to black

    White is still dominating kitchen renovations in Australia at the moment, but the good news is that it will very likely change as we move into calendar 2019. Partly as a reaction to white (perhaps), and as a means of better blending kitchens into all the living space, there is a stronger trend towards black kitchens emerging in Australia.

    New surface technologies that make matte and textured finishes (in wood and other materials) more durable and easier to maintain are also helping to boost the popularity of black. While black will never be an easy colour to keep looking good, matte finishes do ease the task, as at least every individual fingerprint will not be highlighted against a gleaming reflective surface.

    These new technologies are also seeing an increase in the use of darker and more textured woods used as panelling on basic black kitchens. This is a move away from the somewhat nordic kitchen lines of recent years, and a definite shift in how kitchens can relate to the rest of a house.

    One area that remains conflicted is how to present storage space. Along with the shift to black has come designs that hide and conceal the functional parts of the kitchen, such as refrigerators and even cooking surfaces. This has extended to the storage of implements such as pot and pans, as well as pantry supplies.

    At the same time, however, many kitchens are innovating with forms of open shelf storage, including suspended open shelves over the work areas.
    Birth of the blue

    If there is one colour that is coming through the shades of white to influence the design of many kitchens, its is blue. Not a pastel blue, or a blue/grey either, but a deep rich blue. Associated with the blue style, is the use of many different shades of blue, so that, for instance, a rank of cabinet doors will go from dark blue to a lighter blue, and then back again.
    The steel

    The final trend that is of great interest is a move to make greater use of stainless steel surfaces in kitchens. This is the surface most often used in commercial kitchens, as it is easy to keep clean and sanitary, is highly durable, resists very high temperatures and is relatively difficult to mark. (It does wear over time, but many regard this as a positive attribute.)

    If HNN's predictions are correct, and kitchens do evolve to smaller, alcove-like units, open to the home, with a focus on cooking technology that makes life easier, it's easy to see that stainless steel might become more popular.
    The kitchen market
    Changes from 2017 to 2018

    The kitchen trends study from online home ideas website Houzz indicates kitchens for 2018 are not all that different from kitchens for 2017 - with a few important exceptions. The one that stands out the most is that the demand for kitchens priced at over $40,000 has declined, while the mid-range of kitchens, between $10,000 and $35,000, has grown, with an average spend in 2018 of between $15,000 and $20,000.

    The other change relates to technology, with fully 12% of renovators adding colour touchscreen displays to their kitchens (with this trending higher, surprisingly, with older renovators). Built-in apps in appliances are used in 8% of kitchens, and wireless controls by 6%.

    The areas that have changed only slightly include:
  • most people renovate their kitchens because they really want to change what they have, or because they now have the finance to make changes they have long considered
  • 60% plan to expand the area of the kitchen
  • more than half plan to open their kitchens to the rest of the house, and over a third plan to open the new kitchen to the outdoors
  • contemporary and modern kitchen styles dominate designs, with 82% opting to make some change to the existing kitchen style
  • benchtops remain the most popular item to change, with engineered stone gaining a dominant position in this market, with over a third of the market
  • in appliances, stainless steel is very much the preferred colour option at 61%, followed by black at 15% and white at just 9%
  • white benchtops still dominate at 32%, followed by grey at 22% and black at 10%
  • Market size

    One pressing question to answer is how the kitchen market will develop in terms of size over the next two years. Tracking this down in terms of statistics has always been a little difficult. One good indicator to begin with are the figures the ABS uses to help calculate the national accounts (from which gross domestic product is derived), the catalogue series 5216.0. These include numbers for alterations and additions, which is the label given to renovations by the ABS.

    There seems to be something of a misunderstanding among economists and statisticians who report on these matters as to how these numbers are derived. To quote directly from the ABS guidebook, "Australian System of National Accounts: Concepts, Sources and Methods" published in 2000:15.22
    The value of alterations and additions to existing dwellings is estimated using data from regular surveys of building activity, and from the periodic Household Expenditure Survey. The Building Activity Survey provides estimates of the value of work done on alterations and additions with an approval value of $10,000 or more.

    As a significant part of alterations and additions activity is not covered in the Building Activity Survey, estimates from the survey are used only as an indicator to move forward benchmark estimates of expenditure on alterations and additions obtained from the Household Expenditure Survey.

    Hopefully this will clarify that these ABS numbers do include renovations which cost less than $10,000, as well as those that do not require building permits.

    Charts 7 through 15 show the percentage change between the trailing 12 months to March from 2009 to 2018 for each state and territory, as well as the total expenditures. Chart 15 shows the same statistics for Australia as a whole.

    One element this last chart shows is a high degree of concentration in terms of outcome for five of the eight states, all indicating a downwards trend in expenditure. The last time there was a similar grouping was in the 2011/12 year, which was followed by a steep drop in expenditure for 2012/13.

    These groupings would indicate that there are nationwide forces at work which are independent of the conditions in each state and territory. At the present moment, the most obvious candidate for this is the continuing slow fall in house prices and clearance rates at auctions. These in turn have been caused by two factors. One is increasingly tight credit, as banks move to reduce the number of interest-only loans - though, as the Reserve Bank of Australia (RBA) has noted, the average mortgage rate in August 2018 is lower than that in August 2017. The other factor is the expectation that the RBA is likely to lift interest rates in the first calendar quarter of 2019.

    If we were looking for some kind of predictive statistic for kitchens, one that could give some indication, would be the ABS statistic for the number of purchases of owner-occupied established homes for which finance has been provided. This statistic would be linked to both home-owners prepping a house for sale with a kitchen refresh, and purchasers redoing kitchens to suit their own needs.

    The Australia-wide changes in those numbers are shown in Chart 14. If these numbers have something of a lag effect, this would indicate that spending on renovations, including kitchens for the remainder of 2018 and the first three quarters of 2019 is likely to be subdued, in a range somewhere between a 0.5% decline and a 1.0% increase.

    Kaboodle has made two strategic changes in association with Bunnings. The first has been the introduction and ongoing success of its kitchen consultancy. This echoes the service long provided by IKEA, and helps to walk customers through the process of designing their kitchens. The second change to service, which is the inclusion of custom-cut cabinetry. The two fit together nicely.

    In terms of its marketing, Kaboodle has made some decent TV advertising, and is running this at a higher rotation than its past ads. This campaign seems to be part of a positioning push to make Kaboodle a mainstream choice for kitchens, rather than the kitchen you choose as a compromise.


    To read the rest of this article, please download the free, complete edition of HI News at:
    HI News 4.6: Kitchens 2018-19
    Big box update
    Bunnings satisfies most customers, according to Roy Morgan
    HNN Sources
    Bunnings could feel the impact of a slowing housing market, says Morgan Stanley
    Bunnings' $25.3million, 10,000sqm Victor Harbor (SA) is officially open
    Click to visit the HBT website for more information
    Bunnings satisfies most customers, according to Roy Morgan Research; Morgan Stanley believes a slowing housing market could hurt Bunnings; another push for a Bunnings store in Coolum (QLD); confirmation for Kingaroy (QLD) opening; expansion for Albany (WA) store; early 2019 launch date for Port Macquarie (NSW); staff restructuring at Baldivis (WA) outlet; employment offered at new Bunnings Caringbah; and Victor Harbor officially opens.
    Bunnings "best performer" for customers

    Research company Roy Morgan has found that in the 12 months to May 2018, 89.5% of hardware store customers were satisfied, an increase of 2.2% year on year. All other significant hardware retailers showed improvement with Bunnings up by 1.3% points to 89.8%.

    These are the latest results from Roy Morgan's "Hardware Store Satisfaction Report" which is based on personal interviews conducted face-to-face with over 50,000 Australians per annum in their own homes. This includes over 9,000 interviews with people who have shopped in a hardware store in the last four weeks.

    With eleven million people shopping at Bunnings in an average four week period, they are the dominant player in this market with around 95% of hardware shoppers and have the highest customer satisfaction with 89.8%, according to Roy Morgan.

    Its research also revealed Bunnings had an increase of nearly 600,000 customers over the last year and were the only retailer to show an increase, apart from True Value Hardware (up by 1,000).

    In second place for satisfaction was Home Timber & Hardware on 89.4% (up 1.5% for the year), followed by Mitre 10 with 88.1% (up 0.1%). These top three performers are only separated by 1.7% points and all remain well ahead of True Value Hardware on 79.3% (up 4.7% year on year). Industry communications director, Norman Morris, said:
    Satisfaction levels with hardware stores is higher than most other retail categories and over the last year they are showing that they are continuing their customer focus, with all four of the majors showing improvement.
    To date there has been limited competition from online players but our research shows that in an average four week period around a quarter of a million people purchase some hardware online. With increased competition from new players like Amazon, bricks and mortar hardware stores will need to focus even more on customers, particularly the advantage they are likely to have regarding their ability to provide personal advice.
    Online visits

    Inside Retail also recently published a list of the most visited Australian shopping websites, based on data from coupon site Cuponation. JB Hi-Fi topped the list with approximately 74 million local visits between January and June this year.

    Bunnings came second with 68.82 million local visits to its website in the same six-month period, according to Cuponation.
    Slower housing impact on Bunnings

    Investment bank and financial services group, Morgan Stanley believes Bunnings may start to feel the negative impact of a cooling housing market as lending for renovations appears to have peaked.

    Government data seems to indicate that as banks tighten lending, less people are looking to update the house for sale.

    Fairfax reports Morgan Stanley analysts suggest that Bunnings' strong trading is likely to slow from the fourth quarter of 2018, based on lower auction clearance rates.

    They said, however, that Bunnings' like-for-like sales growth could continue and margins increase as either the housing slowdown reverses or proves counter cyclical. People may not sell but decide to update the couch or kitchen. Analysts said in a report to clients:
    We think a combination of tightening lending activity from the banks and home owners losing confidence in the housing market has led to the decline in lending for renovations.

    The latest Corelogic data shows that auction clearance rates are down 15 percentage points year-on-year, to 53% in July. Morgan Stanley analysts said:
    Whilst Bunnings' Australia and New Zealand like-for-like sales growth has held up so far, we think the second half of 2017 and the first half of the 2108 period was supported by the Masters exit and the third quarter of 2018 result looks to have been assisted 200-300 basis points by weather, meaning that underlying like-for-like sales may have been as low as 4.7%.

    According to the latest Australian Bureau of Statistics (ABS) figures, in trend terms, lending for alterations and additions (renovations) of homes fell to 17-year lows of $310.8 million in May, down 22.6% from the most recent peak of $401.3 million in September last year. The annual decline of 19.9% was the lowest in seven and a half years.

    Ryan Felsman, senior economist at CommSec, said Aussies had found it incredibly difficult to find a local tradie in recent years as the housing market was going gangbusters. He said:
    However, a decline in home prices, particularly in Sydney and Melbourne, and tighter lending restrictions and anaemic wages growth appear to be impacting homeowners' views towards their castles.
    In fact, homeowners appear to be less enthused about taking out a loan to renovate their abodes. Loans for renovations fell to 17-year lows in trend terms in May, suggesting that more people are shelving immediate plans to add extra rooms or revamp kitchens and bathrooms as the housing market slows in some cities and regions.

    The ABS defines alterations and additions as all structural and non-structural changes which are integral to the functional and structural design of a dwelling. The ABS says examples are garages, carports, pergolas, roofing and re-cladding. But they do not include swimming pools, ongoing repairs, or maintenance and home improvements which do not involve building work. Morgan Stanley analysts said:
    Historically, there has been some relationship between lending activity for this purpose and Bunnings Australia and New Zealand like-for-like sales growth, hence we think this is an indication of the headwinds Bunnings faces in the near term.
    Bunnings pursues Coolum store

    Despite being rejected multiple times, Bunnings is pushing on with its Coolum development, reports the Sunshine Coast Daily.

    The big box retailer has said its warehouse, restaurant and servo could boost local employment. However some opponents have cited the project's size and visual amenity as reasons for blocking it.

    Sunshine Coast Regional Council recommended rejecting the retailer's plans. So Bunnings went to the Planning and Environment Court in Brisbane.

    Bunnings's barrister Danny Gore said the warehouse size differed in the company's two remaining proposals. He told the court one plan was for a 5850sqm warehouse. The other proposed warehouse was 8600sqm. The servo and restaurant were 300sqm each, in both plans.

    Judge William Everson said it seemed "very unorthodox" for Bunnings not to have decided which proposal to advance.

    "The barrister said although Bunnings had already decided to ditch one proposal, with the two surviving proposals "it really will depend on the way the evidence unfolds". Ultimately, differences between the two surviving plans would probably be "marginal" but that too might change, Mr Gore said. He also provided a traffic engineer's report.

    Judge Everson said traffic and parking issues might differ. He told the court that all sides had to agree on what the bones of contention were.

    The court was also told local businesspeople and residents, including parents of local schoolchildren, might give evidence.

    Bunnings tries a second time to build in Coolum - HNN
    Albany store will be bigger

    A time frame on the planned expansion of Bunnings Albany is yet to be decided after a major development of the store was announced late last year.

    The hardware retailer is expected to double in size and expand by 6000sqm into three lots but details of when the it will begin are not yet known. Bunnings property -general manager Andrew Marks told The West Australian:
    The timing and details of the expansion works have not been finalised at this stage...

    The planned development is the first major expansion since the store opened 18 years ago.
    Kingaroy store start date

    South Burnett Regional Council announced that the Bunnings store in Kingaroy should be open by Easter 2019. Councillor Terry Fleischfresser, who has been working with Bunnings' property development manager on bringing the new store to town, said this was a huge confidence boost for the region. He told the South Burnett Times:
    The new Bunnings opening by Easter will create 40 new jobs for locals. There is currently a lot of development in the region which means a strong future for our business sectors.

    Cr Fleischfresser said having big retail stores like Bunnings in the South Burnett allowed residents to keep their shopping dollars in the region.
    No longer will locals drive to Toowoomba or Dalby (to shop at Bunnings), they can do all their shopping right here.

    Construction on the store is expected to start soon.
    Port Macquarie warehouse on schedule

    Bunnings' state operations manager NSW north, Cheryl Williams, said the construction work on the $43 million, 18,000sqm Port Macquarie store is progressing as planned. It is expected to open its doors in early 2019. She told the Wauchope Gazette:
    Once complete, the existing team will transfer to the new store and will be joined by more than 60 new team members. Stock from the existing site will be distributed to other Bunnings stores and racking will be recycled within the store network. Bunnings has been a part of the Port Macquarie community since 2003...
    Baldivis staff changes

    Bunnings in Baldivis, which employs 108 people, recently offered some of its team members several "employment options", including redeployment to other stores, reduced hours and suspension of work. State operations manager WA Hayley Coulsen said the decision was not taken lightly and Bunnings would continue to work to find the best solution for all team members. She told The West newspaper:
    As with any of our new stores we review and adjust team resources as required, and this has been the case for our Baldivis store.
    We recently offered some Baldivis team members several employment options, including redeployment to other stores where possible, reducing their contracted hours or suspension of their role with the understanding that as other positions become available within the Bunnings network, they would be offered these roles.
    Team members who take up other roles will have the option of returning to Baldivis in the future...
    Caringbah store staff search

    The Bunnings store on Koonya Circuit at Caringbah (NSW) is due to open in November, providing120 employment opportunities for Sutherland Shire residents and school leavers.

    Complex manager, Emily Sakalis, started her career at Bunnings 14 years ago and has previously held positions at stores across NSW. She told The Leader:
    I was the complex manager for the old Caringbah Warehouse, and am excited about looking after this bigger and better store. The Bunnings culture is positive and supportive and we strive to bring an element of fun to every day. This is something I've always valued.

    Celebrations for the opening of the Caringbah store are planned for later this year.
    Victor Harbor opening

    Local community groups were strongly represented at the official opening of Bunnings' $25.3million, 10,000sqm Victor Harbor store in South Australia.

    Complex manager Danny Leach outlined the company's policy of a partnership theme - using the skills and materials of Bunnings to support the work of community groups. The store has been involved in Whalers Housing in both Goolwa and Victor Harbor, kids' breakfasts and gardening projects in local primary schools, providing recyclable timber for Encounter Centre and help for dugouts at the Breakers soccer field.

    The star of the official opening was AFL legend Malcolm Blight who coached the Crows to two premierships and scored 786 goals during his AFL career.

    Quizzed by 18-year-old Bunnings team member Tahnee Thatcher, Mr Blight chose two career highlights - one was playing with his mates in the local Woodville footy team while the other was taking out two premierships as coach of the Crows. He told a captive audience:
    Football is a team game so success is shared. People are the common ingredient in success. If you act enthusiastic, then you will be enthusiastic!"
    Indie store update
    Domain Mitre 10 in Westbourne Park (SA) has closed
    HNN Sources
    Mitre 10 in Kingaroy (QLD) responds to new Bunnings store
    ATOM industrial hardware opens in Mt Isa (QLD)
    Click to visit the HBT website for more information
    A South Australian Mitre 10 store is shutting down in anticipation of a nearby Bunnings being built; a hardware store in Port Fairy (VIC) is on the market; Mitre 10 gets ready to compete with Bunnings in Kingaroy (QLD); Mount Isa store gets an ATOM industrial hardware store; hardware is part of new-look Hastings Co-op; and Terang Co-op records small profit in annual results.
    Domain Mitre 10 closes before Bunnings opens

    After 26 years, Domain Mitre 10 in Westbourne Park (SA) is closing down before a new Bunnings store being built just 3km away opens for business. Owner Chris Wauchope told the Adelaide Advertiser that his store could not compete with a $45 million Bunnings store being built in nearby South Road, Edwardstown.

    Mr Wauchope said he chose not to renew his lease after predictive figures showed his business had little chance of surviving a loss of trade once the Edwardstown Bunnings opened. He said it was a "very tough decision" that had "far-reaching implications".
    Port Fairy hardware business for sale

    Ken and June Brookes are selling their Port Fairy (VIC) hardware business and property after 42 years in the industry. The couple has decided to retire and the sale of Brookes Home Timber and Hardware is expected to fetch in excess of $2.5 million.

    While the couple is keen to sell the business and property as one, there has been interest from those who want to just purchase the property for redevelopment.

    Mr and Mrs Brookes opened the store not long after they cut short a round-the-world trip and returned to Koroit (VIC) to help his ill father. The couple had left Australia in 1973, spent a year living in New Zealand before heading around the world via South America and Europe when word came that Mr Brookes' father needed help running his plumbing business. He told The Standard:
    This is why we are here. We were going to head over to Canada so we'll take that up later, we'll resume our trip so to speak.

    The couple's first store, called Port Fairy Hardware, opened in March 1976. In 1983 they purchased the Sackville Street shop and moved the business there, expanding the site over the years when they purchased about five neighbouring blocks.

    Mr Brookes said he had built up the business to include electrical goods, tools, hardware, timber, paint and giftware.
    We've grown it from nothing to what it is. Our aim was to keep business in Port Fairy for Port Fairy and district people. I just hope that whoever takes it on has a good feeling for Port Fairy.
    Mitre 10 responds to Bunnings Kingaroy

    Sunshine Mitre 10 Kingaroy in South Burnett (QLD) believes it already offers everything people need despite a new Bunnings Warehouse opening in 2019. Retail store manager Steve Miatt said he was extremely proud of his team and the hard work they did for the community. He told the South Burnett Times:
    We employ more than 40 people and have many staff with 10 years or more service and some with more than 15.

    Julie Hanson and Barry Collins are two such team members with 27 years of service to Mitre 10's Kingaroy store between them.

    Sunshine Mitre 10 has been focused on supporting the local community since it opened in 1985 in its 4000sqm purpose built premises. Mr Miatt said:
    We employ locals who have been a part of the Kingaroy community for many years and are proud of their long term connections.

    The store has heavily supported many community and sporting groups for nearly over three decades, Mr Miatt said. And it would continue to look after their customers as well as they always have, no matter what new business came into town.
    We pride ourselves on our exceptional service to retail and trade customers, providing a large range from our store as well as expert advice for everyone.
    ATOM opens in Mount Isa

    Industrial hardware supplier ATOM has opened shop in Mount Isa (QLD) thanks to resident, Mark Campbell.

    Born and bred in Mount Isa, Mr Campbell has spent the past 20 years working in the mining sector. He saw an opportunity to develop the local supply market, so he approached the company.

    ATOM chairman Jason Johnson flew up to Mount Isa to meet with Mr Campbell and was so impressed he spent the plane ride home putting together a business plan on the back of an envelope. He told the North West Star:
    Mark approached us and told us there was a gap in the market, and we really backed him. We checked out his credentials and thought this is someone we can build a business around.
    We could see that our business model would work here, provided we had the right local person. The original plan was to open a small to medium size business, but we were lucky enough to land two major Glencore tenders at about the same time we were opening.

    ATOM's Mount Isa store is referred to as the "Bunnings for industry", selling giant spanners, gumboots, angle grinders and safety goggles.
    Hastings Co-op re-development includes hardware

    Construction work is progressing behind the scenes on Hastings Co-op's IGA supermarket, hardware and liquor store which will open in October 2019, as part of the Sovereign Hills town centre in regional New South Wales.

    Chief executive officer Allan Gordon said the new store would be an integral part of Hastings Co-op's family of 15 businesses. He told Port Macquarie News:
    Uniquely, our IGA store will incorporate a full-service hardware store where customers will be able to buy everything from a hammer to landscaping supplies. Covering more than 600sqm, the hardware component will add a great dimension to our offering.

    The development will eventually provide 25,000sqm of amenity to the growing Sovereign Hills community and beyond. The open-air design will feature roof-mounted solar panels, with rainwater harvesting to be utilised for all landscaping irrigation, while recycled bricks and natural timbers will form the key architectural features of the building.

    When it's completed, the Sovereign Hills master-planned community will be home to 2,000-plus new homes, onsite schools, childcare, recreation facilities and the area's new town centre.
    Terang Co-op believes in its business model

    Rural co-operative, Terang Co-op posted a modest profit for the 2017-18 financial year in what has been a tough economic period for south-west Victoria.

    The supermarket, hardware and rural supplies business made a small net profit of $9900 from a turnover of more than $23 million. (The Co-op posted a profit of $150,000 for the 2016-17 financial year.)

    Co-op chief executive officer Kevin Ford said although the Co-op's bottom line hadn't provided the result they'd wanted, the positive was that $270,000 of debt had been paid. He told the Standard:
    We're in a financially stronger position than we were 12 months ago.

    Terang Co-op chairman Brendan Kenna said the Co-op had grown sales against the previous year but costs had continued to climb. He also said the Co-op's rural services were still suffering from the severe downturn that hit the dairy industry. He told the Weekly Times:
    Our business is reflecting their reduced circumstances.

    Mr Kenna believes the co-operative model remained viable and important to rural communities. He said:
    We were all shocked to watch the rapid demise of one of Australia's largest co-operatives, Murray-Goulburn. [We] felt the pain and disappointment of its members as they saw their business fail.
    But as big business and the large banks increasingly turn their back on rural Australia, in the pursuit of higher profits at the expense of services, it makes the co-operative model more important than ever and we think it has an exciting future.

    Membership continued to grow with 110 new members bringing the total to 2610. Highlights of the year also included the purchase of the DTS West business and the branding of dairy services as 360 Dairy Solutions.
    Supplier update
    Genesis makes specialty attachments for heavy equipment
    HNN Sources
    Methven shares lift 5% on China deal for shower and tapware
    The Hilti TE 50-AVR combihammer was named "best of the best" at the Red Dot Awards
    Subscribe to HNN weekly e-newsletter
    Stanley buys maker of heavy equipment attachments; Sika acquires specialist foam systems company; Methven has a Chinese deal for its shower technology; Hilti wins Red Dot awards for product design; and a new pipe and drainage laser from Imex.
    Stanley invests in industrial tool unit

    Stanley Black & Decker (SBD) said it will pay USD690 million for a manufacturer of heavy equipment attachment tools, its third acquisition in two years.

    The acquisition of International Equipment Solutions Attachments Group (IES Attachments) will diversify the company's presence in industrial markets and establishes another "well-defined path for continued profitable growth" according to chief executive officer James M. Loree.

    IES Attachments' brands include Paladin, which makes excavators, wheel loaders, tractors and truck chassis; Genesis, which makes specialty attachments for the scrap processing, demolition, material handling and decommissioning industries; and Pengo, a manufacturer of augers and related parts for the utility, construction and agriculture markets.

    Mr Loree said the brands generate about USD400 million in annual revenue, of which nearly two-thirds comes from after-market sales of heavy-tool attachments, like drilling augers, used in off-highway construction

    The IES Attachments acquisition will be integrated into SBD's hydraulic tools business in its industrial segment. It is expected to add US25 cents to US30 cents in earnings per share by 2022. SBD posted USD8.04 in earnings per share last year.

    The deal, which must be approved by regulators, will be paid for by available cash and proceeds from borrowing.
    Q2 organic sales growth

    SBD's 2018 second quarter financial results was led by continued double-digit sales growth year-over-year (YoY), including an acceleration in organic growth powered by its tools & storage segment.

    The company posted total Q2 sales of USD3.64 billion, up 10.9% YoY, and up 13.5% from Q1's USD3.21 billion. SBD had approximately 7% organic sales growth in Q2, with strategic pricing actions responsible for one percentage point of that, volume comprising +6%, acquisitions at +3% and currency at +1%.

    The company's Q2 profit of USD293.6 million also improved from USD277.6 million a year earlier and USD170.1 million in Q1. Gross margin of 35.3% in Q2 was down from 36.9% a year earlier and 36.3% in Q1, while Q2 operating margin of 13.2% was down from 14.3% a year earlier and up from 11.8% in Q1.

    SBD's Q2 sales and profit numbers both exceeded Wall Street expectations.

    It also announced the completion of the buyback of USD300 million more of its common stock, bringing its year-to-date repurchase total to USD500 million.
    Sika acquires Swiss manufacturer

    Sika has agreed to acquire Polypag, a Swiss-based manufacturer and developer of polyurethane foam systems. This acquisition will enhance Sika's expertise in the area of polyurethane foam development, expand its production capacity, and drive forward its specialist trade business.

    Polypag was founded in 1980. Last year, it recorded annual sales of some CHF40 million (Swiss francs), with a workforce of 120 employees.

    Foams based on polyurethane are used in professional construction applications as well as the DIY market. Sika EMEA regional manager, Ivo Schadler, said:
    The acquisition of Polypag will significantly strengthen our sealing and bonding business. The combined technological and development expertise will open up new cross-selling opportunities. Moreover, by expanding the specialist trade business we will drive market penetration and establish growth platforms for both companies...
    Sika's H1 profit

    The company also reported a better-than-expected profit for the first half of the year recently, the first set of results since it settled its long-running feud with Saint-Gobain.

    Sika said its net profit rose 11.4% during the first six months to CHF318.2 million, or AUD440.38 million, from CHF285.7 million (AUD395.62 million) a year earlier, beating analyst forecasts for CHF310 million (AUD429.06 million) in a Reuters poll.

    The company said sales rose 16%, from CHF2.99 billion (AUD4.13 billion) to CHF3.47 billion (AUD4.80 billion), and said it was still on track for a more than 10% rise in sales to CHF7 billion (AUD9.68 billion). Sika expects EBIT and net profit to increase at a slightly higher rate than sales in 2018.

    Sika repelled a hostile takeover bid from Saint-Gobain earlier in May 2018 after being locked in a bitter battle with the French construction materials company for three-and-a-half years. Under a settlement, Saint-Gobain dropped its plans to take control of Sika by buying the founding family's controlling stake. Instead, it agreed to take a 10.75% holding and not make a tender offer for Sika for at least six years.

    Since then, Sika has adopted a simplified share structure and abolished the dual share scheme which enabled the takeover attempt to be launched.
    Methven's China deal boosts share price

    Tapware and showerware specialist, Methven's shares lifted 5% after it announced a deal with China's Jiangsu RuiZhiShang Building Materials Company to use its shower technology in a series of key projects over the next decade. In a statement to the stock exchange, the New Zealand-based company said:
    By adding Methven showerware and tapware into RuiZhiShang's projects, Methven is targeting annual sales of between NZD8.5 and NZD10.5 million by 2020/21.

    Methven is pursuing international growth in countries like China as it seeks to benefit from its investment in proprietary shower and tap technology. The Kiwi firm increased Chinese sales to NZD507,000 in the six months to Dec. 31, 2017, from NZD81,000 a year earlier, delivering earnings of NZD3,000 compared to a loss of NZD89,000 a year earlier. The company said it was in final negotiations with a number of new distributors to expand its presence in China.

    Methven chief executive David Banfield said the company has delivered over 1 million Chinese yuan, or NZD217,000, in sales per month for the last four months and this current deal together with a national retail distributor it signed in March "further secures consumers' confidence in our brand, and enables us to deliver long-term profitable growth in China". He said:
    The opportunity to bring our award-winning showerware and tapware into hundreds of premium hotels and high-end apartments allows us to tell our compelling brand and technology story to discerning Chinese consumers.

    RuiZhiShang was set up in 2001 in China and specialises in supplying bathroom fittings. According to Methven, it signed its first distribution agreement with the company in November 2017, and they quickly brought Methven products into two large projects right after that.
    Hilti wins product design awards

    This year's Red Dot Design Award competition awarded the Hilti TE 50-AVR combihammer as the winner in its category. Judges cited the tool's "pioneering design". The tool provides improved performance at a lower weight than previous generations of the tool and features an optimised slip clutch which provides added user safety.

    The sixth generation of the Hilti toolbox also received a Red Dot Design Award. It is equipped with a swivel handle, allowing two toolboxes to be easily carried in one hand, and a new interior which can be individually configured to hold various accessories.

    Other Hilti products receiving Red Dot Awards include the range of cordless cutting tool, pipe crimper and punching tool. The TE 6- A36 cordless rotary hammer also received an award.

    The Red Dot Design Award is a well-regarded international product design award. Submissions are assessed based on a criteria that includes innovation, ergonomics, functionality and quality.
    Laser for major pipe works

    Leading Australian supplier, Imex has released its latest technology pipe and drainage laser which combines a number of innovative features that increase efficiency and function for the professional civil contractor.

    The new IPL3 series comes in both red and green beam and has a wireless remote setting. It auto tracks the target plate and fits in a 100mm PVC pipe.

    This laser is also powered by an 8Ah lithium battery with a USB charging port - an Australian first - and is IP68 fully submersible for the harshest conditions.

    A modern use for these pipe lasers is the setting up of columns for solar farms. To meet the needs of this new market, the Imex IPL3 has a unique lock-out grade mode which keeps the beam steady even when working in conjunction with pile driving.

    The laser is set remotely via the remote control unit which can be used 100m away from it. The IPL3 has a working range of 300m at 1.5mm @30m accuracy.

    The accompanying kit includes three target plates for different sized pipes, five different metal leg sets to suit pipe sizes from 100-500mm, a recharger and a USB charger and a remote. Main features include:
  • 300m range
  • Fits 100mm PVC
  • Auto tracks target plate
  • A -20% to +40% gradient
  • Lock-out grade (for solar farm pile driving)
  • 8 Ah lithium battery
  • IP68 fully submersible
  • 1.5mm @30m accuracy
  • LCD display remote - 100m pick-up from unit

  • Also included is a five-year warranty from Imex, the first calibration free and standard Calibration Certificate. For more details:
    Imex Lasers Australia homepage
    Smarthome: Look who's talking
    Amazon Echo Show feature screens as well
    HI News 4.6
    Google Home Mini comes in three colours
    Apple HomePod is $499
    Subscribe to HNN weekly e-newsletter
    One of the puzzles of retail in Australia is that, had Dick Smith Electronics (DSE) managed to survive up until the present day, it would likely be on the cusp of becoming a thriving business again.

    As HNN has described in the past, the demise of DSE was largely down to most of its "natural" markets being eroded. After it had left its hobbyist origins behind, DSE's major product lines consisted of: telephones, music players, alarm clocks, laptops and accessories, still and video cameras, ebook readers, GPS navigation systems, calculators, and sundry electrical goods. Just about all of the main nine categories were upended from 2011 onwards by the advent of the popular smartphone.

    Customers weren't spending $80 to $300 in each of those categories, they were spending $300 to $700 for a single smartphone that did all those things - often a lot better than the technologies it could replace.

    However, dominant technologies such as the smartphone tend to go down an interesting path where, after a period of replacement, they give rise to new markets, or come to affect adjacent markets. Their inability to fully satisfy the demands of these additional markets can then lead to the creation of somewhat derivative but also new products.

    For example, the modern zipper was invented in 1913 by Gideon Sundback, and it took until 1948 (and the advent of plastics) for George de Mestral to invent velcro. The two serve quite different purposes - with some overlap - but if the zipper had not established a market for one style of closure, it's unlikely that velcro would have developed in quite the same way.

    In the case of the smartphone, one of the markets that it at first influenced, and now has changed dramatically, is home automation. Its influence is very clearly seen in the fact that today we've even moved away from the term "home automation", and have instead begun to refer to the "smarthome".

    This new market is one that a retailer such as DSE could have served well. Where the smartphone initially narrowed much of the electronics market down to two categories - the smartphone itself and the accessories that went with it - it is now, via its influence on these overlapping markets, expanding other categories and creating new ones. Drones and smartwatches would be examples of these new categories.

    Absent retailers such as DSE, the smarthome business does not really attach itself that easily to other retail categories. Companies such as Officeworks and JB HiFi are making efforts to enter the market, but these are half-hearted, and poorly directed. Bunnings has pointed out this market as one that is of high interest to it, but statements from the company indicate it has not really fully understood it as yet - and, in fact, views the smarthome with a degree of puzzlement.

    The missing ingredient from all of these retailers - and something that DSE could have contributed - is providing knowledge and advice to consumers. For that reason alone, it seems likely that smarthome devices and accessories could end up being a good new market for independent hardware retailers, both inside groups such as Metcash's Independent Hardware Group (IHG), and non-corporate independents (NCIs).
    Smarthome evolution

    Prior to 2014 the vision most of the industry had for home automation involved using hubs. These hubs made use of new wireless communication protocols, mostly WiFi but Bluetooth as well, to hook into the internet, and enable forms of remote control and monitoring that had not been possible prior to 2000. The other half of the hub consisted of an array of legacy wireless communication protocols that pre-dated the internet, but were common to many home automation systems.

    A major problem with these systems was how to control them. Early home automation typically gave users the option of either making settings work programatically, or using some kind of switching system, such as physical switches anchored to the wall, or sometimes a remote control. You flicked a switch or pressed a button, and the windows closed, the drapes were drawn, soft lighting came on, and music began to play.

    As smartphones gained wider popularity around 2010, home automation began to make small steps to integrate these as a more sophisticated remote control. With hubs enabling internet connection you could, for example, lower or raise the garage door from your office at work, or possibly switch on the airconditioner before you turned into your driveway.
    Enter the Echo

    In 2014 the global online retailer Amazon launched its Echo device. This was a small cylindrical tower, about 180mm tall and 83mm in diameter, which was dominated by its speaker array. While the speaker system was good, the real magic to the Echo, however, was its array of seven microphones.

    This microphone array, backed up by some powerful software, enabled it to "hear" human speech at low volumes and over relatively large distances, even over interfering noise. What it was listening for was its "wake word", which in this case was the name "Alexa" (though it could be easily changed to "Amazon" instead). When the Echo "heard" that wake word, it began listening for commands its online voice recognition system could understand.

    Originally, these commands had mostly to do with enabling the speaker system to play music, which could originate from a number of online music services, including Amazon's own Music services. However, it could also answer basic questions that might be asked of it, such as how many grams were in a cup of flour, what the capital of Belarus was, and so forth.

    While many reviewers mocked the device initially, it began to gain rapid acceptance by the public in the US. Amazon opened the system to developers, and, surprisingly, a large number of home automation tools began to appear. The device removed the awkwardness of having to find a remote, or pull out a smartphone in order to use home automation. Users could say "Alexa, turn on the living room lights", and it would just happen with surprising reliability.

    Even what seemed at first to be small abilities came to assume an important place in households. For example, the original Echo enabled the user to easily set timers, by just saying "Alexa, set a timer for one minute and ten seconds". For a cook with his or her hands full, this was a great aid. It proved so popular that in mid-2017 Amazon added the ability to set named timers, meaning it was easier to keep track of multiple timers.
    At home with Google

    It didn't take that long for the Alphabet company Google to realise that the Echo posed something of a problem for it. Google seeks to "own" activities such as search as much as possible, and with the increasing success of the Echo, its share of that market could come under threat.

    The Google Home was announced by the company in mid-2016, and released at the end of that year, in time for the Christmas market. While very similar to the Echo, the Google Home was somewhat more ambitious at its launch, with more features "baked into" the basic model, where the Echo relied more on third-party suppliers. The Echo was very reliable at what it did, while the Home did more, but would tend to fail more frequently.
    Apple's Siri

    Siri was arguably the first commonly available voice-based assistant to be made available on smartphones. It was originally launched as an app for the iPhone in 2010, developed by the SRI International Artificial Intelligence Center, which is a non-profit associated with Stanford University in northern California (and arguably home to the core developments for personal computing itself). The technology was rapidly acquired by Apple, and was included as a feature on the iPhone 4S when it was launched in 2011.

    The abilities of Siri remain somewhat controversial, with many regarding the system as now being, as compared to the Amazon and Google systems, somewhat underdeveloped. Others see Siri as being a far more ambitious project, that is unfairly judged by comparison to much more limited systems.

    What is certain is that not only did Apple not spot the potential of using its voice assistant independently of its smartphones, but also that it has continued to not understand how this market works.

    Apple began getting into the smarthome market by introducing HomeKit in 2014. This provided a framework for home automation to work with Apple's mobile operating system, iOS. It was only with the release of iOS 10.0 in 2016, however, that Apple added an actual Home app to its smartphones, providing a single location from which all connected devices could be accessed.

    What considerably hampered development of devices that could connect to HomeKit was Apple's insistence that anything that did connect needed to use a specific secure communications chipset. This meant that manufacturers would need to make a version specifically just for HomeKit, outside of versions that worked for Echo and Google Home. Few did so, and those that did typically made these devices very expensive, to compensate for the extra development work involved, and the very narrow market Apple offered.

    The result has been, predictably, that there are very few HomeKit devices available - the online Apple store lists around 20, if you can find them after going through four layers of navigation.

    In 2018 Apple has finally realised its errors, and, after four years of poor performance, has replaced its previous hardware security requirement with software requirement instead, which should see more devices become HomeKit compatible, hopefully at lower prices.

    In general, however, this has been a real failure for the company, going from having a leading position in the field, to not even being considered much of a contender, in just six or seven years.
    The future of the smarthome

    There are big differences between the way that home automation developed prior to 2014, and the way the smarthome has been developing since then.

    Home automation has always required a very high degree of integration for it to work properly. It has mostly relied on that integration through the fundamental controls, such as the actual in-wall powerpoints, light switches, custom security systems, and fixed cameras. These controls have mostly been relatively simple, "dumb" devices.


    To read the rest of this article, please download the free, complete edition of HI News at:
    HI News 4.6 - Smarthome: Look who's talking
    USA update
    Home Depot is installing in-store lockers so that customers can pick up their online orders
    HNN Sources
    Holoroom Test Drive uses VR that offers Lowe's customers a chance to sense the feeling they are actually holding and using a power tool
    US home improvement companies ban toxic chemicals found in paint removers
    Click to visit the HBT website for more information
    Home Depot is installing lockers in its stores for customers to pick up items they have ordered online; Lowe's CEO is working quickly to streamline the business; MORSCO enters Nevada plumbing market; Lowe's is using virtual reality technology to get people into stores; cloud-based platform makes managing hourly staff more efficient at Ace Hardware; and home improvement companies phasing out paint strippers with toxic chemicals.
    Home Depot adds convenience to online sales

    Big box retailer, Home Depot is installing lockers in many of its locations to support its in-store pick-up service. The move enables the home improvement retailer to get items to online customers right away instead of waiting for their purchases to be delivered to their home.

    Those who order merchandise online are directed to the rows of orange boxes, where they unlock the designated one and then leave without having to seek assistance from an employee. Spokeswoman Lana Johnston has said:
    ...customers' expectations with shopping are changing, and they want as many options as you can possibly give them.

    As a result, Home Depot hopes to have lockers in all its brick-and-mortar stores within three years. With 46% of its online orders picked up at stores, "the lockers allow us to simplify that process by providing customers with the convenience of self-service and time savings," Ms Johnston said.

    Lockers at Home Depot were first tested in early 2016 and were rolled out more widely late last year. They offer three compartment sizes that can hold more than 60% of items available through the retailer's "Buy Online, Pickup In Store" program. Items that don't fit can be picked up at the customer service desk.

    Lockers are a way that chains such as Home Depot are trying to leverage their network of stores - one is situated within 10 miles (16kms) of 90% of the US population - to provide customers with their merchandise soon after it is ordered.

    Given the massive size of its stores and myriad items that it makes available online but are not sold in stores, the lockers seem to make sense. Rob Haslehurst, managing director and partner of L.E.K. Consulting, believes the lockers help reduce lines at the stores' customer service desks, which had become a "pinch point." And "many consumers don't like interacting with people, and the locker gives that segment a way to get their product in an all-digital experience."

    The pick up locker option also meets the consumer desire to avoid shipping charges on their online orders, according to research from Astound Commerce, which found that 57% of shoppers (in the US) hunt for free shipping offers, making "low shipping rates" too expensive for most.
    Q2 performance

    The big box retailer also beat expectations during the second quarter as it boosted its full-year profit and revenue forecasts. Its second-quarter profit reached USD3.51 billion, or USD3.05 per share. That a much bigger per-share profit than the USD2.84 that Wall Street was looking for, according to analysts surveyed by Zacks Investment Research.

    Revenue rose to USD30.46 billion, from USD28.11 billion, also topping projections of USD29.98 billion on Wall Street.

    Sales at stores open at least a year, or same-store sales, increased 8%, and 8.1% in the US.

    Home Depot said that big ticket sales - now being defined as transactions over USD1,000 - represent about 20% of the chain's US sales. It had previously defined big ticket sales as transactions over USD900.

    In the second quarter, transactions over USD1,000 were up 10.6% compared to the second quarter of fiscal 2017. Big ticket purchases that contributed to growth during the period included vinyl plank flooring appliances. Its Pro customers also helped drive growth.
    New Lowe's CEO hits the ground running

    In less than two months, Lowe's chief executive officer Marvin Ellison has decided to shut down a division of smaller stores and eliminate USD500 million in capital projects that will be returned to shareholders.

    Lowe's said it would close 99 stores of its hardware and garden chain Orchard Supply by the end of the fiscal year. It also said it would seek to cut back on inventory of slow-selling product lines and reinvest in faster-moving goods.

    The acquisition of Orchard Supply, with stores based mainly on the west coast of America, accelerated the company's expansion into key markets like California. But it came at a price as the chain, which Lowe's purchased out of bankruptcy for about USD205 million, was often a drag on results.

    For the shutdown of the unit, Lowe's took a USD230 million charge last quarter, and it expects additional costs of as much as USD475 million in the second half of the year.

    Mr Ellison said the exiting of Orchard Supply was part of a larger strategic review of the company that will including looking at its real estate holdings and assets that don't involve its retail business. Cost cutting will also be a major focus. He said:
    The company has unfortunately become distracted over the past few years. We must create a true expense reduction culture here.

    Lowe's same-store sales growth has usually lagged Home Depot's because it focuses more on DIY customers compared to its rival's focus on professional contractors (tradies) with their larger purchases.

    The home improvement retailer's same-store sales increased 5.2% during the period that ended August 3, capitalising on the delayed demand for spring season goods but missed expectation of a 5.34% increase.

    However net sales rose 7% to USD20.89 billion, beating expectations. Excluding one-time items, the company earned USD2.07 per share, topping estimates of USD2.02.

    Under Mr Ellison, who took charge in July, the company has also eliminated four senior positions including chief operating officer, chief customer officer, corporate administration executive, and chief development officer, while creating two new senior roles for stores and supply chain.

    To keep Lowe's from slipping further behind Home Depot, Mr Ellison said a shake-up was necessary. In a statement, he said:
    We have taken a fresh look at our organisational structure and are realigning our leadership team to improve our focus, better leverage Lowe's omni-channel capabilities and deliver increased value for our customers, associates and shareholders.

    The overall purpose of the changes is to "drive operational excellence," according to the company.
    Reece-owned MORSCO enters new market

    US-based distributor of plumbing, waterworks and HVAC products, MORSCO announced it has entered into an agreement to purchase the assets of Desert Pipe & Supply's Las Vegas location.

    Desert Pipe & Supply is a plumbing wholesaler located in Palm Desert, California and Las Vegas. The company has serviced residential and commercial plumbing and mechanical contractors for more than 30 years.

    As a part of the agreement, five associates and one Desert Pipe & Supply location in Las Vegas will become a part of MORSCO, operating under the Farnsworth Wholesale brand, following a transition period. Desert Pipe & Supply's Palm Desert outpost will continue to be owned and operated by the existing Desert Pipe & Supply ownership. MORSCO CEO, Chip Hornsby, said:
    MORSCO is very enthusiastic to be a part of the booming Las Vegas market. This is certainly an area of the country we've had on our radar for some time and this opportunity with Desert Pipe & Supply fits well into our overall strategic growth initiatives for 2018. As the Las Vegas economy continues to recover from the financial crisis in the late 2000s, MORSCO sees plenty of opportunity here...

    Australian plumbing group, Reece recently completed its acquisition of MORSCO. First announced in May 2018, this acquisition marks Reece Group's entry into the US plumbing market through MORSCO's 170+ branches within 16 states throughout the Sun Belt region of the US.

    Supplier update: Reece expands into US, after 10 year study
    Lowe's attracting DIYers with reality tech

    Augmented reality and virtual reality tools are being used by Lowe's to help customers visualise and "feel" a large home improvement product in the context of the customer's living space.

    Josh Shabtai, director of lab productions at Lowe's Innovation Labs, said:
    We look at age-old customer problems. These are problems that keep resurfacing that folks haven't solved yet. Our hypothesis is that as we move people closer to realising their visions, they'll feel more confident.

    Lowe's Innovation Labs were established four years ago to delve deeper into these questions, said Mr Shabtai. Often working with startups, the company has since rolled out several pilot projects to test customers' comfort with virtual and augmented reality, including Holoroom How-To, which immerses a customer in a DIY project - such as tiling a shower - and gives them step-by-step instruction to complete the task; employee training programs that involve virtual reality; Holoroom Test Drive, a feature that uses VR to offer customers a chance to sense the feeling they are actually holding and using a power tool; and View in Your Space, a mobile app feature which lets customers visualise how a piece of furniture may fit within the physical dimensions of their own living spaces.

    Of these pilots, two currently are still in market: Holoroom Test and the AR feature which went live for Android users in March.

    While quick turnaround trials may suggest there are challenges getting customers to comfortably use the technology on a regular basis, Mr Shabtai said the timing is part of Lowe's approach to test new use cases, study the outcomes, and apply the lessons to future releases. He said:
    We're trying to refine the experience and move on to an application that will be better and ready to scale.

    Mr Shabtai said early results are showing that VR-and AR-enabled tools offer two key use cases: helping customers better navigate how they'll use tools or whether products are physically compatible with their homes; and helping employees learn more quickly to offer more personalised expertise. This will add more value to the in-store experience.
    When [customers] come into a Lowe's store, they want to talk to an employee who is a real expert in the space.

    According to company proprietary data, employees who are trained on machinery using VR are 76% more likely to try out a piece of machinery compared to those who were trained using conventional methods; and customers have 42% greater recall with VR tools compared to YouTube how-to videos.

    He conceded that the biggest challenge standing in the way of more mainstream adoption is cost, while AR can be more quickly deployed given the ubiquity of smartphones.

    Lowe's advantage is to tie the customer closer to the brand through these types of immersive efforts. Tactile experiences through virtual and augmented reality are ways legacy retailers can keep customers loyal, especially with competition from Amazon. Jim Cusson, president of retail marketing agency Theory House, said:
    Amazon wins on convenience and selection, so how can retailers combat that? A lot of this has to do with the experience and brand engagement [derived from immersive tools like VR and AR].

    Morningstar analyst Jaime Katz also wrote in a recent report that Lowes' business model is built off of customer service, knowledge, and innovation. Using VR and AR could help augment its reach.
    Ace Hardware manages hourly staff with software

    Several Ace Hardware locations have turned to workforce management software company Deputy to help manage an hourly workforce across a number of stores.

    The software supports mobile clocking in and out capabilities, scheduling, meal and break compliance, task-tracking and performance management. This should free up managers and floor staff to spend time serving customers. Darrell Moseley, owner of a Washington-based Ace Hardware store, said:
    I used to spend up to eight hours a week creating my staff's schedules, With Deputy's integrated timesheet and scheduling feature, this previously laborious task only takes a couple hours, leaving my time open to pay attention to other critical matters - bettering our store's performance.

    Deputy is an Australian-based company that aims is to make managing employees easier. Ashik Ahmed, Deputy's CEO and founder, tells UK-based Techworld.com that Deputy is designed to reduce the stress of mundane tasks and automate team schedule management. He said:
    Deputy as a product, what we do is scheduling, time and attendance, communication and tasking. These problems are universal for any hourly paid worker and Deputy solves them in a mobile-first, user-intuitive way that allows the product to get easily adopted.
    The key part of what we offer is mobility. Everyone has a smartphone these days and 60% of our user base is actually on mobile.

    Deputy's platform is a smartphone-based app, which is accessible by every employee to clock in and out and swaps shifts. Auto-scheduling is a new feature that is powered by artificial intelligence for workers to build their own schedules. Mr Ahmed said:
    Quite a lot of businesses will be using an iPad app that we have for clock in and out, and of course we made sure it is all GDPR (General Data Protection Regulation) complaint. Because it is smartphone accessible, people can have their schedules and do everything they need to change their work lives.
    For Deputy...what we want to do is get the best employees back on the floor working with the team. Everything that they have to do from an administrative perspective, they can do straight from their phone.
    Home improvement firms ban toxic chemicals

    Home Depot announced it will stop selling paint stripping products containing purportedly toxic substances responsible for consumer deaths. The big box retailer will phase out the use of the chemicals - methylene chloride and N-methylpyrrolidone - in paint removal products by the end of this year.

    Banning the two chemicals is a way "to build upon our strategy to maintain continual improvement in health and environmental safety for products," it said in a statement.

    The announcement came after aggressive lobbying by a group known as Safer Chemicals, Healthy Families, which includes more than 450 US-based organisations and businesses. At least 60 deaths are blamed on the chemicals commercial use, the group said.

    Rival home improvement retailer, Lowe's was the first US retailer to agree to ban those chemicals, according to Mike Schade, a representative of Safer Chemicals.

    Paint and coating giant, Sherwin-Williams also recently said it would stop using the chemicals.

    The chemicals have been found to pose unacceptable health risks to the public, including cancer, harm to the nervous system and to childhood development, and death. In 2017, the US Environmental Protection Agency proposed a ban on the paint removers that contain the chemicals.

    However, the agency has taken no action since Scott Pruitt became EPA administrator.
    Europe update
    Homebase closes more stores
    HNN Sources
    B&Q slashes prices on thousands of items
    Metabo Germany becomes part of the cordless alliance system (CAS)
    Click to visit the HBT website for more information
    Homebase's turnaround plans involves closing 42 of its 241 stores; B&Q will reduce the use of short-term pricing deals and discounts; Metabo Germany partners with power tool manufactures to form Cordless Alliance System (CAS); HOUSE opens fifth UK store; and Travis Perkins said a "challenging UK DIY market" has negatively impacted its consumer-facing brands.
    Homebase confirms 42 closures, for now

    DIY retailer Homebase said at least 42 outlets will be shutting down by early next year. The company is looking to close stores in order to cut costs after being acquired by Hilco for GBP1 earlier this year, with up to 70 more stores potentially at risk.

    Homebase wants to cut rents - or close - on nearly a fifth of its 241-store chain, via a company voluntary agreement (CVA), a controversial insolvency procedure used by struggling firms to shut underperforming shops.

    Under the process, Homebase will also promise to continue paying market rents on about half its stores but will ask for smaller rent reductions on another 60 and business rate reductions on all the stores where it wants rent cuts. Chief executive Damian McGloughlin said:
    Launching a CVA has been a difficult decision and one that we have not taken lightly. Homebase has been one of the most recognisable retail brands for almost 40 years, but the reality is we need to continue to take decisive action to address the underperformance of the business and deal with the burden of our cost base, as well as to protect thousands of jobs.
    The CVA is therefore an essential measure for the business to take and will enable us to refocus our operations and rebuild our offer for the years ahead.

    The company added that the trading environment had been "extremely challenging", with weak consumer confidence. Homebase said:
    Under the terms of the CVA proposal, all creditors receive a better outcome than any other likely alternative.

    Restructuring experts at Alvarez & Marsal will carry out the CVA, which will require the support of landlords via a vote on 31 August. The process is designed to stave off administration and save the business, but landlords say it is being misused as a quick way to downsize during tough times.

    A group of landlords settled out of court after challenging a CVA process at department store House of Fraser before it was bought by Sports Direct via a pre-pack administration.

    However, Stephanie Pollitt, the assistant director of real estate policy at the landlords' trade body, the British Property Federation (BPF), said:
    Homebase and Alvarez & Marsal have demonstrated best practice, engaging with the BPF in the process and therefore ensuring property owners' interests have been properly taken into account.

    Under Hilco's ownership, the 24 stores that were trading as Bunnings will convert back to the Homebase fascia.
    Amazon to buy sites?

    According to the Sunday Telegraph, Amazon is looking to acquire Homebase stores around the UK as it looks to extend its network of warehouses. If completed, the Homebase sites, many of which are situated in urban locations in major towns and cities, could become "last mile" warehouses, allowing for quicker delivery times for items ordered from the site.
    B&Q drops prices, adopts EDLP strategy

    UK-based DIY and garden chain, B&Q plans to lower prices on 2,000 products by around 15%, as part of its "Do It For Less" strategy, in the hope that lower prices all year round will appeal to shoppers. As a result, the retailer will be reducing its short-term pricing deals, including multi-buys, and reviewing some of its loyalty scheme benefits.

    It has already invested GBP100 million in dropping prices on both branded and own-branded products, with further discounts planned on additional lines later on this year.

    Like EDLP (Every Day Low Prices), B&Q's pricing strategy is aimed at encouraging shoppers to take on home improvement projects straight away, rather than waiting weeks or months for the next promotion or sales event.

    B&Q said its new policy means that customers can enjoy competitively-priced products any day of the week throughout the year, rather than having to wait for sales to roll around.

    The company also said its "Do It For Less" plan will make DIY more affordable, and therefore accessible to homeowners and renters of all ages and incomes. Paul White, B&Q's commercial director, said:
    People may enjoy hunting for the best deal, but at the end of the day there is much more comfort knowing that there's one place where you can always get a low price.
    All customers want to have prices they can trust and, as industry leaders, it's our responsibility to look after their best interests by ensuring our customers get our most competitive price.

    B&Q first introduced a "simplified pricing strategy" across its kitchens offer in September 2014. Describing it as a successful move, B&Q said the use of promotional pricing in the category makes it difficult for customers to know if they are getting the best possible price.

    The retailer said the economies of scale afforded by being part of the Kingfisher group and the joint buying functions under the One Kingfisher transformation enable it to price products competitively, as well as building a "unique and unified offer".

    B&Q started to promote its Do It For Less price drops in mid-July, in the mainstream press, and via digital and social media, as well as in-store marketing.

    When Bunnings acquired the Homebase stores in 2016, it rolled out EDLP across the Homebase business with an "Always low prices" tagline. The converted Bunnings stores came with "Lowest prices are just the beginning" tagline that was later changed to help UK customers understand what the stores actually sold. It meant that Bunnings generally concentrated on beating the opposition with low prices but analysts believe B&Q was often able to match these savings, which often resulted in a race to the lowest price.
    Q2 improves

    A run of hot weather also boosted sales at B&Q parent company, Kingfisher in the second quarter as more customers stocked up on barbecues and other outdoor items.

    However, shares fell 2.2% as analysts pointed out that Kingfisher's recent performance has relied too much on good weather conditions.

    The retail group, which also owns Screwfix, reported a 3.4% increase in sales to GBP3.25 billion for the quarter ended July 31. On a like-for-like basis, sales grew 1.6%, rebounding from a 4.0% decline in the first quarter when snowfall and icy temperatures in February and March kept customers away.

    In the UK and Ireland division, like-for-like sales increased 4.2%, including 3.6% growth at B&Q and a 5.5% gain at Screwfix. Kingfisher said sales at B&Q were buoyed by demand for weather-related categories while Screwfix sales were lifted by the opening of 12 new outlets during the quarter. George Salmon, equity analyst at Hargreaves Lansdown, said:
    At first glance, UK results represent a marked improvement. However, the strong sales figures are more a function of a scorching summer than any underlying progress. Strip out the impact of summer items like barbeques and garden furniture, and sales, which headed south over the winter, have continued to fall. That's quashed any hopes that B&Q would benefit from the recent problems at Homebase.

    Like-for-sales in France dipped 1% as its DIY retail store Castorama continued to struggle in part due to weaker footfall and the impact of restructuring efforts. In the other international unit, like-for-like sales edged up 1.4%, driven by growth in Poland.
    Metabo Germany joins Cordless Alliance System

    Metabo in Germany announced its partnership with other tool manufacturers to create the Cordless Alliance System (CAS).

    Under the CAS partnership, nine manufacturers of similar company size and with a focus on power tools for professional applications, will be sharing the same battery platform and chargers produced by Metabo. This allows CAS manufactures the use of the same battery pack systems, providing compatible batteries to be interchanged with other CAS tools manufacturers.

    It provides end-users more freedom, flexibility with a broader range of tools, costs savings and solves problems by sharing the same battery platform across multiple tool manufacturers. Currently, there are over 110 power tools that are part of the CAS manufacturers.

    The partnership is the latest step towards expanding Metabo's vision of a cordless construction site and metalworking shop, entirely run with 18V Lithium-ion High-Density Battery operated tools.

    Metabo Germany president, Horst Garbrecht, expects the CAS to continue to grow, with a variety of manufacturers joining in the name of advanced battery technology. He said:
    With Lithium-ion High-Density Battery we have enough power for the most energy-intensive applications, allowing us to build any hand-held power tool in a cordless version in such a way it meets the professional user's requirements of power and endurance.

    When choosing a technology partner, CAS manufacturer Rothenberger chose to go with Metabo for several reasons, according to managing director Dr Christian Heine:
    Due to the developments in [previous] years, Metabo has conquered the technological leadership and currently offers the most powerful system in the industry.
    Aussie HOUSE opens in Norwich

    Homewares and kitchen specialist, HOUSE, has opened its fifth UK store in Norwich's intu Chapelfield centre.

    The Australian-based retailer has already opened stores in Oxford, Bracknell, Sheffield and online at www.houseUK.com. Executive chairman and CEO, Steven Lew, said:
    Our UK rollout has focused on opening the best stores in the right locations. Norwich is a natural fit for HOUSE...

    The Norwich HOUSE store offers more than 4,000 products including cookware, bakeware, glassware, kitchen gadgets, small electrical appliances, knives, table linens and accessories. With online ordering available in-store, Norwich residents will have access to a large range of brands including Cuisinepro, Alex Liddy, LSA and Joseph Joseph, to name a few.

    Established in Australia in 1978, HOUSE is a member of the Global Retail Brands (GRB) family. GRB is the largest private specialty kitchen & homewares chain in the southern hemisphere, with more than 170 stand alone stores. The UK is the first foray into the northern hemisphere with more planned.
    Travis Perkins' DIY business faces market challenges

    The challenging state of the home improvement market in the UK are reflected in the latest results from Travis Perkins' consumer-facing division that includes DIY chain Wickes and trade supplier Toolstation.

    Sales fell 1.8% to GBP807 million in the six months to the end of June, though on a like-for-like basis the drop was 4.2%.

    Travis Perkins previously warned householders was reining in spending and unwilling to splash out on major DIY projects such as kitchens and bathrooms. Uncertainty in the property market and poor weather in March and April compounded this, as building projects were put off.

    However, the situation has become so serious chief executive John Carter has launched a comprehensive review of the business, with current market conditions expected to continue for the "foreseeable future". He said:
    Wickes has had a far more challenging period as weaker consumer spending trends, combined with a difficult competitive environment, have held back profitability.
    Consequently, the Wickes team is executing a significant cost-reduction program. Whilst these savings will help drive improved profitability through the second half of the year, Wickes' profits will be lower than previously expected.

    While attention was focused on the consumer business, Travis Perkins reported a rise in group revenues of 4.4% at GBP3.4 billion, though it fell to a GBP123.4 million pre-tax loss from a GBP167.4 million profit for the same period last year. This was largely the result of a GBP246 million goodwill impairment against Wickes, with restructuring costs also having an impact.

    Sales growth was driven by the continued growth of the store network in the UK, with 22 new stores opened in the half taking the total network to 317. The expansion of the Toolstation Europe network continued with further stores in the Netherlands and an extension of the trial in France, with encouraging sales results.

    The other parts of the business performed better. General merchanting, the company's largest division which supplies builders, reported sales up 0.9% at GBP1.1 billion, plumbing and heating - which was restructured last year - was 15.5% better at GBP774 million, and the contracts business, which supplies larger builders, saw sales rise 6.4% to GBP718 million.

    Mr Carter tried to put a positive spin on the business, saying "long-term drivers of market growth remain strong, centred on the UK's requirement for more homes and under-investment in the repair, maintenance and improvement of existing dwellings".
    New products
    The new Mirka LEROS claims to be the world's first and only electric random orbital ceiling and wall sander
    HNN Sources
    Nylex re-usable sprayers are for fertilising, and managing pests and weeds
    The Gator SpeedLoad has been field tested in harsh conditions
    Click to visit the HBT website for more information
    The Mirka Leros sander is going to change the way that tradesmen work, according to its Australian distributor Tenaru; Nylex sprayers can help reduce single-use plastic in outdoor spaces; a trimmer head and line system can provide contractors with precision and speed; and safety gloves have an added level of cut protection.
    Sanding reaches new heights

    Abrasives specialist, Mirka said its LEROS product is the world's first and only electric random orbital ceiling and wall sander. Weighing less than 3.5 kg, this tool is the lightest wall and ceiling sander on the market.

    Awarded the Red Dot Best of the Best Award 2018 for design, the LEROS features a 180-degree flexible 225mm sanding head and 5mm random orbital movement, which enables it to respond precisely to the operator's movement.

    The dual suction points in the sanding head and full force system allows the complete force to be transferred to the sanding head. This means that there is no need to press the tool against the sanding surface, removing the weight from the user's hands and reducing tiredness.

    The LEROS also has an optional 50cm-long extension shaft, specially designed for sanding high walls and ceilings.
    Sustainable garden sprayers

    Watering products supplier, Nylex, want homeowners to switch to re-usable products when fertilising, and managing pests and weeds. The Nylex 16L Heavy Duty Sprayer can be worn like a backpack so garden enthusiasts can easily cover large areas of tough vegetation in a single session.

    Alternatively, the Nylex 500ml Trigger Sprayer is ideal for spot maintenance of blooms and maintaining indoor plants. Product manager, Alyce Rigby, said:
    Ready-to-use weed and pest sprayers are notorious for being thrown in the bin after mere minutes of use, yet one bottle of concentrate lasts the equivalent of 32 on average single-use spray bottles -significantly decreasing the amount of plastic you throw away.
    These single-use sprayers also cost on average 76% more than buying a good quality sprayer and concentrate, so in choosing an environmentally friendly option you also get more bang for your buck.
    Simple reloading system

    The Gator(r) SpeedLoad[tm] trimmer head and line system is the solution for homeowners fed up with a tangled trimmer line. It eliminates the common frustration associated with reloading trimmer line, and reduces reloading time to 20 seconds or less.

    Designed for petrol-powered line trimmers, the system is made of a self-contained disk of double-ended line. With only two parts, the pocket-sized disk cartridges and the trimmer head, the Gator SpeedLoad is designed for ease of use. The innovative tongue-and-groove disk allows for a quick load double the durability.

    The Gator SpeedLoad Cutting System fits most straight and bent shaft products, including Victa, Echo, Shindaiwa, and other popular trimmers.

    Oregon is now available exclusively through Briggs & Stratton.
    Cut resistant gloves

    The Honeywell Rig Dog[tm] CR gloves feature moulded TPR (Thermoplastic Rubber) pads that are ergonomically placed to provide protection in impact situations along with an ANSI A7 enhanced cut-resistant palm to guard against cuts and slashes.

    The polyurethane (PU) slip-resistant palm features EVA foam pads for added comfort and some vibration relief. Hi-Viz Spandex(r) fabric stretches for flexing to help reduce hand fatigue.

    Hook and loop tab closure allows the wearer to tighten or loosen cuffs for a more comfortable and secure fit. The gloves are fully washable which helps to limit bacterial growth.

    Applications include rigging, warehouse, mining, mechanical, parts handling fabrication, heavy machinery and construction, automotive, oil industry and railway.
    HI News V.4 No.5: Bunnings turns to tradies
    Download the latest issue of HI News Vol. 4, issue no. 5
    HI News
    Bunnings continues to improve its displays
    Ian Watt of Diamond Valley Mitre 10
    Click to visit the HBT website for more information
    Wesfarmers' recent Strategy Day signified a firm move towards data analytics. In this issue, we explore what this might mean for the large and small retailers in the hardware-home improvement industry.

    At the same time, Bunnings managing director, Michael Schneider, outlined areas of growth for the big-box home improvement retailer. It will utilise data sources such as its PowerPass loyalty card to drive future progress.

    Simply click on the following link to download this edition:
    HI News V.5 No.5: Bunnings turns to tradies

    In this issue, we also detail the latest results from Metcash, parent company of Independent Hardware Group that includes Mitre 10 and Home Timber & Hardware.

    Plumbing is likely to be a big focus for the rest of 2018. Reece Group has acquired US company MORSCO, and HI News speculates this may have something to do with the company expanding its data analytics capability. There are also rumours about Bunnings' plans to change its plumbing range while plumbing specialist, Samios has developed trade-oriented showrooms to boost its sales. Linkware International has also developed an advanced hang-sell and window box packaging system, which makes it easier for DIYers to self service in-store.

    In our occasional series of profiling people from the industry, we speak to Steve Fatileh, group buying manager for Hardware & Building Traders group. He has done a lot of work to expand the H brand of stores.

    The statistics section features trends in the home improvement and renovation markets, as indicated by Houzz.

    International retailers in this issue include B&Q, Screwfix, Home Depot, Lowe's and Ace Hardware. Suppliers include Stanley Black & Decker, Reliance Worldwide, Reece, Fletcher Building Australia, Knauf and Briggs & Stratton.
    Wesfarmers Strategy Briefing 2018
    Bunnings continues to improve its displays
    HNN Sources
    Ozito's new 12-volt Home range
    Bosch's new nanoblade tools are not available
    Click to visit the HBT website for more information
    On 7 June 2018 Wesfarmers held its Strategy Briefing Day. This annual event provides a preview of management and strategic thinking the Australian conglomerate will apply to the coming financial year (FY), in this case FY2018/19.

    Australia's seventh-largest listed company in the Australian Stock Exchange 100 index by market capitalisation ($55,900 million), Wesfarmers has undergone a somewhat "rocky" FY 2017/18, with the need to shut down an attempt to enter the European market through its Bunnings United Kingdom and Ireland (BUKI) operations. BUKI was initially launched in early 2016, through the acquisition of the UK-based Homebase home improvement retailer. Shutting down these operations solidified an overall direct loss of over $1.25 billion for Wesfarmers.

    That major shift in strategy has come as Rob Scott assumed the role of managing director (MD) for Wesfarmers, replacing the incumbent, Richard Goyder. His appointment was initially announced on 14 February 2017, and Mr Scott assumed the role immediately after Wesfarmers' annual general meeting in mid-November 2017.

    A number of other top level executive changes took place around the same time. In late May 2017, Anthony Gianotti was announced as the next Wesfarmers chief financial officer (CFO), replacing Terry Bowen. Michael Schneider, who was then MD for Bunnings Australia and New Zealand (BANZ), was promoted immediately to MD, Bunnings Group, replacing long term, highly respected MD John Gillam. (Mr Gillam had moved to an advisory position in December 2016.) Mr Schneider thus assumed responsibility for both BANZ and BUKI.

    Mr Scott in his first six months as MD has shown himself keen to change the direction of Wesfarmers' development. The largest such change was the move to divest its largest operational division, the Australian supermarket chain Coles.

    The acquisition of Coles was announced in April of 2007, and at the time was Australia's largest, valued at over $19 billion. This acquisition included Kmart, Target, Officeworks and Harris Technology, and became the signature event of Mr Goyder's time as MD of Wesfarmers.

    With the exception of Target, the company turned each of these struggling retail enterprises into a success. Coles, for example, achieved a 9.5% compounded annual growth rate (CAGR) between FY2008/09 and FY2016/17. However, the supermarket division absorbed 61% of Wesfarmers' overall capital employed, while it returned only 34% of the company's earnings before interest and taxation (EBIT). In raw terms, the FY2016/17 return on capital (ROC) for Coles was under 10%, while the ROC for BANZ was over 40%.

    In the terse language of Wesfarmers:
    Wesfarmers is targeting a higher capital weighting toward businesses with strong earnings growth prospects.

    These were the circumstances under which Mr Scott took up the microphone early one cool, mild Thursday morning in Sydney, after an early light rain, to deliver his first Strategy Day briefing.
    A new direction for Wesfarmers

    The narrative Mr Scott provided at the Strategy Day for the coming evolution of Wesfarmers sketched out a return to some of the values the company had prior to the acquisition of the Coles Group, with a strong mixture of new technology-based opportunities and processes added.

    There is little doubt that the acquisition of Coles Group under Mr Goyder's stewardship was a brilliant move. It would also be difficult to find another MD who could have steered its operational success so well.

    Coles pre-acquisition was a retail company struggling to compete in the mid-2000s with the skills and business practices of the late-1980s. Wesfarmers applied some of the supplychain knowledge it had gained from running Bunnings to rapidly gain ground on Woolworths. Added to this was the crafty guidance of its MD, UK retailer Ian McLeod. Mr McLeod stepped down as Coles MD in July 2014, to be replaced by his then-deputy, John Durkan.

    The result was that in its year of operations prior to acquisition, its food business slipped from an EBIT of $766.3 million to $693.3 million, a decline of 9.5%. Ten years later, for its FY2016/17 Coles returned EBIT of over $1600 million - albeit representing a decline over the prior FY of 13%.

    Those numbers do a good job of summarising the arc of Coles over the past 12 years or so. The initial Coles opportunity is of the sort that arrives only once every 40 or 50 years. However, once it was established as a near-equal number 2 to Woolworths, growth slowed.

    Internally, it seems Coles had dragged Wesfarmers management thinking as far as it could in one direction, and further development stalled. That was clearly indicated by the company's inability to take advantage of Woolworths' weakest moment, after the collapse of its foray into hardware retail, Masters Home Improvement. Wesfarmers interpreted this as a triumph for Bunnings, when the real victory could only have been realised through the expansion of Coles. It is this which potentially unbalanced Wesfarmers' thinking on a directorial and management level, opening the door for its under-researched, under-managed and under-financed entry into the UK with BUKI.

    A new direction

    Mr Scott's new vision for Wesfarmers is stripped of the kind of thinking that would otherwise have made Coles seem a worthwhile ongoing investment. It acknowledges first that Wesfarmers does not have the skills needed to advance Coles to the next level - which would likely involve either a deeper involvement with supplychain (such as, like some US supermarkets, farming its own beef), or the "self disruption" of opening a discount grocery operation, optionally based and entirely online.

    What the vision adds is an increased sense of what the company's best capabilities are, and how these can be enhanced through the use of technology, both to better understand existing channels to market, and as providing new channels to market.

    As Mr Scott stated during his prepared remarks at the start of the Strategy Day:
    Just to be really clear, we do not rely solely on mergers and acquisitions to deliver superior returns to shareholders. In fact,  the outcome would need to be very compelling, in order to justify investing a significant amount of capital on a significant investment. Post the divestment of Coles, and the divestment of Curragh [coal mine along with the Coronado Coal Group in December 2017] and Homebase, we will have a portfolio of businesses with strong growth prospects, with opportunities for investor capital to generate superior returns. These are not mature businesses, these are businesses that still have a lot of runway ahead.

    So, spending on mergers and acquisitions is to come under new strictures, and is destined to meet a higher level of return certainty. If investment in mergers and acquisitions is to have tighter controls, where will that investment be shifted? Mr Scott outlined some of the internal areas where Wesfarmers plans to ramp up spending:
    Wesfarmers has enormous potential to develop and better utilise extensive data and digital assets, and it is also clear that this is an area that supports group-wide investment and collaboration. In the year ahead across our group, we will be almost doubling our capital expenditure and operational expenditure in new technologies and digital capabilities. This will represent a greater proportion of our group capital investment.

    This focus on data and digital has two main points of focus in the company: the FlyBuys customer loyalty/data collection operation, and the development of the Wesfarmers Advanced Analytics Centre.
    The FlyBuys joint venture between Coles and Wesfarmers is an exciting opportunity to further invest in and expand FlyBuys, to accelerate its future growth. FlyBuys is a leading loyalty program in Australia, and as you would know from other large scale data and loyalty businesses, both here and around the world, these are valuable assets in their own right, whilst also being strategically important to key partners. Now we see significant opportunities for FlyBuys, and believe FlyBuys is better able to realise its potential through the ongoing support, investment, and collaboration of both Coles and Wesfarmers.
    There is no question that FlyBuys will be stronger and more valuable to Coles by leveraging the broader networks of the Wesfarmers group. This creates the basis of the much larger ecosystem that can add value to FlyBuys members and, ultimately, our retail businesses. Maintaining a strategic stake in Coles further provides an opportunity for connection to reinforce the opportunities to collaborate in the data, digital and loyalty area.

    The Advanced Analytics Centre is an effort to improve some of the research and decision-making efforts at Wesfarmers:
    An ongoing stake in FlyBuys will also support the development of Coles' and Wesfarmers' broader digital and other capabilities, as will the investment that we are making at a group level in a centre for advanced analytics, which I foreshadowed at our half-year results. The Advanced Analytics Centre, as we call it, will assist in utilising data science and best practice analytics to enhance our decision making, develop new business opportunities and help solve problems across the group in a range of areas, including customer insights, pricing, ranging, sales force effectiveness, and supply chain management.

    That is the broad outline for investment by Wesfarmers going into FY2018/19. What is missing, of course, is a note on the company culture, which was something the Bank of America Merrill Lynch analyst David Errington picked up on in his questions posed at the end of Mr Scott's prepared remarks:
    I am trying to understand what you're saying today in regards to what the new Wesfarmers is going to look like in terms of culture, in terms of growth initiatives, in terms of your attitude towards where you want to take the company. Now you have mentioned the words "entrepreneurial initiatives" quite a few times, but you have also cooled the heels on expectations towards mergers and acquisitions. So the question I have is: what can we expect from the new Wesfarmers post the Coles demerger, post the BUKI exit? What can we expect from your management and your team that is different from what we have expected from the management teams from Wesfarmers, say, in the past 10 years?

    Mr Scott responded:
    I see it as being really simple. Post the Coles demerger, we will have a portfolio of high return businesses that are generating better than market growth. They are businesses that are very well positioned strategically, they are businesses that we can continue to invest our capital in to deliver superior returns.
    So, it might sound a bit boring, but actually, [it is all about] running what I believe is a portfolio of exceptional businesses really well. I think we have demonstrated in our group that we can do that. Then [through] being really disciplined and opportunistic around our capital, and offering a smaller capital base, shareholders will do well out of that.

    This, in the end, is the essence of what Wesfarmers once was, especially as it developed under the stewardship of Michael Chaney, who preceded Mr Goyder as MD, from July 1992 to July 2005. Mr Chaney became chairman of the Wesfarmers board in November 2015, and is known to have close links to Mr Scott.

    What has changed, however, since that earlier development of Wesfarmers, is the awareness of a need to better integrate the individual businesses. Mr Scott went further into this in response to a question from JP Morgan analyst Shaun Cousins:
    In working through the opportunities with our divisional leadership, over the last year or so, when I started to talk about this opportunity, our divisional teams are actually finding that there are significant opportunities to leverage this capability. It also helps when the Corporate Centre is paying for it, I should note!
    Just recently we had an offsite with our leadership team and we went through the use cases that we're focused on here. What was really pleasing for me to see was I really didn't have to say much. The team was engaged, sharing ideas, sharing learnings, and are already actively engaged in a number of use cases across the divisions where we are seeing improvements flow through.

    However, there was one final point that Mr Scott did want to make, and he made it with a certain level of acerbity, which indicates it may be personally important to him:
    If I go back 20 or 30 years ago to when Wesfarmers set up the corporate business development team to provide some additional commercial support for divisions - that was somewhat novel at the time, right? It is not very novel anymore.

    In today's world, given the range of opportunities available through data science and advanced analytics, we have the luxury to invest in some very deep, specific specialist capabilities that we can then utilise across the group.

    To borrow from the American writer Mark Twain, the present seldom repeats the past, but they sometimes rhyme. The Coles acquisition was in some ways necessary to an earlier Wesfarmers due to limits on the return in self-investment. As the role and value of data has increased, data generation and utilisation is eclipsing pure market investment, as it acts as an accelerator on market presence.

    At the moment, the gains to be made in data and analytics are "cheaper" and more effective than direct market investment. (To some extent this is also perhaps the underlying story as to why US big-box home improvement retailer Home Depot pulled back from physical store investment to pursue digital and online instead.)

    Mr Scott did start off his prepared remarks with what amounts to something like a final management farewell to BUKI.

    The above is only a preview of this article. To read the entire article, please download the complete issue as a PDF, by visiting the following link:
    HI News Vol. 4 No.5: Wesfarmers Strategy Briefing 2018
    Plumbing opens the data pipe
    Ian Watt of Diamond Valley Mitre 10
    HNN Sources
    Home Depot's data backup for sales associates
    GWA Group's breakdown of industry markets
    Give to Amnesty International
    Something big is happening in the plumbing industry.

    The headline news of the moment is the move by the highly successful but previously somewhat passive Reece Group to expand its operations to the US through the acquisition of the Fort Worth, Texas based MORSCO. This was purchased from US private equity firm Advent International for USD1.44 billion.

    Meanwhile, behind the scenes, there have been rumours that Wesfarmers, especially through its Bunnings retail operations, is planning to increase competitive pressure in this area. One strong rumour is that Bunnings has a new line of products sourced from Chinese suppliers and ready for launch in the final calendar quarter of this year.

    Also, while it has emerged that Wesfarmers did not move to acquire a 3% stake in New Zealand based construction and building supplies company Fletcher Building (as suggested by Fairfax Media), there is a rumour Wesfarmers still has an ongoing interest in the company. One possibility would be that Wesfarmers might seek to acquire Fletcher's struggling plumbing supplies business, Tradelink. Tradelink was the cause of a NZD153 million impairment for FY2016/17. While it has picked up performance in the FY2017/18, it remains a relatively underperforming asset for Fletcher in a market that continues to grow.

    Whether either of those rumours is true, what is certain is that Bunnings is planning to ramp up its efforts to supply plumbing to tradespeople. (Please see our coverage of the Wesfarmers Strategy Day 2018 in this issue for more details.)

    Meanwhile, other plumbing supplies businesses in Australia have been innovating and seeking to engage the market in new ways. Samios (a member of the Hardware & Building Traders group) has been expanding its trade-oriented showrooms across Australia, and is about to launch a new own-brand range of plumbing products.

    Australian plumbing supplier manufacturer Linkware International has also been steadily building up its business over the past two years. The company has brought out a cleverly designed range of packaging for products aimed at the DIY customer, which have gained marketshare through Metcash's IHG, in particular its Mitre 10 Sapphire stores.

    So, what exactly is going on? On the face of it, this investment does make sense, as an increasing number of Australians are willing to invest more in the their bathrooms. The question remains, however: Why now? What has triggered this investment?

    HNN believes there is a central source for these moves, one which runs through much of the big-end investment in plumbing/bathrooms. Those investments then have a flow-on effect to the rest of the market.

    That central source of change comes down to just one, simple phrase: data analytics. What's important about this change is that plumbing is just the first of several home improvement market segments that will be affected by this over the next five years. Australia has finally come to the stage where it needs to rapidly catchup with data analytical practices that have become common elsewhere in the world.

    To put it in the simplest possible terms: for today's larger retailers, data analytics will become in 2019 what warehouse and transportation logistics were 20 years ago. It is that important.

    A number of factors are driving that change. The plumbing industry itself is undergoing some shifts. For example, quick-connect systems are replacing older methods of soldering for plumbers themselves, opening the field up to many new innovations.

    Online retailing is also on the rise. Plumbing is expanding quickly online in markets such as the UK. In Australia, Amazon is building its offer of plumbing fixtures and accessories online, following on from its parent in the US, which offers dozens of products in categories such as showerheads. In slightly wilder online territory, Alibaba and its offshoot Aliexpress offer direct access to hundreds of Chinese-made products.

    On a practical level, it is also true that the resources necessary to manipulate and interpret big data have improved dramatically over the past two to three years. Companies such as Amazon and Alphabet (Google) now make mammoth, data-centric processing capability available on an hourly or daily basis, eliminating the need for companies to scale their own data operations. Processing power is available at a fraction of the cost of 10 years ago, and new developments arrive on the market every two or three months.

    Combined, these factors suggest that for major companies, and even larger mid-sized companies, those that have not developed some data analytics capability will be left behind in two to three years.
    Background: data at Home Depot

    The company with the most outstanding data practices in the home improvement retail market is, without doubt, the US-based big-box retailer Home Depot. At an Investor & Analyst Conference held on 6 December 2017, Home Depot senior vice-president and president - online Kevin Hofmann spoke at length about the importance of data to the Home Depot operations.

    He began by giving an introduction to the sheer scale of data that Home Depot has available:
    So I'll give you some detail and some examples on investments we'll be making, starting at the top, how we're trying to become a more personal retailer. Becoming more personal will all start with the power of our data. Through our size and our scale, we have a great deal of data on our customers, their homes, their businesses and their preferences and needs.
    We have most of the US in our database, and nearly 50 million households of the country have been active with us in the last 12 months. Through those interactions, we are now modelling 1.7 trillion data points a week just from our own data sets. And we leverage our data - combined with third-party data sets, we have an enormous opportunity to understand communities, neighbourhoods and businesses at scale. This is all in the quest to understand our customers better.

    For Home Depot, one of the main uses of all that data is to model and develop its engagement with existing and potential customers.
    So let me give you some examples on investments we'll be making. We will invest into capabilities that make us more location aware. When the customers receive those tailored weather-triggered ads or those messages influenced by their location, the customer's going to expect to land on an experience that also understands their location, understanding if you're in your home, at your place of business or in a store or not. In the example you see here, there are different product recommendations for Atlanta versus Boston.
    We will also invest to build machinery to be more context aware, understanding if the customer is just looking for a simple $100 item or if they're contemplating a full remodel project or understanding if they've been engaged for the last few weeks, trying to get inspired, and maybe they just need some design help. These are all important contextual elements that are vital to creating a great and easy customer experience. We'll be investing to gather intelligence in real time to personalise the experience by the customers' context and provide the best products, content and services for their need and situation.
    And lastly, being persona aware. Personalised content curated for individuals, consumers versus Pros, DIY enthusiasts or novices. We will invest heavily to become a more personal store for the customer. So for example, when we recommend products to Pros, we'll show them case packs and pro-grade brands. For the consumer, we'll show them individual quantities.

    Obviously, while the data can be used to deliver the best possible promotional experience to individual customers, it has a wide range of other uses as well. One area in particular is pricing, especially as it applies to online products (and therefore to in-store products as well). Just one sign of how serious Home Depot is about pricing data, is the establishment of its BlackLocus operation.

    BlackLocus was a venture-funded startup, founded by Carnegie Mellon alumni with a passion for creative deployment of new technology. It was acquired by The Home Depot in December of 2012. Its engineers and scientists use disruptive techniques to analyse data from online retailers. By applying machine learning and revenue management techniques, the BlackLocus platform enables intelligent retail software to identify opportunities for competitive advantage.

    Beyond that, there is also the way that data informs customer profiles, and can make this available to salespeople on the floor and elsewhere in the organisation. At the same investor day, Home Depot's Bill Lennie, the executive vice-president of outside sales and service, explained how one part of this works:
    We recognise the need to equip our associates for success. One of the ways our PASAs [Pro Associates in the stores] have been able to deliver a 20% growth in account spend is through the My View tool found at the Pro desk. My View provides store and customer data in a simple format that arms our Pro sales associates with the information they need, empowering them to serve our customers better.
    Here's an example [see Figure 1] of the store level data that a PASA sees when they go into My View at the Pro desk. As you can see, it paints a clear picture of activity at the store level as well as customer-specific information. When the associate drills down, he or she can get a great view of that customer's spend pattern as well as potential opportunities for growth.
    The associates focus on 2 key areas of growth to help their Pro customers. Products, which are merchandising categories, that the customer may benefit from in their line of work; and services that provide business benefits that reduce friction for our Pros like credit, tool rental and delivery. New this year are alerts. Alerts indicate potential opportunities that customers may be missing based on their buying habits.
    Finally, there are additional products with suggestions that may make sense given how similar customers spend with us today. All of these data points help facilitate a conversation between PASAs and our Pros, allowing them to highlight what we bring to the table in a tailored fashion.

    Home Depot has sometimes referred to its marketing and channel availability as providing "360 degree" coverage. Now its use of data analytics is moving towards a similar coverage, as it becomes more infused into most aspects of its commercial enterprise.
    Background: The market

    GWA Group, makers of brands such as Caroma and Clark, provided a very good summary of the Australian bathroom market for their presentation to investment analysts. Figure 2 shows slide 35 from that presentation. This is a market breakdown based on a 2x2 box that shows market size and position on the axes of experience and the form/function split.

    If we think of Reece and most other mainstream retailers in the bathroom market, it's evident that they provide services and products that match up with four of the five market segments diagramed. The one they all miss out on is the segment labelled as "The Novice".

    Looking at Figure 3, one reason for this is apparent. The Novice segment is at the lower end of the quality/price incline. Even though it represents a hefty 22% of the total market, conventional thinking identifies it as a low margin, low expenditure segment. It's notable that even GWA Group, which ramped up its Clark range specifically to provide better design and quality at a lower price point, effectively dismisses 80% of the Novice market segment as not viable for its products. Clark is really aimed at the Dreamer segment, and is designed to combine practicality with clear style/design elements.

    However, HNN would suggest that the true potential of the Novice segment is quite understated in these diagrams. This is likely accurate as a portrayal of the current, actual market, in terms of those who do complete bathroom renovations. But what about the potential market, which would include non-completes, and those who give up in just the planning stages?

    When taking over running the UK-based home improvement retailer Kingfisher, its managing director, Veronique Laury, launched a lengthy survey over all the markets the company services, including France, the UK, Ireland, Poland, and other Eastern European countries. One result of that survey is the bathroom renovation journey diagram shown in Figure 4, which was part of a January 2016 analyst presentation. This indicates that well over one third of bathroom renovations fail to be completed.

    It's likely that this is also a fair description of the situation in Australia as well. If so, then it is likely that the actual size of the Novice segment is around twice that ascribed to it by GWA Group - or over a third of an expanded market view that includes non-completes. This makes it a very significant segment - and one that is ideally suited to the model of customer engagement that Bunnings uses.

    In a recent interview with the UK newspaper Mail on Sunday, Ms Laury added some colour to this research:
    [Laury] is adamant, after extensive research, that younger customers are not the inept and lazy types that some among the older generations like to think.
    What customers are looking for is someone who helps them make the right choice.
    It's a myth - not true at all. They want to have a go but they haven't been taught by their parents. They just need more support to learn skills," she says, pointing out some of YouTube's most-watched videos are for DIY jobs.

    Ms Laury also thinks that home improvement's expansion of do-it-for-me is overrated:
    It is a question of money. Are you telling me the most successful retailers are the low-priced retailers like B&M or Aldi and Lidl, and at the same time people are going to have tradesmen doing everything for them? Are you kidding?

    It is a familiar retail story for the 21st Century: the marketers have remained fixated on the baby boomer generation, and have failed to see the opportunities in the emerging Millennial market.

    The above is only a preview of this article. To read the entire article, please download the complete issue as a PDF, by visiting the following link:
    HI News Vol. 4 No.5: Plumbing opens the data pipe
    Steve Fatileh, HBT
    Steve Fatileh at a meeting of the HBT executive
    HNN Sources
    Chris Moorfoot's store in Yarra Junction, Victoria
    The front entrance to the Inverell H Hardware
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    Steve Fatileh has become very much "Mr H", when it comes to his work with Hardware and Building Traders (HBT) as a group buying manager.

    While he has been responsible for securing a wide range of suppliers for the overall buying group, there's no secret to the fact that he has helped to nurture the group's once static H brand from just 13 stores, to 28 active stores, with another 14 in various stages of transition.

    In the 12 months to June 2018 alone, eight stores completed the changeover.

    In an industry that has a pressing need for innovation and innovators, Steve has helped to shape the beginnings of a brand presence for an independent buying group.

    Steve had a slight premonition even before he officially started working for HBT back in early 2015 that the H part of the business might attract his interest.

    At the second meeting he had with the Australia-wide buying group, the subject of the group's H Hardware branded stores had come up. Speaking to the HBT managers and senior members of the group who were interviewing him, Steve started asking questions.

    He first asked what HBT was currently doing with the H stores. The answer was, at that time, very little. The 13 H Hardware stores signed up were the same 13 that had signed on five years before.

    Steve followed up by asking what the advantages were for members who signed up for the H branding. The answer was that, well, the stores certainly looked good, with strong colours and a workable design. But at the time, in terms of anything material beyond their appearance, H stores did not get any extras.

    Afterwards, walking away from a meeting that had ranged over many topics, Steve found his thoughts returning to the H stores. He thought that, if he accepted this role with HBT, he might consider seeing what he could do with H.

    It was a modest ambition. He had no idea that it would soon become, in less than a year, something of a driving obsession for him.
    First steps

    With a strong background as a category manager for Clark Rubber, which is a strict franchise operation, it took Steve a little while at first to acclimatise himself to a buying group that was made up of a collection of opinionated, widely varying individuals, who were free to sign on to deals if that suited them, or go their own way if it did not. While he respected that attitude, he was also aware that there were gains to be made if like minds could get together.
    What triggered my interest in the H brand straight away is that part of my role is to benefit the stores and see what I can do for them. I thought immediately that if we have some commonality between some stores, there would be more we could do for them as a collective group.

    Part of what reinforced that thinking was his first exposure to the H Hardware stores that were then operating.
    The first HBT store I went to was Cameron's H Hardware store [in Bateman's Bay, NSW]. Like anything, the first impression you get lasts with you the longest. So that became the sort of benchmark for me. I went and saw one of our best stores straight off. Later, I saw other stores, which were good, but didn't quite reach that level of excellence. So in my mind there was the question: Why couldn't all our stores be more like the very best stores?

    Steve still remembers that first encounter with Cameron's.
    There was a professional feel to the store straight away. The workers were all in uniform. There was good signage, and there was good direction, if you wanted to look for something. Everything was clearly marked with signs. Each product had its own area, and each category had its own area, and it was all well-planned. The people that I spoke to, the staff, were well informed about the products. So, yeah, straight away you got that sense of professionals. So that would that would probably be the store that captivated me at the beginning.

    If he wanted to work on H Hardware, the first thing Steve had to do was to get management buy-in. Fortunately, the group manager at the time, the late Tim Starkey, was known for his encouraging management style.
    There was certainly a plan behind H Hardware in those early days, and it was my own plan, one that I put forward. The first thing I had to do was to convince Tim it would be worth it, as a lot of my time would go into building the brand. Tim was the kind of manager who backed you. He just said something along the lines of: "Yeah see how you go. If you think that's the way to do it, see how you go doing it your way." And, you know, if you succeed, well done, if you fail - well, they'll come and talk to you!

    Steve started out first with research, getting some numbers to back up what his intuition was telling him about the status of the brand, and its potential for the future. That led him to develop two key questions that would end up determining the future of the H brand stores. In the end, it all came down to a matter of costs and benefits.

    The first question was "Why?" Why would anyone want to go through the transition to an H Hardware store? What were the benefits, and how would they be delivered?

    The second question he developed was about the raw costs of doing the conversion, and the amount of time it would take up for retailers. The transition period itself would affect the business, then on top of that were the costs of the raw materials to make the change, the cost of installation, and the sheer amount of time required for the staff and owner to implement the changeover.

    It was by coming up with an answer to the second question that Steve ended up solving the first as well. That answer came to Steve as a result of a "thinktank" session HBT held in 2016. HBT had yet to develop its "key suppliers", but they had brought in some of the major suppliers to the group for a chat.
    We talked about H Hardware and one of the suppliers asked us: "Why aren't you guys pushing this? Do you realise we will get behind it if you do?" I think that even the suppliers felt that they wanted another player in the market.
    Straightaway then, you know, it was a bit of a light bulb moment for me. I said well that can eliminate our cost issue with the conversions to H Hardware. If the suppliers were willing to back it up, let's get them to support the stores and finance some of it or assist in contributing to the fitout cost of the paint, the signs, and so forth.

    Of course, for that kind of deal to work out, there needed to be something in return for the suppliers, as well.
    In return, if the member agrees to receive help with the fitout, they then commit to that supplier to be their main supplier in that category. In most cases, that supplier is already dealing with that member and is already their predominant supplier. But it gives the supplier security, knowing they are locked in.

    Hardware retailers are a little unique in that they tend to need individual premises, often on a large piece of land, with both a main building and sub-buildings they have to maintain. Changing all that to a new brand is expensive and difficult. The result of the deals with suppliers over items such as paint can mean that the new brand fitout costs even less than the standard capex allocated to the major maintenance stores do every four to six years.

    As a natural consequence of these arrangements, Steve worked out what the special benefits would be for members who converted to H Hardware. These, too, would come from the suppliers, and help to further enhance their relationship with H Hardware stores.
    Second stage: branded products

    While these answers to the initial questions helped to spur the first stage of development of the H Hardware stores, Steve knew he had to go further still to drive the brand to the next stage of its development. That next step turned out to be the development of "H" branded products, for sale through all HBT member stores.

    The lead product Steve chose to work on was paint. Partly that was inspired by a slightly neglected offer that had come the way of Mr Starkey some time before.
    The paint deal was sitting there for a while, because after Gavin [Keane] took up his position [as group buying manager], he took on ITT [Industrial & Tool Traders] as a pet project. Tim and Gavin were then really busy getting new members to come on board.
    Duralex long had this idea, and they left it with Tim, so it was sitting there on the shelf. Some time after I came onboard Tim just said one day: "Hey Steve, look at this for us, will you?" So that was where the idea for a branded paint came from.
    We had to refine it. We also had to go to market as well, and see if other paint manufacturers were interested, because Duralex were only a smaller supplier to HBT at the time. They had a good reputation for the quality of what they did. They didn't have that many accounts with us, and we were concerned if they would be able to keep up with the supply and availability.
    But we found Duralex really wanted to invest in HBT and invest in the concept of the paint itself. While other companies were interested, Duralex were willing to go all out on this project. It was a slight risk, but one we were keen to take. It also meant that from 2016 to 2017, Duralex have seen their order numbers with HBT grow by a very high percentage. So, yeah, it's a good story. It worked out well for everyone.

    After the paint launched, with its distinctive "H" branding, HBT turned its attention to a range of other products as well. One of the major coups was to launch an H branded version of Soudal silicone products, along with others such as tape measures, paint brushes, and even door handles.

    Managing that kind of program, Steve explains, is very much a matter of focusing on quality.
    With all the H branded products, if you have a look who they are, they're all reputable suppliers that we chose. When we go through the process of picking a supplier, we pick the product first.

    Finding quality products needs a quality process, so HBT came up with the idea of an "H" committee to help it develop this line of business.
    After we had developed a couple of the products, we then formed the H committee. Our committee decides what products we should look at as candidates for exclusive H products. We invite sometimes three or four submissions, though when we start, we already a good sense of which suppliers would likely work out best.
    For the most part, the suppliers that we choose must have a very good relationship with the HBT team, HBT members, and have a lot of accounts across the group. We always look for equal or better quality to the product they're already selling to our members - but with a price advantage. So that's kind of the selection process for an H product.
    Third stage: marketing

    With an attractive offer for HBT members to move over to H Hardware, a deal that made the transition easier in terms of cost, and included benefits that would accrue to both members and suppliers from participating in the brand, Steve next turned his attention to the hardest challenge of all: marketing, and generating brand awareness.

    Steve decided to look to an idea long familiar with hardware retailers: the print catalogue.
    The reason we did the catalogue was that we don't have the financing to do something like television advertising. HBT is still gearing up to get digital channels such as social media working. Catalogues were a reasonable cost, and the potential for a good return.
    Since doing the catalogues we've had suppliers new and old saying: "How do we get in there? How do we promote our products?
    So I think it has benefited us by putting our name out there, showing that we're a player in the market, and also it's benefited suppliers who want to be involved and want their products in our catalogues.
    It's a demand situation. If a supplier sees their competitor in there and they're not, they're coming to the party by giving us better deals and better specials to be in the catalogue. So the benefit extends even beyond marketing.

    Keen to find other cost-effective channels, the H brand has launched a presence in Shop A Docket at targeted Woolworths stores as well. For example, in the northern Melbourne exurban suburb of Whittlesea, both the local IGA grocer and the local Woolworths store now promote Whittlesea H Hardware through shop-a-dockets.
    A building brand

    This all adds up to what has become a considerable asset not just for HBT, but for the independent hardware community at large. Steve sees the H brand as offering many independents just the right mix of brand presence and power, mixed with real choice.
    So there's a bit of buoyancy now, there's a bit of excitement with H Hardware. Especially with the bigger players in the market, such as Bunnings, if your business doesn't stand for something, and there's not consumer confidence that you're buying well, that you are part of a brand or a group, then consumers will think that you're not competitive. They won't have the confidence to come to your store.
    H Hardware gives you that, it gives you that brand, that perception that these guys are part of a bigger picture and that they're going to be around for a few more years. Unlike an independent with just a very local brand, such as "Bob's Hardware Store".

    And yet, as Steve points out, with H Hardware, the spirit of individuality that runs so strong in a "Bob's Hardware Store" is kept alive.
    That's the thing with H Hardware from the start. There were a couple of concerns by some people before they joined, such as that they didn't want to lose that identity. For example, with someone like Chris Moorfoot out at Yarra Junction H Hardware, he was worried about the store's identity. But that is still a very unique store, and uniquely suited to its environment, in one of the real beauty spots of Victoria. These stores not only keep their name when they convert to H Hardware, they keep that independent spirit.

    The thing that makes Steve the happiest, however, about the whole H Hardware enterprise, is that he is just now seeing the results coming through for full-year financials at the stores he has helped steer into H Hardware. And they are good, very good in fact.
    The stores posted a significant increase. That released me from my biggest fear. A lot of them have come on because of the trust they have in the person behind the brand implementation, in me, you know. So to see that at the end that they are doing well and have achieved success through the brand - I'm just happy.

    What's next? Steve wants to hit a total of 50 stores by the end of 2018. And unless something major happens to the industry, HNN is very sure he's going to make his number.
    Metcash results FY2017-18
    Results for Metcash FY2017/18
    HNN Sources
    Guy Bruno from Danahers Mitre 10
    One of Mitre 10's trade centric stores, in Bayswater (VIC)
    Subscribe to HNN weekly e-newsletter
    Australian food, liquor and hardware wholesaler Metcash released its results for its FY2017/18 (ending 30 April 2018) on 25 June 2018.

    As has become standard practice with Metcash, we will present the results in two sections. This first section will deal with the information that is available, which includes the ASX announcement and financials, plus the slides from the presentation. Hopefully the number 112 company on the ASX 200 will manage to publish the presentation recording before August 2018, and HNN will bring you analysis of that.

    Metcash has produced results that were somewhat mixed. While it performed well operationally, the company was forced to take an impairment on goodwill and other net assets of $345.5 million. This was announced to the Australian Stock Exchange (ASX) on 6 June 2018. The ASX release stated, in part:
    These impairments follow the company's year-end review of the carrying value of its assets. The review has taken into account the information contained in Metcash's ASX release on 28 May 2018 concerning Drakes Supermarkets in South Australia, as well as weakness in the Western Australian economy and the ongoing intensity of competition in the sector.
    The impairment charge comprises $318 million of goodwill and other intangibles, and $34 million of other net assets in the Supermarkets & Convenience pillar.

    As a consequence, Metcash's statutory profit was negative, at $149.5 million. Using Metcash's stated numbers for underlying profit after tax, the result was $215.6 million, up by 10.7% on the figure for the previous corresponding period (pcp), which was FY2016/17.

    Overall Metcash group sales grew by 2.4% on the pcp to reach $14,463.7 million (4.3% based on a 52 week for the pcp).

    In terms of earnings before interest and taxation (EBIT), the company reported this at $332.7 million, up by 9.2% on the pcp. The company also reported a strengthening of its balance sheet, positive to $42.8 million, as compared to net debt of $80.8 million for the pcp.

    Metcash signalled an off-market share buyback valued at circa $125 million.

    Revenue for the company's food business fell by 3.1% to reach $8899.6 million, (1.2% based on a 52 week pcp) while the division's EBIT was broadly flat, recording an increase of 0.3% to $188.6 million. Liquor recorded a sales increase of 4.0% compared to the pcp (5.7% based on a 52 week pcp), coming in at $3465.5 million, with EBIT at $68.4 million, up by 2.0%.

    Metcash's Independent Hardware Group (IHG) was certainly the star of its FY2017/18 results. The pcp benefitted from only seven months of sales and EBIT from acquisition of the Home Timber & Hardware Group (HTH) on 2 October 2016, so the comparative annual results are not truly indicative of operational performance. Revenue came in at $2098.6 million, up by 30.45% on the pcp (33% based on a 52 week pcp), while EBIT was $69.0 million, up by 42.7% on the pcp.

    However, it is possible to compare the numbers for the second half (H2) of the pcp with H2 of the current reporting period, as both periods reflect six months of HTH integration. Sales for H2 of the current period were $1034.4 million, while for H2 of the pcp they were $1027.2, indicating an increase of 0.7%. Adjusted to cancel out the effect of the 53rd trading week in the pcp, sales for H2 of the pcp would have been $996.9 million, indicating an increase in revenue of 3.8%.

    In EBIT terms, the current H2 produced $41.9 million, while the pcp H2 produced $36.0 million, indicating an increase of 16.4%. The EBIT result is obviously very welcome to Metcash, but is likely to largely reflect one-off gains through integration efficiencies. Nonetheless, it does demonstrate that IHG has integrated Mitre 10 and HTH successfully. The company's presentation for IHG indicates it has achieved "gross realised synergies" during the current period of circa $20 million.

    Like-for-like (comp) sales provide a good view of true operational performance. Metcash states that Mitre 10 saw a comp increase in wholesale sales of 6.0%, while HTH recorded a comp increaes of 3.4%. Overall comp sales for the IHG banner group rose by 7.4% (across 104 stores).

    Total wholesale sales were posted as gaining by 5.3%. Mitre 10 saw a lift of 8.6% over the pcp, while HTH gained 1.9%. (Wholesale sales include sales by Mitre 10 and HTH to both independent retailers and company-owned stores, the company states.)

    The company also states that the "wholesales sales margin" for IHG was 2.4%, which we take to be a reference to the EBIT margin. The company states that its weighting to trade sales is now 63%, and that this increase (from around 60% previously) reduced these sales margins.

    The overall EBIT margin for hardware operations was 3.29% in the current period, compared to 3.01% in the pcp. For the current period's H2 it was an impressive 4.05%, compared to 3.50% in the H2 of the pcp.

    The company pointed to a number of developments, including the introduction of Hardings Plumbing into New South Wales and Tasmania, and the opening of four new trade-focused stores. It also states that its "core ranging" program, which defines preferred suppliers, has extended to five categories: fasteners, paint, power tools, hand tools, and cement.

    IHG provided more detail on its continued rollout of its premium store fitout for Mitre 10 stores, known as the Sapphire program. It states this continues to increase sales revenues at participating stores by over 15%. To date, 30 stores have participated, and the company plans to have circa 200 stores in the program within five years.

    The importance of its hardware "pillar" to Metcash can be seen by the fact that while the division is a long way third in terms of sales revenue, it has now moved up to being second in terms of EBIT. Contrasted with the heavy price warfare of both the food and liquor businesses, hardware still manages to return reasonable margins.

    That is despite hardware facing the same basic challenge that food and liquor face: competing against large, well-run retailers from the Wesfarmers group.

    However, there is a good chance some of this might change. As HNN reports in this issue, Bunnings is planning to ramp up its already considerable presence in the commercial/trade sector of hardware. HNN estimates that the Wesfarmers-owned big box retailer could take out an additional $2 billion from this sector over the coming three years.

    The problem facing IHG in these circumstances is a little reflective of that which Woolworths believed itself to face in competing with Coles, and which led it to launch its failed Masters Home Improvement big-box retailer. Woolworths saw Bunnings as providing a lot of EBIT which Coles could then invest in growth. Bunnings today has such a strong (and very high margin) DIY/home business, that it can afford to invest a lot in building its trade/commercial business.

    There are also evident synergies between some trade businesses and consumer business. A good example is the great business Bunnings has built in association with Kaboodle over the years. It provides a very good consumer-level revenue stream, but it also has helped tradespeople establish kitchen businesses. It's easy to see how Bunnings can extend that business, as it has suggested, into bathrooms, outdoor deck living spaces, and even other rooms in the house.

    That simply isn't the case for Metcash.

    Hardware is, in terms of the Metcash strategy (in HNN's opinion), supposed to do exactly what it is doing: generate a very good EBIT margin to fuel further investment in food and liquor. If Bunnings simply manages to curtail further growth for IHG below $2.2 billion in sales and $72 million in EBIT over the next three years, Metcash may be led to rethink its position in IHG.

    For individual hardware retailers faced with choosing a buying group solution to face the future, the questions to be asked are about the effectiveness of IHG's warehouse-based core ranging strategy, and the relevance of the kind of branding that IHG has to offer.

    It is certainly true that IHG has managed to achieve some attractive prices across its core range brands, very close in many cases to the pricing at Bunnings for comparable items. It is simply difficult to predict whether this will last, once Bunnings turns its full attention to many of these categories. IHG then runs the risk of having invested considerable time and effort on a specific strategy - price on familiar brands - which might not help it grow as much as it expects. At the moment this is unclear, but two years from now we will see an answer.

    In terms of the value of the Mitre 10 and the HTH brands, this is difficult to assess. The question that will be raised in the years to come is, what does that brand (and all others in hardware) really represent? HNN believes that one very important component will be what kinds of technological and other assistance the brand promises tradespeople (and DIYers). Bunnings, for example, is moving to providing a kind of automatic checkout for commercial customers using its PowerPass loyalty/credit card. IHG may, in another year, be able to match that - but what about the next development, and the one after that?

    Putting those concerns aside, IHG has managed to achieve some great things with its Sapphire program. While early Sapphire stores seemed "sterile", more recent ones - such as the corporate-owned Danahers in Heidelberg, Victoria, and the Diamond Valley store in Diamond Valley, Victoria - are very good stores, with excellent merchandising, and very competent, friendly staff.

    Even with that, however, at its heart the core difficulty with the warehouse-based, price-conscious, brand-promoted business model that IHG has adopted is that it tends to mitigate against radical innovation. IHG's strategy is something of a bet that the Australian home improvement retail industry will, for the next three or four years, go along the same path it has for the past 15 years or so, with only moderate innovation, and a steady reliance on the "tried and tested".

    That could turn out to be a very good gamble, given the industry's surprising resistance to change. But it is almost as likely that this kind of model will experience an increasing, cumulative pressure to either expand into growing areas of consumer demand, or risk declining in profitability.

    What is undeniable, whatever risks IHG may face in the future, is that IHG's management team has done an excellent job in integrating HTH with Mitre 10. Considering how many such acquisitions have failed, or taken three years to complete, this is a praiseworthy achievement.
    Big box update
    Tradies are projected to spend more money at Bunnings, according to a report from Macquarie Wealth Management
    HNN Sources
    The proposed expansion of the Bunnings Complex at South Nowra will see an overall bigger warehouse area. Image: Sutherland and Associates Planning
    Bunnings customers purchase the installation in-store with their toilet suite, then follow a process to connect with a hipages tradie
    Click to visit the HBT website for more information
    A Macquarie Wealth Management report indicates tradies will spend more money at Bunnings; fifteen more stores in Queensland; a partnership with hipages connects Bunnings customers with toilet pros; store opening in Katoomba while staff are being recruited for the new Caringbah outlet in NSW; and back payments for Bunnings staff in New Zealand.
    More tradies to buy from Bunnings?

    Tradies are projected to spend more money at Bunnings, according to a report from Macquarie Wealth Management sent to its clients earlier this year.

    The report, seen by The Australian, included a recent Macquarie survey of the mood of tradies pointing to more orders being placed with Bunnings. The Macquarie client note said:
    We completed a survey of 27 trade firms to obtain a better sense of market conditions and perceptions towards Bunnings. Participation included the following trades: builders, carpenters, electricians, landscapers, painters, plumbers and others.

    The key takeaways from its survey was that conditions are generally stable or getting better, and that Bunnings remained a "preferred retailer" from 48% of respondents. Macquarie said:
    ...68% of respondents view Bunnings positively (compared to 8% who view it negatively) and 28% expect to spend more at Bunnings over the next 12 months. Primary drivers for the success of Bunnings were attributed to convenience/location (36%), customer service (24%) and product range (24%).

    The survey found that tradies believe conditions are generally stable or getting better, with 40% of respondents indicating their backlog is steady on last year and 40% indicating it is more positive.

    Bunnings continues to lead the hardware retail sector, based on responses in the Macquarie report. It said:
    Bunnings was clearly the preferred retailer for tradespeople with 48% of responses, while Home Timber & Hardware and Mitre 10 both received only a 4% preference...
    Bunnings' like-for-like stats are impressive. Supplementing this, the group has generally rolled out 10-14 stores per annum with a footprint now of 363 stores. While highly variable due to store ramp-up/stabilisation phases, we estimate rollout has accounted for around 30% of Bunnings EBIT growth over time.
    Even if there is a sharp retreat in the housing market, caused by financial shocks, rising debt levels or a slowdown in new housing, Bunnings could take on defensive characteristics that would serve it well in such a downturn.
    Should there be an external shock, we contend Bunnings should be reasonably defensive as consumers are likely to cut back on more disposable spending and continue to spend money on their primary asset (their home) as evidenced by Bunnings' strong performance during the GFC.
    Bunnings store developments continue apace

    Queensland will have a bigger Bunnings presence; the Port Macquarie (NSW) store is on track to open in early 2019; South Nowra (NSW) is set to get a $27.8 million Bunnings complex; and a revamped Bunnings Fyshwick in the ACT will focus on trades and have a smaller retail offering.

    Bunnings is investing more than $636 million in existing stores and creating 15 new ones across Queensland over the next five years. Managing director Michael Schneider told the Courier Mail:
    We look forward to continuing to grow our presence in both metro and regional parts of Queensland ... Construction is underway at new sites in Newstead, Underwood and Warwick, with 12 more stores around the state in the planning stages.

    The Australian Bureau of Statistics data showed 22,500 new residents made Queensland home last year - up by 7500 on 2015-16.
    Port Macquarie

    Work on the $43 million, 18,000sqm Bunnings Warehouse on John Oxley Drive is on schedule. Bunnings' state operations manager NSW north, Cheryl Williams, said the construction work is progressing as planned. She told Port Macquarie News:
    Once complete, the existing team will transfer to the new store and will be joined by more than 60 new team members. Stock from the existing site will be distributed to other Bunnings stores and racking will be recycled within the store network. Bunnings has been a part of the Port Macquarie community since 2003...
    South Nowra

    Bunnings' development approvals manager, Philip Drew has lodged a development application with Shoalhaven City Council for a new store, which will be built on the current site at South Nowra and take in an adjoining block of land to the north.

    In plans and reports prepared by JR Brogan & Associates and Sutherland & Associates Planning, it wants to demolish the existing warehouse complex on the Princes Highway, consolidate the two lots of land and construct a new hardware, building supplies and garden centre including car parking and signage.

    The proposal will see the complex's footprint grow by almost two and a half times its current size. It is set to grow from the current gross floor area of 6,248sqm to 14,130sqm. Parking to go from 225 spaces to 428 spaces under the building.

    This $27.8 million development will see a new Bunnings Warehouse above an undercroft car parking level. The design will see the current complex layout on the site flipped, with the timber trade area moving to the south of the property, and an outdoor nursery and bagged goods canopy moving to the northern end.

    The construction including a cafe, offices and other staff amenities areas will be located at the northern end of the main warehouse floor and in a mezzanine level above.

    The main pedestrian entrance into the store is located on the eastern side of the ground floor, with the main entry centrally located and containing lifts, stairs as well as the travelator providing access to the parking level. A separate secondary entrance to the nursery is provided at the northern end of the eastern side of the building.

    The big box retailer is also reviewing its options for a temporary store location while the complex is being constructed.

    The Fyshwick store is not closing in the wake of Bunnings opening its new airport site. It is to be repurposed as a trades centre, with a significantly less general retail offering. The airport store is expected to capture the majority of retail activity, according to a development application (DA). It said:
    The proposed alterations and additions to the Fyshwick Bunnings warehouse store coincides with the 2016 purchase and current fit-out of the former Masters site located at Canberra International Airport.
    Since acquiring the airport site, Bunnings has reviewed the current retail and trade offering within the ACT and surrounding regions and have decided to re-purpose the Fyshwick operation to provide for more goods and services aimed at trade related retailing.

    The bulky goods retail area will lose about 1000sqm of space, according to the plans. The outdoor nursery area at the rear of building will be relocated to the front so that space can be converted into a bulk trade delivery loading and unloading area for the retail operation and truck queuing area.

    The slightly smaller nursery will be an open structure partially covered by a shade sail canopy suspended between steel columns and 3.6m high chain mesh fence. A new opening, roller shutter door and canopy is to be installed at the front (western side) of the building to incorporate five internal loading/parking bays.

    The DA also proposes changes to the existing floorplan to allow part of the retail area to be transformed into a trade centre. The proposed alterations will not increase the total floor space or building height.
    Bunnnings, hipages team up for toilet installations

    Bunnings is offering its customers a fixed-price installation service through a strategic partnership with online trades and services site hipages.

    The deal will give Bunnings customers the option of adding a $275 fixed-price installation service - which includes all fittings and fixtures, removal and disposal of old toilets, and a five-year warranty - from hipages when they purchase a toilet suite. This offer is available across the complete range of back to wall and close coupled toilets in the Bunnings range.

    Customers will receive a unique voucher code at the time of purchase, which is used to book a local tradesperson on the hipages website.

    The installation service will be rolled out nationwide, following a four-week trial in 15 Bunnings stores across Newcastle and the Central Coast, earlier in the year. In a statement, Bunnings managing director Michael Schneider, said:
    This is an exciting offer...making it easier and more affordable for customers to update their bathroom and connect with local tradies to assist with those jobs that require a licensed tradesperson.

    The big box retailer joins other retailers as they move toward the market of Do-It-For-Me (DIFM) customers. IKEA, Bing Lee and Coles have recently teamed up with the outsourcing marketplace Airtasker to offer similar installation or personal shopping services.

    Hipages said it vets the trades licenses and Australian Business Numbers of all tradespeople registered on its site. The company has approximately 4,000 plumbers registered with its service nationwide. Hipages co-founder and chief executive David Vitek said:
    We're thrilled to partner with Bunnings, to help more Australians experience the benefit and ease of being able to instantly book a qualified, local tradie online.
    Katoomba opening, Caringbah staffing

    Blue Mountains residents were invited to the launch of the new Bunnings Katoomba store and Bunnings said it will recruit 120 staff for its Caringbah warehouse.

    Bunnings Katoomba recently had its official opening. The new $9 million store covers more than 2900sqm and features a kitchen and bathroom display, kids playground and parking for over 50 cars.

    Bunnings chief operating officer Debbie Poole joined store manager April Spillett and the local Bunnings team to celebrate the opening. Ms Spillett said they are excited to lend a hand in the local community and welcome people to the store.
    Our new team members have already supported a number of community groups and assisted in projects such as revamping the Morven Gardens Baptist Care's Dementia Ward outdoor area with a sensory garden and refreshed garden beds. The team has also given the Blue Mountain's community garden a makeover and repainting the interior walls of the Blackheath Scout Hall.

    Bunnings Katoomba is located at corner of Wilson and Megalong Street, Katoomba (NSW).

    Bunnings said it will employ an extra 120 staff to work in its new Caringbah warehouse, which is expected to open in late October.

    The building, which was estimated to cost $37.7 million to construct, will be double the size of the previous structure, with two retail levels and underground parking connected by lifts and travelators.

    Bunnings state operations manager, NSW South, Robyn Hudson, said construction was on schedule and progressing as planned. She told The Leader newspaper:
    With two car park levels completed, construction has progressed to the exterior of the building including the erection of concrete wall panels and the roof. When complete, the new store will span over 15,000sqm with the retail area spread across two levels.
    The existing Caringbah team members will transfer from the temporary store to the new warehouse and will be joined by over 120 new team members.
    Bunnings NZ corrects holiday payments

    Bunnings will pay more than NZD11 million to 12,235 New Zealand past and current employees after identifying mistakes in implementing the Holidays Act 2003. The company has recalculated all leave payments from April 1, 2004, to May 31, 2018, and said all money owed will be inflated to today's dollars in line with the Reserve Bank of New Zealand Consumer Price Index. The median payment is NZD317.

    Bunnings NZ general manager Toby Lawrance said the company will ensure employees are paid correctly until a permanent solution can be implemented. He said in a statement:
    Like many other private and government organisations, we have found interpreting and applying the Holiday Act to be a challenge. As a large employer in New Zealand we understand the importance of the trust that exists between our team and the business, particularly in ensuring they are paid correctly. Clearly this is disappointing for us and for our team and we will continue to work to ensure that we have the right systems and processes to support our team.

    The issues with the act centre around the fact that there are two ways to calculate holiday pay - either on the basis of ordinary weekly pay or an employee's average weekly earnings over the past 12 months. Employers must pay whatever gives the employee the most money. But employers who calculate holiday pay based on an employee's contracted hours can get caught out if that person does variable hours or earns a commission or other variable pay.

    The New Zealand government formed a taskforce involving government, business and workers, to recommend changes to the Holidays Act 2003 in a bid to unravel the legislation's complexity to cope with a fast-changing labour market. The taskforce aims to recommend changes to the act by mid-2019.
    Indie store update
    Fagg's Mitre 10 in Geelong (VIC) has absorbed the Belmont Timber & Hardware business
    HNN Sources
    Culburra Beach Hardware in NSW is forced to close its doors
    Landmark expands with two new agribusinesses
    Click to visit the HBT website for more information
    Bringing Belmont Timber and Fagg's together; rejection of development leads to a hardware store closure in Culburra Beach (NSW); and Landmark adds to its rural merchandise business.
    Belmont Timber & Fagg's integration

    As the new general manager of Belmont Timber and Fagg's Mitre 10, Andrew Pitman said uniting the cultures of the two businesses into one is a priority. With a corporate background working for oil companies, Mr Pittman can bring another approach to the hardware and timber business. He told the Geelong Advertiser:
    I don't claim to know the timber, but I think I know and understand business and how we can market the business in a different direction and in a different way to reach the customers better than we do at the moment.

    Previously the wholesale fuels sales manager for Mobil Oil Australia, Mr Pitman's career has been in downstream marketing in the oil industry and his retail exposure was gained through running Mobil's company-operated service stations. He brings an outside perspective and experience in a highly competitive environment to the Geelong-based business:
    We are going to employ new technologies, new marketing techniques, things that I am going to bring to the table that haven't necessarily been in play in this industry.

    He and his team will work to combine two significant Geelong brands. Fagg's has a 164-year history in the city and Belmont Timber was established by well-known Geelong Football Club benefactor, the late Alex Popescu in the early 1950s.

    In recent years, both companies have come under Metcash ownership in different ways but there is a commitment to keep both brands under the new merged operation. Mr Pitman explains:
    There is a rich history and pedigree of experience there which is well recognised in the Geelong community and we are not going to let that go. We are keeping the heritage of both companies alive.

    Having completed the initial back-end integration so they share point of sale and accounting systems, attention has turned to harmonising the cultures of teams who were once competitors. That process includes relocating some senior management from Fagg's, which has absorbed the Belmont Timber business, and investing more than $100,000 to renovate offices on the Settlement Road site.

    Belmont Timber represents about 30-40% of the combined company which employs 230 staff (including casuals and part-timers) and which now promotes itself as the largest timber and hardware business in the greater Geelong region. Mr Pitman said the focus would be on growing its share of the trade market.
    We don't discount the retail side ... Bunnings has had an impact, but our DIY and Mighty Rewards customers remain loyal and from a trade perspective, that's where our strength is and that's where our core business is.

    Operating out of four locations will give trade customers, particularly Belmont Timber clients, greater scope and opportunity to engage with the business.

    Fagg's is partly owned by Metcash, while Belmont Timber has been owned by Metcash since it bought the Home Timber & Hardware group from Woolworths for $165 million almost two years ago. Mr Pitman said:
    They were owned by the one company, (but) operating independently, competing independently. What we have done has brought them together.
    Culburra Beach Hardware forced to close

    The West Culburra development in NSW gained the support of the local community, especially businesses who believed they could drastically improve their bottom-line. Jean-Paul and Kylie Maulguet purchased Culburra Beach Hardware eight years ago after hearing about the proposed development. Ms Maulguet told the South Coast Register:
    That was one of the main reasons we bought the shop. With all the new homes we would have had a lot of ongoing clients."=

    But, after news the Department of Planning and Environment recommended refusal of the project, the Maulguets have decided to close the doors at their hardware store. Mr Maulguet said:
    It's just not financially viable. A large proportion of people who own homes in Culburra don't live here so we don't have enough customers to keep us going.

    Mrs Maulguet said the couple made the decision, after months of stress.
    There are still plenty of tourists coming through but they don't stop at stores like ours. When you're married and have kids the stress of the business flows on to that, so we needed to make the decision to close up. It's really sad.

    The proposed development covers nearly 100 hectares of land. Approval was sought for 650 homes, 3.5 hectares of industrial real estate, tourist accommodation, cafes, restaurants, cycleways, picnic areas and a sports field. Mr and Mrs Maulguet said had the development gone ahead sooner, it could have allowed them to stay open.
    We thought this development would have gone ahead years ago which could have really helped us.

    Mr and Mrs Maulguet said although the decision was fresh, they believed they would be closed within the next couple of months. Mrs Maulguet said:
    ...There's been a hardware store in Culburra Beach since the 1970s so we feel like we are letting our loyal customers down, but we just can't do it anymore.
    Agribusiness group gets bigger

    Landmark refers to itself as Australia's largest distributor of (rural) merchandise and fertiliser with a national network of around 400 locations. Recently it has acquired two independent South Australian-based agribusinesses, Jolpac Rural Supplies and Naracoorte Agri Services.

    The entities now trade as Landmark Jolpac in Bordertown and Landmark NAS in Naracoorte. General manager for SA, Craig Tapfield said the two well-established, successful businesses were a "good fit" for the company. He told Stock Journal:
    We are continuing on what the Jolpac and NAS team have been doing. We are not here to change anything, just add to it and provide extra services to the local community.

    At Bordertown, Landmark Jolpac will run out of the current Jolpac site, while the company's Dalgety Wool depot will run from the existing Landmark site. Fertiliser and seed sales will continue out of the NAS site in Naracoorte, with Landmark Naracoorte's branch remaining the merchandise hub.

    NAS also owned a site at Murray Bridge which is now being used by Landmark Murray Bridge. All staff were offered full-time employment during the change of ownership.

    Jolpac director Peter Jolly has become the new Landmark Jolpac branch manager. NAS general manager Neil Nolan has taken on the role of fertiliser manager and agronomist at Naracoorte.
    Supplier update
    Fletcher Building Australia gets new CEO
    HNN Sources
    New Zealand plumbing businesses become part of Reece Group
    Wesfarmers workwear group enters joint venture with online company, ONTHEGO
    Subscribe to HNN weekly e-newsletter
    Fletcher Building consolidates Australian operations and installs new CEO; Reece snaps up New Zealand plumbing businesses; Wesfarmers's workwear division takes equity stake and forms joint venture with digital business; Reliance buys UK plumbing fittings maker; German manufacturer Knauf takes over Chicago-based USG; Stanley Black & Decker partners with wireless charging startup; and more brands to be distributed by Briggs & Stratton Australia.
    Fletcher's Australian operations gets new boss

    New Zealand's Fletcher Building has consolidated its Australian operations into one division and appointed Dean Fradgley as the new division's head. He was previously chief executive of distribution for the company.

    Fletcher is bringing all of its Australian businesses, which combined generate 30% of Fletcher's total revenues, under the one roof to be managed by Mr Fradgley. They include Tradelink plumbing and bathroom supplies, Iplex pipes, Rocla concrete, Stramit steel products, Tasman Sinkware and Fletcher insulation, and together generate about $3 billion in sales annually.

    Chief executive Ross Taylor has a five-year strategy for rebuilding Fletcher using a simplified model where it will concentrate on improving its New Zealand and Australian operations after a cost blowout crisis in its NZ commercial construction business which suffered AUD1 billion in writedowns.

    Mr Taylor believes the Australasian businesses have room to grow market share. He said:
    As we announced to the market in April, we have made the decision to focus our portfolio by divesting our Formica and Roof Tile Group businesses and focusing our capital and capability behind the New Zealand and Australian markets.
    While we don't expect these markets to experience the same levels of growth they have seen in recent times, we do expect them to remain stable and, with only 15% share of the New Zealand market and 1% in Australia, there is plenty of opportunity to deliver more from our existing operations.

    He has plans to double profit margins from Fletcher's Australian building products operations by 2023.

    Mr Taylor also expects the broader Australian residential construction market to shrink marginally in 2019 and 2020 because of falling demand for apartments. However this would be more than offset by the infrastructure boom on the eastern seaboard of Australia.
    Reece portfolio grows with NZ businesses

    Plumbing and bathroom supply company Reece has acquired New Zealand plumbing business Edward Gibbon and Zip Plumbing Plus stores.

    The company has also agreed to acquire Heatcraft's New Zealand operations from Swedish company, Beijer Ref. Heatcraft is a supplier of wholesale refrigeration. This move expands Reece's footprint across the north and south islands of New Zealand from 11 to 18 locations.

    Edward Gibbon has 10 stores in the main centres of New Zealand's south and north islands, while Zip Plumbing has Christchurch and Takanini stores. Under the agreement the business's existing management will remain in place for the immediate future, with completion expected towards the end of July.
    Wesfarmers workwear JV seeks to disrupt category

    The Workwear Group (WWG), a subsidiary of Wesfarmers Industrial & Safety, has acquired an equity stake in ONTHEGO (OTG), an online retailer of customised uniforms and sports apparel.

    Under the deal, WWG will become another minority shareholder with others that include construction company Doma Group, Chris and Bob Cameron from Rockcote, and TakeABreak co-founder Craig Davis, now CEO of the GRIFFIN Accelerator, and snow sports retailer Neil Ritchie.

    ONTHEGO founder Mick Spencer, who started printing customised jerseys in the garage of his parents' Canberra home while still at university almost eight years ago, said the joint venture would boost the company's revenues to more than $10 million a year.

    WWG, which owns Neat & Trim Uniforms and the Hard Yakka and King Gee brands, will white label ONTHEGO's software. Under a joint venture and profit-share agreement, orders generated through WWG's sales team and its website will be fulfilled by ONTHEGO.

    WWG chief executive Doug Swan said the upfront investment was small in the context of Wesfarmers but ONTHEGO's model - on-demand manufacturing, personalisation and a digital supply chain - could disrupt the uniform and workwear sector by slashing inventories and dramatically improving speed to market. He told Fairfax Media:
    I personally feel that that type of model is potentially the way of the future ...There's almost an element here of keep your friends close and keep your enemies closer. If we can learn from Mick how he's doing it and we can replicate that with our business I think we have an opportunity to transform the uniform industry.

    Mr Swan said there was also scope to take ONTHEGO's model into other Wesfarmers divisions and to other retailers by, for example, setting up kiosks in Officeworks, Bunnings or Rebel Sport, where customers could order and design customised uniforms, sports apparel and team clothing online. He said:
    Longer term it's got big implications for how we can take the core brands King Gee and Hard Yakka to market ... We could have kiosk in resellers like Totally Workwear, where a tradesman comes in and he needs uniforms for his team and he can design it and we can deliver it to him in three weeks - it has far-reaching ramifications.
    Reliance expands into Europe

    Plumbing products maker, Reliance Worldwide Corporation has completed its acquisition of UK based fittings manufacturer, John Guest Holdings. The company will fund the acquisition with a $1.1 billion equity raising and extended debt facility of $750m with existing lenders.

    It now intends to step up in the European market using John Guest as the platform making strong headway in the USA with its Sharkbite brand of push-to-connect plumbing fittings. They are sold in Lowe's and Home Depot.

    Reliance chief executive Heath Sharp said John Guest, which employs 1300 people and has three large manufacturing plants in the UK, was strong in plastic push-to-connect fittings, which were popular in Europe, compared with the US where brass versions of the product were steadily increasing in penetration. Reliance makes brass the brass versions.

    Mr Sharp said plastic push-to-connect fittings were more accepted in the UK for historical reasons, partly to do with the lower water pressure in the pipes.

    John Guest, is reporting profit margins of more than 30% from sales of 145 million fittings in calendar 2017, mainly under the John Guest and Speedfit brands. It services the plumbing, heating and industrial markets with distribution facilities in Germany, France, Italy and Spain.

    Reliance aims to extract $20 million in synergies annually once the business is fully integrated, but Mr Sharp said the company's main goal was to harness the growth. He told Fairfax Media:
    They're doing a lot that's right. The number one goal is to retain the revenue.

    Mr Sharp said Reliance had been a supplier in components for under-floor heating to John Guest for more than a decade, and had been looking to potentially buy the business in 2016 but John Guest aborted a formal sale process then, in which others were also interested as potential acquirers. When the opportunity emerged again, Reliance took advantage.

    Reliance currently generates 70% of its sales from North America and operates 12 manufacturing facilities around the world and this will expand to 15 with the acquisition of John Guest.

    Mr Sharp said John Guest was an ideal fit and its products could be successfully leveraged through Reliance's established North American and Asia-Pacific distribution channels. The company is already working on a "100-day" integration plan, using a similar template as it used in the smaller acquisition of the Holdrite business in the US in mid-2017.

    Reliance said the transaction is expected to be more than 20% accretive to earnings per share on a 2018 financial year basis, before synergies.

    Reliance is acquiring Holdrite - HI News, page 40
    Knauf's deal to buy USG for USD7b

    German manufacturer Knauf has agreed to buy Chicago-based USG for USD7 billion. The transaction, which is expected to close in early 2019, brings together two major building materials companies.

    Under the terms of the deal, Knauf will pay USG shareholders USD44 per share, which represents a 31% premium.

    The proposed merger was unanimously approved by USG's board. Berkshire Hathaway, which owned 31% of USG's shares as of June 11, has agreed to vote its shares in favour of the transaction.

    Warren Buffet, Berkshire Hathaway chairman and CEO, is now exiting USG, an investment he made in 2001 with a loan to the then-bankrupt company.

    USG filed for Chapter 11 bankruptcy protection in 2001 amid spiralling costs for asbestos-related injury lawsuits. The company emerged in 2006 with a reorganisation plan that included funding an asbestos trust to compensate claimants.

    In 2008, Berkshire Hathaway bailed out USG during the housing crisis by buying USD400 million of the company's debt, converting much of it to common stock.

    Privately held Knauf already owns nearly 11% of the outstanding USG shares and has been pursuing the acquisition since last year. In March, USG rejected a USD42 per share bid by Knauf, sparking a shareholder revolt led by Mr Buffett.

    Knauf is financing the current deal from existing cash and committed debt.

    Founded in 1902 as United States Gypsum, USG had 6,800 employees and annual sales of USD3.2 billion as of last year. Knauf generated more than USD8 billion in revenue and employed more than 27,000 people last year, according to the company.

    Knauf's offer to buy USG is rejected - HI News, page 26
    Stanley invests in wireless charging startup

    Stanley Black & Decker is investing, through its Stanley Ventures affiliate, in the Israeli wireless charging startup, Humavox. According to a statement:
    With Humavox technology, everyday objects can turn into 'hidden chargers' including anything from car cup holders and gym bags, and more. The company's technology uses near-field radio frequency charging to transform any of such 'storage instrument/device/object' into a charger, so that users can keep using their portable electronics fully powered.

    The companies did not disclose the amount of Stanley's investment in the Israeli firm. But as part of this strategic partnership, Stanley Black & Decker is the lead investor in Humavox's current funding round.

    Humavox was founded in 2010 by CEO Omri Lachman and vice president of innovation Asaf Elssibony.

    This cooperation signals a significant step in Humavox's progression into the commercial and industrial space. It will help Humavox make wireless charging more feasible and readily available to a wider range of products.
    Briggs & Stratton to distribute more OPE brands

    Yamabiko Corporation said it has entered into a memorandum of understanding (MOU) with Briggs & Stratton to distribute Shindaiwa and ECHO branded products. The companies are finalising the agreement which is expected to provide Briggs & Stratton Australia with exclusive distribution rights in Australia, New Zealand and selected Pacific Islands. Dean Harriott, managing director of Briggs & Stratton Australasia, said:
    Briggs & Stratton is very excited about this new relationship. We see the Shindaiwa and ECHO brands as the perfect complement to our current portfolio in order to deliver a true commercial handheld range.

    Briggs & Stratton has also recently been awarded exclusive distribution for Oregon(r) and Carlton(r) branded products in Australia, by their manufacturer Blount International.

    Based in Portland, Oregon, Blount International sells its products in more than 115 countries around the world. The Oregon brand makes professional-grade replacement parts and whole goods for the forestry and lawn and garden industries, while Carlton offers high-quality saw chain, guide bars, and related accessories.
    USA update
    Home Depot overhauls supply chain to improve delivery times
    HNN Sources
    Lowe's attract investor activity as it misses the mark on sales and earnings in Q1
    Ace Hardware's e-commerce sales boosts its Q1 performance
    Click to visit the HBT website for more information
    Home Depot initiative aimed at making next-day deliveries to all its US customers; Lowe's attracts hedge funds after missing expectations in Q1; Ace Hardware's Q1 benefits from online sales; Amazon's home improvement growth outpaces major players; Tesla ends partnership with Home Depot; Menards ranks highest in customer satisfaction; Kobalt tool chests offer SmartKey security; and Hillman agrees to acquire minuteKEY.
    Home Depot investing in delivery infrastructure

    The Home Depot plans to spend USD1.2 billion over the next four years to speed up delivery of goods to homes and job sites, reports The Wall Street Journal. It comes at a time when the rise of online shopping is re-setting consumer expectations.

    The funds will be used to add over 170 new distribution facilities across the US, allowing 90% of the country's population to have same-day or next-day delivery. The retailer can now only reach about 30% of the country with that type of service.

    The new distribution centres will have a mix of products. Some of the centres will specialise in products that are most frequently ordered, while others will concentrate on larger, more difficult-to-ship items like patio furniture, building materials and appliances.

    Speaking at the Bernstein 34th Annual Strategic Decisions Conference in New York City recently, Home Depot chairman and CEO Craig Menear acknowledged that, upon completion, the investment will enable Home Depot to offer the same shipping capabilities like that of Amazon

    The investment could also do more than fighting off a major competitor. It can also improve the in-store experience, something Amazon cannot offer. Home Depot's Northern Division president, Crystal Hanlon, explained this benefit using roof shingles as an example:
    Today, if we were to sell a delivery of shingles, you're going to pull those shingles off of the shelf in the store potentially during business hours, right, disrupting the customer experience who wants to be in that aisle shopping shingles. You're going to bring it to the back, you're going to load it on a truck, that truck's going to go out to the customer. If you think about the future state, the future state involves essentially what we'll call a warehouse for ease of understanding, where those are already staged. And so now we're not disrupting the experience in the store. We're also centralising where all of those delivery trucks are going to. So it becomes much more efficient, gives us greater capacity, and makes the experience better.

    Online orders accounted for 6.7% of Home Depot's USD100.9 billion in sales last year, but the digital revenues grew 21% from the year before. About 45% of online orders are picked up inside stores, and the company is rolling out self-service lockers at the front of some stores to speed up order retrieval.

    Shoppers accustomed to two-day delivery from online retailers like Amazon are increasingly making buying decisions based on convenience factors, experts say, such as speed of delivery or availability of a wide range of products.

    That's pushing retailers to reshape distribution networks that were originally designed to ship pallet-loads of goods from warehouses to stores. They are turning to tactics such as drop-shipping, where suppliers ship online orders directly to customers, and opening warehouses closer to customers.

    Mark Holifield, the company's executive vice president of supply chain and product development told a logistics industry conference the retailer is realigning its supply chain to a changing retail landscape. He said:
    Customers expect delivery to be free, they expect it to be timely. Sometimes they want it fast, and are willing to pay for that. Sometimes they want it free, and they're willing to wait for it. We need to have the right options there.

    The company is already pushing the so called BOPIS initiative, which stands for "buy online, pick up in store." Home Depot's stores will play key roles in the new initiatives as delivery nodes, Mr Holifield said.
    Investor targets as Lowe's Q1 disappoints

    Investment firm Pershing Square Capital Management has accumulated approximately USD1 billion worth of shares in Lowe's Home Improvement.

    Pershing is led by CEO and founder, billionaire William (Bill) Ackman. He is one of the hedge fund industry's most high profile and closely watched activist investors. Mr Ackman's stock bets tend to push up shares of companies he invests in, on speculation that he will agitate for boardroom changes.

    Pershing Square is now the second activist investor in Lowe's stock. Activist investors take large stakes in public companies in an effort to effect change.

    Earlier this year the home improvement retailer reached a settlement with hedge fund D.E. Shaw Group, which has a roughly USD1 billion stake in the company, to put three new directors on the board.
    Q1 results

    The news of Pershing's investment, first reported by the Wall Street Journal, came the same day Lowe's reported first-quarter earnings that fell short of analysts' expectations, which the company attributed to a cold start to the spring season.

    This has impacted negatively on sales of lawn-mowers, patio furniture and other seasonal products during the February-April period. But the company was optimistic about making up for lost business. Chief financial officer Marshall Croom said on a conference call with analysts:
    We are anticipating recovering the majority of the sales miss in the first quarter. ... So that's what we factored in to maintain our guidance.

    Sales totalled USD17.36 billion in the latest period, up about 3% from USD16.9 billion a year ago. Analysts had expected earnings revenue of USD17.46 billion.

    Same-store sales rose 0.6% in the three months ended May 4, whereas analysts had projected an increase of 3%.

    According to the earnings call transcript, the retailer is focusing on more frequent but smaller shipments to better manage inventory and meet consumer demands. Chief operating officer, Richard Maltsbarger, said:
    The first [action plan] is supply chain product flow where we believe we've made the inventory investments necessary to have the depth and breadth in key categories like appliances and flooring and tools and hardware to serve both the Pro customer and DIY customer. Our focus is now shifted to, how do we optimise that flow to improve our service levels and to improve our in-stock percentages.

    The home improvement retailer also plans to open 10 new stores this year and will test a new delivery service for home delivery.

    Lowe's president and CEO Marvin Ellison began his tenure on 2 July. Mr Ellison boasts some 30 years of experience in the retail sector including 12 years at The Home Depot. He is credited with helping improve in-store operations at Home Depot by investing in technology to reduce labour in some areas, so that it could be shifted to helping customers.

    As of May 4, Lowe's had 2,154 home-improvement and hardware stores in operation across the US, Canada and Mexico.

    Looking ahead, the company says it expects a 5% increase in sales in fiscal 2018, with same-store sales increasing 3.5%.

    USA update: Lowe's names new CEO - HNN
    Online sales drives Ace Hardware in Q1

    Ace Hardware Corporation posted record sales in its first quarter, mainly as a result of e-commerce growth.

    The hardware cooperative said it had a 2.2% increase in retail same-store sales during the first quarter of 2018, reported by the approximately 3,000 Ace retailers who share daily retail sales data. This increase was the result of a 3.3% increase in average ticket, partially offset by 1.1% decrease in same-store transactions.

    Consolidated revenues for the quarter ended March 31, 2018, totalled USD1.31 billion, an increase of 6% from the previous corresponding period (pcp). Total wholesale revenues were USD1.25 billion, an increase of 5.3%, as compared to the pcp. Increases were noted across all departments with paint, electric and outdoor living showing the largest gains.

    Total retail revenues for the quarter were USD63.1 million, an increase of 21.3%, compared to the pcp. Retail revenues from Ace Retail Holdings were USD57 million in the first quarter of 2018. Retail revenues from Ace Ecommerce Holdings, which was formed in the third quarter of 2017 for the acquisition of The Grommet, were USD6.1 million in the first quarter of 2018.

    Net income was USD11.9 million for the first quarter of 2018, a decrease of USD16.4 million from the first quarter of 2017, as the retailer boosted its strategic investments. President and CEO, John Venhuizen, said:
    A 34% increase in sales from Acehardware.com coupled with new store growth from existing Ace retailers and renewed interest from competitor conversions fuelled our record sales growth.
    While first quarter profits are well below last year's levels, most of this was expected. We invested heavily in the first quarter to get our new 1.1 million square foot Fredericksburg retail support centre ready to open in June as well as to prepare for the insourcing and re-platforming of our new Acehardware.com website.

    Ace added 28 US stores in the first quarter of 2018 and cancelled 28 stores. The retailer co-op's total domestic store count remained at 4,418 for the first quarter of 2018 which was an increase of 60 stores from the first quarter of 2017. On a worldwide basis, Ace added 44 stores in the first quarter of 2018 and cancelled 28, bringing the international store count to 5,137 at the end of the first quarter of 2018.

    USA update: The Grommet boosts sales at Ace Hardware
    Online home improvement sales growth trails Amazon

    Home improvement sales are moving increasingly online in the US market, according to Retail Dive. This positions Amazon to take marketshare in a category largely seen as immune to e-commerce. Home Depot's first quarter e-commerce sales rose 20% this year, while Lowe's said it saw comp sales growth 20% online in its first quarter or about 5% of overall sales.

    Amazon has catching up to do in terms of raw sales across all sub-categories in home improvement, but sales of tools and other home improvement items grew 25% last year to USD6.1 billion, according to One Click Retail.

    Connected-home and Alexa-enabled devices, especially in security, are key to Amazon's share, but so are tool sales, and tool brands themselves are helping stoke Amazon's growth in the segment, based on a benchmark report from product experience platform Salsify.

    In the first quarter, Amazon had 93% market share in home improvement tool sales, according to another report from Jumpshot.

    Home improvement seemed to be a retail segment sheltered from the Amazon effect, largely because of the two big retailers' level of sales to building professionals, their in-store expertise when DIY customers embarked on home projects and the spontaneous nature of some of the work - weekend weather is nice, or a homeowner needs a new drill when the old one breaks down.

    That customer service is protective, especially to Home Depot, according to GlobalData Retail managing director Neil Saunders. Home Depot benefits from being a destination for home improvement projects in all stages from planning through final touches and from its locations, he said, while Lowe's draws in more impulse shoppers. Mr Saunders believes that difference hurts Lowe's when weather drives a decline in demand.

    But many home improvement items - from bathtubs to tools - are now available at Amazon, and tool brands are vying for market share on its marketplace. Brands that provide more information, including all technical specifications, a variety of images and, especially at higher price points, good reviews are taking sales, according to Salsify's report.

    As Amazon grows in the space - it acquired smart doorbell startup Ring in February - the legacy retailers are also facing some challenges that could make customers more sensitive to price, something that tends to send many consumers to Amazon.

    Amazon remains a small player, although its marketplace gives shoppers a range of products that rival the big box players, according to Salsify. Still, Home Depot's USD24.9 billion in sales in the first quarter alone vastly outpaces Amazon's USD6 billion take in the segment for all of last year - and Mr Saunders believes Home Depot isn't feeling the impact of Amazon.

    Amazon's growth is outpacing other retailers in the category, though, and it has a smooth path upward. Analysts predict that traditional home improvement and hardware stores may not be immune to the "Amazon Effect" forever.

    Read the One Click Retail here:
    Tools & Home Improvement: The Amazon Effect - One Click Retail
    Tesla pulling out of Home Depot stores

    Tesla is ending its partnership with Home Depot and will remove its branded kiosks from as many as 800 of the home improvement chain's US stores by the end of the year.

    The move is sudden reversal for Tesla, which has spent the past six months trying to expand its presence in Home Depot stores.

    The Tesla kiosks were designed to educate consumers and ultimately generate sales of its residential rooftop solar panels and Powerwall, a battery it designed for homes that store the energy generated by solar panels.

    Home Depot's relationship with Tesla will continue through the end of the year, a Home Depot spokesman told Fortune magazine. The change doesn't affect Home Depot's plans to continue offering solar options to its customers.

    A Tesla spokesman confirmed that the kiosks would be phased out and the home energy products will be moved to Tesla's retail locations. The automaker has 300 retail locations worldwide.

    The company confirmed that the exit is not a signal that its pivoting away from its residential solar or energy storage products.
    Customers most satisfied with Menards

    Menards ranks highest in customer satisfaction among home improvement retailers for the first time, according to the J.D. Power 2018 Home Improvement Retailer Satisfaction Study.

    The study measures customer satisfaction with US-based home improvement retailers by examining five factors (in alphabetical order): merchandise; price; sales and promotions; staff and service; and store facility. Satisfaction is measured on a 1,000-point scale.

    Some key findings of the 2018 study include the following:
  • The "two-minute warning". From the time a customer enters a store, that person expects to receive assistance from a store employee within two minutes, otherwise, satisfaction begins to decline. Overall satisfaction declines significantly when a customer waits more than two minutes to have his/her question answered, compared with waiting less than two minutes (satisfaction scores of 821 vs. 882, respectively).
  • Satisfaction drives loyalty. Among delighted customers (overall satisfaction scores of 901 and above), 80% say they "definitely will" repurchase from the retailer, compared with the study average of 48%. Additionally, 83% of delighted home improvement retailer customers say they "definitely will" recommend the retailer to others, compared with the study average of 49%.
  • Delightful experience influences recommendations. Among delighted customers, the average number of positive recommendations is 4.0, compared with the study average of 2.6.

  • Menards (836) ranks highest in customer satisfaction among home improvement retailers and performs particularly well in the merchandise; price; and sales and promotions factors. Ace Hardware (832) ranks second, performing highest in staff and service. Lowe's (828) ranks third, performing highest in merchandise and store facility.

    The 2018 Home Improvement Retailer Satisfaction Study is based on responses from 2,972 customers who purchased home improvement-related products from a home improvement retailer within the previous 12 months. The study was fielded in March 2018.

    For more information about the J.D. Power Home Improvement Retailer Satisfaction Study, visit:
    J.D. Power 2018 Home Improvement Retailer Satisfaction Study
    SmartKey available in select Kobalt tool chests

    The Kwikset brand of Spectrum Brands' Hardware & Home Improvement Division (HHI), now offers one-key convenience through SmartKey Security[tm] technology in select Kobalt Tools 3000 Series tool chests, available at Lowe's. This will allow homeowners and trade professionals one-key access for their home or workshop.

    SmartKey Security is a patented feature that enables end-users to quickly and easily re-key their locks so all can be accessed using the same key. It was designed to make security simple, with features to protect homeowners from common break-in methods such as lock bumping and picking.

    The ability to mix and match different sizes to build a custom work station that is accessible with a single key is now possible with the new Kobalt 3000 Series tool chests that have SmartKey Security.

    The partnership between Kobalt Tools and Kwikset bring a streamlined, secure solution to the tool storage category.
    Hillman integrates key cutting service

    The Hillman Group has entered into a definitive agreement to acquire minuteKey. Terms of the transaction were not disclosed.

    The transaction will join together Hillman's full-service key-cutting platform with minuteKEY's self-service key-cutting kiosks, building on both companies' technologies. The unified key-cutting platform will be backed by KeyHero, Hillman's digital key backup and retrieval technology platform.

    Hillman president and CEO Greg Gluchowski said the combination brings advantages to both companies.
    Hillman's key duplication and origination business is primarily driven by the hardware desk at home improvement retailers across North America. By combining that retail presence with minuteKEY's network of self-service kiosks, we will be able to offer consumers a simple, consistent, technology-enabled solution regardless of how, when, and where they want to have their key made.

    The transaction is subject to regulatory approvals.

    minuteKEY makes the world's first patented self-service, key duplication kiosk. It has created a highly accurate, secure and easy-to-use key-cutting device. The kiosks are found in Lowe's, Menards and Walmart across North America and Canada. It was founded in 2008 and based in Boulder, Colorado (USA).

    USA update: Hillman's digital platform for keys - HNN
    Europe update
    Kitchens & bathrooms at a B&Q store
    HNN Sources
    The Screwfix store in Peterborough is powered by solar, air source heat pumps and battery storage
    "DIY NEXT - Reinventing our industry" was the theme at the 6th Global DIY Summit in Spain
    Click to visit the HBT website for more information
    B&Q will simplify kitchen and bathroom sales and no longer offer installations; a Screfix store is Kingfisher's first net zero energy store powered by solar and storage; and delegates to the this year's Global DIY Summit are not confident about the shift from bricks & mortar to online retail.
    B&Q overhauls kitchen and bathroom sales

    UK DIY retailer, B&Q has revealed plans to change the way it sells kitchens and bathrooms, opting to simplify the procedure so customers only have to deal with one staff member.

    The changes are also designed to speed up the buying process, reducing the time between the design and delivery of the product. As part of the plans, it will scrap its Homefit installation service at the end of the year.

    When introduced in spring 2013 under Kingfisher chief executive Ian Cheshire, the company said the installation service was showing "encouraging signs". However, the retailer has data that shows around 90% of its customers now choose to use third-party fitters.
    Online installation

    Amazon has just rolled out an installation service through its Home Services offering in the UK. This means that customers shopping for products on Amazon.co.uk

    can now opt for installation or assembly support from trusted tradespeople by adding pre-packaged services to their online shopping baskets.

    Customers can also browse, purchase and schedule a selection of services even if they didn't buy their products on Amazon.co.uk.

    Each service comes with a predefined scope of work and upfront pricing. It features a curated list of handpicked tradespeople including general handymen, electricians, plumbers and home cinema specialists. All professionals are background checked, required to carry an applicable license or insurance and expected to maintain an excellent performance standard.

    Amazon's "Happiness Guaranteed" allows customers to rate the quality of the service or get their money back in case if they aren't happy with the outcome.

    Prior to the launch, Amazon commissioned a study which revealed that 61% of the 1,500 adults in the UK surveyed would prefer to enlist the help of a professional to carry out household tasks. In addition, one in four confessed to having suffered a DIY disaster in the past.

    Almost a half (47%) admit that they need "a little help," as they simply have no idea when faced with a challenge around the house.

    The study concludes by revealing that two years is the longest time on average that jobs around the house are ignored.

    Amazon has officially jumped on the bandwagon of UK retailers offering services that accompany their purchase. Department store John Lewis recently announced the acquisition of Opun, which manages home improvement projects on customers' behalf.
    Net zero energy store for DIY group

    Kingfisher-owned retail chain, Screwfix officially launched its first net zero energy store. The company said energy generated by the onsite solar array will power the store and charge up batteries which will then power it during the evenings. Meanwhile, a new air source heat pump, coupled with a range of efficiency measures, has allowed Kingfisher to replace gas and electric heating units. It said:
    Surplus power goes back to the grid, off-setting the days in winter when the solar PV will be generating less power and grid energy is needed to power the store.

    Jeremy Parsons, head of energy and renewables at Kingfisher, hailed the project as a "huge milestone" for the company. He said in a statement:
    This store has a range of solutions that we have deployed individually across distribution centres and large format stores in the UK and France. Pulling them into one project at Screwfix demonstrates how far we can go towards creating very low carbon stores, and this approach is informing our next phase of investment in energy projects for the near future.

    The company added that it is now planning to install energy storage batteries at the B&Q distribution centre in Swindon and is exploring the potential for similar investments at other sites.

    The company also hailed the importance of energy monitoring systems to the project. For example, energy meters revealed a spike in energy use at the start of the day when employees were making their morning coffee. By fitting a hot water tap that uses battery-stored solar power, the firm now hopes to eliminate this spike in energy use.

    The Screwfix opening comes on the same day as Kingfisher published its annual sustainability report, confirming it has cut its absolute carbon footprint 16% since 2010/11 and is still aiming to deliver a 25% cut by 2020. It now purchases 100% of its UK energy from renewable sources, covering both the Screwfix and B&Q businesses, and will have invested over GBP10 million in on-site renewables by the end of this year.

    The report also revealed the company now generates just under a third of its sales from products that make customers' homes more sustainable.

    Kingfisher also announced a new wave of sustainability targets designed to support its overall goal of becoming a "net positive" business. The new strategy includes both internal emissions, water and waste targets and goals to enable a 50% reduction in customer energy use and a 50% improvement in customer water efficiency through products, services and advice by 2025. Graham Bell, CEO at Screwfix, said:
    We are investing now to cut energy across our own operations, and our long-term aspiration is to match this by helping customers have zero carbon or energy positive homes and businesses too. Our net zero store in Peterborough represents a significant milestone in our ambition to embed sustainability across the business, and help customers to create good, sustainable homes and businesses.
    6th Global DIY Summit 2018

    Organisers of the sixth Global DIY Summit that closed recently in Barcelona, Spain said a record of 1,100 delegates from 55 countries attended this year's congress, including more than 300 of the top retailers from around the world.

    The event is jointly hosted by the European DIY Retail Association (EDRA), the European Federation of DIY Manufacturers (Fediyma), and the Global Home Improvement Network (GHIN). Delegates gave their feedback using a voting tool, with 60% rating it as "very good" to "excellent" and a further 28% rating the event as "good".

    John W. Herbert (EDRA/GHIN) and Ralf Rahmede (fediyma) serve as co-chairmen of the event.

    Over 30% of the audience attending presentations at the summit were retailers, a big increase compared to the congress held in Berlin last year, according to organisers. However suppliers still accounted for the majority of delegates, with approximately 59% listed as manufacturers.

    Organisers also used the voting tool to gauge sentiment about the industry from its international attendees. When asked what expectations delegates have for their business development for this year compared to last year, 19% were optimistic, estimating growth of more than 10%, whilst 37% of the audience was more cautious, forecasting growth of between 0% and 4%.

    Approximately 22% of the suppliers think their business will increase more than 10% compared to last year, while 15% of the retailers forecast the same growth as the previous year.

    The industry still seems to be sceptical regarding the switch from bricks and mortar into online retailing. Twenty-one per cent of the total delegates believe online sales in DIY in five years will be less than 10%. Almost 26% of the audience predicted a range between 10% and 15%. Sixteen per cent of delegates forecast more than 25%.

    This year's theme, "DIY NEXT - Reinventing our industry", featured speakers presenting on topics such as digital transformations and new platforms as business models.

    A panel with leading figures from the home improvement industry including Kingfisher's Veronique Laury, 3M's Jeff Lavers, Sylvain Prud'homme from Lowe's Canada, and Henning von Boxberg from Robert Bosch exchanged views on a new kind of co-operation between retailers and suppliers.

    Speakers were Alejandro Gonzalez, leader of the Debt, Capital & Treasury Advisory group at Deloitte; Matt Schweickert, chief strategy officer at The Home Depot; Jorn Kupper, senior partner ay McKinsey & Co. in Germany; Martin Wild, chief digital officer, MediaMarktSaturn Retail Group; Steven van Belleghem, an expert in customer focus in a digital world; Peter Hinssen, partner, nexxworks; and ManoMano co-founder Christian Raisson.

    The next Global DIY Summit will be held in Dublin from June 6-7, 2019.
    New products
    Goal Zero has released its brand new Lithium Yeti Range
    HNN Sources
    CSR Gyprock extends its perforated plasterboard range with two new Gyptone profiles for curved ceilings
    The Grange black showerscreen from Stegbar
    Click to visit the HBT website for more information
    The Lithium Yeti is a range of portable power stations released by Goal Zero; CSR Gyprock launches Gyptone Flexible Plasterboard; black finishes are available in Stegbar's Grange showerscreens; and Husqvarna promises efficiency and increased performance with its new power cutter.
    Power anywhere, anytime

    Goal Zero has created a new category of portable power in motion, one that provides a safe, clean alternative, to traditional gas generators. The Lithium Yeti range includes the 400, 1400 and 3000 series.

    The Lithium Yeti 400 has real-time usage data via an upgraded display, two AC outputs, three USB ports, and a 12V output for devices designed for car cigarette lighters.

    The 1400 has 1400Wh of power with high-quality, replaceable lithium packs that yield long run times and feature additional monitoring electronics for safety.

    With over ten ports to pick from and 3000Wh capacity, the 3000 is ideal for using multiple devices, and comes with preinstalled wheels and a telescoping handle.
    Curves and contours

    CSR Gyprock has extended its perforated plasterboard range with two new profiles for curved ceilings - Gyptone Flexible 12mm Square and Gyptone Flexible Slotted Minigrid.

    Gyptone Flexible 12mm Square plasterboard consists of eight large square groupings per sheet, each with 400mm x 12mm square perforations at 25mm centres. Gyptone Flexible Slotted Minigrid plasterboard has eight large square groupings per sheet, each with 16 mini grids of six 6mm x 80mm slot perforations.

    Both plasterboard profiles have a black acoustic fabric backing that improves the acoustics of the ceiling.

    Activ'Air is also part of the Gyptone Flexible range. It is a patented technology that converts formaldehyde into non-harmful inert compounds that are permanently locked in the board and cannot be released back into the air.
    Monochrome bathrooms

    Stegbar's Grange Inline Showerscreen and Overlap Showerscreen comes in a new black finish. The sleek lines of the black slim perimeter frame act like the frame of an artwork - allowing the shower fixtures and splashback to take centre stage. Also practical in design, the slim perimeter frame has no hidden corners, making it easy to clean and maintain.

    Expertly engineered, the black Grange showerscreens are available in a range of configurations to suit any bathroom layout. Sleek in design and look, the Inline Showerscreen is a pivot door system developed to withstand everyday use. While the Grange Overlap Showerscreen is a semi-frameless structure with a functional difference - an overlapping pivot door to minimise water leakage.
    The big cut

    The K 770 power cutter from Husqvarna features a 5-horsepower 74cc engine, a 5-inch cutting depth, and may be used with a choice of blades with diameters from 12 to 14 inches.

    It has a vibration-damped chassis, and spring-loaded semi-automatic SmartTension technology that is designed to keep the drive belt at the correct tension. This allows for optimal power transmission, minimum wear and maximum belt life.

    The light weight, effective power-to-weight ratio, reliable start and low vibrations mean less strain and maximised productivity. Suitable for road work and easy to cut in a straight or curved track or close to sidewalk when used with the KV7 Husqvarna cutting trolley.
    HI News V4 No.4: HBT speaks to its future
    Download the latest issue of HI News Vol. 4, issue no. 4
    HNN Sources
    Can buying groups evolve?
    Paint 2017-18: The movie
    Click to visit the HBT website for more information
    Now firmly under new leadership, Hardware & Building Traders (HBT) is navigating a future where corporate-owned Independent Hardware Group (IHG) and big box retailer Bunnings dominate. Newly appointed CEO, Greg Benstead and general manager, Mike LoRicco map out the group's path for the next few years. We provide extensive 90-page coverage of the 2018 conference.

    Simply click on the following link to download this edition:
    HI News V4 No. 4: HBT speaks to its future

    Buying groups in the hardware retail industry have traditionally pursued the goal of offering volume in exchange for lower prices, but with the success of IHG in the market, they may need to re-think this approach. We explore a different alternative.

    Our regular review of the global paint companies, Paint-O-Rama is in this edition. It features DuluxGroup's latest results along with AkzoNobel, Sherwin Williams and PPG.

    In our other main feature, we also analyse Bunnings' exit from the UK market and what its consequences might be.

    Companies mentioned in our suppliers section include Reece, CSR, Allegion, Saint Gobain and Yates amongst others. Mitre 10 stores are highlighted in the indie store update in this edition.

    Kingfisher, Home Depot and Lowe's dominate our overseas news coverage.
    Can buying groups evolve?
    A map of independent retailers in Australia
    HNN Sources
    A map of hardware retailers in Sydney
    A map of hardware retailers in Melbourne
    Give to Amnesty International
    The hardware retail industry has underestimated the extent to which the acquisition of the Home Timber & Hardware Group (HTH) by Metcash would change the hardware retail market. Rather than being a footnote, just a shifting around of the existing players, it has instead unleashed new competitive forces.

    Overall, we could say that prior to the failure of Woolworths' Masters Home Improvement venture at the end of 2016, the hardware retail market was divided into two, or, at most, two-and-a-half sectors. Today, it has become clearly divided into three sectors. All three are now in competition with each other.

    In addition, strategic changes at Bunnings, accelerated by shifts in the overall strategy of its parent corporation, Wesfarmers, will also add to these new competitive pressures.

    This means that buying groups for independent hardware retailers outside of IHG will need to rethink their strategies, and their management metrics. What strategies will work in this new competitive environment, and what metrics should they be supported by?
    Changing roles

    Fundamental to these questions is the consideration of what the real role of the buying group will be for hardware retailers in the future. Up until the present day, the primary focus of buying groups has been, understandably, on helping member retailers obtain reasonable wholesale prices and rebates on a wide range of products.

    While that will obviously be an ongoing, and very important role, we need to consider whether these buying groups need to consider expanding on what they do offer members. Now that there are two players in the market, Bunnings and IHG, which place a competitive premium on driving down prices ever lower by leveraging volume, other retailers participating in the market may need to consider further leveraging the advantages they have outside of price, in order to retain both their marketshare, and reasonable margins on the products they sell.

    Most independent retailers see one of their prime market advantages as being their close working relationships with tradies and building businesses. Could it be that in the future buying groups need to also concentrate on helping their members enhance that aspect of their businesses?

    In order to trace how the hardware retail market has changed, it's necessary to consider how it has developed over the past 25 years.

    After its full acquisition by Metcash in 2012, up until 2017, Mitre 10 represented one alternative path for independent store owners to take. The CEO of Mitre 10 (and now of IHG), Mark Laidlaw, worked quite hard in public speeches during that time to suggest that Bunnings was something of an endlessly accretive force aimed at "gobbling up" as much marketshare as possible. He presented Mitre 10 as offering something of a shield from that, and many independent retailers were grateful to accept what seemed at least a safer harbour in the market.

    We could say that during this time the independent sector, outside of Bunnings, had something of a "soft line" between the Mitre 10 and HTH businesses, both of which were corporate-owned, and the rest of the independents. Mitre 10 certainly wanted to coax more independent stores to join the group. That competitive drive, however, was balanced by the near-equal market share of HTH. HTH also had very strong corporate backing from Woolworths, with its massive investment in Masters. This limited the extent of competitive actions by Mitre 10.

    With the acquisition by Metcash of HTH in late 2016, competitive actions by IHG were directed largely to self-preservation, especially in discouraging either Mitre 10 or HTH stores from leaving the network in the wake of the amalgamation of the two. One aspect of that shift was that the company's public statements as regards competition with Bunnings shifted from providing a safe harbour, to IHG being able to "take it to Bunnings". IHG suggested, in comments repeated in the mainstream press, that its $2.1 billion in annual revenue somehow compared to the $13.6 billion of Bunnings.

    Overall, IHG's actions to retain stores have been successful, with relatively few leaving, even after the announcement that the Home brand would eventually become secondary to the Mitre 10 brand in 2020. Publicly Mr Laidlaw has stated that IHG has lost only a few smaller stores to the Hardware & Building Traders (HBT) group, as of the end of the first half for its FY2017/18.

    Perhaps encouraged by that success, by late 2017 there began to emerge moves by IHG to compete more directly with other independents. This went beyond encouraging more stores to join IHG. Instead, it shifted to taking marketshare away from stores in the independent sector.

    Take, for example, the recent dustup between Natbuild and IHG regarding allegations of unauthorised access to a database of trade agreements made between the former and its suppliers. This could be taken as a clear sign of a change in competitive strategy at IHG. While there has never been any suggestion in these allegations that this was part of a formal strategy by IHG, in HNN's opinion the allegations portrayed the actions of not just one or two "rogue" individuals, but showed a wider (though limited) involvement. Those allegations (if they were factual) indicate a degree of independent-on-independent competition that is completely new to the market. (We note that, according to industry sources, a settlement has been made in this case.)

    From this we can see that the independent market, after the consolidation of the market power of HTH and Mitre 10 into a single entity, has fractured into two distinct, competing parts. This split market operates alongside the existing competition with Bunnings.

    In FY2018/19 Bunnings, with the divestment of Coles by its parent company Wesfarmers, and the cessation of its UK-based expansion, will likely be stepping up its competitive pressure in the Australia hardware market.

    This combination of factors means that as we move into FY2018/19, the overall hardware retail industry is facing a very different competitive situation from that of the previous six or seven years.
    IHG and critical mass

    While this is the overall picture, its effects on individual store retailers remain muted, so far. Most of the retailers in IHG might compete avidly with nearby stores from other buying groups - but no more avidly than they would with stores from IHG that are also located in their immediate geographic market area.

    In general, all independent retailers see themselves as sharing a great many values and vulnerabilities with most other independent stores, from all buying groups. Some of that unification is an indirect result of having to constantly deal with highly effective competition from Bunnings over the past eight years.

    The reason why store-on-store competition is not noticeable just yet is that the real competitive arena is currently at the supplychain level. Each sector of the current market has its own supplychain strategies. While these have broad similarities, they also have important differences, and carry varying strategic consequences.

    The Bunnings strategy is very sophisticated, and makes complex use of captive brands and, in the case of certain suppliers, what we might even term captured brands (Irwin being an example of the latter). This is a supply (rather than purchasing) strategy, in that it reaches all the way back to the manufacturing process for many products. It is this strategy that in many ways is responsible for creating the market conditions under which the entire market operates.

    The IHG strategy is simpler, and borrows heavily from the Mitre 10 strategy, which was in turn largely modelled on the overall strategy of Metcash's wholesale food businesses. In that strategy, a system of distribution (as opposed to storage) warehouses is central to a buying system that seeks to purchase goods in bulk, then distributes these directly to member stores. This model is aimed at creating highly efficient purchasing, such that IHG can pressure suppliers into ever-lower prices, creating - in theory - wider profit margins and/or higher sales volume through lower prices.

    Key to the success of this strategy for a wholesaler such as IHG, which has a far from dominant position in the market, is the consolidation of demand. The fewer suppliers it contracts with, and thus the higher the volume for each of its product lines, the more pressure it is able to exert on suppliers, and the better the deal it will be able to obtain.

    Yet, as the majority of the stores in its retail network are independently owned, it cannot overtly control what is sold. It can, however, exert some influence through, for example, requiring that stores stock items marketed through a print mail catalogue, or promoted on TV and radio. Incentives, such as the Sapphire store program, can also help to impose narrower choices by placing constraints on retailers.

    Ultimately, of course, if all goes according to plan, and IHG is able to reach a kind of critical mass of order consolidation, the lower prices on its approved product lines will be so attractive that stores will have little inclination to order anything outside of them. This creates a circular relationship were lower prices drive concentrated demand, and concentrated demand further drives lower prices.

    Both Bunnings and IHG seek to use scale to obtain lower prices. The scale (order volume) that Bunnings provides across several lines of goods is enough to facilitate manufacturing economies, as typically the production cost-per-unit drops as volume increases. That applies less frequently to the level of scale that IHG provides. Both, however, can provide scale benefits that reduce distribution costs, especially for imported goods. And, of course, through guaranteed forward order volumes, both substantially reduce risk for suppliers, which, in a very fragmented market, has considerable value.
    Independents and scale

    In the third sector, outside Bunnings and IHG, made up of small independent buying groups, strategies have until recently been much simpler. Several of these groups were formed as something of a "rebellion" in the late 1990s against what were seen as restrictive and unprofitable requirements by the Danks and Mitre 10 management of the time. Their goal back then was to bring together retailers into groups which could better negotiate with suppliers to get sharper deals on supply price and rebates than retailers could manage on their own.

    As these groups have grown in terms of size and complexity, their strategies have shifted. There are, at the moment, really two main aspects to these strategies.

    One of their most important developments (from the perspective of the overall health of the market) has been the introduction and support of comparatively new brands and suppliers. As many of these brands are, to some extent, excluded from dealing with Bunnings and/or IHG, or have only a minor presence in those retailers, they are eager to cultivate alternative distribution.

    Doing deals with these brands provides the buying groups with two key advantages: lower prices and better rebates, as well as a clear point of differentiation from larger retailers and retail groups.

    The second part of the strategies has to do with scale. However, scale for the smaller buying groups behaves differently that it does for the other two market sectors.

    Over the past two years, these buying groups have begun to follow IHG somewhat in terms of trying to concentrate orders through an elevated group of suppliers, so as to increase volume, and create further opportunities for better margins and/or larger rebates. While this does certainly make sense, and does deliver definite benefits in some areas, it may be a case of pursuing a smaller advantage at the cost of a greater one.

    To uncover some of the potentially greater benefits in the market, it is necessary to look at:
  • what the goals of independents are in terms of pricing strategies,
  • the types of suppliers they deal with and how potential scale affects each of these, and
  • how the division of the independent market into two discrete sectors has changed the situation.
  • Pricing and market goals for independents

    In analysing pricing strategies it is almost impossible to start anywhere other than the influence of Bunnings on the market. Bunnings has used its scale to bring prices down very low in certain key areas, such as power-tools, to the extent that many small- and mid-sized independents have all but given up on these ranges.

    As a result, one of the primary considerations for small retailers is not to achieve price leadership, but rather to achieve "price nullification". As much as possible, they want to remove price as a consideration.

    This is just the start of this article. To read the complete text, please download our HI News PDF magazine by clicking/tapping on the following link:
    HI News Vol.4 No.4: Can buying groups evolve?
    Bunnings misses
    Bunnings misses the mark in the UK
    HNN Sources
    The Homebase store layout when acquired by Wesfarmers
    Bunnings UK, much like Bunnings Australia
    Click to visit the HBT website for more information
    In what for many was a surprise, on 25 May 2018 the Australian conglomerate Wesfarmers announced the divestment of its Bunnings UK and Ireland (BUKI) division.

    This does not affect the ongoing operations of its Bunnings Australia and New Zealand (BANZ) division, which will continue as is. In answer to an analyst's question about whether there would be changes to the senior executives managing BANZ, as Wesfarmers brings some personnel back to Australia, Wesfarmers' recently appointed managing director, Rob Scott replied that:
    No we don't see any disruptions there... A number of the most senior team members will remain on with [Homebase], which I think is good for the business and good for the team. There may be a few team members that do relocate back to Australia, and we will work through that in the coming months, but no material impact to either business.

    The divestment is expected to be completed by 30 June 2018. BUKI's operations will be taken over by Hilco Capital, a private equity firm with a record of UK retail turnarounds.

    It has been reported that the transaction was based on the nominal payment of GBP1.00, but Wesfarmers has retained rights to receive 20% of any equity distribution subsequent to the further sale of Homebase. The agreement is not time-limited. Importantly, however, the agreement means that Hilco will be responsible for all lease entitlements, which relieves Wesfarmers of a substantial potential burden.

    The announcement was accompanied by a presentation to analysts, which was attended by Mr Scott, and the company's chief financial officer, Anthony Gianotti. In his prepared remarks, Mr Scott stated that:
    Homebase was acquired by Wesfarmers in 2016. The investment has been disappointing, with the problems arising from poor execution post-acquisition being compounded by a deterioration in the macro environment and retail sector in the UK. While it is important that we learn from this experience, this should not discourage our team from being bold and diligent in pursuing opportunities to create shareholder value.

    In other remarks, Mr Scott repeatedly highlighted BUKI's dismissal of all of its executive staff, a move instigated by the division's managing director at the time, Peter Davis, as being one of the major mistakes Wesfarmers made.

    The company announced that it expects the divestment to affect its FY2017/18 by between GBP200 million and GBP230 million, depending on elements such as pension contributions. Financial analysts estimate the overall loss from the BUKI venture may be in excess of $1.25 billion.
    Analyst questions

    Many of the questions that analysts asked were about how accountability for the loss of such a substantial sum would flow through to management and board members. Though not mentioned by name, much of that accountability would likely rest on the shoulders of the former managing director of Bunnings, John Gillam, and the former managing director of Wesfarmers, Richard Goyder.

    They were the primary architects of the deal to acquire Homebase. Equally, though, Mr Gillam did not take a prominent role in Bunnings management during the period when Homebase was being transformed in the UK.

    Mr Scott pointed out that decisions about how accountability would be enforced were up to board and management processes in Wesfarmers, and that it would not be appropriate for him to comment. However, he gave what assurances he could, including his personal view that the losses incurred should result in some form of consequence.

    Perhaps the most interesting exchange took place between respected JP Morgan analyst Shaun Cousins and Mr Scott. Mr Cousins followed up a previous question by asking:
    OK, but I mean, wouldn't due diligence actually highlight that you need to have local management in there. So was it a decision where the management effectively ignored some of the recommendations of the due diligence, or were these things not identified during the due diligence part?

    Mr Scott responded:
    Yeah, look I think, Shaun, part of it goes to implementation, and execution, management is critical both at an implementation level and also at a due diligence level.
    I think there was an underestimation - this is just my personal view having reflected on the work - there was an underestimation of the competitive environment, and there was also an overly optimistic outlook in terms of the growth opportunity, and the capital investment that was required. They were some of the issues.
    But as you would know, in every acquisition you make a lot of different assumptions. I feel like I've said a lot about the problems that went into this acquisition, and frankly what I am most focused on, is what can we learn from this, and what can we do better?
    We've acknowledged that we needed to strengthen our capabilities. We have made material changes to strengthen our corporate capability. We have taken a very strong approach from the corporate centre around capital allocation, and we also recognise that when you move to offshore markets, you need to prioritise local management expertise.
    Those are all the things that we are learning. To be frank, we need to learn from this experience, and look forward to what we can improve. I'm not sure what more I can say on what's happened in the past.

    Unusually for Mr Cousins, he added a comment of his own to this, before moving on to the next question:
    It is just concerning that you are looking to grow in an acquisitive manner, where the company's track record is not great, in that [when] you think about BUKI, the WorkWear business you bought from Pacific Brands doesn't appear to have been fantastic, you look at Australian Vinyls, Coles has been executed very well, but caused a lot of damage to group return on equity. It doesn't appear as though Wesfarmers has executed M&A really well over the last decade.

    This is just the start of this article. To read the complete text, please download our HI News PDF magazine by clicking/tapping on the following link:
    HI News Vol.4 No.4: Bunnings misses
    Paint 2017-18: The movie
    Market share percentages and dollar value in USD
    HNN Sources
    PPG results
    The global resources of Sherwin Williams
    Subscribe to HNN weekly e-newsletter
    For a business whose level of excitement has been oft-compared (unfairly) to the activity of watching its chief product dry, the paint industry has embarked on some pretty exciting activities over the past year. At times it has seem to come close to one of those fraught big family movie dramas of tangled marriages and divorces.

    What really kicked off the current situation was the move by US paint company Sherwin Williams to merge with fellow US paint and industrial coatings company Valspar, announced in March 2016, and completed in June 2017. That had been (in part) triggered by Sherwin William paints displacing some Valspar paints in US-based big box home improvement retailer Lowe's Home Improvement stores in early 2016.

    That merger created a company that was comparable in size to the two other leading companies in the market, the US-based PPG and the Dutch-based AkzoNobel. PPG, partly in reaction to that move, then began a process of attempting to acquire AkzoNobel, which would have created the world's largest paint and coatings company. The first proposal was made in March 2017, and offered a 30% premium on the company's share price at the time, with a total valuation of EUR22.4 billion. This was rejected, so PPG made a second bid with some improvements in conditions. Again, this was rejected. PPG made a third big, this time for EUR26.0 billion, which represented a 50% premium on AkzoNobel's share price from the previous March - and, yes, it was rejected as well.

    In the midst of this, AkzoNobel's CEO, Ton Büchner, resigned, citing health reasons. He was replaced by Thierry Vanlancker.

    There were a number of consequences that flowed from all this. The one that most recently came to fruition was the resignation of AkzoNobel chairman Antony Burgmans on 26 April 2018. He has been replaced by Nils Andersen, former CEO of the Danish shipping-to-oil conglomerate AP Moller-Maers and Carlsberg, the Dutch brewer.

    Mr Burgmans led the company's opposition to the takeover by PPG, a role which put him at odds with many investors in AkzoNobel, in particular the US-based hedge fund Elliot Management, which brought a court case to force AkzoNobel to consider the takeover offers (which it lost), and to oust Mr Burgmans. A key part of Elliot's argument was that the Dutch resistance was hypocritical, as AkzoNobel itself had grown through acquisitions, most notably of the Swedish based Nobel, and the UK-based ICI.

    PPG's offer for AkzoNobel took place immediately before a hotly contested Dutch election, and it led to calls for legislation to be enacted which would have introduced a mandatory one-year "cooling down" period for any foreign company attempting to take over a Dutch-based one. However, the law was widely ridiculed by academics and others, who pointed out that it would have a strongly negative effect on the business environment and economy of Holland.

    The real ongoing legacy of all this, however, has been a series of promises made by Mr Büchner prior to his resignation regarding a series of reforms AkzoNobel would undertake. The purpose of those promises was to present the company as one that could produce the same level of shareholder return as would have been generated by simply accepting one of PPG's offers. To quote from an article published in The Economist newspaper on 22 April 2017, entitled: "AkzoNobel, under siege, makes unrealistic promises about growth":
    The future for AkzoNobel is dazzling - if you believe Ton Büchner, its chief executive. The boss of the Dutch paint-and-coatings firm reported a solid set of quarterly earnings on April 19th, then promised a new era of rapid growth and investments. Shareholders are to get lavish dividends this year. The firm will break up its ungainly conglomerate structure. A speciality-chemicals part of the business will be sold or listed separately next year.
    Mr Büchner has no choice but to talk things up, if he is to justify rebuffing two recent takeover offers from a similar-sized American rival, PPG.
    Akzo's promises were welcome. But like a newly opened tin of paint, they made some heads spin. After years of eking out smallish gains mostly through cost-cutting, the firm is suddenly to boom. Akzo had previously forecast that returns on sales would be 11% by 2018, already well over its average of less than 9% since 2008; now the CEO promises a rate of 14% by 2020. The firm, which had revenues of EUR14.2 billion in 2016, has emerged from a difficult period. It bought Britain's Imperial Chemical Industries (ICI), the owner of Dulux paint and other products, a decade ago, absorbing it as Europe fell into a slump. The group's recovery since looks solid, but not of the sort to match Mr Büchner's bold targets. "It is a huge stretch, it looks really tough," is the verdict of Jeremy Redenius of Sanford C. Bernstein, a research firm.

    To carry on the cinematic comparison, if you were looking for an analogy for the way AkzoNobel has behaved for the past 12 months, a good one would be one of those chase scenes from a thriller movie. You know the ones, where a protagonist is chased down alleyways and through buildings, all the time knocking over file cabinets, slamming doors, rolling out garbage dumpsters in an effort to impede the progress of his or her pursuers, usually to little or no avail.

    AkzoNobel's version of this has included moves such as a mooted merger with US-based paint company Axalta, an effort which eventually failed on 21 November 2017. Had AkzoNobel completed that merger, it would have ended any effort by PPG to acquire it, as Axalta pursues many of the same markets as PPG, and the anti-trust complications alone would have caused it to fail.

    Then there is the sale of Specialty Chemicals to The Carlyle Group and GIC for EUR10.1 billion. Though with that move, some of the double-bind the company finds itself in is evident. In order to keep its shareholders satisfied, it is going to return the profits from that sale to them, which means it can't use those funds to leverage acquisitions, or fund its restructuring program.

    Meanwhile, AkzoNobel's results for its 2017 were somewhere between "flat" and "dismal", depending on which analysts you read, and it has followed that up with a first quarter for 2018 that also missed expectations.

    In its results the company promotes the many changes and new things it is creating, while downplaying these results as the consequence of "temporary headwinds", brought about by currency fluctuations and raw material price increases - headwinds which most of the rest of the industry seemed to have little trouble predicting.

    We all know how these chase scenes typically end: the three-metre high wire fence you can't climb over. In AkzoNobel's case, that is likely to be its 2018 results. We'll have to wait and see.

    Finally, of course, no movie is ever complete without that final twist, which in this case is a scandal that has broken out at PPG. It seems that financial reporting guidelines have been breached by its financial controller, Mark Kelly (allegedly), who has subsequently been dismissed by the company. Initially the error were thought to be limited to its first quarter report for 2018, where its net income before taxes had been overstated by USD7.8 million. Further investigation indicates that there were further errors amount to USD2.1 million for the second quarter of 2017, and USD4.7 million in the fourth quarter of 2017. As they say (truthfully) in the movies, it's the sort of thing that could happen to anybody.

    As for Sherwin Williams, the company has now succeeded in pushing some PPG paints out from Lowe's, though the home improvement retailer will continue to stock many of the other great products PPG makes, such as the very popular Liquid Nails. And in "turnabout is fair play", PPG has likewise displaced some Lowe's wood stain products from the archrival of Lowe's, The Home Depot.

    Sherwin Williams also enjoyed strong improvements in its overall numbers due to the consolidation of results from Valspar operations. Even without that extra, however, the company recorded good results both for 2017 and the first quarter of 2018. In the words of John G. Morikis, chairman, president and chief executive officer:
    2017 was a year of record sales, net income, earnings per share, cash and EBITDA, but it will best be remembered as the year in which we joined forces with Valspar. The enormous amount of effort and energy invested over the past seven months in bringing these two great companies together, strengthening our customer relationships, defining the right organisational structure and building momentum in every line of business is transforming Sherwin-Williams into a faster growing, financially stronger and more profitable enterprise. These efforts will continue throughout 2018 with similar effect.

    This is the first in a series of four articles on the paint category. To read the other three, please download our HI News PDF magazine by clicking/tapping on the following link:
    HI News Vol.4 No.4: Paint 2017-18: The movie
    Big box update
    Bunnings Baldivis officially opened in a former Masters site
    HNN Sources
    The Toowoomba arm of Hutchinson Builders is building the Warwick store in Queensland
    An artist's impression of the proposed Bunnings store on the Frankton Flats, Queenstown (NZ)
    Click to visit the HBT website for more information
    Bunnings in Baldivis (WA) and in Canberra Airport opened on a former Masters while Katoomba (NSW) is due to open at the end of June; structures for the Bunnings store in Warwick (QLD) are being erected and construction imminent for stores in Kingaroy (QLD) and Port Macquarie (NSW); Bunnings New Zealand is appealing a decision for its proposed store in Queenstown.
    Store openings, now and in the near future

    Bunnings stores have opened or are about to be open in Baldivis (WA), Canberra Airport (ACT) and Katoomba (NSW).

    Bunnings in Baldivis (WA) opened to big celebrations recently, with Australian Paralympian Brant Garvey joining team members to launch the store.

    The 13,000sqm outlet had a soft launch before hosting an official opening ceremony. Located on the corner of Safety Bay Road and Baldivis Road, it opened to local fanfare after Masters Home Improvement shut its doors in the same location more than a year ago.

    Complex manager Darren Feenstra praised his team for working to fit out the store extensively in less than a month.

    Bunnings is due to open in Katoomba (NSW) soon, just a block away from the old Home Timber & Hardware store. And in preparation, the Home store is transforming into Mitre 10 with a major refurbishment.

    Store manager, Rhonda Steed, said it was bought by Metcash about 18 months ago and is being rebranded as a Mitre 10. She told the Blue Mountains Gazette:
    ...It will be a Sapphire store - a bit more like a shop experience than a warehouse experience. It's like a total revamp. It will give us the best we can have to tackle our friends down the road so we're very happy with that.

    Ms Steed also said Metcash had "armed us with a much ammunition as we can have" to counter the opposition.

    Down the road, where shelves are being stocked and landscaping works being completed, Bunnings said it is employing more than 50 locals in its new store. Manager, April Spillett, said she was excited to welcome residents to the store, as well as helping out in the community.
    Team members have worked together to assist in revamping the outside spaces and sensory garden with new garden beds and refreshing the sitting area at Baptist Care Morven Gardens Aged Care Centre.

    A Bunnings spokeswoman added:
    Bunnings competes with a number of different types of businesses in the home improvement and outdoor living market and find there is ample room in the market for all to operate successfully.

    HI News Vol. 3 No. 7: Blue Mountains store close to Home, page 11
    Canberra Airport

    Rugby league legend and head coach of the Australian national rugby team Mal Meninga officially opened the new Bunnings Warehouse at Canberra Airport.

    The $42 million store covers more than 13,000sqm and is Canberra's second largest Bunnings outlet, the fifth in the state. There are already Bunnings stores in nearby Fyshwick, as well as Gungahlin, Belconnen and Tuggeranong. Complex manager Robert Manning said:
    Our new team members have assisted in local community projects such as revamping the outside spaces at Bungendore Public School to celebrate its 100-year anniversary. The team has also given the back garden at local YWCA Refuge House a makeover and supported Hackett Preschool by upgrading its playground.
    Bunnings stores in the pipeline

    Port Macquarie (NSW), Warwick (QLD) and Kingaroy (QLD) are set to have new Bunnings stores.

    Building on the Bunnings store in Warwick (QLD) has begun with concrete walls being placed on the site. Bunnings general manager - property Andrew Marks said:
    Construction has progressed to the erection of the external concrete wall panels with structural steel to be added shortly. The new Bunnings Warehouse Warwick represents a $16 million investment in the local economy and will span approximately 7000 square metres once complete.

    The new store is expected to open in late 2018.

    The Toowoomba arm of Hutchinson Builders is in charge of the project and is fabricating all concrete wall panels on site. Southern Downs Mayor Tracy Dobie said it was great to see the development forging ahead.
    They are tripling the size of their business, which will be positive for employment and the economy of the region.

    HI News Vol.4 No.3: Plans for more Bunnings stores underway, page 18

    The proposed Bunnings Warehouse store in Kingaroy (QLD) is a step closer to starting construction following the tender process for builders recently.

    A Bunnings Warehouse spokeswoman said the time line for construction depended on which builder secured the contract. She told the South Burnett Times:
    Until we review the tenders received and allocate a builder, we won't know any timings.

    The South Burnett Regional Council approved the new development in November last year. Bunnings is expected to spend about $15 million building the new store, which is estimated will provide 60 new jobs.
    Port Macquarie

    The planned Bunnings Port Macquarie store is expected to be operating by early 2019. Mr Marks confirmed that work at the site is likely to commence soon. He told Port Macquarie News:
    We have received development approval to build a new Bunnings Warehouse in Port Macquarie which will replace the existing store. The new Bunnings Warehouse Port Macquarie represents an investment of over $43 million...

    Mr Marks said Bunnings looks forward to continuing to work with Port Macquarie-Hastings Council and the local community throughout the construction of the new warehouse.

    Big box update: Plans for more Bunnings stores underway - HNN
    Bunnings battle in Queenstown NZ continues

    Bunnings has appealed a decision to decline consent for a store it proposed to build on the Frankton Flats, beside State Highway 6, in New Zealand.

    In appealing the entire decision, Bunnings said the subject site was located within an area "in a dynamic state of development and urbanisation" where there was a variety of commercial, retail, and light industrial developments, either constructed, under construction, or recently consented.

    Bunnings had identified the site on the Frankton Flats as the "ideal location" to enter the "booming Queenstown construction and trade supply market".

    The new store would "increase competition between trade suppliers in the Queenstown market and lower the costs of construction, and therefore housing, along with other projects".

    The company had worked extensively with the council before lodging a consent application and, as a result, made significant adjustments to the layout and design, the appeal notice said. Bunnings said the commissioners erred in their decision.

    It also said there were two key questions at issue during the two-day hearing - whether a Bunnings store would be an appropriate and compatible activity for the site and, if so, whether the effects on the environment were appropriately avoided, remedied or mitigated.

    While a council officer had recommended consent be declined, citing, in part, adverse effects would be more than minor in relation to the loss of industrial-zoned land, urban design, visual and signage effects, commissioners held the effects on the district's industrial zoned land would be "minor only". That view should be upheld, the appeal notice said.

    A finding by commissioners that the effects were more than minor and the development contrary to the objectives and policies in the district plan, however, "should be rejected".

    Bunnings sought for the appeal to be allowed and the application granted, subject to conditions offered at the hearing, or such conditions the court considered appropriate and for "costs of and incidental to" the appeal.

    Hi News, Vol.4 No.2: Bunnings NZ rejected for Queenstown store, page 18
    Indie store update
    Goodwin and Storr Mitre 10 will be honoured by the Lockyer Valley Chamber of Commerce and Industry
    HNN Sources
    Business as usual at Kellys Mitre 10 Wodonga
    Click to visit the HBT website for more information
    A Mitre 10 store is celebrated for its longevity; a 58-year-old hardware business in NSW will shut its doors for good; and Kellys in Wodonga (VIC) shows consistency after changing to the Mitre 10 banner.
    Goodwin & Storr's long term legacy

    The Goodwin & Storr Mitre 10 in Laidley (QLD) will be honoured in the Long Established Category at the Lockyer Valley Chamber of Commerce and Industry Business Recognition Dinner later this month.

    The store started out as a fabrication business when Bill Goodwin and John Herbert "Herb" Storr took it on "more by accident than anything" over a century ago, according to the Gatton Star newspaper.

    The firm John Storr's grandfather began has evolved into a major hardware store in the region. He explains:
    During the 1920s when Peter Nelson, who had the hardware shop in town, passed away, his son sold the business. That's when we got into hardware as well as making tanks and iron mongering.

    In the 1950s, Mr Goodwin left the business and Herb ran things with his son, Arthur. Mr Storr's own father went into partnership in the business in the 1980s when he returned from overseas.

    In 1992, Mr Storr joined the business - in which his three sisters are partners - and during his time he has seen plenty of change. He said it was vital to keep on top of the market and make sure he was selling things people wanted.
    When I started here 30 years ago we were selling different products. We would have sold 90% nails and 10% screws and, of course, there were hammers and things.
    Now we probably sell 90% screws, 10% nails and it's not hammers any more, it's all electric screw guns. The nail section has completely diminished...You can have the same product in two different colours and one won't sell, the other will walk out the door. And what sells in Brisbane won't necessarily sell in Laidley, they're completely different markets.

    In 2011, Mr Storr made the decision to focus on hardware and get out of tank manufacturing. He said:
    We stopped the tanks after the last rebates back in about 2011 because the business died.

    Shifting the focus meant he was able to invest in expanding and renovating the hardware store. He said:
    We did about a quarter-of-a-million-dollar expansion back around that time. You've got to keep reinvesting in your business otherwise you just keep losing."

    After 105 years in business Mr Storr is not sure what the future will hold, with no family members interested in taking over once he retires.
    My dad asked me to get it to 100 years old and he said 'I don't care what you do after that'. To get it to 110 would be a good score. I'm 58, I don't want to be like my grandfather and uncle, working until I'm 100 and not have a life.

    Mr Storr said he would like to see the business continue but admitted it was "hard yakka" and there were easier ways to make money, especially with pressure from major stores like Bunnings.
    Bexley North Hardware calls it a day

    Peter Blackwell is closing the hardware business started by his father at Bexley North (NSW) 58 years ago, reports The Leader newspaper. Blackwell's Bexley North Hardware closes its doors at the end of June. He said:
    This one little shop has supplied hardware to some major projects including the M5, the Port Botany container wharf expansion and the upgrade of railway bridges at Bardwell Park, Kingsgrove and Narwee.

    Mr Blackwell's father, Ronald opened the family business in the late 1960s and Peter bought it from him 21 years ago. He said:
    We don't have any kids and my nephews and nieces aren't interested in taking it over...A small hardware shop is not as viable as it used to be.

    Mr Blackwell has seen a lot of changes in Bexley North over the years. He explains to The Leader:
    The area has an ageing population and now the elderly are passing away or going into retirement villages. The new people moving are either in too much debt or are not doing their own handy-work but getting someone else to do it.
    Where the older generation did it themselves the new generation doesn't know what they are doing.

    Mr Blackwell said the attitude of some of his bigger customers, particularly the local schools, has also changed when it comes to supporting small businesses.
    We used to have a lot of accounts with the schools. But the new principals always tell their maintenance people to go to Bunnings.
    I know we are still officially on the books with the schools. We are still asked to source specialist supplies. They have always had good customer service here. Otherwise, they go to Bunnings.
    I don't know why the government is encouraging them to do it just to keep the big boys going.

    Mr Blackwell said he has three categories of customers: project managers covering major developments; developers building units, and people building their own homes.
    The only people we have had trouble with payment are the developers. But I never have trouble with payment from the top end project managers or the home handymen. Sometimes a project manager would ring and ask for something that could not be sourced anywhere or that they needed in a hurry and I would do it.

    There have been difficult times in the past when Mr Blackwell was hit by a car and seriously injured. His wife Karen had to run the business for two years but he was able to recover and make it back to working full-time. While Mr Blackwell won that battle, he said the fight with big business has defeated him.
    When the new Bunnings opened at Kingsgrove I thought we would lose about 30% of our clients but we lost 60%...For Bexley North it means that personal service will be lost.
    Kellys Wodonga re-brand two years on

    The Border Mail newspaper recently profiled Kelly's Wodonga and reports that despite external changes, the owners and service are still the same with Adrian (AJ) and Shelley still managing the store under the Kelly's Mitre 10 Wodonga brand.

    The husband and wife team have been operating the business since 2006, starting as Kelly's Wodonga. They changed to take on the Mitre 10 banner in July 2016. AJ said:
    We are still the same business as we were when we were Kelly's. We just added some additional Mitre 10 products to our existing lines. Even though we are just a husband and wife business, we are backed with the buying power of Mitre 10, NRI and AIS, which means that our prices are competitive with the big corporate enterprises.

    Agricultural retail has been in the Kelly blood for some time. Adrian's father, Des Kelly, was a stock and station agent as was his father.
    You can quite often see any of our four kids in the business as well. Samson now works on one of the counters and Zach helps customers out with their needs and loading cars. Cate and Isla help with putting stock away and cleaning shelves on occasions. Also our niece Gabbs has joined our team, and she is a great asset.

    Indie store update: Kellys Wodonga part of Mitre 10 - HNN
    Supplier update
    Reece will operate MORSCO separately to its Australian and New Zealand businesses
    HNN Sources
    Allegion to acquire Australian brand, Gainsborough Hardware
    CSR's Hebel precast concrete blocks and panels benefit from residential builds
    Subscribe to HNN weekly e-newsletter
    The US housing sector has been targeted for growth by Reece; Gainsborough Hardware and API Locksmiths sold off to Allegion; CSR believes there is a shift toward residential knock down and builds; Ardex takes a majority stake in DTA; Boral sells off "non-core" business; Portwest completes Huski workwear acquisition; Genuine tradies star on Bostik campaign; and Sika and Saint Gobain come to an agreement.
    Reece expands into US, after 10 year study

    ASX-listed plumbing products company, Reece Group has maintained a cautionary approach as it acquires Texas-based distributor Morsco for AUD1.9 billion including debt.

    Morsco generates annual sales of USD1.72 billion and is being sold by its private equity owner Advent International. It operates 172 branches along 16 states in southern United States, between the east and west coasts. The deal will double the size of the normally conservative Melbourne-based company.

    This acquisition will give Reece access to what it has identified as the fast growing Sun Belt region which includes Florida, Louisiana, South Carolina and Texas. Reece chief executive Peter Wilson said in a statement:
    It's a market that's forecast to grow at twice the rate of the Australian market and it is currently about eight times the size.

    Reece said the deal will be funded through a combination of cash and debt, adding that it will also raise AUD560 million through a stock offering. The billionaire Wilson family, which owns a majority stake in Reece and is backing the deal, will subscribe to AUD300 million worth of shares in the offering. A bulk of the funding, however, will come from an underwritten USD1.14 billion secured credit facility.

    Reece said it will operate Morsco separately from its Australian and New Zealand businesses and there would be no attempt to try and rebadge the Morsco stores. It will also retain the US management led by CEO Chip Hornsby who has been at the helm since 2011.

    It will also deploy several of its own team members to the US to help with collaboration and sharing of industry knowledge and expertise.
    Overseas markets

    As Australia's biggest plumbing and bathroom products company, Reece had run out of local acquisition opportunities where it already has a large portion of the bathroom and plumbing supplies market.

    Mr Wilson said the company has been carefully studying the US market for 10 years. It had been talking with Morsco and Advent for two years. Serious due diligence had begun in January this year. He told Fairfax Media:
    We've certainly done our homework...We're really comfortable we've got a handle on it.

    Mr Wilson said Reece had gained extra confidence about the US through its relationships in Australia with ASX-listed Reliance Worldwide, which has a big presence in the US plumbing market with its Sharkbite push-to-connect fittings.

    He said the acquisition of Morsco is a "transformational opportunity" that will drive returns for the next generation of shareholders.
    It has a strong platform across the sunbelt states. It's in the growth states.


    Reece also gave guidance for the fiscal year ending June 2018. It expects an after-tax profit of AUD223-AUD230 million, 5% higher than last year. It forecast sales of AUD2.65 billion-AUD2.70 billion.

    It said the results are driven by new branch openings, leveraging of its supply chain, investment in improving and delivering great customer service and an enhanced online offering for both trade and retail customers.

    Reece, which has a sharemarket value of AUD5.4 billion, runs 600 plumbing and bathroom products showrooms across Australia and New Zealand. It has annual revenues of AUD2.4 billion.

    Reece fortunes connected to housing - HNN
    Allegion to acquire Gainsborough, API Locksmiths

    Global security products company, Allegion has agreed to acquire GWA Group's door and access systems business through one of its subsidiaries. It includes Australian brands Gainsborough Hardware and API Locksmiths. The transaction is expected to close in the third quarter of 2018. GWA managing director, Tim Salt, said:
    The door and access systems business is strong, and we believe Allegion can maximize its potential. Allegion's global scale, innovative technologies and supply chain capabilities will enable both Gainsborough and API to further enhance their offerings to customers.

    The GWA door and access systems business generated sales of approximately AUD95 million for calendar year 2017. The business will operate in Allegion's Asia-Pacific region. Allegion president, chairman and CEO, David D. Petratis, said:
    This strategic acquisition bolsters Allegion's presence in Australia and significantly increases our scale in the Asia-Pacific region ... We're enhancing our residential presence with market-leading positions and longstanding customer relationships, all while accelerating our development of electronic security solutions. This is consistent with Allegion's growth strategy in the region - and highly complementary to our core business.

    The transaction is valued at AUD107million. Allegion plans to fund the acquisition through existing cash on hand and borrowings under its revolving credit facility. Excluding merger and acquisitions costs, Allegion expects the transaction to be slightly accretive to adjusted EPS for 2018.
    Knock down home builds help drive CSR profit

    CSR managing director Rob Sindel said an acceleration in commercial construction of hotels and aged care homes and people wanting to shift into a detached house from an apartment will drive demand in the next 12 months.

    Mr Sindel also said there was a renewed upturn recently for detached houses, particularly on the eastern seaboard.

    As a supplier of Gyprock plasterboard, PGH bricks, Hebel precast concrete blocks and panels, and Bradford insulation and storage battery products to the building market, Mr Sindel believes the company is in a solid position to make the most of this opportunity.

    Mr Sindel said housing markets had benefited from large migrant intakes over the past few years, which had fuelled strong population growth, and while many families had started off living in apartments, they were increasingly looking to upgrade to a detached house. He told Fairfax Media:
    A lot of people start off in an apartment. They want to live in a house in the suburbs.

    The demand for a detached house has been reinforced constantly by the long line-ups of people prepared to camp out to secure a block of land when they were released to the market by developers, according to the company.

    Mr Sindel said CSR had also noticed a marginal slowing in the renovations market, with more people instead opting to demolish an existing property and then build a new home on the same block of land.
    They want a new house, but they like the street.

    He believes heavy stamp duty costs were a big deterrent to moving. Once council approvals had been granted, it usually took far less time for a new build, rather than a more complex renovation. A new house might take six months, compared with a complex renovation that may run for 12 to 18 months.

    The desire for a speeded up process was also playing out in rising demand for Hebel aerated concrete blocks as a building material. Mr Sindel said the use of Hebel was growing strongly off a low base, with builders becoming more enthusiastic about it. CSR is investing $75 million to expand capacity at a Hebel plant at Somersby on the NSW central coast.
    A lot of it is being driven by the builders. It's faster and it's easier to construct.

    While many experts are predicting a softening of property prices, Mr Sindel said first home buyers would welcome it even though existing home owners liked the wealth effect from ever-rising prices.

    The only building products unit that turned in a softer annual performance was Monier roofing tiles, which experienced lower demand in Queensland.

    CSR generates about 12% of its revenues from high-rise apartment construction and while that market has softened substantially, commercial construction was gaining momentum.

    CSR had benefited from the construction of the new Optus sports stadium in Perth and from Commonwealth Games construction on the Gold Coast. But there were also improving activity levels in construction of hotels, hospitals and aged care homes.

    Energy costs are slowing down further growth on the company, jumping 12% over the past year and costing an extra $9 million.

    Former managing director of Bunnings, John Gillam, has also just become the chairman of CSR, taking over from Jeremy Sutcliffe.
    DTA majority owned by Ardex

    The Ardex Group announced it has attained a strategic stake in DTA, a quality tools, trims and machinery supplier for the wall and floor market in Australia, New Zealand and USA. DTA was established in Australia in 1976, and considered a market leader in the industry.

    Dedicated to delivering innovative, dependable products, DTA focuses on servicing the professional contractor. It will continue to operate independently from the Ardex companies in the US, Australia and New Zealand. Phillip Cozens, owner of DTA, said:
    DTA is proud to be welcomed into the fold of the Ardex Group. We anticipate building on opportunities for DTA in markets around the world.

    There are no planned changes to personnel in either company.

    For nearly 70 years, Ardex has been a significant supplier of specialist building materials and remains an independent, family-owned business with over 2,700 employees in 50 countries. Mark Eslamlooy, CEO, Ardex Group said:
    This joint venture is an exciting addition to the Ardex strategy of system solutions. The burgeoning synergies we develop with DTA will present additional value to our customers.
    Boral offloads US business, NSW property

    Boral is selling its US concrete and quarrying business for USD127 million (AUD169 million) to Brannan Sand and Gravel Company as it narrows its focus on building products in North America.

    The company said the Colorado-based business had performed well, but it was non-core to Boral's operations. Boral's CEO and managing director Mike Kane said in a statement:
    Boral's strategy in the USA is focused on growing our building products and fly ash businesses. As we continue to strengthen our core business and deliver synergies from the Headwaters acquisition, the time is right for Boral to realise value by divesting the construction materials business in Colorado.

    Boral acquired American building materials supplier Headwaters in late 2016 for USD3.5 billion (AUD4.6 billion).

    Boral expects to make a pre-tax profit on the sale of USD45 million (AUD60 million), which will be included in its financial results for the current financial year. It said the proceeds will be used to reduce debt. Boral has owned its US construction materials and quarrying operations since 2004.

    The company also expects the sale of its Prospect Masonry property at Greystanes in NSW to contribute AUD56 million to earnings for the 2018 financial year. It said the sale of the progressed earlier than expected and will provide a more detailed update at the company's investor day.
    Portwest finalises purchase of Huski

    Irish speciality clothing company Portwest has completed the acquisition of a second Australian brand as it expands its presence in the local market. It has acquired Huski for EUR10 million.

    Although Huski was acquired in October 2017, Portwest could not state the name of the Melbourne-based company due to a non-disclosure agreement.

    This acquisition is expected to more than double the Irish company's turnover in Australia and New Zealand to EUR25 million by 2019, which will represent about 10% of its business. Huski's turnover in 2017 was close to AUD10 million.

    Last year Portwest acquired Australian workwear business, Prime Mover Workwear, for EUR7.5 million.

    Financial director, Owen Hughes, said the company is looking to expand further in the Australia and New Zealand markets. He told The Irish Times:
    This [acquisition] marks an exciting new phase of development for Portwest and we look forward to expanding our reach in this area.

    Founded in 1904 by Charles Hughes as a small shop, Portwest's products are sold in more than 100 countries and it employs over 2,000 people globally.

    Portwest is run by three Hughes brothers and they have grown revenues at the firm from about EUR200,000 in 1979 to EUR126.9 million for the 12 months ending February 2017.

    Irish workwear firm expands in Australia - HI News, page 22
    Workwear category dominated by UK player - HNN
    Bostik's tradie campaign

    Adhesives company, Bostik has hired two genuine Australian tradies as brand ambassadors. Mark Menagatti (aka Spaghetti) and Adrian Franchina have been given the moniker, "Bostik Boys" to represent the brand.

    According to Bostik, Menagatti and Franchina's relationship with the brand will span the next few years. The pair was introduced in a teaser video on Bostik's Facebook and YouTube pages recently.

    The campaign has launched with a television commercial, "Tradie Life'", featuring the Bostik Boys discussing what it's really like to be a tradie. "Due to TV shows, a tradie's life looks easy, but actually isn't as easy as what you think," said Mr Menagatti. The end of the commercial delivers the tagline, "Real Tradies. Not Real Actors". Anthony Voyage, marketing manager at Bostik, said:
    We wanted authentic tradies who are on the tools 24/7. Tradies who wake up before light and come home after dark. We have Bostik products in thousands of tool boxes around the country at any one time and we want our consumers to be proud of our connection.
    We hope the Australian public find this approach refreshing, informative and engaging.

    Bostik plans to build on the Bostik Boys miniseries by exploring the life of a tradie further, giving trade tips and DIY how-to guides featuring the Bostik product line.
    Saint-Gobain, Sika reach deal after takeover battle

    French building materials company, Saint-Gobain has given up its fight for control of Swiss rival Sika in return for a pay-off. This ends one of Europe's most contentious takeover battles.

    The fight for Sika had seen Saint-Gobain tied up in Swiss courts for years as Sika's shareholders and its board fought back against the takeover attempt, which was launched in 2014.

    The complex deal, first reported by the Financial Times, will see Saint-Gobain take a 10% share of Sika. The Swiss chemicals maker can secure its immediate independence while allowing the Burkard family, the heirs of Sika's founder, to exit the company.

    Under the terms, the heirs behind Sika sold their entire 17% stake for 3.22 billion francs (USD3.21 billion) - and 52% of its voting rights - to Saint Gobain, which will give up the special voting rights that were at the heart of the conflict with other Sika shareholders and management. Sika in turn bought an almost 7% holding from Saint Gobain.

    The settlement could herald fresh consolidation in the sector, with the deal freeing Sika to make acquisitions. Chief executive Paul Schuler told the Financial Times:
    With the new structure we can really explore possibilities for Sika.

    The agreement will allow Saint-Gobain to make a profit while retaining its 10% share of Sika. The companies agreed to a two-year lock-up and a six-year period during which Saint-Gobain cannot increase its ownership beyond 12.9%. Sika will also have the right of first refusal if Saint-Gobain wants to sell. Guillaume Texier, Saint-Gobain's chief financial officer, said:
    This deal...creates value for Saint-Gobain. Second, it puts an end to all of this uncertainty. That's what this does as all litigation is finished. And last, it's strategically important as we have 10% of a great company.

    Having failed to take over a market leader in adhesives and sealants, Mr Texier said no decision has been made on how long the French company will hold its stake in Sika beyond the lock-up period.

    He also indicated Saint-Gobain is ready to move on. Construction chemicals remains a strategic area of growth, and small- to medium-sized targets in markets like the US are a focus area, he told Bloomberg.

    Saint-Gobain bids for control of Sika - HNN
    Retail update
    Temple & Webster has released its own paint range developed in conjunction with Taubmans
    HNN Sources
    Australia could have 30 more Ikea stores in the future
    Ikea Australia CEO Jan Gardberg has plans to expand stores in Australia
    Click to visit the HBT website for more information
    The paint range Temple & Webster developed with Taubmans is available exclusively on the retailer's website; and Ikea could have 40 stores in Australia by 2030, up from 10, according to its new CEO.
    Taubmans paint for Temple & Webster

    Online furniture and homewares retailer, Temple & Webster has released its paint line developed in collaboration with Taubmans. Colour by Temple & Webster is made up of 20 low-VOC classic paint shades and on-trend colours designed to work together seamlessly.

    Included in the range are neutral palettes of Chateau, Lighthouse and Pavilion, or the serene, coastal feel created by Treehouse, Ranch and Temple.

    With the added convenience of to-your-door delivery, renovators and decorators have the option to try a ready-made palette of colours or build a custom colour scheme with wall colour, trim colour and accessories.

    All 20 colours come in two finishes; low sheen, available in one and four litre tins; and semi-gloss, available in one litre tins. A low-sheen, white ceiling paint is also available.

    There are also ready-to-go sample pot packs in varying colour combinations, as well as brushes, rollers, trays and drop sheets.
    Ikea sees 30 more stores in Australia

    Home improvement giant Ikea said it will open over 30 new Australian stores. It currently has 10 stores in Australia, but by 2030 the number is expected to increase to 40. And the number could be even greater if "smaller format" stores are opened inside shopping centres.

    The expansion is part of a plan by Ikea's new boss, Jan Gardberg, who has set his sights on rapid growth in Australia, including selling solar panels. He said:
    We have more than 40 years of home furnishing experience here in Australia and we want to take that and transform that home furnishing knowledge into the virtual and electronic world also.

    In addition to its existing 10 stores, Ikea has recently rolled out collection points in regional areas, primarily for online shopping in Queensland, Northern Territory, Tasmania, Canberra and greater Sydney.

    Last year, the company also opened a $150 million distribution centre in Sydney's Marsden Park, underpinning its online shopping push.

    Ikea customers can expect to see fewer human beings at the checkouts in favour of a more "seamless" experience of touchscreens, self-service and online ordering. Richard Harries, head of HR for Ikea Australia, said:
    Our focus is on customer fulfilment. We know we have great possibilities to meet the needs of our customers. The technology that we're looking at is how we can make it as seamless as possible. We're looking at digital screens for the Ikea food business, payment methods - all things to make it a seamless journey.
    Europe update
    The Entrance to B&Q's small-format store in London
    HNN Sources
    Australian retailers may be able to stock Greenman garden tools soon
    MarXman will soon be manufactured, marketed and distributed by GripIt Fixings
    Give to Amnesty International
    B&Q may open more smaller-format stores; Greenman Garden Tools could be bound for Australia; Kingfisher has a worse than expected quarterly result before the announcement of Bunnings' exit from the UK market; and GripIt Fixings will begin to develop sales and marketing initiatives under the MarXman brand.
    Eyes on Kingfisher following BUKI exit

    European home improvement retailer, Kingfisher received a boost in its share price after Australia's Wesfarmers announcement it would sell its UK chain Homebase to restructuring firm Hilco Capital just two years after buying it.

    Andrea Felsted, writing in Bloomberg, also believes this should be an opportunity for Kingfisher boss Veronique Laury, who is trying to lift her company's profit by GBP500 million pounds a year by 2021. But she also thinks the performance has been disappointing, so far.

    The increase to Kingfisher's share price also came after it reported a worse than expected 9% fall in UK same-store sales at its B&Q chain.

    Like-for-like sales at B&Q tumbled 9% in the UK and Ireland in the three months to 30 April. Sales at its French DIY chain Castorama also dropped 8%. The falls led to an overall 4% decline in like-for-like sales for the quarter.

    The wave of extreme cold weather dubbed the Beast from the East had a negative impact on its first quarter results. Chief executive Veronique Laury said:
    It was a challenging start to the year with exceptionally harsh weather across Europe and weak UK consumer demand. This impacted footfall, especially sales of weather-related categories. February and March were particularly affected with sales improving over the course of April and into May.

    Ms Laury said market conditions in the UK remained uncertain and a cooling property market,, as demonstrated by recent weak retail sales. However UK retail sales beat expectations in April, with a stronger-than-expected rebound from March's cold snap.

    Despite the cold weather, sales at Screwfix still rose by 3.6% in the UK, although Kingfisher said sales would have been higher if it had not been forced to close some stores temporarily due to the weather.

    Total sales for the company fell 1.2% to GBP2.8 billion, while sales in the UK were down 3.7% to GBP1.2 billion.

    B&Q is also seeing market share stolen by fast-rising discount chains in the UK. Fiona Paton of GlobalData said chains like B&Q were struggling to cope with fast-rising discounters. She told The Telegraph:
    [B&Q] is at risk of losing ground to discounters, especially B&M. Discounters' collective market share in DIY & gardening is forecast to reach 14.3pc by 2022. It is currently 11.5pc. Consumers are switching to discounters to purchase lower-ticket items such as paint and small tools.

    Kingfisher is half way through a five-year strategy is to cut costs, improve IT and integrate its products across all businesses. Ms Laury insists the company is "on track to deliver ONE Kingfisher strategic milestones for the third year in a row and we continue to see tangible delivery of our plan", and points out her charge has returned a further GBP40 million to shareholders year to date via share buybacks. She said:
    Around 40% of our ranges are now unified and continue to be well received by customers. Sales of these ranges, excluding outdoor products, are up, and we expect to grow the full year group gross margin, after clearance costs. Meanwhile, we are into the final year of our unified IT platform roll out with Poland now underway and Brico Depot France due to start soon.
    Garden tools exporting down under

    Devon-based retailer, Reedy Supplies are planning to set to sell its garden tool brand, Greenman to Australia and New Zealand.

    Reedy Supplies is a family-owned agricultural and horticultural tool retailer and intending to increase its sales exports to 40% after launching its first online store. Founded in 1972, it has been successfully exporting its handmade garden tools to Germany, France, Canada and the United States for two years.

    Now, the company is in discussions for its first orders from a distributor in Australia and a large garden retailer in New Zealand. Adam Greenman, marketing director at Reedy Supplies, told Devon Live:
    Because of the kind of products we sell, our sales are naturally affected by the seasons. One of our main aims in starting to export was to iron out this fluctuating demand. When it's cold here, it's summer somewhere else, which is why we decided to target the southern hemisphere in our bid for growth.

    Following the launch of its online store, the website will be translated into at least two languages as the business looks to increase its international trade. Mr Greenman, said:
    ...We'll be using it as an online catalogue at first, so that customers and buyers abroad can look at our range, but with DIT's (Department for International Trade) help we are also looking into having it translated into other languages to grow our online sales.
    One of the main challenges we've faced is finding accurate information about the business cultures in New Zealand and Australia. We've also found that there is no substitute for meeting buyers and distributors face-to-face if you want to build relationships. By exporting, we've grown as a business and learned a lot about ourselves in the process.

    Interesting links: UK toolmakers launch garden range - HNN
    Smaller store vision for B&Q

    UK home improvement chain, B&Q could stop opening giant warehouses in out-of-town locations to focus on smaller convenience stores, according to chief executive Veronique Laury.

    Asked at the World Retail Congress in Madrid, Spain how stores owned by Kingfisher will change over the next three to five years, Ms Laury hinted that opening convenience stores could be its next move. She said:
    I think there are two directions of travel for stores, I think one of them is ultimate convenience, to be where people want you to be and to be as close as possible to where people live.
    The big impact on that is urbanisation, everywhere in the world more people are living around cities. It's about how you get to those people as close as you can.

    Kingfisher could roll out plans for its B&Q business similar to the rapid expansion of its Screwfix stores, which sell tools for tradies. Screwfix has been a stand-out performer with growth of 16.7% in 2017. Its model of smaller outposts in town centres is a hit with customers who don't want to drive miles to a bigger store.

    Kingfisher aims to open 700 Screwfix stores in the UK, so that 97% of people are within a 30-minute drive of an outlet.

    Ms Laury said stores were also likely to stock fewer products, with staff on hand to offer advice on what to buy.
    I was in one of our stores last week and there was a whole display 10 metres high of head tool replacements for drills. I thought as a customer, who is going to shop like that in five years from now? And actually, I thought, no one.
    We don't need all of that stock in our stores in the future, we definitely don't.

    However, Ms Laury went on to add that she believed Kingfisher was lucky to have such a big footprint in the UK (via its B&Q stores) because e-commerce was so advanced it was "like a lab" showcasing what would happen in other countries. She said:
    What is happening in the UK today, I believe is going to happen in France in two or three years from now and probably in Poland in five years' time. The pace of internet use and mobile equipment in those countries is catching up very fast."
    Response to change

    Ms Laury believes many businesses had simply been too slow to react to the pace of change created by companies such as Amazon. She said the unstoppable boom in online shopping meant Kingfisher's workforce was likely to shrink over the next five years but declined to say by how much.

    It currently employs 78,000 people at its 1,300 stores in the UK, Western Europe, Russia and Turkey. She said:
    For 50 years, retail has been location, location, location. The race was to get the best store in the best location and if there is a cost associated with that it would be fine. Technology has changed all that.

    Ms Laury also told delegates at the conference that fellow retailers must "change or die" as she warned that the industry had to keep up with evolving alongside consumer habits in the wake of mass job losses and store closures.
    The biggest mistake that most retailers have made is thinking they are going to carry on doing what they have always done, with the same number of people and the same number of stores in the same type of location as they always have and just putting digital on top.
    GripIt Fixings signs global licence deal

    UK Building Products (trading as GripIt Fixings) has agreed to a worldwide licence deal with MarXman to manufacture, market and distribute the MarXman, a professional marking tool.

    The license agreement will see MarXman benefit from the international reputation of GripIt Fixings, which exports to 34 countries and has a presence in 5,000 UK stores (including Wickes, Screwfix, Currys, B&Q, Selco and Jewson) and 15,000 stores across Australia, New Zealand (Bunnings and Mitre 10), Canada and the USA (Home Depot).

    MarXman is a tool designed to quickly, easily and clearly mark almost any surface - from tiles to pebble dash, walls to wood or metal, ready for drilling or fixing. It can take the time and frustration out of marking a reference point for fixing or drilling. Founder and CEO of Gripit Fixings Jordan Daykin told Torque-Expo:
    MarXman is a truly innovative product that appeals to tradesmen & DIYers across the globe. Its ability to deliver a simple solution to a common problem aligns with the GripIt philosophy...

    MarXman founder, Martin Chard, said:
    When you consider the success of Gripit Fixings in the UK and overseas, we are very excited about the opportunities this license agreement presents for MarXman and its growth and recognition globally. Our ambition is for every tradesperson and DIYer to have a MarXman in their tool kit.
    USA update
    Home Depot focused on omnichannel initiatives in Q1
    HNN Sources
    The National Hardware Show gets new branding
    A look at True Value's last report as a retail co-op
    Give to Amnesty International
    Marvin Ellison will take on the chief executive role at Lowe's; Home Depot misses first quarter expectations but remains focused on interconnected retail; the National Hardware Show updates its logo; technology recruitment at Home Depot is strategic; True Value reports on its 2017 financial report; and Hillman Group launches its KeyHero system.
    Lowe's names new CEO

    Marvin Ellison has been appointed president and CEO at Lowe's Companies and will join its board of directors. Mr Ellison succeeds Robert Niblock, who previously announced his intention to retire.

    A 30-year industry veteran, Mr Ellison currently serves as chairman and CEO of American department store chain J.C. Penney Company. He also spent 12 years in senior level operations roles with The Home Depot, where he served as executive vice-president of US stores, where he oversaw US sales, operations and Pro strategic initiatives.

    Marshall Larsen, lead director of the board at Lowe's, said:
    Attracting Marvin is a great win for the entire Lowe's team. Marvin is an experienced retail CEO with extensive expertise in a complex omnichannel consumer-facing company. He also brings significant experience in the home improvement industry, with a proven track record of global operational excellence and driving results from both DIY and pro customers. Marvin joins Lowe's at a critical inflection point as we work to enhance our competitive position and capitalise on solid project demand in an evolving consumer environment. We look forward to shepherding an exciting new chapter for Lowe's under Marvin's leadership.

    As Mr Ellison joins Lowe's, he leaves behind a department store retailer in the midst of a turnaround plan that has never quite gained traction.

    At Lowe's, he will find himself in one of retail's brighter spots, where he will predominantly be tasked with making good on the business' broad promise: To help customers love where they live. In order to do that, analysts say Mr Ellison will need put together a business strategy that carves out a distinct identity to set it apart from The Home Depot.

    According to Jefferies analysts, Mr Ellison's previous stint at The Home Depot should be a huge asset, "especially given his focus on store operations, logistics, the Pro, and customer service, all areas that we believe Lowe's needs to improve upon". In emailed comments to Retail Dive, they said:
    The Lowe's brand is solid, its stores have been maintained, pricing is competitive and its balance sheet is strong. However, it does need some shepherding to get it on a path toward stronger growth and higher profitability.

    Neil Saunders, managing director of GlobalData Retail, said any new plan should focus on Lowe's identity as a core DIY retailer. He told Retail Dive:
    It could, for example, develop more of a compelling proposition around indoor decorative projects. Not only are these activities year-round, but they also necessitate a much more inspirational and compelling product mix and store environment. While Lowe's has already made progress in store, including the increased use of specialist advisors, we maintain our view that it has not yet fully capitalized on the opportunity.

    As Mr Ellison's plan comes together over the next few months, Jefferies analysts predict focusing on Pro will be the "single biggest opportunity for Lowe's".
    Mr Ellison was part of developing that winning strategy at [Home Depot] and was closer to the playbook than probably any other candidate for this position. Hence, his ability to adapt key learnings to the Lowe's situation, while maintaining a separate identity, is important and should prove pretty interesting.
    National Hardware Show 2018

    Hardware and home improvement professionals gathered once again at the Las Vegas Convention Center for the 73rd edition of the National Hardware Show (NHS). Rich Russo, vice president of the NHS, said:
    ...With three busy days full of excitement and enthusiasm, we were thrilled to see such a great turnout and hope everyone left feeling inspired by the ideas, best practices, insights and new connections made at the 2018 National Hardware Show.

    As always, a key focus for all who attended were new products and there were several areas where their latest innovations and developments were on display. The educational seminars at the North American Retail Hardware Association's (NRHA) All-Industry Conference were also a popular area for many attendees.

    The Ultimate Backyard was brand-new area that offered a chance for attendees to find outdoor living products in their natural environment: outdoors. The adjacent Tailgate, Backyard & BBQ area has continued to grow each year, and included food, games and music. It gave attendees the chance to experience products in a more interactive way than they might on the show floor.

    Operation Tiny Home also joined the NHS family this year to showcase the trends in tiny and container home construction and raise awareness about housing instability.

    As the popularity of smart home products continues to rise, the NHS provided a new interactive way for attendees to learn more with its Smart Home Virtual Reality Experience. This display offered a virtual reality tour of a fully equipped smart home.

    Attendees who wanted to find "the next big thing" in the home improvement industry could check out Inventors Spotlight to see over 200 new inventions. Inventors also had the opportunity to pitch their products and meet with buyers and potential investors.

    This year, the Featured Product Gallery included New Product World; the Lawn, Garden & Outdoor Living Awards and the Homewares Awards display. Other product areas were the New Product Launch and Made in USA.

    Pet Products continues to be a growing category, and it was a highlighted one at this year's NHS. One trend exhibitors are seeing is that consumers want products that are more natural.

    The International Sourcing area represents how the NHS draws professionals from all over the world. It included exhibitors from China, Hong Kong, India, Korea, Taiwan and Pakistan. Attendees could also find other international exhibitors throughout the show floor.

    The NRHA Village Stage was home to a full slate of industry presentations, exploring everything from competing online to cybersecurity to competing online to managing retailer-supplier relationships.

    The 2019 National Hardware Show will take place May 7-9 in Las Vegas, Nevada (USA).
    Home Depot invests in omnichannel in Q1

    The Home Depot is doubling down on its interconnected strategy, after missing expectations in its first quarter 2018, but e-commerce sales fared well.

    The home improvement retailer reported sales of USD24.9 billion, a 4.4% increase from the same quarter of 2017, while analysts were expecting revenue of USD25.15 billion. Comparable sales for the quarter were up 4.2%, while US comp sales were up 3.9%, both missing analyst expectations.

    Home Depot blamed extreme winter weather in the quarter, which it said had a negative impact on garden, a category which historically represents around 15% to 20% of Home Depot's first quarter sales.

    The big box retailer invested USD144 million in the quarter, putting the money into increased wages, increased advertising as it moves to a more marketing technology platform; and increases in display cost. In addition, the company has hired around 350 people in its IT department.

    Online sales grew approximately 20% from the first quarter of 2017. The retailer said 46% of its online orders were picked up in a physical store in the first quarter.

    Home Depot is seeing buy online, deliver from store customers trying out its car and van delivery service. Load 'N Go is an hourly roundtrip vehicle rental service that uses cargo vans capable of carrying up to 3,000lbs (1360kgs). The program is intended for rentals of one to two hours but can also be rented at a daily, weekly, or monthly rate.
    Omnichannel initiatives

    Home Depot's omnichannel strides during its first quarter included launching the ability to attach install services when online shoppers buy certain products. For example, in certain markets, if a shopper buys a faucet online they can choose to include the installation of the faucet in their purchase.

    Home Depot has implemented an enhanced "wayfinding sign and store refresh package" in nearly 250 stores during the quarter, something it's rolling out over the next two years across all the stores. The retailer is also putting lockers in the front of its stores for pick up, with plans to add about 1,000 lockers this year, and is adding some bigger holding areas for bulkier items near the front of the store.

    Home Depot has plans to pilot its first new supply chain facility starting this year. Craig Menear, chairman, CEO and president, said:
    As we continue to make the shopping experience more convenient for our customers, another area of focus and differentiation is our supply chain. The flexibility of our supply chain is a competitive advantage, particularly when unpredictable weather results in spiky demand patterns.
    True Value posts final report as co-op

    Retail co-op, True Value has released its final annual report as a co-operative, reports Hardware Retailing. The company recently announced the sale of 70% of its stock to private-equity firm ACON Investments and its plans to transition away from the co-op business model.

    In 2017, True Value's revenue was about USD1.49 billion, down 1.7% compared to the prior year. The slight revenue decline was "primarily due to product sales related to the net change in participating retailers," according to the company.

    In addition, comparable store sales were down "as weather related categories were lower by 1.6% compared to the prior year," said the company.

    Based on the 1,700 retailers who provided point-of-sale data, comparable retail sales increased 0.8%. Stores that participate in the Destination True Value program experienced retail sales growth of 1.9%. E-commerce sales were up 21%.

    The company signed 59 new core hardware stores in 2017 and 52 international and specialty stores. The company also had 27 retailers convert to True Value from other buying groups.

    The co-op had 4,311 member stores at the end of 2017, a decline from 4,392 at the end of 2016.

    Sales to new stores increased by USD29.6 million. However, lost revenue from terminated stores was USD47.5 million. The company said:
    New ground-up store activity was consistent in both count and dollar volume to last year. However, due to competitors capitalizing on sale rumours, the company experienced a lower level of conversions from other buying groups to True Value in the second half of 2017.

    True Value moves out of retail co-op model - HI News Vol.4 No.3, page 69
    Home Depot builds IT as strategic advantage

    Home Depot is hiring about 1,000 technology employees by the end of 2018, the biggest technology-focused expansion in company history and a sign of the growing strategic importance of IT to the business.

    The employees will ultimately report to Matt Carey, the company's chief information officer (CIO), and will focus on supporting an USD11.1 billion three-year strategic investment, which includes building new software and digital solutions for areas ranging from self-checkout to supply chain and website-focused personalisation.

    Home Depot is hiring for positions such as software engineers, user experience designers, product managers and systems engineers that support the flexibility for cloud and on-premise platforms, said Mr Carey.

    They will work at the company's technology centres in Atlanta, Austin and Dallas. About 90% of the software the company runs is already written by in-house engineers, he said.

    Home Depot chooses to build technology in-house instead of working with third-party vendors because the business is vastly different from most brick-and-mortar retailers, according to Mr Carey.

    Many products in-store are delivered by rail and need to be lifted with heavy equipment, for example. Home Depot in many cases acts as a general contractor for customers considering projects such as kitchen renovations. The technology needed to support such aspects of the business is difficult to scale with a third-party technology vendor. Mr Carey said:
    Those things really don't look like retail as most people know it. The ability to connect our software developers with those business problems at a deep level is where we create competitive advantage.

    The new employees will help build technology to support several specific initiatives. One initiative includes outfitting self-checkout counters with customised point-of-sale software that's intuitive for the customer.

    Another involves building software for a mobile app that allows employees to see their upcoming work schedule. The company is also enhancing the personalisation of its website and improving user experience by using data analytics to help customers quickly find what they're looking for. Mr Carey said:
    It's all about connecting a person as quickly as possible to the product they're looking for in the world of the web.

    Another initiative is aimed at building out machine learning algorithms to help categorise different home furnishing styles for the company's new decor business. That way, people could help shop for a specific room in their house based on products that fit into a specific style, such as a modern or traditional.

    The company is also building out new technology to support an expansion of its same-day delivery and two-hour delivery program, which requires software to support the supply chain. All of the initiatives were driven by customer and associate feedback. Mr Carey said:
    The closer we listen to those customers and fulfill what they're telling us they want and need, that's how we can compete.
    Hillman's digital platform for keys

    The Hillman Group and UniKey have partnered to launch KeyHero[tm] that transforms mechanical keys into a virtual key ring.

    KeyHero allows a consumer to backup a digital copy of their mechanical key on the KeyHero smartphone app. This allows them to recall it later to make a physical key at any hardware or home improvement store using the KeyHero technology.

    KeyHero creates a secure backup and offers the flexibility of digital key sharing. The app's multi-layer, military grade security means that no image or physical location is saved, according to the company. Only a Hillman key cutting machine can read the encrypted code. Phil Dumas, founder and CEO of UniKey, said in statement:
    We are thrilled to be partnering with an industry leader such as Hillman and excited to bring this technology to market, as it truly represents the bridge between the physical and digital key worlds.

    Greg Gluchowski, president and CEO of The Hillman Group, said:
    ...KeyHero creates a platform for consumers to safely manage their mechanical keys in a digital world. This innovative solution, leverages Hillman's 60+ years of experience in key cutting technology with UniKey's best in class digital access control platform.
    Mr. Dumas and I have a history of developing innovative security technologies together. While at Spectrum Brands HHI, we worked with Phil and the UniKey team to develop Kevo for Kwikset, which was the first Bluetooth enabled deadbolt on the market.

    Over the next year, The Hillman Group plans to roll out this new digital platform across its large key duplication network, starting with a limited release in Florida and Colorado.
    HI News V4 No. 3: Future tools and Oldfields
    Download the latest issue of HI News Vol. 4, issue no. 3
    HI News
    As power tools change, so should retail channels
    Bunnings has a new tagline in the UK
    Give to Amnesty International
    The possibility of an Uber-like disruption to the power tools category is not a popular notion in the hardware industry but the time to discuss it is now. We explore renting tools as a future option for power tools in this issue.

    Simply click on the following link to download this edition:
    HI News V4 No. 3: The future of tools and Oldfields

    Included as part of the power tools feature is a transcript from Joe Galli, the CEO of Techtronic Industries, home to the Milwaukee and Ryobi brands. He talks about new product releases as he presents the company's 2017 results.

    In other stories, we provide a preview of the 2018 HBT conference in Adelaide, and report on the latest numbers of entries and exits in hardware retail.

    Bunnings' conversion of Homebase stores in the UK has stopped while Kingfisher experiences growth through digital and addresses the gender pay gap.

    In the US, Lowe's Robert Niblock is stepping down as CEO and True Value makes a deal with private equity.

    Companies featured in our regular Supplier Update include Fletcher Building, Knauf, Brickworks, Duluxgroup, Philips Lighting and Jeld-Wen, There are products from De-Walt, Worx and Crescent.

    This edition also includes a profile of paint accessories maker, Oldfields.
    Oldfields: A rightful share
    Richard Abela, CEO of Oldfields
    HNN Sources
    The writing on the wall: a slogan at Oldfields
    Workers gathered outside Oldfields' Campsie factory, 1927
    Advertisement for How to Hire, Train and Keep the Best Employees
    The late twenty-teens in Australia have seen a range of smaller Australian hardware-associated businesses finally give up on their plans to continue manufacturing goods in Australia, and turn to sourcing more of them overseas. One of the better known is GWA Group based in Adelaide. In what can only be described as a truly gracious move, the former CEO admitted that he had done some things that were not optimal, found a replacement CEO in Tim Salt, and set the company up to continue to recovery, if not yet complete success.

    The recipe that Mr Salt applied is something of a familiar one. He restarted innovation, research and development, especially in the Caroma brand of sanitaryware, controlled costs, and boosted the overall image of the brand.

    Richard Abela, who took over as CEO of the legacy paintbrush firm Oldfields in early 2017 has followed something of the same path as he has worked to revitalise what had become a small ASX-listed company balanced on the edge of a very precarious P&L. Like Mr Salt, Mr Abela turned to research and development, setting about to build what the company would describe as one of the best possible paintbrushes for professionals on the market today.

    However, he has taken the company much further than that as well, seeking overseas markets for products such as its scaffolding, and moving sales of its shed business to a direct online model.

    While HNN is fairly sure that Mr Abela has not read the books written by modern startup guru Eric Ries (author of The Lean Startup, and The Startup Way), it is interesting how much of what he has done at Oldfields bears a strong resemblance to the strategies that Mr Ries recommends. One fundamental of that kind of startup thinking is simply that a company is nothing without a customer base, and that the only way to find out what customers want is to involve them in the development process and not just by asking questions and hearing the answers. As Mr Ries points out (frequently and with some force), customers are seldom able to really articulate what it is they want. To work out what that might be it is necessary to not just listen to them, but also to watch their actions and reactions.

    It is, we could say, management by doing, rather than management only by meeting and consulting. It takes about five minutes of being in the same room as Mr Abela to grasp that he is strongly committed to this kind of doing.

    When HNN met with Mr Abela it was January, and we trekked through the simmering heat of a Sydney summer day to meet him at the neat, modest factory where Oldfields continues to produce some of its products. He began our conversation by telling us about the new line of brushes the company had launched and how well they were doing in the market.
    The brush that was launched last year has gone really well. It s really exciting for us. We launched it in November 2017, so the pickup has been very, very encouraging. We are already out of stock of one size... And we ve been having conversations with people about brushes that we haven t had for a long time.
    The good news is it s coming from the trade. These are the guys who are using it and if you recall at our launch, we had trade people together with store owners and they are the ones providing that feedback.
    We really went out there to say that Oldfields is back and I think that is the truth. We will continue to push that story.
    In months and years to come it will be an ongoing story... Now we will go through our whole range and there may be some adjacent products launched in the future. I was out in the back yesterday and I saw that our warehouses are now struggling to keep up. That is really great, a good problem to have.
    So we are under some pressure to get orders out. And it s different because historically if we were largely in the DIY market the demand might be prior to Christmas, but now it s the New Year when all the tradies are back at work. It s a shift back towards our core, and what we are traditionally good at. The tradies seem to be saying, We are so glad to have Oldfields back . It s not about us necessarily, but they are buying the brushes and saying this is great .
    Momentum has really started to kick in, replenishment orders are starting to flow in. The stands that we developed, there are now 180 of those in stores across Australia. We didn t have them eight weeks ago. There s a couple hundred more to go and in our pipeline, then there s another couple hundred more to go out. People are trying it, they are liking it, and they are coming back.
    It s a journey back. We re not all the way back in five minutes, but the journey back has commenced. For us, this is long-term. This is the first year of a five-year plan.
    The good news is the first step has been good. We are not sitting here saying we re in just five stores or six stores; we are already in over 120 stores. Soon we should be in 250 stores. That rollout is gaining momentum and that s partly because we do have the history and the legacy. We have a great roller product so to match the brushes up now is really quite exciting. It is taking hold. Even industry experts are saying so.
    It s rewarding and all that but we ve got a lot of work to do. It s good to know that the investment we made sends us back to our core, and the target person which is the tradie is saying this is great .

    While very pleased with the first indications of success in the new strategy, Mr Abela is also very quick to indicate that much of that success (as with GWA Group) is not entirely due to him, as the process was started by the previous CEO.
    It was about a two-year process. And I ve only been here about 13 months, so my predecessor needs to take credit for the development of that. To a large extent that s my predecessors doing. Tony Grima needs credit for that. My predecessors, when we went through a tough time, did all the hard work to get us into a position where I can grow. I am fortunate enough that both those guys worked really hard and they got us into a position of a low cost base and I am the beneficiary of their hard work. So I can now grow that.
    But it s also a re-positioning of where we are. There is no doubt that this business and many others like this business, were seduced by the big boxes. But to be honest with you my realisation when I arrived was that we largely had a homogenised market. We really did have white bread in a white bread shop.
    It s a particular kind of philosophy, you can have any bread you like as long as it s white. And for me, that s not what Oldfields is. Oldfields is trade traditional. Yes, there are segments of that market that are disposable and certainly we can deal with that, but that s not our core.
    Having said that, that [low product cost] discipline is not lost. So the cost savings must continue. For us it s a continuously competitive environment, so the discipline that they instilled must continue and it is continuing. We are adding more costs now because we want to grow, that comes with growth, but it doesn t mean we lose focus on costs.

    Though Oldfields did take the decision to not be a preferred supplier with the Metcash-owned Independent Hardware Group (IHG), Mr Abela is quick to point out that this was not a question of slamming the door on that relationship or that kind of business. Overall his concern seems to have been that concentrating solely on price discount and the ultra-lean production processes that go with it would not be good for a company that really needed to start standing up and presenting a clear, understandable identity to the market.
    We headed down that road [in the past] and strategically that may have given us some volume but now it s not where we want to be. And so we made a decision early 2017 to not exit that market completely but that s not where our focus needs to be...So we did break some relationships with retailers who wanted to take the whole thing off us and we have to make commercial decisions for our shareholders and for our employees and our community, which is our trade community. And we made those tough decisions.
    The good news is we re back now to where we wanted to be. It s taken a year and it will take another year before we are even stronger. But the margin is strong and we are heading in the right trajectory of where we want to be. So we are not on the path of this forever cycle of debating with buyers and big chains who want it 5% cheaper each year.
    There is nothing wrong with seeking cost savings but not to the point where it starts destroying you. And I think for us, getting back to our core has been very very important. So that s what we ve done.
    Download article

    This is only an introduction to this article. To read the full article, please download the PDF of HI News Vol. 4, No. 3 at:
    HI News 4-03: Richard Abela restores Oldfields
    Big box update
    Bunnings has a new tagline in the UK
    HNN Sources
    The fire to Bunnings' Inglewood store has raised questions about additions to its Balcatta outlet
    Bunnings appeals against a development in Keperra (QLD)
    Click to visit the HBT website for more information
    Submissions have been requested from potential bidders for Bunnings' UK-based Homebase chain of stores as it reports on sales for the third quarter; and Bunnings store proposals and openings continue around Australia.
    Bids for Homebase as Q3 sales slide

    Wesfarmers has asked prospective buyers for Homebase, as part of the Bunnings UK and Ireland (BUKI) business, to submit initial offers, according to a report by Sky News.

    Sources told Sky News the conglomerate is putting together a large financial package for any new owner to help contend with BUKI's large losses. The value of the package has not been confirmed but there is speculation it could exceed GBP100 million (AUD184.2 million).

    Same store sales at BUKI's fell 15.4% in the third quarter - an acceleration from declines in previous quarters of 15.1%, 11.9%, and 4.3%. Total sales - which includes the impact of opening or closing stores - fell 13.5%. Wesfarmers said sales were impacted by storms in the UK in the quarter which cut foot traffic at Homebase stores. Wesfarmers said:
    For BUKI, better execution and improved trading results in the early part of the quarter were offset by unusually poor weather in March 2018, resulting in a decline in total sales of 6.5% (13.5% in local currency terms) for the quarter.

    This is in contrast to sales at Bunnings Australia and New Zealand which grew strongly with comparable sales up 7.7% in the quarter, compared to 6% in the same quarter last year, while total sales rose 9.1% compared to 7.4% a year ago.
    External consultants

    Sky News also revealed that Alvarez & Marsal, a restructuring specialist, has been called in to advise Wesfarmers on alternatives to a sale, including a Company Voluntary Arrangement, a mechanism that would see it closing many Homebase outlets. This would help Wesfarmers cut its financial liabilities.

    Investment bankers at Lazard are handling the sale discussions, and its involvement in the review of options for Homebase is notable because of its role in Wesfarmers' purchase of the chain in 2016.

    Archie Norman, chairman at British multinational retailer Marks & Spencer, also chairs Lazard's London operation. He has held separate roles with various Wesfarmers operations for years.

    Boston Consulting Group have also been tasked to advise the management team at BUKI led by managing director Damian McGloughlin.

    Private equity firms, including Hilco, Endless and Lion Capital, as well as bargain retailer B&M, are also considering a bid for the business. It is unclear at this stage whether any bid would be for the entirety of the business, part of it, or in B&M's case, a chunk of Homebase's store estate.
    Switching things up

    Recently, BUKI completed a change of its tagline from "Lowest prices are just the beginning" to "Your home improvement and garden centre". It has updated all exterior signs to educate UK shoppers about Bunnings' offering.

    The retail group said the change is based on customer feedback and that it will still offer low prices, but it wants to show customers what it actually sells through its marketing.

    The new management team has also set about rejigging its product range to appeal to British shoppers. Mr McGloughlin told Horticulture Week:
    Customer feedback is really important to us and as we continue to establish the Bunnings brand in the UK and Ireland, we are updating our tagline and building signage to showcase our great range of home improvement and garden products. We remain committed to delivering the widest range, best service and our policy of lowest prices, backed by our Price Promise Guarantee.
    Plans for more Bunnings stores underway

    Bunnings's latest stores are being planned for South Australia, New South Wales, Queensland and Western Australia. The recent fire that destroyed the Bunnings store in Inglewood (WA) has amplified concerns about fire risk for proposed additions to the hardware chain's Balcatta store.

    A former Bridgestone factory in Edwardstown (SA) will be converted into a $45 million Bunnings Warehouse. Building has started and the new Bunnings is expected to open in the first half of next year.

    Bunnings general manager - property, Andrew Marks told Adelaide Now the company was still deciding what to do with the former TAFE site just 2km from Edwardstown on Goodwood Road, Panorama, where it had previously planned to build a store.

    Mitcham Council's planning panel rejected that project, following backlash from some residents. The Marion store located within the Westfield complex would remain open, Mr Marks said.

    Southern Business Connections chairman Greg Garrihy said the Bunnings development will help strengthen Edwardstown's position as an employment hub and help offset manufacturing job losses.

    Big box update: Bunnings rejected in Panorama - HNN
    Port Macquarie

    Bunnings hopes to commence construction on its proposed store in Port Macquarie (NSW) soon and anticipates it will be completed in 2019.

    The Northern Joint Regional Planning Panel approved an application to modify a bulky goods premises and hardware and building supplies development at 18 John Oxley Drive.

    Bunnings is awaiting official documentation from the planning panel which confirms its decision for a Bunnings Warehouse in Port Macquarie. Mr Marks told Port Macquarie News that once confirmed, the Bunnings Warehouse Port Macquarie development would represent an investment of more than $43 million for the land, construction, fit-out and stock.

    The new Bunnings store will replace the outlet on nearby Lake Road. The modified application includes re-positioning of each building, floor area changes and minor modifications to the car park.
    Kembla Grange

    A Bunnings store is proposed for Northcliffe Drive in Kembla Grange (NSW), which will be considered by the regional planning panel. It is set take up almost a third of a 40,000sqm site, with parking for 415 cars included in the plans.

    The proposal includes a large roundabout at the intersection of Northcliffe Drive and the Princes Highway, which will eventually form a major access point into residential areas of West Dapto.
    Warwick (QLD)

    Signs of construction on the Bunnings Warehouse in Warwick (QLD) can be seen the first bricks being laid. The Warwick Daily News reports that a brick wall about four metres high has been built on the Canning Street site, which spans about 7000sqm.

    Real estate agent Helen Harm said she did everything she could with the funds available to stop the development. Concern about the potential damage caused by flooding is still on Mrs Harm's mind. She said:
    You can't put a two-acre island in the middle of the flood stream and expect nothing to happen, it's unrealistic.

    Mr Marks said a design was developed based on a flood report.
    As part of the development application for the new Bunnings Warehouse Warwick, a flood report by a qualified engineer confirmed the design requirements for the project. These will be adhered to.

    The store is expected to open in late 2018.

    Big box update: Flood concerns continue over Warwick Bunnings - HNN

    Bunnings is likely to return to Inglewood (WA) following a fire that burnt the Beaufort Street store burnt to the ground in late February. Arson Squad has determined the blaze was not deliberately lit.

    Bunnings chief operating officer Debbie Poole confirmed the company was "continuing to work with the landowner to rebuild the Bunnings Inglewood store", according to Community News.

    The fire to its Inglewood store has also raised questions about additions to the Bunnings Balcatta outlet. The big box retailer has sought approval from the Metro North-West Development Assessment Panel for various changes including extending its timber trade sales area and enclosing the building materials and landscape yard.

    A report by the City of Stirling recommended approving plans for changes to the garden centre, hardware showroom, parking, landscaping and signage but refusing the timber trade and building materials yard additions because of bushfire risk.

    The report said the site was in a bushfire prone area and the bushfire management plan and bushfire emergency evacuation plan submitted by the applicant "failed to adequately convey an alternative solution to demonstrate compliance" and had many inconsistencies.

    It said there was not sufficient justification for the location of the structures so approving the extension would represent a "high to extreme risk".

    Burgess Design Group associate director Mark Szabo presented on behalf of Bunnings and said the changes would increase safety because the open timber sales area would become enclosed and described the fire risk area as "small bush" in a road reserve.

    Bushfire behaviour analyst Mike Scott, of Bushfire Prone Planning, also spoke on behalf of Bunnings and told the panel there were "minimal" fatalities from building fires in the past 100 years and the non-combustible materials used in the proposed structure would reduce the risk of a building fire.

    Construction is about to begin on Bunnings' four level store on Breakfast Creek Road in Newstead (QLD), The Courier-Mail reports.

    With a total floor area of more than 17,000sqm over the four levels, the Newstead store will be more than double the size of a typical Bunnings, which generally come in at about 8000sqm.

    The mixed-use site, located about 4km from the CBD, will consist of a basement carpark, the main warehouse, outdoor nursery, bagged goods area, cafe and timber trade sales area, and will also feature six street-level tenancies for retail or office space, totalling just under 1600sqm.

    Bunnings purchased the original site in 2011 and the initial development application (DA) was rejected in the same year. A revised DA for the new-look store was submitted in 2014 and approved last year.

    Big box update: Bunnings builds multi-level site in Queensland - HNN
    Bunnings store network continues to grow

    Western Australia had three new Bunnings store openings while customers were welcomed to individual stores that opened for business in NSW and QLD. The Canberra Airport store is expected to open in late May. The big box retailer is also negotiating with Brisbane City Council about a housing estate in Keperra (QLD) which it believes will have "adverse impacts" on its newly opened warehouse store.
    Gregory Hills

    Legendary racing driver Dick Johnson helped to officially Bunnings' new store in Gregory Hills (NSW) at the site of the former Masters outlet. The $41 million warehouse store spans over 13,000sqm. Complex manager Ben MacDonald said the Bunnings team had been active in the community prior to the opening.

    Bunnings' new $40 million store in Keppera (QLD) has opened recently. The 17,000sqm warehouse is one of the retailer's larger outlets, and is almost 30% bigger than its 13,000sqm store in Stafford.

    Bunnings has also agreed to meet with Brisbane City Council ahead of a court hearing to resolve the big box retailer's appeal against the Brookfield Residential Properties (BRP) housing estate development which has been approved by the council.

    According to the Sunshine Coast Daily, Bunnings lodged an appeal in December, claiming BRP's development would cause "unacceptable adverse impacts" from stormwater entering adjoining lots, and the possible impacts from its business on homes in the development. It also cited conflicts with the rural and extractive industry zones, and said impacts on "local amenity and values" had not been adequately considered and addressed.

    The Keperra store backs onto the BRP site. Bunnings general manager - property Andrew Marks told the North-West News:
    We do not believe that Brookfield Residential Properties has properly identified how the proposed residential development will interact with the operation of our newly opened Keperra Warehouse in a compatible way.
    There are a number of issues such as lighting and noise impacts that do not appear to have been considered in their submission to Council.

    BRP's $313 million plan for the Keperra quarry site includes 700 homes and a 3000sqm shopping centre.
    Canberra Airport

    Bunnings $42 million store at Canberra Airport is expected to open its doors at the end of May. Mr Marks said the Fyshwick store would remain open and continue to trade as normal.

    There are currently four Bunnings stores in the ACT: Fyshwick, Gungahlin, Belconnen and Tuggeranong. The Canberra Airport will be the fifth store.

    West Coast Eagles footballer Josh Kennedy visited Landsdale (WA) to help open the Bunnings Wangara store. He joined the company's marketing and merchandising director Clive Duncan, operations general manager Debbie Poole, complex manager Marty Hornbuckle and staff at the store's official opening recently.

    The warehouse covers over 13,000sqm and includes an indoor timber trade sales area with a four-lane drive-through, flooring display, DIY workshop space, five kitchen displays, four bathroom displays, playground and cafe.

    Another West Coast Eagles player Nic Naitanui was guest of honour at the official opening of the new 14,000sqm Bunnings Warehouse in Bayswater (WA) recently. Complex manager Patrick Kelly said his team looked forward to continuing to help community groups in the future.

    The new $38 million Bunnings Warehouse Mandurah is located at 21 Kirkpatrick Drive, Greenfields (WA). Complex manager Von Soriano told Community News:
    Team members have provided assistance in local community projects such as donating equipment to help reduce safety hazards at the Mandurah Surf Life Saving Club, renovating the outdoor living area for volunteers at the Mandurah Volunteer Fire and Rescue and creating a play area for students from the Peel Development School.
    Supplier update
    Wesfarmers could be eyeing NZ group Fletcher Building
    HNN Sources
    German building materials firm Knauf offers to buy USG - but is rejected
    Philips Lighting is changing its name for the digital era
    Subscribe to HNN weekly e-newsletter
    Wesfarmers managing director Rob Scott has signalled he would look for new business to drive growth and this could include Fletcher Building; Brickworks flags off-shore buying; Jeld-Wen has acquired Australian window and door maker A&L; USG said a USD5.9billion takeover offer from rival building products manufacturer Knauf is inadequate; DuluxGroup ups the ante on digital with an AI-powered digital analyst; Philips Lighting intends to change its name to Signify; QEP has purchased a Queensland-based flooring company; and Briggs & Stratton' Resilient products will be on show at the upcoming Hire & Rental event in Brisbane (QLD).
    Fletcher Building takeover target for Wesfarmers?

    There is growing speculation that New Zealand's Fletcher Building has become a potential acquisition target for Wesfarmers. Sources close to the company have told Fairfax Media that Wesfarmers has bought a stake of about 3 to 4% in the construction and industrial materials company.

    Wesfarmers is expected to chase acquisitions in its industrials division after completing the demerger of Coles. The Coles business accounts for 60% of the capital employed across the Wesfarmers portfolio so the spin-off should free up funds to invest in existing and new businesses.

    The revelation of Wesfarmers' stake in Fletcher comes as the market anticipates where it will look to expand under managing director Rob Scott. When Mr Scott announced that he would spin off Coles into a separate company sitting in the ASX top-30, he said the supermarket chain was not growing fast enough to generate the kind of returns shareholders expected.

    He said carving it out would allow the company to drive growth at its remaining businesses and look for new acquisitions that promised the kind of growth Coles delivered during its decade-long turnaround under Wesfarmer's ownership.

    The potential attractions of Fletcher as a turnaround investment would potentially fit well with Wesfarmers' stated strategy. The Auckland-based company has been in crisis in recent months after cost blowouts at a string of construction projects led to heavy losses and it breaching debt covenants with its lenders.

    Fletcher's troubled projects include the building of Auckland's International Convention Centre for listed casino company SkyCity, which Fletcher estimates will lose it $410 million on instead of an intended $400 million to $500 million profit. The project is due to be completed about six months behind schedule in mid-2019, and SkyCity has indicated it will take legal action to recoup losses from Fletcher because of the delays.

    Fletcher's building and construction division lost $619 million in the first half of 2018, and the company ran at a loss of $332 million, down from a $310 million underlying profit in the same half a year earlier.

    Fletcher's business includes making building products, including under the brands Winstone Wallboards, Altus aluminium, and the road barrier supplier Australian Construction Products. It also has a number of retail brands selling trade and plumbing supplies inducing Tradelink, PlaceMakers and Calder Stewart Roofing, which could complement Wesfarmers' Bunnings chain.

    Fletcher is dual-listed on the Australian and New Zealand stock exchanges and is one of the largest listed companies in New Zealand. It has assets on both sides of the Tasman and a market value of NZD4.1 billion (AUD3.9 billion). However Fletcher's share price has fallen 45% since January 2017 and it is considering selling assets as part of a business-wide review.

    It is likely Wesfarmers would buy stock on an anonymous basis through a nominee entity and would only have to declare its holding once its stake reached 5%.

    Sydney-based fund manager Ellerston Capital recently took on a 5% stake on behalf of a secret investor in Fletcher Building. Ellerston said its stake of Fletcher shares, worth about $214 million at their current price, were "owned by third party account under the discretionary investment management of Ellerston Capital".
    Brickworks' offshore option

    Building products group Brickworks has begun looking into shifting some production offshore as it prepares to face higher energy prices. The company has warned that the surge in gas prices will add $20 million to its costs over the next few years that it will not be able to absorb.

    Brickworks has posted a net profit of $97 million on revenue of $396.2 million for the half-year period ending March 31 2018. The profit and revenue were down 6.7% and up 7% on the prior corresponding period (pcp).

    The company has warned that activity in the building industry was being hampered by "trade shortages and a lack of titled land". Managing director, Lindsay Partridge, told Fairfax Media:
    We're looking at alternative markets such as New Zealand and Malaysia. Malaysia already has a well-developed brick sector.

    Brickworks already sources some of its bricks from Spain, where the deep economic downturn has helped to make some of this product competitive. Mr Partridge said:
    Brick prices from Spain are very cheap, and back-freight prices are also cheap.

    The company was also facing the prospect of a lack of gas supply from 2025, on present indications, he said. Brickworks has contracted gas supplies until the beginning of 2020 but with supplies for 2019 priced at "76% above where we are today", Mr Partridge said. Similarly, the company was facing steep rises in the price of electricity.

    "On the forward price curve we are facing up to an 80% increase", he said of the outlook for the price of electricity.

    Mr Partridge's warnings came as the company said it was enjoying a "full order book" across the east coast of Australia, where builders have a long pipeline of work, with little change expected through to the middle of the year at least.

    Given the size of these projects, they will take some years to complete, with the prospect of continued buoyant activity for a few years yet, he said.
    Jeld-Wen grows footprint in Australia

    Window and door maker, Jeld-Wen has completed the acquisition of A&L, an Australian manufacturer of residential aluminium windows and patio doors. Founded in 1980, A&L has a strong reputation of supporting homebuilders and contractors. It has a network of manufacturing facilities and showrooms across the eastern seaboard.

    Jeld-Wen has acquired five other Australian-based companies since 2015. John Linker, senior vice president, corporate development and investor relations, said:
    A&L's excellent position in the first-time home buyer market expands the reach of our current product range and customer base. The addition of A&L's brand name expands our portfolio of leading Australian brands and supports our strategy to build leadership positions in attractive markets. We expect to deliver synergies through operational savings from the implementation of JEM [Jeld-Wen Excellence Model] and by leveraging the benefits of our combined supply chain...

    A&L was privately held by its founders. Terms of the deal were not disclosed. Jeld-Wen expects the acquisition to add approximately AUD130 million in annual revenue.

    In another recent development, Jeld-Wen president and CEO Mark Beck unexpectedly departed the company. According to a statement, Mr Beck and the board of directors decided to part ways "by mutual agreement". Kirk S. Hachigian, who chairs the company's board and preceded Mr Beck as president and CEO, will take over as CEO while a search for a new leader continues.

    News of Mr Beck's departure comes soon after Jeld-Wen reported that revenues for the fourth quarter of 2017 grew just 0.3% to USD976 million.

    Mr Beck, who joined Jeld-Wen in November 2015, oversaw the company's decision to go public. The company launched its initial public offering (IPO) in January 2017 on the New York Stock Exchange.

    According to filings with the Securities and Exchange Commission, Jeld-Wen is No. 1 in net revenue for residential doors in the United States, Australia, Germany, Switzerland and Scandinavia. In Australia, it owns the Corinthian, Stegbar and Trend brands.
    Knauf's offer to buy USG is rejected

    German building materials supplier, Knauf is seeking to take over the Chicago-based gypsum manufacturer USG Corp. It recently called on USG shareholders to pressure it to engage in deal talks by withholding their support for its board nominees.

    USG have rejected a USD5.9 billion bid by Knauf, arguing it undervalued the company. That was despite Warren Buffett's Berkshire Hathaway, which is USG's largest shareholder, offering to sell its 31% stake at that price, if Knauf clinches a deal for the entirety of USG.

    Knauf said in a statement that voting against USG's four board nominees would send a message that the company must engage in deal negotiations. USG has a staggered board, meaning only four of its 10 directors face a shareholder vote this year. It also has a "poison pill" defence available, preventing Knauf from launching a hostile bid.

    USG said its financial and legal advisors met with Knauf's advisors in one of several meetings between company representatives. It added that Knauf's campaign against its board was a tactic to push through what it called a "wholly inadequate, opportunistic" USD42 per share cash bid.

    In the meeting, Knauf's advisors suggested that USG consider providing at least limited additional information under a non-disclosure agreement, Knauf said in a regulatory filing. USG's advisors responded that the company would not do so, according to Knauf. USG chief executive Jennifer Scanlon said in a statement:
    Knauf knows this industry well and understands that USG, with our Sheetrock brand, is the crown jewel within North American building products, and to date has not indicated any willingness to pay full value to all of our shareholders.

    Knauf has so far resisted raising its bid further. It has argued that USG's share price has "dramatically and consistently" underperformed the market, and that the company would require significant capital investment to remain competitive. It has called its bid, which infers a 30% premium to USG's 12-month average closing share price, attractive.

    Knauf also said it had not decided whether to take up Berkshire on its offer. Berkshire's proposal is unusual, structured as a six-month option contingent on Knauf buying the rest of USG. Knauf would pay a USD2 per share upfront fee, or USD86.8 million, which Berkshire would keep if the six months expired without an acquisition. The option's exercise price would equal Knauf's eventual bid for USG, less USD2 per share.
    DuluxGroup makes more use of digital

    Paints, garden care and home improvement manufacturer, DuluxGroup, is increasing its investment into machine learning and algorithmic-based virtual assistance technology by signing an expanded partnership with Complexica.

    Nine months after announcing its initial investment into the Complexica Customer Opportunity Profiler (COP) system for its trade paints, texture coatings and protective coatings business, the company will now extend usage to its group digital capability team.

    Specifically, the plan is to integrate COP, which is based on Complexica's AI-powered digital analyst and sales assistance tool, Larry, with the Adobe Campaign Platform to drive more personalised campaigns for its brands, Dulux, Yates, Selleys and Cabot's. DuluxGroup group head of CRM, James Jones, said:
    Complexica's software will enable DuluxGroup to reduce the amount of time required to generate usable insights, increase our campaign automation capability, personalise our communications based on core metrics, and close the loop on sales results to optimise ongoing digital marketing capability.

    DuluxGroup started rolling out the Adobe Marketing Cloud more than two years ago as the centrepiece of its marketing technology stack to support its digital offering to customers across both B2B and B2C brands.

    Complexica director of customer engagement, Mike Costa, said DuluxGroup is a significant customer and said his team was looking forward to expanding the relationship across the digital space.
    Our next-generation Customer Opportunity profiler will provide DuluxGroup with the seamless ability to generate personalised campaigns using the advanced machine learning and knowledge discovery algorithms within Larry, the Digital Analyst.

    Initially, the original project (COP) was designed to help automate questions for DuluxGroup's sales team around which customers to visit and prioritise and what to discuss with each customer.

    Complexica managing director, Matt Michalewicz, said the new deployment is for Dulux's digital team, which has a goal of driving personalisation into their digital communications by better understanding was is the next-best conversation to have with each individual customer.
    From there, it's then about deciding whether that personalised conversation/message should be delivered via a sales rep or via a digital channel.

    Complexica pitches Larry as a form of Siri for business, using a combination of algorithms on big data sets to help with data-driven decision making.
    Corporate name change for Philips Lighting

    Philips Lighting is changing its name to Signify, shareholder approval pending.

    The Dutch company said the new moniker originates from the fact "that light becomes an intelligent language, which connects and conveys meaning". The company, however, will continue to use the Philips brand on its products.

    The Philips Lighting stock exchange ticker will remain LIGHT.

    The name change could also reflect the move by lighting vendors such as Philips to outfit LED lights, luminaires, and the lighting infrastructure with chips and sensors connected to the Internet. Vendors hope to turn lights into valuable information nodes, and to turn the lighting infrastructure into vital information networks linked into cloud computing systems.

    This Internet of Things (IoT) strategy would then position lighting vendors as gatherers and providers of data that will help run all typed of operations.

    LEDs magazine also speculates there may be another reason for the rebranding. The company's ownership split from former parent Royal Philips contractually required an eventual change. Royal Philips spun off Philips Lighting in an IPO in May 2016, at first retaining a large share which it has been steadily reducing. Royal Philips, which today focuses on healthcare, owned 18% of Philips Lighting as of late February 2018.
    QEP expands Australian operations

    Manufacturer and marketer, QEP has acquired the assets of PR Floors, a wholesale flooring distribution company established in Queensland in 1961. It provides a wide range of branded flooring products, tools, underlays, marine sealants and accessories. Chairman, Lewis Gould, said:
    We are extremely pleased to welcome customers and associates of PR Floors to the QEP family. The addition of six locations throughout Queensland to our fifteen existing Australian Flooring Supplies (AFS) stores throughout Victoria and New South Wales creates the largest distributor of its kind with an unmatched ability to meet the needs of the professional flooring installer throughout Australia. The acquisition will add efficiency, purchasing power, operational strength and geographic reach to our AFS operation.

    QEP Australia managing director, Bruce Maclaren, said:
    We have enjoyed a relationship with PR Floors and its founders as long-time QEP customers. Through this addition, we are excited to have the opportunity to expand the range of products and services available to PR Floors and AFS customers.

    Terms of the transaction are confidential.
    Briggs & Stratton to showcase Resilient range

    Briggs & Stratton will highlight its Resilient products at the Hire and Rental Industry Association's 50th anniversary convention, HIRE18.

    The Vanguard 200 is a single cylinder, horizontal shaft commercial engine. It includes an advanced version of TransportGuard, Vanguard's exclusive single ignition and fuel shutoff designed to prevent oil dilution during transport.

    Briggs & Stratton's Elite Petrol Generator is designed to provide users with a safe and reliable solution to get power in remote outdoor locations. The heavy-duty frame protects the generator and stands up to transport while the fuel-efficient overhead valve engine starts easily and runs smoothly to maintain power requirements.

    The Ferris IS2100Z with Oil Guard is a first-of-its-kind solution for the commercial turf market. Ferris mowers with the Oil Guard System offer an increased oil capacity of 4.7 litres, allowing cooler running, longer engine life and extended service intervals.

    Billy Goat's AE1300H Hydro Aerator improves hole quantity and quality due to patent pending variable aeration density (VAD[tm]), which creates 2-10 times more holes than drum models in one pass. The intuitive hydro-drive controls allow users to feather the speed and aerate in both forward and reverse with fingertip control.

    The Briggs & Stratton portfolio also includes the Victa brand. HIRE18 will take place at The Brisbane Convention & Exhibition Centre on May 30-31 2018.
    Indie store update
    The "local bloke" is no more at Ruralco
    HNN Sources
    Yolla Co-op impressed at AIRR's retail conference
    Heathcote Rural Merchandise has had the same owners for 25 years
    Click to visit the HBT website for more information
    CRT's "Your local bloke" message is being replaced in an era where women's roles in agriculture are acknowledged to be as significant as men's; Yolla Co-op is a highly "progressive" store; and Dave and Cheryl Thomas took over Heathcote Rural Merchandise 25 years ago.

    "Local bloke" cut from CRT branding

    Ruralco-owned CRT (Combined Rural Traders) branches across Australia will have the "Your Local Bloke" slogan removed. CRT general manager, Greg O'Neil, announced the decision at the group's annual conference recently.

    It has already disappeared from corporate advertising and the slogan will now gradually be removed from uniforms and store advertising at 500 locations around Australia as the branding is updated, he said.

    Mr O'Neil told conference delegates the word "bloke" was a problem when women were increasingly taking professional roles in agriculture. He said:
    It was felt that the word 'bloke' was limiting in today's environment.

    Ruralco managing director, Travis Dillon, believes the familiar "Your Local Bloke" message "has had its time". He said:
    Your Local Bloke is not a branding you would choose today if you were starting from scratch.

    Mr Dillon also said the Ruralco marketing team decided it was time for a refresh and that the slogan change was not motivated by political correctness. He told The Wellington Times:
    It's just unfortunate our timing has come around that of which political correctness is in the headlines. It is a discussion that has been going on within the company for years in order to make it more relevant to our customers and CRT members.
    The Local Bloke, while it has been part of the business since 1988, it's just not as relevant as it was before ... it's just not contemporary or fits with the profile or our business.

    Mr Dillon said it is unlikely the company will create a new slogan for CRT, instead a number of brands around rural Australia will be upgraded and refreshed in what will be rolled out as a staged approach.
    Not everyone will have to change overnight, it is a gradual upgrade over the years. In terms of stores, they'll be given a time frame to change it so we don't expect it will be a massive impact to our branches.

    However he admitted the news hasn't been well-received by all members of the group, some who have been a part of it prior to the slogan even being introduced. Mr Dillon said:
    I think everyone understands we need to have a more contemporary logo and that 'Your Local Bloke' doesn't necessarily represent our customer base anymore, so generally it's all been pretty supportive.

    During the past year it acquired "a portfolio of high quality businesses", including five CRT member sites in WA, NSW and Tasmania, with help from a $65 million capital raising a year ago. Mr Dillon said:
    We've looked to grow our base by attracting existing member businesses to come over to Ruralco, and we've also acquired businesses not previously part of the network.
    AIRR chooses most progressive store

    Yolla Co-op in Tasmania has won the award for Most Progressive Store for the second year running, at the Australian Independent Rural Retailers (AIRR) conference. General manager Peter Moore told The Advocate:
    This award for the best marketed store is voted on by suppliers around Australia. It's a great honour.

    Mr Moore credits Yolla Co-op's success to the relationships staff and management build with suppliers. He said:
    We run the largest in-store open day each year, where 60 national suppliers attend

    Yolla Co-op runs supplier information sessions and regularly sends staff to mainland Australia or New Zealand for training. Mr Moore explains:
    We are heavily into forming good relationships with suppliers. It's that commitment to work with suppliers in partnership and understand their objectives. This is recognition of what we do in the field and store and is a good indication of what we put into the store.

    AIRR group sales general manager Peter Lourey said the award was based on driving sales, promotional support, in-store merchandise, service and use of technology, and Yolla Co-op won "fairly resoundingly".
    Suppliers spend a lot of money to get in front of the end user and Yolla harnesses that exceptionally well. They really see the worth in partnering with suppliers to bring value to their customers. They're leading the way Australia wide.

    AIRR said it has 400 members in the group.
    Rural retailers celebrate 25 years

    Cheryl and Dave Thomas, owners of Heathcote Rural Merchandise in regional Victoria, have reached the quarter century milestone of operating the business.

    In March 1993, they moved from Dandenong to take it over. Cheryl told The McIvor Times that after 25 years, she is unsure if the time has gone fast or slow but sometimes it can be both. She said:
    It seems like a very long time when you look back on it, but then again time flies when you're having fun and we sure have had fun.

    When the couple took over, the newspaper ran an article in which Dave said they were "looking forward to getting to know the people here". Cheryl said he anticipated correctly that it is what they've enjoyed most about the job.
    The most rewarding and enjoyable part for us has been the people - the people you meet every day and what we have learnt from them and are still learning. The relationships you make out of a job like this mean a lot to Dave and I, some of them will last a long time.

    Cheryl was hopeful the milestone wasn't going to attract attention. She said:
    We were hoping it was going to just drift by!

    While Cheryl and Dave have enjoyed their time at Heathcote Rural Merchandise, Cheryl mentioned it hasn't always been smooth sailing.
    There have definitely been tough times, it obviously depends on the season, but the whole way through we have tried to stick to the positives and think about the good times because there have been plenty of them.
    New products
    The new ExoCore tools from DeWalt feature durable, lightweight carbon fibre composite handles
    HNN Sources
    Worx's Circular Saw with ExacTrack incorporates a tracking guide that enables accurate rip cuts
    Crescent (H.K. Porter) introduces new PowerPivot bolt cutters
    Click to visit the HBT website for more information
    DeWalt expands into sledge hammers and axes; Worx said its latest circular saw simplifies accurate rip cutting; the PowerPivot bolt cutters boast a double compound action system; and the Wiha e-screwdriver handles time-consuming screw-fastening.
    Axes and hammers from DeWalt

    DeWalt has a new line of seven ExoCore sledge hammers and three ExoCore axes, marking the company's first foray into this category.

    The sledge hammer range is designed to meet a variety of applications, from metal to drywall to driving a punch or chisel. The hammers are available in 6lbs (2.7kgs), 8lbs (3.6kgs), and 12lbs (5.4kgs) models with a 32" handle, and a 4lbs (1.8kgs) model with a 12" handle. A Blacksmith sledge hammer with a triangular head is also available. Each hammer features an efficient strike face and a carbon fibre composite overlay to mitigate damage to the tool.

    The ExoCore Axe range includes a camper's hatchet with a 12" handle, a 3.5 single bit splitter with a 32" handle, and a log splitter with a 32" axes. All of the axes feature a scalloped cutting edge, designed to ensure a deep cut and improved separation.
    Simple, accurate circular saw

    The Worx 20V 6-1/2 in. Circular Saw with ExacTrack can take the guess work out of straight line cutting by incorporating a tracking guide that enables accurate rip cuts.

    Weighing 6lbs (2.7kgs), the new Worx circular saw is compact and lightweight. It is powered by a 20V 2.0 Ah Power Share Max lithium battery and 3600 rpm (no-load) motor.

    It features a rubber overmould comfort grip and a spindle lock for fast and convenient blade changes. As part of the Worx Power Share program, the 20V 2.0 Ah battery is compatible with more than two dozen Worx DIY and lawn and garden tools.

    In addition to the saw, the kit includes a 20V 2.0 Ah battery, a 3-5 hour charger and a 24-tooth, carbide-tipped saw blade.
    More cutting power, less effort

    Crescent (H.K. Porter) has introduced its new line of PowerPivot bolt cutters. Featuring a compound action design, they can provide more cutting power, but require 30% less force to cut than traditionally designed bolt cutters.

    Blades are precisely ground then induction hardened for extended edge life and added ability to cut hard materials. Handles are made of tubular steel for extra strength and have durable rubber grips for added comfort and control.

    PowerPivot Bolt Cutters are available in five sizes with handle lengths of 14, 18, 24, 30, and 36 inches. All have been designed for high performance cutting capacity, both in diameter and hardness of materials.
    E-screwdriver promises fast work

    A new motor assisted screwdriver called the speedE from Wiha promises to halve the time users take to complete their work.

    An electric motor assists with fastening screws up to 0.4 Nm before disengaging to ensure that material is protected. The screw can then be fixed by hand with a deft touch, similar to a conventional screwdriver. An electric ratchet function assists users as they complete fastening.

    Thanks to its electric drive, the Wiha e-screwdriver handles screw-fastening at a rapid rate. This power transmission and torque control in electric mode brings a particular benefit to users for delicate screw-fastenings. An integrated LED light also ensures users are not left in the dark as they fasten screws.

    When fully charged, speedE can fasten electrically up to 800 times without re-charging the batteries.
    Retail update
    Bob Beaumont (centre) surrounded by his Beaumont Tiles senior executive team
    HNN Sources
    Beaumont Tiles eyes domestic and international expansion
    Australian housewares retailer, House has launched in the UK
    Click to visit the HBT website for more information
    Bob Beaumont from Beaumont Tiles has been in the business for 50 years; and House is providing a different proposition for the UK customer with an omnichannel experience.
    Global expansion for Beaumont Tiles

    Australia's largest tile retailer, Beaumont Tiles - Bunnings is the second biggest player in tile retailing - plans to grow its footprint in the country from 115 stores to 180 outlets and take its brand overseas. Most of the 65 new Australian stores will be franchised businesses, according to CEO and executive chairman Bob Beaumont.

    Mr Beaumont also believes home owners are spending an average of $20,000 on a full bathroom renovation which is helping to drive its robust growth. The company is importing 100 shipping containers full of tiles each week to keep up with demand, according to a report in Fairfax Media.

    Beaumont Tiles generates about 50% of its business from the renovations market and the other half from new home and apartment construction.

    However Mr Beaumont believes there has been slight cooling in the market and the company isn't likely to repeat the exceptional 12% growth in sales to $275 million that occurred in 2016-17. It was likely that rate of growth was the high watermark in this housing cycle.

    Mr Beaumont expects it to remain solid even if interest rates begin to rise this year but said a tapering was occurring in NSW. He said:
    Melbourne is still going gangbusters. We are seeing a slight tapering off in Sydney. Things are certainly coming off the boil a bit.

    Despite an expected slowdown, Mr Beaumont told Inside Franchise Business, "there is plenty of opportunity within Australia, and opportunity for sales within each store to grow as well". Staff development is the key to strong sales growth, he added.
    We already have very good marketing. I think we can develop our people to be stronger and better than they already are.

    This year the retailer is launching an IT system that is a base for future business. Mr Beaumont said:
    We plan to grow substantially over the next four to five years and then we can use this as a launch pad to extend the brand overseas.

    There are currently no specific countries targeted for expansion, but the team working on exporting the brand have pinpointed countries such as Malaysia and India as well as North America (ie. Canada) as potential regions. He said:
    We believe by bringing together the disparate parts of the business, particularly the IT this year, we can build on this package, transfer and adapt it. We will have to be flexible but strong enough to withstand any environment.

    Mr Beaumont identifies the challenges ahead to be developing a system that takes a client through the sales process to delivery and payment, integrating all aspects. He said:
    We also need to be able to plug in marketing, web, IT based training and payroll - any system in a different country. The big one is logistics but we're set up already with worldwide sourcing so its not such a big step there.
    House homewares kicks off in the UK

    Australian housewares retailer, House said its launch in the UK in April will see it initially open four stores and will be joined by a further two before the end of June.

    The first branch has opened at Westgate shopping centre in Oxford, followed by Bracknell in Berkshire and Meadowhall shopping centre in Sheffield. There are also plans for House to trade directly to consumers via its own dedicated UK website.

    It has ambitious plans to open 75 stores across the UK within three years. Steven Lew, founder and executive chairman of Global Retail Brands, owner of House, said:
    Visiting a House store will not be a 'me-tool' experience. We have a strong store presence, with both favourite brands and so much never seen before product launches.
    We are committed to showing our fresh approach to customer interaction. We want our customers to feel right at home when they come in to see us for cooking, dining and entertaining tips.

    Mr Lew added that the company is an "extraordinary advocate" of training its in-store teams, and has already secured its first UK-based training kitchen and learning facility. He said:
    Our teams must know our products 'inside and out' before they can interact in our stores with our customers...What better endorsement is there than a team member who uses the very product they are demonstrating to you?

    Mr Lew said it is also revealed that it has won the exclusive rights to launch a number of international brands into the UK that are not yet available.

    Europe update: Aussie retailer House in UK launch - HNN
    Europe update
    Screwfix mobile sales deliver for Kingfisher
    HNN Sources
    Bunnings store in Frome, Somerset (UK). The store conversion program has stopped until Wesfarmers' review in June.
    Kingfisher addresses the gender pay gap at its home improvement stores
    Click to visit the HBT website for more information
    Kingfisher experiences strong digital growth in the last financial year; there will be no more store Homebase store conversions in the UK until Wesfarmers' review has been completed; and the gender pay gap is acknowledged at Kingfisher.
    Digital delivers for Kingfisher despite profit fall

    Home improvement group, Kingfisher has reported that total sales increased 3.8% to GBP11.6 billion, up from GBP11.2 billion, for the year ended 31 January 2018. However it posted a 10.1% fall in annual pre-tax profits to GBP682 million, but saw underlying profits edge 1.3% higher to GBP797 million.

    Like-for-like sales were down 0.7% year-on-year at constant currencies, to GBP11.7 million.

    Its annual results has been impacted by softer sales from its UK chains, Screwfix and B&Q, in the fourth quarter. The slowdown was due to less demand for big ticket items - such as kitchens - as the housing market cooled and as consumers hit by higher inflation and stagnant wage growth cut back on spending.
    Screwfix digital

    Over the year, total sales at Screwfix grew by 16.7% to GBP1.5 billion and by 10.1% on a like-for-like basis, as mobile sales soared by 86% and click and collect by 38%. Sales from specialist trade desks exclusive to plumbers and electricians also grew. But in the fourth quarter, sales slowed to 7.1% on a like-for-like basis. By the end of the financial year, 60 new outlets were opened, reaching a total of 577. Kingfisher said it aims to have 700 Screwfix outlets in the UK.

    Screwfix continued to offset sales woes at B&Q, with price inflation also providing a boost.

    Sister company B&Q saw sales fall by 5.3% to GBP3.5 billion during the year, following a store closure program which has seen it shut 65 shops and cut around 3,000 jobs in the UK and Ireland over the last two years. Sales were down by 2.8% on a like-for-like basis associated with the store closures.

    However, digital sales grew by 11% to represent 4% of total sales. More than 33,000 B&Q products can now be collected via click and click, including 29,00 for one hour pick up.

    A new B&Q mobile app launched in September 2017 which "is delivering improved average transaction values", according to the company. The first of its digital home improvement services has also launched, including a bathroom planner tool.
    Castorama and Brico Depot

    Kingfisher trades as Brico Depot and Castorama in France. Castorama total sales fell 1.9% (like-for-like sales declined 2.4%) to GBP2.4 billion. Brico Depot total sales fell 4.2% (like-for-like sales declined 4.8%) to GBP1.9 billion. Across the two businesses, two new stores opened and one was revamped. Kingfisher said it is encouraged by the market in France, "although it is volatile".
    Other international sales

    Sales in Poland grew 6.3% (like-for-likes increased 5.3%) to GBP1.3 billion. Russia sales fell 3.7% to GBP391 million and Spain sales dropped 4.8% to GBP316 million.

    Romania, Portugal and Germany saw sales of GBP174 million. A further roll out of Screwfix Germany is on hold this year pending completion of the unified IT platform roll out.
    ONE Kingfisher progress

    Kingfisher is coming into the third year of a five-year transformation plan. More than 50% of its group sales now operate on one unified IT platform. Six per cent of sales took place online in its latest financial year, up from 4% a year earlier.

    There has been an 80% reduction of SKUs and suppliers as part of the "ONE Kingfisher" strategy. Kingfisher said "business disruption" knocked around 1.5% off its group-wide like-for-like sales as it was left with stock availability problems amid efforts to clear out old stock. But it had "acted on the root causes of business disruption".

    Chief executive officer, Veronique Laury insists her turnaround was beginning to bear fruit and said it was set to deliver a GBP500 million boost to annual profits by the end of 2020-21.
    BUKI store conversion halted

    The program that saw a number of stores (23) changing from Homebase to the Bunnings' format has stopped as Wesfarmers reviews what to do about staying in the UK. The most recent store openings have been in Somerset, Walton-on-Thames and Sprowston.

    Bunnings officially opened its doors in Frome, Somerset, replacing the Homebase store at Wessex Fields. Former skeleton racer and Olympic gold medallist, Amy Williams, helped to open the 47,000 square feet store.

    Complex manager, Mandy Wilkinson said Bunnings team members have helped with projects in the Frome area ahead of the official opening. These include painting a classroom for students at St John's First School and giving the doors of the local YMCA a fresh coat of paint.

    A new Bunnings store measuring 34,000 square feet has opened on the site of the former Homebase store in Walton-on-Thames, a large affluent market town located on the River Thames in the Elmbridge borough of Surrey. Kelly Smith, former England footballer, helped to launch the store.

    Bunnings in-store staff have assisted with projects in the local area including fixing the scout hut guttering for the Walton Sea Scouts and painting planters and repairing shed roofing for students at Walton Oak School.

    Bunnings' newly opened store in Norwich, Sprowston is among the first Homebase branches to be re-branded to Bunnings as part of the pilot scheme. To celebrate the opening, former Premier League footballer Grant Holt joined a welcome breakfast for team members.
    Kingfisher addresses gender pay gap

    Kingfisher has reported a 9.6% mean gender pay gap for fixed hourly pay across its 34,000 UK employees as at 5 April 2017. This is based on data across the retail group's four legal entities in line with the British government's gender pay gap reporting regulations. The entities Kingfisher has reported on include B&Q, Screwfix Direct, Kingfisher Information Technology Services and Kingfisher Corporate.

    Kingfisher has attributed its gender pay gap to the fact that it has a lower level of female representation in senior roles across the business. Typically, senior positions attract higher pay and bonuses and the majority of these job roles are currently held by male employees.

    To tackle its gender pay gap, Kingfisher is reviewing its employee benefits for parents, making more senior job roles open to flexible working and reduced hours opportunities, changing the way in which job adverts are written and introducing new programs to help support women returning to work.

    In addition, as part of the organisation's leadership development programs, Kingfisher will help leaders to understand the importance and benefits of building inclusive teams, as well as understand the implications around unconscious bias. The organisation has also signed up to the 30% Club, which aims to achieve having a minimum of 30% of women on its board.

    The gender pay gap reporting regulations require organisations in Britain with 250 or more employees to publish the difference between both the mean and median hourly rate of pay for male and female full-time employees; the difference between both the mean bonus pay and median bonus pay for male and female employees; the proportions of male and female employees who were awarded bonus pay; and the proportions of male and female full-time employees in the lower, lower middle, upper middle and upper quartile pay bands.

    Kingfisher's median gender pay gap for fixed hourly pay as at 5 April 2017 is 2.5%.

    Its mean gender pay gap for bonuses paid in the year to 5 April 2017 is 33.2%, and the median gender pay gap for bonus payments is 0.1% in favour of female employees. Over this period, 62.3% of female employees received a bonus payment compared to 60.7% of male employees.

    More than a third (37.3%) of employees in the highest pay quartile at Kingfisher are female, compared to 43.5% in the second quartile, 46.4% in the third quartile and 46.9% in the lowest pay quartile.

    Kingfisher is also considering ways to analyse its gender pay gap across the organisation internationally, as well as exploring how it can investigate pay gaps across different ethnicities and other characteristics. This is to ensure that the organisation pro-actively manages its pay fairly and equitably.
    USA update
    True Value strikes a deal with private equity
    HNN Sources
    Positive changes for a new CEO at Lowe's
    Home Depot has more than 100,000 shoppable products on Pinterest
    Click to visit the HBT website for more information
    True Value to enter the deal with ACON Investments; Lowe's CEO Robert Niblock will retire as soon as the company finds a successor; Home Depot and Pinterest expand "Shop the Look" feature with over 100,000 decor products; Lowe's has a new artificial reality feature in its mobile phone app; and a female-led paint company is taking it up to the corporate players in terms of environmentally-safe products.
    True Value moves out of retail co-op model

    A private equity firm has taken a majority stake in True Value that will shift the hardware retailer away from its co-operative roots that dates back to1948.

    Eighty-five per cent of True Value members voted to pass the deal, which will turn over 70% equity of the Chicago-based retailer to ACON Investments. Current members will keep the remaining 30% equity, as well as receive a USD196 million cash payout.

    About USD229 million of ACON's funds will be used to return 70% of retailers' capital, promissory notes and dividends. In an interview, True Value president and CEO John Hartmann Hartmann said the returned money would give store operators more financial flexibility.
    The concept of a co-op, which I'm very respectful of even though I've asked shareholders to move away from that, is that individuals came together as a group to do things they couldn't do on their own. The unfortunate thing is it traps their investment, their equity, in the company.

    The retailers who retain a stake in the new True Value can use the returned funds to invest in their business or use as they see fit. Mr Hatmann said:
    Our independent retailers operate in a very competitive space, so freeing up this capital is a really big deal. It allows them to reinvest in their stores, modernise their stores and invest in new stores.

    The retailer's day-to-day operations at existing stores will not change, at least for now. Members will continue to receive True Value merchandising and marketing support. In the future, a minimum-purchase threshold will entitle retailers to use the True Value brand in the store and in local media, as well as participation in the True Value e-commerce ship to store program. Mr Hartmann said:
    The partnership also will let True Value broaden its brand's reach by eliminating the requirement that anyone selling True Value products purchase stock. The company is now free to sell to anyone who wants to buy from us.

    Mr Hartmann acknowledges that members "have weathered some significant intrusions from very able competitors" including big box home improvement stores like Home Depot and Lowe's. He also concedes the company is "not 100-percent insulated from Amazon". But he remains optimistic that True Value has carved out a solid niche.
    Our stores are community-based, very convenient, small retail. A drone can't get you a hammer any faster than you can get it from your local True Value, and it can't mix your paint, either.

    ACON's investment was particularly attractive, Mr Hartmann said, because the firm already has investments in wholesale, retail and manufacturing - all three of which are part of True Value's business. In addition to its retail locations and wholesale distribution arm, the company also operates a manufacturing facility for its branded paint. In a prepared statement, Aron Schwartz, managing partner of ACON said:
    True Value is an iconic brand and one that we have long admired. We believe that independent hardware retailers are an essential part of our society, providing consumers and communities with unrivalled service and expertise. We share True Value's passion for helping to ensure that the independent hardware retailer thrives for decades to come, even as times change and the competition gets tougher.

    True Value currently has about 4,400 independent retailers worldwide and revenue of USD1.5 billion in 2017. It operates under the store identities of True Value, True Value Rental, Grand Rental Station, Taylor Rental, Home & Garden Showplace and Induserve Supply.
    Lowe's CEO stepping down, investors happy

    Robert Niblock is stepping down as chief executive of Lowe's Home Improvement, and according to a report in Bloomberg, investors are hoping a new leader can bring the mojo back to a chain that has spent years in the shadow of rival Home Depot. Seema Shah, an analyst at Bloomberg Intelligence, said:
    The market is likely excited for new leadership. It is hoping for a leader who can better capitalise on the macro tailwinds and drive improved bottom-line performance.

    Lowe's same-store sales growth has trailed Home Depot's for many years, weighed down by a focus on DIY customers compared to Home Depot's core customer base of professional contractors who buy more bigger ticket items.

    In the most recent (fourth) quarter, same-store sales grew by 4.1% at Lowe's, while Home Depot reported an increase of 7.5%.

    While both Home Depot and Lowe's have benefited enormously from the home improvement boom caused by increasing home values and the ageing housing stock in the United States, Lowe's has not been as adept at capitalising on that. Home Depot has also achieved better sales performances, thanks to better store locations because they are located in more lucrative areas than Lowe's. In addition, its earlier investments in e-commerce and more responsiveness to changing market trends through product assortment, has helped place Home Depot in a leading position.

    And Home Depot is not ready to cede any of its leadership. In addition to an aggressive move into appliances, an area where Lowe's leads it, Home Depot is roughly doubling its capital spending in the next three fiscal years to some USD11.1 billion on store remodelling and new technology to make store workers more productive and deepen their interaction with customers. (Last year, Home Depot's online sales rose 21.5%.) Mr Niblock said in December that Lowe's will increase its own capital spending to USD3.6 billion from 2017 to 2019.
    Strategy for improvement

    Lowe's executives have announced plans to get profits back on track through initiatives aimed at improving the in-store shopping experience. They also want to bring in more exclusive product partnerships like the one it announced with paint giant Sherwin Williams.

    The company has also reinvested in its workforce to increase motivation and performance; it has announced bigger bonuses as well as higher benefits packages for its employees. At the same time, Lowe's is expanding its supply chain by launching its first ever direct-to-customer fulfillment centre in Nashville.

    The home improvement retailer is expecting a growth in revenues of about 4% and same-store sales are expected to increase by 3.5% this year. Additionally, Lowe's is expected to build another 10 stores in the US in 2018.
    Home Depot expands decor strategy with Pinterest

    The Home Depot is doubling down on its interior home decor push, broadening its partnership with image bookmarking site Pinterest.

    The home improvement retailer said the partnership will "dramatically expand" Pinterest's visual discovery feature called Shop the Look, to include more than 100,000 new shoppable home decor products. That includes vanities, faucets, lighting, textiles, tabletop and interior decor, according to a press release.

    Shop the Look is meant to simplify the way Pinterest users can search and buy similar products to the ones featured in Pins.

    In an article in AdWeek, Melanie Babcock, senior director of agile marketing and social media at Home Depot, explains:
    In the past, a user would go to Pinterest, find a room scene they liked and see an item they really liked ... but now what? In order to find that item, they would have to go to another website and make a search describing it.
    On Pinterest with Shop the Look, they're taking all that extra work out. Customers can roll over hot spots and see an assortment ... hopefully, an exact match and others like it appear in the customer experience.

    Home Depot is now working with Pinterest to identify products in Pins whether they're from Home Depot or not to help that customer experience go from inspiration to discovery to sale in one experience, Ms Babcock added.

    Ms Babcock said that Pinterest is ideal for Home Depot because "it's a great place" for people to start home improvement projects "in a safe way".
    Home Depot has expanded our offering to consumers from traditional do-it-yourself to the home decor business. For us, our strategy with Pinterest was originally around an introduction to do-it-yourself projects and has evolved to drive awareness around soft goods...
    I have been Pinterest's No. 1 advocate at Home Depot for a number of years. Shop the Look is the first time we're able, as a retailer, to see the direct relationship between Pinterest and how it meets customers' need [for] discovery, which is why we're doubling down on multiple versions of types of ads and experiments with components.

    Pinterest debuted Shop the Look in February 2017; the feature combines computer vision and human curation to make recommendations. At the time, Pinterest said visual search was one of its most-used features, with hundreds of millions of searches every month.
    Video campaign

    Home Depot launched a video campaign on Pinterest in earlier this called "Built in Pins" that demonstrates the work for home improvement projects inside a pinned video. The Pins feature how-to guides and tip-sheets for the projects and are fully shoppable. Ms Babcock explains::
    Sometimes, when you're a big company and have a campaign or message you want to send, you tend to create a creative strategy that is generic across multiple channels. In this case, we knew customers are going to Pinterest to seek out help around home decor and redoing rooms, and we wanted to build a strategy for the actual pins.

    Home Depot said the partnership expansion with Pinterest complements its growing online catalogue of home and interior decor products. Most notably, it fits with the company's acquisition in December 2017 of home decor online retailer The Company Store from Hanover Direct.

    Last July, Home Depot also joined online startup Laurel & Wolf, which describes itself as a "digital decorating platform," to provide customers with a professional designer.
    Lowe's using AR for faster buying decisions

    Home improvement retailer Lowe's has partnered with Google to launch an augmented reality (AR) enabled feature showcasing the latest spring collection on its mobile app.

    The new "View in Your Space" mobile tool allows Android users with ARCore-enabled devices to place lifelike, size-accurate items from Lowe's spring catalogue into their outdoor spaces, according to the company's website. They select certain products in their homes prior to making a purchase.

    Lowe's research reveals consumers often take weeks when considering big-ticket items such as patio furniture and bbq setups, culminated in the "stalling out" of more than USD70 billion in home improvement projects. The goal for Lowe's mobile augmented reality is to close this gap.

    Typically that lag in purchase is due to ensuring the potential product will fit and look appropriate in the home or yard space. The AR capability eliminates any concern about how the items will look once in place as it lets consumers embed products into a scanned image of the space.

    Gihad Jawhar, head of digital development at Lowe's, told Retail Dive in an interview:
    There are a lot of returns driven by a product not actually fitting in a space. Many times it doesn't look like what it looked like it did in the picture, because you're looking at this two dimensional picture on a small screen even if it's on a desktop...

    With the "View in Your Space" feature, a Lowe's app user taps on the option while browsing products on the retailer's website. The customer can then scan, via the device camera, a potential product location and then drag and drop a product into the desired spot.

    Shoppers can even "walk" closer to the product or walk "around" it to get a look at how the item looks from different vantage points. If all looks good, consumers just need to click an icon in the lower right-hand corner to move it into their online cart.

    While technology is the centerpiece to Mr Jawhar's job, he acknowledges that Lowe's doesn't have a competitive advantage when it comes to technology but companies like Google and Apple do, so partnerships are a critical piece to staying ahead of the retail competition.

    Stores are an important piece of tying everything together. Roughly 60% of all in-store sales are influenced by digital, Mr Jawhar said. Where Lowe's hopes to continue to differentiate from online players like Amazon and other brick-and-mortar companies that haven't invested much in technology is with the interplay between channels, allowing customers to research online or on mobile and then come into stores to get advice and browse materials and potentially buy them.
    Paint brand challenging others to think green

    Colorhouse is a US-based women-led, women-owned company that is making its product as eco-friendly as possible. Established in 2005, it became one of the first paint companies to combine an eco-formulation (of acrylic-based paints) with an emphasis on colour and sustainability.

    The paints are GreenWise certified, the highest verification available for a paint brand. As part of that certification, the following chemical compounds are not allowed: methylene chloride, 1,2 dichlorobenzene, phthalates, isophorone, formaldehyde, methyl ethyl ketone, methyl isobutyl ketone, and heavy metals (antimony, cadmium, hexavalent chromium, lead, and mercury).

    Puji Sherer, company president, said the eco-sensibility goes beyond just the formulation: the paint comes in recycled content containers with 100% PCW chlorine-free labels, and brochures; it is manufactured in a LEED gold manufacturing facility, and the company is a member of the EPA SmartWay transportation (to streamline freight and delivery). Colorhouse headquarters is run on renewable energy and serves as a paint can drop off site.

    When founders, Virginia Young and Janie Lowe, started the company, they wanted to adapt their clay-based paints to make them easier for consumers to use in their homes. But the company ended up going beyond just formulation to think more deeply about their impact. Ms Young said:
    Our search for healthier paint options pointed us to the vibrant green building community, a grassroots community that is about sharing knowledge and pushing the envelope on building materials that are better for us and the planet.

    That trickles down to small details: for instance, the company doesn't hand out colour cards. Instead, they ask customers to purchase the cards (for 50 cents a piece) on its website. It is simply to reduce waste and unnecessary paper usage. And instead of having a long roster of colour cards, Colorhouse has 128 in total.

    Kim Martin, e-commerce manager, works with customers to find the right colour. She answers everyone's questions whether it is on email, Facebook Messenger, or Instagram. Ms Sherer said:
    The biggest challenge for Colorhouse has been competing in an industry with only a few major players, all with deep pockets. From offering free colour chips to Google Adwords, it is expensive for us to compete in the traditional marketing world, so we rely on our reputation for quality, our creativity, and grassroots marketing ideas to get the word out about our brand.

    Colorhouse has received investment from Solera Capital, a women-owned, mission-based private equity firm that invests in emerging-growth companies.

    That said the economics of running a small business in a massive industry can be challenging. The paints do cost more than standard options at Home Depot but they have zero smell, which some consumers appreciate, making it easy to swiftly move into the space after painting it. Ms Sherer said:
    We have a toll manufacturing agreement that allows us to share in the cost of raw materials and helps to keep the cost of our paint down. As an independent paint brand, it would be difficult to keep costs down without this arrangement.

    As the company expands, it is turning up in more stores: Ace Hardware, Home Depot (online), Amazon, Crate and Barrel.

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