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

    In praise of families: Mitre 10

    Grass roots marketing campaign

    The "Built by Families" series uses documentary-style videos to bring to life the legacy of family-run businesses in the Mitre 10 store network, and their connection to their local communities

    The latest campaign from Mitre 10 seeks to celebrate the "real stories and people behind its stores".

    Independent Hardware Group general manager of marketing Karen Fahey said the video series aims to invite consumers to understand what the Mitre 10 brand stands for. In a statement, she said:

    We are so proud to tell the stories of the local and incredibly generous families in our network. The people within our stores are the real brand champions and this is one way we can give them a voice.
    Built by Families aims to demonstrate how family-owned businesses engage and support their communities. It invites Australian consumers into the lives of these families, stirring emotions and building relatability. There's nothing superficial or contrived about the stories. Just genuine tales told by authentic people in communities across Australia.

    The videos begin with three businesses, the Hitchins family based in Moe (VIC), the Hastings and Benton family in Diamond Creek (VIC) and coming soon, the Johnson family in Mona Vale (NSW). Brand ambassador, Scott Cam, provides an introduction for the series. Ms Fahey said:

    Consumer trust and belief in our brand stems from generations of families delivering on a service and work ethic and fostering strong relationships with their customers - the very trademark of locally-owned, family-run business.
    The generational knowledge and expertise contained within these families is priceless and cannot be replicated. These three stories are saying it's not just product on the shelf in our stores...it's the people who work there, their values and the small things they do that make their communities better.
    The spirit of Mitre 10 lingers on in towns long after the lights go out and the store is shut. We encourage consumers to think differently about the people behind their local hardware store and listen to their stories. When you shop with locals you'll not only have a more enriching experience, you'll invest in the health of that community.

    The campaign will be implemented through multiple channels including a dedicated "Built by Families" website, TV advertising spots during The Block and social media.

  • Source: AdNews
  • Related: HNN featured the Mitre 10 Diamond Valley store extensively in a previous edition:

    HI News: Diamond Valley Mitre 10: The corporate/indie balance
    retailers

    Cost control at CSR

    Increased diversification of building products

    The company remains cautious on the outlook for the housing sector as stimulus measures including JobKeeper ease off next year

    Chief executive of building products group CSR, Julie Coates said she is keeping a tight rein on costs in an uncertain market where revenue in the core business - Bradford insulation, PGH bricks, Hebel lightweight construction blocks, Monier roofing and Gyprock plasterboard - fell 6% to $58.7 million in the six months to September 30.

    Bottom-line profit at CSR was down 15% to $58.7 million in the period. However, earnings in the building products division edged up slightly to $96.3 million, with the earnings before interest and tax margin rose to 12.1%, up from 11.4%.

    Ms Coates said greater diversification in the range of products CSR supplies to the construction industry, along with robust cost-cutting of $20 million, helped the company deliver the slight lift in profit and margins in building materials. But profits in its smaller aluminium business were impacted by the COVID-19 economic fallout.

    CSR, has a 25% stake in the Tomago aluminium smelter in NSW, which accounts for about 12% of electricity consumption in the state. According to The Australian Financial Review (AFR) Ms Coates hinted CSR may eventually exit the aluminium business but emphasised that the first task was to ensure commercially viable energy prices for that operation. Ms Coates said:

    We're predominantly a building products business.

    It remains hopeful the Tomago aluminium smelter can strike a cheaper power deal with AGL Energy to ensure the facility remains profitable.

    The company will also be closely watching the fallout on the building materials market as the JobKeeper and JobSeeker payments wind down. However renovations market had improved as people who were stuck at home for lengthy periods found flaws in their dwellings they wanted to fix. Ms Coates said:

    We plan to monitor pretty closely what that might mean for our business and manage it ­accordingly.

    Related: Ms Coates took the helm of CSR in September 2019 after heading up the Big W discount department store chain as its managing director and running the Australasian operations of $2 billion food group Goodman Fielder.

    CSR will be led by former Woolies exec - HI News, page 29
  • Sources: The Australian Financial Review and The Australian
  • companies

    Pandemic delivers gardening boom in SA

    Newman's Nursery in Tea Tree Gully

    Industry association president expects the increase in sales, up 25% on average, to last for at least the next 18 months to two years

    In South Australia, demand for plants has increased so much since the pandemic that many nurseries and garden centres are struggling to find workers, according to a report in The Adelaide Advertiser. Nursery & Garden Industry of SA president David Eaton said members are looking for more staff in most areas, from production through to retail.

    Initially when COVID-19 hit, there was huge demand for vegetables then anything edible, then fruit trees that would take three years to bear fruit, then indoor plants.
    With more people spending time at home, perennial outdoor colour is showing strong growth and we think high demand will continue. This has sparked something that will be a trend for many years to come."

    Communications consultant Neville Sloss said surveys of garden centres revealed much of the rise in demand has come from new customers and many of them keep coming back. He told The Advertiser:

    Our garden centres reported that apart from extra business from existing customers, many more people new to gardening were shopping with them.
    What they are now reporting is that these people have kept coming back, and we estimate that there are now up to 30% new gardeners in our SA community - and that is the feeling nationally as well.

    At Newman's Nursery in Tea Tree Gully (SA), co-director Dianne Hall is experiencing a "major skills shortage" and has been unable to fill two full-time positions for trained staff. She said:

    People need expert guidance and so they ask lots of questions like 'Does that fruit tree need a pollinator?', 'How big will it grow?', 'What's the root system like?', 'Will it affect the footings of my house?' or 'Does it like sun or shade?'
    You need to be a trained horticulturalist. In the past, you'd advertise and there'd be 200 or 300 apply and half of those people would have horticultural qualifications. Now they haven't got any qualifications. They might be a keen gardener and mow someone's lawn but haven't got the knowledge to answer customers' questions.

    Members of the Horticultural Media Association Australia have been lobbying the South Australian state government to address the issue by creating more pathways for training the skilled workers that the industry needs.

  • Source: The Adelaide Advertiser
  • retailers

    ABS Stats: Hardware retail sales

    September 2020 retail stats

    ABS stats show that retail growth improved during September 2020, countering a slight decline in August 2020

    The Australian Bureau of Statistics (ABS) has released its results for retail sales in Australia up to September 2020. HNN has used series 8501, the original data for sub-categories, to chart how well hardware retail sales have progressed.

    Chart 1 shows the total sales for the trailing 12 months to September. It clearly demonstrates that, as compared to the past four years, sales have increased substantially ahead of trend (though the proportion of sales for each state, back to 2016, and specifically between 2019 and 2020, has barely altered). Note that figures for the Northern Territory (NT) and Tasmania are not yet available, and have had to be (unfortunately) excluded from this analysis.

    Retail sales have surged considerably. Australia recorded its highest ever total hardware sales for this time period, at $22,533 million. For the states, New South Wales (NSW) recorded a record $6589 million, just surpassing Victoria (VIC) at $6464 million. Queensland (QLD) had sales of $4630 million, and Western Australia (WA) of $2281 million, while South Australia (SA) recorded $1379 million in sales. The Australian Capital Territory (ACT) saw its sales jump from $371 million to $455 million for this 12-month period, a strongest percentage rise of all states and territories.

    Chart 2 shows these percentage changes on comparative trailing 12 months to September time periods. The grey line represents the ACT and climbs far above the other states and territories - not unusual, as regions with lower populations tend to be more volatile when it comes to percentage changes. That probably also plays a part in the strong performance of SA, with a 17% lift in sales.

    The other states - as well as the overall figure for Australia - are clustered around a 15% growth rate. This is a very strong showing, compared to the previous four years, with WA in particular making a strong recovery from negative growth of 3.6% in 2019.

    Chart 3 continues to be the most interesting of the retail stats, as it details how exceptional the pandemic period has been. This chart shows month-on-month comparisons of hardware retail sales going back two years.

    As we have detailed in the past, there is a very clear peak in sales across May, June and July in 2020. August saw something of a decline for most states and territories, except in NSW, which had declined in both June and July after peaking in May. September, however, shows another upward tick in growth, except for WA. The Australian average for growth in September was 20%.

    Analysis

    Reports from the field indicate that many hardware retailers are, as the expression goes, "flat out" at the moment. HNN's contacts at Hardware & Building Traders are so busy it's been hard for them to find time to speak with us, but the indication is that sales are not only going well, but they are also expanding their network of affiliated stores.

    The big question is, of course, what is fuelling this growth? HNN will be looking more closely at the ABS stats on Building Proposals in our next Flash enewsletter, but the most interesting information will the Building Work Done stats that come out on 25 November 2020. That should give us some better insight into the September numbers, and the shift up from the August numbers.

    What HNN is concerned about, as is likely the case with many retailers, is that we could see a rapid slowdown in construction activity sometime in early 2021. We're working on developing some kind of predictive modelling that will enable us to better predict such an event.

    We do think, however, that the current September figures are a positive sign that we will see some uptick in spending through the holiday season. It's what happens in February 2021 that really concerns us.

    Thanks, ABS!

    HNN would like to express both our appreciation, and, we are sure, the appreciation of our readers for the good work of the ABS in tirelessly assembling these very useful stats. The ABS has worked very hard through the pandemic to assemble these numbers, and other numbers that have helped to guide the government in developing measures to help the economy recover.

    HNN would also note that the ABS has recently updated its website, and done a fantastic job in designing a clear, easily understood website, that is outstandingly useful. We certainly hope that their efforts are rewarded with expanded funding in the future.

    statistics

    Will cordless housekeeping tools fuel new boom?

    As men do more housework, power tools are sure to follow

    Bosch, Ryobi move into a new sector where "handyman" and "housecleaner" merge. While vacuum cleaners are currently the major overlap, other tools are sure to follow

    One of the truly classic Australian comedy routines has to be the early, pre-Crocodile Dundee Paul Hogan, playing the character of "Hoges" on his TV show, getting up in the morning with his room mate "Strop" (John Cornell), and making toast. If you've never seen this, here's the link:

    Hoges fixes breakfast

    It's just perfect. The combination of earnest simplicity with subtle self-mockery, and a kind of pride, is something no Australian comedian has ever really matched. Hoges was just an absolute one-off.

    While most Australian men may have surpassed that mark in terms of their general domesticity, it's also true that the majority have lagged behind in terms of doing their share of the housework in family households. The Household, Income and Labour Dynamics in Australia (HILDA) Survey of 2018, funded by the Australian Government's Department of Social Services, states that:

    [W]omen still do the lion's share of housework and care - they spend 13 hours more than men each week doing unpaid work, while men spend 11 hours more on paid employment.

    A 2018 Organisation for Economic Co-operation and Development (OECD) study into paid and unpaid work by gender confirms this. At the time of its release, Australian TV media made much of the statistic that Australian men spent more total time on unpaid work than the men of many other nations. However, the real number to watch is the ratio of unpaid work women do compared to men. Chart 1 shows that Australian women do 180% of the unpaid work Australian men do - or, in other words, for every hour men do housework, women do over an hour and 45 minutes.

    In fact, in this statistic, Australia ranks 15 out of 33 countries, bested by both the UK and the US - not to mention New Zealand. A large determinant of women's unpaid work, of course, is the employment opportunities for women in paid work, which explains the very poor showing of India, Japan, Turkey and Korea.

    COVID-19 at home

    With the pandemic of 2020, it will be interesting to see how much these numbers change, and in which countries. Many families have found that, with both partners at home, the division of unpaid work has shifted. For one thing, there has been so much more to do, including keeping younger children occupied, and filling in for schools and teachers with older children.

    While there is, reportedly, at times even greater inequality in these new arrangements (with women doing more of the schooling), one thing is for sure: men are spending more time overall doing housework. Indications are that even when Australia gets back to some kind of "normal" - COVID-19 normal, or even, one day, you know, "normal normal" - things are not going to just revert to "2019 part two". Surveys through some Australian unions indicate that something like 80% of workers would like to continue working from home, at least some of the time.

    And what does more men spending more time doing housework mean, for the home improvement and hardware retail industry?

    That's right: power tools for cleaning. Of course.

    One direct entrant in that category is the Rubbermaid Reveal Power Scrubber, which is - wait for it - an electric toothbrush for cleaning "those hard to reach places". (Because you wouldn't want to use a manual toothbrush, now would you?) It features a small range of attachments, including one for cleaning grout.

    A slightly more ambitious product is the Dremel Versa PC-10 4-volt Cordless Cleaning Tool. According to its product description:

    Versa's spin brush and pads are best at removing grime, mould, mildew, grease, soap scum, lime build up, bug splatter, gunk and rust anywhere around the home.

    However, probably at the top of pack is the Ryobi 18V ONE+ Power Scrubber. Using standard Ryobi 18-volt batteries, the Scrubber rotates a 150mm stiff bristle brush at between 0 and 210rpm to help clean bathrooms and other hard surfaces. (As far as we can tell, this isn't available at Bunnings.)

    Serious vacuums

    While there is something just a little "gadgety" about these tools (as useful as they may be), when it comes to home vacuum cleaners, there is more serious product development underway.

    The maker of the Ryobi and Milwaukee brands, Techtronic Industries (TTI) also has a vacuum cleaner division - an act of real foresight by the company's CEO, Joe Galli. That division has some commercial cleaning products but is best known for its Hoover and Vax brands.

    One entrant in this area is the Ryobi 18V ONE+ Stick Vacuum, which seems to borrow heavily from Vax stick vacuums, but runs on the standard Ryobi 18-volt battery.

    A big advantage of this is that where most stick vacuums have maximum runtimes of around 20 minutes, the Ryobi can run for 45 minutes on a four amp-hour battery.

    Moving up a bracket from the Ryobi stick vacuum is TTI's Vax Blade 2 Max VX82. This has been reviewed by the consumer website Choice, and received its "recommended" designation, with a score of 82%. It came fourth in the ratings at $399, while the vacuum that came third, from LG Electronics, cost $1199. At number five is the Dyson V10 Animal - which costs $999.

    But the biggest surprise is that the Ryobi Stick Vacuum mentioned above is also on the Choice list of recommended appliances. It comes in at number six, also at $399.

    It is clear from this that the incumbent vacuum makers are facing a new challenge in the price/performance area. Dyson vacuum cleaners do have some unmatched features - but are these really worth the extra cost?

    All that said, however, the real winner in this category may end up being Bosch. Its Serie 8 Rechargeable Vacuum Cleaner Unlimited manages to combine the features of the Vax and the Ryobi vacuums: it uses a standard Bosch 18-volt battery (same as for Bosch "green" DIY power tools), but is designed to look sleek and modern, like the Vax.

    One advantage of this vacuum is that it is highly modular, with an array of attachments that make it ideal for a wide range of cleaning tasks, from cleaning the interior of a car, to dusting down venetian blinds.

    It's also interesting that Bosch has picked up on the "men's work" theme, with its main video advertisement for its line of tools featuring the guy doing the vacuuming while his partner reads on the couch.

    Future housework tools

    This is all very well and good, but is it really what men want in housework tools? Why can't we, for example, hook up our Playstation/Xbox controllers to one of those Roomba-like "intelligent" floor vacuums? And maybe amp-up the electric motors in the thing? Add a video camera, and you've not only got the makings of a way to share high-speed floor vacuum chases but (dare I suggest it?) the makings of a Twitch channel.

    Analysis

    All joking aside, it's evident that an evolution - even a disruption - is getting underway when it comes to cordless power tools in the Australian home. That disruption, in the classic Clayton Christensen sense, is especially evident in vacuum cleaners.

    The Dyson stick vacuums that both TTI and Bosch are competing against are, overall better, appliances. But the two entrants have worked out that most consumers will readily forego some of the extra features of a Dyson if they can save $600 to $800. As Prof. Christensen predicted, disruption often comes from new products that don't exceed the capabilities of established products but offer fewer features at a reduced price.

    With gardening surging in 2020, and likely to continue to grow through to 2024, there is big scope for consumer cordless OPE. Add to that an increased interest in home handyman DIY, and the ongoing growth of craft DIY, and it is evident home cordless will be profitable for retailers.

    In addition to those four areas - household appliances, gardening, home DIY and craft - there is a fifth as well: security. There are a lot of homeowners who would be pleased if they could have the ability to link to an external, cordless security camera from time-to-time. That could be for everything from while they are away on holiday, when they have a new puppy in the backyard, or to monitor their children having fun in the backyard.

    Another big opportunity in home cordless that manufacturers have yet to really take advantage of is the further development of Li-ion battery chargers. If we do see an increased surge in interest in battery systems, most homes will likely end up with at least two Li-ion batteries - a medium, four to six amp-hour battery, and a lightweight, two to three amp-hour battery. With those batteries getting a daily workout, most households would benefit from a two-port charger. Yet neither Bosch nor Ryobi offer such a device.

    Further, the battery charging station is really much more of an opportunity to sell a more expensive, higher-margin device than either Bosch or TTI realise. For one thing, in the home situation, the charger isn't just about how you charge up the battery, it is going to be the permanent home of the batteries. That means there is room for a more complex system that is as much about battery maintenance as charging.

    Nothing is worse for a Li-ion battery than keeping it at 100% charge for long periods. There is an opportunity here for a charger that charges a battery to 100% on initial insertion, then maintains charge at 80%. Better still, what about a charger that can be pre-set to peak charge at certain times, possibly through a smartphone app?

    Homeowners could set a 100% charge level for Saturday and Sunday mornings, for example, while letting the battery "idle" at 70% charge for the rest of the week.

    Still further, what if the charging station gains a few extra functions as well? A couple five-volt, 15-amp USB chargers would be an obvious addition. It would also be a simple design task to add a security camera or a temperature/humidity sensor, with links to a smartphone app.

    In other words, take the charger out of the cupboard or workshop, and give it a place in the kitchen or hallway. Instead of cutting charger costs as much as possible, make it an expansive purchase.

    Retailers

    For retailers, one of the first difficulties is simply brand access. Ryobi is (of course) exclusive to Bunnings in Australia, which pretty much leaves Bosch as the only alternative. The Black & Decker brand from Stanley Black & Decker, which is the third player in this general market, does not really have a high quality vacuum cleaner, and no such household appliance that is compatible with its Li-ion battery range.

    Bosch, which has not always received the support it deserves in DIY tools, has established a considerable presence on Amazon in Australia. It's a very successful effort, and retailers would have to offer something substantial to compete effectively.

    products

    Big box update

    Bunnings works towards 100% renewables

    Managing director, Michael Schneider, sees continuing robust trading in hardware retail because ongoing travel restrictions will turn people's attention toward their homes, using the DIY skills they gained during the pandemic

    Bunnings is the latest major Australian retailer to pledge to source 100% renewable electricity for its operations by 2025.

    It recently announced this commitment, alongside plans to roll out 20 new solar rooftop solar systems and upgrade 10 of the existing 70 PV (solar photovoltaic) panels systems already installed across the company's stores.

    Bunnings said it had been installing solar systems across its retail network since 2014, which currently supplied an average of up to 30% of a store's energy needs.

    Some of Bunnings' energy efficiency and emissions reduction efforts to date include 150 sites in its network using LED lighting, which the company said reduces a store's energy consumption by more than 20%. Bunnings has also been trialling daylight and motion sensing technology, which it said can reduce lighting related energy usage by 25%.

    Battery storage has been added to the PV solar system at the Bunnings store in Alice Springs (NT), allowing the system to provide up to 80% of its energy needs. This could potentially be an option for its other stores.

    The hardware retailer said it had worked to develop renewable energy solutions "over many years," starting in 2009 with PV system at Bunnings Belconnen (ACT) and wind turbines at Bunnings Port Kennedy and Bunnings Rockingham, both in Western Australia. Bunnings managing director, Michael Schneider, said in a statement:

    We recognise that business has an important part to play in reducing carbon emissions and addressing climate change.
    This is a journey we started some time ago, but we know that we have a long way to go. We are absolutely committed to finding solutions that benefit our business, our customers and the environment and we are excited about what the future looks like.

    Where Bunnings will source the rest of the renewable energy required to meet all of its retail and operational energy needs was not specified in the statement it released. It said only that "new pathways" were being developed to transition the hardware retailer entirely to renewable sources.

    Bunnings' commitment to renewables follows the announcement from parent company Wesfarmers that its retail businesses that also include Kmart, Target and Officeworks are now aiming to achieve net-zero scope 1 and scope 2 emissions by 2030, mainly by tapping cleaner and more efficient energy.

    The retailer's commitment was welcomed by Greenpeace Australia Pacific's Reenergise Campaign, which noted that Bunnings ranked the equivalent of number 55 on the list of Australia's largest electricity users in 2018-19. Reenergise Campaign director Lindsay Soutar said in a statement:

    As one of Australia's biggest users of energy, this is a fantastic shift away from polluting sources of the past and towards clean, modern renewable energy. Bunnings is known for its lowest prices, but now lowering emissions is just the beginning.
    Committing to 100% renewable electricity and net zero emissions is a great win for the climate and for helping create local future-proof jobs in renewables.

    Research by Deloitte Access Economics suggests Australia could adopt a net-zero emissions policy at a fraction of the cost of dealing with the pandemic that would help grow the economy over the next half century and add a quarter-of-a-million jobs.

    According to the report, delivering net zero emissions over the next 30 years could add $680 billion to the economy and create 250,000 jobs by 2070.

    If Australia does "limit global average warming to 1.5 degrees Celsius along with the rest of the world," it could create 250,000 jobs and grow the economy by 680 billion dollars, the report states.

    IKEA in Adelaide

    Home improvement big box retailer, IKEA said it will initially place a large solar installation on its roof at its Adelaide Airport site, coupled with battery back-up, to provide 70% of its energy needs.

    This project is backed by a $1.95 million grant from the South Australian Government's Renewable Technology Fund. The company said in a statement to the Adelaide Advertiser:

    As part of the project, electric vehicle chargers will be erected on site for customers, co-workers and the Ikea delivery fleet servicing South Australia.

    In the second stage of the project, the IKEA carpark will be covered with timber shade structures topped with solar panels, which will bring the site's renewable generation up to 100% of its needs.

    The first two stages of the project are expected to be complete by 2025, with stage one comprised of 1.2MW of solar panels coupled with a 3.4MWh battery.

    IKEA Australia chief executive Jan Gardberg said the Adelaide site would be a "first mover" and the ambition was to "inspire other IKEA stores to install larger solar installations, batteries and digital solutions".

    Related: IKEA has already spent more than $4 billion on making its stores focused on cleaner energy. In Australia, 20,000 solar panels have been installed across its sites.

    Ikea Australia to sell solar panels - HI News, page 47

    Retail optimism

    Speaking at The Australian Financial Review CFO Live event in Sydney's CBD, Mr Schneider said:

    We have quite an optimistic outlook on what's going on around Australia. People see the home as the safest place to be. We've all learnt new skills over the last few months.

    He believes people gained enormous satisfaction from mini-renovations and doing small projects during the pandemic. Bunnings will be increasing the number of DIY classes and tips offered to customers because there was an enormous appetite among householders.

    Mr Schneider said October, November and December were traditionally strong months for the hardware and DIY sector, and as warmer weather approached, he expected sales to rise in products such as outdoor furniture and barbecues.

    He said the focus by some people on shifting to regional centres or seaside communities outside cities was also driving more spending on renovations. Mr Schneider expected this trend in pursuing a "tree change or a sea change" to accelerate as people eyed potential locations in provincial and regional towns.

    He also said the group wanted to accelerate its organic growth.

    It's very much a growth mindset, predominantly organic growth.
  • Sources: One Step Off The Grid, Sydney Morning Herald, Adelaide Advertiser, The West Australian and The Australian Financial Review
  • bigbox

    Indie store update

    Marulan Rural Supplies

    Nagambie hardware store, F.W. Parris and Sons is closing its doors and the premises has been sold

    In Nagambie (VIC) Bruce and Gladys Parris have decided to slow down and make the most of their golden years after working in the family hardware store since 1968. Their store, F.W. Parris and Sons is shutting down.

    According to the Southern Riverina News, John Sanderson Machinery will take on part of the building where the store is located, and Rebecca Baker Pharmacy has purchased the showroom.

    Mr Parris said his dad and uncle borrowed a stationary hay bailer from their father to start the business. He told the Southern Riverina News:

    They worked with the old-school hay bailers where you brought the hay to the machine and it took a team of men to make it all happen. My dad was quite inventive and he and my uncle slowly improved their process until they were working with more modern, automatic hay bailers.
    They purchased the showroom in Nagambie in the '50s and began selling and servicing hay bailers, tractors and other machinery.
    I'm not entirely sure how they made the switch from hay bailers to hardware but over several years they decided it was more viable than trying to keep with the advancing hay bailing technology.

    Mr and Mrs Parris joined the business in 1968 after Mr Parris completed an apprenticeship in Melbourne. The couple was looking for an escape from the city and had always wanted to return to Nagambie. Mr Parris said:

    When my uncle died unexpectedly and my dad had semi-retired, I took over and have been doing it ever since...
    I was joking with Damian Sanderson (from John Sanderson Machinery) for a number of years about him buying the business and me retiring and one day it actually happened.
    Selling the business is not an option because small hardware stores aren't viable due to big businesses coming to town. Having the building in the hands of another local business is the next best thing.

    Mr Parris also told the Shepparton News in a separate interview:

    It's a bit sad the shop is closing, but on the other side it's a little bit of a relief, too. All this is going to continue on - it's not as if developers are going to come in and build on the land.

    He thanked his loyal customers who have kept his family in business for so long.

    Without them, there would be nothing here.

    The couple wants to stay busy in retirement and remain connected with the community. Mr Parris said:

    I'm going to continue carting wool and machinery. That will keep me going but will allow me to back the pace off. We will always remain in the Nagambie community. A big part of what we loved about the business was seeing local faces and finding out what they're up to.

    Serving farming customers

    It's a different story for Daniel Muller who purchased Marulan Rural Supplies (NSW) in November 2015. He recently told the Goulburn Post.

    Being part of a small community has been the most amazing experience. We came from Sydney, where we did not have the same sense of belonging. We have our kids' school teachers, netball coaches, soccer coaches, local shopkeepers, grandparents, aunties, cousins and siblings, employees from the mines, the police, they all come into the store.
    They all come in for a bag of scratch mix, and leave after a yarn and a laugh. Some bump into a neighbour here, others meet new friends. Our humble shop is the most social place.

    Being an active member of the community also means the store sponsors its local soccer and cricket teams and provides its schools with raffle prizes and donations. Mr Muller said:

    We engage with our community by being members of our Chamber of Commerce ... We always strive to support local business, groups and the community in everything we do.

    He described what Marulan Rural Supplies offers its farming customers.

    Our customer service, pricing and reliability is something we pride ourselves on. We carry all stock out to our customers' cars, engage with customers and find out their stories, research and source items that we do not currently stock and help our customers with all their needs.
    Our deliveries are always reliable. From our fencing contractors who come in at the crack of dawn to our 'I'm running late, can you just drop a bale of hay off on your way home' customers.

    The store is an authorised Supagas dealer and recently became a registered firearms dealer selling guns, ammunition and accessories. After responding to customers' requests, Mr Muller employed a resident gun expert and underwent a rigorous eight-month process before being granted a firearms dealer's licence. Mr Muller said:

    This side of the business has gone from strength to strength. Our customers are amazed at our low prices and range.
    We stock a large range of brands including Gamo, Howa, Savage, Lithgow, Adler, Ruger, Miroku, Akkar and many others in all different calibres from air rifles up to 6.5 Creedmoor.

    In addition to an extensive range of rural supplies, it also stocks treated pine from Penrose Pine and are able to cater for customer special orders. The store also sells a high-quality fencing range including treated pine or galvanised strainers and stays, hinge joint, netting and barb. Its stock feed covers animals from alpacas to peacocks, from cattle to bison - the store has a customer with bison - and from racing greyhounds to pedigree cats.

    Marulan Rural Supplies has a small and hardworking team with five full time staff and five casual weekend staff. Mr Muller said:

    Everyone brings their own strengths to the business which is such an asset in helping our customers with their needs.
  • Sources: Southern Riverina News and Goulburn Post
  • retailers

    Reece prepares for downturn

    Sales increase in first quarter

    Reece CEO and managing director Peter Wilson said while the company's services continue to be in demand, its outlook is extremely challenging

    At its virtual annual general meeting, plumbing and bathroom company Reece announced that group sales revenue rose 4.4% in the first quarter but remains wary of the outlook for the year ahead.

    Australia and New Zealand sales revenue was up 6.9%, while sales from its US-based business was up 8.6% on a constant currency basis. According to a report in The Australian, chief executive Peter Wilson said:

    We have continued to see growth in both regions which has exceeded our initial expectations.
    It's important to note that we do not see the first quarter's performance as illustrative of the remainder of the financial year due to significant uncertainty and negative economic indicators across our regions.
    Trading conditions in the US are softening as we speak as the COVID-19 cases escalate and as we are being forced to close more stores.

    While the company's business has seen increased demand from people spending more time at home in light of COVID-19 restrictions in some areas, it's faced major challenges by having to close stores in other areas.

    As such, despite the record $6 billion in sales revenue over the 2020 financial year, Reece is being cautious in terms of expectations.

    The company said "significant uncertainty and negative economic indicators across Australia and New Zealand" meant it couldn't confidently provide any guidance.

    Mr Wilson also said activity in Australia was increasing as COVID-19 restrictions eased, largely stimulated by government incentives and low interest rates. He told the AGM:

    With borders closed, population growth - a key driver for new housing - has fallen sharply since March. And we don't expect overseas migration to return to pre-COVID-19 levels until 2024. Dwelling approvals are expected to fall by 5% in the 2021 financial year. This represents a 30% decline since 2018.
    With more people spending time at home, we will continue to see an increase in demand for alterations and additions, helping to balance the short-term impact of the housing downturn. With less people in the office, coupled with a decline of inner-city investment, non-residential commencements are expected to decline in the 2021 financial year.

    Reece, which runs 630 outlets in Australia has navigated two global pandemics. The company launched a major campaign in 1920 in the US after the Spanish flu pandemic highlighting the importance of sanitation and plumbing. Mr Wilson said this idea still underpins the business today.

    We often say that doctors and scientists help cure disease, but plumbers prevent it.

    With this in mind, the company said it has a clear long-term vision and a resilient business model to withstand the difficulties of 2020.

  • Sources: The Australian and The Market Herald
  • companies

    WD-40 rebrands Specialist range

    Redesigned products for easier identification

    In July, the California-based supplier called out Australia as one of its strongest growth regions

    WD-40 Specialist range of products - including lubricants, penetrants, greases, cleaners and degreasers, and rust-management solutions - now have the colours of the WD-40(r) brand. This means that for every challenging job, there is now a blue and yellow can.

    With the redesign, the WD-40 Specialist line more closely resembles the highly recognisable WD-40 multi-use product. The changes were made to make it easier for professional end-users to identify the brand.

    The Specialist products are suited to work in the most demanding situations in factories, facilities, garages and farms.

    Australian market

    Earlier this year, WD-40 President Steve Brass highlighted Australia to US investors and analysts during the third-quarter earnings update.

    Sales of its WD-40 lubricants and maintenance sprays, Solvol soaps and No Vac carpet sanitiser increased almost 20% in the quarter or 28% (after removing the impact of foreign currency movements).

    At the time, sales in Australia eclipsed those in its home market of the US, helped by hardware stores and other distributors being able to stay open during the first wave of the COVID-19 outbreak. Mr Brass said:

    Though our sales held up relatively well compared to some industries, the performance of our individual segments in the third quarter was driven primarily by whether or not distribution channels were open in any particular market.
    We saw the most significant sales declines in markets that were hardest hit by COVID-19 and which had the most stringent lockdown orders in place...
    For example, in the US and Australia, sales increased 1% and 16% respectively. This is because in these markets most of our traditional distribution channels were open.

    The brands owned by WD-40 were helped by a spike in taking on home improvement and renovation projects as the coronavirus pandemic emerged and Australian consumers spent the majority of their time at home.

    This led to a sales boost for hardware stores including market leader Bunnings, Mitre 10 and independent outlets.

  • Sources: Business Wire and The Australian
  • products

    Connected tools continue development

    Bosch and DeWalt are outmatched by Milwaukee

    Milwaukee's One-Key Bluetooth-based inventory and tool control system has been updated to integrate with Autodesk BIM 360. Connected tools could help the Australian construction industry boost productivity.

    Bluetooth connectivity for tools is now five years old. It was announced by the Techtronic Industries (TTI) company Milwaukee Tool in 2015, branded as "One-Key", and hit the market in January 2016. That followed on from the release of "connected batteries" by the Stanley Black & Decker brand DeWalt earlier in 2015. Both DeWalt and Bosch Power Tools announced matching systems in the wake of the One-Key announcement, and these became available about 18 months after One-Key.

    Makita and Hitachi (now Hikoki), which round out the five major global power tool companies, have added some Bluetooth functionality to a few tools, but nothing at the scale of the other three.

    At launch, the DeWalt and Bosch systems copied features from One-Key, but they also each had their own twist on what connectivity was, and how it would be used. Five years later, there have been further advances in the development of all three systems, but they have, for the most part, stayed true to their original differences.

    The reason why now is a good time to review what has happened in the market so far, is that in its most recent release of One-Key, Milwaukee has moved to include integration with Autodesk's Building Information Modelling (BIM) system. That's significant, because it points to the possible future of these systems.

    What Bluetooth connectivity is

    The Bluetooth connectivity provided in power tools really consists of two different types. The most basic connection makes use of "beacon" technology, which likely follows either Apple's iBeacon standard or Android's Eddystone standard (or both).

    Beacons basically do just one thing: continuously broadcast a universally unique ID (UUID). Bluetooth receivers - such as smartphones - can pick up that signal and retrieve the UUID. They also can assess the signal strength. If the type of beacon is known (as it always will be with these power tool systems) the receiver can use the signal strength to estimate how far away the beacon is. (It's an estimate, because signal strength can be reduced by obstacles, such as people.) The end result is that a single receiver can know it is close to a beacon, but it cannot determine the direction to the beacon.

    This kind of access is quite general. Any receiver can pick up this type of Bluetooth signal. There is no encryption, as all that would do is change the UUID.

    Milwaukee and other companies with similar technologies have leveraged this capability. Anyone running the One-Key app will pick up every Milwaukee tool beacon running in their proximity, and that information will be transmitted back to the central network database. This means that tools that "wander off" will likely be detected eventually, and their location will be transmitted back to the owner.

    The second kind of Bluetooth connectivity is more like the connection you might have to smarthome devices or even Bluetooth linked radios. In these cases, the power tool is also a receiver as well as a sender. A smartphone can send signals to the power tool over Bluetooth which cause it to change internal settings, such as the speed of a drill, or the kickback protection on an angle grinder.

    This connection does need to be protected and encrypted. This is done during the initial linking process, when the smartphone app and the tool are "synched", usually by pressing a button on the tool. Typically, a random token is generated, and that token is used to certify future connections between tool and smartphone. Transmission of that token is itself likely protected through the use of private and public keys.

    These two systems can be combined to provide a powerful disincentive to steal tools. For example, a tool can be "geo-fenced", so that when it moves outside the connection range of its controlling smartphone, it is automatically disabled. Tools can be loaned to others, with a time limit attached, so that they shut down at a particular date and time.

    Design parameters

    The main problem that all three companies initially faced in adding a form of Bluetooth connectivity was how to handle incorporating that connectivity into the tools themselves.

    Milwaukee saw this, initially, as being all about the tool. One-Key connectivity was built into a limited range of its M18 FUEL line of tools. This has had the advantage of making these tools increasingly theft-proof, as the location technology associated with One-Key has developed, and the network of tool owners has grown. However, it has also created an element of range complexity, as Milwaukee offers these tools in two models, with and without One-Key. Additionally, in its original form, One-Key made little allowance for tools that did not have One-Key built in.

    Bosch took a very different approach when it launched its version in 2016. From the beginning, it offered a "TrackTag" that could be added to any tool - either glued in place or secured by a clamp to the power cord (in the case of corded tools).

    Behind this system was Bosch's own TrackMyTools app, which offered (obviously) tool tracking. The Bosch system did eliminate the need for separate connected and non-connected tools, as well as being as inclusive as possible. However, it did so at the loss of virtually all theft-prevention safeguards. You could track tools, but not when the person in possession of them didn't want to be tracked.

    Bosch also offered in-tool integration, but this was done by purchasing an additional module, that could be plugged into the original (not-yet-connected) tool. That meant Bosch did not need to manufacture separate connected and non-connected tools. However, a little confusingly, while TrackMyTools looked after tool tracking, users had to download the Bosch Toolbox app to customise tools via the Bluetooth connection.

    A further complexity was added in early 2018, when Bosch launched a service named BlueHound. BlueHound is an inventory management system that greatly expanded on what was offered by TrackMyTools, enabling just about any construction-related asset (such as vehicles) to be tracked. The system also provides documentation, service alerts and user manuals. Another addition was the ability to integrate with software such as Triax's Spot-r system, which includes personnel and safety management as well. That system works by more or less tagging people as well as tools, so that they get tracked on the jobsite as well.

    DeWalt steered a path that took it somewhat between the Milwaukee and the Bosch approaches. Following on from the "smart" batteries it launched in 2015, in May 2017 DeWalt expanded Tool Connect. This expansion included DeWalt tools which fully integrated into connectivity, as well as the Tag, a simple Bluetooth beacon that provides location information and little else, like the Bosch TrackTag.

    There is also a special "connector", which the company labelled as the "20V MAX Tool Connect Connector". This can be fitted to the battery shoe on an 18-volt DeWalt tool, and provides basic Tool Connect functionality. According to DeWalt, once attached the connector cannot be removed. The Connector also does have the capability to shut down the tool, adding to theft deterrence.

    At the same time it launched Tool Connect, DeWalt also announced a fully-connected mesh network system which, it promised, would power next generation Internet of Things (IoT) products for construction sites. While DeWalt has introduced a rugged WiFi access point for construction sites, HNN has not been able to find any reference to the IoT project post 2018.

    To circle back, after the release of the Bosch and DeWalt products, in February 2017, Milwaukee released its own version of the Bluetooth tag, which was named the Tick. This allows a wide range of assets to be tracked by One-Key

    Ongoing development

    In general, TTI while TTI has continued its commitment to One-Key and connectivity in general, both Bosch and DeWalt seemed to have reduced their engagement. One indication of this is that, for example, DeWalt has not integrated Bluetooth into its line of Flexvolt batteries (for its 54-volt range), while Milwaukee has integrated One-Key into its MX FUEL line of 72-volt batteries.

    Beyond that, however, Milwaukee has a truly impressive range of One-Key tools, while both Bosch and DeWalt have significantly smaller ranges. The Milwaukee website, in fact, lists no fewer than 1214 SKUs associated with One-Key - though this includes, of course kits and other repeats of tools. Just to give a sense of the range, these are the first 30 SKUs listed:

  • M12 FUEL 1/2" Digital Torque Wrench w/ ONE-KEY
  • M18 FUEL w/ ONE-KEY High Torque Impact Wrench 1/2" Friction Ring
  • M18 FUEL 7/16" Hex Utility High Torque Impact Wrench w/ ONE-KEY (Tool Only)
  • M18 FORCE LOGIC 600 MCM Crimper
  • M18 FORCE LOGIC 15T Crimper (Tool Only)
  • M18 FORCE LOGIC 750 MCM Crimper Kit
  • M18 FORCE LOGIC 750 MCM Dieless Crimper
  • M18 FORCE LOGIC Press Tool w/ ONE-KEY
  • M18 FUEL Sewer Sectional Machine w/ CABLE DRIVE
  • M18 FUEL 9" Cut-Off Saw w/ ONE-KEY
  • M18 FUEL SAWZALL Recip Saw w/ ONE-KEY (Tool-Only)
  • M18 FUEL 1" D-Handle Ext. Anvil High Torque Impact Wrench w/ ONE-KEY
  • MX FUEL 14" CUT-OFF SAW
  • M18 FUEL 1" D-Handle High Torque Impact Wrench w/ ONE-KEY
  • MX FUEL REDLITHIUM XC406 Battery/Charger Expansion Kit
  • MX FUEL REDLITHIUM XC406 BATTERY PACK
  • M18 FUEL w/ ONE-KEY High Torque Impact Wrench 3/4" Friction Ring Bare Tool
  • M18 FUEL w/ ONE-KEY High Torque Impact Wrench 1/2" Pin Detent
  • M18 FUEL 12" Dual Bevel Sliding Compound Miter Saw
  • M18 FUEL SAWZALL Reciprocating Saw w/ ONE-KEY
  • M18 FUEL 8-1/4" Table Saw w/ One-Key
  • M18 FUEL 1-3/4" SDS Max Rotary Hammer w/ ONE KEY
  • MX FUEL REDLITHIUM XC406 Battery/Charger Expansion Kit
  • MX FUEL REDLITHIUM XC406 BATTERY PACK
  • M18 FORCE LOGIC 2"-3" ProPEX Expansion Tool
  • M18 RADIUS Site Light/Charger w/ ONE-KEY
  • M18 RADIUS Compact Site Light w/ ONE-KEY
  • M18 ROCKET Dual Pack Tower Light w/ ONE-KEY
  • M18 RADIUS Compact Site Light w/ ONE-KEY (Twist Lock)
  • M18 FUEL 12" Dual Bevel Sliding Compound Miter Saw
  • One of the recent additions to the One-Key system has been its Asset ID Tags. These are not Bluetooth connected. Instead they are simple QR code stickers that come in two sizes, and two different types, one for sticking to plastic, and one for sticking to metal.

    Milwaukee's thinking behind these tags is that they integrate more easily into the One-Key system than do the standard barcodes. Also, though, Milwaukee had found out in its field-based research that many standard barcodes would tend to peel off, or to become unreadable. The Asset ID Tags are designed to be durable, and extra-adhesive.

    The disruption

    As recent as these innovations seem, they are about to be overtaken by even newer technologies. Ultra Wide Band (UWB) devices offer a different approach to location tracking, one which is both far more accurate in terms of distance, and can also provide directionality as well.

    Two events have sparked the development of UWB. In the US, the UWB spectrum was opened for commercial use in 2005 by the Federal Communications Commission for pulse-based transmission in the 3.1 to 10.6 GHz frequency range. Following on from that, around about 2015, a company named Decawave began selling inexpensive UWB chips that can be embedded into pretty much anything. The chip is able to schedule transmission of UWB packets and measure the time a signal is received in picoseconds.

    The location data returned is very accurate, down to 200mm to 300mm in accuracy. It's the difference between knowing a tool is somewhere in a building, and having it pinpointed as being hidden behind one particular cupboard. The advantage when it comes to helping people located tools is evident.

    Apple began including its U1 UWB chip in the iPhone 11, and it is, of course, continued in the iPhone 12 as well. This chip enables the hyper-accurate location tracking. Over the past year there has been speculation about the company launching its own version of the Bluetooth-based location tags that several other companies make. Rumours have included an Apple product named AirTag, as well as Apple simply making access to the UWB widely available to developers.

    The difficulty Apple has is that it already faces concerns over activities which could activate federal anti-trust regulations in the US, where the company is headquartered (in particular some of its dealings with Alphabet, the parent company of Google and Android).

    There is little doubt that an Apple location tag would severely damage the businesses of other location tags. These systems rely on there being a widespread network of people using their apps (to detect the tags when they are out of range of their owner's smartphone). Integrated into the iPhone, that detection could run constantly - something the apps cannot achieve - on every recent Apple smartphone.

    While we can expect Alphabet to launch a similar service via Android, it's unlikely to work as well as Apple's version. That's because the UWB tags depend both on software and on the hardware in the smartphone itself - and Alphabet has next to no control over the latter, outside the smartphones it makes itself.

    This places the connected tools of Bosch, Dewalt and Milwaukee in something of a corner. Do they simply persist with their existing Bluetooth systems, or do they integrate some form of UWB tags as well? Much of that will also depend on how Apple handles third-party software integrating with the UWB systems it has developed.

    What HNN can fairly reliably predict, however, is that UWB may make tagging consumer grade tools a real possibility. That could include integrating a UWB chip directly into a tool, or just providing a place where such a tag can be glued of clipped. We would reliably expect to see this appear on Bosch Green, Black & Decker and Ryobi tools by 2023.

    The UWB tags might also offer both Hikoki and Bosch the chance to get involved in asset tracking, if they can directly integrate the tags into their tools. This might depend on how well the Apple system is duplicated in Android.

    In the market

    While there has been some adoption of connected tools by major construction and infrastructure maintenance companies worldwide, the take up by contractors and trades would seem to be less enthusiastic. As an indicator of that, searches for the word "Bluetooth" on the websites of Total Tools, Sydney Tools and Bunnings show few, if any, connected tools. The results that come back include Bluetooth sound equipment, some measuring devices that use Bluetooth connectivity to communicate results, a few Li-ion batteries, notably DeWalt and FesTool - but no frontline powertools, such as drills, impact drivers and grinders. (Though, to be fair, searching for Milwaukee's proprietary connectivity brand, One-Key, does return a range of Milwaukee tools for the first two retailers. But then, One-Key is included in the name of the products featured.)

    It would seem the tradies who buy from hardware retailers typically are not all that interested in Bluetooth connectivity as a main feature. The factors that do interest them are those that relate to durability, improvements in speed of task execution, and the range of tasks a tool can perform. Bluetooth connectivity, for the most part, does not seem to tick any of those boxes.

    One response to this is to suggest we might see some more interesting advances in power tools over the next three to four years. For example, a cordless drill equipped with a LIDAR sensor (now available on iPhones and iPads, and a core technology behind near-autonomous vehicles such as the Tesla range) could provide information about drilling depth. The user would pre-set a depth in millimetres, click a button just before starting, and have the drill automatically turn off when the correct depth was reached.

    There is also the possibility of using a wide range of augmented reality tools to help on construction sites. Imagine, for example, a carpenter putting up a house frame, and able see the entire structure from the plans projected onto her safety glasses. A plumber or electrician could have the ability to "see through" walls to the pipes and conduits beneath.

    It's not technically difficult to provide that kind of functionality - the real problems come with both cost and durability. The cost relates not only to the LIDAR sensors (which will probably drop 30% in price over the next two years), but to the processing power required to make use of them in real time applications. It would not make sense to embed that power in every single tool. What could develop would be a kind of personal connective device housing the same kind of capabilities as a smartphone, but dedicated to providing the processing backend to a range of power tools.

    What this comes down to is that the next wave of innovations in power tools is going to be about connected tools, and not just because of what can be achieved through IoT devices intercommunicating. What we are heading towards are truly intelligent tools. However, we can't afford (for the moment - we will be able to in the 2030s) to make each tool intelligent. So the most likely model is to develop central hubs that provide the necessary "smarts" to semi-intelligent tools through connectivity. It's really a form of distributive computing.

    Connectivity, then, is likely to be a major path to innovation. That means today's tool system that enables inventory and some systems integration (both really good things) could in five years be the conduit used to make power tools smarter, safer, more capable and, as a result, far more productive.

    The next step

    It's true that those kinds of almost futuristic tools are probably five to ten years away being available. That's not because they are difficult to develop - there are probably a couple of dozen companies in the world that could code those up in less than a year. The barrier to their development is not about the technology, but about the systems with which they interact.

    The construction industry has already made a considerable step towards developing systems for the future of the industry - it's just that the take-up of those systems has, until recently, been very slow. While it is not the only piece of this integration puzzle, perhaps the most evident piece is BIM. BIM is a good start at providing the kind of data/information "glue" that could make future developments such as augmented reality for construction possible.

    In this area, closer to the cutting edge, while Bosch and DeWalt have made some notable contributions, it is really TTI through Milwaukee Tool that continues to make the truly outstanding advances - most recently through integration between AutoDesk BIM 360 and One-Key.

    BIM 360 is a construction collaboration system, which enables project managers to consolidate most of the relevant design and build information. While it most closely integrates with other AutoDesk products, such as Revit, BIM 360 also provides for a wide range of additional integrations. Its modules include:

  • BIM 360 Coordinate is used for the coordination of model files that are stored inside BIM 360 Docs.
  • BIM 360 Build lets you collaborate on-site during -construction using a mobile device. It allows you to track changes, issues etc.
  • BIM 360 Layout is used for delivering BIM information to survey equipment.
  • BIM 360 Plan is used for simple project and task management during the construction process.
  • BIM 360 OPS streamlines handovers and limits warranty expenses.
  • BIM 360 Insight is a module that offers a project-level overview of data and analytics.
  • Users of One-Key can link their account into their BIM 360 account, and then import records such as Projects and Contacts, enabling synchronisation between the two systems. That can create considerable workflow efficiencies. Milwaukee quotes the head of integrations at Autodesk Construction Solutions, James Cook, as saying:

    Integrating with One-Key enables us to provide customers access to their asset data in BIM 360 so they have the context they need for project management, simplifying decision making ultimately helping reduce project risks.

    However, the really exciting news, from a power tools perspective, is that even more direct integration is being offered. Milwaukee also informs us:

    Furthermore, users of Milwaukee's new M12 FUEL Digital Torque Wrenches will be able to upload torque reports directly from One-Key into BIM 360 Docs, digitally syncing torque quality data from the field to the back office. Milwaukee plans to roll out similar reporting functionalities with other tools over time.

    That capability is really the end goal of connected tools: direct reporting of the technical details of tasks completed to a centralised project management hub.

    Eventually, we could see this kind of reporting, as it grows more comprehensive, being tracked by blockchain processes, which would result in a building certification process which indicated not only what work has been done, but also who is directly responsible, right down to one tool, one operator, on one particular day.

    Analysis

    Why does this matter? What is the point behind connected tools, LIDAR, UWB, augmented reality?

    The fact is that construction companies and individual trades remain some of the least technologically advanced areas of the Australian economy. While they've benefitted from being the endpoint users of some technological advances, such as those in adhesives, paints/coatings and the development of Lithium-ion (Li-ion) batteries for cordless power tools, their own practices have changed little over the past 15 years.

    This is reflected in productivity as measured by the Australian Bureau of Statistics (ABS). ABS statistics show that construction industry multi-factor productivity (MFA - this includes both labour and capital productivity), in the ten years from FY2009/10 to FY2018/19, fell seven times. That includes every year for the most recent five years of that range.

    The main reasons for that fall are twofold. In the first place, for the construction industry productivity is seen to have little effect on profitability outside of a certain basic range. Profitability in construction is instead largely driven by market forces. During periods of undersupply of construction services, the price for these climbs substantially, and over the past six years in particular, there have been frequent, lengthy periods of undersupply.

    Secondly - and these two factors interact strongly - the construction/housing market is one of the most highly subsidised industries in Australia. Looking back over the histories of construction activity and dwelling prices, the pattern that emerges over the past ten years is that this industry has repeatedly fallen to lows and has been boosted back up again by cuts to interest rates.

    That combination - an industry reliant on short supply to boost profits, tied to indirect government subsidies - is a known recipe to economists for failed productivity rates. If anything, as with the broad, general tariffs of the 1970s, productivity is disincentivized, as the government support has been largely based on employment provision, and better productivity would likely see a reduction in the construction workforce.

    What has happened during the Sars-CoV-2 pandemic of 2020 is that the "buffer" of interest rates the construction industry had been counting on for the next two years or so has run out. The cash rate set by the Reserve Bank of Australia (RBA) is now just 25 basis points (0.25%). There is no room for further cuts - unless the economy re-enters recession.

    Without this kind of monetary stimulus, the only other option is fiscal stimulus, which is what happened with the government's HomeBuilder $25,000 boost to renovations and new home builds, which cost around $680 million. That expires at the end of 2020. There might, possibly, be an equivalent package during 2021, but it is highly unlikely this kind of regressive (it favours better-off Australians) stimulus spending will exceed a total of $1.4 billion.

    That means that by the start of 2022 the construction industry is going to have to seriously consider how it rebases itself as an industry like any other Australian industry, with its profit gains linked more closely to gains in productivity.

    The good news is that Australian construction, especially in home building, is so inefficient that making those gains will not be difficult to manage. And you can be sure that the areas that will receive a lot of attention will be inventory management and BIM - an ideal use case for connected tools.

    companies

    Blackwoods industrials retail expands in NZ

    Store rollout and refurbishment

    The Wesfarmers-owned retailer said it is responding to changes in the market as it updates its Workhorse range

    Industrials retailer, NZ Safety Blackwoods - part of Wesfarmers - is embarking on an expansion plan for the New Zealand market over the coming year.

    National manager of trade centres, Chris Mason, said it is already two-thirds of its way through its nationwide store refresh program to upgrade stores and relocate a number of them to bigger sites. He told The New Zealand Herald:

    There will be more stores [opening], particularly in the Auckland market. What we'll be looking to do around the rest of the country is to either expand existing locations or refurbish and transform the retail experience.
    [Store growth] will be single-digits over the next year, but we've certainly got larger plans.

    NZ Safety Blackwoods currently has six stores in Auckland and 24 spread throughout the country, selling safety equipment, engineering supplies, uniforms and packaging.

    It has been operating in New Zealand in various forms for over 30 years. NZ Safety and Blackwoods were trading separately until about four years ago when Wesfarmers merged both brands.

    In Australia, Blackwoods is the largest provider of industrial and safety supplies with 60 branches and distribution centres.

    Growth factors

    The trend towards fashionable workwear among tradies along with a boom in infrastructure projects and advances in technology are helping to fuel its expansion, said Mr Mason.

    The drive for growth comes down to a changing trend from our customer base. A younger more image-conscious tradie who cares about brand and their image when on site. We're being driven by a desire for fashionable workwear - not just in clothing, even with tools.
    The industrial sector is also being disrupted by technology and things are changing at a rapid pace in terms of safety and innovation. You see it in tools, for example, with wireless connections to control speed and who can use them now, earmuffs with Bluetooth and different types of connectivity to allow people to communicate easily on site. We're not immune to that disruption from technology that you are seeing in other industries.

    Durable workwear labels designed for the "fashion conscious" tradie are now sold alongside tools, engineering supplies, safety and personal protective equipment (PPE) in a retail environment which for the first time has mirrors and changing rooms - features that would have been unheard of in this industry even just a few years ago.

    Mr Mason said the trade industries are shedding their traditional persona as a new generation of more image-conscious tradies emerge along with increasing numbers of women entering trade industries. Its stores are evolving to meet this changing demand.

    The old school self-image of the typical New Zealand tradie has changed over recent years and this has manifested in a growing design trend for more stylish workwear which was traditionally seen as purely functional.
    More commonly now, they are looking for workwear that they can come off the site, take off their work boots and head down to the pub.
    The designer label on their work clothing is just as important to them as their casual clothes are and a range of recognisable fashion brands like King Gee, Levis and FXD have developed an offering to meet this need...
    As a retailer, our offering has evolved to provide the service levels to match the positioning of this style of attire which now includes a more customised fitting service.

    Tools, clothing and apparel have been the fast-growing products for NZ Safety Blackwoods. Its plans were to increase the size of existing stores to accommodate larger ranges in these categories. Mr Mason said:

    The line between workwear and casual wear is certainly being blurred, and that's right across the industry ... With the infrastructure projects going on there is a need for a larger workforce and so younger tradies are entering that workforce. There's been a drive on recruitment into the trades and apprenticeships, and we're certainly seeing that drive some of the growth.
    In the short to medium-term there's still a large opportunity for expansion. The government through Covid has committed to big spending in infrastructure and construction to keep the economy moving forward so we see there is a big market.

    Mr Mason said Wesfarmers recognised "there was a opportunity here" and "would continue to invest where it makes sense to do so". NZ Safety Blackwoods turns over about NZD240 million each year.

    Flagship store

    It recently opened a new 1000sqm flagship store in Penrose, an industrial suburb in Auckland. The Penrose store footprint is twice as large as the group's next largest store and is its 30th store in New Zealand.

    Mr Mason said its investment in a local omnichannel expansion program will cover bricks and mortar stores as well as its e-commerce platforms.

    We are seeing more tradespeople working in smaller teams now and there is a move towards a centralised purchasing model where being able to get everything they need to get the job done in one place means greater efficiency and less time away from the site.
    Offering an integrated retail solution provides access to a wider range of products with the minimum time needed to make the purchase," he says.

    Mr Mason also said the number of customers using click and collect has doubled in recent months and the new store will include a touch screen terminal that allows customers to order from more than 100,000 products - with the option of delivery to their worksite or collection from one of its 30 trade centres across New Zealand.

    Workhorse range

    Blackwoods recently revamped its own brand of workwear called Workhorse, according to Manufacturers' Monthly. Originally launched in 2014, Workhorse now has clothing or both night and day wear.

    Apparel program manager at Blackwoods, Cahal Callanan, said the company wanted to provide a "real value proposition" to large industrial businesses who needed workwear to protect employees. She told Manufacturers' Monthly:

    One of the main factors in the new range was to add in more stretch fabric, so it fits to workers bodies and allows more movement for people on site doing these active jobs. They are working eight to ten hours each day of really solid work, so if their uniform can fit and move with them it makes them more comfortable and efficient.

    Workhorse launched a range with high visibility as a focus. Instead of using day-time high-visibility colours, such as yellow or orange, the range is made from white fabrics. The Blackwoods team believe white is the most naturally luminescent colour and contrasts well in dark environments.

    National category and sourcing manager of apparel and footwear, Leigh Eam, said the safety aspects of the designs across the Workhorse range is what makes it unique. She told Manufacturers' Monthly:

    White really does stand out in a dark environment and in addition with our biometric tape applied to the garments a person is really visible.

    Biomotion retro-reflective tape is another element of design for the nightwear range that is crucial to improving safety. She said:

    Usually you may only get one band of tape around the leg and arm for visibility. But to increase this, with our new range we added two bands on either side of the joint on the leg and arm and this makes it easier to identify which direction the person is moving in.

    She said there is also an "X" configuration across the back of the uniform so machine operators can easily identify which way a person is facing.

    With two bands featured on the arms and legs of the clothing, each band moves when a person is walking and people can clearly see the motion of that person. I think this range that Cahal has created really focuses on the fit-for-purpose needs for night works.

    Blackwoods developed the Workhorse range by listening to its customer support staff to identify the unique needs of Australian industries. One important aspect that came out of this direct feedback is the use of 100% cotton fabric. Mr Eam said:

    Australians love wearing 100% cotton and we know that the Australian high-visibility standard has been modified to allow workwear ranges to use the natural cotton that Australians want.
    There are also a range of other factors like clothing vents to combat heat and collars that can be pulled up around the neck to protect from the sun. We created clothing with these elements, and they are intrinsic to our workwear range.
  • Sources: New Zealand Herald, NZ Safety Blackwoods, The Press and Manufacturers' Monthly
  • retailers

    Boral divests 50% share of USG Boral

    Knauf will have complete ownership

    The USG Boral joint venture with Knauf includes the plasterboard-based businesses in Australia, New Zealand, Asia and Middle East

    After completing a strategic review, Boral chief executive Zlatko Todorcevski announced the company will sell its 50% stake in the USG Boral plasterboard business for $1.43 billion to its joint venture partner, Germany-based Knauf.

    Mr Todorcevski said limits on the joint venture arrangement with US Gypsum and the big offer price were the key reasons for the asset sale.

    The deal gives Boral profit before tax of $540 million and was higher than the market expected. It would enable Boral to cut debt.

    USG Boral is a strong performer and has solid growth prospects in emerging Asian markets but Mr Todorcevski said the sale would help simplify the Boral portfolio of businesses.

    Boral experienced six profit downgrades over two years after former chief executive Mike Kane spent $3.5 billion buying the Headwaters business in the US in late 2016.

    Mr Todorcevski has conceded previous management had paid too much for Headwaters, but no further write-downs of goodwill would be needed after it took a $1.22 billion impairment on the US business in August. He said:

    We've failed to maximise the opportunities. Integration and execution have been found wanting.

    He said fly ash volume for the September quarter was down 11%. Fly ash was a core part of the Headwaters acquisition.

    In a recent trading update, Boral said that in the three months to the end of September, revenue from the Australian operations fell by 9%, and earnings before interest and tax dropped 5% on the same period a year earlier.

    The first quarter of the 2021 financial year has seen fewer disruptions in most businesses relative to the previous six months, which is encouraging, but it is still not business as usual. We're not seeing consistency in activity levels from month to month, which reflects ongoing uncertainty and challenges.

    US business

    Mr Todorcevski said overall revenue at the North American operations fell in the first quarter in a patchy market, although new home construction was improving. He said:

    In terms of North America we're not committed to selling. It's a really good business and we see a lot of upside and we've had inbound inquiries both directly and indirectly. But we have a value expectation there and if potential buyers don't meet that expectation, I think it's in the best interests of shareholders to hold those assets and deliver the opportunities we see.

    The preference was for a sale of the entire building products portfolio rather than a piecemeal approach. Mr Todorcevski said:

    What we don't want to do is have people pick the eyes out of that portfolio and we're left with some of the less attractive building product segments. That is something we're very conscious about.

    Mr Todorcevski said Boral had fielded a number of approaches from potential buyers but wanted to see what impact an improving US housing market would have on the value of its US divisions, which are tied to the building and construction sectors. The US residential construction market has renewed momentum in the COVID-19 pandemic fallout, as people look to regional areas to live.

    Kerry Stokes' Seven Group has been pushing for an exit of the US business. It holds 19.9% of Boral after a steady buy-up of the stock that began early in 2020 as it eyed the big infrastructure spend in the pipeline in Australia if an aggressive Boral turnaround was pursued.

    Strategic review

    The company has completed months of work on whether it should unwind the ambitious US growth plans championed under Mr Kane, and narrow its focus to the Australian construction materials market as part of a push to lift investment returns after a disappointing past two years. Property asset sell-offs are also under serious consideration.

    Its review found that its Australian operations have a strong market position but need to be better managed, leaner and more customer-focused to lift returns. Mr Todorcevski said Boral in Australia was also eyeing a move into recycled concrete and asphalt. The focus will be on getting costs down and improving speed to market.

    Boral, with its strong quarries and aggregates position, was in a strong position to do well out of big infrastructure spending by governments in Australia if the business was tightly managed.

    Knauf

    Merchant banker Goldman Sachs has noted that Knauf faces risk with the USG Boral deal. Goldman analyst David Schwartz told The Australian:

    One key impediment to the transaction remains the possible divestment of Knauf's existing Australian assets, given competition concerns in the Australian plasterboard market - Knauf's call option on USG Boral Australia was previously rejected by the Australian Competition & Consumer Commission (ACCC), and the market remains largely concentrated between Knauf, CSR and USG Boral.

    The Data Room column in The Australian also reports that Belgium-based building materials provider Etex could be looking to acquire Knauf's Australian assets.

    Etex is a family-owned building materials company that operates in 42 countries but generates most of its revenue from the European market. It sells cement, fibres, gypsum, sand, clay and other materials such as vermiculite, paper, mica and coatings.

    Boral's sale of its half share of its USG plasterboard venture to Knauf places pressure on the German building materials group to sell its other plasterboard plants in Australia to appease the ACCC.

    Knauf was already planning sell the plasterboard factories it owned before it purchased the USG assets in Australia and Asia through the Boral partnership.

    Before acquiring USG, Knauf's Australian operations consisted of plasterboard, metal framing systems and acoustic linings and ceiling tiles. It has four manufacturing plants in Victoria, NSW and Queensland. The plasterboard manufacturing sites that it owned before the USG deal are located at Altona in Melbourne, Matraville in Sydney and Bundaberg, Queensland. There is also a factory in Beenleigh (QLD) where it makes metal profile lines.

    The plasterboard sites that were part of the USG joint venture and are not for sale are at Port Melbourne, Camellia in Sydney and Pinkenba in Brisbane.

    Data Room has reported that European building materials company, Saint-Gobain could be looking at Knauf's portfolio for acquisition. The company has a presence in 67 countries including Australia. It has an annual revenue of about EUR10.9 billion.

    China National Building Material (CNBM) is also understood to have shown interest. The publicly traded company is involved in cement, lightweight building materials, glass fibre, fibre-reinforced plastic products and engineering services

  • Sources: The Australian Financial Review, The Australian and The Age
  • Related: Boral had a plasterboard joint venture across Asia, Australia and New Zealand with USG, but Knauf bought out USG in a deal last year worth USD7 billion.

    Knauf's deal to buy USG for USD7b - HI News, page 27
    companies

    Keeping hardware customers post-pandemic

    The Home Depot's tech investments pay off

    The retailer won a lot of customers during the pandemic and credits its digital technology for attracting DIY consumers

    In the US, Home Depot reacted to the rapid spread of COVID-19 by cancelling annual sales events and pulling many marked-down goods off the shelves to keep crowds away from stores. But rather than experiencing a drop in traffic, amid lockdowns and social distancing, customers began flocking to its physical and online stores. They were spending stay-at-home savings and government stimulus checks on home improvement projects.

    The digital technology needed to meet that rush in demand fell to Matt Carey, Home Depot's chief information officer. Mr Carey and his team quickly created a feature on the company's mobile app and website to let customers pick up items in front of the store if they didn't feel comfortable going inside. It also developed real-time inventory-tracking software, among other tools.

    Mr. Carey spoke to The Wall Street Journal (WSJ) about the efforts Home Depot made to get its technology in place and how it's handling the surge in business. Here are edited excerpts of the discussion.

    WSJ: Hardware stores were declared an essential service. But how did you keep stores open?

    Mr Carey: We went to crowd-limiting very early. Within 24 hours, we had an app deployed, running in the cloud, that allowed our associates to control the crowds coming in and out of the stores. You have a person who has a hand-held device in front of the store. As one customer goes in, you add them, and as one comes out, you subtract. Nothing high tech, but it did the job.

    WSJ: What have you learned, and what would you do differently?

    Mr Carey: The past several months provided us a wealth of customer feedback, in a compressed time frame, related to the digital capabilities we offer. Take our curbside rollout, for example. We started with a very scrappy, manual process where a customer would arrive at the store after ordering online, inform an associate of their order number, and then the associate would get the order and bring it out. Associates were actually making handmade signs that said, "Curbside pickup, park here." We were able to introduce enhanced features very quickly. The experience today is now fully embedded into our app - customers can even opt-in to location-based alerts that let the store know they've arrived to pick up their order.

    WSJ: What was happening at the online store?

    Mr Carey: There was a significant spike in our online business. Because we earlier had invested in moving that platform to the cloud, it went off just great with no issues and we continue to handle that volume without a problem.

    The great thing about the cloud is that you don't have to order hardware, bring it into your data centre, get it set up on the data-centre floor and wire it up. Obviously, there is lead time there. It's pretty clear that we would not have been able, had we hosted it ourselves, to withstand the volumes that we experienced, and are still experiencing, on the online platform.

    WSJ: What's one example of how the online software might help customers get what they need for the project they're planning?

    Mr Carey: When a customer is searching for a term such as "fence" or "fencing," we will return a range of results based on the various fencing needs they may have. As an example, within a couple clicks, we can determine that the intent of the project is to install a wooden fence for a yard, and we will help the customer with suggestions for additional tools and materials to complete the project. Suggestions may include concrete for the footings, hinges for a gate, and even a how-to guide for installing a backyard fence.

    WSJ: How did you handle the pandemic's impact on logistics?

    Mr Carey: The supply chain in general across the US, just finding drivers and trailers, was a challenge. Making sure we could get products to the stores, a lot of that was human resources, a need to staff up. But we also had a brand-new distribution centre that was going to come online. Within two weeks, the use of that building was pivoted to become an online fulfillment centre, to help offload the volume from the other online fulfillment centre. The flexibility of our software allowed us to do that.

    Essentially, what we did was turn a market-delivery centre into a direct-to-home pick-pack-and-ship centre. It was a bulk distribution centre and required a whole different software stack. You're not planning routes at fulfillment centres. You're forwarding packages to UPS and other home-delivery carriers. As a result, customers weren't experiencing the long lead times that they were from competitors.

    WSJ: How were you able to help DIY home improvement shoppers?

    Mr Carey: We have a home-measure service, whether it be carpet or other products. We want to be able to engage a customer how they want to be engaged with. If they want to order a sample online, we want to get those to you. We can help you know how many bolts you might need. We have a tool to calculate how much it will cost to buy new countertops. All the things that help you assess a project. Anything to remove the friction that prevents a customer from doing a job, even connecting them with a professional. We have these online services.

    We're also using AI and natural-language processing to help connect the customer to a product they're looking for. In some cases they don't know what to ask.

    WSJ: How are the stores seeing their customer change? Are more novices still jumping in?

    Mr Carey: We are seeing customers take on expanded projects throughout their homes that, in turn, create additional activity across the store. We are seeing their confidence grow after they complete their first DIY project - it may be a garden or it may be painting. With that confidence, we see them take on the next project that may grow in complexity, like installing ceiling fans or light fixtures.

    WSJ: How has this crisis had a lasting impact on the way people shop for home products?

    Mr Carey: In many ways, COVID-19 has fundamentally changed how consumers shop. For many customers, homedepot.com or the mobile app is the new front door to the store. Our digital sales increased by roughly 100% in the second quarter, with 60% of those sales being picked up at our stores.

    WSJ: How is Home Depot planning to keep that pandemic home-improvement surge going? How are you going to keep people coming into your stores and not your competitors? And once people are able to leave their homes, do you expect a decrease in home-improvement interest? If so, how can you win them back?

    Mr Carey: We continue to invest in capabilities that make it easier for customers to choose however, whenever and wherever they want to shop with us.

  • Source: Wall Street Journal
  • bigbox

    ABS Building Work Done

    Clear signs of trouble ahead

    ABS stats that predict work in the pipeline show a clear hit for the June 2020 quarter

    The Australian Bureau of Statistics (ABS) includes in its finalised Building Work Done statistics for the June quarter of 2020 more fine-grained stats on the pipeline of work that is available to be done. This includes stats on building work commenced, alterations and additions commenced, work yet to be done, work not yet commenced, and work in the pipeline.

    At the current point of time, as the construction industry - and therefore the hardware retail trade - are trying to work out how the market will respond to the ongoing pandemic, these are key stats, as any disruption is likely to show up in them first.

    It is, of course, quite tempting to regard the construction market as being in something of a state of chaos. HNN doesn't think that construction is in chaos, nor do we think it will become chaotic - at least in the near term.

    What we do have, however, is a market that is subject to a number of competing influences. What makes it seem chaotic is that none of these consistently dominate. Instead they interact with each other in ways that are not always easy to predict or even analyse.

    The first of these influences is the pandemic itself. For the most part, construction has been less affected than many other business categories - except in Victoria (VIC), and even there it has had a significant but not overbearing impact.

    The second influence is purely on the market itself. There have been some positive outcomes for the dwelling market, in terms of families stuck in lockdown and various forms of isolation have developed a greater appreciation of their homes than ever before. However, the economic influence of the pandemic has been broadly negative. At the moment - and through to the end of 2020 - much of the immediate impact has been directly cushioned by broader and more generous support for the unemployed, as well as programs such as JobKeeper, which help businesses continue to employ workers.

    Thirdly, there has been some direct support for residential construction through the HomeBuilder program, which has provided grants for new home builds and renovations that fit within fairly narrow constraints. Whether that will be continued in its current form into 2021 is still unknown. It's quite possible a different fiscal policy will emerge.

    Fourthly and finally, there has been considerable support provided through the Reserve Bank of Australia (RBA), both with quantitative easing, and a monetary policy that has seen it sharply reduce interest rates. With rates already low, from June 2019 to March 2020 the RBA dropped rates from 1.25% to a historic low of 0.25%, with half that drop occurring in March 2020.

    Basically, the outcome of all this considerable stimulus has been that the economy (and this applies to residential construction) has declined only slightly. The hope is that, if Australia manages to find ways to keep the economy going while restraining COVID-19 infection rates in all states and territories, and if a vaccine is found that at least promises some community immunity by mid-2021, these current settings will be enough for the economy to lift itself out of recession.

    While there is a fair chance that this will prove true of the economy in general, it remains - at least in HNN's opinion - far less certain it will apply to residential construction. The main reason for this is that, while the industry has self-promoted as a dynamic, driven business sector, that is not the reality. From November 2010, when the RBA last raised interest rates by 25 basis points to 4.75%, up until October 2019, there has been a long chain of gradual rate reductions, with most of these at least partly driven by declines in the housing market.

    Eight months before the pandemic first struck, in June and July 2019, the RBA had already dropped interest rates by a total of 50 basis points, followed by another rate drop of 25 basis points in October 2019. So, just boosting housing in 2019 burnt through 75 basis points, leaving only a 50 basis points margin to help deal with the economy.

    With the potential of, at best, an interest rate reduction of 15 basis points left in the future, support for the housing industry would have to come through fiscal (policy) measures. If the government attempts to drive the housing market through measures such as an expanded HomeBuilder program it will encounter resistance, as that stimulus is heavily weighted to benefit wealthier Australians, who do have jobs. It is far more likely that the government will choose to stimulate the housing industry indirectly, by investing in those areas that do represent better growth opportunities than the construction industry. In other words, housing will be treated as a secondary demand market.

    HNN will leave the discussion of why attempting economic stimulus through boosting the housing market is generally a bad idea for a later, more in-depth article. Briefly, the reasons are ably summed up by the economist Claudio Borio, who is head of the monetary and economic department at the Bank of International Settlements. The main problem is that, he has explained, the construction market continues to be a sector with very low gains in productivity - about the lowest of any sector. Money that is spent in housing may distribute wealth to some extent, but it will not lead to a high level of economic growth.

    What the numbers show

    Building work commenced

    Charts 1 through 3 show the stats for residential building work commenced. Chart 1 compares one set of four quarters against the preceding four quarters - though in this case that actually means comparing financial years. This shows that the most recently completed financial year saw a depletion in work commenced.

    That's not a surprising result. The RBA had predicted it, after all, which is one reason why it delivered a 0.75% cut in rates to stimulate the market prior to the pandemic.

    Chart 2 shows that, with the exception of South Australia (SA), every state and territory is in negative growth for the most recent year, though some, such as Victoria, have managed to decline at a slower rate than they did in FY2018/19.

    Chart 3 is perhaps the most interesting of these charts, as it shows an unusually tight clustering of negative growth for June 2020 as compared to June 2019. While the result for June 2019 as compared to June 2018 is even worse, that older result came after over two and a half years without a reduction in interest rates.

    In pandemic terms, the June 2020 growth rates might not be too bad, but if a combined drop of 1.25% only produces this result, it could indicate the limits all stimulus will have in the future as well

    Additions and alterations commenced

    Charts 4 through 6 show the stats for alterations and additions (renovations) commenced. At first glance, both charts 4 and 5 appear to show a reasonably good rate of growth. However, on closer inspection, it looks like Queensland is the only state with a good news story (the Northern Territory is so volatile that it's difficult to see trends). That is confirmed in chart 6. Contrary to expectations that homeowners were investing in renovations, June 2020 has seen a sharp decline in that final quarter.

    It's likely that the reduction in interest rates during 2019 helped to buoy renovation commencements in the first half of the financial year, but the pandemic has had a direct and negative effect in late FY2019/20.

    Work yet to be done

    Charts 7 to 9 show the pool of work yet to be done. If we do see a general fall in building stats over the next year, it's likely that these charts will be the ones pointed to as identifying that trend at its earliest point. In chart 7, it's clear that there is a sustained decline in all the major states. Chart 8 shows a strong clustering of a decline in growth below -5%.

    Again, it is the month-on-month comparison that reveals most directly the likely impact of the pandemic, in chart 9. Only the Northern Territory shows a positive gain, and the average decline is -13% for Australia overall.

    Work not yet commenced

    Charts 10 to 12 show the stats for work not yet commenced. This is perhaps one of the trickiest stats to really understand, as it relies heavily on the outside context. A sharp increase in work not commenced typically means that there has been a rush in approvals, but builders are holding back from construction for some reason. These numbers are very sensitive to regional variations, which actually makes them quite valuable.

    As Chart 10 shows, New South Wales has seen a sharp increase on work not commenced since 2014, with a reduction after 2018, while Victoria shows a gradual increase, and QLD an overall reduction.

    That is more clearly outlined in Chart 11. Chart 12, however, shows an understandable increase in non-commencement for July 2020, as this period would have been very directly affected by the pandemic.

    Work in the pipeline

    If you are looking for some kind of "good news story" for the construction industry that comes out of these numbers, you would find it in Charts 13 to 15, the stats for work in the pipeline. Again, these stats do need some contextual interpretation. Too much work in the pipeline can indicate that the industry is stalling before a downturn, but also too little work in the pipeline can indicate the start of a long and difficult recession.

    The view that HNN prefers to take about these stats is that they represent a vote for the longer-term health of the construction industry. Charts 13 and 14 each show a general decline of work in the pipeline for both the 2018/19 and the 2019/20 financial years. But the third chart, Chart 15, shows that the decline has begun to turn around beginning with the end of 2019 and continuing through June 2020. This could be a sign that the lower interest rates are actually having an effect in terms of longer-term planning for construction.

    In other words, while the immediate vote is for a difficult FY2021/22, there may be more industry optimism for what might come in FY2022/23. Not the best news possible, but it's certainly a lot better than the alternative.

    Conclusions

    The current difficult circumstances could lead to permanent, fundamental changes in the longer term for the housing industry. The lack of room for the RBA to cut interest rates could see the market confront its boom/bust cycle, and realise that the pricing models it has tried to follow are simply not sustainable without that extra boost from monetary policy.

    One factor that could help it out in that way would be a possible trend that sees more people telecommuting rather than driving into cities every day. Not only would we see more distant (and affordable) suburbs become prime real estate, but also ex-urban regions increase in population, bringing with that better schools and other services for communities that are currently struggling.

    Housing in Australia has, quite simply, just been too expensive for its economy. That's not only about people purchasing or renting individual dwellings, it is also about the general level of support the industry has grown used to receiving. Getting to something more sustainable might mean some businesses and families take something of a hit initially, but in the long run, the economy and society would really benefit.

    statistics

    Bosch IXO VI screwdriver

    Small, and very popular

    Bosch continues to make tools that people actually use

    The IXO might, in fact, win the award for being just about the most copied design of any power tool. There are some, umm, surprisingly similar shaped offerings from companies like Ryobi out there.

    HNN has to admit that, in the past, we have had a bit of fun in describing both the IXO and some of its fans. In our defence, it's just hard to put power tools and sequins together mentally.

    However, whatever reservations we might once have had about the humble IXO, they have been firmly laid to rest by its most recent iteration, the IXO VI.

    It must have been quite a design meeting when the Bosch engineers came forward with the idea of radically changing the shape of the ultra-popular screwdriver. But, as it turns out, the new design is really a vast improvement on the more familiar IXO III to V design.

    Gone is the bulgy handle, and in its place is a design that is simple, clean and elegant. It's not going to put off your favourite aunt who needs an IXO for craft work, but it also looks at home in any handyman's toolbox.

    Two outstanding features are that it now has a squeeze-for-speed trigger, which makes it much easier to deal with tiny metal screws in assemblies such as PC cases, as well as starting self-tapping screws in some woods.

    Secondly, the IXO now has a top-mounted switch to control forward and reverse settings. We are very "into" switches here at HNN, and we have to tell you: this is one fantastic switch. It has a light, positive action, and that solid mechanical feel that gives you confidence it's going to be one of the last elements to wear out on the IXO - which has a fantastic reputation for reliability.

    The IXO recharges via a USB cable, though a dock is also available. It has also retained the twist off cover over the drive shaft, which enables it to accept many of the attachments previously made for the IXO V. These range from spice mills, to a higher speed drill fitting, a fabric cutter, and even a blower to help fan the flames of a barbecue grill.

    The one reservation that HNN would have about the overall IXO design has to do with the box in which the screwdriver is sold. Bosch is well-known for its high quality tool cases, but it does tend to make these a little bit larger than they really need to be, and this is also true for the IXO. It's a good case if you keep it in your garage, but too large for, say, a kitchen drawer.

    As a tool that is close to being a right-angle, it does present some challenges. HNN thinks that Bosch should have considered making the box taller but narrower, with the IXO held at about 60 degrees to the horizontal to conserve width.

    Additionally, it would be great to see some kind of arrangement where at least one extra screwdriver bit could be carried on the tool itself. A simple magnetic place in the right place, for example, could be a really useful addition.

    But these are, in the end really quibbles. HNN does think that Bosch has made a great transition for a DIY favourite.

    A growing market

    In fact, we are so in favour of the IXO that we will be basing a series of articles in the future around the screwdriver. HNN has long held the opinion that one reason why modern power tool makers and many hardware retailers have not done as well out of home DIY as they could have, is because they are really not making and selling the tools modern people need.

    The IXO, which can be found for around $80, might be compared with some cordless drill/battery/charger kits that can be bought for $99 (such as Ozito's basic PXC 18-volt kit). To people who come from a more "serious" DIY/woodworking background there is simply no comparison, and they would argue that the IXO does not represent good value.

    However, the real measure of the value of any tool is how often it gets used, and how important that usage is to the tool's owner. What needs to be understood about the potential of the IXO is that it isn't just a screwdriver that can be used as a drill in a pinch, it's really a highly portable, compact, electric motor platform, that can be used for a wide range of convenience uses. It's a question of providing just enough power in an accessible package.

    To name just one area where the IXO really shines, consider the act of assembling the very popular IKEA furniture. HNN has observed even competent DIYers with quite a few tools reduced to endless turning Allen Keys to tighten fasteners on furniture. The IXO makes a point of coming with a range of small hex bits - bits which, we would add, are sometimes just hard to find on their own in many hardware stores.

    But we've been taking the IXO considerably further than that. Wait until you see the IXO used as a drilling head on computer numerically controlled (CNC) unit!

    products

    Big box update

    Bunnings responds to restrictions in Victoria

    Large retailers like Bunnings must remain closed until November 2 - or until further announcements by the state government

    Victorian Premier Daniel Andrews recently announced that retailers could open their doors with COVID-19 precautions in place from November 2, though this date might be brought forward - to October 26 - if case numbers remained low.

    Some small businesses are allowed to reopen, including hairdressers, allied health centres, in-person real estate auctions and those offering home maintenance and renovation.

    But retail and hospitality venues such as restaurants, bars and hotels in Melbourne, have to wait until November 2 to reopen. Even after that, restrictions will remain on indoor and outdoor gatherings and on movement in the city, including retaining the 25-kilometre rule and travel to regional Victoria.

    Bunnings managing director Michael Schneider said he appreciated the clarity but remains disappointed the government had not considered its proposal for a staggered reopening and that larger format stores were unable to open.

    We do still have genuine concerns for both our team members and the community that the reopening of retail on a single day will see large numbers due to built-up demand...
    We're disappointed that the different risk profiles in the retail sector have not been recognised, particularly standalone large format retail with outdoor adjacencies and stringent COVID-safe measures.

    Wesfarmers-owned Bunnings and Officeworks have been lobbying the state government to be able to reopen for weeks, pointing to supermarkets as an example of the low risk in bigger retail spaces.

    Wesfarmers managing director Rob Scott welcomed the removal of some restrictions but said it was difficult to understand the rationale for some changes and the ongoing business restrictions. He said:

    You can go to the hairdresser or a skate park and have more freedom to travel, but you can't go to your local Bunnings warehouse.

    He said there was significant "pent-up" demand for the return of retail stores and while Wesfarmers had been able to keep paying its Melbourne staff through the shutdowns, smaller businesses had been hit hard. He told The Australian:

    Reopening will be an important step towards rebuilding a very damaged Victorian economy, and providing some hope and relief for people in the lead-up to Christmas.

    Business Council of Australia CEO Jennifer Westacott said there was "an inexplicable and unacceptable delay for Victorians and small businesses who are hanging on by a day, not a week. Adopting a wait-and-see approach to easing restrictions is not an answer for people who face a bleak Christmas and businesses that are trying to get back up and running."

    Ms Westacott is also a non-executive director at Wesfarmers after joining the board in 2013. She said:

    For businesses, it is now a day-to-day proposition, not a week-to-week one, whether they remain viable or close their doors forever. There is no sound reason to continue the restrictions on business, especially with case numbers clearly on a downward trajectory.

    However, Australian Retailers Association chief Paul Zahra said the reopening before the Christmas rush was an "enormous relief".

    While this date is many weeks later than we would have hoped, it is just in time for the official start of the Christmas shopping period and very welcome news for retailers who have been desperately seeking clarity for months. The ARA has been calling for store staff to have the ability to return earlier to begin the arduous task of store preparations in time for the busiest and most important trading period of the year.

    Yeppoon store

    In other news, the construction of the Bunnings store in Yeppoon (QLD) is currently underway. A number of local dignitaries recently gathered at the Capricorn Coast Homemaker's Centre to watch the first soil being turned as building begins, according to The Courier Mail.

    The new Bunnings is expected to open in the second quarter of 2021 and will span 8900sqm.

    Angus Holloway, senior development manager for property development company Gibb Group, believes the Bunnings Warehouse development represents a significant investment in the local community, boosting job opportunities and economic activity.

    Queensland builder De Luca Corporation was awarded the tender in August, from a shortlist of five prequalified tenderers.

  • Sources: The Australian Financial Review, The Australian, The Age and The Courier Mail
  • bigbox

    Indie store update

    Budget gets positive response

    Total Tools is set to open an outlet in regional Victoria and Narromine Hardware keeps it local

    General manager, Andrew Pitman from Geelong based Belmont Timber and Fagg's Mitre 10 said the business believes the federal budget will help revitalise the wider economy and provide a confidence boost for the local community. He said he is pleased the government will borrow to fund personal tax relief and new incentive programs for business, infrastructure and job creation. He told The Geelong Advertiser:

    A trillion-dollar national debt is breathtaking in scale but it's what the country, and regional Australia, needs to support future investment and growth.

    In particular, Mr Pitman welcomed the extension of the first home loan deposit scheme, the ability to write off new assets, job creation incentives and the tax cuts. He said:

    The payment of up to $200 per week to hire young Australians is very appealing and will help reverse some of the high youth unemployment we have in Geelong. This aligns with our participation in the GROW G21 program that helps disadvantaged youth secure new work opportunities.

    Mr Pitman said the hardware retailer would also take advantage of the ability to write off assets through the purchase of vehicles and equipment with that investment to be shared among Geelong suppliers.

    He believes personal income tax cuts will also ultimately see more money flow back into the economy and build consumer confidence. He said:

    In the lead-up to Christmas, the additional money will be spent in the retail space and help resuscitate retailers that have suffocated under the weight of COVID-19...
    Small business, tourism and the hospitality industry have been haemorrhaging under lockdown and the additional federal government stimulus will help bring back the customers as Australians seek to holiday domestically.
    We also believe that 2021 will see a strengthening trend of Melburnians migrating to regional Victoria and in particular Geelong.
    COVID-19 has been an enabler for the development of the home office workplace. The new work from home ethos will see Geelong's population continue to grow as Melburnians seek the appeal of an affordable regional lifestyle.

    Total Tools in Warrnambool

    Total Tools Warrnambool franchise director Kyall Wragge has been placing the final touches on a 1534sqm store in East Warrnambool's Harvey Norman Complex. It is expected to open in mid-November.

    The business owner went ahead with plans to open despite this year's disruptions, using a vacant shopfront and a site occupied previously by floorcare and cleaning retailer Goodfreys. Mr Wragge told The Warrnambool Standard:

    We weren't going to let the challenge of COVID hold us back.

    A former Melbourne resident, Mr Wragge moved to Warrnambool to start the store because of the city's growing trade-based industries. He explains:

    Data shows there's a lot of qualified tradies around the area. It's a growing area, you can see it through the roads and the housing ... It was voted the most liveable city in Australia; it's a beautiful place and it's growing.

    Mr Wragge said he is gearing the new store at both DIY and trades markets to "complement" existing hardware stores in the region.

    Narromine Hardware

    Narromine Hardware located about 40 kilometres west of Dubbo (NSW) is benefitting from an air of optimism with local shopkeepers enjoying increased foot traffic and farmers excited by the prospect of a long-awaited, decent harvest.

    After experiencing the devastating impacts of a prolonged, unprecedented dry spell, closely followed by the global pandemic blow, the general vibe among locals is finally looking up, according to Dubbo Photo News.

    The hardware store will soon celebrate its second year under new ownership in November. In its first year, the team made much-needed changes to the space which was home to previous hardware shop fronts for over 65 years. In an earlier interview, manager Tracy Brennan said:

    We've remodelled the layout to serve our customers better, expanded the range of stock and refurbished both the interior and exterior of the shop and trade desk. We also cemented our back shed and turned it into a trade centre.

    It also modified the range in store to better suit the current water restrictions, and ordered grey water hoses and a range of gardening products so residents can reuse their water elsewhere.

    More recently, it brought the newsagency into the hardware store, making it a one-stop-shop for locals.

    Capitalising on the buoyant atmosphere, retailers have teamed up with the Narromine Shire Council for a major Shop Local campaign which will run from November 1 to December 18.

    The marketing strategy aims to promote the Narromine region as a leading shopping destination in the lead up to Christmas and continue to encourage people to shop locally. Narromine Shire Council communications manager, Kelly McCutcheon, told Dubbo Photo News:

    Come December, our shops will turn into overall weekend trading so they will be open on Saturday and Sunday. A lot of our cafes are going to complement that and open for that time as well.

    A late-night shopping event in Narromine is also planned for December 10, where most retailers will keep their doors open for a few extra hours.

  • Sources: Geelong Advertiser, The Warrnambool Standard and Dubbo Photo News
  • retailers

    Pandemic drives sales at Beacon Lighting

    Effective online channel

    The company said first-quarter underlying net profit after tax (excluding Beacon Energy Solutions) had increased to $8.4 million from $2.2 million

    A trading update for the first quarter of 2021 showed Beacon Lighting's like-for-like store sales was up by 26.6% driven by an increase in home renovations and home offices during COVID-19 lockdowns. Consumers have been sprucing up their homes with new lighting products, as well as desk lamps or ceiling fans for home offices.

    The online channel proved successful for Beacon Lighting, as it has for many retailers during home isolation. Its online sales rose by 156% in the period.

    Retail trading conditions have been supportive of the lighting and fan product categories, with strong growth being exhibited across all Australian markets except for the Melbourne region.

    Due to lockdowns, the company's Melbourne stores have been closed to retail customers since 6 August 2020. However, it has made use of these stores to process online orders, click & collect contact-free pickups, and service trade customers.

    Beacon Lighting chief executive Glen Robinson said during the difficult times around the coronavirus pandemic the retailer had been able to provide its customers with a safe and rewarding shopping experience in stores and online.

    We are seeing many customers investing in their home as they spend more time at home working and studying. Thanks to the support of our customers and the commitment of our team members, the group has been able to achieve these strong results.

    FY results

    Beacon Lighting has been benefitting from the trend to work from home driven by the COVID-19 restrictions, as stuck-at-home Aussies spruce up their fixtures and fittings with the spare cash they have that would have otherwise been spent on a holiday, travel or hospitality. In August, it unveiled a bumper full-year profit, up 38.5% to $22.2 million after sales grew to $252.2 million for the 12 months through June.

    On an underlying basis, which strips out the impact of Beacon's exit from its solar business as well as the sale of a distribution centre, net profit after tax lifted 16.8% to $19.1 million.

    Beacon Lighting's online sales surged 78% in the June half, lifting online sales for the year by 50.6%.

    In an earlier trading update back in June, Mr Robinson told The Australian:

    Much of it (rising sales) is coming from the fact people are not spending in cafes and restaurants, they are not going on overseas holidays, so they are investing in their house.
    Some of it might be coming out of superannuation money, and they see it as a good opportunity to improve the value of their home and change their spending habits from where they would usually go...
    [Sales increase] is across the board so there has been an uplift. Probably the strongest growth categories were light globes, desk lamps that sort of stuff ... even things like ceiling fans, garden lighting was very popular.

    More recently, the lighting retailer took out a seven-year lease on prominent retail space located on 1860 Sandgate Road, Virginia (QLD). A Bunnings store is being built next door. CBRE's Adam Brimson told The Courier Mail that an estimated 63,000 vehicles passed the location each day.

    In Melbourne, Beacon Lighting's purpose-built distribution facility at the Gilbertson Industrial Estate in Derrimut (VIC), encompasses a 11,469sqm warehouse and office on a two-hectare site.

  • Sources: Weekend Australian, Motley Fool Australia, The Australian, The Australian Financial Review, The Courier Mail, and Sydney Morning Herald
  • retailers

    ABS Retail Stats: August 2020

    Growth is reduced, but still exuberant

    While growth in hardware retail revenue has slowed from 35% in June/July to 25% in August, the market remains robust

    The Australian Bureau of Statistics (ABS) has released its statistics for Retail Trade, Australia to August 2020. Overall, the revenue numbers for hardware stores have continued to show a sharp increase over previous periods. The results for hardware retail revenue largely continue the strong growth year-on-year seen since March 2020.

    As the August numbers cover the period when Victoria (VIC) entered into a lockdown that excluded DIYers from shopping in-store, there is - as expected - that state experienced slowing growth, though in overall terms it continued.

    Chart 1 shows the cumulative totals for the trailing 12 months to August over the past 10 years. The most remarkable characteristic is the increase in overall sales for the most recent 12-month period.

    Comparing the figures for the trailing 12 months to August, the Australian Capital Territory (ACT) showed the strongest percentage growth at 19.1%, while VIC grew by the highest dollar amount, showing an increase of $816 million for the most recent period against the previous corresponding period (pcp), which was the trailing 12 months to August 2019. This gave VIC a growth rate of 14.6%.

    New South Wales (NSW) grew by 12.2%, Queensland (QLD) grew by 12.6%, South Australia (SA) by 15.4%, and Western Australia (WA) by 14.2%. (Figures for Tasmania and the Northern Territory are not included in the ABS numbers.)

    Overall, Australian hardware retail revenue come in at $22,187 million, up from $19,554 in the pcp, an increase of 13.5%.

    Chart 2 shows the historical growth rate for the trailing 12-month periods to August. The effect of the pandemic is clearly seen in the sharp upwards trend for the most recent period.

    Chart 3 is perhaps a more revealing graph. It shows the growth rate comparison between a month and the same month in the previous year. The pandemic effect clearly shows in March 2020, and this peaks in June and July. August shows some retreat from the high growth rates, though, at over 25%, this still remains remarkable. It's interesting to note that the decline for VIC in August, though evident is less overall than that for other states.

    Chart 4 provides an overview for how the growth has been distributed through the states as a percentage of overall revenue for each month of the pandemic. This shows clearly that in August 2020, Victoria's overall share of revenue has declined, while NSW and QLD show increases.

    Analysis

    The major concern for hardware retailers is how much of this surge is spending in genuinely "new business", and how much relates to projects being brought forward. It is evidently a mix of these, and the high rates of growth are unlikely to be sustained post December 2020.

    The problem is, of course, how to anticipate demand, and adjust forward ordering so as to have adequate supply, while not risking over-ordering, and being left to remainder stock during a downturn. The retail trade figures for September 2020 will be crucial in providing some guidance to this. A decline to growth below 10% - while still representing a substantial gain - could signal a forthcoming weakness in the market.

    The risk factors currently active vary by state as well as by metropolitan versus rural regions, but essentially come down to whether a vaccine will be developed by the end of 2020, as well as how effective and available that vaccine would be.

    There is also the real potential that there will be a "third wave" of pandemic contagion, in which case we could see these growth numbers invert, as Australians become extremely cautious in their purchases.

    statistics

    Tools of the Week: Bosch + Ryobi

    Ryobi electrostatic sprayers and Bosch EasyCurvSander

    Ryobi has just released a range of electrostatic sprayers, ideal for COVID-19 disinfection, and Bosch's EasyCurvSander smooths curves

    This week's Tools of the Week looks at two innovative products. Ryobi's electrostatic sprayers could be a big help in coping with COVID-19, and Bosch's cordless sander could be aimed at the 3D maker market, as well as DIY woodworking.

    Ryobi electrostatic sprayers

    Industrial tools have made use of electrostatics for some time, most notably by applying a positive charge to paint and other coatings. That positive charge makes the fine droplets of the coating attractive to the negatively charged surfaces they interact with.

    The result is a better coating that can, to some extent "wrap around" the edges of the target object, as well as providing more coverage on the sides of nooks and crannies. The coating gets applied more evenly, and in most cases, this means that less of the coating material is wasted so less of it is needed to treat surfaces.

    The newest use for electrostatics is in applying cleaners and disinfectants to surfaces. With the Sars-CoV-2 pandemic, one approach to limiting contagion has been to disinfect public spaces such as trains and buses. This has increased attention regarding getting disinfectant to reach into holes and crevices - something that electrostatics are good at boosting.

    Victory Innovations, based in Minnesota, USA, was one of the first companies to make electrostatic sprayers suitable for maintenance and facility use. Their units typically cost over USD850, and demand has been high enough for there to typically be a waiting list of a month or more.

    The Hong Kong and US-based Techtronic Industries (TTI) has now entered the field, with its mid-range Ryobi brand. Ryobi has recently released a range of three electrostatic sprayers, with capacities of 1.0 litre, 1.9 litres and 3.8 litres. The smallest unit has a range of up to 1.5m, and features nozzles that can provide 50, 70 and 100 micron droplet sizes. It can spray 60 litres for one charge of a 2.0 amp-hour Ryobi ONE+ Lithium-ion battery.

    The 1.9 litre and 3.8 litre models appear to use the same base unit, with the smaller one using an attached container, and the second a backpack container. These can spray at 65 microns to a distance of 0.6m, 85 microns at 1.5m, and 160 microns at up to 3.1m. They can spray over 100 litres from a single charge of the same 2.0 amp-hour battery used by the handheld units.

    These sprayers are currently being sold through Home Depot Pro in the US. The 1.0 litre sprayer is priced at USD399 and the backpack spray is priced at USD429. The mid-range sprayer has yet to be fully released. Prices are for a full kit of battery and charger.

    As these are very new products, and likely to find high market demand in the US, there are no details as to whether they will be distributed by Bunnings in Australia.

    Bosch EasyCurvSander 12

    At first glance, it might be just a little bit difficult to understand the EasyCurvSander (ECS). Looking somewhat like a Philips electric shaver, it features three rotating pads mounted on flexible joints which enables them to independently adjust to a wide range of angles. To use it, a mesh-type sanding material is attached to each of the pads, or, alternatively, a polishing pad can be fitted.

    The end result is a sander that can easily cope with bowl-shaped surfaces and a wide range of variable curves. It's powered by Bosch's well-known 12-volt (really 10.8-volt) in-handle Lithium-ion battery. It retails for under EUR70, and is available in many countries of the EU, as well as the UK. At the moment it is not distributed in Australia.

    For the average DIYer this might seem a handy gizmo for sanding the fiddly bits of, say, garden furniture, but its prospects of being a truly popular and profitable tool might seem a bit dim.

    However, HNN would suggest that this tool is really not aimed only at the average DIYer. Its target market is likely to include the "Maker" area as well, as it is an ideal tool for finishing products produced through 3D printing. Objects made with 3D printers that have large curved surfaces typically have some degree of striations (or they do if you don't want to spend three days printing them in ultrafine mode).

    Sanding these smooth is a fairly unpleasant task, especially if they've been printed in one of the harder filaments (in particular ABS).

    One reason why this seems like a valid suggestion is that Bosch is already highly regarded in the Maker community through its Dremel brand of rotary tools. These are used for fine work on 3D printed pieces to remove the thin frameworks the printers add to keep the object stable, as well as to smooth out notches and holes.

    companies

    Mental health initiative from Bunnings

    Founding member of Corporate Mental Health Alliance Australia

    Bunnings Group managing director, Michael Schneider also welcomes the idea of a travel bubble with New Zealand

    More than just a response to restrictions as a result of the coronavirus pandemic, Bunnings has emphasised the mental health of its employees. Led by managing director Michael Schneider, the retailer has increased access to counselling for staff and encouraged a culture of openness where management have shared their virus experiences with front-line employees. He told The West Australian:

    It's important from a leadership point of view because when we go through something so unbelievable, particularly in Victoria, the team needs to know we are facing our own issues as it helps them realise they're not doing this on their own.

    Even though mental health had been part of the company's workplace health and safety plan for several years, the virus has put renewed emphasis on the role of employers in caring for the mental health of employees.

    Mr Schneider shows genuine empathy for store staff who have to deal with unreasonable demands by some of its customers. In an exclusive interview with the My Chanticleer column in The Australian Financial Review (AFR), Mr Schneider said:

    The mental health crisis that's running alongside the actual health crisis of COVID is huge. You have just got people who are anxious with stress and they come into stores not in a great way and something goes wrong and you get certain reactions.
    We've sadly had team members abused, spat on, all sorts of things - and we're not alone. This is an industry-wide issue, and something the union is very focused on as well. And it is something I am a little bit worried about coming back into stores being opened in Victoria.
    Not only is there going to be pent-up demand for product, but I think there is pent-up emotion from extended periods of pretty significant isolation.

    Mr Schneider said not only were frontline retail staff dealing with people who were anxious about COVID-19, but support teams in Melbourne had spent eight months working in isolation. He told The AFR:

    They are now watching everyone else get their life back together. I'm now seeing my friends in Brisbane, Perth or Sydney getting on with life that gives a sense of, 'what do I have to look forward to?'
    For us, [this] has led to a consistent higher use of our [employee assistance program] services.

    Non-profit alliance

    Bunnings has joined forces with other corporates across different industries to form an alliance that addresses mental health at work. The Corporate Mental Health Alliance Australia (CMHAA) is part of the global City Mental Health Alliance network, founded in the UK in 2012. The local arm is a business-led, expert-guided member organisation dedicated to improving mental health in the workplace.

    Bunnings is a founding member of CMHAA along with companies such as AIA Australia, Allianz Australia, Clayton Utz, Coles Group, Commonwealth Bank, Deloitte, DLA Piper, Johnson & Johnson Family of Companies, King & Wood Mallesons, KPMG, Microsoft, MinterEllison, Woolworths Group and PwC Australia.

    Steven Worrall is managing director of Microsoft Australia and serves as CMHAA chairman.

    The establishment of the non-profit group comes at a time when mental health issues in the workplace are increasing as a result of the pandemic. The federal budget committed $62.1 million over four years to improve access to mental health services and double the number of rebated psychology sessions to 20 sessions on Medicare.

    Re-opening

    Mr Schneider is well placed to discuss the challenges facing Victorian retailers coming out of lock down. Bunnings has 50 stores in New Zealand that have come out of a Stage 4 lockdown.

    In August, it opened one of its largest NZ stores approximately 20km outside of Auckland in Westgate. This 15,000sqm store is the first in the country to have a Dream Kitchen Design Centre, with more than 10 kitchen displays, along with six bathroom displays and assisted living displays.

    When Bunnings reopened in New Zealand, the stores could not cope with the rush of people. Mr Schneider said he is focused on thinking about the right settings for a successful exit from lockdown in Victoria. He told the My Chanticleer column (AFR):

    We've been having conversations with the Victorian government and have recommended that consideration be given to the deeply fragmented nature of the retail sector and the safety aspects of a staggered re-opening.
    Our experience in New Zealand demonstrated that reopening retail all at once can significantly increase anxiety and risk for customers and retail employees.
    We believe the safest way to reopen is to take a staggered approach, starting with retailers that have strong COVID protocols like ours. We can start to revive the economy and restore a sense of normality while keeping everyone safe.

    During economic summit webinar organised by the Trans-Tasman Business Circle, Mr Schneider said he is a big supporter of opening state borders and creating a travel bubble between Australia and New Zealand. But in order to do so consistent rules need to be applied across Australia and New Zealand.

    What we need to have is not only all the borders open, but if you're going to have all the borders open, a very consistent approach to how COVID outbreaks are managed.
    We want to be clear that if there is a COVID outbreak somewhere it's dealt with the same way, because nothing will kill your holiday more than being told you have to go and isolate for two weeks. I think we've got a long way to go to get consistency.

    Mr Schneider believes a travel bubble with New Zealand would stimulate tourism and commercial activity, and said the pandemic was also opening opportunities for regional markets.

    Mr Schneider also spoke about the impact on the broader economy of the trend to work from home, which he viewed as positive for a retailer like Bunnings as people changed their lifestyles. This would have a direct impact on the housing market, he added. He told the summit, as reported in The Weekend Australian:

    One of the things that is pleasingly emerging is this work-from-home period - whether it is longer term or shorter term, - depending on where you are living - has taught us we can work differently. And I think that has been seen particularly in regional markets.

    He said there had been "some stimulation of the housing markets, because I think people have realised 'I can live somewhere that has a great quality of life, by the coast, in the country, and by comparison to living in the city perhaps my dollar goes further'. Those sorts of things are exciting."

    Mr Schneider said there will be interesting changes in the market.

    People might be more interested in buying a holiday property or a caravan, doing those sorts of things.
  • Sources: The West Australian, The Australian Financial Review, Weekend Australian and Inside Retail New Zealand
  • bigbox