HI News V.6 No.4: HBT Virtual Conference 2020

Disinformation about the housing market

Profiling the current management team at HBT as well as some key members and suppliers about the Virtual Conference that was held in late 2020

As a hardware retail buying group, Hardware & Building Traders (HBT) has come a long way from the first time I met them in the early oughts. Now under the leadership of CEO Greg Benstead, it is more equipped to battle the challenges ahead, and doing it with a few laughs along the way.

Simply click on the following link to download this edition:

HI News Vol.6 No 4: HBT Virtual Conference 2020

In this edition, we also have a long, investigative article on why Australia - and specifically, Melbourne and Sydney - is in the grip of housing price bubble. Rising house prices are being used to compensate Australian workers for poor productivity growth, which has resulted in very low levels of wage growth.

editorial

Big box update

Sponsorship deal with league football

Brunswick store battle is ongoing, and Bunnings expands retail network in WA and QLD with latest openings

Bunnings has become a sponsor of league football; extension planned for Bunnings in North Penrith (NSW); objections to a store development in Brunswick (VIC); store openings in Albany (WA) and Pimpama (QLD); progress on Seymour outlet in regional Victoria; stores in Robina (QLD), Seven Hills (NSW) and Caboolture (QLD) have changed hands in real estate deals; and New Zealand retail development.

Leagues sponsorship

The A-League and Westfield W-League have signed a partnership with Bunnings, the first time the hardware retailer has sponsored football.

The partnership will see the launch of the "Bunnings Ladder" and "Bunnings Team of the Week", a celebration of the best performing team in every round of the A-League and Westfield W-League.

Danny Townsend, CEO of Sydney FC, and commercial-lead of the Australian Professional Football Clubs Association (APFCA), the representative body of the A-League and Westfield W-League Clubs, said:

This is a partnership of perfectly aligned values - Bunnings' team members are the heart and soul of their business, and our sport is all about teamwork.
As we enter a new era for Australian football, with the soon to be independent professional leagues, we are delighted to have one of Australia's most loved brands on the journey with us.

Keith Murray, Bunnings general manager of marketing said:

The opportunity represented by football in Australia is huge - we know there is a highly engaged, diverse and culturally rich audience who love the game. We see our partnership with the A-League and Westfield W-League as a great fit for the Bunnings brand and we are excited to engage with a new audience.

Related: In 2019, Bunnings had a sponsorship deal with the National Basketball League.

Bunnings re-signs NBL sponsorship - HNN

Penrith

A development application (DA) has been lodged with Penrith Council for the Bunnings store located on Castlereagh Road in North Penrith. If approved, the works involve an extension on the western end of the building for a larger timber trade sales area, as well as a building materials and landscape supplies yard.

Parking would also be changed for an additional 14 parking spots to the area, and five new "business identification" signs would be erected. The gross floor area of the store would increase by almost 3000sqm. It is expected to cost more than $4 million.

Sutherland and Associates Planning, on behalf of Bunnings, said the works would "improve the visual quality of the site". It told the Daily Telegraph:

The massing of the development remains of an appropriate scale ... and will not result in any significant impacts on the amenity of the adjoining properties...

The planning company said the style of the building wouldn't change, and all relevant legislations are met by the plans.

The proposal provides the opportunity to upgrade the functionality of the site and improve the streetscape presentation of the existing building.

Brunswick

Bunnings' two-storey, $21 million development proposal in Glenlyon Road, located in the inner Melbourne suburb of Brunswick (VIC) has been opposed by Moreland Council, citing traffic impact and other concerns. According to a report in the Herald Sun, it said the design was not in keeping with the area's character and has recommended to the state planning tribunal that no permit be issued.

A total of 538 objections have also been lodged, raising similar concerns about traffic congestion, noise and fears the development is inappropriate for the area.

Toby Lawrance, Victorian regional operations manager at Bunnings, said traffic management and access to the site had been carefully considered to ensure the store would be safe and accessible.

The developer had ensured the area would not be adversely affected by noise levels and worked with the council to make certain the store design fit with the area.

The proposed store will have 250 underground parking spaces, be open daily between 6am and 10pm and include an enclosed area for truck unloading.

The matter goes before VCAT some time this year.

Related: In October 2020, Bunnings announced plans to build a two-storey shop with 250 underground parking spaces in Brunswick (VIC).

Big box update: Brunswick - HNN

Albany

The recently opened Bunnings Albany store on Chester Pass Road in WA spans more than 14,500sqm.

A kitchen design centre with nine kitchen displays, a timber trade area with three-lane drive-through, a hire shop and a range of artificial plants are some of the store's new features. It has double the parking of the previous store, with 290 car bays, and represents an investment of $29 million, according to the big box retailer. Bunnings Albany manager Doug Grant told Albany Extra:

We've been part of the community for over 20 years, so we're really excited to bring an even better offer to customers in Albany.

Mr Grant said Bunnings had employed 20 new staff members, in addition to the 110 team members transferring from the old store.

Pimpama

A $36 million 14,500sqm Bunnings store has opened as part of the Home Focus Pimpama development on the Gold Coast (QLD).

It is the first in Queensland to be fitted with a new kitchen design centre and has a artificial plant and flower range, a new-look trade desk and a door selector display.

Complex manager Brendan O'Boyle, who has been a part of the Bunnings team for 10 years, said as part of the opening the team had already provided support to local community groups with product donations.

Home Focus Pimpama, which is being developed by Gold Coast-based company Baycrown Property Group, will have over 50,000sqm of lettable space with up to 60 tenancies upon completion.

Related: Work began on Home Focus Pimpama in late 2019.

Big box update: Stores in development around Australia - HI News, page 25

Seymour

The Bunnings Seymour (VIC) store is expected to open early this year. Internal construction is almost complete along with the car park and landscaping, and merchandising of the store has begun.

Bunnings Seymour complex manager Ruben Anderson told the Seymour Telegraph:

The new store will span more than 4500sqm and have car parking for more than 70 cars. Features will include the main retail area, a timber trade drive-through and an outdoor nursery.

Related: The Seymour store was being built in the latter half of 2019.

Big box update: Seymour - HNN

Real estate sales

Robina

The Bunnings Robina store in QLD has been sold for $28 million to Melbourne-based investor. The building spans 12,803sqm on a 3ha block and was built in 2014 as a Masters Home Improvement Store before being rebranded in 2018 to Bunnings.

The property was marketed by global real estate services firm JLL (Jones Lang LaSalle). According to a sales analysis from JLL, the buyer identified "real value" in the underlying real estate despite Bunnings having an early termination clause in its lease.

Seven Hills

National Rugby League team, the Canberra Raiders has almost doubled its investment in the Bunnings Seven Hills store after selling it to Home Consortium (HomeCo) for $56 million.

According to The Australian Financial Review (AFR), the sports club paid $29.55 million in 2011 for the newly built large-format retail property in Sydney's Seven Hills as part of plans to expand its asset base and create new income streams.

Property records show it was acquired through a subsidiary of the club's controlling entity, Queanbeyan United Rugby League Football Inc.

HomeCo purchased the Bunnings Seven Hills property on a yield of 5.1%. HomeCo CEO and executive chairman David Di Pilla told the AFR:

This Bunnings asset ticks all the boxes: excellent Sydney metro location in high-growth corridor, high-quality tenant and the acquisition is immediately accretive to funds from operations [or earnings].

Caboolture

ASX-listed Charter Hall Long WALE Real Estate Investment Trust (REIT) has paid $28.1 million for a Bunnings property to be developed in Caboolture, north of Brisbane. It is scheduled for completion in early 2022.

The site is part of a new master planned large format retail precinct.

In March 2020, Charter Hall set a new benchmark for Bunnings warehouses by acquiring a new 16,000sqm outlet in Melbourne's south-east for $42.3 million on a yield of 4.5%.

Related: The Bunnings Mascot store in Sydney was recently sold to Charter Hall for $70 million.

Big box update: Alexandria - HNN

New Zealand

Bunnings has confirmed its tenancy at Timaru's Showgrounds Hill retail centre, the same day developer Redwood Group confirmed it had purchased the 12-hectare site. Bunnings New Zealand director Jacqui Coombes told The Timaru Herald:

We've been searching for a location that allows us to serve the Timaru community for some time, and we're pleased to confirm we plan to become a tenant at the development when it's constructed.
We expect the store to create more than 80 new team member positions when it opens in 2022.
It will allow us to offer a wide range of home and lifestyle products to Timaru residents in a convenient location, that also includes other large format retailers.

Bunnings has six stores in the South Island - three in Christchurch, one in Blenheim, one in Nelson and one in Dunedin and 47 stores across New Zealand.

  • Sources: Herald Sun, The Daily Telegraph (Online), A League Football, Albany Extra, The Gold Coast Bulletin, Seymour Telegraph, The Courier-Mail, The Australian Financial Review and Timaru Herald
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    bigbox

    Indie store update

    Margaret River store wins Mitre 10 state award

    A Tasmanian based store described as a "well-established family business with a strong brand and customer base" has been listed for sale

    Margaret River Mitre 10 has won the retail group's state award for excellence in Western Australia. The store won the annual award on a criterion based on sales, customer service, store standards, stock availability and community involvement.

    The store changed to the Mitre 10 banner in October 2019, from the Home Timber and Hardware brand.

    A new layout helped staff and customers deal with the restrictions brought on by the COVID-19 pandemic. Store manager Paul Brown told the Margaret River Mail they could practice social distancing with a lot more ease than with the old layout.

    Mr Brown said it was extra special to receive the award after only being part of the Mitre 10 group for 12 months. He said:

    We're all thrilled to have taken out this prestigious award. It's a real feather in the cap for us. Since transitioning, the store has become the flagship Mitre 10 outlet in the South West [of WA] and continues to offer the best possible service and range to their loyal trade and retail customers.
    Our fantastic team provide our customers with professional and dedicated customer service, always striving towards 100% satisfaction.
    This award was only possible due to the fantastic support we have received from the local community, in what has been very trying times.

    The state awards were announced in late November 2020.

    Brighton Hardware

    The owners of a hardware store located in Brighton (TAS), around 29kms from Hobart, have decided to retire and placed the store for sale.

    For the past 15 years, Paul Diaz and Leanne Taylor-Diaz have focused on providing quality products and exceptional service.

    The store is a previous Tasmanian Telstra Micro Business Awards winner after turning the business around from a reputation of being poorly stocked and over-priced to successful regional store.

    At the time, Paul and Leanne told Brighton Community News that when they took over the store the stock was depleted, there were few customers, and they had only about $20,000 to stock the shop. Leanne admitted she hardly knew the difference between a nail and a bolt.

    While Paul said he had a strong background knowledge of what was required in terms of making sure the shop flourished, both of them also relied on finding out what customers wanted and then let their friendly personalities deliver it. Their loyal customers did the rest.

    In three years, Brighton Hardware became a $450,000-a-year business. Paul said:

    It's a local shop and once they saw that they could come in here and get what they wanted, they came and bought more and more.

    The store is currently operating six days a week and is set just off the main road with customer parking available.

  • Sources: Margaret River Mail, The Mercury and Commercial Real Estate
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    retailers

    Boral exits from global brick operations

    Sale of Meridian Brick business

    The US-based clay brick joint venture - with private equity firm Lone Star Funds - has been sold to Wienerberger

    Boral, together with its joint-venture partner, an affiliate of private equity firm Lone Star Funds, have agreed to sell the North American-based Meridian Brick business to Austrian brick maker, Wienerberger for USD250 million.

    This equates to USD125 million for Boral's 50% share and is expected to result in a small pre-tax accounting profit on a sale of approximately AUD10 million at closing. The transaction is subject to various closing conditions and regulatory approvals, with both parties targeting completion in the first half of 2021.

    The divestment of Meridian Brick represents the final step in Boral's exit from brick operations globally. It is also part of the plan by Boral's chief executive officer and managing director, Zlatko Todorcevski to overhaul the building materials supplier. He said in a statement:

    In recent years Boral have divested their interest in bricks in Australia, and since forming the bricks joint venture in the US with Lone Star in 2016, the plan was to ultimately prepare the business for sale.
    As part of this process, Meridian's leadership was refreshed with the appointment of a new chief executive officer in December 2018, and a stronger focus on improving performance.
    The divestment of Meridian is a further step in Boral's portfolio review works. It helps to streamline our US business and allows us to further focus on the improvement initiatives under way in the remaining businesses in Boral North America.

    Based in the southern state of Georgia, Meridian Brick is the largest manufacturer of clay facade solutions by capacity in the US and has a leading position in Canada. With more than 1,000 employees operating in 20 manufacturing plants across the US and Canada, the company generated revenues in excess of USD400 million in the financial year to 30 June 2020.

    Through the acquisition of Meridian Brick, Wienerberger will immediately double the revenue of their North America business to more than USD800 million.

  • Sources: Agg-Net and Weekend Australian
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    companies

    Women's workwear designed for inclusion

    Hi vis maternity wear

    Toowoomba based Co Gear has created a workwear range that supports women's real-life decisions

    Industrial workwear company Co Gear has collaborated with BHP and Blackwoods to launch a redesign of its women's workwear to give mums to-be a comfortable option that will take them through their whole pregnancy.

    Founder Kym O'Leary said for quite a while industries had been talking a good game about addressing inclusion and diversity initiatives in their workplaces but were slow to change. She told The Daily Mercury:

    There is a growing number of women looking to pivot away from roles in metro areas and take on industrial and trade roles with some of the biggest mining and construction companies in Australia.
    But they are holding themselves back because things like workwear are not always suited for women ... businesses need to go beyond creating committees and implementing policies, assuming the job is done.
    They need to make broader strides and take immediate action where they can, even if it is bucking the one size fits all mentality around workwear.

    The Co Gear designs were tested across the Bowen Basin (QLD) and Pilbara (WA) mining regions to ensure they withstood the practical challenges women face every day on site. Ms O'Leary said:

    We also had an exciting opportunity to collaborate with a number of women from varying industrial and trade backgrounds over a 12-month period on our maternity wear range, which went through endless rounds of design changes to ensure it provides comfort, functionality and a flattering fit at all stages of pregnancy.

    Ms O'Leary said the real-world application of the Co Gear range had been important.

    When we started working on the redesigns for our range of women's workwear, we knew that collaboration was going to be a major contributor to our success, and fortunately we had plenty of support from industry leaders such as BHP and Blackwoods.
  • Sources: The Chronicle and The Daily Mercury (Online)
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    companies

    Europe update

    Wickes launches work-from-home kitchen range

    Homebase is selling premium Miele appliances and Grafton Group announces its latest acquisitions

    UK DIY retailer Wickes is selling a range of fitted kitchens with built in desks and bookcases to help its customers to work from home more efficiently. This collection of multifunctional kitchens is a clever response to a demand for more home office space.

    The new Fitted Kitchen Home Office range aims to provide a more professional set-up so that everyone can repurpose their space to better suit their needs.

    Available in Wickes stores around the UK, homeowners can mix and match a selection of 33 modern colours, cupboards, shelves, drawers and practical workstations to suit different design preferences. It gives those without a study the chance to easily create a dedicated space for the working week, while still keeping the kitchen functional for other family members.

    There are six styles to choose from including the shaker-style Chester range, Milton, Tiverton, minimalist Sofia, Melrose, and modern Camden.

    The idea rides on the back of recent consumer research that found only 49% of Britons have a proper desk or workstation, with 39% using the dining table, 28% working on a kitchen table, and 20% sitting on the sofa with a laptop tray. Whilst these are manageable for short periods of time, they aren't the best long-term solution. Paul Bangs, category director of Kitchens and Bathrooms at Wickes, said:

    We understand there can be challenges associated with working from home which is why we've introduced a new working solution that fits seamlessly into everyday life.
    We are always working to deliver innovative and helpful products and services that fit into our customers ever changing needs and believe the new option of a kitchen home office will provide them with more choice when considering at-home workspaces as we all continue to adapt to new ways of working.

    Kitchens at Homebase

    Home improvement and garden retailer Homebase has a partnership with Miele that allows it to sell the appliance maker's ovens, hobs, extraction, refrigeration, dishwashers and laundry products online and in showrooms. The Miele range of appliances have been on display in 15 stores including in the new "Kitchens by Homebase" showroom in Guildford, Surrey. Michael Hardwick, key account manager for Miele GB, said:

    Homebase is a new partner for Miele, enabling us to create greater brand awareness and communicate with a much broader audience.

    In August 2020, Homebase announced the launch of Bosch and NEFF appliances as part of its kitchen offering. At the time, Ian Penney, business director for Homebase Room Solutions, said:

    The kitchen is the hub of the home and we know our customers are looking for inspiration for how they can make their busy lives easier.
    Embarking on a kitchen renovation can be daunting, but we're here to take the pain out of the journey ... A kitchen isn't just units and worktops, the appliances, paint, flooring and tiling, accessories are just as important - and we have something for every taste. We're really pleased to be partnering with Bosch and NEFF, to help bring our customers even more innovative and quality products.

    In similar move, selected Bunnings stores began selling Samsung home appliances in late 2020. This rollout is expected to expand this year, according to Appliance Retailer.

    Bunnings director of merchandising and marketing, Phil Bishop said the partnership supports its focus on extending its product range in the kitchen category.

    We are thrilled to be working with Samsung to expand their home appliance range in the Australian market and to provide our customers with even more choice at the best price. Samsung is world renowned for their cutting-edge technology and we look forward to continuing to grow our partnership to offer our customers the latest innovations in home appliances.

    The partnership is a first for Samsung and aims to meet growing demand for smart products.

    Grafton Group

    Building materials distributor Grafton Group and owner of the Woodies DIY chain has agreed to acquire Dublin-based Proline Architectural Hardware.

    Proline specialises in the supply of traditional and contemporary architectural ironmongery products including door locks, hinges and handles. It works closely with architects on the specification and scheduling of ironmongery products for commercial, public sector and residential projects. The company reported revenue of EUR10.8 million in 2019.

    Grafton said Proline's product range and expertise allowed joinery manufacturers, contractors and trade customers to source ironmongery products from a single source. Grafton chief executive Gavin Slark said:

    Proline will bring specialist expertise to Grafton in the architectural ironmongery distribution segment in Ireland. It will also enable us to offer a broader range of products and services and to extend our customer base in this segment of the market. The acquisition of Proline is in line with our strategy of acquiring specialist, high-quality businesses that trade in complementary markets.

    Grafton said the deal is still subject to approval by the Competition and Consumer Protection Commission.

    Prior to its Proline acquisition, Grafton announced its purchase of AVC Ltd, a UK-based manufacturer and distributor of bespoke wooden staircases that trades as StairBox.

    Founded in 1994, StairBox has focuses on "the use of technology, operational expertise and a culture dedicated to cost effectively manufacture an extensive range of high-quality customised staircases".

    It has developed a software application that enables customers to accurately design, visualise and price staircases on the StairBox website. The resulting products are manufactured at what it said was a state-of-the-art production facility in Stoke-on-Trent.

    The company primarily serves trade customers operating in the repair, maintenance and improvement market.

  • Sources: House Beautiful (UK), Retail Times, Appliance Retailer, RTE, Irish Times, DIY Week, Proactive Investors and Irish independent
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    retailers

    USA update

    Home Depot adds more home decor to its online offer

    Lowe's has partnered with home services platform Handy so its US customers can use Handy Pros for installations

    US home improvement retailer The Home Depot has expanded its online inventory to add more home decor, including furniture, towels and wine glasses, according to an exclusive report in USA TODAY.

    Jeanine Huebner, Home Depot's senior vice president of interconnected merchandising, said the company started adding more decor items before the pandemic but has seen interest grow.

    Since COVID, people are engaged in their home they're undertaking work at home projects. Kids furniture and office furniture is just off the charts and people are now investing because they want to make sure that they're comfortable.

    Ms Huebner said the plans are for most of the new home decor categories to stay online only.

    There's been a huge shift in the whole industry this year to online that we're also seeing the benefit of. Our stores aren't getting bigger, and we just wouldn't have the space to really offer you the collection you'd want to see.

    In late 2017, Home Depot acquired The Company Store, a 109-year-old brand known for its high-end linens and down comforters.

    The assortment on the retailer's online decor business called HD Home includes interior furniture, wall decor, home accents, housewares, tableware and even cookware. The products are designed for people to complete their projects and rooms, it said.

    Ted Decker, the company's president and chief operating officer, said the home decor market has been hit by store closings, including department stores, which he believes is where shoppers previously turned for decor.

    The traditional outlets that a customer would go to literally are closing their doors and this type of product selection is increasingly moving online.

    As part of its "strategic investments", Home Depot has been "leaning into several home decor categories", Mr Decker said in an earnings report.

    The company's trend and design team found that customers were more interested in items that make them feel "comfortable at home", which the company said falls into the home decor categories.

    And with the resurgence of COVID-19 cases in the US keeping consumers homebound now more than ever before, having that comfortable living space has proven to be even more important.

    With "record levels" of online traffic, Mr Decker said the company has seen "significant, outsized sales growth" with HD Home.

    As consumers shop fewer and fewer retailers, our research showed that our customers were increasingly looking to HomeDepot.com to help with project completers like room decor and textiles.

    Related: Home Depot acquired The Company Store, an online retailer of home decor and textile products in 2017.

    Home Depot gets in touch with its softer side - HI News, page 60

    Lowe's home services

    Lowe's and web-based platform Handy have formed a partnership to offer the home improvement retailer's customers on-demand home services at checkout.

    Right at checkout, Lowe's customers can now book a Handy Pro to help them install plumbing purchases, garage door openers, lighting fixtures, window air conditioner units and more. It is available online and in over 1,000 stores.

    It follows Handy's launch with Target (US) and expanded partnership with Walmart in December to install holiday lights. Handy said it provides home service solutions with flexible scheduling options and preferred pricing, all backed by the Handy Happiness Guarantee. In response to COVID-19, Handy has also implemented safety standards. Handy CEO and co-founder, Oisin Hanrahan, said:

    Handy continues to be the installer of choice for leading retail brands. Together with Lowe's, we're bringing more installation options to consumers that want to make their homes safer and more convenient as we all spend more time at home during this challenging time.

    Founded in 2012, Handy offers services such as furniture assembly and television mounting and home decor installations through partnerships with retailers such as Crate & Barrel, Walmart and Wayfair.

  • Sources: USA TODAY, Yahoo Finance, HomeWorld Business and Chainstore Age
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    bigbox

    Nippon Paint develops antiviral product

    Commercial launch in China

    The paint contains Corning Guardiant[tm] antimicrobial particles shown to kill 99.9% of the virus that causes COVID-19

    Nippon Paint's Antivirus Kids Paint uses Corning Guardiant[tm], an antimicrobial paint additive containing copper ions.

    When incorporated into the antiviral paint, the copper ions in Corning Guardiant[tm] create an effective defence against coronavirus SARS-CoV-2 and 229E on the coated surfaces by either destroying viral envelopes to render them dysfunctional or non-infectious, or tampering with genetic materials so that the virus cannot reproduce.

    In late 2020, American multinational technology company Corning announced breakthrough test results demonstrating that paints formulated with Corning Guardiant[tm] showed a 99.9% kill of the SARS-CoV-2 virus on coated surfaces in less than two hours.

    Surfaces coated with Nippon Paint's Antivirus Kids Paint also showed a greater than 99.9% kill of the SARS-CoV-2 virus. These tests were carried out in compliance with rigorous test protocols approved by the US Environmental Protection Agency. Joydeep Lahiri, division vice president and program director, Specialty Surfaces at Corning said:

    Nippon Paint's Antivirus Kids Paint creates a surface with in-built antimicrobial function, adding another layer of sustained protection to temporary disinfection measures such as liquid disinfectants.

    Results on the SARS-CoV-2 virus were obtained using test methods that simulate invisible contamination on dry surfaces. Coatings containing additives such as silver and zinc pass traditional "wet" contamination test methods, but do not perform well under more realistic dry test conditions. Nippon Kids Paint demonstrates effectiveness under both wet and dry test conditions.

    Apart from killing bacteria and viruses, Nippon Paint's Antivirus Kids Paint can eliminate formaldehyde across indoor environments, and its stain resistance meets the level-1 anti-pollution standard. The makers of this paint said it can provide healthy indoor air for users with indoor air quality improvement after rigorous tests certified by TUV and the GREENGUARD Gold Certification Standard and A+ Standard.

    A TUV certification means a sampling of the product has been tested for safety and found to meet the minimum requirements of the German Equipment and Product Safety Act.

    The GREENGUARD Gold Certification standard includes health-based criteria for additional chemicals and also requires lower total VOC emissions levels to help ensure that products are acceptable for use in environments like schools and healthcare facilities.

    In March 2020, before the antiviral paint product was commercially available, Corning and Nippon Paint jointly donated the first batches of Antivirus Kids Paint tested in US independent labs to four Chinese hospitals designated by the Department of Commerce of Hubei province. The surface space spanned a total area of 120,000sqm.

    Related: Nippon Paint acquired Australia's DuluxGroup in 2019.

    Paintorama: Nippon Paint - HI News, page 123
  • Sources: Global Times, China Daily and Globe Newswire
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    products

    Social media and builders

    Customer insights for hardware retailers

    James Hardie ambassador Neil Hipwell offers tips for builders on how to enhance their social media presence. Retailers can learn more about their builder customers from their use of these online platforms.

    Recent data shows that 33% of users on Facebook, Instagram and Twitter have increased the amount of time they spend on social media during COVID-19, making it more relevant than ever as a marketing tool for businesses. Neil Hipwell, founder of NSW building firm Futureflip and James Hardie ambassador, said:

    If you don't have a social media presence, it's time you did. A lot of our client leads have come in from someone seeing our work on Instagram, which is a great platform to showcase your work. With users saying that they increased the amount of time they spend on social media last year, the opportunity to secure more work is only growing.

    Neil shares some of the social media practices he's used to drive the success of his growing business, even throughout COVID-19. He has also created a video with business advice for builders. The video features on James Hardie's Design Ideas site, which is also home to information on the looks that consumers are looking to their builders for help with.

    Know your audience

    Always remember that social media is a part of a marketing strategy. It's there to help you make sales, so while it can be enticing to create content that gets the most likes or attracts the most followers, you need to make sure you focus on engaging potential clients.

    Think about what your audience wants to see. This could be inspirational homes that you can help them achieve, through to advice on how to pick the right building materials for their needs. It's all about adding value to their lives so that your brand becomes a trusted go-to for advice.

    Choose the best platform

    So, you know the who (your audience) and the what (your great content) the next step is the where (platform). My go-to is Instagram which is used by 52%3 of people in metro areas and accessed by users 28 times a week on average.

    Instagram is image based, creating an ideal opportunity to visually share high quality photos and videos of your projects in posts, while the Stories function lets you take a more informal approach with short form content that's only live for a day.

    Pick the right tone

    Creating the right tone for your social media channel can be difficult as you need to balance professionalism with personality. Swearing or crude language are clear no-gos, as is technical jargon.

    Take inspiration from brands in the industry you admire. Look at how they talk about homes, the length of posts, words and language they use. This can also be a good way to generate a list of hashtags that will help your content get seen.

    Tone also includes images. I keep my in-feed posts professional and aspirational with a consistent look and feel. It's important to think about why you're posting the picture. For example, if you're showcasing the shadow lines created by Linea Weatherboard, don't turn the brightness up so high that the façade looks flat. I also use my stories to give a "behind the scenes" look to add a bit more personality.

    Planning is everything

    Social media is a bit like a project, you need a solid plan in place. Start by considering what is important for your audience to know, as well as what they will find valuable. See if there are any consistent themes, such as inspiration, trends advice and examples of your work.

    Each month create content that hits each of these topics to keep your channel fresh and varied. I will have our projects shot by professionals but using a smartphone with a bit of editing on the social media platform you're using is a great option when you're starting out. Getting the images and videos right will not only help you grow your channel but can turn it into a great catalogue of your work for prospective and current clients.

    Tag partners and collaborate

    A quick way to increase the number of people who see your content is to get it reposted by an account that's got a large following. Big brands are often looking for content that shows off their product or service. When you tag them in your posts, they get an automated alert directing then to your content, which creates a quick way for them to share it with your channel's details.

    The Design Ideas section of www.jameshardie.com.au provides inspiration and information on residential and commercial builds, compliance issues and trends from Hamptons to modern looks.

    To read the latest edition, please download HI News:

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    Metcash/IHG results for FY2020-21 H1

    Acquisitions help to drive growth

    While IHG continued to trail the market in terms of sales revenue growth, growth in EBIT was very strong, boosted by increased DIY sales and cost containment

    Metcash, the owner of the Independent Hardware Group (IHG), has reported its results for the first half of its FY2020/21, covering the period between 1 May 2020 to 31 October 2020. Results for the overall company showed sales of $7.06 billion, up from $6.29 billion in the previous corresponding period (pcp), which was the first half of FY2019/20. This represents an increase of 12.24%.

    Earnings before interest and taxation (EBIT) came in at $203.0 million, up from $155.7 million in the pcp, an increase of 30.38%. Net profit after tax is stated as $125.1 million for the half. As Metcash wrote down $249.3 million during the pcp, leaving a loss of $151.6 million, percentage comparisons are not meaningful.

    Hardware division

    The Hardware division, which includes IHG and the newly acquired Total Tools, earned $759.3 million for the half, up from $599.9 million in the pcp, an increase of 26.57%. Division EBIT came in at $64.5 million as compared to $38.9 million in the pcp, an increase of 65.80%.

    That's the simple version.

    First of all, these are the results that are derived from applying the Australian Accounting Standards Board (AASB) 15 standards, which exclude "charge-through" earnings. We can include those, in which case the Hardware division earned a total of $1259 million in the reported half, and $1044 million in the pcp, an increase of 20.6%.

    While that is useful in terms of comparing past first half-years, AASB 15 is here to stay, so it is best to get used to the new numbers, excluding charge-through sales.

    Acquisitions

    In a note on its presentation slides for the Hardware division (#14), Metcash states that:

    Excluding acquisitions, total sales increased 16.2%

    This is footnoted, and the footnote reads:

    Acquisitions include Total Tools Holdings and in FY20 G. Gay & Co, Keith Timber and Wormersley's.

    We would have to assume that "total sales" refers to sales under AASB 15, which means that acquisitions were responsible for $62.3 million in sales. Of that, Total Tool Holdings (TTH) is responsible for $18.6 million, which means the other acquisitions brought in $43.7 million.

    One additional part to this, however, is that, as Metcash's chief financial officer Brad Soller informed the analysts during the earnings presentation, while Metcash owns only 70% of TTH, it is required to report 100% of that company's revenues. The other 30% is then taken out in liabilities.

    So, effectively, $5.6 million should be deducted from the overall sales, bringing them down to $753.7 million. TTH is responsible for $13 million of that, the other acquisitions for $43.7 million, and IHG (for comparison purposes to the pcp) $697.0 million. (That's a derived estimate, so we cannot vouch for its complete accuracy.)

    In terms of EBIT, the Metcash presentation notes that acquisitions contributed $8.5 million to earnings, and lists TTH's contribution as $4.8 million. (In this case, as we're dealing with EBIT, we would assume the 30% liability has been already applied to TTH's EBIT numbers.)

    So that would mean that EBIT can be broken down into $56 million largely from IHG, $4.8 million from TTH, and $3.7 million from the other acquisitions. Which means that a rough estimate of EBIT growth directly attributable to IHG would be around 44.0%.

    The media release which accompanied the results indicated the growth in EBIT was the result of higher sales volumes, an increase in sales of DIY/consumer products which carry a higher margin, a shift to more direct revenues from joint venture and fully owned company stores. Hardware also delivered a great deal of cost containment, especially as regards necessary expenditure on COVID-19 containment measures.

    In response to an analyst question about the source of growth, IHG CEO Annette Welsh responded:

    Customers were unable to go further than five kilometres. And to that extent, it would have driven some of those customers to their closest hardware store, and we benefited from that.

    Other performance metrics

    According to the media release accompanying the results, like-for-like (comp) sales increased by 13.2%, with DIY/consumer up 35% and trade sales up by 4%. This helped to shift the balance for IHG between DIY and trade from its previous 36/64 to 40/60, in percentage terms.

    While IHG had good performance, the store network also saw a net loss of six stores during the reported half. The Metcash presentation reports a loss of 10 stores from the banner group, and a gain of 90 stores - though 86 of those are from TTH, so in terms of IHG, it was a gain of just four stores.

    The number of Mitre 10 stores increased by nine to a total of 330, while the number of Home Timber and Hardware stores declined from 168 to 153. True Value Hardware and Thrifty-Link store numbers remained constant on 161.

    Total Tools Holdings

    A number of interesting issues were raised by the analysts at the results presentation as regards TTH. However, this turns out to be a complex topic, and HNN will be covering it in more depth in our next edition of HI News.

    Outlook

    Metcash is very optimistic - with a few caveats - about the future of its Hardware division. According to the company's media release:

    In Hardware, sales in the first five weeks of 2H21 are up 25.3% (+19.3% ex-Total Tools) with sustained strong demand in DIY and Trade sales continuing to track positively. The business will continue to focus on its MFuture growth initiatives across Trade, DIY and digital, and retaining customers gained through the COVID-19 period. The second half will include a full six months of trading by Total Tools, including the four stores acquired and anticipated acquisition of a majority interest in a further eight independent stores.

    The caveat, however, is this:

    There continues to be a high level of uncertainty as to the potential impact on all our Pillars of any changes to COVID-19 related restrictions and resulting changes in consumer behaviour.

    The optimism the company has around TTH, and what that indicates both about Metcash and the market, is something that Andrew McLennan, an analyst with Goldman Sachs, picked up on as well in his questions:

    With respect to tools, with the successful Total Tools acquisition on your belt, you've got a very strong position now in trade. I'm just wondering how we should think about this business going forward from a consolidation perspective? Could you say that the growth - you are a mile ahead of anyone else in the trade part of the market. I'm just wondering how we should think about MFuture consolidation opportunities.
    ...
    Just given the scale and the positioning in the trade part of the market, just how much more consolidation could be?

    Metcash CEO Jeff Adams responded encouragingly, but with a degree of wariness as well:

    Look, I think it's still very fragmented. There's still lots of opportunities out there for us to, similar to Total Tools, really step change and if we're able to find the right strategic fit and the value work for that, then certainly, we'd be interested. But there's still lots of opportunity because it's still a very fragmented market in Hardware.

    IHG CEO Annette Welsh also responded to these suggestions:

    Yes. I think the one thing to say is that there's real confidence in the model that we have and in the heritage in trade in that format... So we'll look to continue to drive that.

    Analysis

    It is a somewhat well-worn saying, but a rising tide does lift all boats. Looked at strictly comparatively, the 16.2% increase in IHG revenue does not actually track the market. Overall hardware retail sales for Australia for the pcp were $9769.7 million. For the reporting half, sales were $12,214.6 million. That's an increase of 25.03%, leaving IHG a full 9% off the pace. And more likely, given that IHG has a larger presence in Victoria, New South Wales and Queensland, which gained the most sales during the recent half, closer to 10%.

    Of course that is offset by the large gain in EBIT that the Hardware division did manage to accrue, which is in part a tribute to extensive cost-cutting measures, as well as the surge of DIY spending.

    The real question that continues to linger over IHG is whether it is continuing to pursue an early 2000s strategy as we enter into the third decade of the 21st Century. Take for example, this statement by Mr Adams:

    Our retail banner groups are ideally positioned to continue benefiting from the change in consumer behaviour to more 'local' shopping, and their improved competitiveness supported by our MFuture initiatives is assisting them to retain new and returning customers to their stores.

    HNN would dispute that there can be any real evidence of that pattern change in consumer behaviour at this time. It is simply a myth to believe - in our opinion - that in the long term consumers will "wake up" to the benefits of shopping locally.

    There are some consumers that certainly like to shop locally, and there are consumers who find it easier - and more enjoyable - to shop at "big box" retailers. Rather than hoping that consumers have somehow been "retrained" to prefer local shopping, it might be better to research ways to better appeal to a broader market.

    This is actually a very deep subject - and one we will explore in more depth in the next issue of HI News. Perhaps as a pointer towards that, it is best to close with this: all the acquisitions that Metcash - and therefore the Hardware division - have pursued have been about acquiring businesses with established path-to-market which could be enhanced through a centralised, moderately scaled approach to business processes.

    Contrast that with, for example, Wesfarmers' acquisition of Catch - which was all about technology, innovation and personnel. The COVID-19 pandemic should have been a "wake-up call" (in the American parlance) to these possibilities not a further temptation to continue with what are really the market daydreams of the 1990s.

    retailers

    ABS retail stats: October 2020

    Strong growth continues for hardware in October

    While lower growth figures for Victoria reflect that state's lockdown status during October, other states and territories performed well, continuing the pattern of growth from August and September.

    The Australian Bureau of Statistics (ABS) has released numbers tracking retail sales. Sales for hardware retail have continued to grow at a high rate in month-on-month terms, and results over the past seven to eight months show continued strong growth in most states.

    Chart 1 shows the sales numbers for the trailing 12 months to October, and Chart 2 shows the percentage change between those 12-month periods. (The ABS has had to temporarily remove Tasmania and the Northern Territory from the most recent data for these series, though this information will be restored at a later date.)

    The Australian Capital Territory (ACT) showed the most growth of over 25% for the 12 months ended October 2020 as contrasted with the previous corresponding period (pcp), which is the 12 months ended October 2019. South Australia (SA) grew by nearly 19%, and Western Australia (WA) by nearly 17%.

    New South Wales (NSW) and Queensland (QLD) both grew by close to 16.5%, while Victoria (VIC) recorded the lowest growth rate at 15.2%. Growth overall for Australia averaged out at 16.4%.

    Chart 3 shows a month-on-month comparison of growth over the 12 months to October 2020, comparing each month to the same month in the previous year. This indicates a slight decline in the growth rate for October, though this is generally back to around the level of growth for August, following a significant increase in September.

    VIC is the one state that does not follow this pattern, with a sharp fall from July to August, as COVID-19 pandemic restrictions came into force, limiting hardware sales to online only for consumer DIY.

    Chart 4 shows a view of the month-on-month data, based on comparing October 2020 to the average of the same month in 2017, 2018 and 2019. This helps to compensate for 2019 being a year when hardware sales were somewhat subdued. This shows that NSW has taken a strong lead for this period, while growth in VIC was much slower, and growth for QLD was robust. The overall figure for Australia was higher than 20%.

    Online

    Chart 5 and Chart 6 show statistics drawn from the NAB report on internet sales. According to that report:

    We estimate that in the 12 months to October, Australians spent $42.2 billion on online retail, a level that is around 12.3% of the total retail trade estimate (Preliminary Oct 2020, Series 8501, Australian Bureau of Statistics), and about 41.2% higher than the 12 months to October 2019.

    Chart 5 shows how that growth has played out, with a sharp spike in April 2020, followed by a second spike in August 2020.

    Chart 6 shows the comparative growth in domestic sales generated online and overseas sales generated online. Growth of domestic sales has completely overshadowed growth in overseas.

    Analysis

    Most hardware retailers are reporting that sales to consumer DIY customers have increased substantially. One reason is that it appears doing DIY/repair in Australia is regarded as a conservative activity to undertake during times of potential economic stress.

    The growth figures for hardware retail sales are uncommonly high. However, they are occurring under conditions where the housing/construction industry has received a strong boost, both from lowered interest rates and from incentive programs such as HomeBuilder. There still remains a question mark over what will happen by mid-2021, when potentially the priorities of the government will shift away from housing.

    The second factor is how well hardware retailers are doing in providing online sales. To a large extent, most retailers have opted for a "wait-and-see" attitude. That has probably cost them in terms of sales during 2020, as we've seen a number of hurried and poorly implemented websites and processes result.

    As with the high overall level of sales, the big question is how much of these online sales will continue, once Australia has distributed vaccines, and COVID-19 is under control.

    statistics

    Biggest Bunnings store in WA opens

    Replaces current Midland store

    It has features and displays not seen before in a WA Bunnings store and will allow it to compete more directly with IKEA

    The newly built $55 million Midland store is 21,000sqm - nearly 7000sqm larger than the existing store - and the largest in Western Australia.

    It is the first Bunnings store in WA with a hybrid tradie-everyday shopper concept, offering bulk building materials in an enclosed area with five lanes of undercover carparking - enough to accommodate 32 vehicles at a time. Tradies will have their own self-checkout section to keep queues short at the other check-outs.

    In another first for a WA Bunnings outlet, the store has a wardrobe section (typically seen in IKEA), showing how items can be mixed and matched to suit a space, and low-height kitchen and bathroom tap displays so home builders and renovators can get a close look and feel of the range.

    These features are part of its eight bathrooms and 12 kitchens that are showcased in-store.

    The new Midland also store has a large garage storage section, with mix-and-match shelving and toolboxes all in the same space. This is an Australian first concept for a Bunnings store.

    Complex manager Justin Myles said the layout has been planned to ensure products that are often bought together are located nearby in the store. He said there has been an emphasis on big growth categories such as smart home technology. He told NCA NewsWire:

    Indoor plants [are] also huge - it's very on-trend to have the inside of your house looking like the outside - so people were going nuts for indoor plants and all the garden decor that goes with it to make that homely feel.
    And moving into this time of the year, it's all about making your backyard ready - lots of people host Christmas, [they] want to make that big family experience and bring people together - so outdoor furniture and barbecue [products] are on-trend.

    The store has invested in the low, slow barbecue cooking movement, offering a range of flavoured wood smoking chips, pellets and meat probes, as well as complete outdoor kitchens.

    Other features include a landscaping materials section and a nursery.

    Easy access is a theme throughout the store with walk-throughs in between the long aisles so customers can cut through areas.

    WA is set to get similar Bunnings store concept in Albany, in the state's Great Southern region.

    Related: Construction of the new Midland store began earlier this year at the old Midland saleyards.

    Store network additions and replacements - HI News, page 23
  • Sources: NCA NewsWire, news.com.au and The West Australian
  • bigbox

    Knauf sells Australian plasterboard factories

    Belgium-based Etex is the buyer

    Saint-Gobain and China National Building Material were also reportedly looking at the assets

    The Knauf Group has agreed to sell its Australian plasterboard facilities to Etex, according to a report in the DataRoom column in The Australian.

    Etex is a family-owned, global manufacturer of lightweight building products that operates in 42 countries.

    In 2019, Knauf bought out USG in the plasterboard joint venture across Asia, Australia and New Zealand that USG owned with Boral. The deal was worth USD7billion. However, Knauf recently announced it would also buy Boral's half-share of its USG plasterboard venture for AUD1.43 billion.

    The plasterboard factories being sold are those Knauf had before it bought the USG assets in Australia and Asia, owned in partnership with Boral. They are located at Altona (VIC), Matraville (NSW) and Bundaberg (QLD). It also has a metal profile production facility in Beenleigh (QLD).

    Knauf Australia managing director Gavin Burton said the deal with Etex would offer synergies. He told The Australian:

    Etex is known for its excellent customer service, innovative solutions and a strong focus on workplace health and safety.

    The transaction is subject to regulatory approvals and the deal is set to be completed in the first quarter of 2021. DataRoom revealed the interest by Etex in October and that time, the portfolio was thought to be worth about AUD400 million.

    Knauf said Etex was purchasing Knauf Australia as a going concern, and the existing employees in Australia, including the management team, would continue to operate the business in Australia. The company employs over 300 people.

    Etex said in a statement that the transaction expanded its footprint on the Australian construction market with strong growth opportunities.

    The company said in addition to strong business advantages, the acquisition was consistent with Etex's recent strategic refocus plan to reinforce the Belgian multinational's strengths in lightweight and modular construction technologies globally.

    Etex said it expanded its plasterboard business into a market where the group is already present in the fire protection and fibre cement segments. It currently has its Promat, Cedral and Equitone brands available in Australia. Promat is for fire protection, high temperature applications and intumescent seals; Cedral offers pre-coated fibre cement sidings and slates; and Equitone supplies fibre cement cladding panels for large to mid-size buildings.

    Related: Knauf exploring sale of Australian plasterboard assets

    German, family-owned global manufacturer Knauf is understood to be making its Australian plasterboard assets available for sale - HNN
  • Sources: Weekend Australian, The Australian and Etex Group
  • companies

    Lowe's unveils "Total Home" strategy

    Plans to capture market share from rivals

    At its virtual investor update, the home improvement retailer said it expects sales to grow by about 22% in fiscal 2020

    After working for the last two years on its turnaround efforts, Lowe's CEO Marvin Ellison said the company will now focus on strategic moves to win more of the approximately USD900 billion US home improvement market.

    In the year ahead, he said the company will have a "Total Home" strategy. It will expand its online only assortment from kitchen appliances to home decor. It will test ways to speed up and lower the cost of fulfilling online orders by freeing up more space in the back of its stores. And it will localise products on shelves in different markets, so it doesn't have snow blowers at stores in warm climates or riding lawnmowers in big cities. Mr Ellison said:

    At Lowe's we will be committed to offering everything a homeowner needs to provide a 'total home solution' across every area in the home. This includes products and services for everything needed to repair and improve the home, for DIY and Pro customers alike, across all decor categories including paint, as well as simple and complex installations.
    Our Total Home strategy will enhance customer engagement and grow market share by intensifying our focus on the Pro customer, expanding our online business, modernising installation services, improving localisation efforts and elevating our product assortment.

    The investor presentations included the company's strategies to drive productivity and deliver a seamless, omnichannel experience.

    Lowe's chief financial officer Dave Denton said its efforts in the months ahead will lift the company's sales per square foot. He said it expects to have USD423 per square foot by the end of this year and it will raise its goal to USD460 for the future.

    2020 was a pivotal year for the company, and we are taking market share earlier than we expected, and we are making the right investments for future growth. We are committed to investing in the business, including expanding our supply chain network to enhance our omnichannel capabilities.

    Mr Ellison also said the retailer has overhauled its website and added new signs to help customers navigate its stores as the company gets a boost from the popularity of home improvement projects during the coronavirus pandemic.

    Our commitment to retail fundamentals has been essential to our 2020 financial success. Our supply chain, in-store and digital systems would have collapsed under the weight of the unprecedented customer demand created by the pandemic without this focus.

    Mr Ellison highlighted improvements that the retailer has made across its brick-and-mortar and digital businesses since he took the helm two years ago. Among them are its recently launched loyalty program to gain more business from home professionals, such as electricians and contractors. And its digital fulfillment options such as curbside pickup and in-store lockers.

    He said the company has come a long way from Black Friday 2018 when its website crashed. Now, he said, the retailer is handling a surge in e-commerce demand day after day because of the pandemic.

    The company reiterated its outlook at the investor conference, saying it expects sales to grow by about 22% this year. Same-store sales are expected to increase by about 23% during the same period.

  • Sources: CNBC, HomeWorld Business and Lowe's Companies
  • bigbox

    Home Depot offers skilled trades education

    Tradies in training

    The big box retailer is providing an omnichannel job training and placement program

    The US based hardware-home improvement giant is expanding its commitment to train 20,000 tradespeople over the next 10 years with a new education and job placement program called Path to Pro. It pledged USD50 million towards these efforts in 2018, offering resources and training for people to pursue and grow their careers in the trades.

    Path to Pro aims to educate more people in the skilled trades, connect skilled tradespeople with jobs and careers, and generate interest in trade professions through educational campaigns. Home Depot is investing in training from entry-level to advanced certifications, and recently sponsored its first weeklong boot camp to teach job site safety, tool usage, material handling, and communications.

    The boot camp is piloting in the Atlanta, with plans to expand into additional markets in 2021. Graduates earn a Home Depot certificate that recognises construction skills and professional fundamentals.

    In early 2021, Home Depot will also launch a website to be a centralised resource for people to search local training programs, licensing requirements and open jobs in the trades. The site will feature day-in-the-life videos and stories for each trade, with projected growth and salary information in industries like electrical, carpentry, plumbing, and HVAC.

    The retailer will introduce a proprietary online platform to increase access to networking between skilled tradespeople and the company's Pro contractor customers. Training program graduates will be able to showcase their work portfolio, experience and additional qualifications, and be contacted by Home Depot Pro customers in their area looking for skilled labour help.

    In 2018, The Home Depot Foundation launched its trades training mission to help fill the skilled labour gap through programs in high schools, technical colleges and military bases across the US.

    It works with the Construction Education Foundation of Georgia and Home Builders Institute (HBI). In partnership with HBI and 10 military bases, service members are trained and certified, helping them launch their next career. The Home Depot is also the trades industry sponsor for the Center for Workforce Innovation at Atlanta Technical College which is providing skills to help students attain economic mobility in the trades.

    The foundation's trades-focused partnerships have exposed more than 15,000 people to the skilled trades and certified 3,600 participants in its first two years.

    bigbox

    ABS stats: building approvals and housing finance

    Houses surge, while multi-unit dwellings get taller

    The statistics have caught up to the pandemic, revealing the trends that are likely to be with us for some time.

    The Australian Bureau of Statistics (ABS) has released statistics for building approvals through to October 2020, as well as statistics for housing finance through to September 2020.

    ABS: Building approvals ABS: Housing finance

    The harshest effects of the COVID-19 pandemic in Australia became evident in April/May 2020. The Reserve Bank of Australia (RBA) cut the target cash rate by a total of 0.50% during March 2020. The federal government introduced its HomeBuilder program, a near $700 million fiscal stimulus, on 4 June 2020 (and extended it to 31 March 2021 on 29 November 2020).

    This means Australia has by now crossed over into new territory, on two fronts. In terms of actions to stimulate the economy, and particularly housing, the nation is now past the initial stage, where the priority was to prevent a crash through market panics, and moved into the time where the foundations of an economic recovery are being put in place.

    Secondly, the nation is now also at a stage where there are enough statistical data to provide a clearer picture of what the effects of both the pandemic and the early stimulus efforts have been.

    Building approvals

    Chart 1 confirms what has by now become familiar in the building approval stats: activity has not only equalled that of 2019, but slightly improved on it, driven by approvals for detached houses.

    In fact, approvals for houses grew by 5.74% for the trailing 12 months to October 2020, compared to the prior 12 months, while approvals for multi-unit dwellings fell by -2.37%. The total value of housing approved for the current period was $58.7 billion, up from $57.2 billion in the prior period. However, this was a substantial fall from the $70.2 billion total for the period from November 2017 to October 2018.

    Chart 2 reflects those changes. Going back to 2013, there is a spike in multi-dwelling units, and a more modest increase in detached houses.

    In 2014 both houses and multi-units see an increase of over 15%. 2015 sees multi-units spike sharply by 40%. For 2015 through to 2018, houses maintain the same level, while multi-units decline. 2019 shows a significant decline in both houses and multi-units.

    Chart 3 gives us perhaps the best direct read on how the pandemic has played out in building approvals, as it compares each month's number of approvals with the same month in the previous year, going back three years.

    The first serious impact on approvals took place in May 2020, after a positive upward trend in both March and April, likely driven by the interest rate cuts. The July 2020 surge in multi-unit dwelling approvals was probably driven by the announcement of the HomeBuilder grants.

    Building approvals composition

    As we move more into the second pandemic stage, close to "COVID-19 normal", we can see some patterns emerging in the composition of housing types for building approvals. Chart 4 provides an indication of how these have been changing. This outlines the proportion of building approvals held by each category of housing type.

    Overall, one of the major changes has been that for multi-unit dwellings there is a strong tendency to build taller. The share of flats in one or two storeys has declined sharply, and there has also been a decline in single-storey townhouses, though this last remains significant. Detached houses, two or more storey townhouses, and apartment buildings with four or more storeys are the main categories.

    There is also a clear sequence to building composition. Both years ended 2019 and 2020 are somewhat similar to years ended 2011 and 2012, while years ended 2013 to 2018 show a stronger presence of four-plus storey apartment buildings, moderated by the growth of two-plus storey town houses from 2015 onwards.

    Chart 5 confirms these changes, showing the percentage changes between different periods. Two of the most significant declines are for three-storey apartment buildings, as well as one- and two-storey apartment buildings.

    Housing finance

    Again, as we enter into the second phase of the pandemic economy, the stats for housing finance also begin to show patterns. Chart 6 shows the trailing 12 months to September figures for housing loans taken out by investors and owner occupiers.

    There is a surprising similarity between this chart and that for multi-unit dwellings and detached houses. Investor loans peaked in 2017, then fell while owner occupier loans rose in 2018, which followed owner occupier loans down in 2019, and then were almost flat into 2020. Owner occupier loans grew by 17.66% in the period ending September 2020 as compared to the prior period, while investor loans fell by -0.43%. Overall, loans grew by 12.37% on the same comparison.

    Chart 7 shows a similar grouping of results, but this time for first homeowner occupier housing and all housing loans. (First home investor loans data were not collected until relatively recently.)

    The value of first home loans tends to work inversely to the number of building approvals, but for 2020 this relationship has been reversed. First home loans make up over 20% of overall loan values, up from the average since 2010 of 15%. There is a notable acceleration in loans after June 2020, indicating that this is likely due to the HomeBuilder grants. There is also the influence of the First Home Loan Deposit Scheme (New Homes) or FHLDS (New Homes). In the 2020-21 Budget, 10,000 FHLDS places were announced for the 2020-21 financial year, specifically for eligible first home buyers.

    Chart 8 shows the percentage difference between the periods from Chart 7. The most interesting feature is the sharp decrease in 2019, followed by a steep increase for 2020, with investment loans, after two years of negative growth, returning to near parity.

    Finally, Chart 9 shows the month-on-month comparison for housing loan changes. It is interesting that immediately prior to the pandemic, loan amounts were growing as compared to the previous year, before falling steeply in May 2020.

    However, they recovered immediately in June. Owner occupier and first home loans have continued to grow, while investment loans struggled until September 2020, when growth returned.

    Analysis

    The headline good news for most independent hardware retailers is that the housing market looks set to experienced sustained demand in the short term, and much of that demand will be for the types of buildings they would cater to: detached houses and town houses. Larger projects, such as four-plus storey apartment buildings, will continue, but at a reduced rate to that of the past.

    Again, for a short term, that is. However, what about the longer term? One of the issues that eventually must be tackled is what will happen with house prices. The market has conditioned retailers to regard increasing house prices as being a good sign, as it signals increased market demand.

    Yet there is probably not a single hardware retailer in Australia who has not, from time to time, pondered the crazy logic at the core of that notion. After all, hardware retailers make their money, basically, on the number of houses that get built - not the cost of the houses to the consumer. Given strong, indicated, basic demand, wouldn't retailers benefit more from lower house prices, if that meant a higher volume of builds would get under way?

    There is a complex nest of issues around that thought, and it is one HNN will be delving deeply into in our forthcoming issue of HI News. For the moment, though, let's think about the issue of the Australian government and house prices.

    It's a rather curious situation, because just as the lower interest rates will work to boost house prices over the next year, on the other side HomeBuilder is attempting to make those higher prices more affordable.

    While the housing industry - and therefore hardware retailers - may welcome these boosts, the question remains whether this stimulus is going to be helpful in the longer term.

    The purpose behind this stimulus is not, after all, all about housing and construction. Increasing house prices means that homeowners see the assumed value of their prime asset increase, which means that they can draw-down more on their mortgages, if they so choose. That should, the government hopes, translate into increased consumer confidence, and possibly increased spending as well.

    The real problem is just how long this whole system is going to be supported, and what the effect of reducing or removing the support will be. While the good news is that the RBA has guaranteed low interest rates for the next two or three years, the bad news is the RBA cannot cut rates any lower.

    All that is left to support the housing industry in the future is fiscal stimulus. And the core problem with this is that fiscal stimulus of the construction industry is a long-term growth strategy recommended by pretty much no independent economists. Largely because the construction industry is not able to improve productivity quickly, and because the industry has few, if any, real spillover effects - it doesn't help other, adjacent industries become more productive either (as opposed, for example, to software development).

    While time will tell, this stimulus may bring some welcome results in the short term, but create future instabilities that will be very difficult to deal with. That said, what may lie on the other side of a housing price reduction could be very good for hardware retailers - and the rest of Australia as well.

    statistics

    Makita's first upright vacuum

    Japanese power tool company expansion?

    Makita, ever unpredictable, has decided to design and produce its own upright vacuum cleaner - though we don't really know why

    In terms of its overall strategy, Makita has increasingly become something of an outlier among the other four major power tool companies - Stanley Black & Decker (SBD), Bosch and Techtronic Industries (TTI).

    While the other three have embraced Internet of Things (IoT) links for their tools to various degrees, Makita has made only minor forays along that path, enabling, for example, a Bluetooth link between some power tools and a vacuum for dust removal.

    Also, while Makita has worked to expand its current range of tools, it hasn't done all that much to expand its product range footprint. SBD has acquired a mid-market brand in the US. TTI is constantly growing the versatility of its tools by adding cordless power to many small but time-consuming tasks (such as riveting). Bosch has made some great advances in areas such as consumer, DIY tools.

    But Makita, for the most part, has continued to develop great tools with a relatively narrow focus, though this has grown to include outdoor power equipment as well.

    All that makes it more than a little surprising to find that the company has released a new cordless vacuum cleaner, which is aimed at use by professional premises and professional cleaners.

    The 36-volt LXT Brushless HEPA Filter Upright Vacuum Kit has the product designation XCV19PG. It uses two standard 18-volt Makita batteries, and is, of course, Makita's first cordless upright vacuum. The company makes quite a point of the fact that it carries "the Carpet and Rug Institute (CRI) Seal of Approval Certification for high performance in commercial cleaning applications."

    Makita describes the vacuum as using a brushless motor to generate 67 CFM of suction power and "120cm of water lift". The upright vacuum has a cleaning path that 30cm wide and four height adjustment levels to handle different floor types. The company claims that its two-stage HEPA filter will capture 99.97% of particulates 0.3 microns in size and larger.

    To be clear, this isn't the kind of stick vacuum cleaner that both Bosch and TTI have added to their consumer range of tools. This is a standard upright, with a constantly driven brush head.

    Makita cites several advantages for the vacuum. The company claims it is quieter than its corded counterparts (Makita claims 57dBa), minimising disruption, and that it provides long run-time:

    Makita-built motor and batteries efficiently use energy to provide up to 60 minutes of run time. Two 6.0Ah LXT Batteries charge in less than 1 hour, allowing for minimal down time.

    Analysis

    It really is difficult to work out exactly what Makita is doing with this product. It does fit into the product line somewhat, as Makita has long made a backpack vacuum for professional use.

    That said, many of the technologies required for a device of this kind are a departure from Makita's standard product line. There is, first of all, the ergonomics that go into the design of the cleaner itself, not to mention the design and function of the product's brush-head.

    There is also the matter of marketing. The 90-second video the company has produced is interesting in that the vacuum cleaner is never shown encountering actual dirt. It just constant cleans already clean floors.

    As it frequently the case with companies such as Makita, which are a little obscure in their motivations and strategies, this vacuum cleaner raises many questions. Is it an attempt to emulate the product diversification of Bosch, and especially TTI? TTI has, of course, parlayed its cordless technology in combination with its ownership of the Hoover brand (along with a number of other vacuum cleaner brands) to produce increasingly competitive products. Or is it perhaps a reaction to specific requests from its customers, especially in Japan, where cleaning might have achieved a higher priority due to the current pandemic?

    We can't really know, but we will certainly be following the success or failure of this product over the next couple of years.

    products

    Big box update

    Bunnings Young store has opened

    The big box retailer also plans to build a trade centre in New Zealand and the Bunnings Mascot site has been sold

    The town of Young in New South Wales has its own Bunnings Warehouse; a trade centre will be built in Invercargill, New Zealand; and the site of the Bunnings Mascot store located in Alexandria (NSW) has been sold to a major property investor.

    Young

    The Bunnings store in Young spans over 5,500sqm and includes an enclosed timber drive through with 10 indoor car spaces, a newly designed trade desk and car parking for over 85 cars.

    As part of the store opening, the team has provided support to local community groups with gift card donations. Young Bunnings store manager Matthew Ross told The Grenfell Record:

    So far, we've provided a $1,000 gift card donation to the local Men's Shed and we've also provided the Young Local Aboriginal Land Council with a $1,000 donation towards their school education and sustainably projects.
    We're also running a competition among local schools in the area, asking them to create and paint a banner of the Young Cherry Festival.
    Because the festival was cancelled this year, we thought we'd try and keep the festival spirit going and create a bit of fun in the town. We've got 10 banners on display at the store and the local community will pick two schools as winners, who will also receive a gift card donation to go towards school sustainability projects.
    Once we're able to get back out into the community, we look forward to assisting more groups in the area with hands-on projects.

    COVID-19 restrictions will be in place throughout the store during and after the opening.

    Invercargill

    The NZD7 million Bunnings trade centre in Invercargill (NZ) is expected to open in the second half of 2021, and measure about 4000sqm.

    With seven other locations around New Zealand, Bunnings trade centres cater for specialised trades such as electricians, landscapers and plumbers as well as farmers and the rural community, according to Bunnings New Zealand director Jacqui Coombes.

    Demolition of existing buildings on site had recently begun and construction should begin in early 2021. Developer and director of CPMC Developments, Martin Russell told The Southland Times:

    We're very pleased to be commencing construction on this exciting new addition to Invercargill's growing commercial district. This project will generate upwards of 80 jobs during delivery and provide a valuable resource for the local community.

    Invercargill-based Archer Construction director Kerry Archer said he wasn't surprised Bunnings was moving in, as there had been rumours for years. Invercargill was already well supplied with trade merchants but he believed a bit of competition was always a good thing.

    But Mr Archer said Southlanders were loyal to their merchants. He also told The Southland Times:

    You generally build up a fairly good relationship with one or two and they are your main suppliers, it takes quite a bit to change that relationship and it's normally going to be priced based.

    He said he would check out Bunnings for pricing to see how it stacked up.

    It's good they have the forethought that the market will stay strong and they can see positives down here.

    Alexandria

    A 1.9 hectare site at 520-530 Gardeners Road in Alexandria where the Bunnings Mascot store is located was sold to ASX-listed property fund Charter Hall for $70 million. Corporate lawyer David Gonski, philanthropist Simon Mordant and businessman John Curtis purchased site in 2015 for $16 million. They are the three directors of South Central Sydney Pty Ltd, the vendor of the Alexandria property.

    The Bunnings store has been on the site for 20 years and has about four years remaining on its lease on the site, according to a report in the Sydney Morning Herald.

    However Charter Hall negotiated a lease-surrender package with the big box retailer, which no longer needs the facility, to vacate immediately. Bunnings has two other stores close by.

    Charter Hall fund manager Simon Greig said the property provides redevelopment options including the ability to develop a high-profile logistics or last mile facility under the current zoning.

    He told the Sydney Morning Herald that South Sydney has emerged one of the most sought-after industrial precincts in Australia given its access to major transport hubs, the CBD, Port Botany, Sydney airport and surrounding residential precincts.

    The acquisition is part of an emerging trend of retail-to-logistics conversions driven by the rise of e-commerce and the growing demand for fulfilment centres close to urban centres to ensure speedy delivery of goods.

  • Sources: The Grenfell Record and Bland Advertiser, The Southland Times, Sydney Morning Herald, and The Australian Financial Review
  • bigbox

    Drone potential in hardware deliveries

    Service for tradies in Queensland

    Wing Aviation delivers food and other small goods from shops to homes but not tools and implements to workplaces

    Drone delivery company Wing Aviation said it is considering expanding its services to take tools to tradies on jobs around Canberra.

    The idea would be to team up with a hardware supplier so that tradies who suddenly needed a particular item for a job like a particular size of screw, a drill bit or paint brush would be able to order it online and get it delivered within minutes.

    Wing is currently talking to tradespeople to see how the service might work and what the demand for it might be. It would need a change in the way the drone service operates. At the moment, users order and pay through an app - but delivery is to the home address. The tradies' service would need delivery to the location of the jobsite.

    Wing's head of public policy in Australia, Jesse Surkin, said hardware deliveries would stop jobs or projects being delayed for days when tradies found they were missing an essential part. A company spokesperson told The Canberra Times:

    A carpenter without the right drill bit might have to knock-off to go to the hardware store, which has a ripple-on delay effect for the other tradespersons working on site. The project that was scheduled to finish up in a week, will now take three.

    Wing has commissioned an economics consultancy to study the idea. The report's conclusion notes:

    In Australia, tradespeople such as builders make a total of 60 million unplanned trips to the store each year to collect hardware items, tools, or spare parts they need on the job.
    At an average of one hour each, these interruptions amount to $2 billion annually in labour and vehicle costs.
    They can also result in larger workflow disruptions, leading to lost time for clients, and in some cases, expensive contract penalties for delayed projects.

    The company already has a service for tradespeople in Queensland and can't see why it shouldn't operate in the ACT in a similar way. In three suburbs of Brisbane, Wing drones have been used by landscape gardeners who found they had run out of line for a whipper-snipper.

    Pilot cities

    In 2019, US-based Wing Aviation - owned by Google's parent company, Alphabet - launched pilot programs in the Canberra suburb of Gungahlin and Logan City in south-east Queensland delivering food and domestic items. Orders (maximum weight 1.5 kilograms) are filled by "local merchant partners" at a centralised service-and-fly site.

    Wing delivery drones typically fly at a height of 60 metres and can reach speeds up to 113km/h. Once a Wing drone arrives, it hovers around seven metres above the ground, lowers the package using a winch and after releasing it in the nominated front or back yard, returns to Wing's base. Average delivery time is less than 10 minutes.

    Australia was hand-picked as a testing ground for drone services worldwide. Wing communications executive, Maria Catanzariti told the Sydney Morning Herald that Australia was chosen to be part of pilot scheme because "Australians are natural early adopters, and they give useful feedback".

    But the feedback hasn't always been favourable. There have been noise complaints, and safety and privacy fears, which Ms Catanzariti described as "great learning opportunities". Wing drones now have quieter propellers; they comply with all safety requirements, and although they can take photos for geolocation, images are so greyscale and low-resolution that "you can't tell if you're looking at a person or a tree".

    There are also limits to drones. If the weather is rainy, windy or dark then the Wing fleet is grounded.

    Households in Wing's Early Flyer program have been able to order a range of goods from a coffee shop, grocery store and hardware outlet, with drone delivery initially offered free of charge.

    Wing chief executive James Ryan Burgess said the company was committed to taking to the skies in other parts of Australia.

  • Sources: The Canberra Times, Sydney Morning Herald, Central Western Daily, and Sunday Telegraph
  • companies

    QLD insecticide maker competes globally

    Home grown brand

    Since finding a niche in the local market, RID Australia has been exporting its products around the world

    The RID brand has undergone a rebrand, manufacturing upgrade and product expansion since co-owners Natalene Carter, David Griffin and a third party bought the company from Thorley Laboratories in 2013. All the work is being done from Townsville and Brisbane in Queensland.

    Both Ms Carter and Mr Griffin have extensive business backgrounds - in accounting - and this has helped to transform the company.

    They had the vision, passion and work ethic needed to take on a national brand but when it came to insect repellent it was an unknown world to them. Unlike other businesses, the insecticide industry doesn't have the luxury of a quick turnaround. Ms Carter said products they were currently working on wouldn't see retail shelves for two years. This is why innovation and forward thinking was an integral part of their business plan.

    The duo quickly decided to go down the path of product innovation after they took over the Australian brand. Ms Carter told the Townsville Bulletin:

    We went on a real journey to expand our product as much as possible. We've grown our market share by accessing other markets.

    The RID product range now includes its medicated insect repellent, an outdoor mosquito coil range, sunscreen insect-repellent combination product, a low-irritant range, and a line of flying and crawling insect sprays. The products are distributed to Asia, the UK and the Pacific region. Ms Carter explains:

    In the years after we took over the company, we dissected the market into three areas - industrial, sports/leisure and then retail and groceries. We found the market gap was in the industrial area.
    A lot of the larger mining companies now have to supply protection for their employees, so we have developed a new strategy to that market.

    The company is now working actively in the industrial field and achieving significant results.

    In a previous interview with Townsville publication BDmag, Ms Carter explains how it successfully doubled the RID range in four years. She said:

    We constantly read the market. So we saw what trends were happening, what customers were doing and what we could develop to match future demand.

    When researching their competitors, Ms Carter and Mr Griffin immediately noticed the lack of diversity in their range. This encouraged them to work faster and harder.

    ...We made a strategic decision, to increase our offering of quality Australian owned brands, across this sector. It's an endorsement to our strengths in the category of insecticides that now extends to bug killers for the home. It also gives our customers confidence with Australian owned brands that work in our Aussie environment.

    Ms Carter she's proud that RID Australia is a business that's competing around the world, from its Townsville and Brisbane base.

    COVID has taught us that you can be based anywhere in the world and do business effectively and efficiently. I can work from Townsville and know what is happening in the RID manufacturing plant in Brisbane.
    There are cameras in every warehouse around the country, so from my phone I can see what is happening...I can see all the orders coming in and track their progress.

    The company competes effectively against larger corporations. She said:

    The main brands competing for the same market share as RID Australia are multinationals and multi-international companies. For us to get market share from them and grow products that RID wasn't in is something we're extremely proud of.
    We were able to secure the only insect repellent in Bunnings across all stores nationally, which was five years of hard work and we are really pleased with the growth in this retail sector.

    Ms Carter also said one of the keys to business success was staff.

    I have really good staff. If they come to me with a problem, mostly they'll already have the solution to the problem.

    The company remains 100% Australian-owned and maintains its manufacturing in Queensland.

  • Sources: Townsville Bulletin and BDmag
  • companies

    Crescent Z2 pliers and project kits

    Pliers get additional features

    Three new project kits provide the tools required to get common tasks done properly

    The latest Z2 Pliers from Crescent Tools have next-level design features that make them more effective, more efficient, durable and useful, according to the company. Jarrett Wolf, US-based product manager for Crescent Tools, said:

    When we set out to make better pliers, we turned to our customers to find out what features they needed to complete their jobs. We talked to professionals in different trades with different needs and distilled that information down to create features that make a difference in their day-to-day work.

    The Crescent Z2 8" Needle Nose Pliers feature:

  • High-leverage joint design provides up to 35% greater cutting power
  • Laser-hardened cutting edges cut clean and remain sharp 50% longer
  • Six-zone head with a cross-hatched jaw for gripping and pulling; wire puller notch for gripping, pulling and twisting fine wire; non-marring grip zone for gripping and turning decorative fasteners; torque zone for pulling, twisting and bending; fastener grip area for turning nuts and bolts; and cut zone for extreme cutting
  • Also joining the Z2 line are:

  • Tongue & groove pliers that have K9 Gripping Technology to grip and turn at angles up to 35 degrees. With up to 10 jaw positions, these pliers are more flexible and have greater jaw capacity.
  • Slip joint pliers have a curved jaw design that grips fasteners from 3mm to 25mm with a cross-hatched jaw, and the deep integrated wire cutter reduces cutting effort.
  • Diagonal pliers are designed with a 20-degree head angle for true, flush cutting.
  • Linesman pliers have a high-leverage joint that provides up to 35% greater cutting power, and the fish tape channel is designed for use with flat steel tapes.
  • The Crescent Z2 line includes 35 new products (18 groove-joint, 12 solid-joint, and 5 sets), and are available with dual-material handles that have tether points for increased safety, as well as dipped handles.

    Project kits

    Certain projects require specific tools that aren't necessarily staples in every toolbox. And when those projects come up, people may have to pay more for individual tools or for an expensive set that's not always needed. To help tool users out, Crescent APEX developed three project kits with the tools to help make quick work and move on to the next one.

    The eSHOK-GUARD Ceiling Fan and Light Installation Kit puts the tools for safe installation of a ceiling fan or light fixture in one place. The 11-piece kit comes with a e-SHOK-GUARD 1/4-inch bit holder that's designed with an isolation zone to withstand up to 1,000 volts, keeping users safe when working around electricity.

    Its impact-rated design withstands heavy use with an impact driver. The kit also comes with four bits, three strips of wire (black, white, and green) and three wire caps.

    Similarly, the 22-piece u-GUARD Drywall Anchor Kit can make installing drywall anchors easy. The set has a 3.5" Phillips u-GUARD covered impact power bit with its non-marring, free-spinning sleeve for a scratch-free finish.

    Lastly, the 5-piece u-GUARD Quick Release Bit Holder and Vortex Bits is suitable for installing doorknobs, hinges, and other surfaces that people don't want scratched.

    The kits have been developed for Lowe's stores.

    products

    Houses increase value over units: RBA

    RBA Governor outlines changes in housing market

    Both statements by RBA Governor Philip Lowe and building work done stats from the ABS show multi-unit dwellings decline in value

    Using statistics to forecast the future has sometimes been likened to travelling in a car, with the navigator peering out its rear window at the landscape passing by, and shouting directions to the driver. That's a little unkind, of course, but it does point to the central problem: it's easy to forecast what is going to happen on the statistical equivalent of a straight road, but when you get to the twisty, uncertain bits, it is a lot harder.

    One thing that does help with this, is to rely on an experienced navigator who has been through some twisty bits before. Which brings us to a speech that was recently made by Philip Lowe, the Governor of the Reserve Bank of Australia (RBA). Entitled "COVID, Our Changing Economy and Monetary Policy", this was delivered at the Committee for Economic Development of Australia (CEDA) Annual Dinner in Sydney on 16 November 2020.

    Property values

    There are two aspects of the Mr Lowe's speech that are of interest to hardware retailers. The first consists of some direct comments made about Australia's property market. Mr Lowe described just how difficult this area is to accurately forecast:

    It is a complex picture here, with the market simultaneously adjusting to: a recession; lower population growth; record low interest rates; substantial government incentives to support residential construction; and changes to the way that people work, shop and live. So there are a lot of moving pieces at present and the effects are very uneven across different types of property and across the country.

    He went on to note that the pandemic has had quite different effects on housing markets in major cities and in more rural areas. Chart 1 is the graph that supports his claims. This shows that while house prices have declined steeply in both Sydney and Melbourne, in rural regions they continue to grow in New South Wales, and have moved to neutral in Victoria. As Mr Lowe points out:

    Many regional centres have been less affected by the virus and some are experiencing increased demand as people work remotely and look for property outside the big cities.

    For the rental market, there has also been something of a divergence in rents charged in major cities between houses and attached dwellings. Chart 2 shows the data that back up Mr Lowe's analysis. He describes some of the influences that have boosted house rental rates and diminished those of apartments:

    The apartment markets are more affected by the lower population growth and fewer foreign students and by young adults staying at home with their parents. There has also been an increase in demand for houses as people work from home.

    Digital and productivity

    Mr Lowe makes an explicit link between the move by business to more digital processes and methods and an increase in productivity.

    In some areas, progress that otherwise would have taken years has been made in a matter of months. The combination of necessity, new technologies and the easing of regulations has made a real difference. Digitalisation is not only helping Australians deal with the pandemic, but it will also boost productivity and can help drive future economic growth.

    He also points directly to the rise in online retail throughout the pandemic, which lifted from a former high of 7% of all retail sales to close to 11%, as illustrated in Chart 3.

    Building work done

    How does this analysis hold up when we look at some of the numbers the Australian Bureau of Statistics (ABS) collects about the construction industry? Its Construction Work Done, Australia, Preliminary series, released on 25 November 2020, details the work actually done around Australia on its construction sites.

    Chart 4 shows the raw numbers for the 12 months to September, based on the original numbers, over a 10-year period to 2020. It shows clearly that there was a peak in 2018, followed by declines in both 2019 and 2020. Once again, it is evident the big variable is in the multi-unit dwelling sector.

    Chart 5 backs up Chart 4 by showing the percentage change between the 12-month periods. Multi-units show a high degree of volatility, ending in decline. This chart also picks up the uptick in Alts, going from a slight decline in 2019, to an increase of 1.9% in 2020 - about the same as its growth in 2016. (The dollar value of Alts is so much lower than house/multi-dwelling construction that this isn't evident in Chart 4.)

    Chart 6 gives perhaps the clearest vision of what is happening during the pandemic period. Multi-unit dwellings have generally continued to decline, while housing, still in decline, has improved slightly. Only Alts have managed to move to positive growth, in both July and September.

    Analysis

    The ABS stats certainly backup what Mr Lowe had to say. Over the past five or six years there has been a gradual "joining up" of the market between apartments and detached houses - though Sydney was one area where those markets had joined up by 2012. As Mr Lowe indicates, the pandemic has led to families re-evaluating, and now valuing houses at a higher level.

    That is, of course, not a bad state of affairs for most independent hardware retailers, who tend to benefit more from detached house construction than from multi-unit dwellings.

    However, even though hardware retailers have seen a boost in sales recently, it is important to note that while the first wave of support during the pandemic has benefitted the construction sector, that won't necessarily continue to be the case.

    Dropping interest rates close to zero, and the nearly $700 million HomeBuilder stimulus were largely emergency measures. The next stage of the recovery needs not to subsidise industries, but to stimulate industries that can contribute real growth to the economy.

    The construction industry is not capable of delivering those growth opportunities. Real growth is, in large part, linked to growth in productivity. Being able to do more with less is what economies have been about since the first industrial revolution in the 18th Century. Yet over the past 12 years and more, the construction industry has not only grown productivity at a slow rate, it has at times actually lost productivity. While tools such as building information modelling (BIM) offer a possibility for better productivity, there are few prospects for growth in this area over the next four or five years.

    Secondly, construction has few - if any - of what economists call "spillover effects". A building consumes a number of resources in terms of materials, person-hours of labour, and so forth, and at the end of the process you have, well, a building. There is nothing wrong with that, but it stands in sharp contrast to something like, as an example at the other end of the productivity spectrum, software development. Every major piece of software that gets developed tends to have some impact on software development elsewhere. So in addition to producing a software product that does something useful, that development improves the process of development itself. Those multiplying spillover effects themselves drive productivity up.

    The other problem with further stimulus spending is that as dwelling prices have grown rapidly, participation in home ownership has fallen. Today over 36% of Australians are in the rental market. Essentially, further fiscal support would mean over a third of Australians would be funding the housing purchases of people wealthier than they are through their taxes.

    That doesn't mean there will not be further stimulus spending for construction on both the state and federal levels, but it does mean it will be moderated. The goal will be to sustain the industry back to near-2019 levels. It's simply not really a primary growth driver.

    So, if we are looking at an extended period when interest rates cannot be reduced further and stimulus may fall off, it is quite likely we will see some kind of price collapse in the residential market. To refer to a data HNN has used before, Chart 7 shows the ABS capital city house price index charted against interest rate reductions. Without those reductions, there are several places where house prices might have continued downwards.

    There is a strong likelihood that we will see something of a residential price collapse, quite possibly between April 2021 and February 2022. Fortunately, with good cashflows in the period leading up to that, most hardware retailers will be in a good position to make it through that eventuality.

    statistics

    Indie store update

    Dahlsens Mitre 10 Myrtleford property sold

    Achesons changes to the blue banner and threw a party for the local community in Forbes (NSW)

    The 4560sqm building that houses the Dahlsens Mitre 10 store in Myrtleford (VIC) has sold for $3.35 million and Acheson's Mitre 10 recently held an event to celebrate its new look grand opening.

    Myrtleford

    The freestanding Dahlsens Mitre 10 property located at 39-49 Myrtle Street attracted 63 inquiries and sold on a yield of 8.5%, according to a report in The Age.

    The property, which was listed for sale for the first time in 30 years, hit the market early in the COVID-19 shutdowns.

    Just prior to the building's auction, Dahlsens reassured locals that while the landlords may change, there will be no change to the hardware store's services.

    At the time, Wangaratta-based director Mike Noble from Garry Nash & Co said the property and its location were very appealing for prospective buyers. He told The Myrtleford Times:

    When we have a really good regional asset come on the market we often get regional people enquiring because, without generalising, regional people understand regional assets.
    Generally you get a much better return on a regional asset than a city investment so we also tend to get the city people looking at regional investments based on the return. It has been quite competitive - this is not a cheap asset.
    With interest rates being the lowest they've ever been, it is a very good condition for people to be looking at commercial investments...

    The hardware store employs around 30 people and pays just over $284,000 a year in rent and is 10 years through a 15-year lease.

    Forbes

    The Acheson family owned hardware store has served the local community for several decades and first opened in 1970.

    Jacinda Acheson said the grand opening was a great day out for everyone and was a success. She told the Forbes Advocate:

    It was fantastic to see people bring their family out and support their local business.

    Ms Acheson said Acheson's Mitre 10 would like to thank the Forbes Magpies Junior Rugby League Club for running the BBQ, as well as Lars Coffee for providing hot drinks, Brianna Bell from Showbiz Foods, Dippin Dots, and 2PK/ROK FM.

    Along with thanking the everyone who attended the launch of the store's new look, Ms Acheson said they would like to thank and acknowledge the team at Acheson's Mitre 10 for all their effort and support.

    Related: Acheson's Mitre 10 was formerly a Home Timber and Hardware store.

    Acheson's HTH makes the switch to Mitre 10 - HI News, page 27
  • Sources: The Age, Myrtleford Times and Forbes Advocate
  • retailers

    Home Depot buys HD Supply Holdings (again)

    Pandemic brings another strong quarter

    The big box retailer is also giving USD1 billion in raises to its retail employees as it makes pandemic bonuses permanent

    Home Depot has agreed to buy HD Supply Holdings for about USD8.7 billion, reuniting with a former subsidiary it sold off in 2007 as the home improvement giant looks to strengthen its ability to distribute industrial products amid the pandemic.

    HD Supply is one of the largest distributors of maintenance, repair and operations (MRO) products in the multifamily and hospitality markets throughout the US and Canada. It provides everything from bleach, to doors and ceramic tile, electrical, plumbing and other supplies to about 500,000 customers from 270 branches and 44 distribution centres.

    The acquisition brings back together two companies that used to be under the same roof and will give Home Depot more exposure to the professional contractor side of the business.

    It will allow Home Depot to expand into projects in the education and healthcare sectors, according to Jefferies analyst Jonathan Matuszewski. Analysts at Wells Fargo also said the deal will accelerate Home Depot's ability to provide job-site delivery.

    The acquisition fits well with Home Depot's larger strategy as it has been leaning into the professional segment. HD Supply commands more than 4% of the addressable USD68 billion MRO market the big box retailer has identified. This market remains highly fragmented. Home Depot only has a mid-single-digit percentage of the market, so the acquisition of HD Supply will help broaden its base of professional customers, wrote Mr Matuszewski in a note to clients.

    Home Depot chairman and CEO Craig Menear said in a prepared statement that the acqusition aligns with Home Depot's goals to reach a larger share of the MRO business. He said:

    That is a huge opportunity for the Home Depot to continue to grow, not only on the MRO side, but as we build relationships with customers on the MRO side, we build relationships to be able to participate in capital refreshes of those facilities as well, which is something that we're pretty focused on.

    Professional customers currently account for about 45% of Home Depot's sales, and HD Supply could help it cement its leadership position, said Drew Reading, an analyst with Bloomberg Intelligence.

    Though HD Supply has exposure to slower growth commercial end-markets, sales trends among pros continue to improve and may accelerate in 2021.

    Home Depot initially bought HD Supply in 1997 but sold it in 2007 when it began to focus more on its retail operations. It was sold to a group of buyout firms - Carlyle Group LP, Bain Capital LLC and Clayton, Dubilier & Rice LLC - that took it public in 2013.

    The HD Supply transaction is expected to be completed in Home Depot's fiscal fourth quarter, which ends January 31. HD Supply competes with Fastenal, W.W. Grainger and Home Depot's own Pro division.

    Management sees the acquisition adding to Home Depot earnings in 2021.

    Q3 results

    Home Depot has reported strong sales growth in its latest quarter as it continues to thrive from people spending more time on home improvement projects during the coronavirus pandemic.

    In the third quarter, the company's revenue rose to USD33.54 billion, up 23% from a year earlier. Analysts surveyed by FactSet were expecting revenue of USD31.83 billion. Same-store sales grew by 24% year-over-year overall, and by 25% in the US.

    As Americans have spent more time at home during the public-health crisis, many have turned their attention to DIY and renovation projects, shifting money they would have otherwise spent on vacations, gym memberships and other activities that have been postponed to prevent the spread of the virus that causes COVID-19.

    During the pandemic, Home Depot offered some temporary benefits to workers, including more paid time off and a weekly bonus program, leading to costs of about USD355 million in the latest quarter. The company said it plans to make some of these compensation benefits permanent for its front-line retail workers in a program that will cost about USD1 billion a year. The company said:

    We believe that our associates are a competitive advantage to the Home Depot, and they're critical to the overall customer experience.

    The number of customer transactions for Home Depot in the quarter rose 13% year-over-year to more than 453 million, with an average ticket size of USD72.98. Sales per retail square foot increased more than USD100 to USD552.85.

    However chief operating officer Ted Decker noted that the continued increase in demand has pressured supply chains. He said the company is adapting by introducing new products, adjusting assortments and "in some cases, reducing the number of [stock keeping units] in certain categories to focus on the highest demand products".

    As a result of all these actions, we have seen reduced product lead times and continued improvement in our in-stock positions. While we are pleased with these results, we are not at pre-pandemic levels.

    Still, Mr Decker said the company is "in a great position" heading into the holiday season.

    Related: Home Depot built HD Supply in the 2000s through an acquisition spree led by then chief executive Robert Nardelli.

    Disruption 2020: Home Depot - HI News, page 70

    Related: Home Depot re-entered the MRO market in 2015 when it spent USD1.6 billion on Interline, now called The Home Depot Pro, in 2015.

    Pro customers deliver for Home Depot, Lowe's - HI News, page 66
  • Sources: Bloomberg, Wall Street Journal, Associated Press, Telegraph Herald, Investor's Business Daily, Business Insider (US edition) and CNBC
  • bigbox

    Kingfisher acquires online DIY marketplace

    Connects tradespeople with households

    B&Q's owner has seen sales rise as the pandemic helped drive spending on home improvements

    European home improvement group, Kingfisher is buying an online platform that helps customers with DIY projects.

    The company has bought an 80% stake in NeedHelp for GBP8.9 million that connects consumers with home improvement service providers, similar to the way hipages works in Australia.

    The number of jobs completed through its platform is set to reach 58,000 in 2020, and Kingfisher is hoping to cash in on the surge in DIY projects as the COVID-19 pandemic saw more people turning to home improvements.

    Executives are keen to stress NeedHelp is different to other online DIY marketplaces because it focuses on specialist skills - from vetted professional tradespeople and other skilled experts - needed for home improvement. Kitchen installations, painting, flooring and bathroom renovations are the most common jobs used on the platform. Other jobs include gardening, furniture assembly and house or furniture moving.

    NeedHelp's services are available from a range of channels including retail partners' stores and e-commerce sites, and from its own site. It operates a data-driven end-to-end platform that manages all bookings, online payments, and rating of tradespeople. It also provides added value to tradespeople including insurance, professional business set-up support and assistance with tax returns.

    Through its open architecture, NeedHelp already provides its services to customers in more than 500 stores.

    Kingfisher had an existing relationship with NeedHelp in France through its Castorama and Brico Depot stores, but it is the first time such a service has been offered to British customers.

    In the UK, NeedHelp will offer support to B&Q's customers who need help with their DIY while Screwfix's customer base of trade professionals will be able to source work from consumers needing help.

    NeedHelp currently operates in Switzerland and has recently expanded into Germany, Belgium, Austria and the Netherlands. It plans to roll out the platform in Poland.

    The company said the acquisition of NeedHelp forms part of its recently announced "Powered by Kingfisher" strategy, which focuses on building a mobile-first customer experience. Kingfisher chief executive Thierry Garnier said:

    To serve customers effectively today, we need to be more digital and service orientated, while leveraging our strong store assets. Online services marketplaces are key to the future of home improvement retail and NeedHelp is an established and fast-growing player in this arena.
    [The] acquisition accelerates our digital capabilities and extends the services that we can provide our customers - two central components of our future growth strategy.
    This represents an exciting opportunity to create a more complete services offer and to help make better homes accessible for everyone.

    As part of the deal, NeedHelp founder Guillaume de Kergariou will retain a 20% stake and remain as chief executive. Mr de Kergariou started the business in France in 2014 and has tripled its revenue every year since its launch. He said:

    The additional investment and expertise that Kingfisher will bring, as well as the ability to help support its huge customer base, opens an exciting new chapter for us. We will continue investing in our technology, product and operational processes to drive even greater customer satisfaction.

    JJ Van Oosten, Kingfisher's chief customer and digital officer, who has been appointed chairman of NeedHelp, added:

    NeedHelp's success has been built by delivering ease and assurance to customers who want to improve their homes, and the tradespeople with the skills to support them. We know the business well, it is a natural fit with our retail banners, and it accelerates our service proposition.
    Kingfisher is committed to supporting NeedHelp in unlocking its significant growth potential, by promoting and growing NeedHelp's open architecture with its existing retail partners, as well as with new retail partners across Europe.

    Results

    Kingfisher recently revealed that total group sales rose by 17.6% to GBP3.5 billion for the quarter to October 31, with a 17.4% increase in like-for-like sales. But the company said it saw like-for-like sales growth slow to 12.6% in the first weeks of the current quarter as it was impacted by a tightening of restrictions across Europe. All of its stores remain open to customers despite lockdown measures, due to their essential status.

    E-commerce sales rose by 152.6% and accounted for 17% of total group sales in the third quarter. Click & collect sales increased 216% and accounted for 77% of e-commerce sales.

    Related: Kingfisher is placing stores at the centre of its online strategy.

    Kingfisher online: the need for speed - HI News, page 86
  • Sources: Shropshire Star, Marketwatch, The Construction Index, Kingfisher and Retail Sector UK
  • companies

    Creality mass production 3D printer

    A conveyor belt makes it a mini-factory

    Distributed manufacturing will see 3D printers proliferate. The Creality CR-30 is a starting prototype for that future.

    One of the trends that HNN has been tracking for some time is the gradual move of 3D printing from hobbyists, prototyping and a few specialists into the mainstream. We strongly believe that we will see a move to "distributive manufacturing". Hardware retailers will have 3D printers in their stores, and be able to customise and print out on the spot simple items such as cabinet handles, brackets and flanges.

    Creality is a well-known Chinese brand that has managed to take open-source designs, tweak them a bit, and produce reliable, easy-to-assemble 3D printer kits at a low cost. Recently, the company has become more innovative, and one result of this is the 3DPrintMill (Creality CR-30).

    What makes this 3D printer unique is that instead of printing an object onto a standard metal or glass bed, it prints onto a conveyor belt. This enables two additional ways to print objects: it can print very long pieces (for example, a duplicate of a floor moulding for restoration purposes), and it can print multiples of a single object.

    In the former case, the object just keeps moving through the printer as it rolls along on the conveyor belt, out to several metres in length, if needed. In the latter case, once an object is printed, the belt moves, dumps the object into a bin, and can start on a new project. The printer can utilise up to a 10kg roll of filament, to support these mass prints.

    The person who instigated the program to produce the CR-30 is a well-known 3D printing expert, Naomi Wu. She started pushing for the printer in 2016, but it wasn't until 2019 that Creality became interested. Ms Wu worked with another developer, Karl Brown, who had produced a kit version of a conveyer belt printer. She wanted to use some aspects of his Open Source design, but also felt he should receive acknowledgement and payback for his work. The other important contributor to the CR-30's development is Bill Steele, also well-known in 3D printing circles.

    Ms Wu was interviewed by Kerry Stevenson of Fabbaloo online magazine. Ms Wu pointed out that the printer is not for everyone:

    The people who need the 3DPrintMill know exactly why they need it the minute they see how it works. It's like a Bridgeport milling machine or high-end gaming computer. People who look at one and are like, "what's that for?" probably shouldn't buy it.
    This isn't for small figurines, it's not a good first printer for kids. I'm really targeting people or businesses who print long objects, like cosplay and prop makers, sign makers, restorers for crown moulding and other long decorative elements, but mostly those who need to fabricate 10-1000 objects - small scale manufacturing, Etsy and eBay stores, local machine shops as a cheaper alternative to CNC to offer customers, people printing PPE and emergency supplies - that kind of thing.
    Fabbaloo article

    The printer will be available by the end of 2020, but it can be pre-ordered through Kickstarter.

    Creality 3D printer on Kickstarter
    products

    Dulux summer colour predictions

    Oceanic shades, sage green and dusty terracotta

    The Dulux Colour Forecast 2021 is based on extensive research into global design trends

    Colours from the latest Dulux forecast are drawn from nature, including brighter, oceanic shades of blue- green and coral, muted botanical greens, warm whites and soothing mauve-greys.

    To show what a big impact colour can have on the look and feel of a space, stylist Bree Leech introduced bold colour to a predominantly white 1970s home.

    Ms Leech chose brighter and uplifting colours from the Reset palette for her room makeovers. She explains:

    I wanted to show how you can create an entirely new look with little more than a paintbrush. The colours in the Reset palette have a fun, retro feel that's perfect for this 70s family home.
    For the dining room, I chose a beautiful deep blue-green, Dulux Wash&Wear in Daintree. This dramatic hue gives the room a distinct mood and enriches the space. The features of the room, such as the rustic brick wall, archway and timber lining, are all amplified through the use of colour and a backdrop is created to contrast against the crisp white pendant light. We painted the inner part of the arch in a neutral white, Dulux Wash&Wear in Snowy Mountains Half, to further accentuate the curve.
    The living room needed an injection of colour but to create a relaxing and casual feel, I used a gentler hue as the feature. The shelving unit is the hero of the space, so I highlighted it by painting the wall behind in subtle green, Dulux Wash&Wear in Light Ceramic.
    The kitchen is extraordinary, with high ceilings and warm timber cabinetry. I wanted even more warmth in this room and was inspired by that chilli red oven. I saw this space as an inviting place for the family to gather and selected a warm palette, giving it a different mood to the adjacent rooms.
    Painting the feature brick wall in Dulux Wash&Wear Gold Pheasant added that extra warmth I was after without taking away from the best feature - the oven. The accents on this wall didn't need to contrast, so I painted the shelving to match the wall and added an eclectic display of artwork and vessels in tonal shades.
    To soften the contrast between the feature wall and the white in the room, I opted to paint the rangehood a gentle blush - Dulux Wash&Wear in Treeless. This colour also sits beautifully against the brass tap.
  • Main image credits: stylist: Bree Leech, photographer: Lisa Cohen, colours: Dulux Daintree And Snowy Mountains Half, suppliers: hall painting by Elle Burguez and print by Stacey Rees - Modern Times; bench seat - Fenton&Fenton; cushion - Kip & Co; glass - House Of Orange; vases - Dean Toepfer; planter - Maker's Mrkt; rug - The Rug Collection.
  • products

    Construction robots bring BIM to life

    Automation comes to the job site

    Hilti's JaiBOT works in the virtual world of BIM, boring holes in concrete ceilings on major sites

    Australia has seen a consistent slump in construction workforce productivity over the past decade. According to the Productivity Commission, comparing the financial years from 1974/75 to 2004/05 with those from 2004/05 to 2018/19, the overall decline is around 21%. While those numbers are nothing new, what is new is an increased focus on what they are, and what they indicate about the future of the industry.

    For those who work close to the industry, it's no secret how those numbers came about. Not only is there a great deal of union activity which has led to only limited evolution in how work is done, but both state and federal governments have funded and supported the construction industry as a means to provide more employment for less-skilled and unqualified workers.

    The result has been an industry whose utilisation of technology - as one example - might be generously described as "uneven". The adoption of Building Information Modelling (BIM) is a clear illustration of this. While Australia lags behind the global leaders, with the UK in first place followed by the US, France, Singapore and the Scandinavian nations, it has kept pace with China (so far) and Germany. There are some Australian construction companies that are heavily invested in BIM, while others see it as more of a compliance issue.

    What happens in these situations where there is both a small active and large passive resistance to technology, is that technological change becomes dammed-up, until it reaches a critical point where the advantages are so great that they can no longer be ignored.

    If construction technology is not quite at that point, it will likely cross over it in the next two to three years - pushed in part by a likely global slowdown following a brief, government-financed recovery from the Sars-CoV-2 pandemic.

    The two prominent technologies on the horizon that will help to reshape construction are robotics and the 5G mobile data networks currently being built-out around the world.

    Robots are coming

    In fact, the robots have already arrived. Lichtenstein-based power tool company Hilti has recently released its JaiBOT, a single-function semi-autonomous robot for large-scale construction sites. The best description of the JaiBOT is provided by Hilti's Aidan Maguire, business unit manager for measuring systems in North America:

    Powered by the data in this BIM model, JaiBOT is a complete self-contained software and hardware system for semi-autonomously drilling, marking and locating anchor locations overhead. This makes it the perfect solution for faster, safer and more accurate execution of digitally coordinated MEP systems on the job site.

    Physically, JaiBot is about the size of a narrow double refrigerator, mounted on rubber tread tracks. It's electric powered, and its batteries can keep it working for eight hours before it needs to be recharged. Its operating mechanism consists of two parts. There is an enclosed lift mechanism, which gives it an operating height range from 2.5m to 4.9m. Mounted on this is the robotic arm, which carries three units: the drill unit itself, a dust shroud connected to an onboard vacuum (enabling it to meet US specifications for dust contamination), and, interestingly enough, a paint dot sprayer.

    The JaiBOT is moved via a remote control to its work area - in transport mode the JaiBot is less than 90cm wide - and from one position is able to drill the required holes within a radius of around 90cm. Drilling widths are between 8mm and 16mm.

    After each hole is drilled, JaiBOT then uses the paint dot sprayer to mark the hole with the required colour to indicate its future trade and function. If rebar is encountered during a drill, the operator can either skip that position, or adjust it to miss the rebar.

    According to Hilti, the holes can be set with an accuracy of 3.5mm. The JaiBOT achieves this by using a Hilti PLT 300 as a reference point. The PLT 300 is the core unit to Hilti's fully automated positioning system which replaces the traditional optics-based total station. The PLT 300 uses the PLC 400 Android-based tablet as its controller, enabling it to integrate with cloud-based BIM two- and three-dimensional drawings.

    To get started with the JaiBOT, the operator first sets up the PLT 300, which is then linked to a prism on the JaiBOT's robotic arm. The operator uses the tablet to approve and activate the drilling function, with a simple "stoplight" interface.

    Users report that the JaiBOT succeeds in three areas. It is highly accurate. It's also time efficient, even though it does require a full-time operator, as the time spent on setting up ladders, going up and down, then moving the ladder to a new position is eliminated. As importantly, it's a big advance in health and safety, as drilling through concrete overhead is one of the most wearying and highest repetitive-stress injury potentials on large construction sites.

    In addition to those advantages, the JaiBot fits seamlessly into the construction site's information flow. As Mr Maguire describes it:

    This system can work on a wide range of projects in the commercial construction sector. JaiBOT synchs with a dedicated project cloud to access the most up-to-date design data, enabling infield access to the planned anchor locations for the entire project.

    What's more, as the JaiBOT drills, it updates the BIM links, in real time, according to Mr Maguire:

    Of course, the hole locations and drill progress synch back to the cloud and can be accessed live in the office.

    Rafael Garcia, senior vice president of marketing for Hilti North America, sums up the information advantage:

    Contractors will be able to more seamlessly get information from design directly to execution, with the JaiBOT, and then record exactly where and what has been drilled on site for progress monitoring and documentation of work completed.

    Hilti, with its usual attention to detail, has of course developed solutions for the delivery, movement, storage and charging of the JaiBOT. Mr Maguire details these solutions:

    The system arrives on site in a container that can be lifted by a forklift or crane allowing easy access to the working area. When not in-use, this container also works as a charging station and secure storage. When it's time to work, the operator simply drives JaiBOT out of this container directly to the working area.

    One thing that is also clear is that Hilti is making a broad commitment to this area of development. Jan Doongaji, a member of the Hilti's executive board, responsible for electric tools and group research, commented that:

    We all agree that our industry is facing significant challenges in the future, such as a shortage of skilled labour, health and safety issues, and also stagnant productivity. Now as opposed to other industries, construction by and large is today less productive than a couple of decades ago.
    This is thus a game-changing opportunity, which we as innovation leader, want to drive. We always strive to offer holistic solutions to our customers with the JaiBOT we can finally digitalise the missing gap in the entire value chain from planning to implementation on the job site.

    The 5G revolution

    There's little doubt that the 5G cellular communications standard has been more than a little hyped during 2020. Nonetheless, as the network develops, it is likely that 5G will have a considerable impact on both mobile computing, as well as more traditional desktop computing. It could also help to bring changes to construction sites.

    There really are three different types of 5G. At the low-end, one version of 5G boasts only a moderate gain in download speeds over the 4G network, 30 to 250 megabits per second (Mbit/s). Many 5G networks are likely to not even support that range.

    Mid-band 5G uses microwaves of 2.5-3.7 GHz, allowing speeds of 100-900 Mbit/s, with cell towers delivering a signal beyond 5km. This level of service will be the most common in urban areas. High-band 5G uses frequencies of 25-39 GHz, though higher frequencies may be used in the future. This type of service can achieve download speeds in the gigabit per second (Gbit/s) range.

    However, millimetre waves have a limited range, meaning that more cell towers, closer apart, are needed. These waves also have trouble getting through materials such as walls and glass windows. This type of service will likely be limited to areas where that host crowds of people, such as sports stadiums and convention centres.

    While much of the focus has been on telecom providers of 5G, some private companies have gone so far as to license a slice of the 5G spectrum and replaced their wired networks with 5G connections. It is possible that in the future we could see some construction sites follow that trend as well.

    What would be the benefits of 5G to construction? China has been finding out, with the launch of its first 5G enabled construction site. China Construction's Eighth Engineering Division has created a "smart site" using the latest 5G telecom network. This hooked into sensors which could provide updates on workers' health and interactions, enabling remote management of site personnel. This included using 5G AI glasses to provide users' location information, enabling engineers to perform remote site inspection.

    The technology could also be used directly onsite, such as cases where a crane driver could see the real-time transmitted picture outside of the crane, including the load pickup and drop areas, which can help to reduce accidents.

    The endpoint could see video become a functional, expected part of most construction sites, embedded into construction helmets, lighting systems, as well as heavy and light machinery.

    Analysis

    Why is there so much resistance still, today, to BIM? Academic papers commonly suggest it comes down to these five main factors:

  • Social and habitual resistance to change
  • Traditional methods of contracting
  • Training expenses and the learning curve are too expensive
  • High cost of software purchasing
  • Lack of awareness about BIM
  • What these really add up to, in the end, are the current culture of construction. It isn't that there are not enough construction workers who are smart enough to understand the requirements of BIM, and to work with the digital and intellectual tools, such as 3D visualisations, tablet computers and robots. There are, but their skills are going to waste.

    What is required, however, is a move towards understanding and respecting a different skillset on the job site. That reaches back, really, into the kinds of training that construction workers receive, whether that is during apprenticeships or in a more formal environment. BIM needs to move from being some kind of option for training, to being the main way in which construction workers are trained to do their jobs.

    So many heavy industries are finding themselves in this precise position. Often it arises because they feel themselves to some extent protected from direct competition. But the lesson of the digital age is that the real competition is not direct at all. When industries fail to keep pace with technology, technology finds ways to get around them.

    companies

    Houzz renovation survey 2019

    Kitchens down, bathrooms up

    Planning period stretches out much longer than actual construction

    Online home design and renovation resource guide Houzz has released its study of renovations, a survey taken in February and March 2020 regarding activity during 2019.

    While reading the results does seem a little like a look backwards into a lost time, there are still some valid and interesting data points that do relate to 2020/21.

    Expenditure

    The median spend on home renovation projects came in at $20,000, about the same as 2018, but down from $25,000 in 2017. Most renovators relied on cash to fund the work (80%), while credit cards were the second most popular source (the two are not mutually exclusive in the survey).

    Some 57% reported that they had managed to bring their project in on budget, while 25% were over-budget by less than 25%, and 14% overspent even more than that. Only 3% reported coming in under-budget. The most common reason cited for being over-budget was that products or services were more expensive than expected.

    The biggest change in spending from 2018 to 2019 was that in the recent year an average of only $15,000 was spent on renovating the kitchen, down from $20,000 the previous year.

    Bathrooms, however received a bit of boost, with spending on master bedrooms up $1000 to $13,000, and spending on other bathrooms up $2000 to $10,000.

    What was renovated

    While 53% of the those surveyed reported decorating or furnishing in 2019, renovations were down to 48%, a drop of 2%. Repairs held steady at 41%, however. The two leading reasons for renovating were "wanted to do it, finally had the time" and "wanted to do it, finally have the money". The first was 39% of the survey, and the second was 33%.

    While they dropped by 3% for the year, kitchens were still the most popular renovation at 23%, followed closely by living/family rooms at 20%, also a 3% drop from 2018. Bathrooms, laundry and non-master bedrooms were all equal on 17%.

    Plumbing and electrical led the trades upgrades, at 31% and 30% respectively. Survey respondents reports upgrading an average of 2.8 interior rooms, 2.6 home systems (such as plumbing), and 2.7 exterior features. All three were down slightly on the previous year.

    Planning

    In terms of planning a project, the survey reports the average planning time for a kitchen was 11.1 months, followed by - surprisingly - the laundry room at 10.4 months, and the master bedroom at 10.0 months. The shortest planning times were for the wardrobe (understandably) at 6.2 months, the home office at 6.4 months, and the basement at 6.5 months.

    The laundry room also had the longest completion time (work started to finish) of 5.7 months, followed by the basement at 5.6 months, and then the non-master bathroom at 5.0 months.

    Electricians were the most frequently hired trades at 60%, followed by plumbers at 45% and carpenters at 35%. Home builders were hired by only 17% of respondents.

    companies

    Big box update

    Hervey Bay to get a new Bunnings

    Analysts believe Bunnings will continue to dominate DIY retail in the next 10 years and more stores sold off

    Bunnings has been given the green light for a $56 million development in Hervey Bay (QLD); an analysts' report finds that Bunnings is on track to increase its market share; and property fund investor Charter Hall has purchased six Bunnings Warehouse stores for $353 million.

    Hervey Bay store

    Fraser Coast Regional Council has given its approval for a Bunnings Warehouse development. The $56 million project will involve the construction of a new, larger Bunnings store on the vacant block of land, next to the existing Bunnings located on the corner of Boat Harbour Drive and Main Street in Hervey Bay.

    Mayor George Seymour opposed the development, but council voted 10 to one in favour of the proposal. According to The Courier-Mail, he said:

    I am very concerned this movement from the current Bunnings site will impact upon an already very difficult intersection [on] McLiver Street and Main Street.
    Good town planning is central to the role of local ­government. While I disagree with my colleagues on this application, I will work to ensure we get the best possible outcome from the development.

    Councillor David Lee supported the motion, but also had reservations about the impact of the project.

    Cr Lee said he was empathetic towards people living near the site because of the traffic congestion the project would likely cause. Despite this, he said:

    It is my submission this application has been assessed against the relevant benchmarks. I support this development proposal on the merits it has predetermined zoning under our planning scheme.

    Councillor Denis Chapman said he was proud Hervey Bay had been chosen for the large development.

    This is going to be a lot better for our builders, a lot better for our community to use ... I commend Bunnings for bringing this here and having the confidence in the Fraser Coast.

    Future growth

    Bunnings is "on track to dominate the Australian market over the next 10 years", based on new report from stock analysts, Morningstar Equity Research. It has forecast the big box retailer will gain more market share and grow annual sales year-on-year.

    However Morningstar's analysts said sales would comparatively slow after Bunnings boomed during coronavirus-enforced lockdowns. In a recent trading update, Wesfarmers told shareholders:

    In the short term we continue to expect weaker sales growth as Bunnings laps unusually strong sales growth induced by temporary shifts in consumer spending patterns toward home improvement during COVID-19.
    We have slightly downgraded our near-term sales forecast due to a more cautious outlook on consumer price inflation and population growth.

    The next goal is to improve Bunnings' digital offering as consumers turn to options such as click and collect and online shopping, according to Morningstar's analysts.

    Real estate sale

    Charter Hall Group and two Australian superannuation funds have acquired a $353 million portfolio of six Bunnings hardware stores.

    The outlets located in Bonnyrigg (NSW), Caringbah (NSW), Windsor Gardens (SA), West Footscray (VIC), Underwood (QLD) and Virginia (QLD) have a weighted average lease expiry of 10 years and 2.5% annual rent reviews.

    The properties, which formed CBRE Global Investors' Asia Pacific Bunnings Trust, were sold in an off-market deal representing a yield of 4.63%. It is understood Charter Hall is also acquiring CBRE GI's last remaining Bunnings asset, in New Lynn, an outer suburb of New Zealand's Auckland, for about $50 million.

    The investors including Victoria's state investment agency, Victoria Funds Management Corporation (VFMC) and TelstraSuper, the super scheme for Telstra, are partners of Charter Hall in what is known as the LWHP partnership.

    Apart from LWHP, Charter Hall also manages special mandates from super funds which invest in Bunning stores. Charter Hall managing director and group CEO, David Harrison, said:

    Across the Charter Hall platform we now have in excess of $2.4 billion invested in 59 Bunnings stores, 50 of which are located in metropolitan locations.
  • Sources: The Courier-Mail, Channel 9News, IPE Real Assets and The Australian Financial Review
  • bigbox

    Elders expects more retail members

    Australian Independent Rural Retailers

    Earlier this year, a Roy Morgan consumer survey of about 1000 respondents found the Elders brand the most trusted name in Australian agribusiness

    Listed agribusiness Elders has grown its branch and wholesale rural supplies member network as the sector continues to undergo a shakeup following the amalgamation of Landmark and Ruralco by major rival Nutrien Ag Solutions last year.

    The Australian Independent Rural Retailers (AIRR) network, which includes eight warehouses, supplies wholesale products to about 370 AIRR member stores. It has grown from about 340 back when the rural merchandising group agreed to the $187 million Elders takeover in mid-2019.

    Among recent additions to AIRR has been South Australia-based YP Ag - a former CRT (Combined Rural Traders) member. Elders chief executive officer and managing director, Mark Allison describes it as the sort of "blue chip" rural merchandising business that is likely to trigger another wave of recruits moving away from Nutrien. He told Stock Journal:

    We've had about 12 new members coming across from CRT to sign up to the wholesale group this year and we can see good growth potential in VIC, NSW and QLD.
    We haven't lost any AIRR members since the business became part of Elders. AIRR has already exceeded our performance expectations with earnings before interest and tax of $21.9 million and is highly likely to exceed year earnings we originally planned over a full year.

    Former rival operators are now trading as part of the Elders network after it spent a further $18 million on business acquisitions in the financial year. The NSW North Coast was proving fertile ground for new Elders/AIRR members who were previously aligned with Landmark and Ruralco.

    AIRR also has plans for a warehouse in Tasmania, which could see more retailers joining Elders.

    Mr Allison said other potential AIRR members may actually find a better fit as part of the Elders' agency and store network, or within its horticulture business, Ace Ohlsson.

    According to Mr Allison, part of the company's latest eight-point plant is to continue pursuing some "massive opportunities" to win more market share in new geographies and across all product and services areas.

    Although he said the company is taking a methodical and "low pulse rate" approach to growth, it is understood there are about six potential acquisitions under consideration. Mr Allison said:

    We have a pipeline of acquisition opportunities, but it comes down to talking about the right numbers, locations and being sure they are the right cultural fit for us.

    The company also launched a branch incentive program enabling store managers to share bonus reward payments with staff as specific sales benchmarks are achieved. Mr Allison said:

    We looked at our competition in the market, which is invariably private operators and we thought this platform would drive the right private reward mentality in our teams.

    Profit performance

    Elders has posted an 80% profit increase to almost $123 million in the year ended September 30. It has been bolstered by a rain-revived turnaround in cropping activity and restocking demand, and strong flow-on benefits from its 2019 takeover of AIRR. Mr Allison said:

    Coronavirus has had no material impact on us so far.

    Although some specific business categories experienced market price shocks, notably the wool market, Elders had not needed to tap any government JobKeeper funding, or cut staff or working hours across its 220 branches, or draw on a $50 million working capital facility it established to provide emergency trading headroom when the pandemic hit.

    Mr Allison said rural property vendors were experiencing high demand for their farmland, which was expected to continue well into 2021.

    Revenue rose 29% to $2.09 billion and underlying earnings before interest and tax jumped 60% to $119.4 million. Gross margin growth was recorded across all state geographies and products. Mr Allison said:

    Our solid business foundations and strict financial discipline, and a commitment to ensuring the safety and prosperity of clients, communities and staff, allowed us to succeed despite challenging operating conditions in FY20.
    We now have a business that can make good money in a bad year and great money in a good year.

    Mr Allison said the results included 10 months of contribution from the AIRR business. AIRR added $44 million in wholesale gross margin - well in excess of projections. Its portfolio of house brand crop protection and veterinary products, combined with growth in Elders' Titan chemical product sales, were expected to make even more impact as the farm supplies division attracted more retailer members.

    Elders has about 18% of the total farm services market across Australia, behind Nutrien with more than 40%.

  • Sources: Stock Journal and The Australian Financial Review
  • retailers

    UK's Homebase up for sale again

    Pandemic drives sales at DIY stores

    Hilco, the turnround specialist company that bought the home improvement retail group in 2018, looks to benefit from the boost in DIY sales

    UK-based Homebase could have a new owner - its fourth in five years - as its current owner, Hilco looks to capitalise on the pandemic boost for home improvement retailers by putting the DIY chain up for sale. It is seeking to secure a deal from potential buyers after just over two years of getting the company back on track.

    Damian McGloughlin, Homebase chief executive, told the Financial Times that a transfer of ownership within two to three years had "always been part of the plan" and that with Homebase's profitability restored "now was the right time".

    A stock market listing is also an option, added Homebase chief financial officer Andrew Coleman. He told the Financial Times:

    It is something we have looked at. We'll have to see how things play out but all options are on the table.

    The group is thought to be hoping to secure new ownership by next Easter.

    Hilco acquired Homebase for GBP1 (and its substantial lease liabilities) in 2018 from Wesfarmers which had paid GBP340 million for the group just 18 months earlier. Wesfarmers had wanted to convert Homebase stores to its Bunnings format, but customers proved unreceptive to the focus on building and DIY in warehouse-style stores at a retailer traditionally known for home decor and gardening.

    Under the deal in which it sold Homebase, it should be noted that Wesfarmers is entitled to 20% of the sale proceeds if the Hilco sale happens.

    Under Mr McGloughlin, Homebase has moved back towards its homewares areas and introduced partners such as Tapi for carpets and Bathstore, which it acquired out of administration, for bathrooms. He said:

    We operate across a broader range of categories than B&Q or Wickes. People come to us to finish a room, not to build one.

    Mr McGloughlin also helped to steer Homebase to a return to profit in 2019 with underlying profits of GBP3.2 million against losses of GBP114 million in 2018.

    Hardware and home improvement stores have been among the relative winners from the COVID-19 pandemic as consumers adapted their properties to incorporate home offices and diverted spending from holidays and leisure to DIY projects.

    Mr McGloughlin said that spending more time away from the office had "helped people fall back in love with their homes" during the pandemic and that the warm summer weather in the UK had helped its garden centres.

    However, he added that sales of big-ticket items such as kitchens had suffered, and the company's ecommerce operation had at times struggled to cope with the increased demand. He said:

    We did more orders in three weeks than we would ordinarily do in 52 weeks.

    Homebase has since signed a 10-year partnership with Hut Group to overhaul its ecommerce offering, and said it would be opening more stores and experimenting with new formats as it emerged from its rehabilitation.

    Hilco ownership

    In just over two years of ownership, Hilco has carried out a widespread overhaul, closing underperforming stores, securing rent-reductions and cutting jobs to shore up the firm's finances. It has also shut two of Homebase's six distribution centres and secured a GBP95 million lending facility from Wells Fargo, a major American multinational financial services company. In a statement, Homebase said:

    Having built an excellent foundation, Homebase is moving out of its turnaround phase and entering into an exciting new chapter of growth. Now is the right time for us to be starting conversations with potential new owners to accelerate our plan.

    Homebase said it hopes to build on the more than 10,000 product lines added in the last two years, introducing new and expanded ranges by working with brand partners.

    It also has plans to open around 15 new stores over the next two years in cities and regions where it does not already have a Homebase store.

    The DIY chain now has 155 shops and 15 Bathstore outlets with more than 6,600 employees. At its peak it had 250 stores and 12,000 staff.

    Related: HNN covered the Wesfarmers sale of Homebase extensively.

    Wesfarmers takes a new path to growth - HI News, page 34
  • Sources: Financial Times, Yahoo Finance UK, Irish Examiner, Telegraph.co.uk and The Australian
  • retailers

    ABS stats: Building approvals

    The market recovers, but from what to what else?

    Finding the right chart is essential to getting a better grasp on stats. HNN explores some alternative viewpoints.

    One of the side effects of the COVID-19 pandemic has been an increased awareness of statistics. Most Australians (and certainly every Victorian) today knows what a 14-day moving average is all about, for example. Statistics are likely to dominate economic discussion as well through much of 2021.

    While there has been an understandable concentration on statistics as they directly reflect the effects of the pandemic, it is just as important to better understand the general environment with which the pandemic will interact. So there are advantages in taking a broader view of current stats, to better contextualise what is likely to happen in the future.

    The beauty of charts

    Statistical charts offer a way to quickly understand statistics. (We use the word "chart" at HNN, because the more common "graph" encompasses something a bit more complex in maths. Charts are a specific type of graph.) When used to aid understanding, rather than to shore up an established point of view, the best charts give a boost to our intuition. They are a bit like our favourite photos, really: there's "that" photo which shows how you are with friends, but another special photo that shows how you relate to your partner (or pet, family, car, house, etc.). They are all "true" (mostly), but each highlights a different aspect of who you are. The same applies to stats charts.

    In terms of building statistics, one of the areas that really needs some help from charts is analysing building approvals. Approvals are very important for gauging the "mood" of the housing development industry, and seeing what that industry expects to happen in the housing market in another six to 12 months.

    Chart 1 illustrates the monthly numbers provided by the Australian Bureau of Statistics (ABS) for building approvals up to the end of September 2020. We're using the consolidated numbers for houses and multi-unit dwellings, which include both private and public (government funded) construction.

    The technical statistical term for a chart such as this is: "a bunch of squiggly lines going everywhere". In other words, it's really hard to tell what is going on in this chart.

    Chart 2 shows a technique sometimes used to make these charts somewhat more readable, with the monthly figures consolidated into quarterly (or three-month blocks) of numbers.

    This looks a little better, but does it really help? There is a real problem in taking lots of good data points and blurring them into fewer data points. You lose definition, and can suffer information loss.

    Chart 3, which goes back to using the monthly numbers, shows a much better solution. Here all we've done is to take exactly the same numbers, and "stack" them.

    So, for example, in January 2020 the number of houses approved was 8797, and the number of multi-dwellings was 7349. The bottom shading represents the 8797, and the top shading represents a further 7349, so the very top line for that month represents 16,146, the total dwelling approvals for January 2020.

    The reason this chart works so well is that it clearly shows how the number of multi-unit dwellings relates to the number of houses, and represents clearly the total building approvals at the same time. What we see most clearly in this chart is that, while the housing approvals show some variance, the multi-unit approvals fluctuate much more, and are largely responsible for the peaks and valleys in the approvals data.

    What a chart such as Chart 3 really gives us is a good place to start. It can help us to come up with more charts which provide confirmation and some extra details. One way of doing this is to shift to a much broader timescale. We can do that by using what statisticians calling a "trailing 12-month" period. For example, these ABS stats can end with the trailing 12 months from October 2019 to September 2020. (Sometimes "year-to-date" is used for this timescale, but it is ambiguous, as year-to-date September - for example - can also mean January to September.)

    Chart 4 shows what those numbers look like. Trailing 12-month timescales all but eliminate seasonal variations, which helps to smooth the data.

    It's very clear from this chart that our suppositions from Chart 3 are correct: house numbers are relatively stable, while multi-unit dwellings are more volatile.

    To extend this a little further, we can chart the percentage changes between the trailing 12-month periods, which is what Chart 5 shows. There are some additional details this chart makes evident.

    Perhaps the most interesting is that for the six years between 2013 and 2018 house proposals averaged 5.14% growth, with the lowest dip coming in 2017 at -1.74%. So, in terms of houses, this was not so much a period of decline, as some commentators have suggested, but mild, relatively stable growth.

    The story for multi-unit dwellings is quite different. Over that same period average growth was 11.22%, while growth declined as much as 18%, and rose as high as 34%.

    For the final two years, both dwelling types declined steeply in 2019, but then recovered, with houses managing to return to positive growth in 2020.

    Volatility

    So far, what we've been looking at are trends. The other element of interest in building approvals is what are sometimes called the "spikes": where the data goes sharply up or down.

    To measure the overall volatility of data (how it goes up and down) we typically use something known as "standard deviation" (STDEV). There is a bit of fancy maths to this, but the STDEV of a set of data basically provides an average for how much the data deviates from the data average. As a rule of thumb, something a bit under 70% of results will lie within one standard deviation from the average.

    What we can do, then, is to work out the average and the STDEV, then plot only those months where the number of approvals exceeds the average plus one standard deviation.

    To make it work better, we won't show any data points that are below one standard deviation, and we can express the ones we do show in terms of a percentage of one standard deviation, to keep everything in scale.

    That is what is shown in Chart 6.

    While this is an interesting chart, it's not all that effective. What we can see in the chart is that many of the data points are "clumped" together. What we could do - and in this case it will genuinely help - is to show the data not as monthly, but in quarters.

    While we're at it, we are currently only showing data points beyond one standard deviation from the average - why not add data points for those that fall one standard deviation below the average as well? That's what is shown in Chart 7.

    What becomes clear in this chart is that we can define four distinct periods. The first is a downside trend in spikes in the aftermath of the global financial crisis, from (in quarters) December 2008 to December 2009. The second follows the fading of the mining boom (a boom in terms of trade), from March 2011 to March 2013, also a downside spike.

    The next two are upside spikes. There is a significant series of spikes from September 2014 through to September 2016, and from September 2017 to September 2018.

    There is a very in-depth story to be told about how these spikes relate to the general market, and the actions of the Reserve Bank of Australia (RBA) in lowering interest rates, as well as the bank's influence on lending guidelines. HNN will be going deeper on this in the next issue of HI News.

    COVID-19 pandemic

    The big question, of course, is what kind of effects from the COVID-19 pandemic can be detected in the data, especially from March through to September 2020.

    To tackle this question, the best tool to use is a month-on-month comparison of growth in building approval numbers. We can graph that over the three years to show how current numbers differ from past numbers during the same seasonal period. That's what we have done in Chart 8.

    For people outside the hardware retail and home improvement industry, it might come as a surprise to see that, while the growth rate for detached houses did go negative in May, it recovered well in June, July and August, and increased by 28% in September.

    The story for multi-unit dwellings is not as good. There was a brief upwards peak in July 2020, but this returned sharply to negative growth for both August and September. While the numbers are not as good as for houses, however, they are close to those for the same period in 2019.

    One major factor in this is that the RBA dropped the cash interest rate by a total of 0.5% in March 2020. The federal government also launched its HomeBuilder program, which has made over $600 million in bonus payments available to new home builders and renovators.

    Analysis

    While this has been a fairly deep look at some aspects of the ABS Building Approvals stats, we really haven't gone nearly as deep as we could. The data the ABS provides is great, but the difficulty is to be able to extract the information that is relevant to the challenges your business faces.

    The process of understanding statistics is seldom achieved by glancing at a single chart. For most of us, you really need at least two or three charts, examining data from different angles, and in the right time and statistical context, to get some sense about what data might really indicate.

    At the moment, looking at the questions that COVID-19 pandemic has created, all that can be said statistically is that the support measures provided by the government to date seem to be working. The real difficulty, as HNN has suggested in the past, is going to be the state of the economy around May 2021.

    A problem deeper than the pandemic, but which the pandemic recovery will need to play off of is that the housing market does not always function as it should. In a more efficient market, when demand decreases due to price rises, those prices should decrease to create more demand. The Australian housing market has become conditioned to the expectation that when it does encounter difficulties, and prices do begin to fall, the market will receive help, usually in the form of reduced interest rates.

    Those interest rate reductions then feed into yet higher house prices, and the cycle starts over again.

    With interest rates currently lower than they have ever been, and unlikely to decline any further, there will not be any help coming from that area, at least not for five or six years. With monetary stimulation all but gone, that just leaves fiscal stimulation, through programs such as HomeBuilder. Those are unlikely to go past $2 billion in total.

    All this means that at some point, the housing market will need to reform itself, and start to act as a more efficient market. There is almost certainly going to be a downwards slide at the point where that occurs. The question is well that transition point can be managed.

    statistics

    Future drill: The Bosch AdvancedImpact 18

    It's all about the customer

    The Bosch AdvancedImpact 18 is a drill designed to match the needs of beginning DIYers. Its advanced features make it one of the first "smart-drills".

    How many hardware stores today carry a cordless drill that is ideally suited to the needs of DIY customers? It's something to think about, as there has been a surge in DIY interest stemming from the COVID-19 pandemic. That's not always going to be there, but this is a great opportunity to create some loyal, and longer-lasting customers.

    When we think of cordless tools, most of us regard the cordless drill as something like the "baseline" of any substantial range. It was the drill that really fuelled the move to cordless, as the first tool to be converted to batteries, and the most popular tool, today, for both consumers and trades to buy.

    Yet, while we've seen incredible advances in tools for tradies, it is a fact that development of tools for DIY consumers has lagged somewhat behind. One reason for this is that retailers, designers and manufacturers seem to think that a DIYer seeking to upgrade a cordless drill will simply move over to the high-end drills made for tradies.

    That may be true for most manufacturers, but there is one not so surprising exception: Bosch. And while, again, what we are looking at is in some ways "just a drill", HNN thinks it is something more significant than that. Looked at more closely, it's really a new way of looking at the market for cordless tools, and a new way of retailing to customers.

    The drill

    Let's start by describing this advanced drill, and some of the choices that Bosch has made in its design. The drill model in question is Bosch's AdvancedImpact 18. The main sales channel for Bosch - in terms of the most comprehensive range - would seem to be its Amazon store (which is one of the better online tool buying experiences). The drill sells as a "skin" for $159, or with one 2.5 amp-hour battery and a charger for $219 (with free delivery through Prime).

    While we do not know for certain what the design brief was for this drill, we can certainly work out some of the points the drill has been developed to solve. The three mains ones that we think probably applied are: a drill that delivers the best experience when setting a screw; a drill that has "one tool" versatility - you only need this drill to accomplish most tasks; and a drill that is compact and lightweight.

    The immediate outstanding feature of the drill is that first one: it is designed to make setting a screw as simple as possible. The main feature of the basic screw head is that it provides a magnetic attachment to hold the screw on the screw bit securely. This makes one-handed operation easy, freeing the other hand for positioning the drill target or bracing in tight situations.

    The drill also comes with a separate chuck head that can be used for drilling - including impact drilling in masonry - so there is no need for a second tool. There are also two additional screwing attachments available, one a rotatable offset head, and the other a right-angle head. The drill chuck can be attached to the right-angle head to enable drilling as well. All of these attachments are held securely to the drill by a system of shafts and magnets.

    The AdvancedImpact 18 also inherits some features from previous Bosch DIY drills. The direction of the drill is managed via an electric switch on both sides of the handle, and the direction is indicated by two LED arrows on the top of the case. Set the drill aside for more than 30 seconds, and it will automatically reset its direction from reverse to normal.

    Design choices

    Perhaps the most essential design choice Bosch has made, however, is to use a brushless motor - not to increase power, but rather to decrease the overall size of the drill. In this photograph, the brushless motor is on the right, next to the previous generation brushed motor.

    The power output, in fact, is a modest 36 Nm - around what most manufacturers would get from a standard brushed drill.

    The result, however is a drill that has a maximum 1500 rpm, weighs 1.1kg without battery, and 1.6kg complete with battery. It measures 58mm x 169mm x 224mm.

    The market

    For the most part, the consumer DIY drill market has been driven purely by price and consequent commodification. Bosch's real competition in the market would come mostly from the Bunnings captive brand Ozito, and Techtronic Industries' (TTI) Ryobi brand - both sold exclusively through Bunnings. There are also some cheaper drills by suppliers such as Rockwell, as well as somewhat outdated designs from brands such as Worx.

    Outside of DIY, the Makita MT series cordless drill kit would be a contender, as well as some of the Makita 12-volt drills. Then there are outside possibilities like some of the Stanley FatMax drills, and so forth.

    But none of these drills, none of these competitors actually offer what Bosch is offering in the AdvancedImpact 18. The mistake that the competitors have made is to think about drill capability, and price/value ratings as having to do with how big a job you can do with the drill. They mostly feature more power, bigger batteries, and so on.

    What they don't feature is a drill that has been designed and tailor-made to make simple, basic tasks as easy to do as possible. That is, HNN is quite sure, the mission-goal of the AdvancedImpact 18. It is a drill that belongs in the home, not just in a workshop.

    Analysis

    For some time now the hardware retail and home improvement industry has been somewhat haunted by what we might call the kitchen drawer drill. That's the drill that retailers cheerfully sell to customers - and ends up spending, over its six-year lifespan, literally 98% of its life on its side with a flat battery in that drawer.

    The industry, for a very long time, has almost always blamed the customer for this. If only the customer would learn how to use tools properly! If only the customer would get out and give it a go sometimes! And so on.

    The reality is that those drills sit in those drawers, wasting not only the customer's money but also the retailer's opportunity, because they are not very good. Let's be frank here: they are "dumb" drills. Making beginning DIYers use these drills would be the equivalent of giving a family a two-tonne truck to fetch the groceries with every week. They are, very simply, not fit for purpose.

    It's a frustrating situation for the industry to be in. Even as more customers come through the doors during these pandemic days, ready and willing to do DIY, a large number of them will end up discouraged because the industry just makes things too hard for them.

    It's important to remember that the people showing up in hardware stores with serious DIY intent for the first time probably did not spend hours as an eight-year-old holding pieces of wood steady for their Dad, and blowing the sawdust off the cut-line for the saw. And they are not interested in finding a way to replicate that kind of experience in their adult lives. They have jobs, often small jobs, more about assembly than building, and they need help to get through those.

    It would be a great idea, whatever you do in hardware retail and home improvement, to buy yourself a Bosch AdvancedImpact 18. Don't think of it as a tool, though. Think of it as a first step in a much-needed education. Because the very simple fact is, as hardware retail and home improvement develops post-pandemic, that we very much need to go to the customers, not sit back and wait for them to measure up to our standards.

    products

    Big box update

    Trading update

    Fresh new flooring and garage storage displays at the Nowra store and expansion planned for Bunnings in Brisbane's north

    Wesfarmers has released a trading update for its retail operations. Speaking of trading conditions overall, the company's managing director, Rob Scott, stated in the update that:

    The trading restrictions in Melbourne were difficult for team members and customers, and it is encouraging to see progress with the reopening of stores over recent weeks. As a result of significant pent-up demand, the trading performance across stores in Melbourne has been very strong since they re-opened to retail customers on 28 October 2020.

    Bunnings reported ongoing strong growth for both DIY consumers and tradies. On a comparative basis, if Melbourne stores are excluded (due to the lockdown) the company reports an outstanding 29.3% growth in sales revenue. Including all stores, sales growth would be 25.2%. Bunnings also reports that online sales are now responsible for 3.8% of its overall revenue. The hardware retail group commented that:

    Consumer sales remained particularly strong as customers spent more time undertaking projects around the home.

    Nowra store opening

    The new Bunnings store in Nowra (NSW) measures 14,130sqm, an increase from 6,248sqm of the previous outlet. The former store was demolished in late 2019 to make way for the $27.8 million building.

    COVID-19 restrictions will be in place when the store opens, so children won't be able to use the indoor and outdoor playgrounds yet, and the cafe will be operating as takeaway only.

    It has more than 400 car parks and an escalator will take customers from the undercover parking level up to the store.

    Bunnings Warehouse Nowra has a larger main warehouse, a timber trade sales area with a five-lane timber drive through, an outdoor nursery and landscape yard. It also has the latest in-store concepts including wardrobe and bathroom displays, as well as a kitchen design centre with 12 brand-new kitchen concepts.

    As part of the store opening, the team has provided support to local community groups with product donations. Complex manager Richard Jenkins told the South Coast Register:

    So far, we've provided help to Anglicare by donating equipment such as gardening tools, seedlings and fruit trees, as well as variety of edible plants to help establish their community gardens in local indigenous communities.
    We also provided Havenlee School with a kitchen and supplied plywood to the Northern Shoalhaven Community of Schools Project.

    Stafford location

    Bunnings has submitted a development application after two years of preparation and negotiation with the Brisbane City Council (BCC) to extend its pre-existing store at 450 Stafford Road, replacing the previously approved display and sales area with a timber trade sales area.

    If the application is approved, Bunnings will also repurpose buildings located at nearby 33 Windorah Street to construct a fully enclosed building materials and landscape yard, a nursery area, two showrooms and 176 additional car parks.

    There is expected to be a new access road via Windorah Street and truck access along the entire length of the site's western boundary.

    The proposal was first taken to the BCC for a pre-lodgement discussion in 2018, in which city planners identified potential problems with land use, access and parking.

    The plans lodged recently seem to have addressed those concerns with an extensive, drought-hardy landscaping plan, alternative truck access through Windorah Street, widened driveways to facilitate truck movements and a number of additional parking areas across the site.

    The BCC is yet to make a decision regarding the application.

  • Sources: Wesfarmers, South Coast Register and The Courier Mail
  • bigbox