Metcash 2019-20 H1 results

Company stutters due to major client losses

IHG parent company Metcash has suffered writedowns of $500 million since June 2018, while IHG itself has continued its downward trend in both earnings and EBIT

Australian-based Metcash, the owner of the Independent Hardware Group (IHG), has released results for the first half of FY2019/20. Prior to the release of results, Metcash announced a $237.4 million writedown against its major food division just days after revealing 7-Eleven would not be renewing its $800 million supply contract. According to the ASX announcement:

This impairment follows the company's review of the carrying value of its assets undertaken as part of its process for preparation of the 1H20 financial statements. The review has taken into account the information contained in Metcash's ASX release dated 22 November 2019 concerning 7-Eleven's advice that it will not be renewing the current supply agreement with Metcash following its conclusion on 12 August 2020. This advice is expected to result in the loss of ~$15 million EBIT (annualised) in the Food pillar, after adjusting for mitigating costs savings.

Total impairments for Metcash since June 2018 have now exceeded $500 million. Unfortunately, the results from Metcash for the half did little to allay the sombre outlook conveyed by the ASX announcement. Post the results presentation, the share price for the company fell precipitously. It ended far below its mid-year high of $3.17 at $2.70, a drop of close to 15%.

Overall Metcash sales revenue was $6289.8 million, up from $6189.2 million in the previous corresponding period (pcp), which was the first half of FY2018/19, an increase of 1.6%. Earnings before interest and taxation (EBIT) was down by $8.4 million to $149.7 million, a drop of 5.3%. Underlying profit was down 4.6% on the pcp to $95.7 million, and net profit fell substantially due to the write off.

Hardware sales (including charge-throughs) fell by 4.2% over the pcp to $1040 million. EBIT fell by 1.3% to $37.3 million. Like-for-like (comp) sales were down 2.6%, while retailer sales through the IHG banner stores were down 3.2%.

IHG expansion

The media release which accompanied the financial report stated that the losses would have been worse, had the sales balance not lifted from 35% DIY/consumer sales, to 36%. The Sapphire program is seen as playing a role in this, along with growth in sales through IHG's digital platform.

In his opening remarks during the presentation to analysts, Metcash CEO Jeffery (Jeff) Adams emphasised many of the ways in which IHG has continued to expand. He began by mentioning Sapphire, the store enhancement program that originated with Mitre 10, and now includes stores operating under the Home Timber & Hardware (HTH) brand.

Total stores through the program and in progress has increased to 75. So we are still targeting 200 stores to be upgraded by 2022. And we still continue to see strong retail sales growth in those stores that we've refreshed of greater than 15%.

IHG has also moved to acquire more frame and truss businesses, he noted.

In build trade, we've acquired two frame and trust plants through the acquisition of Keith Timber in [South Australia]. Frame and truss offers are now available in all of our states.

The company has also continued to build closer ties with construction services.

We've increased the number of supply and install alliances to 15, and those alliances are now in place with key players across all of the stages of a house build.

The Hardings plumbing business also continues to be a bright spot for the company, as IHG rolls this out through the network.

Another initiative that continues to grow is the move towards better use of technology. According to Mr Adams, online sales increased by 50% over the pcp, and the number of stock-keeping units (SKUs) increased from 3000 to 11,300 listed online. Meanwhile the use of technologies such as Truck Tracker continues to grow.

IHG has also continued its move towards more direct ownership of the stores that make up its network.

[In] our retail network, our retail and joint venture company-owned stores has now increased to 102. So in the first half of last year, that was 92. And we've got 37 company-owned stores and 65 JV stores ... And our company-owned and JV stores now represent about 15% of our total stores, about 40% of our total IHG sales, so quite significant for the network.

Losses and efficiencies

Mr Adams stated that the losses in hardware were "mainly reflecting the impact of the slowdown in construction on trade sales". He also pointed out that without the loss of hardware and timber business Bretts, the decrease in sales would have been on the order of 2.5%, which he said was "a pretty good result in a tough market". He went on to praise the work of IHG CEO Mark Laidlaw in managing to limit the decline in EBIT, saying:

EBIT decreased by $0.5 million to $37.3 million, impacted by the decline in trade sales, and that's been partially offset by Mark and the team by improved DIY sales. Very good work, I would say, from the team on cost efficiencies and full - and some synergy benefits still flowing through on the HTH acquisition.

Later in the presentation, Metcash's CFO, Brad Soller, in response to an analyst's question, quantified the contribution from the HTH acquisition:

So there was some roll forward in terms of the HTH synergies that have actually come through from last year. We would have carried forward - benefit was about $2.5 million to $3 million actually coming through. So that actually has flown through into this rate - into our results this period.

Mr Soller, in the same response, went into the negative factors that affected hardware sales in more detail:

We have a big presence, as you saw, in terms of the corporate stores, so we actually got quite impacted on that. And that was the key delta in terms of our numbers. So [with] the offset from the lower sales and lower margin, I think Mark and his team have done a fantastic job in taking costs out, to actually limit the decline to where we've actually got to.

What Mr Soller is pointing to, is that as IHG increases its direct control of more stores in its network, it stands to benefit from the "complete stack" of margins, including wholesale, retail and service. However, when the market goes negative, as it has during 2019, this also increases the direct impact on the business.

Mr Laidlaw added to Mr Soller's statement by pointing out that the continuing benefits from the HTH acquisition had mostly come from new efficiencies in the supply chain. This included reducing the total of seven warehouses that HTH combined with Mitre 10 previously had, down to just four, with one further warehouse (in Western Australia) due to close during 2020.

Closing out his introductory remarks, Mr Adams painted a less than positive picture for the remainder of the financial year:

In Hardware now, trade sales over the remainder of financial year '20 are expected to continue to be impacted by the slowdown in construction activity. Our non-trade sales are expected to be less impacted than trade sales due to the level of DIY activity and acceleration of the Sapphire store upgrade program. The business continues to have a strong focus on costs to help offset the impact of the slowdown in construction activity.

Like most in the hardware industry, however, Mr Adams points to the fundamentals of the Australian market as underpinning opportunities for future growth:

The medium to long-term market fundamentals remain positive, with construction activity expected to be underpinned by population growth and an undersupply of housing.

Total Tools

The Australian Financial Review has reported strong rumours that Metcash is in takeover discussions with trade power tool franchise retailer Total Tools, though this has not been confirmed by Metcash. Bryan Raymond of Citigroup asked a question that seemed to touch on this matter:

Just in terms of the trade market within Hardware, obviously, it's a bit of a tough spot at the moment. Just wondering about your appetite for further acquisitions there. There's obviously some mention about it this week in the press with you connected to it. Just wanted to hear - see if that's something you would entertain, or if other acquisitions would be on the radar that are a bit more sizable than what you've done today within that business, excluding HTH, of course?

Mr Adams responded:

Well, look, I think, as we said, we're very positive about the long term, even the medium- and long-term aspects in that business. And it is still a relatively fragmented market, particularly on the trade side, which is where our strengths are.
We don't comment on rumours. But obviously, we're willing to talk. And if we can find a deal out there that helps us accelerate on our strategy and it's done at the right valuations to add value for our shareholders, then we'd certainly be interested in doing it.

Bunnings competition

With Bunnings continuing to ramp up its competition in trade, Johannes Faul of Morningstar asked the question as to whether that might have had an effect on IHG's results:

I understand that the trade sales account for a bit less sales than they have last year and also cyclical factors are at play there. But also the leading hardware retailer has said it's trying to pivot or pivoting to the trade side as well. Have you seen more competition on the trade side? Or put differently, are you losing share in trade? Has that impacted that as well?

Mr Laidlaw was emphatic that IHG had not lost market share in trade.

We're clearly not losing share in trade. It's a lot of market-related factors. I think we all know this. October last year, we're very concerned, and we saw new housing approvals go from 230,000 down to 190,000. So there was a 20% drop in new housing approvals. And some of our competitors have actually reported in that trade space that they are down 20%. So we are very encouraged, I must say, by the result that we've reported at the half.
I must say, we don't see - we see there will continue to be headwinds ahead for the next 12 to 18 months, so all we can do at this stage - we've got a good business here. All we can do is continue to tighten the belt and wait for the market to go on that cyclical upswing, and we'll be ready to take full advantage of that when it happens.

Analysis

Metcash has portrayed the results from IHG as being a good result in a down market. IHG has denied that market share has been lost to Bunnings, despite the major investment that company has made in acquiring more of the trade market.

Does this portrayal really stand up? How tough has the hardware retail market really been during the period May 2019 to October 2019? HNN's own calculations point to a different situation than that outlined by Mr Adams and Mr Laidlaw.

To start, Mr Laidlaw is roughly correct in pointing to a 20% drop in building permits (it's actually around 19% when comparing FY2017/18 to FY2018/19, but a 22% drop when comparing the numbers for Metcash's current half to the pcp).

However, building permit statistics register intent to build rather than actual work. We need to look at a different set of statistics to see what is really happening in the construction industry.

Chart 1 shows the numbers from the Australian Bureau of Statistics (ABS) 8755: Value of construction work done. It is evident from this that the area most hit by the slowdown has been dwellings other than houses, which is mostly multi-dwelling construction, particularly apartments.

Mr Laidlaw and others have often commented that IHG is much less affected by changes in construction on multi-dwelling than on standard single dwellings. So the most important numbers relate to houses. In terms of houses, work done has fallen for all three quarters of the current calendar year when compared to the previous year, down by 13.2%, 5.4% and 5.2% for March, June and September quarters respectively.

However, if we compare the current year to two years ago, specifically the first three quarters of 2017, the results are interesting. The percentage change for the three quarters are positive for the first two, at 3.8% and 2.8%, and only negative for the September quarter, down 1.5%.

Chart 2 illustrates this point. If you look at the pattern of the blue line representing work on houses, you can clearly see that the pattern in 2017 is nearly identical to that for 2019.

In more normal times, we might think of 2018 as something of a "bubble" year. The picture is a little more complex than that, but it does seem clear there is a degree of overstatement in many analyses of how dire current conditions are.

Chart 3 shows the value of construction work commenced. Again, there is a steep fall in multi-dwelling builds, which began in mid 2018, but a far more moderate fall in new house builds.

Chart 4 shows the percentage change in the numbers from Chart 3. This illustrates more clearly the sharp decline in multi-unit, and the slower decline in building work on house commencements.

Chart 5 illustrates what many see behind this behaviour, house prices in Australia's capital cities. This chart shows the percentage change in the price index compared to the preceding quarter (not the corresponding quarter in the prior year). Sydney entered negative territory in mid-2017, and Melbourne two quarters later, but both have had only three quarters of fairly steep falls in prices. Both have recovered in the second and third quarters of 2019.

Chart 6 shows the price index numbers themselves. In terms of homeowners expecting a reasonable return from their investment over a reasonable period of time (such as eight to ten years), the market that has existed over the past eight years has certainly treated them better than at any prior period in Australian history.

To sum up all of the above stats: 2019 is the third year of a housing market that has trended down, with subsequent major reductions in construction activity related to multi-unit dwellings, and comparatively mild reductions in construction related to new houses. 2017 saw the beginning of falls in construction activity. While 2018 reversed some of these falls, they were still present in the early part of 2019, with some signs of a late increase in activity.

What the ABS terms "alterations & additions" (A&A) is an added revenue stream for retailers outside of new constructions. In the past, retailers have indicated that when house prices declined, A&A activity has increased. What we are seeing across the three major states is a split in this behaviour. Arguably, as Chart 7 indicates, Queensland has followed this pattern to some extent, Victoria has followed it to a reduced extent, and New South Wales has seen declined in both building activity and A&A activity.

In fact, if we compare Chart 7 with Chart 6 we can see that the most recent peak in A&A activity coincided with a peak in capital city house prices. That is made more clear by Chart 8, which traces the extent of change between comparable quarters.

What this suggests is that there is a second connection between house prices and A&A: when house prices reach a point where they are excessive, renovation activity picks up. That could be a signal both of homeowners' reluctance to enter an inflated market, and of the potential for increased value being applied to renovation activity itself.

Finally we come to Chart 9, which shows the change in retail sales over the second and third quarters, backgrounded by the total retail sales for these combined quarters across Australia. The two quarters do not quite match up with the Metcash/IHG first half, but this is close enough to give a good indication.

We see here the same story repeated from the building activity numbers. 2018 was a better year than either 2017 or 2019, but, importantly, 2019 still shows growth, with Queensland being the slightly surprising exception, and Victoria providing a strong showing.

Summary

In HNN's opinion, what Mr Adams termed a "tough market" for hardware is more illusion than reality. Being as generous as possible, we can look at the background numbers across the Metcash/IHG FY2019/20 H1 as being neutral. It's also arguable, from what HNN knows, that the removal of Bretts accounted for a loss of less than 1.7% of IHG revenue (1.5% is a more likely number). But even if we accept this, we're left with IHG down by over 2% from where it should be.

There are a number of potential reasons behind that. One of the most prominent is increased competitive activity by Bunnings in the trade sector. It seems entirely possible that Bunnings took about 1% of market share away from IHG over the half. That's $10 million or so, which is certainly more than a rounding error for Bunnings and Wesfarmers, but also not a surprising gain.

A second potential to consider is that IHG's "whole of house" strategy - positioned at its March 2018 Expo as a means of coping with a slowing market - has not been as successful as expected. That doesn't mean it is a failed strategy, but it is a program that would really take three years to fully implement. And the reason it was not implemented in 2018, for example, is that IHG was busy with the acquisition of HTH.

Finally, though, we really do need to consider if some parts of IHG's core strategy should be revisited. The hardware retail pattern that we've seen over the past three years in terms of fluctuations that include gains and losses is likely to continue for the next three to five years. This is what Bunnings and Wesfarmers realised two years ago, hence a move into increasing trade sales, launching online commerce, and starting up MarketLink.

There really has not been an equivalent move by IHG. One problem that HNN has seen for some time in IHG is that there is a little too much of what we sometimes refer to as "supermarket thinking". Supermarkets are one of the very few retail industries that actually can grow through cost-cutting - because they sell "must buy" staples, and consumer price is a major purchase trigger in those categories.

About the only thing that approaches a "must buy" in hardware retail is exterior paint. For almost everything else, it's necessary to inspire the consumer to make the purchase. Upgrades such as those the Sapphire program offers are neat and convenient, but do they really inspire consumers?

In short, there is a real need for more innovation in IHG retail, if it is to continue to grow in a market that has more subdued growth. Just waiting to see if the market goes up so that your results can go up is not a strategy, it's an admission of strategic failure.

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Metcash rumoured in bid for Total Tools

Metcash & Total Tool CEO links could seal deal

Total Tools is up for auction as an acquisition, with Metcash rumoured to be competing with a private equity firm

The Australian Financial Review has revealed some information about the potential acquisition of power tool franchise provider Total Tools by Metcash. Presumably, if acquired, Total Tools would be merged with Metcash's existing hardware operations in the Independent Hardware Group (IHG).

The AFR article was put together by journalists Sarah Thompson, Anthony Macdonald and Tim Boyd, and published on 2 December 2019.

Metcash potential bidder for Total Tools - Australian Financial Review

The article indicates it does not have definitive information, but suggests a high probability of likelihood about the following:

  • Metcash is one of several bidders in an auction for Total Tools managed by Miles Advisory.
  • The two most likely winners are Metcash and an unnamed private equity firm.
  • The sale is being made at the behest of existing Total Tools franchise holders, each of whom own up to 5% of the company.
  • The sale comes after rumoured moves by Total Tools to consider a listing on the Australian Stock Exchange during 2018.
  • Miles Advisory was hired to explore alternatives after listing was deemed unsuitable.
  • Earnings for Total Tools are estimated at $25 million a year.
  • The winning bid is expected to reach up to ten times those earnings, or $250 million.
  • Total Tools has 26 stores in Victoria, 18 in both New South Wales and Queensland, nine in Western Australia, six in South Australia, two in Tasmania, and one in both the Northern Territory and the Australian Capital Territory - making a total of 81.
  • The CEO connection

    One element to consider in the competition for Total Tools is that the company's current CEO, Paul Dumbrell, previously headed up the automotive division of Metcash, both prior and consequent to its sale to the Burson Group in June 2015. He took over as CEO of Total Tools in August 2018 - most likely with a mandate to realise the company's capital.

    That association could enhance the attractiveness of Total Tools for Metcash, as the CEO of IHG, Mark Laidlaw, has worked with Mr Dumbrell in the past.

    Competition

    Some commentators, including the AFR, have mentioned the acquisition by Bunnings of Adelaide Tools as being possibly related to Metcash's interest in Total Tools. That seems unlikely, as a possible strategy of Bunnings with that acquisition is to develop its own version of UK retailer Kingfisher's Screwfix. Total Tools for IHG is more in line with its current strategies, adding scale, breadth and depth.

    Total Tools history

    Total Tools was started in 1989 as a cooperative, and grew to 39 stores by 2014. It then expanded to its current 81 stores, including 26 stores in Victoria, 18 in both New South Wales and Queensland, nine in Western Australia, six in South Australia, two in Tasmania, and one in both the Northern Territory and the Australian Capital Territory. Today there is also an extensive range of tools sold through its online ecommerce website.

    The company's expansion has been extensive, matching its goal of achieving over 75 stores by 2019. That said, its 2014 strategy was to eventually have 113 stores Australia-wide, indicating room for further growth.

    In 2012, the company was basically 50% cooperative, 50% franchise. The journey to being more of a franchise company was something of a struggle for many of the earliest participants. In 2014 then-CEO Tim Cockayne described that process in CEO magazine:

    I think in the early days it thrived as a cooperative because that was the way a lot of businesses were built, but the secret was really unlocked when it became a franchise and introduced standards around compliance and discipline. For those stores that were cooperative, that change was difficult and they had to give up a lot of things. They gained a lot, but they also had to give up a lot. In doing that, the discipline of making sure our stores looked the same and felt the same and were all open at the same hours has been the real point of difference.

    Analysis

    Metcash has something of a history of making acquisitions and divestments at critical moments in the development of its mainstay businesses. In the past it has used these as a balancing mechanism, to indicate new channels of growth, or to realise profit during a difficult phase.

    On average, Metcash generally performs OK, but after its one disastrous plunge in share price, when former CEO Ian Morrice announced the cessation of dividends and a one-year turnaround program (that eventually ran for four years), the company has gone to extraordinary lengths in developing creative messaging about its performance.

    Total Tools could be more of a strategic acquisition than an exercise in future messaging. A major feature of the hardware industry since around 2005 has been Bunnings' dominance in the power tool area. That dominance is built on the basis of very low prices, and this means that many hardware retailers are not able to sell power tools for a reasonable margin. From a business perspective, they essentially sell power tools so as to sell power tool accessories, which continue to have high margins.

    Bunnings is almost completely dominant in the DIY/consumer power tool market, as well as in mid-range trade tools. The one major weakness it has is it does not distribute Techtronic Industries' (TTI) Milwaukee brand - despite being the sole distributor in Australia of TTI's Ryobi brand. Instead of Milwaukee, Bunnings does offer Stanley Black & Decker's DeWalt brand, the Bosch "blue" trade tools, and is the exclusive distributor in Australia of TTI's other trade brand, AEG.

    TTI has, a little surprisingly, allowed IHG to sell some of its Milwaukee range in 2019, mostly through regional Mitre 10 retailers, such as Hume & Iser Mitre 10 in Bendigo, Victoria. Previously TTI has limited the Milwaukee range to smaller independent retailers. It may be that the growth of some of these once small companies, such as Sydney Tools, has forced it to reconsider how it distributed the Milwaukee brand.

    If Metcash went ahead with the acquisition - which remains a big "if" - IHG could make use of the tool retailer in one of two ways. The first way would be to continue with Total Tools "as is", perhaps adding on more fully IHG-owned stores to the existing network. This would enhance its ability to obtain better deals on tools through volume purchases, and those benefits would flow through to all IHG members, potentially "rescuing" the category from break-even to profit. It is IHG's "core ranging" strategy writ large.

    Alternatively, though, IHG could adopt a very different strategy with Total Tools. What if Total Tools became the IHG brand for all tool sales? That could see the power tool section of IHG's joint venture and wholly owned stores rebranded to Total Tools.

    It would even be possible, at the furthest stretch, for Total Tools to operate as small franchises inside existing IHG stores, operated by the store owner, or by a third party, leasing store space from the store owner.

    companies

    Bunnings reaches out to Gen M with "Make It Yours"

    Can Bunnings get popular with Millennials?

    Hardware and DIY are not top of the shopping list for most Millennials, but Bunnings is working hard to turn that around.

    Bunnings, as HNN has suggested in the past, traffics in part, in surprise. It's the surprising low price that encourages consumers to buy, or a surprise in the width of range. Increasingly, they are surprising the hardware retail industry itself, with the launch of online marketplaces such as MarketLink. Most recently they've also surprised with the launch of a new video series aimed directly at the Millennial market, titled "Make It Yours".

    The Millennial/Boomer market dilemma

    Hardware retailers face a difficult market situation in the DIY/consumer part of their businesses. Increasingly this is a market that is dividing sharply between the "boomer" generation, and the "Millennial" generation, with "Generation X" somewhere in-between. The Millennials represent the future of hardware, but the boomers are currently - for most retailers - the largest market segment.

    What makes this split difficult, is that it is hard to imagine two more different groups of consumers. Boomers are spending big on home renovations, either upgrading or downsizing their current homes. Millennials are mostly buying a first home or first investment property, or - more likely - renting to save for a future home.

    There are also differences in terms of culture. Boomers tend to believe that more is better than less, and newer is better than older. Millennials place a greater emphasis on "the right thing" - though it's possible they place an even greater emphasis on not buying "the wrong thing". Boomers collect, Millennials curate.

    In the DIY realm Millennials often get somewhat unfairly "dinged" for lacking basic skills. Where boomers were subject in their youth to helping Dad and Mum paint the nursery or the kitchen walls, Millennials were more likely to be holed-up in their rooms learning conic sections and the fun bits of integral calculus.

    There may be some truth to this stereotype of a lack of basic skills, but it is also true that Millennials have other, different skills, ones that boomers don't always adequately value. Their sense of style is more advanced. They tend to be more consultative in their approach to tasks. They are, a little surprisingly, less influenced by advertising directly, but more influenced by peer opinion, especially peer opinion that is transmitted via social media.

    The part of Millennial culture that hardware retailers continue to struggle with today, is their ardent desire to not own anything that resembles a tool, unless they really, really have to. After decades of selling more and more to boomers, who were eager to expand their DIY universe with quality power tools once well beyond their price range, this new attitude is a hard one to cope with.

    There is a solution, of course, which seems just slightly counter-intuitive: sell versatile, multi-use tools that provide great functionality, even if they cost more than standard tools. So far, the only power tool company to really catch on to this market is Bosch, with its EasyCut line of saws, the EasyImpact 12 drill/driver, and, most recently, the EasyCurvSander 12.

    Beyond that, though, the secret of Millennials is that they are very focused on the results of DIY work. DIY is less a joy and a pleasure to them, and more a necessity. They want results, and they want those results with the smallest possible risk of failure, the lowest expense, the fewest purchases, and the biggest possible effect.

    Solutions

    That last sentence could well have been a part of the inspiration for the "Make It Yours" video series.

    The premise of the series appears at first to be nothing all that new. Bunnings has bought a house in an unidentified suburb of Melbourne, and has assigned a number of teams to lightly renovate different areas, such as the kitchen, bedroom, livingroom, and bathroom, as well as the front and back yards.

    This doesn't seem all that different to other efforts by Bunnings in the past. Bunnings has already purchased a house and renovated it, making videos of the renovations as part of their online information base.

    That said, the older series was a bit advanced at times in the renovations it demonstrated. HNN's favourite episode is one where one of the Bunnings staff whips out an arc welder and does a casual bit of welding (and a very good job, too) on a gate. Ten points for going all-out on the job, but maybe only two or three points for really knowing what the market for the video is.

    "Make It Yours" is pretty much the exact reverse of that approach - ten points for knowing the audience and six points for demonstrating DIY know-how. That is not to pan the series at all - sneaking in six points worth of DIY is actually quite an achievement.

    This is achieved by employing a familiar modern marketing tactic, but one done at Bunnings scale. All of the renovation work is done by Millennial "influencers", who have already gained an audience via social media, and often are on their way to developing their own personal "brand".

    That could, of course, not have worked out all that well, but Bunnings has succeeded in selecting influencers who are down-to-earth and pleasant, then combining them with a good camera and directorial team - and some really first-rate post-production editing. As a result, the show is clean, crisp, attention grabbing, and very watchable not only by Millennials, but other generations as well.

    The caveats

    With hundreds of viewing experiences just one mouse click or finger-tap away from any video content presented online, it's evident producers need to keep the interest level high. Unfortunately, that means this new form of DIY video tends to lurch into the "here's one I prepared earlier" school of presentation.

    For example, on many of the episodes, the DIYers rely on that incredibly photogenic and helpful tool, the nailgun. With the least expensive nailgun at Bunnings running to $290 (the Ryobi Airstrike), plus another $80 for a battery and charger, it's an unlikely tool to find in the toolbox of any young and "financially-challenged" DIYer. Especially because, let's face it, the nailgun would only get used a couple of hours a year, at most.

    It's also remarkable, as is stated in the first episode of the series, just how quickly the flooring they use gets put down. That might be in part because there are bits that never get discussed, such as having to horizontally rip the first row that goes down to make sure the end finishes correctly, and adding mouldings along the edges to cover the expansion gap. And, while it's understandable they use vinyl flooring, as it is simpler to cut and lay, let's face it, it still looks like vinyl, while laminates continue to improve at a rapid rate.

    There are other omissions as well, of course. It's a series that, in the balance between inspiration, and practical know-how, leans more towards the former.

    The non-caveats

    However, all of that is forgiven, because Make It Yours does one outstanding thing that has long been missing from DIY videos: the episodes show mistakes. In the episode on the lounge design, the two presenters disagree slightly about the colour of paint to be used. The result is a room where blue and green walls meet up - almost never a good thing. They end up repainting one of the walls, in a really good-humoured and valuable way.

    Similarly, in one of the slightly funnier episodes, the male part of a New Zealand design couple redoing the bathroom ends up getting stuck in the bathroom, because he mis-installed the door knob. The couple also scornfully discards the hinged "Australian" shower heads, replacing them with graceful "New Zealand" fixed heads - which turn out to be too low for practical use.

    This is very good for a whole range of reasons. It breaks through that "everything is perfect" feel that so many DIY videos provide, it adds real entertainment value, and it makes the influencers who present more approachable and more "real".

    Analysis

    While this is a great step by Bunnings, it should be only be the start to the retailer's efforts to better connect with the Millennial generation. Marketing is great, but there are some really low-level moves that need to be made as well.

    For example, if you look at the kind of brands - both external and its captive brands such as Tactix and Ozito - the company stocks, these are overwhelmingly designed to suit the needs of the boomer generation. For Millennials, trying to shop at Bunnings can feel like rummaging through the stuff their parents buy, rather than finding something they themselves can connect to.

    One way out of that is for Bunnings to ask itself what the pathway would be for Bunnings itself to become an influencer. The lesson of the Millennials isn't just that it is possible to build a personal brand, one that acts as a kind of passkey in the world of social media. The real lesson is that, for the Millennials, all brands are ultimately personal.

    Boomers grew up with brands that were built through manufacturing and hence design processes. Car brands, for example, were important because they indicated durability and reliability - something we almost don't think about anymore, as the general quality of cars has vastly improved.

    Brands today instead relate to the notion of personal curation. They are driven by the desire to connect with others, and to have others connect with the consumer as well. As such, they no longer signal social status as much as they once did. Instead they indicate a cultural set, the influences to which a consumer chooses to subscribe.

    So the question is, who is Bunnings as a brand? That is the identity, the personal one, that will be important in the future, not corporate messaging, or assurances of community involvement - both of which are, ultimately, "lazy" half-solutions.

    The role of all good marketing is to, of course, raise better questions. That is certainly one thing that Make It Yours has done well. It has almost turned it up to eleven.

    bigbox

    Bunnings moving into ex-Masters site

    Retail sites sold

    Bricks-and-mortar buildings located in Victoria and Western Australia are being sold or auctioned off

    The big box retailer has confirmed to The Adelaide Advertiser that it will open a store on Sir Donald Bradman Drive in the warehouse once occupied by Masters Home Improvement, at Adelaide Airport.

    Work has begun on a $15 million redevelopment of the site, opposite Ikea, with the 13,000sqm store set to open mid-next year.

    Adelaide Airport property executive general manager James Sangster welcomed the addition of Bunnings to the airport. He told The Advertiser:

    Bunnings' presence will create more retail jobs at the airport on top of those already being created by (the airport) as part of the expansion of our main terminal.

    Bunnings acting general manager - property Garry James said the new store was a "significant investment" for the hardware retailer. Masters had two locations in South Australia and two under construction when it closed all stores in December 2016 after enormous losses.

    Real estate sell-off

    In other developments, Bunnings has also been selling off some of its real estate holdings around Australia.

    Horsham

    The building that houses Bunnings Horsham has gone to auction and is expected to have a sale price of $9.25 million. The 9581sqm site has three street frontages on Horsham's Wilson Street. It is the only Bunnings in the Wimmera.

    The property returns $560,766 per annum and is on a 12-year lease until 2025, with a further four five-year options until 2045.

    Melbourne-based commercial real estate agency Burgess Rawson has auctioned the property. Burgess Rawson director Shaun Venables said the property's location added to its appeal. He told The Wimmera Mail-Times:

    Horsham is the capital of northwestern Victoria and it's a really captive catchment endorsed by the fact that all of the major supermarkets are represented. Coles, Woolworths, Aldi and Kmart are all within 500 metres of the site.

    Perth

    The Charter Hall Direct Consumer Staples Fund has bought a Bunnings-anchored retail centre in Perth in an off-market deal worth $35 million.

    The property at 303 Stirling Highway in Claremont has 5460sqm of space across three levels. The Bunnings store accounts for 93% - a little more than 5000sqm - of the total retail space and has a lease expiry of 2027 plus options.

    The property is located about 10 kilometres south-west of Perth's CBD.

    Charter Hall also announced its Long WALE REIT had made several off-market property acquisitions collectively worth $331.5 million, including a Bunnings Warehouse site in Darwin.

    The deal, worth $41.3 million, was transacted on a passing yield of 5.7% with a 12-year lease to Bunnings.

    Warragul

    Newmark Capital has acquired a $51 million large-format retail centre in Warragul (VIC), anchored by Bunnings and Kmart. The 25,238sqm centre on a 5.7-hectare corner site is about 107 kilometres south-east of Melbourne.

    It will sit within the Newmark Hardware Trust, which owns three Bunnings properties in Launceston, Lake Haven and Maroochydore.

    A 6% yield is anticipated on the completed development, which Newmark purchased with development deals in place with Ballarat-based Troon Group.

    Newmark Capital joint managing director, Chris Langford said since restructuring and opening the Hardware Trust to new investments, $20 million of fresh capital had been raised.

    The Warragul centre includes nine tenancies and is 85% pre-leased, including leases to Bunnings and Kmart. The site settled in July and construction has commenced, with completion expected next June.

    Mr Langford said the retail centre was in an area of strong population growth. He told the Australian Financial Review:

    [Nearby Pakenham] is going like blazes. It has the highest population growth in the state at 3.5% per year.

    Clyde North

    Bunnings has placed its recently opened large-format Clyde North warehouse in Melbourne's south-east up for sale.

    The 16,634sqm retail warehouse and 372-vehicle car park will be sold with a new 12-year lease in place, bringing in net income of about $1.9 million a year. Based on a yield of around 5% struck for similar Bunnings assets, it could be worth about $38 million.

    The Clyde North Bunnings is on Berwick-Cranbourne Road and fronts developer MAB Corp's Element Park, a 30-hectare master-planned business and retail park.

    Ballarat

    Ballarat's original Bunnings Trade Centre in Mitchell Park (VIC) has been auctioned. Bunnings Trade was a tenant at the warehouse at 19 Waringa Drive until November but moved out before that after the opening of the new Bunnings store in Delacombe.

    The 6738sqm property includes surplus land that could be developed or sold. Graeme Watson from Burgess Rawson commercial real estate said the location capitalises on an upgraded road network, which services the western part of Victorian and connects to Melbourne.

    Sourced from The Adelaide Advertiser, Wimmera Mail-Times, Australian Financial Review and Ballarat Courier

    bigbox

    Store openings with stars of The Block

    Maclean Mitre 10 in New South Wales

    A Home Timber and Hardware store, part of Hastings Co-op, celebrated the first day of trade at Sovereign Place Town Centre in Port Macquarie (NSW)

    The Block contestants Andy and Deb Saunders were special guests at the Maclean Mitre 10 store opening recently. The Daily Examiner reports that families lined up to meet the TV celebrities. A stand-up comedian, Andy easily broke the ice with the store's customers. He told the newspaper:

    We just love things like this because we love to connect to people. Their barriers come down when you're relaxed and having fun with them. The alternative is not having fun with people...
    I love watching smiles on people's faces. Some people don't have as many teeth as others, but it's still a smile nonetheless.

    The couple share a lot in common with many people in the region. Their home at Wallabi Point on the Mid-North Coast was recently saved by the NSW Rural Fire Service.

    Maclean Mitre 10 co-owner Shaun Johnson said Andy and Deb were the latest in a string of The Block contestants to visit the store. He told the Daily Examiner:

    The Block is just such a fantastic show and Andy and Deb would probably be the

    fourth or fifth couple of contestants we've hosted over the years.

    It's great for the local community to come out and engage with celebrities and appreciate how down to earth and normal they are.

    The opening also acknowledged the hardware store's branding switch from Home Timber and Hardware. Mr Johnson and Jason Southwell have co-owned the store since September 2018 and have been in the process of transitioning the business to Mitre 10 since July 1. Mr Johnson said:

    In a town like Maclean, we understand the community needs to have responsive, knowledgeable staff in the hardware store so we can give them the right product for their jobs, at the right price.

    Sovereign Place Town Centre

    As one of the contestants of the latest series of The Block, Deb was also special guest at the opening of the Home Timber and Hardware (HTH) store in Thrumster (NSW).

    The store is just one of the Hasting Co-op's rural and hardware offerings that also includes a Mitre 10 and CRT, and is located in the newly opened Sovereign Place Town Centre in Port Macquarie. Hastings Co-operative CEO Allan Gordon said the opening was the beginning of a different era for retail in the Hastings.

    The IGA supermarket is a concept store which has been designed as a one-stop destination for shoppers with an in-house butcher, bakery, a significant range of locally-made products and produce as well as partnership hubs with HTH and Harvey Norman.

    Mr Gordon said the new IGA outlet, which has a creche, has set a new benchmark. He told Port Macquarie News:

    This project is at another level and captures the latest trends. Having a creche in a supermarket is a real winner for us too. We have set the new benchmark for future development in this area.

    The centre is home to Port Macquarie's first NRMA electric vehicle charging station. NRMA executive general manager motoring Neil Payne said this charger would help drive the next generation of motoring tourists to the region, improving mobility and contributing to the local tourism economy.

    Sourced from The Daily Examiner, Wauchope Gazette and Port Macquarie News

    retailers

    CSR a possibility for takeover?

    Building products EBIT down in H1

    The Australian has reported that CSR could be "on the radar of a buyer" following a failed effort by GFG Alliance to buy the business in 2018

    A number of sources have suggested to DataRoom in The Australian that building materials company CSR could be a takeover target.

    It is understood that Gupta Family Group (GFG) Alliance made efforts to buy the business about a year ago when shares were trading at $2.69 - their lowest level since 2016. Some industry analysts believe CSR is still good value with a market value of $2 billion and its share price at $4.33.

    GFG Alliance is an international group of businesses associated with industrialist Sanjeev Gupta and the British Gupta family, and are involved in mining, industry and trading. It purchased the failed Australian steel manufacturer Arrium in 2017 for $700 million.

    The talk surrounding CSR comes as building materials is expected to be an in-demand sector when it comes to mergers and acquisitions in 2020, with two private equity groups - one understood to be Lone Star Funds - recently looking at Boral. Some also question whether Fletcher Building could be a target for a break-up or an acquisition, while Adelaide Brighton is expected to merge its operations with its largest shareholder, the family-controlled Barro Group.

    BGC is also up for sale through Macquarie Capital, while speculation has been mounting that LafargeHolcim has been looking to sell its Australian assets (Holcim Australia), although this has been denied by the Swiss company

    New housing approvals jumped 7.6% in seasonally adjusted terms in September so that a major increase in demand for building materials could follow. In line with this, building materials suppliers are emerging as potential takeover targets as the residential construction market begins to recover.

    CSR is a diversified business with brands that include Gyprock plasterboard and Bradford insulation and Monier roof tiles. It also has a significant share in the Tomago aluminium smelter near Newcastle (NSW), about 40 manufacturing plants in Australia and New Zealand, and commercial real estate, which may make the company appealing to a private equity firm interested in carving up and selling the assets.

    Asbestos liabilities may be seen as a deterrent for an acquisition, but the liability is understood to have been largely isolated and would not impact any acquirer.

    Building products performance

    Earnings before interest and tax (EBIT) for its building products division in the half year to September 30 fell 18% to $95.9 million, a direct impact of the slowdown in residential housing and undermined by a 19% drop in housing starts across the industry.

    Revenue for the building products division was down 5% to $839 million with lower volumes reflective of slower construction activity.

    CSR's chief executive Julie Coates said the company would expand into the commercial building products sector to reduce its reliance on the residential sector. A slowdown in high-rise apartment construction, particularly in NSW, has hurt the business.

    However, the company believes there are signs that housing activity would increase, citing improved house prices, increased credit availability and low interest rates. But it expects that it will take at least another year before the residential construction market resumes growth. Ms Coates said:

    I think we are looking at a 12-month lag ... We've seen housing activity starting to be driven by population growth, high employment and low interest rates and positivity around access to credit. But we're not seeing that come through yet.

    Ms Coates said it would take some time for the positive developments in the housing market such as interest rate cuts and the easing of lending restrictions by banks, to translate into higher orders for the company. She said:

    I think there's been quite a lot of positive news from the developers around deposits on housing lots and that should flow through to us, but there's a lag.
    The use of our products in the building of houses comes later, so insulation, gyprock [plasterboard], bricks, they come later in the construction cycle.

    CSR building products brands include Gyprock plasterboard, PGH bricks and pavers, and Bradford insulation.

    Group results

    Ms Coates took over as CEO in early September from Rob Sindel, who had been chief executive since 2011. She said she would be disciplined on costs in the short-term and also wanted to unlock more value from the group's extensive property portfolio. It owns 58 freehold sites.

    In the half year ending 30 September, CSR reported group EBIT down 16% to $113 million reflecting a lower result from the building products division.

    Net profit fell 20% to $71.6 million but net income jumped 157% to $68.8 million a year ago after the prior period was hit by impairment charges on its now sold Viridian Glass business.

    Results in the second half of the financial year are expected to be lower than the first half due to seasonality in volumes. It expects net profit for the 2020 financial year between $107 million and $133 million.

    Land sale

    CSR also announced it has sold its 20-hectare Horsley Park brick manufacturing plant in outer Sydney for $142.5 million. The company said earnings from the sale would be split into two 10-hectare stages that would fall within the 2021 and 2023 financial years.

    The sale comes after the business sold 10ha last year for $58 million.

    The 30ha of land offloaded by CSR has been "surplus". The business still owns another 20ha where its brick manufacturing facility operates.

    The buyer is ESR, a logistics and warehousing business of no relation, prominent across the Asia-Pacific. ESR will build four-to-six distribution houses on the property, the company's chief executive Phil Pearce said.

    The land sold by CSR falls within Western Sydney Airport's industrial zone, is close to the M4 and M7 motorways, and is bolstered by large infrastructure projects, including WestConnex, Sydney Metro and Moorebank Intermodal.

    CSR has netted $200 million by selling 30ha of land in Horsley Park over the last two years. It has filed paperwork to demolish the PGH Bricks manufacturing plant on its remaining 20ha property in Horsley Park. This has been subdivided into eight independent properties and can be sold off in parcels. Another nearby PGH Bricks plant, PGH Bricks & Pavers in Cecil Park, could be sold off too.

    Sourced from The Australian, Sydney Morning Herald, The Australian Financial Review, Motley Fool and Fairfield Advance

    companies

    BGC building materials draws interest

    Contracting division sold off

    A portfolio of more than $1.5 billion is up for grabs for building material providers and private equity firms

    The building materials assets of the late billionaire Len Buckeridge is expected to attract the buying interest of companies such as CSR and Wagners as well as private equity firms, according to DataRoom in The Australian. This follows the sale of BGC Contracting, the mining services business unit, to NRW Holdings. It has now been renamed NRW Contracting.

    The Buckeridge business empire also spans transport operations, real estate, quarries and a cement grinding plant, and is highly regarded for its scale and market dominance.

    BGC's cement grinding plants could be a major drawcard for CSR and Wagners. Fletcher Building is considered the most obvious owner but it has many challenges at its home base in Auckland, New Zealand.

    Just prior to the sale of its mining services and contracting operations, it was believed BGC attracted the attention of a suitor based in India, which was in negotiations to acquire the bulk of the operations.

    While it remains unclear what group is eager to gain a presence in the Australian market, some speculate it could be Indian conglomerate Tata Group, or Sanjeev Gupta's Liberty Steel.

    The sale is previously thought to have been slow-paced for various reasons. It is thought that the group's divisions are all interrelated and are largely reliant on each other for profitability.

    But the opportunity for a buyer is to pick up BGC's numerous operations all at once, in a move that would provide an industry newcomer to Australia an instant construction materials platform.

    When Mr Buckeridge died in 2014, the empire was to be divided up between his family, and he had placed it in five separate trusts for his children and grandchildren. The situation has resulted in a legal battle in the Supreme Court over, among other issues, the payment of dividends.

    BGC is considered among Australia's top 10 largest privately-owned companies, with 3500 employees, an annual turnover of at least $3 billion and is one of Western Australia's largest home builders.

    Sourced from The Australian and Australian Mining

    companies

    ECHO re-enters the construction market

    Known for its cut-off saws

    After a brief absence from the Australian market, ECHO is back with its latest product

    The CSG-7410ES cuts metal and concrete with ease, according the manufacturer.

    ECHO has developed a brand-new 73.5cc engine for the CSG-7410ES that features a chrome cylinder and patented Kaniboron(r) piston plating to reduce friction and improve heat resistance. For the best power output and compression, a twin-ring system is used. For lighter weight operation and strength, the engine is fitted with a magnesium crankcase. Coupled with a 2.6:1 drive ratio to the 14" cutting wheel, the CSG-7410 provides the torque for exceptional cutting performance in tough applications.

    The CSG-7410ES has been designed for high frequency use with a patented 4-stage air cleaner system, dust sealed starter assembly, stainless steel shield, and brass water valve as standard. It is a robust unit made for years of service.

    ECHO has also considered the operator and the CSG-7410ES has spring assisted starting with a decompression valve and automatic fast idle for easier starting, a stop switch that returns automatically to the ON position, and a padded aluminium front handle and a shield adjustment lever. This ensures the shield is easy to rotate even when matted with dust.

    The cutting arm is reversible and can be fitted to the inside for ergonomics, or the outside to cut close to obstacles. Belt tension is easily adjusted from the side of the machine with a visible gauge for improved accuracy.

    products

    HI News V.5 No.4: Sunshine Mitre 10 and Hume & Iser

    VIDA Wood expands

    Klingspor has been successful in creating new businesses for retailers through its belt-making service

    It was a milestone of sorts when we completed this edition of HI News. We put together one of the largest retail profiles we have ever done so far on the Sunshine Mitre 10 group in Queensland. In the same edition, we also profile Stephen Iser from Hume & Iser in regional Victoria. The store has long been the gold standard for independent hardware stores in Australia.

    Simply download the latest edition here:

    HI News Vol.5 No 4: Sunshine Mitre 10 and Hume & Iser

    VIDA Wood has had its product offering strengthened by its link to Canadian company Canfor. This includes longer lengths of structural timber. VIDA is pushing to expand its reach in Australia, and has appointed Jacinta Colley as its national sales director.

    Klingspor Australia's managing director, Paul Hoye believes there is a good market for belts, and that Klingspor can offer "an excellent product range, and the knowledge to suit all applications". We profile Klingspor's belt-making capabilities and speak to some of its satisfied customers.

    Plus, Bunnings' latest initiatives, a new name in Australian rural merchandise, Ikea is pushing hard into smarthome, and technology is driving change at international home improvement retailers such as UK's homebase and Lowe's in the US.

    Other companies featured in this edition include James Hardie, Laminex, Wattyl, Swann Security, USG Boral, Imex Australia and many more.

    editorial

    Sunshine Mitre 10

    The innovators

    Sunshine Mitre 10 has developed a network of stores in Queensland, which has provided a testbed for new innovations

    How will Australia's home improvement industry develop into the future? After spending several days with the managers of Sunshine Mitre 10, Travis Cunnane (general manager), Darren Fanshaw (group retail manager), Deen Saint (group trade manager) and Jason Monahan (trade operations manager), HNN thinks we might have had a glimpse of one possible future.

    It's a future that could enable more independent retailers to take a greater share of the ongoing growth in the home improvement category. It also might help some hardware retail entrepreneurs to escape the defensive, low-capital rut in which they have been trapped since the early 2000s.

    Sunshine Mitre 10 has 20 business units at 18 different locations, based in Queensland's Sunshine Coast, about 100km north of Brisbane. While the Sunshine Coast is central to Sunshine Mitre 10, its locations range from Ipswich, to the immediate west and south of Brisbane, up into northern Queensland, at Weipa. That is a span of some 2500km - roughly the same distance you would have to travel to reach Moscow from Zurich.

    It's a thriving, well-run business, with turnover of around $100 million a year. But what makes it really interesting is that Sunshine represents one of the best examples of a new kind of retail structure in the independent hardware and home improvement retail sector (iHHIR). It's a pointer towards the real potential that exists in this sector of the market, even as competitive pressures continue to grow.

    The Sunshine solution

    The big question is: what does that response need to be? Looking at the example of Bunnings itself, it's not difficult to give an answer. What is clearly needed is more market innovation, particularly when it comes to developing better path-to-customer offerings. However, innovation was a major problem for the iHHIR sector even before the global financial crisis (GFC) and reduction in mining activity that followed. With the Australian economy in a period of sustained slow growth, an increasing number of retailers now find innovation too risky a strategy to chance.

    These survival factors are compounded by structural difficulties in the small to medium business (SMB) sector. A major difficulty is that the sector does not have readily available sources of capital (as we'll discuss in more detail later), especially for innovation investments. Much of retail, and especially iHHIR, is dominated by small retailers, which struggle with innovation, because any change will affect their entire revenue stream, which means the risks are consistently high.

    What this points to is that if the iHHIR sector is to survive and thrive in the future, it needs to change more than just its processes. It needs to shift structure, to develop an overall business model which makes innovation more possible and less risky.

    It's important to note that this doesn't mean every retailer has to engage in risky innovation. It does mean, however, that the industry needs to develop significant centres of innovation, which can help to generate needed change for the overall industry.

    After spending several days on Queensland's Sunshine Coast being given a tour of, and insight into, IHG's Sunshine Mitre 10, it is fairly clear to HNN where the industry can find at least one starting point for building this kind of innovation engine.

    What Sunshine has done, over the past decade, is to mould its business into a kind of regional hub, a store network that not only can act as a growing profit centre, but which also - almost paradoxically - strengthens rather than diminishes the independent stores adjacent to - but outside of - its own network.

    It's not the case that most retailers in the iHHIR should consider becoming part of such a network - a type of network HNN is calling a "hub network". But most retailers would benefit from there being more regional hub networks in the Australian market.

    Sunshine history

    Sunshine Mitre 10 today is a network of stores, along with a small warehouse facility in Brisbane, and a truss plant. The company also participates directly in the business areas of locks, appliance sales, and steel products.

    Its formation dates back to 2008, before Metcash acquired the Mitre 10 group. It was built on the merger of two established Queensland retailers, Lanham's and the Melville family business, Melco.

    Lanham's began as W. Lanham & Sons Timber Mill in 1910, based in Nambour. The steam-powered sawmill provided timber for construction as the town prospered in the shadow of its sugar mill. By the 1970s, Lanham's had moved beyond timber to hardware supplies, and opened an additional store in Cooroy.

    John and Mark Melville opened their Noosaville Melco store in 1988, selling timber and building supplies. Subsequent stores were opened in Gympie, Maroochydore and Caloundra.

    When the two companies got together in 2008, the combined business was initially known as MelcoLanhams Mitre 10. The business also held the registered name of Sunshine Hardware Pty Ltd, and some years after the merger changed its operating name to Sunshine Mitre 10.

    Such amalgamations are not uncommon in hardware retail, but what followed was uncommon, as the Mitre 10 organisation (prior to its acquisition by Metcash) entered into a 49% ownership joint venture (JV) with Sunshine. According to Travis:

    John Melville wanted to get out, the Lanhams wanted to stay in. There were a few brothers on the Lanhams side, and two of them stayed. Dave Lanham is the chairman of Sunshine, and Tim is a shareholder who also works in the business. He's part of the management team.
    They own the freeholding in Nambour and Kingaroy. So that's how the joint venture came about, and they renamed it "Sunshine". And from there, opportunities [for expansion] came about, like [the stores at] Roma and Kingaroy.

    This investment ended up as a significant feature of Metcash's eventual acquisition of Mitre 10. The proffer documents from Metcash indicate that Sunshine produced earnings before interest, taxation, depreciation and amortisation (EBITDA) of $4.9 million in the 12 months to 30 June 2009. Mitre 10 gained $2.4 million for its 49% share. That equates to over 13% of Mitre 10's $18 million overall EBITDA at the time - a considerable contribution.

    The next change was that at some time during FY2013/14, Mitre 10 acquired a further 35.7% of Sunshine, moving its ownership up to 84.7%. The company also aquisitioned Northern Hardware Group in April 2016, which included the Weipa Mitre 10 and the Mareeba Mitre 10.

    Sunshine helped to create a key strategy that Mark Laidlaw adopted after he took over as CEO of Mitre 10, following Mark Burrowes, who was the first CEO after the Metcash acquisition. While Mr Laidlaw made it clear that Mitre 10 would not pursue a strategy of corporate ownership of stores - one of the wrong steps Mitre 10 had taken, with the development of a subsidiary to develop and own "Mega" stores, in a countermove to Bunnings - JVs offered an opportunity to extend Metcash's reach, while retaining the advantages of the knowledge and skill of independent hardware retailers. Similar JVs followed with companies such as Fagg's Mitre 10 stores in Geelong. (Metcash now controls 90% of Fagg's.)

    While the strategy has been copied and repeated, Sunshine has itself become something unique and original for Metcash's IHG. It could be said that Sunshine has become less of a JV arrangement, and more of a "hybrid" enterprise.

    In a standard JV, there tends to be a strong separation of concerns. The capital partner provides finance, and sets a series of guidelines and goals. The operational partner follows those guidelines and goals, but also pursues its own goals, and provides certain guidelines for the capital partner as well.

    The difficulty with this is that capital and non-capital partners can have very different objectives. In general, capital partners want to see growth, and non-capital partners concentrate on return on investment (RoI). The end arrangement is typically a balance between these two - but, in many cases, it is the RoI approach that wins out. JVs frequently provide above-average returns, but are a poor vehicle for growth.

    What has happened at Sunshine is that both the capital partner, IHG, and the independent principals are obviously committed to achieving high levels of growth, through innovation tied to appropriate - but far-ranging - expansion.

    The need to push beyond some of the unwarranted assumptions people have about JVs is something Travis is passionate about. As he told HNN:

    One of the things that frustrates me is because we're a JV corporate - whatever - people say a lot of nonsense about how the business works. Listen, we treat this as if it's our business. For the management team, this is our baby.
    Apart from the board meetings that we have, to be fair to Mark [Laidlaw] and to the directors, IHG gives us a fair bit of autonomy to deliver the outcomes, and they support us when we need it, pull us into the line on the odd occasion when we need that.
    It's really like every other single retailer in hardware, in that if you're passionate and you treat it like it's your own business, you generally get good results. If the people who work here are turning up just because they're getting a pay cheque, I think we're in trouble.

    Travis is also adamant that JVs do not get special privileges when it comes to treatment by IHG. They do get exposed to new ideas first, but that can be both good and bad, he says.

    We trial things before we roll them out to independent members and all that. It's true. We do. We often have this stuff, two years, 12 to 18 months before it gets rolled out to independents.
    We give a lot of feedback. We've told them some stuff is just crap and you need to start again, and they do it. It would be very difficult for an independent to put in, say, the core range for the first time, because what if it turns out to be a disaster?
    Whereas for us, we can just roll with the punches, and modify it, and give them the feedback. So it is really important from that regard.

    Travis also sees the expansion through the acquisition of HTH as offering considerable advantages:

    If you don't have a network, it's easier for the builder to go to Bunnings, because they have a network. Since Metcash have come onboard, and particularly with the Danks acquisition, we're starting to act like a network now. We have given jobs to Hudsons in New South Wales, through Murphy Builders, actually.
    We've started to act like a group, now. We've actually got a larger network than Bunnings. But yeah, historically we've never really taken advantage of that. I think now we're starting to do that.

    Travis and the rest of the Sunshine team also see JVs as providing a very good exit strategy for many independent hardware retailers, especially those that are "ageing out" of the business, without a clear path of succession.

    Having joint ventures is good for members that do want to get out. Because there aren't people queuing up to buy an independent hardware store, and if there's no succession planning, it's just becoming more common now. [JVs] are a good way for owners to extract some value out of the business. And they're entitled to that.

    To read more about Sunshine Mitre 10, please download HI News:

    Download hinews-5-04

    retailers

    Hume & Iser, Bendigo

    Stephen Iser takes the store to the next level

    After nearly 140 years, Hume & Iser knows a thing or two about hardware retail. As does Stephen Iser, its managing director.

    Since the 1990s, Hume & Iser has been a watchword in the industry for how a regional retailer should operate, first under Home Timber & Hardware livery, and more recently as it has transformed into the virtual epitome of what a modern Mitre 10 Sapphire store should be.

    Stephen Iser, the company's managing director, is one of the stalwarts of his generation of retail managers, the people who have really defined what the modern hardware retail industry is all about. It is a generation that has been slowly but steadily retiring out of the industry. The reasons are usually, like Stephen's, family related.

    Hume & Iser modernises

    While Stephen modestly says he got the top job because he was "the last man standing" after many management changes, that was far from the case. By the time he was appointed, he had spent 22 years working at Hume & Iser, the last 10 of those as sales manager.

    In fact, as it turned out, this was almost perfect timing at Hume & Iser. Someone with a heavy sales background was exactly what was needed to take advantage of what was going to be the a strong, sustained surge in spending on home improvement by Australian households, and a rapid expansion in Bendigo.

    According to the website Australian Property Investor:

    Ranked 209th out of a total of 550, Greater-Bendigo was among Australia's top 20% when compared to the rest of Australia.
    The median price for a house in Bendigo has increased at an average of 8.3 per cent average annually, from $98,500 at the start of 2000 to $320,000 at the end of 2014. Average rental yields of 4.7 per cent resulted in a total return of 13 per cent.

    Bendigo's population has grown by an average of 1.5 per cent over the last decade, lower than the national average of 1.6 per cent.

    Currently, Bendigo also has home ownership of over 70%, and a steadily increasing overall population, with new suburbs growing at the fastest rate.

    The challenge facing Stephen, after he was appointed general manager, and the company had time to readjust to its changed circumstances, was how best to take advantage of the available growth. The solution he came up with for Hume & Iser was to make sure that it could grow its DIY/consumer business - something that he was very successful at doing. Even today, the balance between trade and DIY stands at around 50/50 - a considerable achievement, considering that it is now close to 70/30 across IHG.

    One of the main reasons for this is Stephen understood early on that to take advantage of the growth potential of the area, it was necessary to appeal to a broader market, especially women. A key part of that strategy was Hume & Iser's ongoing membership in HTH. After joining its early incarnation, Pro International, the company did leave for a while in the late 1980s, but rejoined HTH in the 1990s.

    The move to Sapphire

    Stephen admits that when Metcash initially took over HTH he was somewhat sceptical about how that arrangement was going to work.

    I just didn't think, you know - how could it work? How could one company own Mitre 10, Home Hardware, Thrifty-Link, and True Value?

    I!t just didn't gel with me. So in the interim, we joined Natbuild [National Building Suppliers Group] because I thought, we're going to end up a creek without a paddle. So we joined Natbuild in the interim.

    I sat on the national council of HTH, and we merged the HTH and Mitre 10 councils together. They started talking how they're going to manage it, in discussions with Mark Laidlaw and Annette Welsh. Anyway, a path became reasonably clear of how it could be done, even though it was very complicated.
    Then IHG said they would prefer us to go along with the IHG. They said, "And here's what we can do". So, cutting a long story short, we got out of our relationship with Natbuild.

    At that stage, Hume & Iser were still an HTH store, but clearly part of IHG. The Sapphire process started later in 2017,

    Then the process started about the Sapphire program, and they introduced the Sapphire program. And the Sapphire program was for them to build 200 Sapphire stores of this size throughout Australia by 2021 or 2022. And they came to us and said, "We want you to build" what they call "the best store in town: the Sapphire store".

    What is interesting about this is that, where for most retailers Sapphire has meant boosting their DIY/consumer business, in the case of Hume & Iser, it meant improving the store's trade business.

    When this Sapphire program came up, while we had a good business, I could see that there was better layouts and that it was a fresher store. In particular, we hadn't done anything out in this area, in the timberyard, for over 25 years. That was old hat [the way it was], so I said to the board, "We could've done that out there".

    Stephen realised that, given the current market, the under-investment in the trade area had meant some lost opportunities.

    Yeah, all the racking and that hadn't been updated. Inside, it wasn't too bad. It was quite reasonable in the main store, but I said to the board, "If we do [the store], we have to do [the outside trade area].. We just have to do this". So they agreed. They could see the merit.
    Builders are changing all the time, as you can imagine, the younger ones coming through now. Most stuff gets delivered, but they also pick up a lot of stuff from the first thing in the morning to the last thing at night.
    So we had massive congestion out there [in the yard] when we had a lot of staff in there, and a lot of utes and trailers. So [IHG] came up with this plan. The group's got a lot of experience in the people that are doing this. We could've fiddled around with it [ourselves], but would've got it as nowhere near as good as what they've done.
    [IHG] gave us a whole new concept, a whole new plan for the whole place. And then we put it on a big piece of paper, and we said week one, week two, week three, and off we went.

    To read more in Hume & Iser, please download HI News:

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    retailers

    VIDA Wood expands in Australia

    Jacinta Colley heads up revised team

    Canadian company Canfor has acquired part of Swedish company VIDA Wood. VIDA now distributes the Canfor product in Australia.

    Not that long ago, every time HNN would visit a hardware retailer to check in on the market and how things were going, at some point the retailer's eyes would glance over to the wood storage lot, and you would see concern bordering on panic show in their face. The lots were mostly empty, and several retailers confessed that they had exhausted even their "reserve" storage, which they kept for their best customers. That shortage was especially acute for framing timber.

    That's a thing of the past, today, of course. The stocks of wood are plentiful, and negotiations have turned back to issues of cost and quality, rather than logistics. The question that still remains, however - especially as some commentators have raised fears of a "glut" on the current market, causing more cyclical problems over the next couple of years - is how did the forecasting go so wrong?

    Morwell shutdown

    The most significant local event for the problems with supply was probably the shutdown of Morwell, Victoria softwood sawmill by Carter Holt Harvey Building Supplies Group (CHH) in mid-2017. The press release put out by the Victorian government at the time stated:

    [T]he Government has been told the closure is unavoidable given poor sawlog quality and a lack of volume available from the privately-owned softwood plantations which supply Carter Holt Harvey.

    The reason for the decline in volume was given as:

    A number of damaging fires, including Black Saturday, across HVP's Gippsland plantations over the past two decades has severely affected the volume and quality of 28 year-old sawlog available to supply Carter Holt Harvey.

    While this is understandable, what is less understandable is how much it seemed to take the industry by surprise, particularly given that CHH has been reducing its Australian holdings since 2015.

    Demand fluctuations

    A very evident problem has been global fluctuations in demand. The global financial crisis (GFC) of 2008 saw the high level of demand in the US and Europe shutdown rapidly over the course of two years. Demand in Australia did not decrease as much, but this was followed by an unexpectedly rapid recovery in the US and Europe. That kind of "whiplash" effect was a major contributor to supply issues, as timber initially destined for import into Australia found other, more lucrative markets.

    Exports to China

    A third influence promoted by some commentators is a rise in exports of timber to China. The well-regarded Australian source of all news timber-related, Timber Trader, outlined this problem in an article entitled "Softwood Shortages", published on 22 August 2018. As that article points out, China decreased the amount of sawlogs from local forests, and increased imports. This was a welcome market, Timber Trader suggests:

    In the years when local sawmills were finding it uneconomical to compete with imports, some growers looked overseas to develop new markets to future-proof their plantations against Australian downturns. China welcomed Australian sawlogs, seeing them as a low-cost, high-quality product. And for Australian growers, Chinese contracts represented an additional layer of security for forward planning.
    Softwood shortages - Timber Trader

    However, as Timber Trader goes on to suggest, these export markets probably contributed to shortages of softwood in South Australia and regional areas of other states.

    Causes

    While these are all valid matters to consider, the reality is that we are really looking at elements that are symptomatic, rather than causative. The underlying condition is that timber markets have changed sharply over the past 10 years, but the Australian timber industry itself remains locked into practices from the 20th Century.

    That's not surprising. Timber, especially in Australia, is about so much more than business, economics and market forces. There is an ecological aspect, a cultural aspect and - especially important - an aspect that relates to providing employment in regional areas where the local communities continue to decline. All that adds up to heavy political involvement. That can be clearly seen in, for example, other parts of the Victorian governments press release regarding the Morwell closure:

    The plantations from which Carter Holt Harvey sources its wood were privatised and sold to Hancock Victorian Plantations (HVP) by the Kennett Government in 1998.

    Solutions

    It's difficult to imagine a time when the catch-all word "globalisation" will really apply to the timber industry - partly because of the organic (and therefore slightly chaotic) nature of the product, and partly because local factors will always exert a strong force on the industry.

    However, we can identify some industry moves which indicate a general direction towards a globalised supply market. There is hope that many of these moves will provide a means for retailers to seek better stabilisation of demand.

    For example, there is a lot of good news about two, linked moves that started in the timber industry last year, and have now rolled through into the current market. In November 2018, the very large Vancouver, Canada-based company Canfor announced that it was purchasing 70% of the Swedish timber company VIDA Wood, a deal that was finalised in February 2019.

    Coupled with that news, VIDA Wood has announced that it is revving up its business in Australia, and seeking out new markets and opportunities. To help them advance the company, VIDA head-hunted one of the timber industry's star executives, Jacinta Colley, to take over the position of national sales director with the company. HNN sat down with Ms Colley and VIDA's director of operations, Ian Brett, to find out what is in store for VIDA.

    Ms Colley is familiar to most in the hardware industry from her ongoing senior roles with Simmonds, where she worked for over 13 years. Mr Brett joined the company in early 2017. His early career was spent with Brett's Timber & Hardware, the well-known Queensland company. As he says, he's been involved in wholesaling timber all his life.

    It became evident as we spoke with Ms Colley that VIDA had, in the past, not lived up to the full potential the company has to affect the market. As she told us:

    What is important to us and the market right now is that we can provide continuity of supply, followed by quality, followed by a competitive price, and that our relationships are strong.
    I think that relationships play a really big part in the business. In the past, VIDA was sometimes a little light on the ground, to be fair, and has not paid dividends. But when you've got more feet on the ground, you can cover territory quicker. By having me on board now, it means that I can get on a plane if need be, same day, and get to Melbourne. Whereas in the past, Kurt [Schrammel, the CEO] was covering off Melbourne. He's based in Sweden and it's just not viable.

    Ms Colley is very adamant that the company now has very strong Australian credentials, and a strong presence in the market.

    Our head office is in Narangba [QLD]. We run a third-party logistics operation out of Melbourne, but that's more to service the Bunnings stores, and then we top it up with some of our merchants. We also have our wholesale distribution arm through VTW. But we haven't yet really tapped into New South Wales, and we really haven't tapped hard enough into Queensland. That's what we're starting to do now.

    As part of that presence, VIDA now has six key staff members in addition to Ms Colley and Mr Brett. Mick Dixon is the account manager for Queensland, and has been with VIDA since it first came to Australia. His background includes over 20 years working at Boral. Trish Bressow looks after internal sales. Trevor Dixon is the logistics warehouse manager for Queensland and Victoria. Alicia Nagle is on accounts, handling credit. Malinda Dalzell handles importing, including everything related to overseas shipping. And Tanya McDougall is in stock management.

    It's a substantial commitment. VIDA has gone through its own struggles, growing in Australia, but it is evident from what Ms Colley says that they've tackled these head-on, and are setup for growth.

    I think a fair observation would be that VIDA has flown under the radar in the past. They have been quiet achievers, to a certain degree.
    We did go through a bit of a troubled times with quality three years ago, which wasn't a fun time for the business. Then Ian Brett joined the business. He helped to bring in a phenomenal amount of quality control. We spent 18 months having quality assurance on site every week to get that right. And that's now paying dividends.
    Now with me coming on board, it has enabled the sales team to focus on sales, for me to help with the backend, with the administration, with my connections and networking, and help grow the brand and its presence, in a really professional manner.

    All that is set to accelerate as the potential of Canfor is added to the solid base VIDA has established. Mr Brett outlined for us how Canfor would expand the range of products:

    I think the biggest change for us from a Canfor production sense was that we had been limited to specific lengths coming out of Sweden. Other supplies out of Europe, Canfor can be heavy, particularly in the long length market. Something that the Swedes struggled with, particularly in five to six metre lengths in continuous supply. So the Canadians were very good and had large volumes in Spruce Pine, Fir Larch and Doug Fir in the six metres. So that's been very good.
    The quality of product we've seen to date, when we got our first shipments in looks really good quality.

    VIDA's view of the industry's future

    VIDA had a very direct experience of the problems of a scarcity of timber. As Mr Brett puts it "we could have played a cricket match in the timber warehouse, it was that empty at one time". But now he is very concerned that the cycle has shifted too far over in the other direction:

    Buyers had gone overseas, and we did the same, bought wood and a lot of wood arrived. The Australian sawmills got their production scaled up, and demand dropped.
    That wasn't coincidental. We put regulatory controls in banking, we had a banking royal commission. We controlled immigration. We did everything to reduce demand.
    And now we find ourselves in a completely opposite situation where there is too much wood. It was such a brutally quick cycle. I have never seen all the stars align at one point to go one way, and then, in a very short period of time, they align to go the other way. Almost instantaneously.

    Mr Brett sees some tough times immediately ahead for some timber suppliers, though there are also signs of real moderation.

    I think it's gonna be a tough twelve months, going forward. However, housing starts are still reasonable. Interest rates are low. The banks are making it a little bit difficult to borrow money, but I think that might improve over time.

    The end note of this is that, like most people in the timber industry, they do see things improving, and continuing to improve over the next five to ten years. The general tendency, just about everyone agrees, is up. It's working out how to somehow cope with the swings and roundabouts along the way that poses the real challenge.

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    companies

    Adelaide Tools acquisition attracts ACCC attention

    Findings due in late January 2020

    The Adelaide Tools acquisition sees Bunnings set to sell Milwaukee brand tools, signalling a potential shift in the market

    The competition watchdog recently launched an informal review into Bunnings' planned purchase of Adelaide Tools. It is looking at the impact of the proposed acquisition on competition in South Australia and around the country, reports the Financial Review.

    The Australian Competition and Consumer Commission (ACCC) has sought submissions from interested parties on how closely Bunnings and Adelaide Tools compete with each other. It wanted to know which products/services they competed over, which other retailers competed in the tools, hardware and power equipment categories, and the likely impact of the acquisition on prices and service.

    The ACCC review will look closely at competition between bricks and mortar and online stores. The findings from the are expected to be announced in late January next year.

    Bunnings said the acquisition was always subject to regulatory approval and the review was part of that process.

    About the acquisition

    As HNN reported previously, the Adelaide Tools acquisition sees Bunnings set to sell Milwaukee brand tools. It could signal an increased interest in developing an online driven trade brand similar to the UK-based, Kingfisher-owned Screwfix.

    In the media release that announced the acquisition, Bunnings managing director Michael Schneider stated:

    The acquisition ... will allow us to improve the way we connect, serve and engage with trade customers and is aligned with our strategy to accelerate the growth of the trade business.

    Bunnings also said it will to continue to run the business as Adelaide Tools.

    Established in 1949, Adelaide Tools is headquartered at Mile End and has stores in St Marys, Pooraka, Lonsdale and Gawler, as well as Oaklands Mower Centre at Somerton Park. Its online store lists over 8000 products.

    Analysis

    The acquisition, as with all acquisitions by Wesfarmers, will be subject to regulatory approval. However, as HNN has remarked in the past, the amalgamation of the Home Timber & Hardware group with Mitre 10 has lessened many of the competitive checks that might previously have applied to Wesfarmers.

    In an immediate sense, the acquisition of Adelaide Tools is unlikely to have a direct impact on revenue or earnings before interest and taxation (EBIT) for Bunnings. The impact on the company's future strategies, however, is likely to be outsize in proportion to the acquisition's financial weight.

    It's worth noting that press releases from Wesfarmers in general usually bear some analysis. They are never directly misleading, but they do tend to direct the attention of the media away from the core issues.

    In this case while HNN is sure that the comments of one of the directors of Adelaide Tools are heartfelt when he says that "this [acquisition] shows a vote of confidence in the South Australian retail market", it seems unlikely that this is factually the case.

    Bill Peach and his co-directors have built a great company that is well-regarded, and should be proud of that achievement, but it is doubtful Bunnings expects the Adelaide market to experience a building boom in the near future.

    There are, however, two aspects to the strategic leverage we are likely to see result from this acquisition. The first is Bunnings' stated intention not to rebrand these operations in line with its Bunnings retail warehouses. An additional part of this puzzle is that Adelaide Tools has established such a strongly competitive position online, with its prices often matching leading discounter Sydney Tools (which has long been the subject of "grey market", parallel importing rumours).

    Added together, it's tempting to suggest that Bunnings might be planning on launching something like UK home improvement company Kingfisher's Screwfix operation, which continues to drive growth, even as its traditional DIY sales decline in profitability. Screwfix began as a catalogue company for tradies, then expanded to a same-day delivery operation online. It has begun expanding its physical store presence over the past three years.

    The potential for Bunnings would be a separate brand with a major online presence and limited physical store presence, but offering click-and-collect as well as servicing drop-off through Bunnings warehouses.

    The second, major aspect to this acquisition is that Bunnings will, for the first time, be selling Techtronic Industries (TTI) Milwaukee brand in Australia, through Adelaide Tools. (HNN confirmed this with Bunnings.)

    With Metcash's IHG now selling Milwaukee tools in some regional stores, it may be possible that Bunnings was able to wrest a concession to sell Milwaukee through stores it owned that were not branded Bunnings - subject to similar constraints to those placed on independent retailers.

    Extending from that, it would seem possible that a new Bunnings-owned retail brand might be permitted to sell other TTI brands, such as AEG and possibly Ryobi. While Ryobi is not warrantied for professional, trade use, it has become a popular brand with businesses in the repair, maintain and improve (RMI) industries, as its fleet costs are around half of those of brands such as Milwaukee and Makita.

    Even if these two possibilities do not develop beyond Adelaide Tools, it's likely this acquisition will have something of a chilling effect on some sectors of the professional tool market. Total Tools would be one company that could suffer from this kind of direct competition, along with a number of smaller, non-franchise retailers.

    Finally, HNN has to say that we have, once again, been surprised by the astuteness of Bunnings. Adelaide Tools is very close to being a perfect acquisition. While larger operations might be tempting, Adelaide Tools has long been recognised as one of the canniest operators in the tools business, with a particularly strong presence online, and a good record of ethical business practices.

    It marks, in HNN's opinion, a return to the kind of strategic practice Bunnings pursued pre-BUKI, with innovation rather than scale as a strong focus for growth.

    Related:

    Adelaide Tools acquisition sees Bunnings set to sell Milwaukee brand tools - HNN Flash #10

    Sourced from The Australian Financial Review and Adelaide Advertiser

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    bigbox

    Bunnings plan places other stores on alert

    It will join Bridgestone Select Tyre and Auto in the precinct

    Proposed store is consistent with the approvals in place at Plainland (QLD), according to the developer

    The Lockyer Valley in Queensland will be home to a new Bunnings Warehouse, with a location now confirmed. (See "Stores in development around Australia" story in Big Box Update.) Commercial construction website EstimateOne had a listing for a Bunnings store in Plainland, with a budget of between $15 million to $20 million.

    Prior to a location being confirmed, the news that Bunnings was planning a store in the region sparked major concerns amongst local hardware store owners.

    Goodwin and Storr Mitre 10 owner John Storr said it was worrying, as Bunnings was already affecting his business. He told the Gatton Star:

    Even at the moment when there's no Bunnings in the area they're still having a detrimental affect on my business. There's such a big floating population of workers that work outside the area - they're going to Bunnings all the time.

    He believes the arrival of the hardware retail chain would be catastrophic. Mr Storr said:

    We've been in business for over 100 years and I don't know how well I'll do against Bunnings, to be honest. It's not just prices, it's just the volume of product they have that I can't compete with.
    If they do open up, I'll give it two years to see how it is and if I can't make a living out of it I'm just going to close up the shop.

    He claimed the big box store "decimated" small businesses and questioned how it was allowed to expand.

    Plainland's Hardware and Rural owner Stephen Rule also told the Gatton Star:

    I hope our customers would be loyal, we're a family business - all the hardware stores in the area are family businesses.

    Mr Rule claimed customers wouldn't benefit, saying prices at Bunnings were no cheaper.

    I's perception - they try to give the perception they're cheaper but they're actually not.

    He believes any job creation from the development would be offset by losses in other businesses.

    Bunnings acting general manager for property Garry James said in response to the concerns there was room for everyone in the market. He said:

    We compete with a huge range of retailers and believe that there is ample room for a wide variety of operators, speciality providers and online retailers. Bunnings is a strong employer of local residents in the Lockyer Valley, with over 700 team members employed in surrounding stores.

    Sourced from the Gatton, Lockyer and Brisbane Valley Star

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    retailers

    Klingspor's belt-making service helps retailers grow

    Belts made in its Silverwater (NSW) premises

    Cost Less Bolts and Industrial Supplies and Rotary Tools attest to the genuine benefits of Klingspor's belts

    Retailers need to find sources of growth, especially in the face of steadily consolidating markets. While seeking out new product lines, and new sales areas in stores (such as checkout counter impulse purchases) can be attractive, another approach is to explore further possibilities from their existing suppliers.

    For example, Klingspor is well-known for its range of abrasive products, but it has also been successful in creating new businesses for retailers through its belt-making service. The company's managing director, Paul Hoye believes there is a good market for belts, and that Klingspor can offer "an excellent product range, and the knowledge to suit all applications".

    Steve Gilbert from Cost Less Bolts and Industrial Supplies (CLBIS) in Ringwood (VIC) is one of the retailers which have benefitted from this. He sees Klingspor as an ideal supplier for this reason. As he explains to HNN:

    We started with Klingspor in 2006, but I reckon it wasn't until a few years later that we started with their belt-making.
    They had a really good rep - not saying they don't have a good rep now - and he gave us a bit more confidence in selling it ... We were used to selling grinding wheels, just the basics. But he gave us the confidence to go and sell that sort of product [belt-making] ourselves. Klingspor advised us on where we should be selling it, who to, and how to get in the door of the customers.

    Since then CLBIS has been regularly selling belts in various sizes, from 10mm miniature belts up to very large belts, which can run up to ten metres long. In this instance, Klingspor helped to create a brand-new business with an additional revenue stream for CLBIS.

    Developing that kind of new revenue stream is almost a kind of partnership, with the sales rep working to understand the store well enough to provide advice on how to effectively expand its offer. And Klingspor would not have been able to help start something new at CLBIS without Steve's enthusiasm - along with his ability to see an opportunity when it was presented to him.

    Steve refers to it as "taking the blinkers off". He said:

    We pride ourselves on being a diverse business, we don't just sell nuts and bolts. When we started selling cutting and grinding wheels ... we were with another brand ... and there was no push for any sideways movement on the products. It was always 'sell more cut off wheels, sell more grinding wheels'.

    However, when Klingspor became a supplier to the store, it worked with Steve to look beyond its traditional product categories. He said:

    ...When Klingspor came in, they said 'why don't you try the belts?' [So] we started with the linishing belt for your standard belt grinding machine. And then, of course, once you're into that then you ask the question of your customers, and you find more out about whether people use a bigger linishing belt or a wider one...

    The belts suit the store's customer base, which includes handymen who do small jobs, on up to large commercial customers. According to Steve:

    A couple of my biggest customers are offshore oil and gas manufacturers ...The next largest would be steel fabrication, and stainless steel manufacturers [that produce] balustrading, stainless steel fencing and hand rails ... And we've got some guys involved in timber.

    Another Klingspor customer in Thomastown (VIC), Jonathan Dewar from Rotary Tools, said Klingspor's belt-making facility in Sydney suited its business for fast, short and large volume abrasive belt supplies. Established in 1947, Jonathan said his business has a strong reputation as an "abrasives house". It is mainly focused on manufacturers in the metal sector. He sees Klingspor as a "reliable and cost effective supplier of abrasive belts".

    Belt-making

    Klingspor has been involved in custom manufacturing abrasive belts in Australia since 2003, with some of the current staff working there from the very beginning. The company said its price book shows the comprehensive range of materials and sizes available. Its specialised staff are always on hand to help advise on a technical level.

    Belts as narrow as 6mm and up to 1.6 metres wide can be manufactured, in most lengths. The longest belt Klingspor has made was over 10 metres long. All its belts are made in its factory located in Silverwater (NSW).

    Klingspor has belt materials for all applications, from knife making to timber finishing, as well as for specialised tasks such as glass grinding and floor sanding. In fact, it has well over 20 different types of materials, with some of these materials available in up to 14 different grit sizes. This means there is a wide range of permutations, from which customers can choose the exact product they need.

    The complex process of making belts involves several procedures. Firstly, the material comes in huge "jumbo" rolls which are up to 1,650mm wide and typically 50 metres long. This material has to be cut to length, and then "scuffed" or "skived" to ensure that it is perfectly flat when it is joined.

    A two-part glue is used to make sure that the join is strong enough to cope with the toughest applications. That is important, because the belt is exposed to very high speeds and pressures when used.

    Once the join is pressed at high pressure and cured overnight, it can be "slashed" to the correct width, packed, labelled and despatched to the customer.

    Klingspor differentiates itself from many other belt manufacturers in one very important way: the company always tests the joins before the belts are sent out.

    Klingspor's in-house engineers in Germany have developed belt join testing machinery. Every batch of belts produced around the world on its sites is tested to make sure that the join is capable of meeting or exceeding its high level standards. The testing machinery transmits the results of the tests back to the home office in Germany, where they can be effectively analysed.

    The production time for the custom-made belts made at Klingspor's facility in Silverwater is usually three to four working days from the date of order.

    Retailers

    Retailers - especially resellers involved in industrial tools - can contact Klingspor directly about adding the abrasive belt service to their business. In addition to pricing and service, Klingspor can suggest the best ways on the best ways to reach out to their local markets.

    When asked what advice he would give retailers thinking about offering something similar, Steve said:

    Not that I'd want everyone to do what we did because that would mean a smaller piece of the pie for us! (Laughs.) At the end of the day, if people are just looking with blinkers on, then they are not going to grow. There's only so much of a certain product you can sell to a person. But if you can possibly take the blinkers off, and go sideways, using lateral thinking, then definitely you have a chance to grow. And the guys at Kingspor are really good with that.

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    companies

    Ace Hardware bets on e-commerce and delivery

    Investment in technology

    The company has more stores than its rivals, and believes this will provide it with a competitive advantage

    According to a special report in the Wall Street Journal (WSJ), Ace Hardware plans to spend billions to expand its e-commerce capabilities, including a recently launched buy-online-deliver-from-store service.

    A number of financial analysts question the viability and cost of such an effort. Each local Ace store owner has autonomy from the retail cooperative's corporate head office, and over half of them - at the time the report was published in August 2019 - have yet to embrace the company's online-delivery vision.

    However chief executive John Venhuizen believes the local focus of his company gives it an edge over bigger competitors such as Home Depot which is also spending billions to shorten the time it takes to reach any home with a delivery, no matter the size.

    Mr Venhuizen spoke to the WSJ about his strategy. In response to a question about how Ace Hardware plans to maintain its market share in a changing industry against larger competitors such Home Depot and Lowe's, as well as Amazon, he said:

    In order for us to win, we've got to wage a battle on three fronts. The first is service. Having local stores with local ownerships who live in, work in, and know that community better than anyone at corporate ever will is a huge strategic advantage to us.
    The second is convenience, and what we're trying to do is exploit the geographic proximity advantage we have. Versus everyone you just mentioned - Home Depot, Lowe's, Amazon - we have a lot more stores. We have 5,200 stores around the world in more than 67 countries, and more than 75% of US households are within 15 minutes of an Ace store. We've got about USD2 billion of inventory sitting right in the neighbourhoods.
    The third is quality. We have a fanatical devotion to locally relevant, high-quality products that are different than what you can get at some of the competitors you just mentioned.

    The WSJ also asked about the bricks-and-mortar focus of Ace said it had in the past. Mr Venhuizen said:

    We're betting the farm on what we know is a timeless principle - that serving hearts and human connection will always have the potential to stir a soul.
    So how do we apply that principle? We recently launched nationally BODFS, which is a goofy industry term that stands for Buy Online, Deliver From Store. We are actually leveraging our local stores, their inventory, their vehicles and - here's the key point - their people to do the delivery to their neighbours.
    There isn't some random who-knows-who delivering the product to whip onto your porch. The person delivering the product knows what the product does, how to use it, how to start it, how to season it in. That matters. Now, sometimes it may be far less relevant, but the greater the degree of complexity, the more important the degree of knowledge.

    Mr Venhuizen also explained how Ace's delivery offerings are different from Lowe's and Home Depot that offer their own delivery, installation and haul-away services.

    We have more stores than the two of them combined. So the proximity to the homes and businesses is a significant advantage.
    Then ... the delivery is actually done by the employees who work in those stores. So it isn't outsourced to a cobbled-together, third-party strategy. It's actually done by the employees who work in the store.

    As a retailer-owned cooperative, Ace store owners have to opt into doing this delivery service, and many aren't participating yet. Mr Venhuizen said:

    It's operationally really difficult to execute, and you see retailers all over the world struggling with that last mile.
    I think we have about 2,100 or 2,200 stores now that are fully executing [the buy-online-deliver-from-store service] from Acehardware.com. Almost every Ace-branded store is doing some form of delivery on their own, and as they operationalise that, they're waiting until it's excellent before they integrate with online because the volume is starting to surge.
    We're helping them with that as best we can, but some of them still feel like they have a way to go.

    Sourced from The Wall Street Journal

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    retailers

    Ikea focuses on "home" in smarthome

    Tech companies are seen as collaborators

    Ikea Home Smart is a newly formed business unit and is responsible for developing the smart home business, end to end

    Home improvement retailer, Ikea is connecting all of its smart tech developments into a single division. It recently announced that it plans to invest heavily in a newly established "Home Smart" business unit that will have end-to-end responsibility for its growing portfolio of smart devices.

    The chief executive of Inter Ikea, which owns the Ikea brand, told the Financial Times (FT) that the group was looking at products such as air cleaners to add to its growing list of smart products including speakers, blinds and lightbulbs. Torbjorn Loof said:

    We see it as a very interesting area for us to embark on. We want to simplify it and make it affordable. I think Ikea could have a leading role in the smart home arena.

    The new business unit is helmed by Bjorn Block, and sits alongside Ikea of Sweden's ten other business units that include Lighting, Livingroom & Workspace, Textiles, Kitchen & Dining, Children's Ikea and Ikea Food. In a statement, Mr Block also said:

    At Ikea we want to continue to offer products for a better life at home for the many people going forward. In order to do so we need to explore products and solutions beyond conventional home furnishing.

    Mr Block also said the big box retailer was taking a different approach to tech and ecommerce giants such as Google and Amazon and start-ups that have dominated the area. He told the FT in separate interview:

    For us, home comes first. When we meet some of the tech companies they come from smart but we come from the home.

    Restructure

    The smarthome unit is part of Ikea's biggest transformation since its founding 76 years ago in Sweden as it reacts to dramatic changes in the retail industry with rapidly increasing ecommerce sales and dwindling visits to malls and many shops.

    Placing the Home Smart business unit on the same footing as its Kitchen & Dining or Children's Ikea division indicates the importance the retailer is assigning to technology as a lucrative revenue stream.

    Key to this is the revamp of its Home Smart app and its shift towards to becoming a hub for smarthome hardware from a variety of different manufacturers. Partnerships with other tech firms will help to raise the unit's profile, and that of Ikea as a leader in the smarthome space. Mr Block said in a statement:

    By working together with all other departments within Ikea, the business unit of Ikea Home smart will drive the digital transformation of the Ikea range, improving and transforming existing businesses and developing new businesses to bring more diverse smart products to the many people ... We are just getting started.

    Technology hub

    Mr Block told the FT that Ikea has been hiring software engineers at its main hub in Almhult, in rural southern Sweden, and could also looking at possibly setting up in the US and Asia. He added that Ikea was looking at greatly increasing the number of smart products it had without revealing details, although he added that both water scarcity and air pollution were big global challenges that the company should try to address.

    Beginning in 2012, Ikea's smart range would not fully emerge until 2015 with the introduction of wireless charging tables and lamps. The company has also developed its own smart lighting and launched speakers in conjunction with well-known American consumer electronics brand Sonos - including one integrated into a lamp. It recently added smart blinds to the range that can all be co-ordinated through the same app.

    In Australia, Ikea competes directly with Bunnings and JB Hi-Fi in the smarthhome category, as well as Google and Amazon, among other retailers.

    As an industry observer noted, despite market growth, many customers are still baffled by smart technology, Much of the task, then, will be simplifying the experience to make it useful.

    Related:

    The smarthome market in Australia is now a $1.1 billion market - HNN

    Sourced from The Financial Times, The Verge and CRN

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    bigbox

    Homebase technology is part of turnaround

    It is working with Neptune's DX Platform

    The IT solutions should help simplify customer ordering, product inventory and supplier management

    UK DIY chain, Homebase has adopted "low-code and agile development methodologies" to build new applications as part of its digital transformation.

    The first application is a "product look-up" mobile app for employees that will enable them to quickly look-up product details and specifications. This app will eventually have features allowing staff to reserve and order items in real-time. It will also have the capability to help customers and staff specify and order complex products, such as bathrooms and kitchens, both instore and online.

    Key to the initiative is joining up information from supply-chain and supplier systems to make it simple for the customer to know if the product is available, how quickly it can be delivered and precisely when their purchase is due to arrive.

    In addition to product selection and availability, the app will include delivery scheduling, warehousing and stock integration, requiring a high level of integration with disparate legacy systems.

    The home improvement retailer is working with Neptune Software's DX Platform that provides a rapid-application development "front end" that connects with Homebase's legacy systems. IT teams can then design, develop, integrate and manage applications demanded by the business with little or no code required.

    Natalie Kouzeleas, managing director of Neptune Software UK, suggested that low-code development approaches can cut development time by 60%.

    Paul Cannon, director of IT at Homebase, talked up the importance of moving quickly with new technology deployments. He said:

    We want to empower our teams with the right, cutting edge technology which allows them to deliver the best possible customer service.
    Gone are the days of complex integration projects that take years to complete. Now we build a new experience, roll it out to a single store, and if it works it can be live across the business in weeks.

    Homebase said the new agile development approach is a key aspect of the company's turnaround strategy, and it indicated this route will give the business a better chance to compete digitally in an increasingly competitive market.

    Small format stores

    Homebase could also be testing small-format outlets and opening new stores in cities where existing branches have closed. CEO Damian McGloughlin spoke exclusively to DIY Week recently about the future of Homebase, as the retailer works to integrate its latest acquisition, Bathstore.

    Homebase has already introduced a number of concessions into its stores to help enhance its offer, including Tapi, Ponden Furniture, Silentnight and, most recently, AHF Furniture and Carpets, Denby, and Bedeck.

    The acquisition of bathroom specialist Bathstore looks set to further expand the collection of what Mr McGloughlin describes as "complementary concessions".

    Plans are afoot to introduce Bathstore into Homebase stores in a number of different forms, from a branded presence in the home improvement retailer's bathroom offer in smaller stores, to a shop-within-a-shop concept in larger Homebase outlets.

    Homebase took control of Bathstore's website, as well as 44 stores, when the bathroom retailer entered administration in June. Mr McGloughlin said it is working closely with landlords to secure the right deals for stores, as they look into the potential for some of these sites to house a small-format Homebase.

    With 70 loss-making Homebase stores set to close by the end of the year as part of an ongoing review of the portfolio, Mr McGloughlin said:

    I think we've got the right-sized stores now, 40,000-45,000sqft is the right size for me. But we could also test smaller stores in smaller locations like high streets.
    If we are very clear about what we are and our proposition, it might be that the smaller format is a decorating shop or even a small kitchen shop. I don't know at this stage ... It's my vision and I'm still shaping it.

    Looking at ways to grow the business further, Mr McGloughlin sees potential for new Homebase stores in a number of geographical locations that don't currently host a branch. Equally, he believes there is scope to return to some regions where Homebase has closed an unprofitable store. He said:

    We would look at putting a Homebase into one of the Bathstore sites ... But, if not, there's lots of retail space out there. There are big cities with opportunities for us to go back but in a better location.

    Sourced from Computing UK, Essential Retail and DIY Week

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    retailers

    IoT security system

    Indoor and outdoor cameras from Swann

    Both cameras are capable of being connected to power and can be set up on a smartphone via Wi-Fi

    DIY home security specialist, Swann has released a new Internet of Things (IoT) ecosystem that includes DVRs with sensor warning light cameras (available in both 1080p and 4K Ultra HD) and 4K Ultra HD NVRs with more powerful spotlight cameras that have sirens. The Swann Wi-Fi cameras have the flexibility for users to choose a product to best suit their property needs - whether it is indoors or outdoors.

    The new Swann Security app also gives users the unique ability to control multiple wired systems, and Wi-Fi cameras from multiple sites, stream live video and receive notifications to know what is happening at all times. Users are able to get day and night access, with 1080p HD videos recorded to the cloud.

    Swann said it offers a line-up of wired and wireless security solutions that integrate with Google Assistant and Amazon Alexa.

    To read more in New Products, please download HI News:

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    products

    Adelaide Tools acquisition sees Bunnings set to sell Milwaukee brand tools

    Family business with bricks-and-mortar and online stores

    The acquisition of Adelaide Tools by Bunnings could signal an increased interest in developing a trade brand similar to the UK-based, Kingfisher-owned Screwfix

    The Wesfarmers-owned Bunnings has announced the acquisition of South Australian-based Adelaide Tools. The managing director of Bunnings, Michael Schneider, stated in the company's media release that:

    The acquisition ... will allow us to improve the way we connect, serve and engage with trade customers and is aligned with our strategy to accelerate the growth of the trade business.

    Some of the key points about the acquisition are:

  • Bunnings will not change the name of Adelaide Tools
  • Adelaide Tools has five tool stores in Adelaide, plus a mower store
  • Its online store lists over 8000 products
  • The company has an established reputation, built up over 70 years
  • The acquisition, as with all acquisitions by Wesfarmers, will be subject to regulatory approval. However, as HNN has remarked in the past, the amalgamation of the Home Timber & Hardware group with Mitre 10 has lessened many of the competitive checks that might previously have applied to Wesfarmers.

    Analysis

    In an immediate sense, the acquisition of Adelaide Tools is unlikely to have a direct impact on revenue or earnings before interest and taxation (EBIT) for Bunnings. The impact on the company's future strategies, however, is likely to be outsize in proportion to the acquisition's financial weight.

    It's worth noting that press releases from Wesfarmers in general usually bear some analysis. They are never directly misleading, but they do tend to direct the attention of the media away from the core issues.

    In this case while HNN is sure that the comments of one of the directors of Adelaide Tools are heartfelt when he says that "this [acquisition] shows a vote of confidence in the South Australian retail market", it seems unlikely that this is factually the case. Bill Peach and his co-directors have built a great company with an established reputation, and should be proud of that achievement, but it is doubtful Bunnings expects the Adelaide market to experience a building boom in the near future.

    There are, however, two aspects to the strategic leverage we are likely to see result from this acquisition. The first is Bunnings' stated intention not to rebrand these operations in line with its Bunnings retail warehouses. An additional part of this puzzle is that Adelaide Tools has established such a strongly competitive position online, with its prices often matching leading discounter Sydney Tools (which has long been the subject of "grey market", parallel importing rumours).

    Added together, it's tempting to suggest that Bunnings might be planning on launching something like UK home improvement company Kingfisher's Screwfix operation, which continues to drive growth, even as its traditional DIY sales decline in profitability. Screwfix began as a catalogue company for tradies, then expanded to a same-day delivery operation online, and has begun expanding its physical store presence over the past three years.

    The potential for Bunnings would be a separate brand with a very strong online presence and limited physical store presence, but offering click-and-collect as well as servicing drop-off through Bunnings warehouses.

    The second, major aspect to this acquisition is that Bunnings will, for the first time, be selling Techtronic Industries (TTI) Milwaukee brand in Australia, through Adelaide Tools. (HNN confirmed this with Bunnings.)

    With Metcash's IHG now selling Milwaukee tools in some regional stores, it may be possible that Bunnings was able to wrest a concession to sell Milwaukee through stores it owned that were not branded Bunnings - subject to similar constraints to those placed on independent retailers.

    Extending from that, it would seem possible that a new Bunnings tool brand might be permitted to sell other TTI brands, such as AEG and possibly Ryobi. While Ryobi is not warrantied for professional, trade use, it has become a popular brand with companies in the repair, maintain and improve (RMI) industries, as its fleet costs are around half of those of brands such as Milwaukee and Makita.

    Even if these two possibilities do not develop beyond Adelaide Tools, it's likely this acquisition will have something of a chilling effect on some sectors of the professional tool market. Total Tools would be one company that could suffer from this kind of direct competition, along with a number of smaller, non-franchise retailers.

    Finally, HNN has to say that we have, once again, been surprised by the astuteness of Bunnings. Adelaide Tools is very close to being a perfect acquisition. While larger operations might be tempting, Adelaide Tools has long been recognised as one of the canniest operators in the tools business, with a particularly strong presence online, and a good record of ethical business practices.

    It marks, in HNN's opinion, a strong return to the kind of strategic practice Bunnings pursued pre-BUKI, with innovation rather than scale as a strong focus for growth.

    bigbox

    Smarthome market to surge from 2019 to 2023

    Smart speakers go from a $1 billion to a $4 billion market

    Surveys indicate that Smarthome in Australia grew strongly during 2018, and forecasts expect strong growth through to 2023. While Bunnings has attempted to enter the market, its overall business model may not be as well suited to it as that of competitors such as IKEA.

    After years of hopeful forecasts, it seems that the Smarthome market sector is now truly poised to take off over the next three years. Australian emerging technology consultancy Telsyte runs an annual survey, the Telsyte Australian IoT@Home Market Study. The results for its 2019 survey indicate that in the the Internet of Things (IoT) market in Australian homes grew by 57% during 2018, and is now a $1.1 billion market.

    The Telsyte IoT survey is based on a sample of 1025 respondents over the age of 16 years, who were surveyed in November and December 2018. Analysis included industry interviews, financial reports of industry companies, and product reviews.

    The $1.1 billion figure represents a sharp increase of over 30% on 2017 results. According to Telsyte, much of that growth has been driven by the widespread adoption of "smart speakers", such as the Amazon Echo and Google Home series. The survey results shows that Google Home has a large market share of 72%, followed by Amazon at 15% and the Apple HomePod at 5%. Telsyte sees that growth continuing, with five million Australian homes using smart speakers by the end of 2019.

    A survey conducted by Voicebot.ai, reported similar results, with Google Home representing 68.2% of the market, Amazon's Echo 14.2%, and the Apple Homepod 5.5%. Voicebot suggests that Google's entry into the market six months prior to Amazon accounts for much of its market dominance.

    The Telsyte survey showed a broadening spectrum of use of smart speakers. Where in previous years the main use was for playing music, the main use in 2018 was said to be "getting everyday info".

    Beyond simple adoption, the Telsyte survey indicates that over 1.2 million are regarded by the company as being "invested" Smarthome users, with five or more IoT devices in the home. The company forecasts this will increase sharply by 2023, with most households owning more than 15 connected IoT home devices. That growth should result in a Smarthome market worth around $3.9 billion by 2023.

    An important growth driver up to the present has been increasing energy costs, which has driven homes to adopt "smart battery" technology in the home, complemented by solar panels. Those products represent around one-third of the current Smarthome market, the company says.

    The other key driver for the Smarthome is a desire to make homes safer, which often leads to the installation of an integrated network of video monitors and alarms. In the medium term, Telsyte sees security and energy savings as driving around 40% of all Smarthome purchases.

    Future growth

    Moving into the future, Telsyte expects that the Smarthome market will eventually become dominated by connected appliances. By 2023 this category will represent 40% of the Smarthome market, by revenue.

    The company also sees opportunities for installers as increasing. Currently, much of the growth is in simple DIY applications, but as systems become more complex and more integrated, homeowners will increasingly rely on professionals.

    Another growing area will be subscription services, with homeowners willing to pay for security and energy use monitoring. Telsyte also sees the development of "smart shopping", using voice-actuated devices, creating a more convenient interface than mobile phone based shopping.

    Home value

    Smarthome concerns are already influencing the home buying and renting decisions of Australians as well. The survey indicates that the major concern, for 58%, is that homes will have an adequate National Broadband Network (NBN) connection. That is closely followed by concerns over the number of powerpoints in each room. Interestingly, around 30% also see "hard wired" network connections (CAT 5e/6 cabling) in homes as being an important factor in choice.

    Current market

    Outside of the Telsyte survey, there are clear signs that some hardware retailers are gearing up to take advantage of a surge in the Smarthome market. For example, we've seen Bunnings launch its Smarthome shopping "pod" - though this is currently active at only one store in the northern outer suburbs of Melbourne.

    Yet Bunnings - and potentially many other home improvement stores as well - are likely to encounter some difficulties in this category. One major reason for this is that Smarthome at the moment is very much about consumer electronics, which is one of the fastest moving, most price-aggressive categories in retail.

    Security cameras

    With its "10%" price guarantee, Bunnings would appear to have played it cautiously in Smarthome. For example, when it comes to security cameras - a popular category - it has stayed away from the more marginal brands, choosing instead the familiar Swann systems, Amazon's Ring, and Arlo. This means the retailer has avoided the low-end layer of security cameras, offered by online suppliers such as Kogan, which provide wireless, cordless cameras for under $100.

    Even with all this caution, Bunnings has not been able to keep up. As the illustration shows, on 13 October 2019 Bunnings was selling the single-unit first generation Arlo with its hub for $399. Amazon Australia was selling the identical unit for $395.31, delivered. (In either case, it's not that great a deal. The unit being sold is the Arlo Pro 1. The other units on sale are the Arlo Pro 2, and Arlo announced the release of its Pro 3 system in August 2019.)

    There are two other aspects that emerge from this comparison. The first is that one reason why the cost is so low for the delivered Amazon product, versus the in-store Bunnings product, is that this is the sale price based on a Prime membership - which provides free delivery.

    Secondly it is notable that Amazon, of course, knows that the purchaser owns three different smarthome devices, with which this product interacts. Furthermore, Amazon would always know if this customer has an Arlo product connected, even if that product had been purchased from Bunnings - while the reverse is certainly not true. It is a case of a superior access to network effects, and outlines an area Bunnings is only beginning to understand.

    Lighting

    The move by Bunnings into lighting fixtures was one of the successful inspirations that came out of competing with Masters Home Improvement. Masters was the pioneer of comprehensive lighting displays in home improvement stores. Bunnings has done well in this category, taking marketshare from pure category players such as Beacon Lighting. But how will it compete in Smarthome lighting?

    As with security cameras, Bunnings has chosen to focus on established brands, mainly the Philips Hue system, with some additional accessories from Arlec. This is a very limited approach, and it seems unlikely it will enjoy long-term success.

    To see why, we need only look at the Smarthome lighting systems offered by IKEA, under the Tradfri internal branding. These were released in the UK marketplace (also 240V) in 2017, and have only been released in Australia during 2019, and not all devices are available.

    To begin with, the smart lightbulbs in the Tradfri range are less capable than some of the Philips Hue range, but they are also significantly less expensive. The least expensive Philips Hue bulb at Bunnings is the White Smart LED Dimmable Bulb with the B22 bayonet fitting at $22.00 (same price, but delivered, from Amazon). The least expensive bulb for IKEA Family members in October 2019 is $11.99 (non-Family: $14.99). The bulbs are nearly identical, except that the IKEA bulb has an output of 1000 lumens (72W), and the Philips output is 880 lumens (60W).

    That price difference continues on through most of the range. For example, a Philips Hue motion detector costs $45 at Bunnings, while the IKEA Tradfri alternative is $20.99 for IKEA Family members. A Tradfri wireless dimmer is $16.99 for Family members, and the Hue equivalent costs $35 - though the Hue device is more capable.

    For automation, bulbs in both the IKEA and the Philips ranges operate on the Zigbee low-power wireless protocol. This means that they require a bridge to interact with wireless networks, so as to indirectly access the internet. The gateway for Tradfre costs $39.99 for Family members, and the Hue gateway costs $69.00.

    The price difference goes deeper than this, however. Philips does not make light fittings, while IKEA does. It's pretty obvious for anyone setting up a smart lighting system that having to buy smart bulbs - even with LEDs, which have a life span of over 10 years - is not as cost effective as buying smart light fittings. IKEA has taken advantage of this by offering a set of light controllers that integrate with special light fittings, which use standard lightbulbs. Those fittings include LED lightbars and shelf lighting.

    Beyond that, IKEA is currently selling in the UK and North American markets smart blinds, which are both cordlessly powered and controllable through the Tradfri system. These start at just USD129 ($190), and are DIY installable. That contrasts with an average price of well over $400 for most other remote systems - which often don't include the blinds themselves.

    In short, the IKEA model of own brand and self-supply is well suited to the Smarthome market in its current stages. The Bunnings approach of, at best, captive brands such as Ozito, Matador and Tactix, is less suited to it.

    The future

    Exactly how the Smarthome market is going to play out over the next three years is difficult to predict. We could say that both FY2017/18 and FY2018/19 were a time of early adopters. What we've started to see in FY2019/20 is the beginning of the early mainstream adopters.

    Generally speaking, where Bunnings has done best in developing, innovative markets, is by entering about a year after the market reaches the early mainstream phase. The company comes in at that time with strong disaggregation resulting in lower production costs, tied to strong logistics.

    The problem for Bunnings with the Smarthome market is that it will continue to undergo rapid development. By 2023, it is possible the Smarthome as such will disappear, and we will just be talking about "homes" - Smarthome features will simply be expected, and installing them on older homes will become a focus for renovators. In home improvement terms, it will move from being a consumer/DIY focus, to a consumer-driven trade focus.

    One choice Bunnings could make over the next three to four years, is to forego much of the revenue and profits it could make from the Smarthome category, and move its focus to more familiar and reliably profitable areas elsewhere. The other main choice would be to develop and extend its current capabilities into a kind of "burst marketing", where it could take on new product lines, develop and bring them to market over 12 to 18 months, then move rapidly on to the next thing.

    For the rest of the home improvement retailer market, one approach would be to start working out how to capture more of the trade-based Smarthome market in 2021. That would mean developing supplier relations with companies offering Zigbee switches that integrate with standards such as the Amazon Echo and Apple's HomeKit. There is going to be a high demand for information about Smarthome by 2021, and retailers that can offer renovators and new home builders some guidance would likely find this to be a profitable market.

    reports

    Mitre 10 returns to Warrnambool

    Petrie's completes its renos

    The Bell family of Kangaroo Island sold its Linden Lea Mitre 10 store in Kingscote to new owners

    The exterior of the Ponting Bros Home Timber and Hardware store in the regional Victorian town of Warrnambool has recently undergone the process of being painted in Mitre 10's signature blue colour. It marks more than a decade since the hardware retailer last traded in the town.

    Independent Hardware Group now owns both brand names. Ponting Bros operations manager Brendan Raven believes the change will entice more shoppers into the store, which has also increased its stock range. He told The Standard:

    I think Mitre 10 is the stronger brand out of two with the public perception. Customers are pleased to see the Mitre 10 brand back in town.

    Warrnambool's former Calco Mitre 10 closed in the early 2000s. The Ponting Bros hardware store, which is now owned by third generation family members, has traded at its current site for nearly a century.

    Mr Raven explains that while the approximately 4000sqm store would remain the same, the layout would change to allow it to hold more stock. He said:

    It had been many years since Pontings had made changes to their retail part of the business and it was time for an upgrade. The paint department has grown three times the size in the new layout.

    Mr Raven said despite reports of a building downturn across the state, the Warrnambool business had seen "year-on-year growth" and expected to grow its 47 staff. He added:

    We are defying a lot of the averages you hear in the city.

    Petrie's upgrade

    Renovations have been under way at the Petrie's Mitre 10 store in Orange (NSW) for the last six months. The investment has seen the addition of a 2000sqm covered drive-through trade yard, reports the Central Western Daily.

    It recently officially opened the centre with a trade breakfast and a range of activities. Customers bought in their Paslode nail guns to be cleaned and serviced and their tools to be tested and tagged.

    Several suppliers offered specials to mark the official opening of the drive-through.

    Ownership change

    A new owner is also taking over the Linden Lea Mitre 10 in Kingscote on Kangaroo Island (SA). Proprietors, the Bell family were a looking to transition and sold the store.

    Philip Bell told The Islander the family had spent more than 40 years building the business up but was now ready to move on. The new owner would keep running the retail outlet under the Mitre 10 banner and there were no major staff changes expected, he said.

    retailers

    Bisley Workwear signs on for UFC

    Three year agreement

    The UFC is building on its partnership with Bisley as its official workwear partner

    Australian workwear brand, Bisley Workwear, has announced a new multi-year agreement with the UFC (Ultimate Fighting Championship), becoming the official workwear partner in Australia and New Zealand.

    The new three-year partnership will include in-octagon branding, stadium activation, social content and consumer promotions. UFC vice president of global partnerships, Nick Smith, said:

    Partnering with iconic Australian brands such as Bisley demonstrates the growth and value of UFC, as we continue to develop our business locally. Bisley and UFC share the same vision and values and this collaboration will work to grow both the sport and brand throughout Australia, as we build a meaningful long-term partnership.

    Bisley Workwear is the Australian market leader in specialist branded Workwear apparel with their sights set on leading the category worldwide. Managing director, David Gazal, said:

    We are proud to announce Bisley Workwear as the official workwear brand of the UFC, one of the fastest-growing sports in the world. Our alignment with the UFC was built on shared attitudes toward innovation in our industries, dedication to our teams, and the rewards of hard work.
    We are looking forward to participation in the octagon and at Marvel Stadium...and our ongoing commitment to the UFC and its athletes, who work hard every day to get the job done.

    Bisley first partnered with UFC as a one-event deal on UFC 234: Adesanya vs. Silva earlier this year in Melbourne, and will now return to the Victorian capital for their first event under the new agreement.

    From Ministry of Sport

    companies

    Dyson-level nail guns developed in NZ

    Sold through Placemakers stores

    A New Zealand based company believes it has made nail guns cool through its advanced technology

    In an inner-city suburb of Auckland, New Zealand, a business with 17 employees is making nail guns with a difference. Hammerforce is the productive result of a midlife crisis and some potentially revolutionary technology, according to its profile in Newsroom. The company has also attracted three serious Kiwi corporate high flyers, former New Zealand Exchange and Financial Markets Authority chair Simon Allen, former Air NZ chief executive Rob Fyfe, and former Meridian and Fletcher CEO Mark Binns to its board.

    The story of this nail gun called the Airbow began about decade ago, when a few builders in their backyards were frustrated with the performance of their framing guns, and liked the idea of trying to devise a better nail gun. So they took the problem to some mechanical engineers, who came up with a system that uses compressed air, not electricity or butane, to power nails into wood.

    This allowed them to get rid of any sort of combustion system, that came with batteries, power leads, fans, and chargers. There were no electronic parts, so no problems with water, and no spark to create a fire risk. There was no carbon dioxide or carbon monoxide released when the gun was fired, and no battery to dispose of.

    It was a new way of making a nail gun. Similar to the vacuum cleaner invented by James Dyson, the product took several years, numerous prototypes, and three million nails fired using automated rigs, to get there.

    Origin story

    Prior to becoming CEO of Hammerforce, Andy Coster worked for global management consultancy company AT Kearney in London and Sydney, then for Chris Liddell (now a Donald Trump senior staffer) at forestry company Carter Holt Harvey (CHH).

    A bright and talented executive, Mr Coster has always been seriously dyslexic. But by the time he was 29, Mr Coster was running CHH's commercialising unit Oxygen Business Systems. In his early 30s he started his own research company, Conversa Global. When he turned 40, his company had been bought "for a life-changing sum" by advertising agency group WPP.

    Mr Coster basically retired, happy to be spending lots of time with his family. But in the end, he says, he needed a business challenge too. He told Newsroom:

    I needed something to do and I had put money [into Hammerforce] in 2009, as one of its first investors. I could see the potential and I started getting more engaged in the physics. I realised if we could come up with a way to create a force just using air, there could be lots of applications.

    By the time Mr Coster joined the company in November 2016, Hammerforce already had a patent over its compressed air technology. But it didn't have a product it could use to demonstrate the technology worked. He said:

    We had to create a nail gun people were going to like and it was going to have to have branding and be mass produced. I knew no one would believe us unless we brought something to market.

    Resellers

    In October last year, Hammerforce sold its first Airbow nail guns to NZ hardware chain Placemakers under a three-year exclusive deal. Its second product, a gun which can shoot nails into concrete and steel, will be launched soon.

    Earlier this year, the Airbow nail gun won a gold medal in the industrial product design category of the London Designweek awards. It beat designs from Philips and IBM. Then it won a silver award in the commercial and industrial products category of the Industrial Society of America's International Design Excellence Awards. Previous winners include the Apple iPhone, Tesla Model S and Oculus Rift.

    New Zealand innovation

    The nail gun parts are manufactured in China and assembled in the Auckland suburb of Ponsonby. And unlike many competitors, Airbow guns doesn't need proprietary nails, explains Mr Coster. That keeps costs down for builders. He said:

    This is a game changer. Our framer can use any nails - we've unbundled the nails from the gun. There's no gunpowder, no earmuffs, and all our stuff is waterproof. You can put it under water.

    Getting the compressed air technology to work and then commercialising the nail gun hasn't been easy - or cheap. Over the last three years Mr Coster has raised NZD15 million from private New Zealand investors in three NZD5 million capital rounds. Now he's working on another round - this time for NZD10 million.

    Hammerforce is still aiming at local high net worth individuals, and Mr Coster is confident he'll get the new money.

    Mr Coster also describes his board as "frustrated entrepreneurs". He said:

    They love the risk taking - and they don't. There's a decision to be made and I say 'Let's do it" and they say "Oh my God, shit'. And that's a healthy tension that's going to help us succeed.

    On the other side, having hard-hitting board members challenges Mr Coster's thinking ("they grill the hell out of me"), and they bring a wealth of contacts in different areas, including investment, he said. They also bring credibility. He said:

    If I want to go overseas, to take the company global, I want experience around me to give confidence to investors, customers and channel partners.
    These [board members] have seen a lot of shit in their day and have done due diligence themselves to put their name on the line. This is a tangible demonstration to others that the product and the company have potential and credibility.

    International licensing

    Power tools aren't where Mr Coster sees the future of his company. Instead it's about the air compression technology behind the nail gun, not the gun itself. And it's not in New Zealand.

    In fact New Zealand is simply a test market, Mr Coster said. The aim from now on isn't to commercialise more products - an expensive business - but to license the Hammerforce compressed air mechanism technology to third parties, probably overseas, who can incorporate it into their products.

    Where many companies go wrong is they build a product and then they think 'Now what?' You have to build a company with processes and systems.

    Mr Coster said Hammerforce is in "advanced talks" with several companies across a range of industries.

    Aviation, construction, marine - any industrial application which requires a force.

    The company believes it has truly disruptive technology, and may find itself partnering with global players across various industries that can use its to create a transformative advantage.

    companies

    Linkware's ongoing innovation

    Patent designs

    In its 20th year, Linkware Australia continues to receive recognition for its products

    Plumbing and hardware manufacturer, Linkware has unveiled a number of enhancements to some of its products and released new ones.

    The round tapware style of its Loui Wall Tops has been heavily featured in popular renovation TV shows such as The Block. National marketing manager, Greg von Einem, explains:

    Whilst many suppliers produce similar items, our unique advantage - apart from being well priced - is that is can be used where the breeching piece is up to 18mm behind the wall. This is very handy for renovation work!

    The Loui Tapware range has a soft operating quarter turn spindle. It is suitable for up to 18mm recess application (wall top assemblies) with the use of the spindle adaptor provided. The elegant circular design comes in high quality chrome and matte black finishes.

    The company also has patent designed 360 degree mini cocks in three models: cistern, washing machine and three way. They are made with solid brass construction and includes blue and red buttons. Mr von Einem said:

    Unique and patent design saves time and money on installation as other items in the market require some adjustment to ensure the outlet is facing in the desired position. With this design, the end-user simply applies a threadseal tap to a wall outlet, and screws on the 360 mini. Once it is tightened, the mini can be rotated 360 degrees into the desired position.

    In addition, Linkware has upgraded the push button mechanism from a "spring loaded" design into a magnetic push design on its timed pillar and bib taps. This means the tap is easier to "turn on" with much less force than other items. The advantage is easier use especially in child care and aged care environments.

    products

    ABS Stats: Hardware retail sales to July 2019

    Victoria surges ahead

    While there was overall growth in the hardware retail sector, Victoria is the only state to post good overall growth numbers

    The Australian Bureau of Statistics (ABS) has released statistics for retail sales during July 2019. Overall retail turnover was down by 0.1% for the month of July in seasonally adjusted terms, following a rise of 0.4% in the previous month.

    The ABS director of quarterly economy-wide surveys, Ben James, summarised seasonally adjusted retail sales in a media statement:

    There were falls in four of the six industries and six of the eight states and territories in July. Cafes, restaurants and takeaway services (-0.6%) led the falls. There were also falls in clothing, footwear and personal accessory retailing (-1.0%), other retailing (-0.4%), and department stores (-0.2%). Food retailing (0.3%), and household goods retailing (0.1%) rose this month.

    For the hardware and garden supplies sector, results were slightly more promising. In unadjusted terms, for the trailing 12 months to July 2019, sales increased by 2.20%, up from 0.97% for results one year prior.

    The Australia-wide month-on-month comparison in unadjusted terms, however, was less positive. Hardware sales rose by 1.74% for the current July, while rises for July 2018 and July 2017 were 2.69% and 4.62%, respectively.

    In terms of the states, Victoria (VIC) has emerged as the highest retail growth state by a considerable margin. In a trailing 12-month comparison, VIC showed growth of 8.56%. Removing VIC from the Australia-wide trailing 12-month comparison shows the rest of Australia with a growth rate of only 0.97%. On the same comparative basis, the Australian Capital Territory showed growth of 5.58%, but all other states and territories failed to exceed 1.2% growth, with Western Australia (WA) down by 7.01%.

    On a month-to-month comparison, VIC grew by 3.58%, which was down on that number for the previous two years, both of which exceeded 7.5%. WA recorded the highest growth for the month, at 4.95%, but this came after a steep decline in July 2018, when retail sales fell by 12.45%.

    Chart 2, which shows the percentage change in trailing 12-month retail sales, shows a clustering of growth numbers, similar to that from 2016, which could indicate the widespread effect of federal elections on retail sales. However, Chart 3, which shows the percentage change in sales for the month of July, shows a tight clustering of growth results for the month that is unprecedented over the previous nine years. This would indicate that there are forces at work that go beyond elections.

    The Victoria story

    Over the past 12 to 24 months, it's evident that VIC has followed a different path to the rest of Australia. While other states and territories have fluctuated in their growth patterns, VIC has - for the most part - shown steady growth.

    Chart 4 shows this growth contrasts with the growth for New South Wales (NSW). The green shaded portion of the chart shows the area where VIC has outperformed NSW.

    Analysis

    The overall economic picture for Australia remains confusing, or, at best, "mixed". Consumer confidence, a little surprisingly, is relatively positive. This is despite growth in household income bumping along at under 1%, and the household savings ratio continuing the decline that began in 2015. The unemployment rate for NSW and VIC is below 5%, Tasmania is over 6.5%, and the other states and territories are all close to 6%. Growth in the wage price index has flatlined well below 2.5%, the lowest it has been in over 25 years.

    Meanwhile business confidence is lower than consumer confidence, pegging at about the average level for the past 20 years. One sign of this doubt is that business investment continues to find new lows, driving its level back toward that of over 25 years ago, in the early 1990s.

    When consumer confidence exceeds business confidence, that means consumers predict a positive future change to be more likely than businesses do. It's notable that Australia's federal government has insisted both that the current poor numbers are not significant, and that the economy is, in fact, doing well.

    This doesn't explain statistical results such as low wage growth and very low business investment. In particular, it doesn't explain why by the end of 2019 it is highly likely Australia's market interest rate will be at a historical low of under 1.0%.

    The danger that is looming is that consumer confidence, based on government statements, could find itself disappointed before the upcoming Christmas period. That could accelerate a downward trend in retail sales, and lead to a defined slump at a time when many retailers expect bumper sales.

    Global trade

    One possible explanation for the confidence the government expresses could be that it expects the mining industry to pull out of a "cyclical" slump. However, that slump has been amplified by the growing trade difficulties between the US and China. The most likely scenario, given that November 2020 presidential election date in the US, is that the US will continue its tough stance through to May 2020, then enter into some kind of compromise trade agreement. Should that happen, any uptick in mining exports will be delayed until near the end of 2020.

    Domestic trade

    It has become apparent that, in terms of spending on home improvement, VIC has become different from the rest of Australia. The state continues to follow the pattern that has been in place over the past six or seven years, where when house prices increase, spending on renovations increase.

    That is not the case in the rest of Australia. That pattern has changed outside of VIC, as money is actually leaving both home improvement and the real estate market.

    An additional trend, as reported by the Australian Financial Review, is that there is less spending at the moment on pre-sale renovations. The reality has always been that the strict dollar-to-dollar return on this kind of investment has seldom been that great. Its real influence has been increasing the chance of sale, rather than the return on sale. With fewer properties offered for sale in most price brackets, it has made increasing strategic sense to not invest in attracting more potential buyers in this way.

    Conclusions

    Looking at the current, slightly contradictory aspects of the Australia economy, HNN would suggest one source of its difficulties is that there are not enough incentives fuelling "inorganic" growth. Organic growth originates from further investments by existing companies in strategies to improve their efficiencies and launch new products. However, globally, most growth value being created today comes from inorganic sources such as the launch of whole new categories of business, or sharp changes in existing categories.

    In an economy rapidly coming to rely more on services than mining, agriculture and manufacturing, there's a need to provide overt support for inorganic growth, even if that does disrupt familiar and convenient incumbents.

    statistics

    Bunnings re-signs NBL sponsorship

    Targeting new-gen apprentices and tradies?

    The multi-year agreement comes immediately after its partnership throughout the 2019 NBL finals

    Bunnings has inked a two-year deal with the National Basketball League (NBL). This follows its initial involvement during the 2018/19 season when it had naming rights of the "Player of the Game" award from Round 13 and branding on the semi-finals courts.

    The big box retailer also sponsored a national "Bunnings Ultimate Team Training Session'" competition, giving one fan and their friends an exclusive training session with an NBL coach in their home state.

    Bunnings has also signed on as a founding partner of NBL1, Australia's premier winter league which aims to strengthen the pathway for the country's best basketball talent. Bunnings general manager - marketing, Keith Murray, has said in a statement:

    Basketball is one of the most exciting and fastest-growing sports in Australia & New Zealand. We are happy to extend our partnership and support the growth of a sport that encourages teamwork, integrity, family-fun and community on and off the court.

    The new season will start in early October when Melbourne United plays new crosstown rival South East Melbourne Phoenix in the first-ever "Throwdown" at Melbourne Arena. NBL chief commercial officer, Brad Joyner, said:

    We are delighted Bunnings has re-signed with the Hungry Jack's NBL after a successful partnership during the 2019 NBL finals. This is an exciting time for basketball in Australia and New Zealand and the 2019-20 season promises to be our biggest and best ever.
    We are also thrilled that it will also become the founding partner of NBL1 which enjoyed a highly successful inaugural season and has strengthened the connection with grassroots basketball and will return in April 2020.

    Related: HNN covered Bunnings signing up for sponsorship with the NBL earlier this year.

    Bunnings teams up with the NBL - HI News, page 21
    bigbox

    Ace Hardware expands with DIFM market

    It buys a home repair services franchise

    The hardware retail co-operative now boasts more locations than the combined store count of its main competitors Home Depot and Lowe's

    US retailer, Ace Hardware is getting straight into the "do it for me" (DIFM) market with its acquisition of home improvement service franchise Handyman Matters. CEO and president, John Venhuizen told Business Insider the timing seemed right for the move, given the group's growth trajectory.

    Its total store network is currently 5,300 globally. Most of those locations - 4,600 - are in the United States. He said:

    We feel like we have an incredible amount of momentum. There are not many retailers in the United States that are opening stores. Many are shutting them. We opened more than 900 in the last five years and we'll open more than 800 in the next five. We feel like we're aligned with what the consumer wants.

    Handyman Matters will be rebranded as Ace Handyman Services and operate as a standalone subsidiary. The Colorado-based company has 57 franchisees across 23 states in the US, employing a workforce of 250 people who help customers with carpentry, flooring, painting, and other home improvement services. On-site services for consumers and small businesses also include plumbing, electrical and flooring.

    Ace expects to complete the integration and re-branding initiatives by the first quarter of 2020. Andy Bell, founder and CEO, will continue to lead the day-to-day business operations for Ace Handyman Services.

    At its recent buying show in Atlanta, Ace Hardware said retailers will not be expected to be franchisees, but they will benefit from the acquisition because local franchisees will be required to purchase their materials at Ace stores.

    According to Mr Venhuizen, customers have been "basically begging" Ace Hardware to launch in-house home improvement services offerings, and Handyman Matters aligned with its goal of being "the helpful place". He explains:

    It's this natural fit of bringing 'helpful' to the home, so that we have a service provider that can actually do it for the consumer. It fits naturally with what we're known for and the trust that our brand has engendered in these communities.

    It also ties in with the rise of the DIFM market where home improvement customers hire professionals to do the heavy lifting on projects through trusted retailers.

    Mr Venhuizen said there's not much of a difference between the DIFM customers and the DIY shopper. Ultimately, it comes down to the customer's appetite for a home improvement project or maintenance task, level of expertise, and the nature of the project.

    DIFM offerings

    The Ace Hardware deal appears similar to Ikea's 2017 acquisition of TaskRabbit, the on-demand platform, which links freelance workers with jobs, from handymen to movers to assistants. TaskRabbit was expected to boost Ikea's delivery and assembly capabilities.

    Home Depot and Lowe's both offer installation services through independent contractors. In 2015, Amazon launched Amazon Home Services, which also works with external service providers.

    In its 2018 annual report, Home Depot wrote that demand for installation services is expanding "particularly for our 'baby boomer' customers who may have historically been DIY customers but who are now looking for someone to complete a project for them."

    The retailer has said it is focusing more on its professional service providers because they perform services for its DIFM customers that will help the it drive higher product sales.

    retailers

    Pro Tool Reviews Innovation Awards

    Cordless tools demonstrate advances

    Pro Tool Reviews covers a range of categories with its annual Innovation awards, but the cordless category typically has the most advanced innovations

    The US website Pro Tool Reviews - which has a lot of credibility, with experienced trade "pros" testing tools and writing about them - has released its most recent tool innovation awards, for 2019.

    Pro Tool Reviews Innovation Awards 2019 - Cordless Tools

    The cordless category tends to be the most interesting of the award categories, as most of the innovation potential of tool companies is focused on this type of power tool. HNN is not going to list all the award winners, just the seven that we think are truly innovative and identify some emerging cordless tool categories.

    EGO POWER+ BAX1501 POWER+ Commercial Backpack Battery

    At a cost of USD1300, this is the kind of really heavy-duty commercial gear the cordless electric outdoor power equipment (OPE) market has been looking for. We are talking a 56-volt, 28 Amp-hour battery (yes, 28, you read that right), with an IP56 weatherproof rating (you can use it in the rain), and a super-comfortable harness. It can go from low charge to fully charged in just 3.5 hours.

    This complements Ego's Pro range of OPE, which manage on average around 80% of the power delivered by petrol-powered equipment. It's the first really great looking power backpack we've seen from any supplier.

    Craftsman CMCF604 Gyroscopic Powered Screwdriver

    What makes this power screwdriver so special is that it looks like - well, a screwdriver. Slimmer than the similar DeWalt model, this screwdriver is powered by a four-volt rechargeable battery, and produces 5.5 Nm of force. Stanley Black & Decker claim it can drive over 300 25mm #6 screws into pine on a single charge.

    The screwdriver works in a very intuitive manner. Just insert it into the screw, then turn your hand clockwise to faster or anti-clockwise to extract. In the US it is priced at USD39.

    Milwaukee 2502-22 M12 Installation Drill/Driver

    Techtronic Industries' leading brand, Milwaukee, has spent the last three to four years carefully adjusting its range of power tools to appeal to fleet purchasers. That's often meant making specialty tools for areas such as power cable line workers and others. Now, the company is turning its attention to areas such as installation, and it has released a multi-headed driver that is ideal for tasks such as installing kitchen cabinetry.

    The 12-volt cordless M12 Installation Drill/Driver comes with a 10mm chuck, an offset chuck, a 6mm hex fitting, and a right-angle chuck. These can be attached in 16 different positions.

    The drill/driver itself is designed to work in tight spaces, with a flat top, and twin handle system that creates a slim profile.

    Milwaukee 2950-20 M18 PACKOUT Radio + Charger

    Most jobsite radios tend to compromise on sound quality and integration with cordless systems. The Milwaukee Packout radio and charger does neither.

    It starts with a 10-speaker system that can provide 360 degree sound with a high level of bass, and good volume. The system integrates into Milwaukee's existing Packout toolbox system, clipping right onto compatible toolboxes. And it also charges Milwaukee's 18-volt tools, providing a secondary source for battery top-outs on worksites.

    Ryobi Cordless Rotary Tool and Ryobi Hybrid Soldering Tool

    We've put these two tools together because, while very different in function, strategically they are quite similar.

    Both use the Ryobi One+ Li-ion battery system, but this provides a base station for a corded attachment. In the case of the rotary tool, this is a 90cm drive shaft that can spin a tool at speeds up to 34,000 rpm. The Soldering Tool also provides a 90cm lead, and features the convenience of operating with the Ryobi One+ battery, or by plugging into mains power.

    Just as Milwaukee's installation drill/driver helps extend that range into new specialised work areas, so these tools from Ryobi extend that battery system further into craft and electronics.

    DeWalt TOOL CONNECT Connector

    How exactly the world of connected cordless power tools is going to play out in the long run is hard to know, but this device from DeWalt help bridge the gap between connected and the unconnected tools. It fits onto a power tools, acting as an adapter between the tool and its battery. Powered by its own, individual coin-sized battery, it provides location tracking, along with the ability to lock a tool down so that it cannot be used. The battery recharges when the tool is connected to a battery.

    It's a simple way to upgrade unconnected tools, providing tracking and anti-theft services when coupled with DeWalt's smartphone app.

    products

    PPG paint endorsed by Australian asthma council

    Taubmans Endure interior paint

    The National Asthma Council has featured Taubmans Endure brand during its Asthma Week education campaign

    The National Asthma Council Australia's Sensitive Choice program named Taubmans Endure interior paint a preferred choice for interior painting projects, according to an announcement from paint maker PPG.

    The recognition was part of a new Healthy Homes video series launched for National Asthma Week (September 1-7, 2019).

    An estimated 2.5 million Australians have asthma, many of whom are also among the one in five people with allergies. The educational videos aim to help people understand and alleviate common triggers when undertaking home improvement projects.

    The video focusing on interior painting projects showcases Taubmans Endure paint by PPG as an approved choice for health-conscious consumers and includes commentary from renovation expert Cherie Barber. Adele Taylor, Sensitive Choice program manager, said:

    People with asthma and allergies are more susceptible to triggers found in many common household products, including paint, but all Australians should be cognisant of the products they choose to use in their homes.
    Taubmans paint has been a Sensitive Choice partner for more than 10 years. The Taubmans Endure products that display the blue butterfly logo have been rigorously reviewed by our independent product advisory panel and proven to offer a potential benefit for people with asthma or allergies. This is through reduced contact with triggers, including the smell of paint, mould and some volatile organic compounds.

    Taubmans Endure has low VOC emissions of less than 16 grams per litre. It is also low in odour and provides superior protection against mould. Ms Barber said:

    Taubmans Endure paint provides eight-in-one multi-benefit protection that helps to keep our homes clean and healthy year after year. It has anti-microbial properties, and once dry, the paint inhibits the future growth of mould and mildew.

    Manufactured in Australia, Taubmans Endure by PPG is also engineered with NANOGUARD(r) advanced technology to provide a strong protective shield against everyday dirt and stains. The paint is wash, stain and scrub resistant, enabling surfaces to be cleaned repeatedly without compromising the quality of the paint finish.

    companies

    Sutton Tools warehouse management

    Microlistics WMS partnership

    As a third party logistics provider, Microlistics has the flexibility to tailor a solution for its clients

    Cutting and power tools accessories maker Sutton Tools has chosen to work with Microlistics WMS as its warehouse management system solution provider.

    The decision to partner with Microlistics followed an extensive market review, according to Transport and Logistics News. Key factors included a requirement for robust and scalable technology, ease of use, and timely implementation at a competitive price point.

    Sutton Tools managing director Peter Sutton said the decision to partner with Microlistics reflects the company's commitment to driving innovation and agility throughout the supply chain. He told Transport and Logistics News:

    We export approximately 50% of our product to overseas markets, so it's essential we not only have industry leading distribution capability within Australia, but also the ability to maintain stock availability of more than 20,000 SKUs across four global regions.

    James Clark, chief supply and distribution executive, said another important consideration was the ability to deploy the new system with minimal interruption to operations.

    Microlistics have a proven capability to deploy their product quickly and seamlessly enabling us to roll out the new system with minimal impact on customers. The software itself supports existing technologies we use in our warehouse today such as RF scanning and automated stock replenishment and positions us well to deploy further optimisation in the future as we continue to grow.

    Mark Dawson, managing director at Microlistics, said:

    Sutton Tools appreciates our consultative approach and we're excited to have them on board. We look forward to providing a path for growth within their warehouses. We're working on exciting new technologies not only in wall-to-wall Voice but in vision and robotics.

    Sutton Tools Melbourne based manufacturing and distribution operations will be the first site to benefit from the new warehouse management system commencing this year, with deployments to international distribution centres in Auckland, New Zealand and the Netherlands to follow soon after.

    About Microlistics

    Microlistics WMS is an enterprise-grade suite of warehouse management solutions that supports RF-based technology to improve the accuracy and speed of inventory management.

    In late 2017, it was acquired by WiseTech Global and became part of the group. At the time, Microlistics listed Mitre 10 and Linfox as part of its roster of customers. When the announcement of the acquisition was made, WiseTech Global CEO, Richard White, said:

    With the impact of ecommerce and advances in automation, warehouse management is an increasingly complex and specialised part of the international supply chain. The combined strength of WiseTech's global innovation capabilities and our CargoWise One supply chain execution platform integrated with Microlistics' powerful warehouse solutions for enterprise, express, third party logistics and cold storage will provide significant benefit to logistics providers.
    products

    Leatherman markets towards Millennials

    Opportunity for rent to be paid

    The company is offering young Australian renters the chance to win one year of free rent - in the name of brand promotion

    Leatherman is best known for creating Swiss army knife-like pocket tools. Based in Oregon (USA) it decided to launch its latest product by offering to pay rent bills of up to $25,000 to one Australian Millennial.

    According to its website, the company wants to help a young Aussie take a load off one of their biggest expenses. It said:

    Millennials actually have it harder than most other age groups, experiencing higher living expenses than ever before.

    It wants to help people prepare for real-life experiences and turn obstacles into opportunities, according to Leatherman Australia managing director David Yates. He said:

    We know many young Australians would love to escape their housemates from hell, or finally move out of their family home, so we want to help free someone from their situation and put that money towards further pursuing their passion projects.

    And the competition has a personal backstory. Founder Tim Leatherman spent eight years developing the tool as a recent engineering graduate, but had to rely on his wife's income during that time to do it. He said:

    We want to support other young individuals to follow their dreams by ridding one Australian millennial from their biggest expense, their rent.

    All this to launch its new range of six tools, the Leatherman FREE which flips the tool open at the push of your thumb.

    Only one Australian Millennial will get to side-step their rent bills for a year. To compete, they will have to head to the leathermanfreerent.com.au website and in no more than 25 words, express why they deserve free rent for a year.

    The competition closes on the last day of October at 11:59pm AEST, with the winner to be announced on November 4th.

    Leatherman is also giving away a Leatherman FREE T2 (which includes eight tools such as a bottle opener, package opener and a Phillips head) to two people for every week of the competition period.

    companies

    Window safety and performance

    Protection against high winds and hazards

    The latest evolution in the world's only self-latching multi-point window system from Doric

    In response to Australia's increasingly extreme weather and the growth of high-rise commercial buildings and vertical living spaces, door and window hardware specialist, Doric has launched the DN9000.

    Like its award-winning predecessor, the DN8000, the DN9000 system holds the window open, only releasing it under high wind loads. The window then falls under its own weight and is caught by the self-latching device, which holds it shut avoiding wind damage. The handle is then operated to release the window when the weather improves. Mike Alchin from the Alchin Long Group explains:

    The DN9000 provides an innovative solution to window safety in high wind areas, which is especially important to high rise properties and homes. The updated system improves upon the reliability and performance of the DN8000.

    The smart window system is made to last as it is manufactured from high yield 304 and 316 stainless steel, which is corrosion free. Available in white, silver and black to suit modern home styles, the DN9000 is also designed with one-way and two-way opening options with top and front mounted handles as required.

    Established in 1972, Doric is Australia's largest privately-owned hardware manufacturer supplying innovative door and window hardware for residential, commercial and architectural applications. With its network of branches located in capital cities and regional locations, Doric is able to provide the service and delivery standards required by its clients across the country. It also has a global footprint with locations in the Asia-Pacific and Auckland, New Zealand.

    Alchin Long Group is a privately held, family-owned Australian group of companies, that started in 1969. It is the parent company of leading hardware brands Doric, Cowdroy, Colonial Castings, Azuma and Lock & Roll.

    products

    Will Millennials boost DIY spray painting?

    Great products, poor information

    No one drills a hole with a brace anymore, but brushes and rollers are still the most common tools for painting. What has held back spray painting, and how can the category develop a better future?

    Here's a puzzle: Ask any average DIYer to drill a hole through a plank of wood with an old-fashioned brace, and they would likely look at you like you were crazy. Similarly, while many DIYers might, from time-to-time, take a handsaw to a piece of wood, few would make a dozen cuts through 2x4s manually.

    We know why. Today, just $500 can buy a basic but complete set of cordless tools. For the DIYer it's not just that power tools make jobs easier, it's that they make them possible. Making a couple of very straight cuts through a 300mm plank with a handsaw is hard if you do that only once every three years. It takes far less skill with a circular saw.

    That combination of affordability, ease of use and indirect upskilling for DIYers has boosted the sales of cordless power tools over the past seven to eight years. That, in turn, has boosted other areas of DIY, as more jobs become possible in less time with greater chances of success.

    While that is the general picture, there are some specific (very interesting) areas where this dynamic has not taken hold. In those areas, even though there have been advances in the affordability and functioning of power tools, DIYers continue to use "traditional" means of performing tasks - though many traditional tools have also been improved.

    One of the most puzzling of these areas is painting. Companies like Wagner SprayTech (part of the Swiss-based Wagner International AG) and Graco have done a good job of getting their products onto the shelves of Australian hardware retailers. Yet even as their products have improved, and delivered better value for money, the DIY painting category has continued to be dominated by paint brushes and rollers.

    That has resulted in what, in the power tool market, would be regarded as somewhat sub-standard growth forecasts. One market researcher, QYR Research, for example, forecasts compounded annual growth (CAGR) for sales of paint spray systems at just 2.8% between 2019 and 2025 (a figure which includes industrial and contractor as well as DIY). QYR sees the market reaching a global figure of USD1560 million by 2025, up from an estimated USD1250 million in 2017.

    A broader problem

    While painting is interesting purely from the perspective of a category that is relatively retrograde in terms of technological adoption, there are additional reasons why it is interesting.

    Most hardware retailers would agree that the DIY sector is undergoing something of a change, or, more accurately, an evolution. We've seen several evolutions over the past 25 years, most recently when Li-ion battery cordless tools became readily affordable, bringing a broader interest in DIY across many categories.

    While that evolution was about existing customers evolving and becoming more committed, the current evolution is more about the interaction between two existing markets. We can broadly describe these as the "old guard" Baby-Boomers, and the "neophyte", younger Millennials. Though, of course, it is a little more complex than this, with both Generation X and Generation Z playing roles, so it is best to simplify it into DIY G1 and the younger DIY G2.

    While it is evident that G2 will eventually take over the market, at the moment most hardware retailers market mainly to G1. Long-standing familiarity with this market is the main reason, but there are some valid structural reasons.

    Retailers see the older market as having the greatest potential for sales, as G2 is a group frequently weighed down with tuition debt and/or high dwelling mortgage repayments, coupled with lower earning power.

    Another difficulty is that there is often an almost binary choice between G1 and G2. The current G1-based merchandising of a product might not suit G2, but shifting to a more G2 approach will not suit G1, which liked the former approach.

    Let's take, for example, an app (mobile or web-based) designed to help customers buy cordless drills. It's pretty easy to imagine how to do that: provide a wide range of specifications, features, prices and customer reviews. There would be a checklist for different uses, design features and price range, which would generate two or three suggestions.

    That app might sound like it's suited for G2 (as it is online), but really this is G1 merchandising. For G2, such an app would be confusing and not useful. What G2 wants is an app that enables them to select one of two drills (a high-end 12-volt, or a mid-range 18-volt) which they can rent over a weekend. Preferably, the tool comes in a box in the mail, and is returned the same way.

    What is going on there?

    G1 and G2 have different attitudes towards tools. For G1, tools are mostly about capability. Buying a drill for a G1 consumer means that they can enter into a wide range of activities, from hanging pictures on a wall, to fixing up a bit of dodgy guttering, or even building a bookcase.

    For G2, tools are useful only in achieving specific projects. Hanging pictures on the wall, for example, is likely a sub-project to the larger project of redecorating the livingroom. The livingroom is important to them, but not the drill. Tools and their use have a limited, narrower focus for them.

    A second factor is that while G1 enjoys buying new things such as tools, G2 does not. That's understandable. For the older generation, there has been a steady development in the development of everyday equipment, and a constant sense of surprise at how much things have improved.

    But over the past 20 years, that development pace has plateaued - with the exception of software-based technology. This is part of what is behind one really important characteristic of G2 that it is very important for retailers to grasp: The ultimate luxury, for G2, is not having to buy and own something.

    G2, for the most part, simply does not want to own a lot of tools - and some don't even want to own any at all. We could say that part of the trend is just good common sense. The majority of DIY tools, after all, get less than 60 hours of use in the first three years post purchase.

    Yet this goes beyond practicality. For G2 almost every purchase is something of an act of self-definition, and self-communication to both close and more distant social groups as well. In those regards, power tools do not rank highly - but making a comfortable, quirky, lovely livingroom would.

    Backing this up, US home security company Alarm.com had consultant OnePoll conduct a survey of 2000 "DIY Dads", regarding their attitude towards DIY. The survey found that the rate of tool ownership had dramatically declined for Millennial families:

    Younger Dads are less likely to own tools that older Dads would consider essential. 46% of Millennial Dads reported not owning a cordless drill. 48% don't own a stepladder, 38% don't own a set of screwdrivers, and 32% don't own a hammer (a tool owned by 93% of Baby Boomer Dads).

    Painting

    How do these attitudes affect painting, and particularly spray painting?

    For G1, paint sprayers meet few of their requirements to inspire a power tool purchase. A spray gun has a very narrow range of use, as it is specialised to one specific job. Also, it doesn't so much add a new capability, as change an existing one. And those changes, for G1, aren't all that comfortable.

    If you think about the tasks where G1 has really excelled, such as building bookcases, brick barbecues, decking, or even brush-and-roller painting, they all have a similar pace. They need to be worked at steadily and constantly, with a sense of care and commitment, and what we could call a medium degree of stress. Attention and endurance are both important.

    Spray painting does not follow that pattern. In brush-and-roller painting even DIYers will spend over 30% up of their painting time on preparation, while professionals will commonly go over 60%. (Some of them joke it shouldn't be called "painting", but rather "sanding", as the key to a great finish is a perfectly smooth and flat surface.)

    With spray painting, its normal to spend 80% to 90% of project time on preparation, depending on the room. That preparation is a lengthy period of low stress, but also low involvement work in masking off areas where you do not want paint. That's followed by a brief period of relatively high stress, when operating the spray gun. (And we mean brief: you can paint a 3m by 3.5m room with 2.5m ceilings in under 18 minutes.)

    That pattern - low involvement, lengthy prep, followed by brief, intense performance - is a common and preferred pattern for G2. It's the pattern in much of tertiary education (study/exams, thesis/oral defence), video games and even social media.

    The other factor to bear in mind is the quality of the results. It takes a lot of brush-and-roller painting to get really proficient, and be able to produce a good room. For G1, that slow gain in proficiency is actually one of the attractions, and one reason why these DIYers are reluctant to switch techniques.

    G2 is less interested in gaining that kind of proficiency. It takes very little time to gain an average competency at spray painting, as difficult tasks such as cutting-in are eliminated. Even if a mistake is made, it's also very easy to cover that up with a subsequent coat of paint - which can take just another 15 minutes to complete.

    Marketing spray painting to G2

    It's not possible to really reduce the success of marketing spray painting to G1, because it simply has not been that successful. G2 offers both a genuine growth opportunity for the category, and a chance to develop the marketing and merchandising skills necessary to capture the G2 market in other categories.

    Manufacturers

    Both Graco and Wagner SprayTech have a strong presence in Australia. However, Wagner has achieved better penetration in the DIY market with its Flexio brand, so we will concentrate on that brand, though most of these comments would apply to Graco as well.

    Marketing at the manufacturer level immediately brings up some problems. One of the marketing boasts of Wagner is that its Flexio products is that they can spray undiluted wall paint.

    That's true, they can. It's also simply not a good idea. When using a premium wall paint such as Taubman's Endure, or Dulux's Wash & Wear, it's a really good idea to dilute these slightly. The results will be much better.

    The marketing problem that Wagner and other companies face is this: what their systems are good at isn't just spraying thick paint, it's that they can adapt to a wide range of paint viscosities. The problem with lesser spray guns is that the viscosity of the paint has to be exact to within a 2% variance to get good results.

    With Flexio, it just doesn't matter that much, partly because you can adjust, with three simple dials, the amount of airflow, the volume of paint delivered, and the width of the spray. This means that paint dilution comes down to dumping 50ml to 90ml of water into the 1.3l tank of the Flexio 590, and mixing it for a couple of minutes. It's really not a big deal.

    However, it does present a difficult marketing situation, because "works with a wide range of viscosities" just isn't as catchy as "no need to dilute paint". One way around this though, that would work with G2 but less so with G1, would be to provide a comprehensive, detailed video that illustrated how paint viscosity and the controls relate to each other.

    Where manufacturers including Wagner really do fall down, however, is with the induction learning for novice users of spray painting. Most of the advice they provide makes sense - if you already know a little about spray painting.

    The critical moment you have to get new users past, both pre-purchase and immediate post-purchase, is how are they going to learn the basics? There is a very simple and highly effective solution to this. In fact, every novice spray painter should do this. After washing the walls, filling and sanding cracks, they should go ahead and mask up the painting area. Then they should fill the spray painter with water, and simply "paint" the water over the walls.

    Doing this eliminates most of the fear new users have about operating the spray gun. It enables them to get used to the motions they need to make, and they can play with the different settings to see how they affect the spray pattern.

    At the end of the water spray, the DIY painter can check the masked areas to see if there is any overspray - a flashlight held at an angle helps. It's also necessary, of course, to wipe down the walls with a towel, and give the walls more time to dry, depending on the air temperature, before painting can start.

    Finally, a word needs to be said about the quality of the manuals that Wagner and other manufacturers provide. These are the fairly standard manuals that come with power drills and other tools, monochrome printed on very thin paper. If there is one big difference between G1 and G2, it's that G1 will, at most, glance through a manual, while G2 will almost always read at least one part of the manual.

    At the very least, Wagner and other manufacturers could include a four-colour printed information card on 300gsm coated stock that shows the basics of the spray adjustments and how to clean the spray gun. The real pity here is that Wagner has done a very good job of making the Flexio spray heads easy to clean, but if you read the manual it seems really complicated and difficult.

    It's such a great product, it's a real shame to see its capabilities not communicated in an interesting way.

    In-store merchandising.

    Unfortunately, just as teachers often pick on their brighter students in class for criticism, so in talking about merchandising spray painting we need to pick on the one retailer that has done the most consistent job in merchandising Wagner SprayTech - Bunnings.

    To be clear, the current Wagner merchandising by Bunnings would rate a definite 7.5 on a scale to 10, while merchandising at most other hardware retailers would struggle to reach a 6.

    The simple, good things that Bunnings have done in marketing Wagner products are: 1) allocated an entire bay to the product line; 2) located the bay actually in the paint department; 3) displayed a good range of products in a clear and informative manner; and 4) added a few useful accessories to that display.

    The current display is a good one for marketing to G1 - but it falls short in marketing to G2. That's because, as is outlined above, G2 doesn't think in terms of tools and materials, they think in terms of projects. To meet that need, merchandisers need to think (at least partly) in terms of "project pods". The idea should be to gather together the key elements needed to complete a project, or to a least indicate what those are and where they are located in the store.

    There are a number of advantages to this approach. It is certainly key to introducing new technologies, such as spray painting, as the pod approach makes starting out more approachable. Customers can see what they need to buy to get going, and they are saved from hiking around the store, to unfamiliar departments, finding products which they are unsure are really the exact right thing they need.

    From the retailer perspective, what we are looking at here are two of the most magic words in the profession: "up-sell" and "profit-centre".

    DIYers trying something new have a disproportionate tendency to purchase more expensive materials, in the hope these will be easier to work with, and help them through the initial phase of learning how do something. All that is needed to up-sell them is the hint that these products will ease the task a little.

    Similarly, if we look at a task such as spray painting, what is its predominate feature? That would be the time spent in preparation, especially masking a room. Wouldn't it be great if there was a product specifically for that, which would make for a repeat sale instigated by the sale of a spray gun?

    Wagner's own Mask-it is just such a product. It provides 21m of 55cm wide masking plastic film, with a strip of adhesive masking tape along the top edge. Bunnings does stock it, at $9.50. However, it is located in a different aisle than the Wagner display, in some Bunnings Warehouses, at the very back on the topmost shelf, making it a little difficult to find.

    The same holds true for other masking products. Unipro makes several masking products, though these are mainly for covering larger areas, and relate to painting in general. It does, however, make a product that is similar to Mask-it. It's designed in a more environmentally friendly manner, with the masking product plus dispenser retails for over $11, but with refills at around $7.

    Again, though, the novice DIY spray painter is not going to know this product exists, unless they do considerable research. It's important to note how much is gained when such a product is properly located. It is not only that the product is now easy to find. Locating it near the Wagner bay will introduce them to the product, and also - very important for G2 - make them aware that an ecosystem has developed around spray painting.

    Where this notion of pods and projects gets more serious is when safety is involved - and this is as much about manufacturers as it is store merchandisers. The instructions for many spray gun products recommend only using the tool in a well-ventilated area. That's great, but how do you spray paint the walls of a 3m by 3m room and keep it ventilated? It may have a window, but that's likely masked up. The door will be closed, as otherwise the hallway will end up being spray painted as well.

    After 15 minutes of spray painting, you will end up with air misted with latex paint particulate, plus 25 square metres of freshly painted wall, all of which will be off-gassing volatile organic compounds (VOCs). You don't want to be breathing that, even for a short time.

    The painting masks that Bunnings and other retailers offer for sale alongside Wagner products are adequate for tasks such as outdoor painting, painting in larger rooms with some ventilation, or smaller jobs. They do not work for small rooms.

    To be fair, Bunnings in its brief introductory video to spray painting does suggest using a full respirator - though the model used, sold at most Bunnings, is a really poorly designed, outdated model.

    The issue of respirators takes us back to the difference between G1 and G2. It is true that for G1 raising concerns about safety and the need to take precautions can be off-putting - after all, how long did it take to introduce mandatory seatbelts, and limit smoking? Not exactly a safety conscious generation.

    For G2, however, raising legitimate safety concerns and providing a solution is actually a positive for sales. Given the choice between a $14 dusk mask with an exhalation valve, and a $60 twin filter respirator that protects against VOCs, it's an easy decision for them.

    This raises an interesting issue, however. Bunnings does sell a very good spray painting respirator from 3M for $59. However, a "virtually identical" respirator, also from 3M, is available from Amazon Australia for $39, delivered.

    Amazon 3M respirator

    Conclusion

    If we really focus in on what has been said above, it all comes down to one thing: information. The product is great, it's made by some really interesting companies with good engineers. The store merchandising is actually quite good. There is a demonstrated need for what it achieves.

    But all of that is really not enough, if the product and its merchandising cannot connect with consumers on the level of information. As power tools evolve, all of them gain an increasingly helpful - but more complex - ecosystem. Consider, for example, all the accessories now available for impact drivers, or the range of attachments available for some Makita routers.

    Anywhere there is an ecosystem, there is a need to make this more available through a better use of information.

    editorial

    MYOB invoice integration with Bunnings

    Streamlining paperwork for tradies

    Bunnings is helping tradies with their businesses and MYOB said the partnership is an industry first for the retail chain

    Chronicling expenses, and receipt and invoice tracking will be easier for tradies with the announcement of a partnership with Bunnings from accounting software company MYOB.

    The company confirmed that it will allow Bunnings customers to have their invoice directly appear in their MYOB in-trays. Speaking at its Partner Connect conference recently, MYOB general manager of product David Weickhardt said:

    Bunnings is now going to integrate directly into our software, and all of the data from Bunnings invoices will come directly into MYOB.

    According to Mr Weickhardt, the integration will do away with manual entries, with customers not needing to take any additional action to have their bill appear directly in their MYOB in-tray.

    Mr Weickhardt said Bunnings is the single biggest invoicer for MYOB clients. He said:

    The number one request from all of our customers was to put Bunnings into the software. The main focus has been on the plumber segment and the trade segment.

    Despite the official announcement, it is understood that the functionality has yet to go live, with MYOB saying that the feature will be available soon.

    The latest integration follows on from other supplier partners including Reece and Tradelink.

    Mr Mr Weickhardt said the pain points of the trade and plumbing service sectors has been a focus for the company as it continues their efforts to provide simple solutions to small business problems.

    Sources: Accounts Daily and Kochie's Business Builders

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