Troubles in tool-land ahead?

The ACCC watches over some big changes

With the proposed Total Tools takeover, the acquisition of Adelaide Tools and Milwaukee tools in IHG stores, the power tool industry is set for some changes. But do those changes go far enough?

Over the past nine months, there has been quite a bit of interest stirred up in the area of power tools here in Australia. Just back in October 2019, the Wesfarmers' owned Bunnings moved to acquire Adelaide Tools. Around about the same time, Stanley Black & Decker (SBD) Australia approached the Australian Competition & Consumer Commission (ACCC) with a request to make a minimum pricing requirement, but with a twist: retailers could sell DeWalt power tools below the recommended retail price (RRP), but they could not advertise them below that price. And finally, in June 2020, it turned out that Metcash has plans to go ahead and acquire the Australian power tools franchise Total Tools.

All three of those moves had an intersection point with the ACCC. The ACCC in June gave the official "go ahead" to the Bunnings acquisition of Adelaide Tools. In the same month, they also completely nixed the SBD plan. And they have, as expected, launched an investigation into the not-quite-an-acquisition-yet of Total Tools.

So many changes in such a short space of time would generally indicate that there are changes occurring that go beyond just one or two companies. Generally speaking, it means that something has shifted in terms of the underlying technology, markets and/or end-user distribution.

In this case, it's likely that distribution is the primary driver. The real question the power tool industry has to respond to, is how much of the business will continue to be transacted in physical stores, and how much will become purely online. The tool industry is one of those areas of retail where there has been considerable movement in both directions. Sydney Tools, for example, expanded largely through its online business, then decided to expand into physical stores as well. However, it is arguable that many tool businesses will, in the future, see an increased amount of business done online.

In terms of the Bunnings acquisition of Adelaide Tools, that business was one of the smaller, geographically marketed tool businesses that had a very competent and wide-ranging online tool offer. Though we have no direct knowledge of Bunnings' plans, if a company were looking for a company that could be expanded into a more extensive online offering of trade and professional tools (including Milwaukee), then Adelaide Tools would be a good place to start.

It is also probable that SBD's efforts to get minimum price restrictions on advertised prices also relates directly to the internet. Competition online is so strong that companies can easily lose a sale on the basis of a few dollars in pricing. But, as HNN wrote at the time, it is also the internet that renders that kind of effort unworkable. Outside of direct advertising, it is not hard for retailers to get the word out about whatever their prices really are.

With Total Tools, the two questions to ask are why the original founding members are willing to sell, and a why is Metcash/IHG willing to buy? At a guess, HNN would say that, strategically, the core or founding members decided Total Tools was close to its maximum value, and that it was vulnerable to online competitors. Meanwhile, IHG has a strong investment in physical stores, and sees itself as being able to resist online competition.

Which way?

From HNN's perspective, we would suggest that the power tool industry is somewhat overdue for disruption, but that it is unlikely this will come from anything as expected as online versus physical store retailing. In an age where technology has started moving so fast that consumers have almost become blase about the latest advances, power tools have continued to develop, but at nowhere near the pace of other technologies. There hasn't been a power tool equivalent of the modern smartphone, or the self-driving (almost) electric car.

One reason for this is that the market remains largely driven by the business-oriented, trade and construction sector. We've seen most power tool manufacturers respond to that sector of the market by developing bigger, more powerful tools. These have grown so powerful that now they are replacing not only main-voltage, generator-driven tools, but also tools that have long relied on petrol engines. The trend started by SBD's FLEXVolt line, has been taken still further by Techtronic Industries (TTI) Milwaukee MX FUEL range.

That's been partly driven by the adoption of new battery standards, specifically a move from the old 18650 format to the newer 21700/20700 format. The latter specifies a cylindrical battery that has a 21mm or 20mm radius and a 70mm length. Developed largely by Tesla, those battery dimensions make sense when it comes to battery physics, while the 18650 format was really just a convention, with inbuilt limitations and inefficiencies. The new dimensions, along with tweaks to anode and cathode composition materials, have enabled both smaller, more powerful battery packs, as well as higher capacity top-of-the-line batteries.

We've also seen certain technologies, such as brushless motors, gradually make their way down from the premium level, to the mid-range. Today brushless has reached the premium budget range, where DIYers with an investment in a budget rechargeable battery system can "buy up" to something a little better. We're probably three years away from brushless becoming the "standard" tool.

What is noticeable about these innovations is that they've been driven, indirectly, by pre-existing innovations in other areas of technology. Without the push to radically improve battery performance for smartphones, battery technology would never have reached the point it has today. And at some point, that technology was taken up by the electric car industry, which pushed it still further. Now, the next accelerator in that area is actually the aviation industry. There are already quite a few airplane prototypes that work just fine under battery power. However, few are commercially viable, due to weight versus power yield issues.

The power tool industry has benefited from some advances made at the consumer end of technology, but it has applied these (mostly) to its commercial business. More importantly, power tool companies have tended to devalue developments that do originate in the consumer end of their businesses.

There are likely a number of reasons that combine to create that situation. From the consumer side, it's difficult for people with little or no experience to commit to buying an "unusual" tool - they start out feeling uncertain, and anything perceived as being non-standard just increases that anxiety. There is also (for the most part) an inverse relation between how much DIY experience someone has and how powerful a tool they buy. More experienced DIYers, for example, might buy a cheap, corded hammer drill that will last 10+ years for drilling in masonry, and a lightweight 12-volt drill/driver for everything else. Inexperienced DIYers will tend to buy an 18-volt "do everything" cordless hammer drill - even if they end up using it for only two hours in total a year.

The other factor at work is that consumers are quite happy to buy an inexpensive DIY tool, or sometimes a more expensive, "trade quality" tool. They are less inclined to buy an expensive DIY tool, especially one that is expensive because it has been designed to be easier and safer for them to use.

The one company whose development is an exception to this has been Bosch. Bosch has been steadily producing tools really crafted for the DIY market since 2016. At the top of the list would have to be the EasyCut and AdvancedCut "micro chainsaw" tools. These use a small, flat blade that has the equivalent of a 1.5mm chainsaw to cut through a range of materials.

HNN has been extensively testing these tools over the past year, and we remain impressed with them. While they do certainly have some drawbacks - the nanoblade remains expensive, at around $45 replacement cost, each - that is really made up for by the versatility and ease of use of these tools.

One aspect of the nanoblade that seldom gets mentioned is that, as compared to both circular saws and standard jigsaws, they are relatively quiet. For the homeowner working away in their garage, that might not be terribly significant, but for the growing numbers of Australians living in multi-unit dwellings, keeping the DIY noise down has become a critical concern.

Added to that are a range of Bosch drills, sanders, and grinders that are designed to match power and capability to DIY needs, while also enhancing ease of use. However, as good as these tools are, and as intelligently suited to DIY tasks as they are designed to be, sales have not really rewarded these innovations. For example, while Bunnings continues to supply nanoblades for the AdvancedCut and EasyCut, they no longer stock the actual tools.

While there may be something of a marketing failure here, there is also the question of what kind of person typically sells power tools. Largely, these are not people who are amateur DIYers. Most have either a professional background, or are not overly involved with tools at all. The number of retailers and retail staff who are interested in the technological development of tools for DIY is quite limited - and not just in Australia.

The new workshop

It is very likely that the next real advances in power tools will originate in the consumer area. Probably those advances are not going to be anything the traditional tool companies acknowledge or take seriously (at first). The two most promising areas at the moment are 3D printing and computer numerically controlled (CNC) routing.

One reason why HNN is pretty confident this is going to be an area of major interest is that the hardware needed to perform this kind of "making" has sharply reduced in price over the past two years. For example, in the 3D printing world, we've seen printers such as the Creality Ender 5 Pro emerge. This is a relatively large volume printer that moves good 3D printing just within the reach of the average DIYer, costing around $650.

Moving up from that, to the more serious, high-quality work that a semi-pro could use, there is the Peopoly Phenom. The Phenom is a resin-based printer. Filament printers like the Ender 5 use a spool of filament to apply a thin layer of plastic, point by point, to build up a finished result. Resin-based printers use a vat of epoxy-based polymer resin into which they shine ultraviolet light, either through a laser or LCD array. The light causes the resin to fuse, creating the required shape.

The resin printer offers faster printing speeds and higher resolution (more accurate printing). It's been held back largely by the cost, but the Phenom is one of the first $3000 printers to offer quality and reliability. While $3000 is a lot for DIY, it's likely to come down to around $1500 over the next two years, bringing it within reach of the serious DIYer.

DIY what?

From the point of view of conventional tool companies, and conventional retailers, the questions they have are: What will DIYers be doing with this technology, and why don't they just stick with wood and woodworking tools, or even a bit of welding?

It's important to consider is just how successful some areas of retail outside of hardware have been. One of the traditional woodworking tasks, for example, was to build bookshelves. Leaving aside the fact that serious readers today are likely to have at least half their library in online ebooks, there are also just so many alternatives for inexpensive bookcases. The Billy bookcase from IKEA - all 2m x 0.8m of it - costs less than $80, and takes about 12 minutes to put together. The same relationship holds true for a whole range of other household furniture and fittings. Yes, there are some practical DIY things that remain viable - fitting a new door, fixing the roof gutters, painting, fencing and so forth - but the core range of activities is smaller, and continuing to diminish. What's left, for many, are just the relatively "big jobs": installing a new laminate floor, building a deck, fitting a kitchen.

What can you do with 3D printing? Well, how about printing your own camera accessories - in fact, even entire film cameras?

Goodman products are for anyone who has access to a 3D printer

(Yeah, mate, best of luck with the lami trimmer, the jigsaw, and a bit of ply. I don't think so. I mean, good on you, but no, mate. Just no.)

Looking for those special tiles, but not having much luck? Well, you can 3D print them, of course.

How to 3D Print Portuguese Azulejo Tiles

On the simpler end, what about a refrigerator storage box.

Refrigerator Storage Box Fresh Spacer - Cults 3D

Or a wallet:

Sliding 3D printed wallet by b03tz - Thingiverse

And something we could all use, a self-watering planter:

3D printer model Self-Watering Planter - Cults 3D

In terms of a CNC router, why go small, when you can build yourself an entire Le Corbusier LC-4 chaise longue out of plywood?

CNC plans for LC4 lounge armchair by Le Corbusier - Etsy

But what is really interesting in this field is the potential for more wide-spread use in the future. Consider, for example, spectacle (glasses) frames. Given a developed, standard lens size system, it would be possible print a wide range of frames that fitted the maker's face exactly. They would not be as durable as commercial frames, but they wouldn't need to be.

In today's world, these are often the sorts of things that people want to make for themselves. And just as woodworkers of old relied on what they learned in workshop at school, and through working with their parents, these tools rely on what people know about design, computers, and a bit of trigonometry. It's the DIY of the service industries, not the factories.

Analysis

As we've said above, there really does not seem much of an alternative to a strong disruption of the DIY hardware industry at some stage over the next 10 years - though HNN would bank on this happening within the next five to six years. The threat to the hardware industry isn't that its markets are going to collapse - people always need a place to live, and the importance of that place has been growing over the past 30 years. The threat is that hardware suppliers and retailers will find themselves displaced in the market. At the moment, it is simply difficult to imagine buying a Ryobi CNC router, or a Stanley Black & Decker 3D printer.

What we will likely find instead happening is that startups will begin to take over significant portions of the market - like Tesla - integrating with others in their area, such as smartphone makers, and eventually shouldering many tool companies out of the home market.

Strategically, due to the complexity of this market, this isn't the case of waiting for the right moment to "catch the wave". That moment was yesterday, or some time ago. But, as always, businesses (especially in hardware) tend to look at their current circumstances as an indicator of the future, when in fact where we are today has more to do with the past.

products

ABS stats show pandemic effect

ABS has released stats for retail sales and building approvals in May 2020

The latest statistical release from the ABS provides a more complete overview of the most critical four months (so far) of the Sars-Cov-2 pandemic

The Australian Bureau of Statistics has released statistics for retail sales through to May 2020, as well as building approvals through to May 2020.

Revenue Statistics

Chart 1 shows the sales for hardware retail in the trailing 12 months to May for each year. (Note that the ABS has not been able to obtain data for some states and territories, so these have been omitted.) The results for hardware retail sales are much in line with expectations, with growth increasing sharply for most states. Overall growth for Australia was 7.81%. The ACT recorded growth of 11.52% with VIC at 9.90% and WA at 9.30%. SA grew by just over 8%, and NSW recorded growth of 6.16%.

Chart 2 shows the growth in sales for the same trailing 12-month period. This shows that even though the growth rates for the year period were high, they are not exceptional.

Chart 3 shows a different data picture. This charts the revenue between the months of February and May, and it shows a marked, sharp increase in the revenues during 2020.

Chart 4 shows how that revenue was distributed through the peak months of March, April and May. While there was only a minor boost in March, April 2020 as contrasted to April 2019 lifted by 5.3%, and May 2020 was up by a considerable 8.8%.

Chart 5 shows the share of the revenues across the same interval, for 2019 and 2020. It's evident that, while the revenues have increased, the proportion between the states has stayed the same.

Building Approvals

While retail shows an increase as the pandemic takes hold, building approvals - which indicate the future of the construction industry - did fall in May 2020 as compared to May 2019, with most of those falls for multi-unit dwellings. Approvals for detached houses held steady.

Chart 6 shows the approvals for major metropolitan regions across the states. Sydney, which is the market where multi-dwelling and single dwellings are the most integrated, showed an ongoing steep fall in multi-dwellings, while house approvals stabilised. Melbourne - surprisingly - showed mild increases for both multi-dwellings and houses. Brisbane and Perth showed relatively stable numbers in house approvals, and a decline in multi-dwelling. Adelaide, like Melbourne, showed a mild improvement in both houses and multi-dwelling, though the multi-dwelling improvement followed a steep decline in 2019.

Chart 7 shows how the approvals were distributed across the four pandemic months Australia-wide. Approvals were already in decline through the first half of 2019, and this was continued into 2020. March shows the sharpest decline, but this is compensated for by a more optimistic April. However, May then reverted to caution.

Analysis

The concern that many hardware retailers have expressed is that while the early months of the pandemic might have seen sales surge, the future could see a recession - or even a depression - take hold of Australia, resulting in a slide in sales. The May figures are heartening, but it will likely be the figures for August and September that will have the most significance.

With Victoria finding itself impelled back into "lockdown" as the never-contained virus surges again, the prospects of there being no recovery until a vaccine is found, and/or rapid treatment of COVID-19 is developed, seem high.

It is evident that at the moment the property development and construction industries are banking on conditions being somewhat unchanged from those of 2019. (The largest recent impact was the slowdown that happened in 2018.) This is likely due to the balance of circumstances: economic prospects have declined, but interest rates are currently at a historic low, and are likely to continue at that low for at least another two years. Of course, being able to take advantage of those rates will depend on an economic recovery, and there are some real question marks over when, or even if (in the medium term) we will have such a recovery.

We're approaching a stage, in fact, where Australia may have to choose between a severe recession, if it follows the guidance to lockdown, socially distance and protect the health of everyone, or, should it choose to try to restart the economy anytime during 2020, plunge into a full-blown depression, where deflation takes hold.

In the end however, if Australia does begin to emerge from the pandemic in the second half of 2021, the economy is likely to have very different characteristics.

statistics

Bunnings drops VicForests wood products

The retailer will stop selling timber logged by VicForests

The timber company was found to have broken environmental laws by cutting down trees in endangered possum habitats

Bunnings said it will no longer sell timber logged by VicForests in the light of a federal court ruling that it had breached laws protecting threatened species including the greater glider and the Leadbeater's possum. Bunnings' director of merchandise, Phil Bishop, said in a statement to The Guardian:

Bunnings has a zero-tolerance approach to illegally logged timber that dates back two decades and our commitment is to only source timber products from legal and well managed forest operations.

Bunnings said it will only source legal timber from sustainable operations as it ends its timber supply contract with the state-owned logging agency.

VicForests was found to have broken the law in May, when the court found in favour of a community environment group - Friends of Leadbeater's Possum - that argued the agency breached the law by failing to protect the endangered Leadbeater's possum when it logged 66 sites designated for logging in the Central Highlands. It found that because VicForests had breached the code of practice, its exemption from national environment laws did not apply. Mr Bishop said:

We will be discontinuing all sourcing of timber from VicForests and will no longer be accepting raw material input into our supply chain from VicForests as of 30 June.
Ultimately, we believe that customers and team members have the right to expect that the timber they purchase is sourced from responsible and lawful forestry operations.

Bunnings said it sold only a small portion of VicForests' harvest but it would work with affected suppliers on a transition plan. That would include buying any timber already processed by the affected suppliers and discussing whether those suppliers could obtain timber from alternative sources.

Sources of timber

The decision by Bunnings to not stock VicForest timber products due to illegal logging would seem to point to a significant change in the industry. There has been a shift from supporting timber operations in remote locations, to preserving forests for future generations (climate change, etc). HNN spoke to Jacinta Colley, national sales director at VIDA Wood Australia to comment on the following questions.

Q1. This shift indicates that consumers, both private and corporate, are becoming less concerned about country-of-origin (ie, Australian-produced), and more concerned about the ethics and sustainability of the timber supply. How does Vida Wood Australian ensure its timber supply is ethically sourced, and what are some of the advantages this offers to your customers?

Sustainability, tractility and the carbon footprint have become the most important topics in our industry. Australia quite rightly introduced a system where suppliers, depending on the country of origin, need to full fill certain criteria when entering Australia with their timber products.
Our countries of operation are Sweden and Canada, known for its political and juridical stability and their long history of well managed forests - all our operations are PEFC and FSC certified.

Q2. In terms of supply, how has the current pandemic affected your sourcing of timber, and the logistics of getting it to Australia?

Given the magnitude of this pandemic, our operations and logistics have managed to supply our customers all over the globe with only minor interruptions. At this stage, we do not foresee any bigger problems either, however some challenges remain.

Q3. What do you see happening in terms of timber demand over the next two years? Do you think that, in net terms, there will be a reduction in demand, or more a redistribution of demand, with FY2020/21 lagging but FY2021/22 compensating?

Globally, without COVID-19, demand would have outstripped supply already in March this year. Timber is now finally recognised as a main contributor to reduce the CO2 footprint in new constructions. New building solutions like CLT, other engineered wood products and pre-manufactured trusses and wall elements are experiencing strong growth especially in Europe but also starting to grow in North America.
The huge advantages of timber over other building materials are finally reaching all corners of the European, North American and Australian building industry - multi-storage buildings and wooden sky scrapers are becoming a common sight - this in return will boost our industry further.
The long-term trend is crystal clear - more timber will be used and we believe in a further growth in demand over the next two years globally - but as always it will never be a straight line and will vary from country to country.
The current increase in demand for timber products in North America and Western Europe is a very good example. Only two months ago we thought "the world had come to an end" and we had to temporarily close a couple of mills, just to see today that all our mills are in full swing (total capacity of 11 million CBM output per year) and are sold out until August and parts of September. [These are] interesting, unprecedent and uncharted times.

Reactions

VicForests labelled Bunnings' move as "extraordinary" and warned Victorian communities that relied on timber work for jobs and income would be devastated. A spokesman for VicForests told The Guardian:

VicForests has already advised our customers that we will be appealing the Friends of the Leadbeater's Possum court decision, once final orders are made by the court.
We regrow all harvested coupes with their original species, all timber harvesting and regeneration operations are conducted to conform with Victoria's strict environmental regulations."

Gippsland East MP Tim Bull also condemned Bunnings management, saying the decision would cost jobs and that it pre-empted VicForests' court challenge. He told The Age:

This woeful decision from Bunnings could not have come at a worse time. Our communities have been impacted by drought, fire and now COVID-19 and the local economy is really struggling.
For Bunnings management to come in on the back of that and make this announcement shows no understanding of our plight. I want to stress this is not about the staff on the ground in local stores. I have several friends who work at Bunnings in Bairnsdale; this is purely a criticism of management.

Victoria plans to end native forest logging by 2030, but Amelia Young from the Wilderness Society believes support for workers needs to be made available now. She told ABC News:

The market is clearly rejecting products supplied by VicForests so the state government needs to work with VicForests and workers in the industry to make sure that workers facing inevitable change are supported through this transition.

While Bunnings is not a major retailer of VicForests products, it is a symbolic blow for the industry due to the company's high profile. Mr Bishop confirmed Bunnings would continue to source native timber from Tasmania, NSW, Queensland and Western Australia, all of which he said met Bunnings' policy requirement of legal, well-managed and responsible operations.

He also said Bunnings would "remain open to sourcing from VicForests in the future", should they attain Forest Stewardship Council Certification and avoid breaching the code.

Sourced from The Guardian Australia, ABC News and The Age

bigbox

Mitre 10 store planned for Hobart CBD

Clennett's Mitre 10 has signed a lease agreement

The company said the development would fill the void left by the demise of K&D, which closed its final store earlier this year

A new inner-city hardware store located in Hobart (TAS) is expected to open in 2021.

The Mercury reports that Clennett's Mitre 10 has earmarked a site for a development which will cater for both retail and trade customers. Managing director William Clennett said he signed a heads-of-agreement with the landlord and hoped to have lease negotiations finalised by the end of July.

The new site is 3900sqm with 1000sqm of retail space, a 2000sqm trade centre and off-street parking for 40 cars. The initial investment will be $2 million, with a further $4 million expected to be spent in the next 10 years.

The development still needs to gain council approval, but he is hopeful the store will open on April 1 next year. The new store would operate in addition to Mr Clennett's stores in Kingston, Huonville, Glenorchy and Mornington.

Bunnings has stores at Kingston, Glenorchy and Mornington. Mr Clennett told The Mercury:

The Clennett's business is set up to really dominate within the building products market, but we have also targeted retail categories where we believe we can offer a more specialised service such as power tools, paint, garden and bathroom goods.
We've also deliberately tried to partner with big brands such as Wattyl paints, Milwaukee, Stihl and Webber, all brands which Bunnings don't supply. We are really focused on supplying quality products, and I think customers are trending back that way.
I think the market is changing, and people are becoming more socially and environmentally conscious, and I think buying local is a natural extension of that.

He also believes the CBD store would add a new level of convenience for shoppers living and working in Hobart, while a free home delivery service can also give Mitre 10 a point of difference.

Meanwhile, Mr Clennett's Kingston business is undergoing an $800,000 expansion, with a new sand and soil yard being developed on the former Kingston Landscape Centre site in Mertonvale Circuit. It is approximately 500 metres from the existing hardware store in Huntingfield Drive.

Mr Clennett has taken ownership of the landscape centre and signed a 20-year lease on the site, which is closed for four to eight weeks while existing buildings and amenities are demolished. The expansion aims to ease traffic congestion and provide more space for shoppers.

Mr Clennett also hopes to redevelop a corner of the existing Mitre 10 site in the next couple of years to incorporate bulky goods tenants, which could include automotive, lighting or other specialist offerings to complement services already provided by the retail business.

Sourced from The Mercury

retailers

Bunnings expands categories through MarketLink

Rattan furniture collection and indoor plant

The popular air fryer appliance is also being sold by Bunnings, following stockouts at Aldi and Coles

Home cooking in the era of COVID-19 lockdowns has helped fuel the popularity of the air fryer and Bunnings has quickly responded to this trend by stocking the appliance through its MarketLink channel. Prior to this, Coles and Aldi released their own versions but sold out quickly, frustrating customers. It has also been reported that Kmart is struggling to keep them in stock.

For many people, the product first appeared en masse as part of Aldi's Special Buys that led to their increasing demand. Soon after, Coles added the appliance to its Best Buys range.

Unlike the supermarkets, Bunnings is offering a range of air fryers from known brands like Philips and Tefal.

Scandi-style designs

Earlier this year, Bunnings released a rattan furniture and homewares range that includes a lounge set, dining table, chairs, bar stools, foot stools, coffee table, chairs and other pieces.

Social media influencers such as @thediydecorator and @addicted_to_bargains have shared and created awareness of the collection with their combined 300K+ followers.

The range of chairs are supplied by Home Bazar. The brand began stocking its sustainably sourced products at Bunnings in April 2020.

Fiddle leaf plants

A post on a Facebook group dedicated to indoor plants - Crazy Indoor Plant People Australia - has also helped increase sales of the Fiddle-Leaf Fig plant after a user mentioned it was being sold through Bunnings at the budget-friendly price of less than $4.

Fiddle leaf figs are a current favourite with gardening fans around Australia, and generally retails for $19.98 but can go up to $200 depending on its size.

The Facebook post quickly generated over 100 comments, with many members saying they would be heading to a Bunnings store to buy the plant.

Recent research commissioned by Bunnings found 64% of people surveyed were tackling DIY once a month and two in five were planning on sprucing up their gardens. Bunnings national greenlife buyer Alex Newman told News Limited newspapers:

We've seen an increase in popularity across all plant types over the past few months. Our customers are tackling everything in the garden from growing their own food to updating their garden landscapes, as well as adding greenery inside their homes with indoor plants.

Related: Bunnings has increased its selection of furniture and homewares over the past few years. And in a relentlessly competitive retail environment, the homewares category is popular among shoppers.

Homewares, the next retail battleground? - HI News, page 32

The COVID-19 economic climate has also led Bunnings to offer products such as treadmills and exercise bikes.

Pandemic opens up new and different markets - HI News, page 22

Sourced from The Daily Mail, thelatch.com.au and Seven News

bigbox

Brennan's rebadged as Petries Mitre 10 Dubbo

Changing of the guard

After more than 40 years in operation in Dubbo, Brennan's Mitre 10 has been sold to Mudgee-based Petrie Group

The new owners of Brennan's Mitre 10 have relaunched the store as Petrie's Mitre 10 in its Dubbo (NSW) location with a member of the Petrie family at the helm. The Petrie Group has taken ownership of the store after an initial delay as a result of the COVID-19 pandemic from the original March 30 timeframe.

Brad Petrie, son of managing director Phillip Petrie, is excited to be the manager of the store after three years' experience at the group's Port Macquarie store. He told the Daily Liberal:

[I was] service replenishment manager at Port Macquarie, and looked after a team of 12 to 14 people. So this is still a step up.

He said Port Macquarie was a "trade-predominant store" whereas Dubbo was "predominantly retail".

Since the sale was announced in March, the Petrie Group has consistently said its approach would be "business as usual", including retaining the Brennan's staff of about 40 people.

Not surprisingly, the final days of ownership of the Brennan's managing director Michael Brennan and his family were emotional. However he told the Daily Liberal it was the "right time for Brennan's to pass it on to Petries".

The two families have known each other for decades, and Mr Brennan said they both had the ideology of "service and being local and regional and a major part of the group we're in". He said:

So I feel very proud to hand it over to them, I really do.

The Petrie Group now has nine stores in its network with the inclusion of the Brennan's store in Dubbo. Mudgee-based Petrie Group managing director Phillip Petrie said the family business was looking forward to being part of Dubbo. He told the Daily Liberal:

The challenge is to follow in the footsteps and maintain the standards that the Brennan family have kept here for a long time, and they're held in high regard.
We want to make sure we continue to be held in the same regard, and to run the business to the standards, and look for ways that we can even improve the offer over time. But yes, I suppose continuation and consistency is the most important thing for us.

Mr Petrie also said a major challenge is combatting the quantity of scale from big box retailers by ensuring customers get personal and informed service.

For starters you need a lot of energy and you need great people and our business has built itself on building long term relationships with our staff, our customers and our suppliers. When we build those relationships, it makes it a really strong business and people come back to us again and again...

He praised the Brennan's model which placed a priority on staff who are friendly, who want to help and who know what they're talking about. He said:

Long term staff, they know their product, they know their customers and they genuinely want to help people solve their problems, it's not just a number coming through the door, they'll know your name, they'll find a solution for you - they'll be part of your solution for the problems you're trying to solve.

Petrie's Mitre 10 was established in 1986 as a result of the sale of Lonergan's - a well-known local business - to Malcolm and Carmel Petrie. Current directors, Phillip and Annette Petrie and Mike and Annette Fergus took the reins in 2009.

Michael Brennan looks back

Mr Brennan spoke extensively to Dubbo Photo News about managing the retail business and his family history in Dubbo. Here are some of his most interesting quotes and responses to its questions.

He regards his father Frank as one of the pioneers of "big box" retailing and believes he has "learnt and inherited much of his tenacity and thinking". When discussing the emphasis he placed on friendly and informed service, he said:

There is one thing about small, local business being that you work beside your team each and every day, you share each other's dreams, desires and lives in the same community. 'Big business' cannot do this. We have always had long-serving, caring, involved staff. The reason would be that certain people click with our style and share what we believe in. We live each other's lives each and every day, we want to treat people as we would want to be treated.

When referring to some of his biggest challenges, Mr Brennan said:

Honestly, the single stand out item would be the regulation that come from governments. A business of this size and smaller has an inordinate amount of pressure put on it, it becomes cost restrictive and they're so time wasting. An example would be the single touch payroll and superannuation reporting that each employer has to undertake now.
The second that comes to mind would be the reduction in prices of products due to Chinese manufacturing. So much more effort has to be undertaken to sell a product that 20 years ago in some instances, was double the price. Yes, we sell more, but the cost to serve is greater.
I recall selling cheap electric drills, such as the Skill brand back in the eighties for $99, nowadays a cheap drill can be around the $20 to $30 mark.
The third challenge has been seven-day a week trading. I'll speak my personal mind here. The world expects retailing to be open 24/7 but at the same time do not want to pay for it, it expects retail staff to give up their lives to provide a service to Monday to Friday workers yet they do not want to pay any more for the increased costs of staff working those weekend hours.
I feel for the employees and do believe they are entitled to increased rates on weekends, I understand why consumers want seven-day trading, but I know from being a retailer that it is incredibly unfair to them due to the cost to serve. An offshoot of that is buying on the internet which forces retail to maintain seven-days a week trading.

When asked about why the family decided it was time to sell the store, he said:

There is no single answer to this question, it is merely the right time. I have a list of probably 20 key points that lead to the decision. Time of life both me, my parents and five sisters, no family succession due to having no children myself and sisters all out of Dubbo. A business this size is difficult to sell, and the timing was right for the purchases by the Petries. Profitability for this style of business is tough, desire to have freedom from a lifelong career in order to try something different, government and statutory regulation is becoming overbearing, and the list goes on.

Mr Brennan remains very optimistic about the future. He said:

We continue to own the buildings of Mitre 10 in Dubbo plus the building of an about to be announced new retail business. We won't be front-line, but we are still a major part of the main street of the city.
Bev and Frank will continue their retirement with much time spent on the golf course and involved with different groups. My wife and I will increase our effort in our couple of properties and at some point I'll probably look for some supplementary income but what that looks like is too early to speculate.

Related: The sale of Brennan's Mitre 10 was initially postponed amid the coronavirus outbreak.

Brennan's ownership change is delayed - HI News, page 32

Sourced from the Daily Liberal and Macquarie Advocate and Dubbo Photo News

retailers

Regional communities gain $150K from paint charity

Taubmans collaborated with online charity GIVIT

The "In It Together" campaign delivered more than its set goal of $120,000 for communities in need

Taubmans paint brand - owned by PPG Industries - worked with national online charity GIVIT to help raise $150,000 from DIYers in isolation and professional painters to support regional communities in need after recent bushfires, prolonged drought, floods and now COVID-19.

GIVIT CEO, Sarah Tennant, said the funds will allow GIVIT to purchase many more essential items to best support people in need, from parched outback farms to bushfire-affected East Gippsland. She told The Tenterfield Star:

Whether it's hardware items and water tanks for a drought-stricken farming community, or supermarket and clothing vouchers for rural families in need, we will put the donated funds to work to make an immediate and positive difference.
We also buy locally, wherever possible, to help stimulate the recovery of regional economies, ensuring the impact from every single generous donor is widespread.

Anne Neeson, Taubmans general manager, PPG architectural coatings - AUS and NZ, thanked all the DIYers and professional painters who supported the donation by choosing to paint with Taubmans.

And thank you to Bunnings, Bristol and our independent retail partners who came on board, despite the challenging economic climate. Your support for the program will make a difference to the lives of many in our regional and rural communities.

GIVIT works with more than 3400 charity partners on the ground throughout Australia to match the donation of goods with the individual and specific needs of recipients.

The "In It Together" campaign follows PPG's $98,437 donation in February to the Australian Red Cross Disaster Relief and Recovery fund, which included employee donations matched dollar for dollar by the company.

Related: The campaign ended on 20 June.

Paint charity benefits regions - HNN

Sourced from The Tenterfield Star

companies

Global trade shows cancel 2020 events

spoga+gafa announces new date

National Hardware Show(r) calls off re-scheduled September event with a virtual show to be announced later in the year

The next spoga+gafa (garden) trade fair in Cologne, Germany will be held from 30 May to 1 June 2021. Organiser, Koelnmesse responded to requests from the industry, and moved the event to next year.

Registrations for the September 2020 event increasingly came to reflect the ongoing concerns regarding COVID-19 especially the uncertainty of international travel. Despite the precautions being implemented, a majority of exhibitors and visitors decided not to attend spoga+gafa.

For these main reasons, Koelnmesse rescheduled the 2020 spoga+gafa. Chief operating officer, Oliver Frese said:

The aim of our conversations with the industry is to work together to give a strong trade fair a chance to gain even more strength and market relevance. The focus here is on the ordering [purchasing] behaviour seen in many parts of the industry, which has evolved over the years.

NHS moves to 2021

Over the last few months, the US-based National Hardware Show (NHS) has been closely monitoring the COVID-19 pandemic and its impact on members of the hardware and home improvement community. Originally slated to open its doors in May, the event was postponed to September. However, as it continues to make the safety of people its top concern, it has made the difficult decision to cancel the 2020 event.

Instead of an in-person experience, NHS plans to host a virtual trade show dedicated to providing education and support that recognises and addresses the needs of the hardware industry. Randy Field, group vice president, Reed Exhibitions, said:

The hardware industry has been greatly impacted by the global pandemic and hundreds of our international exhibitors have been forced to cancel their plans to participate in NHS due to market conditions and continued travel restrictions.
At the NHS we pride ourselves on being the leading industry gathering place and while we recognise and appreciate how important the show is to the community, we believe it is the right decision to transition it to a virtual experience for 2020.
Following the May postponement, we prioritised making NHS Connects the place for the hardware and home improvement community to come together to source information. It will soon be where connections, direct appointment setting, and virtual product showcases will debut.
We will also be adding a virtual tradeshow component to this digital platform that enables networking and we look forward to utilising that platform to allow business to continue. We seek to encourage attendees, exhibitors and all of the NHS community to explore the platform and utilise it until we meet again in person in 2021.

Rich Russo, industry vice president, NHS said:

We are re-imagining the entire physical trade show, so look forward to new initiatives, new pavilions ... and a complete transformation of NHS for 2021.
companies

Effects of COVID-19 on Australian business

ABS releases June 5676.0.55 series

Retail shows it has been strongly affected, while construction sees future supply prices increasing. The pandemic is also affecting how customers pay, with a move away from cash.

The Australian Bureau of Statistics (ABS) continues to detail the plight of Australian business in its 5706 series. According to the ABS summary for the release:

The collection was conducted through a telephone survey between 10 June and 17 June 2020, with a sample size of 2,000 businesses. The final response rate was 72% (1,431 responding businesses).

Chart 1 shows the operating status of businesses. As it illustrates, retail has one of the higher rates of modification for its business processes, at 88%, while construction has been less affected at under 60%.

Chart 2 details what some of those modifications have been. For these three industries, retail has exceeded the other two industries, except in areas relating to staff, reporting fewer changes to staff roles, and fewer general workplace changes than the wholesale industry.

The three areas where retail is far ahead of the others is in a change in the types of products sold, change in operating hours, and, especially, a change in the way payments are accepted.

Chart 3 shows the change in revenue for the reported period compared to the previous period. In these three industries, retail leads for both the number of businesses reporting a decrease, and the number reporting an increase in revenue, which indicates how volatile the industry has become.

Chart 4 shows just how severe those decreases in revenue have been. Retail leads the decline in both the under 25% level and the 50% to 75% level. Wholesale, however, has sustained significant losses in the 25% to 50% level.

Chart 5 shows the estimates businesses make for how long they can survive in their current cash situation. Both construction and retail indicate some fragility, with close to a third of businesses not able to survive beyond three months under current conditions.

Wholesalers seem to be more confident, with nearly half confident of surviving beyond six months, versus around a third in both construction and retail. It is worth noting also that 22% of construction businesses remain uncertain about their future, while only 8% of retail businesses say they don't know what will happen.

Chart 6 shows the current conditions as compared to expected future conditions for retail, construction and wholesale. The top chart shows that the main expected change for retailers is an increase in supply costs accompanied with a decrease in supply levels.

In the middle chart, for construction, that is echoed with both increased supply costs and decreased supply levels a problem. Added to that is an expected increase in staff shortages. Interestingly, however, local demand for construction is expected to continue at its current level.

In the bottom chart, for wholesalers, there is an expectation that more businesses will be affected, and that staff shortages will also create difficulties.

Analysis

For hardware retailers looking at these numbers, it is pretty evident that businesses do not expect that much change to happen over the next six months. With 60% of retail businesses expecting to fail before September 2020, it is a very glum picture. Most retailers, especially in hardware, are strategising to just make it through to the end of the year, with the hope that either a vaccine or effective treatment will have emerged by then.

One aspect of this data that is worth going into somewhat is the high level of changed payment types the retail industry has seen arise. This change has not escaped the attention of the Reserve Bank of Australia (RBA). Speaking at a 3 June online event hosted by stock analysts Morgan Stanley, the RBA's assistant governor (financial system) Michele Bullock sketched out what is happening with payments, and the effect the pandemic has had.

In her opening remarks, Ms Bullock noted:

Today I want to address the potential implications of COVID-19 for the payments system. While we have until now been thinking about disruption to the payments system mostly in terms of the entry of new technologically enabled service providers, the abrupt changes in payment preferences induced by the health crisis could be a similarly disruptive force. The extent to which it is will depend on whether the changes in behaviour are temporary or permanent.

She noted that up until recently, disruption was expected to originate with fintech and "big tech" companies. Though, as she illustrated with Chart 7, while awareness of alternative payment methods is relatively high, take up and usage lags significantly. She also commented that cash remained an important means of payment:

Our most recent consumer payments survey conducted late last year showed that there were still around 25 per cent of consumer payments undertaken using cash, accounting for around 10 per cent of the value of transactions. And while a third of survey respondents did not use cash for any payments, around 10 per cent used cash for all their payments. Cash users tended to be older or people on lower incomes.

However, Ms Bullock confirmed, the pandemic has changed altered the cash/alternative balance. Many retailers all but ceased accepting cash, aided by a majority of consumers who also saw physical money as a potential vector of infection – filthy lucre, indeed. As she stated:

As a result of these changes, ATM withdrawals in April were down 30% from the month before and over 40% lower than twelve months earlier.

The shift was aided by payment vendors lifting the limit on contactless payments from $100 to $200. And there has also been, of course, a shift to online shopping.

One of the most interesting points that Ms Bullock made was the threat to merchants from the continued move away from cash, as cash provided a form of competitive pressure on the payments market.

While cash is not costless for merchants to accept, it does provide some competitive pressure on the cost of payments more broadly. So as cash use declines, it is even more important than ever that we ensure competitive pressure remains on the costs of electronic payments to merchants.

However, she also sees there being additional forces to keep the competitive pressure on payment providers. One is the use of surcharging, which though merchants may not necessarily implement, remains a potent threat. The other major force is, of course, the use of least-cost routing. As she explained:

Least-cost routing puts some power into the hands of merchants by providing them the ability to route a dual-network debit card transaction through the network that costs them the least to accept. In Australia, for many merchants, this is the eftpos network.
The evidence is that the growing availability of least-cost routing has increased competition among card schemes through reductions in interchange fees, and this has resulted in a lower cost of acceptance for card payments for some merchants.

One of the concerns that emerges from an increased reliance on payment systems is how fragile these may be. The RBA in association with the Australian Prudential Regulatory Authority (APRA) is making changes to help ensure stable operations in the future.

The Bank has already been working with the industry and APRA to develop a set of standard operational performance statistics to be disclosed by individual institutions. The proposed disclosures are intended to focus the minds of banks' executives and directors and ensure that appropriate attention is paid to the reliability of their retail payment services. They will also provide customers with transparency about the operational performance of different institutions. While this work is being delayed a bit by the competing operational priorities created by the current circumstances, it has become even more important.

For the hardware retail industry, the decline of cash transactions might have far-reaching consequences. While merchants are generally happy to not have to directly handle cash, due both to the need to closely monitor new staff and the general risks associated with cash (including physical loss, robbery, and forgery), cash has long played a particular role in hardware.

Most hardware merchants are aware that the "black economy" is alive and well, and that some tradies seek to have their income paid in cash. As electronic payments grow, there could be an increase in enforcement, and cash transactions might be more closely monitored by the Australian Taxation Office.

Equally, however, with electronic money gaining in popularity, consumers might become more open to the use of more exotic forms of payment, in particular Ethereum. Like Bitcoin, Ethereum is a self-regulating currency, but unlike Bitcoin, its aim is not to be a speculative system of exchange, but a kind of "active" money that enables users to formulate simple, effective contracts, with Ethereum acting as a kind of escrow account to help enforce requirements.

Conclusions

Increasingly when we look at what is happening in the economy and in the hardware retail industry as a response to the pandemic, there will be a pattern of businesses that attempt to resist change failing, and those that embrace change at least finding some way to survive.

The changing use of currency is a great example of this. The kinds of changes we expected in another five or six years - the decline of branch services, reduction in the number of ATMs, and a shift to online banking - is happening right now. That will have unexpected, far reaching consequences for all types of retailers. For example, some retailers may be unwittingly reliant on customer foot traffic generated by a nearby bank. When that stops, and the bank relocates to a cheaper location, will they then work out how to leverage the interest in that bank's website to drive traffic to their own website?

statistics

Gunna-Do Hardware on the market

Business is for sale after 37 years

It marks the end of an era as the store's owners, the Murphy family put it up for sale

Queensland-based Gunna-Do Hardware located in Allenstown, a suburb of Rockhampton, will have new owners after Pat and Judy Murphy and their daughters, Natasha Murphy and Nikki McCaul put the business up for sale. The family have owned it for almost four decades.

The business under its ownership will come to an end as Pat and Judy look to retire permanently and Natasha and Nikki move in different directions. As the family representative, Natasha said they would like to see another family take on the store. She told The Morning Bulletin:

I know times are tough but it has been an amazing journey for our family and we are hoping another family might be interested.

After 37 years, Natasha said it would be sad to finish up and say goodbye to customers, many of whom they have gotten to closely know over the years. Reflecting on how the store has developed over the years, Natasha said technology had come a long way. She said:

The transition of going from pen and paper to add up stock and going to computerised. The accounting system's gone from doing little paper things at the end of the month, now it's just emailed out.

She also believes the perception of females in the hardware industry has also changed. Natasha and Nikki would often find that customers would see them but ask to speak to their Dad. Most of the time, Pat would still get his daughters to serve the them anyway because they knew what the customer was after. He said:

The attitude of males has evolved. Women themselves are doing a lot more these days, they are not hesitant to swing a hammer, they are in there earning themselves.

Part of the store's survival can also be attributed to the loyal and competent staff they have had over the years. Natasha paid particular mention to current staff members Pete, Joe and Lachlan. She said:

They are the backbone of our success for being here so long. We have had many staff that have gone on to bigger and better things, apprenticeships, navy men, army men, architects, teachers, and they all started as weekend juniors.

Sourced from The Morning Bulletin

retailers

Grant boost for small town nursery

Primary producer designation

Perseverance and recent warm weather have helped the owners to increase production

Parkland Nursery, based in Tinonee, near Taree on the mid-north coast of New South Wales, is a state-wide supplier for Bunnings.

Owners Leah and Bernard Hunt have experienced firsthand the brutal impacts of Mother Nature in the past year through drought and a devastating bushfire in November 2019 that destroyed infrastructure and some plants.

Now more than six months later, the business is well on the road to recovery. To get them back on their feet, the Hunts purchased a new potting machine with a $75,000 state government grant.

Bernard Hunt told The Manning River Times the installation of the machine "was the turning point". He said:

We still have a lot to outlay but that gives you the starting block to go. It's amazing having the backing of the state and federal representatives.
They've been ringing up and backing us right through saying, 'You've got to keep going'. It was a springboard to go 'Okay they're backing us so we're going'.

Leah Hunt said the grant ensured they could stay in business. She adds:

When we were looking at it, we thought do we take out loans to replace the machinery? At our age we thought we wouldn't do it. With that grant, it was enough to say, yes we can still do this.

Member for Myall Lakes Stephen Bromhead said he was happy to help arrange the grant despite some initial issues.

Parkland Nursery wasn't entitled to it initially, some people said nurseries aren't primary producers but we were able to convince them they are. It means 10 full time jobs, they're able to stay open, compete with other nurseries and provide fantastic products.
I take my hat off to these guys, the nursery was devastated by bushfires, they lost their stock sheds and machinery, but through that grant they've been able to keep going.

About 20,000 pot plants are currently produced weekly through the machine. Mr Hunt said:

Production had been stopped for months because of the drought. We were limping along for a year before the fire. We were smashed, all our infrastructure was burnt out but we only lost about 30% of our plants.
We lost most of our machinery except for three machines and a sun sail. We just had to start again.

The business managed to stay afloat and keep the team together by selling the unaffected stock. Working their way through drought, the Hunts thought they were prepared for any fire threat. Leah Hunt said:

We were in the midst of one of the worst droughts we've ever had. There was no water in the dam and we had to close down some areas (of the nursery) because there was no water.
We knew it was going to be a really severe fire season, you could see there was so much fuel around and so dry with a lack of water. We did a lot of work to get the property up to what we thought was fire proof but no it wasn't."

With decent rainfall this year, the dam is back to capacity.

Leah and Bernard have grown the nursery for more than 25 years.

Sourced from The Manning River Times

companies

Lawn supplier gains Smart Approved WaterMark

TifTuf Hybrid Bermuda turf

Consumers can ensure their lawn is waterwise with the official recognition of the Smart Approved WaterMark

Lawn Solutions Australia said it has become the first and only company in the world to have one of its turf grasses receive the Smart Approved WaterMark. It gained recognition for its TifTuf Hybrid Bermuda turf, which the company has been developing over the past six years. Scientific studies have proven TifTuf uses 38% less water than similar varieties.

The Smart Approved WaterMark is a water-conscious certification provided to products so consumers can identify and access the most water-efficient products available on the market. It was established by the Water Services Association of Australia (WSAA), Irrigation Australia, the Nursery and Garden Industry Association and the Australian Water Association.

Managing director Gavin Rogers told the South Coast Register how the business achieved the WaterMark accreditation. He explains:

Five years ago we started applying for it, but it was 'no you don't have enough data'...We've invested more money in turf research than anyone else in the southern hemisphere - a huge private investment - we've imported 90 varieties of grass, testing what would be best suited to the Australian conditions...We've had more Australia data done over four years and it has finally gained the seal of approval...

The team has put every variety of turf grass in that category under two shelters - one is a total rain out shelter (no rainfall can get in and the moisture is controlled), the other is a total rainout shelter with 70% shade cloth to show what grasses can do in shade. Mr Rogers said:

Every seven to 10 days we run a wear machine over them, which simulates things like rugby rucks, kids playing, dogs walking etc. We want to dry hell out of it - there is no point having a drought tolerant grass that can't handle wear and tear.
All these things are considered and at the end of the trial period we can see what grass would survive with minimal input including chemicals and fertilisers. We've even allowed the grasses in the trials to get diseases to see if they can recover.

The data was compiled independently by the Sports Turf Research Institute (STRI), based in England. Mr Rogers said:

We also had trials running simultaneously with the University of Georgia, the largest turfgrass research university in the world.

And after all that data was compiled and submitted, TifTuf was awarded the Smart Approved WaterMark. TifTuf requires less inputs (fertilisers and water) and has a dense sward that enables it to handle high wear situations, while remaining soft and visually "superior" to other turf varieties. Mr Rogers said:

We set up a criteria for the grasses we want, the universities give us 20 or 30 varieties that might meet what we want and test and trial them for our conditions...We do our due diligence on the grasses which can tackle up to six years. We trial them here at our main facility at Jaspers Brush (NSW) but we also have other members around the country trialling them to get a greater array of climate.
We won't release a grass in Australia unless we know it will work in Broome, Melbourne, Cairns, Perth and everywhere in between - it has to be Australia wide.

About Lawn Solutions

The Lawn Solutions business began in 2000 with Sir Walter turf, with the Lawn Solutions Australia group officially forming in 2013. It now has 43 member farms around the country. The group produces 14 million square metres of turf grass per year - around 55% of all turf grass produced in Australia.

Although restrictions surrounding COVID-19 has affected many businesses, Mr Rogers says it has achieved record sales in recent months. He said:

Covid has been really good for the reestablishment of the Aussie backyard. We've started to work out spending time with the kids and family in the backyard is pretty good.
We've lost the backyard over the past 20 years - you usually don't get one in the new blocks, but we've seen a huge shift back to the Aussie backyard and with people being forced to work from home, the do it yourself market has been incredibly strong.
Christmas is traditionally the busiest time for the turf industry but a lot of us are having weeks that are better than Christmas weeks.
One of our biggest competitors in the turf industry is the winnebagos and overseas travel. The baby boomers retire and they either spend money on their homes or take off overseas. We are going to see a return to spending locally which is good.

The group supplies Bunnings Australia wide and is in every single market that turf grass is sold in Australia.

At its Jaspers Brush base, it employs 15 staff in a variety of roles including research and development, marketing, agricultural scientists, greenkeepers and has a small team dedicated to social media.

Along with its TurfCo operations the company employs more people across its four sites that has around 250 acres under turf farming. In addition to grass, there are fertilisers, pesticides and other turf products.

Mr Rogers said the business is very family orientated, with his wife Sue also working with the company as do three of his children, Joe, Marcus, who is the general manager of TurfCo and Sasha who runs turf procurement and logistics, along with other family members.

Sourced from South Coast Register

products

Closing the gap in fencing

Australian owned manufacturing in China

The family business produces a range of fencing, stockyards and livestock handling equipment

Clipex founder Ashley Olsson started the company in 2007 after he came up with an idea for a steel fence post with clips to quickly attach wire and netting while managing the family farm at Goulburn on the NSW Southern Tablelands.

He has lived in China for over a decade where he owns a factory which produces the Clipex range. Its head office is based in Brisbane (QLD). A spokesperson recently told The Land newspaper:

We are employing our own staff and distributing on a global level to Clipex Australia, Clipex South America, Clipex Ireland and others. Some other companies may have a joint venture manufacturing facility overseas, which means they do not wholly own the manufacturing facility but essentially share it. Others simply source their product from a dedicated overseas supplier.
Clipex Australia is passionate about supporting Australians and Aussie jobs and is proud to be one of the few Australian owned family companies that is completely vertically integrated, employing over 65 staff across the country in more than eight store locations.

Clipex said it also sponsors more than 50 local initiatives throughout regional communities every year and bring work to transport, printing, communication, marketing, IT, development and engineering businesses in these areas. The company uses its own store network and in-house installation teams. The spokesperson said:

We believe there has been a serious lack of innovation in the fencing industry, in part because companies have been afraid to implement technology and therefore do not expand and grow in innovation.
We innovated, developed and grew with the technology, giving us products like the Clipex fence posts, what are now being copied with an inferior 'paperclip post' which have now plagued the Australian market. We believe businesses should remain in Australia and be Australian owned.

Sourced from The Land

companies

Paint tech leads to direct-to-consumer sales

Challenging traditional paint processes

The company's supply chain is secured with local Australian manufacturing of its paint, and is not dependent on international suppliers

Tint is an online-only paint retail business selling direct-to-consumers and offers contactless paint delivery to customers' doors. A Melbourne-based start-up, it has been experiencing a major boost in sales as a result of social distancing measures that have been implemented as a result of the coronavirus. Co-founder Djordje (DJ) Dikic told Internet Retailing:

We looked at how customers buy paint today...Somehow painting and decorating has become a chore for most people, and that's because so many aspects of buying paint today are not user-friendly. There are too many colours, too many products with confusing names, too many trips back and forth from the shop, largely without any guidance...
That's what Tint is - we're making painting fun by creating a seamless and super simple way to shop for premium paint and accessories online.

The main idea behind Tint is to take the "pain" out of paint selection. Mr Dikic explains:

Colour confusion is the number one reason people don't paint, so we've spent a lot of time developing solutions to make it easier for Tint customers to feel confident when shopping for paint.
Firstly, we've developed super-size colour stickers you can stick up and peel off all around your house (they're reusable and don't damage surfaces either). We offer sample stickers across our entire collection ... and they make it really easy to see how a colour will look in your space without any of the mess of sample pots.

It officially launched in December 2019 with a range of 70 colours including its first collaboration with Pantone, best known for its colour matching system used by many industries. Mr Dikic said Tint's paints are vegan and 99% VOC free.

Tint allows customers to capture any colour in any environment, view it live on their walls using AR (augmented reality) in the app, and then order online. They can also order Tint's colour capture tool, Pico, to customise paint to their desired shade.

Mr Dikic believes its supply chain is helping them to support its customers. He said:

It's a critical piece of the puzzle for online retailers. For now, we're able to dispatch our goods via courier and offer contactless delivery. For businesses looking to transition online, it's key to really think through the logistics of fulfilment, as they can actually be quite intricate, and distribution is often challenging.
The logistics of supply will also include packaging, order management, tracking parcels and how you share delivery communications with your customer. It can be hard to turn these aspects of a business on overnight, so it's worth making preparations in advance.

The business is also moving forward with plans to provide same-day paint delivery across Australia and expand on its product offering.

About Palette

The concept for Tint came about from a colour recognition business started by Mr Dikic and his co-founders back in 2013 called Palette that sells colour measurement devices to major paint brands. Mr Dikic explains:

We have approximately 100,000 colours scanned around the world each month by our users around the world. The data behind each colour scan gives us amazing insights into the colours people are actually interested in and what the trends are.
Looking at the data it was obvious that users wanted to scan a colour and then tap a 'shop' button to order paint for home delivery. No one was offering a compelling way to shop for paint online, and no one had made picking a colour easy, so we launched Tint to be the one-stop shop for paint and accessories.

It has sold more than 50,000 colour sampling devices in 66 countries. This allows the company to analyse over 1 million colours captured by Palette users and see colour trends in real time as they emerge, and to identify colour preferences based on locations as well as seasonal changes. Mr Dikic also told The Sydney Morning Herald (SMH):

Everything we develop with Palette leads straight into Tint and vice versa.

Palette's aim was to digitise colour and enable users to measure, match and visualise colour everywhere. Its hardware device, Cube was designed to scan and sample colours.

However the co-founders had been disappointed by the lack of uptake from paint companies in using Cube, and found their reluctance to use technology frustrating. So they took the idea for Tint to Palette's board and decided to start the business from there. Mr Dikic said:

After years of collecting colour data with Palette, we realised there was a huge opportunity to transform the paint industry, because only 1% of global paint sales are online.
After we released a world-first piece of tech that lets you walk up to a colour and record it instantly, we had made choosing colour a hell of a lot easier. But we noticed a big barrier in the way of what should be a smooth process. Customers still had to go to a store to buy their paint ... As a tech-first company, we wanted to make the process even simpler and move it all online.
We initially took our technology to incumbents in the paint industry, but were frustrated when they were reluctant to move their paint sales online for fear of disrupting their existing businesses.
So we took our idea to our board and decided to create our own direct to consumer paint brand - which became Tint.
We see a clear path forward to create a better experience for home renovations, professional painters, architects, interior designers and specifiers. By focusing on the customer, we've been able to redesign virtually every step in how people shop for paint.

Tint investment

Palette was born out of a university project and its co-founders came through the Melbourne Accelerator Program.

Mr Dikic said it has raised a total of $3 million to launch Tint from investors including Palette chairman Adam Lewis and Aconex co-founders Rob Phillpott and Leigh Jasper. The capital will primarily be used for expansion and marketing. Mr Lewis told the SMH:

What I have tried to do is back technology and people that try to disrupt existing industries...With Palette, all these industries that rely on colour could have their productivity fundamentally changed through this technology.

Mr Lewis believes the challenge is to get paint companies to adopt a new way of working, as there was a lot of money invested in colour cards and proprietary colour libraries. He said:

We look at Tint really as a proof of concept that people do want to buy paint online and they will find the interaction with digital colour fundamentally better. Tint is proving to every paint company around the world that customers want to interact with paint in this way."

Sourced from Internet Retailing, Dynamic Business and the Sydney Morning Herald

companies

Lowe's launches accelerator program in India

Reimagining home improvement retail

The US-based retailer is betting big on the Indian startup ecosystem. Participants in the program will have the opportunity to showcase their solutions.

Lowe's Innovation Labs, established by US home improvement retailer Lowe's, has launched its first accelerator programme for startups named CONSTRUCT.

(It has been reported that Bunnings is setting up a dedicated technology development centre in Bengaluru, India, known for being a major international software hub.)

Seven startups from across India, representing a diverse range of interests including merchandising, AI (artificial intelligence) trend forecasting, automated content generation, talent acquisition, and AI-driven sustainable home construction technology were selected after a five-city roadshow.

The retailer wants to work with startups that bring diverse, global perspectives. Ankur Mittal, vice-president of technology and managing director of Lowe's India, said the focus has always been to use deep technologies such as AI, analytics and robotics to "power tomorrow's retail".

Our vision at Lowe's India is to transform home improvement retail by building world-class experiences for our customers with the right products and technology.

According to the company, CONSTRUCT is designed to be a flexible alternative to traditional corporate accelerators. In keeping with Lowe's Innovation Labs' mission to use exponential technology to "accelerate experiences that customers expect today and to deliver tomorrow's breakthrough capabilities", the program is open to companies of all sizes and at all stages.

Lowe's start-up partners receive personalised attention from senior executives at Lowe's, as well as external mentors from venture capitalist firms and other supporting companies. Current participants include:

Stylumia

Provides product insights through its AI-powered consumer-driven, demand-sensing technology engine.

Infilect

Strong computer vision capabilities and AI platforms, helping brands and retailers in measuring, monitoring and improving processes such as product distribution, placement and sales.

StoryXpress

An NCR-based startup with an end-to-end video marketing platform that enables brands and retailers to convert their e-commerce product catalogues into videos at a fraction of the standard time and cost.

Headway

Powered by AI and behavioural science to help talent acquisition teams function faster with deep talent analytics.

Siddhi.ai

Emphasis on using AI to craft actionable insights from the vast, unstructured resources of the open web to help lifestyle brands and retailers personalise product decisions.

Rephrase.ai

Builds generative AI tools to make professional automated human-like videos with applications involving "hyper real" AI.

Nanospan

Utilises nanotechnology, producing graphene and nano composites with applications in building next-generation homes, defence tech and energy storage.

The virtual launch event was held in mid-June 2020 with over 5000 participants and speakers from around the world discussing the future of home improvement retail. Abhay Tandon, director - innovation and head of Lowe's Innovation Labs India, said:

India is home to a wide network of innovators developing solutions to global issues. We have set up CONSTRUCT as a way to partner with the brightest minds to reinvent home improvement retail. It provides startups with an opportunity to apply their solutions in a highly conducive environment.

Lowe's India is the retail technology and analytics centre for Lowe's Companies, Inc. With more than 2,500 staff, Lowe's India focuses on technology, analytics and shared services.

Lowe's Innovation Labs also plans to work with academic institutions and is looking to partner with International Institute of Information Technology (IIIT) in Hyderabad to access their research to develop solutions for the company.

Related: Bunnings' move to Bangalore, India to set up a technology centre comes as it continues to execute its omnichannel strategy. Read more in the following link.

Bunnings sets up IT in India - HI News. page 26

Sourced from The Times of India and Telangana Today

bigbox

IHG sales decline as new CEO takes over

In midst of decline, Total Tools acquisition bid confirmed

Sales fell by 1.3% for IHG, despite a Q4 surge in sales, as the pandemic hit. EBIT came in flat for IHG, boosted by increased higher margin DIY sales in Q4. Annette Welsh is now officially CEO, though she has acted in that capacity since February. Metcash announced its offer for Total Tools, which values the company at $140 million.

Metcash released its results for FY2019/20 on 22 June 2020. Overall, the company has reported an increase of 2.9% in sales to $13.0 billion. However, earnings before interest and taxation (EBIT) were $324.2 million, a fall of 1.8% on the previous corresponding period (pcp), which was FY2018/19. The company's food division lost a major customer in South Australia, and the finalisation of supply to the 7-Eleven convenience store chain will see future reductions.

For the company's hardware division, which consists primarily of the Independent Hardware Group (IHG), the year represented a mixture of declining sales, and a fourth quarter sales boost due to an increase in both consumer/DIY sales and trade sales.

Pre-pandemic sales, during the 10 months to February 2020, fell by 2.8% as compared to the same period during FY2019/19. However, the uplift in sales during March and April, as consumers bought more supplies from hardware stores, raised hardware's second half performance by 1.8% over the second half of FY2018/19.

The company also completed two acquisitions, of G. Gay & Co. in Victoria, and Keith Timber in South Australia, which helped to boost sales.

Total sales for the year came in at $2.08 billion, a decline of 1.3% on the pcp. Retail like-for-like (comp) sales increased 1.6% in the second half, after falling by 3.2% in the first half. The result for the full year was a decline of 0.7% in these comp sales.

For wholesale sales in IHG to the banner group, these held flat in the second half, after a decline of 2.6% in the first half, delivering a decline of 1.1% for the full financial year.

Metcash also reports that in terms of comp "scan sales" (relating only to a subset of stores, those which report scan sale data to Metcash) there was an increase of 11.6% for March and April 2020, as compared to the same period in 2019.

Online sales are reported to have grown by 40%, with the company now featuring 14,000 stock-keeping units (SKUs) up from 3000 in FY2018/19 listed on its website. Metcash also notes that the average ticket size online is around $200, which is four times higher than the average in-store purchase ticket.

EBIT for hardware for the year was $81.2 million, equal to that for the pcp. EBIT was propped up by an increase in the proportion of DIY sales from 35% to 37%, Metcash claims, with DIY delivering broader margins.

(For this financial year, HNN is relying on pre-AASB16 accounting figures for comparative purposes.)

Commenting on the performance of hardware during the early stages of the pandemic, Metcash CEO Jeff Adams said:

[T]here [were] changes in consumer behavior, with the most significant being the uplifts in DIY sales. As I mentioned, along with our hardware retailers seeing many new first-time customers in their stores. Some of those customers commenting, they have passed up our competitors because the car parks were too busy or they had queues outside of their stores, and were visiting the local Mitre 10 or Home Timber & Hardware store for the first time. The hardware team and the retailers are now focused on how to retain those new customers after the crisis who have now had a good shopping experience in their local store.

Mr Adams also welcomed the new CEO of hardware, Annette Welsh, as:

[O]ur new CEO of Hardware, Annette Welsh, who has taken over for Mark Laidlaw when he retired at the end of February.

As the original ASX announcement indicated she would assume that position on 1 May 2020, evidently the process was speeded up.

Store network

Metcash has continued its expansion of corporate-owned stores in the bannered Mitre 10 network. Hardware acquired a further six operations with a total of 17 sites during the reported year. Asked by Bryan Raymond of Citigroup to clarify the earnings contribution of the additional stores, Mr Adams responded:

So those would have been phased in at different times throughout the year, Bryan. And in fact, the one lease one came in right at the very end of the financial year, but I think it was around $3 million or something in the year.

The company states that the corporate stores now account for 15% of all stores, and contribute 40% of the sales attributable to IHG. There is also a reference on one slide to "Cost resets in company-owned retail network most exposed to slowdown in construction activity", which could indicate a fall in investment for the coming financial year.

This is also the first report since the acquisition of Home Timber & Hardware (Danks) where there has been no mention of ongoing integration.

The company has continued with its Sapphire upgrade program, claiming this now stands at 90 stores, up from 60 at the close of the previous financial year. The number of trade-only stores has also increased, reaching 19 for the year, up from 11 a year ago. Metcash confirmed the target of reaching 40 of these stores by 2022 still stands.

Future

Looking to the future of the company, Mr Adams provided this overview:

In the Hardware pillar, sales for the first seven weeks of FY2020/21 have increased 9.4%, underpinned by continued strong demand in DIY categories. Weak indicators of future residential construction suggest further weakness in the trade sector is likely from the second half of FY '21. However, the government recently announced a stimulus package to boost residential construction and renovation activity is expected to help mitigate this weakness.

Total Tools acquisition

The surprise announcement of the results is that Metcash has decided to go ahead with the acquisition of Australian power tool and hand tool retail franchise Total Tools. The franchiser has 80 franchise stores, and one corporate store, with each franchise owning a portion of the company. Total Tools generated revenue of over $550 million for calendar 2019. Its EBIT is estimated to be around $25 million a year.

While negotiations are underway, and clearance from the Australian Competition & Consumer Commission is required, the end cost is expected to be around $57 million for a 70% share of the company.

As part of that deal Metcash is also providing a debt facility of $35 million, which – as financial analysts have pointed out – really forms part of the purchase price. That would mean that Total Tools in its entirety is being valued at around $140 million.

At the end of 2019, when Total Tools was first said to be on the market, the estimate was that it would sell for 10 times earnings, or around $250 million. If that is true, then this move by Metcash could see it acquire the business at a significant discount of less than six times earnings.

In his remarks at the presentation, Metcash's chief financial officer Brad Soller presented the rationale behind the acquisition:

The acquisition is in line with our hardware strategy, which is to focus on trade customers. Total Tools has a differentiated offering, which is focused on tradies, who require high-quality tools for commercial use. Total Tools has been operating for 30 years and offers a broad range of products, which, as I said, are focused on tradesmen themselves. This is different to Mitre 10, which tends to be more focused on the actual builders.
Total Tools not only supplies the leading tool brands but also has a highly valued and growing own-brand offering, and its stores pride themselves on offering a broad range and high-quality customer service.
There's a strong strategic rationale for the acquisition. The acquisition aligns with Metcash strategy to be the leading supplier to independents in each of its three pillars. It enhances Metcash's position in the Australian hardware market, which will benefit the independent retailers in both Total Tools and the independent hardware group. It increases the Hardware pillar's exposure to trade customers. It strengthens both Metcash and Total Tools existing independent networks and will provide Metcash with a more balanced mix of earnings across its operating pillars and will deliver significant value creation opportunities and synergies.

Responding to a question from David Errington of Bank of America Merrill Lynch, Mr Soller also clarified the strategy Metcash will take with Total Tools:

The other component in terms of the loan facility we intend to provide them is, we do want to acquire some of their franchisee stores and take our ownership interest. It's a very similar strategy to what we've successfully done in the hardware pillar at the moment through a combination of independent and company-owned stores. So we will look to actually acquire those stores going forward in that [debt] facility specifically for that purpose.

In response to a question from Bryan Raymond of Citigroup, Mr Adams clarified how Total Tools would fit with Metcash's hardware division:

We don't have a very strong presence in the tools category, so we won't get huge merchandising synergies. And it is intended that we actually run the front part of those operations [Total Tools] as an independent business. So Paul Dumbrell, he currently is the CEO of that business, will continue to actually drive the sales and drive the relationship with the franchisees.

Analysis

Mark Laidlaw will no doubt be missed as one of the people who has left a strong imprint on the Australian hardware retail industry. It's difficult to remember exactly how tough things were when Mr Laidlaw first took over Mitre 10 in 2010, with the CEO who preceded him working directly for the then-opposition, HTH. The kind of size and influence he gave the hardware division at Metcash was something Mitre 10 members could only have dreamed about those 10 years ago.

His departure will mark a new phase in the development of what is today IHG. The really big question the hardware division of Metcash faces is whether it intends to pursue its branding and strategy as the only retailer able to "take it to " Bunnings in the marketplace, or if it will instead move to a somewhat more balanced approach, which focuses on consolidation rather than competition.

One reason IHG might consider changing direction is that, as the results for this financial year indicate, its current strategy is not exactly a runaway success. It's facing off against a company that is massive, and looks like turning in 11% sales growth during a period when IHG itself saw sales fall. It's even arguable that IHG is lagging behind not only Bunnings, but also the market at large, with its sales figures not even tracking the general increase in the overall hardware retail market.

In fact, at the moment, it is just difficult to track where aspects of its strategy are leading. The company continues to acquire new properties, many of these stores that would otherwise have shut down, or been sold by the original Mitre 10 owners. Metcash's claim is that by acquiring more corporate stores, which make up more of its overall revenues, it is helping to strengthen existing independents in its network. Given the sales figures, however, it is really difficult to see how and where that is working out.

The Total Tools acquisition only further makes strategy difficult to determine. Again, Metcash is claiming that this will help to strengthen the independents in its network. It's hard to see, on the face of it, how investing in a dedicated tool supplier, and helping it to grow and expand, and therefore compete more for the tool market, will help independents.

Though there are some scenarios where that could happen. For example, Total Tools could move to a store-within-store model with retailers in the IHG network. In that case, instead of having to manage their own line of power tools, which typically return low margins, they could effectively rent space to Total Tools. Which could work, until you get into the business of power tool accessories, where independent retailers do make good margins.

The other aspect of the Total Tools acquisition is that Metcash might not have paid as much as was asked during the first round of the sale, but that discount has come because of increased risks. Just exactly how bad the economic fallout will be in Australia, no one really knows. One reason for that uncertainty is that it is at least partially reliant on overseas markets. Will trade matters settle down between the US and China? Will Australia's insistence that China has to lose face internationally over the COVID-19 pandemic continue to damage Sino-Australian relations?

In short, Ms Welsh, as the new CEO of IHG, has a lot of challenges to face up to over the next two years. There is little doubt that IHG could prosper, and that it could contribute to independent hardware in Australia. But there is also little doubt that the way forward is going to start by recognising the underlying problems and contradictions in the business, and the need to not simply repeat past strategies.

retailers

Bunnings gets 19% lift for March to May

While costs increase, revenue grows

Bunnings provided a "retail trading update" in May 2020, which indicated strong growth in the second half of FY2019/20

Strategy days have been cancelled for just about every ASX listed company, including Wesfarmers. That means that for this year (at least) we will not receive any insights into the strategy settings for Bunnings - which should make for an interesting full year results release in August.

In the meantime, what has been provided is a "Retail trading update" for the first five months of the company's second half. To put it bluntly, after a moderately successful first half, in the second half Bunnings produced a very good result. Bunnings saw total sales grow by 19.2% over that period, which, combined with its first half sales growth of 5.8%, means the company is on track to close out its FY2019/2020 with growth of around 11%.

That growth comes with two caveats, however. Firstly, the growth has come at some cost, as Bunnings moves to make its facilities safe for both its employees and customers. As the update states:

While disciplined cost control remains a focus, Bunnings has invested approximately $20 million in additional cleaning, security and protective equipment to respond to COVID-19 over the last three months. In addition, Bunnings will incur costs of approximately $70 million in the 2020 financial year associated with trading restrictions in New Zealand, the permanent closure of seven small-format stores during the half, and the accelerated roll-out of its online offering, including the write-off of legacy e-commerce platform assets.

Secondly, the company is also aware that current market conditions are unlikely to continue in any predictable way.

Significant demand growth has continued in Bunnings and Officeworks as customers continue to spend more time working, learning and relaxing at home. As a result, sales growth in the calendar year to date has increased significantly relative to the levels achieved in the first half of the financial year. Given the significant changes to the usual customer shopping patterns and expected future changes to government measures, it is uncertain whether the higher levels of sales growth will continue for the remainder of the calendar year.

Speaking to The Australian Financial Review's (AFR) "Chanticleer" column, Bunnings managing director Michael Schneider is reported as saying:

For the foreseeable future ...that cost base [is going to be] baked in .... We're just not going to compromise on safety for our customers and our team members. I think there's a "new normal" for all businesses on hygiene, health and safety. It's going to be a really slow road back.

As testament to just how strong the demand has been, and how much it has stretched Bunnings' supply chain, the company experienced such low stock levels on some of its most popular power tools that it removed these from its website, not even listing them as stock-outs. Perhaps most prominent among these were lower-end cordless circular saws from the retailer's Ozito Power X-Change (PXC) sub-brand.

HNN spoke to Bunnings' media people about the stock situation, and they were kind enough to provide a quote from Phil Bishop, who is director of merchandising.

Overall, we've been well supported by suppliers over the lockdown period, and we have good availability of products in store. We source products from thousands of different suppliers, from all parts of the world and have options to source from elsewhere should supply from one of those areas be affected.
We've seen really strong demand for Ozito cordless circular saws over the past couple of months and demand has exceeded supply for some models at a number of our stores. For this reason, we've temporarily taken two of these products down off our website.

Bunnings also pointed out that these products would be back in stock before the end of June. According to some sources, the stockouts are due to high demand and the same slightly slower logistics in Australia that have affected most retailers. They are not a result of manufacturing or logistical problems overseas.

Whatever Bunnings is doing, it seems to be working. According to Roy Morgan, Bunnings is once again Australia's most trusted brand in 2020 - with ALDI at number two.

The many facets of Michael Schneider

Perhaps partially in response to the lack of a strategy day, Mr Schneider would seem to have something of an increased presence in the press these days. It has been interesting to see how each press outlet has come up with a slightly different version of who he is.

Like HNN, all respect his talents and capabilities, but the way this gets expressed varies.

Mike the Teddy Bear

Australia's CEO magazine is known for its softer portraits of Australian business leaders, but its portrait of Mr Schneider seemed somewhat extraordinary. Written by Wendy Kay, the profile conjures up a cosy image, one which might be not entirely familiar to, for example, some of Bunnings' suppliers.

Ms Kay begins: "A chat with Michael Schneider is a bit like having a yarn around an Aussie barbie," and continues:

[T]he first thing that strikes you about Michael is his warmth - the same easy going nature of the Bunnings "reds", the men and women dressed in their natty [sic] red shirts framed by forest green aprons who serve us in one of Bunnings' 380-plus warehouses, stores or trade centres.
There's no pretence, no spin; what you see is exactly what you get. And what you get is a glimpse of the 15-year-old casual who fell in love with retail while working his first job at Target in Sydney's north.

OK. Very well then.

Definitely looking forward to the movie. Guy Pierce, do you think? Hugo Weaving for Mr Gillam, of course - and Erik Bana for Grant O'Brien?

Are their aprons really forest green? (As Bogart might have said.)

AFR Mike

While HNN has long been an admirer of AFR's "Chanticleer" column, it is also true that it's the one place in the business tabloid that really does love a good narrative - even if it takes a bit of creativity to get there.

As its report begins:

The inside story of how Bunnings balanced surging sales with the need to adjust its business to a radically different trading environment - and how it will now try to get back to something like a new normal - already has the makings of a great case study.

Fortunately, facing into the threat the COVID-19 virus posed, Bunnings had Mr Schneider to rely on - bold, intrepid, determined:

Schneider's challenge went beyond keeping the shelves stocked - something he praises his suppliers for. His biggest task was keeping staff and customers safe.

Beyond that, though, he also had to keep the digital end of the business running:

Schneider and his team also had to put the foot down on a digital offering that the chain had been too slow to develop under the previous management. "We've innovated the daylights out of our offer," he says.

And these frantic, last minute efforts bore fruit:

Ten weeks later, Bunnings' e-commerce offering is transformed.

Well, there is a fair bit there that could be picked apart, but really - "the previous management"? Mr Schneider has been managing director since March 2016.

Facebook Mike

Facebook Mike appeared in the press in July 2019, after Bunnings adopted the Facebook Workplace platform to drive staff communication and engagement. Mr Schneider spoke at a Facebook event to help popularise the platform, and this boosted him into the media spotlight.

As a consequence, he was featured in the article every business leader dreads: the "Six leadership tips from a CEO", this time for Inside Retail. His tips were (in order):

  • Create a community
  • Keep it small
  • Communication is key
  • Empower your staff to become leaders
  • Use technology to keep it real with staff
  • Create a culture around authenticity
  • Mr Schneider actually did really well for such a setup piece, despite some poor editing. His last point is:

    There's a real humility in Bunnings and I think that stands through, not just in the organisation, but the leaders that build successful careers there. They're very down-to-earth people, we don't stand on ceremony. There's always going to be hierarchy, bureaucracy and politics in big organisations, but compared to other organisations I've worked in, it's a very free-flowing, down-to-earth, real organisation, and humility is a really important part.

    Will the real Mr Schneider please stand up?

    For those who have been following Bunnings' (and Wesfarmers') leadership for some time, the story of who Mr Schneider is, and specifically who he is to the company, is more complex. One view with some currency is that Mr Schneider was potentially at his happiest when he worked as the company's IC2 under the leadership of John Gillam. There was an incident where, lured onto the stage at the results presentation one year, Mr Gillam turned part of the announcement over to Mr Schneider - with a very audible vocal protest from the latter.

    Which is to say, what makes some of these versions of Mr Schneider really amusing is that he is very much a modest and self-contained man. However, the leadership Catch-22 of retail is, of course, that it's often the person who doesn't quite want the top job that is the best candidate.

    Also, you really cannot fault anyone for having some doubts about following in the footsteps of a manager like Mr Gillam - who remains, in HNN's view, Australia's greatest retailer of the past 20 years. Though it is certainly worth noting that Mr Gillam himself evidently had few if any doubts about the capabilities of Mr Schneider, and his suitability to lead Bunnings - an intuition that has proved to be correct.

    What the various views of Mr Schneider offered by the non-specialist press miss about him is that he combines two characteristics that are rarely found together in top management. Firstly, Mr Schneider is really, truly a very tough guy. He's tough in a way where he applies this toughness to himself first, it's true. But he's also well known for acerbic, deflating comments, often at the very end of a meeting, that are very effective.

    Secondly - and unusually - he does not seem at all egotistical. A word that Mr Schneider uses a lot is "authentic". He's interested in things that have meaning, that are about doing more than saying, and that reflect genuine values, or at least an effort to get to genuine values.

    That said, if "spin" is what is required in a particular situation, Mr Schneider is certainly capable of that. In fact, he's developed his own version of spin, which works by understatement instead of overstatement. Answering a tough question, or one he simply doesn't want to face up to (for strategic reasons), he has a way of making a distracting, undercutting, "adjacent" statement in response. He's a fighter, but it is never about brute force, just weaving slightly out of the way, and staying at least a half-step ahead.

    The weaknesses that Mr Schneider does have are those you would expect from someone who hasn't just come up through the ranks in traditional retail, but who has genuinely really liked that sort of business.

    Despite what the AFR has to say on the matter, Bunnings was at least one year, and probably two years, late in moving to a transactional digital platform. In terms of the pandemic, it only just made it across the line. And the truth of that is, Bunnings wouldn't have moved so fast over the past 18 months if it had not been for the leadership of Wesfarmers managing director Rob Scott.

    It's easy to see how that happens. For traditional retailers, the online proposition just did not make much sense. Traditional retailers really liked the whole thing where customers came to a store, bought stuff off the shelves, and took it home with them. Digital commerce seemed to require a massive investment in an unfamiliar type of infrastructure and personnel, in order to sell goods online at a reduced profit - due both to competition, and the need for final kilometre delivery logistics.

    Almost unwittingly, the path Bunnings had started down, after it closed the door on Woolworths' efforts to enter hardware through Masters, was to take as much profit as it could from a declining part of retail. It was a slow decline, and the profit was pretty good, but the problem was that committing to that path meant the resources to go down the higher growth path, with its high upfront costs and more limited profits, were not being developed - and would cost exponentially more to develop the further down the familiar path they progressed.

    What Rob Scott brought to Wesfarmers was the confidence and vision to not go down the pathway of trying to solve problems by developing solutions, but to instead concentrate on building capacity - in data analysis in particular. This drove further developments by offering both easier solutions and available growth paths to the various siloed businesses in the conglomerate.

    While that is a great advance, and Mr Schnieder was able to comprehend what Mr Scott had in mind, and execute on it, this is only just a start - something the current pandemic has brought sharply into focus. The "new normal" Mr Schneider mentioned to the AFR brings with a number of pressing questions. How does Bunnings grow and develop over the next five to seven years? How will it cope with a changed environment?

    One reason these questions are so difficult to answer is that Bunnings has found itself in something of a development paradox. For example, it has become increasingly apparent that the basic Bunnings warehouse, while it continues to perform acceptably, is beginning to age itself out of the market.

    Bunnings has made efforts to improve the format, but this has not been generalised across the existing fleet. That is likely because the improvements the retailer has tried out have been relatively incremental. While that makes them "safe" - unlikely to fail in any spectacular manner - it also tends to make then less than significant.

    The paradox is that incremental improvements are likely to succeed at least to some extent, but the improvements offered will not be enough to drive change. On the other side, more extreme improvements will be more likely to fail, and increase risk, even though they could provide the kind of advantage needed to justify investment in change.

    How do you achieve high-delta value, through a process that quantifies and reduces risk?

    An oft-cited example of a solution to this quandary (first publicly identified in these terms by the computer scientist Alan Kay) is how the first truly successful human-powered flight vehicle was developed. Paul MacCready, an American aviation designer and crack sailplane pilot, took up the challenge in 1972, and solved it six months later - a problem that others had spent decades trying to solve. In the process he won a GBP50,000 prize.

    His first insight was that the problem was so difficult that it was important to start by working out why others had failed to solve the problem. He noticed two aspects to the failures. The first was that the other contestants spent a year or more building an aircraft, flew it, crashed it, and then went back to the drawing board. Incremental development through a test/fail process was almost non-existent.

    The second insight was that the others were designing airplanes. The problem, as Dr MacCready saw it, wasn't to build an airplane, but to solve human-powered flight - and they weren't the same problem.

    Dr MacCready solved the problem by building a lightweight device out of thin plastic tarps and aluminium struts. When it crashed - which it did frequently - it would end up in pieces, but those pieces were easy to put back together or refabricate. His plan called for crashing at least 12 times a day.

    He solved the problem of streamlined aerodynamics - which was why the other aircraft were so elaborate - by just ignoring it. His device aimed for a top speed of 16kmh, and at those speeds, aerodynamic drag was not much of a factor.

    Alan Kay - Normal Considered Harmful, from YouTube 2012 Gossamer Albatross: Flight of Imagination, from YouTube 2019

    Alan Kay summarises the task of understanding the problem as being one of finding "the minimum thing you can do that is qualitatively better". That might seem like a particularly "big ask" for a retailer, but it's worth remembering that the Bunnings Warehouse concept - driven by then-Wesfarmers CEO, and now current Wesfarmers chairman, Michael Chaney - was really the result of a similar process. The "qualitatively better" was selling to consumers at trade prices, and the "minimum thing" was using a retail offer that offered low amenity.

    If HNN were to venture a guess at where the fruitful opportunities for Bunnings might be in the future, we can see two possibilities. In terms of its commercial and trade business, we believe that Bunnings could succeed by becoming a strong sponsor of modularity and pre-fabrication in everything related to building. Bunnings needs to understand, that the more modularity and pre-fabrication influence the market, the more the retailer will succeed.

    For example, take the electrical wiring in a house. It's 2020, and we are still wiring buildings by sticking bit of conductive wiring coated in plastic down plastic pipes, and then manually twisting that conductive wire into plugs and sockets. Modular wiring systems have been developed, but these have encountered industry resistance.

    For the trade organisations involved, rationalising the way wiring is installed - even though it would increase safety and ultimately decrease overall costs - would see fewer jobs and less income for "sparkies".

    There are two reasons why systems such as these would boost businesses like Bunnings. Firstly, developing margin on products such as plastic pipes and rolls of wire is very difficult to achieve, as these are basic commodities. Modular wiring systems, however, are manufactured, and more complex.

    Further, a truly effective modular wiring system should make it easy for homeowners to safely DIY the installation of elements such as more power outlets. A correctly designed system would require little more than some plaster work, and plugging the new outlet into the electrical bus.

    The issue here is that, just as the Bunnings warehouse initially entered the market in such a way that it fundamentally changed that market to better suit its business model, today's Bunnings can equally not afford just to be reactive and passive. It has the capacity to become actively involved in areas such as standards, and to create change that will be a positive both for the company and its customers.

    The real opportunity in the area of DIY, however, may come from a better embrace of what has come to be known as "maker culture". Makers today are what advanced DIYers were 20 years ago. The people who back in 2000 would have built bookshelves in the garage are today hooking up actuators to Arduino processors with a Bluetooth shield so that their toaster oven can "magically" lift out of a kitchen bench at the push of a button.

    Again, though, we return to the need to establish a high delta through understandable risks, to do the minimum thing that is qualitatively better. All too often projects such as these are undertaken by retailers, tested out, do not return sufficient results, and are then discarded. Like the earlier efforts at human-powered flight, they have little incremental development.

    Conclusion

    That oft-repeated statement that "retail is detail" may still apply to current markets and businesses, but over the past decade or so it has been joined by a less-positive (and less assonant) truism: "retail is delay". The chief strategy for many major retailers has been to put off the need to truly change their business models to adapt to changed markets, necessary infrastructure, and new ways of engaging customers.

    As we are seeing from both local and international experience, the idea that economies can somehow "snap back" to 2019 is unlikely to hold true. Without a vaccine for the COVID-19 virus, even when infections are brought down to a low level, the virus is so transmissable that it will flare rapidly back up to concerning levels. That means it is likely the economic slowdown will remain in place through to June 2021 at least.

    What this means is that the time for delay in retail is now over. The very reason that major companies have had to cancel their strategy days is that pre-existing strategies make little or no sense. As we move into FY2020/21, companies that continue to pursue a delay in formulating new strategies will be punished not only by the stock markets, but by customers as well.

    The highly positive article from the AFR referenced above begins by outlining a bold move by Mr Schneider to employ someone to record the history of how Bunnings has coped with the first stages of the pandemic. There is certainly something welcome about that, as it improves the ability of the company to learn from experience.

    But one has to wonder if there is an equal - and as essential - team at work planning for a different future. That's the real question that will need to be answered by Wesfarmers and Bunnings at their annual results presentation in August 2020.

    bigbox

    DuluxGroup MD calls for Oz manufacturing support

    Company gains from lockdown sales

    DuluxGroup sold more paint as a result of DIY projects and smaller renovations during self-isolation

    DuluxGroup (Dulux) managing director, Patrick Houlihan told a columnist from The Australian that COVID-19 has been a wake-up call about the benefits of local manufacturing, highlighting the advantages of reliable supply to customers.

    Dulux is owned by Japanese giant Nippon Paints, which bought the Australian company for $3.8 billion in mid-2019 as part of a regional expansion. Nippon Paints alluded to the robust sales of the Dulux operations in a market update in mid-May, according to The Australian Financial Review (AFR): The company said:

    In Australia, DIY paints demand increased due to outing restrictions.

    It now earns 75% of its profits and 60% of sales from paint. The remainder comes from its other brands including Selleys, Yates and other products that are growing in Asia.

    Around 35% of its goods (not including nursery) are made in Australia and the rest is imported, which has been maintained through the lockdown.

    Mr Houlihan believes the value of local production was shown through the lockdown and he wants the government to ensure value-added production is boosted. This means proposed changes to the R&D rules should be scrapped because they are based on the percentage of operating costs, which favours companies with overseas production. Columnist John Durie writes:

    If your costs are $100 and you compete with someone with just $50 in costs and you both spend $10 on R&D, then the competitor will be more R&D intensive and hence get better tax benefits.
    The present system is more volume-based at 8.5 per cent of investment or a bit over half the 15 per cent on offer in New Zealand.

    With 100 chemists and 140 scientists, Mr Houlihan believes he is doing his bit for the R&D effort and local manufacturers should be supported.

    In-store sales

    Bunnings accounts for around 25% of Dulux paint sales, according to The Australian, and is the largest brand stocked by big box retailer.

    Bunnings managing director Mike Schneider said there had been robust demand among paint buyers as more people spent extended time at home in the coronavirus pandemic. He told the AFR:

    During this period we've seen strong demand for DIY paints, especially transformation paints, for kitchen benchtops and cupboards.

    There had also been a rush for "design and effect paints that can be used for upcycling furniture or on an interior feature like a concrete wall", he said.

    Spray paints, for DIY touch up jobs and craft projects, plus interior and exterior paints have also been popular.

    Strong sales for brands such as Porter's Paint, acquired by Dulux in 2015, has been noted at the more premium end of the market.

    As people slowly move out of lockdown, they will find other things and experiences to spend their money on, so companies such as Dulux and Bunnings will face more competition. This will lead to a slowdown in sales unless consumers have fundamentally changed their shopping habits.

    Sourced from The Australian and Australian Financial Review

    Related: HNN has provided extensive coverage of Nippon Paint in Australia. To read more, please visit the following links.

    PAINTORAMA: Nippon Paint - HI News, page 123 Nippon Paint gains foothold in Australia - HI News, page 27
    companies

    Elders grows its customer base

    It is looking to "bolt-on" acquisitions for future growth

    The AIRR wholesale business integration into Elders was going well, according to managing director Mark Allison

    ASX-listed agribusiness giant Elders said it has lured about 260 new farmer customers and 18 staff from competitor Nutrien Ag Solutions.

    Managing director Mark Allison estimated at least another 200 customers had indicated they were likely to jump ship to Elders this year, while eight wholesale businesses have also broken away from the Nutrien-Combined Rural Traders (CRT) business model to join the Elders-Australian Independent Rural Retailers (AIRR) network.

    Elders took official ownership of AIRR in November which it acquired for $187 million in July 2019.

    Mr Allison was speaking after Elders released strong first-half results. Statutory net profit jumped 90% on the first half of last year to $52 million for the six months ended March 31, up from $27.4 million a year ago. The company's underlying profit after tax was $47.6 million.

    Recent drought-breaking rains in eastern Australia have lifted farmer confidence, generating extra demand for fertilisers, chemicals and other Elders products and services.

    The AIRR acquisition helped lift revenues to $925 million, from $733 million a year earlier, an increase of 26.2%. AIRR also contributed $8.6 million to EBIT.

    AIRR is the wholesale supplier of about 6000 products to 240 independent rural merchandise retailers and about 100 Tuckers Pet and Produce stores. With eight warehouses and five of its own retail locations, AIRR should benefit from increased margins from consolidated buying across the Elders group.

    Elders expects full-year net profit to be between the broad range of analysts' forecasts of $85.8 million to $102.9 million.

    "Distressed assets"

    Mr Allison has also flagged Elders' interest in potential acquisition opportunities of distressed businesses as the economic fallout from COVID-19 causes some industry players to stumble, especially after restrictions are lifted. He told the Australian Financial Review:

    We're actively assessing distressed assets and we're actively assessing the economic fallout and the opportunities that will bring.

    He said Elders was in a strong position even though there was uncertainty in some parts of the business, with rural property sales expected to be softer because of the impact of COVID-19, and wool prices weakening further as demand from fashion houses in Europe and North America drops.

    The company would remain highly disciplined and only pursue acquisitions that added value and were earnings per share accretive, but there would be more to choose from as some industry players hit hard times because they had too much debt.

    Acquisitions in the past few years have been strictly focused on the core agricultural sector including the TitanAg agricultural chemicals business, and Livestock in Transit insurance.

    Elders recently announced the purchase of Dalby (QLD) independent stock and property agency, Eastern Rural. It is smaller, compatible business to the Elders group.

    The acquisition will see the residential real estate side of the business integrate into Elders, retaining all staff and offering residential and commercial sales in addition to property management through the Elders Real Estate brand.

    The livestock agency, rural real estate and clearing sales will continue to be operated through the Eastern Rural brand.

    Sourced from the Sydney Morning Herald, The Australian Financial Review, Stock Journal, Beef Central and Queensland Country Life

    Related: Taking on Australian Independent Rural Retailers allows Elders to have a presence in the wholesale market. Read HNN's previous article here.

    Elders moves into wholesale - HNN
    companies

    Could Bunnings stores get smaller?

    Modbury store on the market

    New store being planned at Tarneit and development application withdrawn in Narrabri

    Retail services director Zelman Ainsworth from commercial real estate company CBRE predicts that retailers like Bunnings were looking for "less bricks and mortar" to reduce operating costs in the future. Mr Ainsworth said:

    Larger retailers in the inner city are looking for smaller format metro stores ... There's a real push from tenants to lease spaces which already have existing fit-outs, so there's less costs involved.

    However, a Bunnings spokeswoman told the Sunday Herald Sun there were no plans to relocate any stores or open up boutique shopping outlets. Bunnings' acting general manager of property Garry James previously told Leader Newspapers:

    We are always looking at opportunities to innovate the design of our stores and we have a number of different formats that cater for the local markets where we operate.

    Full Circle Property Buyers director Rob German said customers of all ages would opt to shop online even after the pandemic, which would encourage businesses to downsize shop space.

    He believes there would be a shift of retailers moving to smaller shops in the same suburb they already operate. But there would still be a place for warehouses and factory spaces in the future because they are "places that online shops can hold their stock". Mr German said:

    People also want to buy more Australian-made products, which could help manufacturers and add demand to warehouses too.

    Tarneit hub

    A 16,5000sqm Bunnings store will be part of the Tarneit Park Hub in a western suburb of Melbourne (VIC).

    Ranfurlie Asset Management, the retail and commercial division of the Dennis Family, is overseeing the Tarneit Park Hub development which will spread over 46,000sqm when complete. In March, chief executive Mark Wilson said the new Bunnings store anchors stage one of the project. He said:

    We are excited to have secured Bunnings. It cements Tarneit Park Hub as a key retail and lifestyle asset for the region...

    It is expected to open at the end of this year and should be open for trade in the first quarter of 2021.

    Leasing agent Tom Perkins, of Leedwell Property, said establishing a Bunnings Warehouse in Tarneit would help to draw business into the area.

    The ability to generate footfall seven days a week and its brand recognition in a community is unparalleled. We have recently completed leasing on a number of new developments anchored by a Bunnings [Warehouse] and they have proven to attract quality, national retailers around them.

    Located within the City of Wyndham, the nation's third-fastest growing municipality, the population of Tarneit and the surrounding suburbs are booming. Mr Wilson said:

    Tarneit Park Hub answers the demand from the community for greater amenity, with great access, proximity to public transport and adjoining Tarneit Central [shopping centre]. It sets an excellent foundation to further enhance the precinct and build on what is already a thriving centre.

    Mr Perkins said Tarneit Central ALDI recently had a major store upgrade as a result of growth in the precinct.

    Narrabri withdrawal

    Earlier this year, Narrabri Shire Council confirmed that the development application (DA) for a proposed Bunnings store at Narrabri (QLD) has been withdrawn.

    A site on the Newell Highway on the northern outskirts of Narrabri had been nominated for the project. However, issues arose which precluded the site from being developed for the store. Narrabri Shire Council executive manager - planning and environment, Daniel Boyce told The Narrabri Courier:

    The NSW Government Roads and Maritime Services lodged an objection to Bunnings Narrabri in January 2018 and council understands that since that time Bunnings has been unable to reach agreement with the adjoining landowner for a shared Newell Highway access...

    In a statement to The Courier, sent in January, Bunnings' acting property general manager, Garry James, said:

    Narrabri remains an area of interest for Bunnings and we look forward to working with council when another suitable site has been identified.

    The proposed Bunnings' development gained both support with some in the community seeing it as an endorsement of the town's potential, while others very concerned it would seriously impact on existing similar businesses.

    The Bunnings DA had identified a total retail area of 5,075sqm for the proposed store.

    Related: In a DA lodged last year, Bunnings had proposed a "smaller format" store for Narrabri. See the link to the previous story here.

    Smaller format store rollout - HI News, page 18

    Modbury store

    A Bunnings store in Adelaide's north-east was offered for sale to real estate investors earlier this year, in the midst of the coronavirus.

    The site at 933-945 North East Road, Modbury is leased to Bunnings and generates a net passing income of approximately $1,432,000 per annum. The 8,055sqm store currently has a 12-year lease in place with 3% annual increases. It occupies a site spanning more than 14,000sqm.

    Major developments in the area include the Modbury Triangle Shopping Centre anchored by a Foodland supermarket and Westfield Tea Tree Plaza Shopping Centre that has a variety of department and supermarket stores attached.

    Sourced from The Herald Sun, Star Weekly, Narrabri Courier and Shopping Centre News

    bigbox

    Paint store proposal to expand

    Inspirations Paint North Rockhampton

    A development application has been lodged for the overhaul of the exterior of the business

    An Inspirations Paint store located in High Street, Berserker (QLD) has submitted plans to extend its shopfront. The development application (DA) submitted to Rockhampton Regional Council is for a material change of use for extensions to existing paint shop.

    Specifically, the application relates to 63, 65, 67 and 69 High Street and 64 and 66 Seigle Street for Lesdel Pty Ltd, the owners of the site.

    The company owns another paint store on the southside and is looking to reduce its overheads by operating from the one main paint store. The southside store is mostly used for storage and before they can close it, they need to extend the northside store to accommodate for the extra required space.

    It is noted the shop extension is a 296.6sqm gross floor area and includes the use of the existing buildings on the premises. The DA also notes the site is located near a state-controlled road and intersection.

    The concept plans drawn by Rufus Design Group indicated further works to be submitted for approval at a later date. The current proposed plans include a new paint store extension of 144.5sqm, along with other storerooms and a covered trade entry, measuring 8x15m.

    The existing retail paint shop will remain in its current location and is to be expanded to the rear.

    The existing dangerous goods paint store will be converted to a regular paint store, with a new dangerous goods paint store extension at the rear.

    An extension of the existing trade drive-through will allow space for a small internal workshop hire room. Behind that will be a new sandblasting grit store.

    To the east of the existing shop, a new covered drive-through entry is to be provided which will have space for four painters' vehicles for temporary set down and loading. Recently, the two existing rental houses owned by the company were demolished to make way for an extended concrete driveway area to accommodate 17 additional car parks, a dedicated delivery truck bay, and relocation of the existing shipping containers that are rented out to local painting contractors.

    A retail shop extension has been planned for a future stage but is not part of this application. This area will be seven temporary carparks until the company is in a financial position to proceed with the construction of the additional shop.

    Sourced from The Morning Bulletin

    retailers

    Court ruling favours Boral in cement price battle

    Wagners will make less money from selling cement to Boral

    A judgment has been decided on a long-running dispute between Wagners and Boral over the cost of cement

    The Queensland Supreme Court has ruled that building materials and services supplier, Wagners must meet lower prices offered by a competitor in the market when selling cement to Boral.

    Justice John Bond found that a notice sent by Boral to Wagners in October 2019, showing that the company had been able to buy cement from a rival supplier, Cement Australia, at a lower price per tonne than what it was being charged by Wagners, was "a valid and effective notice".

    While Justice Bond found that the prices quoted by Boral in October 2019 to buy cement were valid, he found the earlier March quote was not valid. The March quote was deemed not to be a "current" market price because it did not start until May when market conditions could be different.

    Under the terms of its take or pay agreement, Boral was allowed to stop buying cement from Wagners for six months if it found cement at a cheaper "market price" elsewhere. It could also ask Wagners to match the lower price.

    Boral resumed buying cement from Wagners on October 22, 2019, but at lower prices than previously, which will hurt Wagners' future earnings.

    Wagners chairman Denis Wagner said the company would continue to hold Boral to the terms of its supply agreement until its end date in 2031, reflecting lower rates from competition in the market. He told The Australian Financial Review (AFR):

    Whilst the outcome is not totally in our favour, there were a number of points determined that support our position and therefore provide clarity on the strength of the supply contract.

    In a statement, Wagners also said:

    The court's findings provide some certainty for the parties moving forward around Boral's ability to issue and rely on a pricing notice. This is important given the long-term nature of the cement supply agreement which remains binding on the parties until December 2031 and requires Boral to purchase a predetermined volume of cement from Wagners on an annual basis.

    Boral referred to an earlier statement welcoming the judgment. Boral Australia chief executive Wayne Manners said:

    Boral welcomes the judgment by the Queensland Supreme Court and we are pleased with the long-term impacts of this result under our cement supply agreement with Wagners.
    The result fulfils our objective to exercise our contractual rights to ensure that we can source cement at competitive rates. Boral has pursued this objective in the best commercial interests of our business and our shareholders.

    Boral extended a separate contract with Cement Australia in October 2019, reducing the amount of cement it needs to buy from its own cement joint venture with Adelaide Brighton, Sunstate Cement.

    Before court action

    Boral competes with Wagners in making cement. But after Boral bought the Queensland group's construction materials business in 2011, it signed a "take or pay" requiring it to keep buying minimum amounts of cement from Wagners' Pinkenba plant in Brisbane.

    The prices paid by Boral for the cement (which were redacted from the court judgment) are adjusted in line with inflation, with a review by an independent expert every three years. In March 2019, Boral sent Wagners a quote showing it could buy cement at lower prices from Cement Australia.

    After Boral issued a pricing notice, Wagners accused the company of trying to force down contract prices and disputed whether the lower price was "bona fide", arguing it was for a future period between May and December 2019 and not a current quote.

    Wagners, which previously supplied 26 truckloads of cement daily to Boral, suspended its cement supplies to the company for six months at a cost of $20 million while the matter was before the courts.

    Boral is Wagners' biggest cement customer and takes about 40% of its cement.

    Sourced from The Australian Financial Review and The Australian

    Related: In 2019, Wagners filed a statement of claim in the Supreme Court of Queensland against Boral after the two parties failed to settle their cement supply pricing dispute. HNN featured the story in a previous edition here:

    Court next stop for cement supply dispute - HI News, page 28
    companies

    BGC offers property assets for sale

    This follows the divestment of BGC Contracting

    There is speculation that the WA-based building materials group may be sold off in parcels

    The company founded by the late billionaire Len Buckeridge, BGC (Buckeridge Group of Companies) has appointed commercial real estate agent, CBRE to sell 47 industrial, office and residential property assets around the country, according to the Australian Financial Review.

    The office and residential components of the portfolio are located around Perth (WA) including affordable housing apartment blocks that Mr Buckeridge built in the 1960s and 1970s. The portfolio also includes industrial properties in Brisbane, Adelaide and Altona in Melbourne, which service the construction side of the business. There are 18 industrial sites in total.

    The industrial and office properties would likely be sold with leaseback arrangements in place. The sale of the property assets is expected to reap hundreds of millions of dollars for the company.

    The intention to sell its assets was revealed by the AFR last year and coincided with the group's planned divestment of its large mining contracting and civil construction business, BGC Contracting.

    Sell down?

    Sources have told The Australian that BGC is now believed to be looking to sell down only part of the building materials group. However, this is likely to occur in the months ahead once COVID-19 restrictions are lifted.

    The sources speculate that a private equity fund could initially own a stake in the business, then buy out the remainder once the performance of the operation improves.

    Last year it was thought BGC had an annual turnover of at least $3 billion, but this included its contracting arm.

    The business is now involved with producing construction and building materials and offering residential and commercial construction services, industrial maintenance and fabrication services, and property ownership and management.

    It owns quarries and a cement grinding plant. Family members have been involved with running the business, but some believe they could be taking more of a backward step in future. It is thought that the group's divisions are all interrelated and are largely reliant on each other for profitability.

    The opportunity for a buyer to acquire the numerous operations as one group would provide the new owner with an instant construction materials platform in Australia, according to The Australian.

    Sourced from the Australian Financial Review and The Australian

    Related: In previous editions, HNN reported that the building materials assets of BGC were expected to attract the buying interest of companies such as CSR and Wagners as well as private equity firms. To read more, visit the following links:

    BGC building materials draws interest - HNN Flash #11 BGC Group potential sale - HI News, page 29
    companies

    Knauf exploring sale of Australian plasterboard assets

    It is also a JV partner with Boral

    Knauf acquired USG Corporation last year, and inherited USG's stake in a regional plasterboard joint venture with Boral, but these assets are not on the block

    German, family-owned global manufacturer Knauf is understood to be making its Australian plasterboard assets available for sale, based on report in the Data Room column in The Australian.

    On offer are believed to be the assets that Knauf owned before it gained an interest in plasterboard assets that Amercian group USG jointly owned with building materials supplier Boral.

    Knauf is seen the No 3 player in the Australian plasterboard market, which is led by CSR. Its Australian operations includes four manufacturing plants in Victoria, NSW and Queensland. It also has plasterboard manufacturing sites at Altona (VIC), Matraville (NSW) and Bundaberg (QLD), and it makes metal profile lines in Beenleigh (QLD).

    These assets are thought to be worth somewhere between $100 million and $200 million. Annual revenue generated from the assets for sale is understood to be about $200 million.

    In 2019. Knauf closed a deal to buy Chicago-based USG for USD7 billion. This gave it ownership of USG's plasterboard joint venture with Boral across Asia and Australia and New Zealand. These assets are not offered for sale.

    The Australian Financial Review (AFR) described the situation as Knauf considering options including a merger or sale. According to the AFR, it is understood that Knauf requested a number of Australian investment bankers to assess options for its assets which includes insulation, plasterboard and ceilings. It is understood Knauf is asking for ideas on where its own assets could fit into the wider industry and what they may be worth.

    Sources have told the AFR they believe Knauf could be a seller at the right price or be involved in consolidation in another capacity, although the review of options is said to be at its early stages.

    Knauf's review is expected to consider the company's relationship with Boral and whether it's time, effort and capital may be better spent in other parts of the world.

    There are also some concerns about a decline in plasterboard sales in the months ahead with predictions that fewer apartments will be built. This is due to recession fears linked to the global COVID-19 pandemic.

    Background

    Knauf and USG-Boral were competitors in the local plasterboard and suspended ceilings markets, and Knauf's USG takeover paved the way for Boral to buy back the Australian joint venture.

    After months of talks, Boral agreed a deal to take full ownership of USG Boral Australia and New Zealand, and tip some of its assets into an expanded 50/50 joint venture with Knauf in Asia.

    However, Boral reneged recently after deciding the Australian Competition & Consumer Commission was unlikely to approve the Australia/New Zealand component. Boral and Knauf are back in talks, according to the AFR.

    Competition concerns exist with Knauf jointly owning other plasterboard assets in Australia with Boral. While Knauf also owns the joint venture assets with Boral here, it has to have an arms-length involvement to appease the competition regulator.

    By selling its existing assets, it can then have an operational involvement in the other assets it jointly owns with Boral.

    Sourced from The Australian and The Australian Financial Review

    Related: HNN included the story of Knauf's acquisition of USG in a previous edition. Click on the link here.

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

    Contemporary facade design

    Mixed cladding trend

    EasyTex by James Hardie can help builders reduce costs, increase efficiencies and still deliver high quality homes

    The "modern" home aesthetic is very popular, accounting for 61% of detached houses in Australia, according to research by BIS Oxford called, "Building Materials in New Dwellings, 2018". This trend is being driven by the "mixed cladding" look, which combines a range of materials from weatherboard and cladding profiles, to render.

    Combining a number of building products on one facade is not only aesthetically challenging, but can impact on budgets and timelines, as it can require multiple trades. As a replacement of those masonry elements, James Hardie's EasyTexTM fibre cement panels offer an embedded render-look finish, to achieve the style without the need for wet trades or expensive render texture coatings. Ronnie Nunez, product & strategy manager, James Hardie Australia, said:

    EasyTex provides a solution that is up to 50% quicker to install than rendered brick and Autoclaved Cellular Concrete (ACC). This results in an on-the-wall cost that is also up to 45% less than rendered brick and ACC.

    (Note: This is based on James Hardie internal data and engagement with qualified third parties. numbers and figures are indicative only.)

    EasyTex comes pre-primed and can be finished simply with two coats of paint. It can provide a more uniform look than traditional render. It is less prone to dirt build up and doesn't suffer from cracking or lime staining.

    It is suitable for use as an external wall cladding in residential detached and medium density buildings. In addition, it can be renovation solution for upper storey additions and ground floor extensions.

    EasyTex can also provide up to 11.27sqm of additional floor space over traditional masonry. (Note: This is based on James Hardie internal data and engagement with qualified third parties. numbers and figures are indicative only.)

    Craig Milson, managing director of Orbit Homes has used the product on a range of medium density and detached home projects. He said:

    EasyTex is easy to use, achieves the look I want and is faster and more cost-efficient to install than traditional materials. I can also use it in non-combustible applications, and being lightweight means I can use it on second levels where masonry would be too heavy. It's my go to for any modern home.

    EasyTex is available in an 8.5mm thickness and a range of panel sizes (2440 x 1200, 3000 x 1200, 3600 x 1200 and 3000 x 1350).

    products

    Construction's future post-pandemic

    ABS stats indicate some troubles, little cause for alarm

    The stats show continued declines in activity, but these are broadly in line with the December 2019 quarter

    Statistics have become a regular feature of the news as we track the progress of moves to limit the COVID-19 pandemic. While these stats are often immediate and shocking, looking at the effect the pandemic has had and will have on the building industry - and thus on the hardware and home improvement industry - is a different task.

    It's not just that there is a considerable lag in obtaining these numbers - as it will not be until August and September that we see the stats reflecting the true initial impact of the pandemic. It is also that the numbers we do have and will have reflect a more complex picture. They really relate to three possible influences:

  • The underlying pre-pandemic economy, especially as it developed under the government's decision to preference an economic surplus ("back in the black" as the election slogan would have it) over stimulus spending
  • The effect that the bushfires of December 2019 to January 2020 had on the economy
  • The direct and secondary effects of the early stages of the pandemic on the economy
  • Just about all the statistics we currently have, for the March quarter as well as the months of March and April, indicate that the pre-pandemic conditions shaped building industry performance during those periods.

    Alterations & additions

    To begin with, we have the numbers from the Australian Bureau of Statistics (ABS) for Australia's national accounts. These include statistics for "alterations and additions", which include renovations and maintenance work. As these are survey-based, rather than permit-based, they reflect a wider range of this work than those statistics provided in the standard building statistics.

    Chart 1 shows that, basically, the figures for the March 2020 quarter followed in line with developments over the preceding three to five years for each of the three major states: NSW, VIC and QLD. While the March quarter number for NSW was the lowest it has been for 10 years, it is nearly equal to the number for the March quarter of 2019.

    Likewise, for VIC, the most recent quarter was the second highest for any March quarter over the past 10 years. That is in keeping with a growth trend that peaked in 2017, but has only declined mildly since then.

    QLD, meanwhile, recorded its best quarter for alterations and additions in its history. That follows on from a steady pattern of growth since its brief decline in 2012 and 2013. QLD is, in fact, beginning to come very close to the numbers that VIC generates.

    Chart 2, however, reveals some more fundamental, structural problems in the alterations and additions market. This chart graphs the percentage change in growth between corresponding quarters for every state.

    Its most marked feature is the strong coalescence of growth factors for the December 2019 quarter. Similar clustering occurred for the December 2014 and June 2015 quarters. Both these cases happened in proximity to decisions by the Reserve Bank of Australia (RBA) to lower interest rates (down by 0.25% to 2.25% in February 2015, and then down to 2.00% in May 2015).

    At the start of the December quarter, in October 2019, the RBA cut interest rates from 1.00% to 0.75%. The minutes for the review meeting in that month had this to say about the housing market:

    The residential construction sector had contracted further and this was expected to continue for some time. The decline in dwelling investment in the June quarter was greater than had been expected a few months earlier. Higher-density approvals had declined in July, to be at their lowest level in seven years; detached approvals had also declined in July. The Bank's liaison program had continued to report weak pre-sales for higher-density developments. Taken together, this information implied that dwelling investment would decline further over coming quarters.

    During March 2020, the RBA cut interest rates twice, by 0.25% each time, bringing the rate down to 0.25%, in response to concerns about the pandemic. In response to a range of factors, the cluster of the December 2019 quarter broke apart, with TAS, VIC and QLD moving into growth, NSW going neutral, and both SA and WA continuing to decline.

    What we can say about this is that this part of the building industry showed contraction during the December 2019 quarter in response to an economy that was declining. In response to a range of stimuli, different states then responded in different ways. So, the economic woes of Australia, pre-pandemic (low business investment, low wage growth and a falling housing market) were national in nature, but the effects of the pandemic itself (as well as the bushfires) varied regionally.

    Building approvals

    When it comes to building approvals, the numbers indicate that regional factors dominate.

    Chart 3 shows the stats for the greater Sydney area. During the peak in approvals, from 2015 through to 2017, most of the growth is in multi-unit dwellings, though detached houses also show growth. That house approval growth continues through until 2018, then begins to decline in 2019. Approvals for non-house projects decline more sharply.

    In Chart 4, Melbourne shows a similar pattern, though the share of approvals is more evenly divided between house and non-house. What is always surprising about the Melbourne market is that non-house approvals account for far less proportionately than they do for Sydney. While that proportion increases from 2014 to 2017, in 2018 and 2019 it returns to close to the levels of 2010 and 2011.

    As far as the numbers show, the two "pandemic months" of March and April 2020 are simply continuing the same trends seen in 2019: an overall reduction, with non-house approvals falling more than house approvals.

    Chart 5 shows approvals for Brisbane. This indicates that much of the "boom" in approvals took place for non-house dwellings from 2014 to 2016, though approvals for houses also increased. Once again, when we look at activity for 2019, what we see are numbers close to those for 2010. House approvals exceed non-house approvals, and there is an overall reduction in activity. The first three months of 2020 seem to be largely following the same trends as 2019.

    Adelaide, represented in Chart 6, shows a different pattern. It is marked by a sharp decline in activity for 2012, with a decline in 2011 leading into that, a recovery in 2013 leading out. For the period form 2014 through to 2018, there is an almost steady-state rate of approvals for houses and non-houses, with the former dominating. Non-house approvals represent much of the growth during those years, though that begins to decline in 2019. The numbers for 2020 indicate the 2019 trend continues.

    Chart 7 shows building approvals for Perth. This is the only set of building approval stats for a state capital that shows a persistent, ongoing decline in approval numbers over the past four years. Like the other cities, there is something of a "boom" from 2013 to 2015. Non-house approvals increase during those years as a proportion of all approvals, but house approvals continue to dominate. From 2016 through to 2019, overall activity declines, and 2020 seems to be continuation of that decline.

    Hobart shows activity that is contradictory to the other capitals. Chart 8 indicates that it experienced a decline during 2012 and 2013, followed by ongoing growth in approvals from 2014 to 2019. Houses almost completely dominate these approvals, though it is noticeable that non-house approvals often increase during times of decline in house approvals. That happens at the end of 2019, but early 2020 indicates a steep rise in house approvals and a decline in non-house approvals.

    Building work done

    NSW

    Chart 9 shows how the value of building work done for houses and non-house residential has developed over the past 10 years for NSW.

    It's clear that non-house construction has contributed the bulk of growth, accelerating since the second calendar half of 2015, peaking in the first calendar half of 2018. Since that time, however, there has been a sharp decline, back to the initial 2015 level in March 2020.

    Chart 10 breaks out the March quarter data from Chart 9, to illustrate the trend. While the decline in the value of building work done for houses is new, the non-house building work actually began to decline in the March quarter of 2019.

    VIC

    Chart 11 shows the value of building work done for VIC. While both work for houses and non-houses increased from mid-2014, the rate of growth for non-houses has been above that for houses. This growth became a decline in mid-2019.

    Chart 12 shows the data for only the March quarter. Here there is a strong pattern of growth for both house and non-house construction value, which went into a decline for the March 2020 quarter.

    QLD

    The graph of building work done for QLD, Chart 13, shows a very significant pattern. Virtually all of the growth that has occurred since mid-2014 has been in the non-house sector, with this peaking early as compared to the other states, in the second half of 2016. At the same time, while growth has been strong in non-house, the house sector has accounted for more value. The decline form 2017 onwards becomes especially sharp in the second half of 2019.

    Chart 14 shows that the March decline for non-house started in 2016, though it was shallow in 2019, and very steep for March 2020. For the house sector, 2019 saw a shallow decline, which became much steeper for 2020.

    SA

    For SA, Chart 15 indicates the state experienced an earlier fall than the other states, at the end of 2012, and has experienced mild but persistent growth since then. While the house sector dominates, the non-house sector has been growing at an equal rate.

    Chart 16 shows the house sector has experienced slow growth, with only a slight decline for March 2020. The non-house sector has fluctuated around shallow growth, and actually improved slightly for March 2020.

    WA

    The WA situation is unique in Australia. As Chart 17 shows, residential building work done dipped sharply in mid-2012, then rose to a peak in mid-2015. It then fell steeply until mid-2017, and continued to decline through to 2020. While the non-house sector did grow at a higher rate than the house during the "boom" period, it also declined faster during the "bust" period.

    Chart 18 compares the March quarters for WA, and shows the steep slide of the house sector, and the milder decline of the non-house sector.

    TAS

    The situation for TAS is somewhat choppier, as Chart 19 shows. There is a trough for 2013, followed by growth in 2014 and 2015, then a trough for 2016 and much of 2017, followed by more growth through to 2020. It is a market very much dominated by the house sector.

    The stats for the March quarters in Chart 20 repeat that basic pattern, with the house sector growing since 2017, and the non-house sector representing a flat line, with some growth in 2018.

    Analysis

    For context, it's worth taking a look at some of the charts the RBA makes available.

    Chart 21 shows that private dwelling investment has been falling for the past year, despite, as Chart 22 shows, an ongoing increase in house prices, likely fuelled by the sharp decline in interest rates, as illustrated in Chart 23. Low interest rates have not encouraged business investment, as shown in Chart 24, and that is hardly going to get better, as the chart of business sentiment, using figures from NAB, indicate in Chart 25. This ongoing mixture of circumstances has led to record low wage growth, as shown in Chart 26.

    As we said in the introduction, much of the task of working through the stats and getting some idea of what the future might hold comes down to sorting out the nature and impact of various factors. The policy adopted by the current federal government for FY2019/20 was to provide a surplus (put Australia "back in the black"), at, it would seem, almost any cost. That meant curtailing any kind of stimulus spending. That resulted - well before the bushfires or the pandemic came about - in lower and lower interest rates, which continued to have less and less impact on stimulating the economy.

    For most economists, this did not seem a very rational approach, as there is little doubt that it created an increasingly weaker economy through calendar 2019. The conclusion has to be that this path was chosen not for rational economic reasons, but rather for socio-political ones.

    HNN's best guess as to what was going on is that the government more or less put the economy "in the freezer", in the hope that China would begin to grow, fuelling exports, and solving Australia's own growth prospects. Importantly, that growth would occur in "traditional" sectors, such as mining and agriculture. If instead Australia had engaged in stimulus spending, it would have made sense to spend in high growth areas, such as alternative energy, software and data services - sectors which would disrupt the "traditional" sectors.

    Rather evidently, this plan did not work out. Somewhat ironically, in fact, the government has found itself in the role of having to provide massive amounts of stimulus spending. Rather than contributing to real growth, however, that spending now can, at best, help Australia to regain a functional economy - albeit still stuck in slow growth.

    Looking at the current statistics, it seems that what we are seeing is most likely that the pandemic - at least up until May - had not really created outsize, independent effects on the building and construction industries. While there were significant declines in 2020, these declines are largely in line with declines already underway at the end of 2019.

    If we look at building approvals, what we are really seeing is the best guess by property industries as to how the economy will look in 12 to 18 months. With overall declines in approvals, the answer is "not all that good", but it is very far from any kind of real collapse.

    The market is pretty much guessing that the economy for property investment purposes will resemble that of the 2019 December quarter: very low growth, with little prospect for immediate improvement. Added to that will be a reduction in general population growth through to the end of 2021, but there is already a high enough level of general demand to support the industry through the next year.

    The building activity numbers are, for most states, signalling a slowdown. The numbers for the March 2020 quarter are just far enough outside of statistical likelihood to signal they represent a change and not a fluctuation. However, the level of activity is high enough in most states that while a reduction will hurt, it won't reach levels low enough to see people leave the industry, and then generate future problems of shortages in both labour and expertise.

    Recovery effects

    Outside of the immediate effects of the pandemic, there are also the ways in which efforts to help the economy recover will shape the housing industry. The government has already released its "HomeBuilder" scheme, which has bewildered more than a few industry commentators.

    Offering grants of $25,000 to people spending $150,000 or more on a renovation or purchasing a house and land package for under $750,000, it's difficult to understand as a strictly stimulus package. With couples earning as much as $200,000 a year are able to apply for the grant, it's difficult to see how it will be truly additive to activity in the industry.

    There are other, practical measures that could be employed. One proposal put forward by Master Builders Australia (MBA) is:

    Support ongoing building of house and land packages through interest free loans for a component of the cost, for example 25 per cent for title-ready blocks. Housing developers, big and small, will be hit by a dramatic fall in sales for new homes due to anxiety over a potential recession but this will rebound meaning the risk of default on the loan would be minimal. This is needed to keep builders on the job, employing people and paying their tradies.

    Effectively what the MBA is suggesting is a means to better securitise the building industry, on a range of levels, helping to ensure that in tough times it does not collapse through a lack of ongoing credit. That is a sophisticated and very useful approach - but it's not flashy. It's about addressing the needs of the construction industry through direct support, rather than by simply stimulating demand in very limited areas.

    Conclusions

    HNN has suggested in the past that we are living through a time when national governments - globally, not just in Australia - are not adept at helping out the business community, even when this is to society's benefit. There are increasing signals coming from the Australian government that support in recovering from the pandemic will be limited, and that businesses - in hardware and construction in particular - will need to rely on their own resources to succeed.

    There are arguments to be made about whether this reflects a particular ethos, or even a lack of a capability. What is more certain, however, is that the way the effects of the pandemic play out on the economy are going to be more regional than national.

    To go back to Chart 2, which shows the quarter-on-quarter growth rates for alterations and additions as recorded by the ABS for the national accounts, there is that very stark, tight cluster of low growth for the December 2019 quarter, followed by a scattering of different positive and negative growth rates for the March 2020 quarter.

    The clustering was caused by overwhelming national concerns, brought about by a slow-growth economy. The scattering was caused by the effects of both the bushfires and the pandemic, which had widely varying regional results.

    Not to over simplify, but the strategy going forward will be for regions to make sure that in that scattering of responses to the pandemic, they end up on the positive part of the graph rather than the negative.

    How can regions do that? It is a feature of current government that state and local governments tend to have much less discretionary funds available than the national government. But what regional governments do possess is better knowledge about their polity, as well as the ability to ably foster connection and communication.

    One area where HNN could see regional participation working well would be in the further development of exurban areas. We've seen the "work from home" (WFH) movement take off, as a consequence of many workers not being able to risk the office during the pandemic. This could mean that more people would find living at a distance of 100km or more from a city centre both possible and welcome.

    State and local governments could find ways to encourage that kind of community building. Not only would that be a boost to the construction industry, but it would also see more funds flow into regional areas - which, HNN believes, could see very tough times later in 2020.

    The pandemic has already taught many of us new lessons about community, whether that is about being grateful to others who obey social distancing to help keep us all safe, or the neighbour who checks in on your family. It may be that the best way out of the pandemic will be found in new ways of connecting and developing a resilience that is based on local links.

    statistics

    Bunnings buildout continues

    Store openings and closures

    The big box retailer continues to bolster its store network with upgrades and replacements

    The $9 million Bunnings store in Young (NSW) is progressing as planned; proposed development next to new Palmerston store in the Northern Territory; the opening date for the Bunnings Gladesville store has been set for September; a development application has been lodged for a $30 million store at Caboolture (QLD); work has been continuing on the Albany warehouse in Western Australia and is on track to open by the end of the year; the Whitfords (WA) store will close its doors after more than 20 years; and two new stores in New Zealand will open with another one planned despite recent closures.

    Young

    The new Bunnings store located at 288 Boorowa Street, Young in NSW is expected to open by the end of 2020. This smaller format store will span over 5000sqm and have car parking for over 85 cars.

    Bunnings area manager James Burke said the new development represents a significant direct investment in the local community and will create a number of new team member positions. He told The Young Witness:

    The new Bunnings Young will create up to 45 jobs for local residents and we're excited to bring a wide range of outdoor living and home improvement products to the Young community.

    Palmerston

    Recently lodged planning documents show the plot of land next to the new Bunnings store in Palmerston (NT) will be turned into a mixed use development with two single-storey buildings and 59 carparking spaces. It is currently being used as a pad site for the Bunnings store that is being constructed.

    The triangular lot is part of a larger 40,000sqm parcel at Pierssene Road, Yarrawonga, purchased by Wesfarmers three years ago, according to The Northern Territory News,

    The $58 million Bunnings Warehouse Palmerston will span over 17,000sqm and is more than twice the size of the current store, and will be the home of Big Kev, the giant fibreglass dinosaur.

    Gladesville

    The $115 million Bunnings store located on 461 Victoria Road, Gladesville (NSW) will be a "direct investment" in the local community with the creation of 140 new jobs.

    On the way to the store being built, Bunnings changed the design to reduce the risk that excavating may have on Victoria Road.

    These changes included greater setbacks to surrounding streets, reducing the size of the store, and vehicle access. Bunnings said one of the main reasons for the changes was to sit the store away from the retaining walls and batters to Victoria Road.

    The previous design required excavating the retaining walls, which could affect their stability and pose risks to public roads, according to Bunnings.

    Caboolture

    The proposed Bunnings store would be situated on the corner of the Bruce Highway and Pumicestone Road, next to local landmark, the Big Fish Tavern. The plans were submitted to Moreton Bay Regional Council after Bunnings signed a lease for the site, according to the Sunshine Coast Daily.

    The store will span more than 13000sqm and have parking space for more than 400 cars.

    Moreton Bay councillor Adam Hain said there was strong demand for another Bunnings in the region. He told the Sunshine Coast Daily:

    All the locals around here have been waiting on bated breath for many years for that site to develop. To hear that Bunnings have announced they're going to move in is just the icing on the cake.

    Cr Hain said the next closest Bunnings in Morayfield was "bursting at the seams".

    The Morayfield warehouse is one of the busiest in Australia. We have people from Bribie Island, from far and wide ... that visit the Morayfield shop. Another one is definitely good.
    Being on the highway, [the proposed warehouse] will also service those in Caloundra South heading home.

    Albany

    The 14,500sqm Bunnings store being built at Chester Pass Mall will feature a carpark with 290 bays. Bunnings area manager Peter Kingwell said the new store represented an investment of $29 million. He told the Albany Extra:

    Bunnings' further investment in the Albany area will provide additional job opportunities for local residents and school leavers. All our team members from the existing Albany store will transfer to the new store once complete...

    Whitfords

    The news of the closure of the Whitfords store comes ahead of the lease expiring in October 2020, Bunnings said in a statement. Bunnings regional operations manager, Hayley Coulson, added:

    The Whitfords Warehouse is one of our older stores and we've made the decision to service customers from our surrounding stores, rather than commit to a further lease term.
    All of the current Whitfords team members will transfer to alternative stores and our focus is on working with them and supporting them throughout this transition...

    The Whitfords store will close its doors on August 30 which will give time to prepare to exit prior to the lease ending.

    Joondalup, which is 6km away, is the next closest Bunnings location to Whitfords.

    New and improved replacement stores are planned for Albany, Midland and Maddington, as well as a new smaller format store in Northam, said Bunnings.

    Westgate, NZ

    Bunnings recently announced plans to open its largest New Zealand store in Westgate and a new Queenstown outlet early next year. Jacqui Coombes, Bunnings NZ director told The New Zealand Herald:

    Last week in July for Westgate and Queenstown in April 2021.

    At 15,544sqm, the Westgate store will be NZ's biggest Bunnings, with an estimated completion value between NZD65 million to NZD67 million. There are also 745sqm of retail tenancies being built, making this complex 16,290sqm on completion, with 318 car parks.

    Bunnings first announced Westgate plans in early 2016. The area already has a Pak'nSave, Mitre 10, Harvey Norman, NorthWest shopping centre and is due to get the first Costco in New Zealand by 2021.

    The new stores in Westgate and Queenstown follows the big box retailer's to close stores in Cambridge, Te Awamutu, Putaruru, Hastings, Rangiora, Christchurch's Hornby and Ashburton, which was recently confirmed.

    Whanganui, NZ

    Bunnings has been given the green light to build a large-format store in Whanganui.

    In January 2019, the big box retailer said if its plans were approved the new warehouse would cost more than NZD19 million and span over 8400sqm, making it well over double the size of the current "smaller format" store. All team members at the current Whanganui store would transfer to the new warehouse and be joined by more than 50 new team members.

    Sourced from The Young Witness, The Northern Territory News, The Daily Telegraph, Northern District Times, Sunshine Coast Daily, Seven News, The New Zealand Herald, Albany Extra and Whanganui Chronicle.

    bigbox

    Wattyl sale possibility: reports

    Wattyl is the third biggest paint maker in Australia

    The process to find a new owner for Wattyl is ongoing and part of a review of what Sherwin-Williams deems non-core assets globally, according to the AFR

    US paint giant, Sherwin-Williams is understood to be reviewing its wide-ranging portfolio which includes Wattyl through its ownership of paint and coatings manufacturer Valspar.

    According to The Australian, Valspar is believed to have appointed accounting firm Deloitte to explore a sale of Wattyl. This report speculates the business could sell for about $100 million based on its understanding that Wattyl could be targeting annual earnings before interest, tax, depreciation and amortisation of about $10 million this year. It believes the most likely buyers to be private equity firms.

    However, sources have speculated to the Australian Financial Review (AFR) that Metcash and New Zealand-headquartered Fletcher Building could be "logical" acquirers. (There is no suggestion either company has made an approach).

    Wattyl is understood to be making about $35 million in earnings before tax, depreciation and amortisation, according to the AFR. Bankers have told the AFR that it could trade for as much as 15 times given its "established market share, trusted brand and defensive qualities".

    It is considered a turnaround opportunity for a buyer as the third player in the local market after DuluxGroup (30.4%) and PPG Industries (17.4%) using data from IBISWorld, and reported by the AFR.

    Wattyl was listed until 2010, when it was purchased by Valspar in a deal worth about $142 million. It became part of Sherwin-Williams when the US paint giant acquired Valspar Corporation for USD11 billion in 2017.

    Sourced from The Australian and The Australian Financial Review

    companies

    Terang Co-op stores move to Mitre 10

    Signage is being changed

    The two stores, in Terang and Camperdown (VIC), will change their banners from Hardware Home and Timber

    Terang Co-op CEO Kevin Ford said moving to the Mitre 10 banner was an exciting change which would build on significant improvements made in recent years. He told The Standard:

    We have been remodelling the stores to ensure presentation and stock levels are what's needed by our communities. To move to the Mitre 10 brand is a natural progression for us.

    The stores have been operating as Home Timber and Hardware. Mr Ford said:

    It was logical to move to Mitre 10 whose support, range of goods and promotional campaigns fit well with the Co-op. Being part of the Mitre 10 brand lets our customers know we're competitive with stock and price compared to anyone in the market.
    The range of products will mostly stay the same. We've already made a lot of changes to better serve the needs of customers. However, more interactive support will help as Australia recovers from COVID-19. Mitre 10 is a much stronger click and collect business, which is ideal at this time. It means our customers can order online and pick it up from the stores.

    The Camperdown Hardware store re-opened under the Co-op ownership in 2014. According to its 2018-19 annual report, the year was challenging with the St Patrick's Day fires in March 2018.

    The report stated that in the first six months of the year the store performed poorly but after improvements were made, the business was reinvigorated. By the end of the financial year, the number of customer transactions had grown by 3,000 with sales growth to support this. According to the report:

    We still have a way to go but a very disturbing trend has been reversed and, with increased sales growth, we expect a vastly different result in the new financial year.

    Sourced from The Standard

    retailers

    ADBRI new name in cement

    Adelaide Brighton changes its name

    The company said its immediate focus is to get through an uncertain time for the economy

    Australia's biggest cement group will now be called Adbri Limited after Adelaide Brighton gained shareholder approval for a new name at its online annual general meeting (AGM). Chairman Raymond Barro told shareholders the group has "evolved" into a national business. He said:

    The change of name is appropriate at this point in our growth to recognise the expanded nature of the enterprise.

    Chief executive Nick Miller believes getting more infrastructure projects off the ground as quickly as possible is the best hope for federal and state governments to get more people back to work. He told The Sydney Morning Herald:

    The first thing we want is bipartisan support for the projects, so we get clarity of what the pipeline is looking like [and] a fast-tracking of those projects.

    He added that projects of varying sizes, including social housing and defence works, were needed because the larger projects typically had longer gestation periods as funding and land acquisitions were arranged.

    That's why the small and medium projects are very important in the mix, because they will get to market quicker, and get people on jobs, on shovels, out there working.

    Mr Miller said that an increased investment in infrastructure projects could provide a much-needed buffer against the subdued activity on the housing front.

    Trading in March and April had been in line with expectations despite the coronavirus lockdowns with strong demand from the mining sector for its cement and lime in Western Australia, South Australia and the Northern Territory. It has also seen strong demand for the masonry products it sells at Bunnings and smaller outlets, with sales up 40% in April.

    The company is also targeting savings of $30 million against "cost headwinds" of $20 million this year.

    About a third of its business has exposure to residential and multi-residential markets. The company has 44 quarries, 95 cement plants and 16 cement and lime depots across Australia.

    Mr Miller is trying to re-position Adelaide Brighton so it can chase more work in infrastructure through an integrated offering of cement, concrete and aggregates, and be less reliant on the ups and downs of the construction cycle. Earlier this year, the company said it is aiming to be a supplier to infrastructure projects in western Sydney, regional Victoria and south-east Queensland.

    Merger

    The AGM also heard the company is open to a potential merger with its largest shareholder, Melbourne-based Barro family, but says navigating the housing downturn remains its immediate priority.

    Barro Group holds a 43% stake in Adelaide Brighton and Raymond Barro assumed the chairman's role a year ago. His older sister Rhonda Barro also sits on the cement company's board, along with Geoff Tarrant, who also represents the Barro Group.

    Adelaide Brighton said a deal still made sense. Adelaide Brighton deputy chairman Zlatko Todorcevski told shareholders at its online AGM:

    We have been clear in the past we do believe there are likely synergies through a combination of Barro assets in concrete, cement and aggregates with the Adelaide Brighton assets. However, at this time there are no active conversations...

    The Barro family has been steadily lifting its control over Adelaide Brighton with its stake raising talk the Barro Group could either launch a takeover of Adelaide Brighton or Barro itself could be swallowed.

    ACCC decision

    In January, the Australian Competition and Consumer Commission (ACCC) found no evidence the stake held by the Barro family in Adelaide Brighton had influenced competition between the companies in Melbourne, Brisbane and Townsville. However ACCC commissioner Stephen Ridgeway said the ACCC would continue to keep a close eye on the industry and might reopen the investigation if other information came to light.

    The competition regulator completed a three-month investigation into whether the financial stake and the presence of Mr Barro as chairman of the Adelaide Brighton was influencing decisions made by the two groups in the cement industry.

    The Barro Group's stake in Adelaide Brighton has been built up over two decades, and it has been a regular user of creep provisions, often referred to as slow ways of edging towards control; ways in which large shareholders can gradually increase - in small increments - their holdings.

    The watchdog examined the issue closely because Barro and Adelaide Brighton have overlapping operations for the supply of cement, pre-mixed concrete and aggregates in Melbourne, Brisbane and Townsville.

    The investigation found Barro and Adelaide Brighton would continue to face competition from Boral, Holcim and Hanson, three large vertically integrated competitors with national operations. Several smaller independent rivals were also operating.

    Barro Group's main brand in pre-mixed concrete in Victoria is Pronto. The company also supplies quarry products, cement, concrete roof tiles and concrete precast panels.

    Its pre-mixed concrete business in Queensland operates under a range of brands including Pronto Concrete, Gladstone Premix, Hervey Bay Ready Mix, Townsville Concrete and Mt Cotton Concrete.

    In March last year, Adelaide Brighton increased protocols on corporate governance around the interactions between board members regarding areas with potential conflicts of interest.

    Sources: Sydney Morning Herald, Australian Financial Review, Adelaide Advertiser and The Australian

    companies

    Local hardware bucks the trend

    Eastern Suburbs Hardware

    Ipswich-based independent hardware stores are reporting solid trade amid the challenges of the pandemic

    Gerry Galligam, owner of Eastern Suburbs Hardware located in Eastern Heights (QLD) said that the business was trading strongly. He told The Queensland Times:

    We have had an increase in sales, in fact we have doubled our usual retail. DIY is big. We are not really a retail store as such, we do more with the trade.

    From the perspective of his business, he was unphased by the COVID-19 pandemic. He explains:

    There are always ups and downs. Frankly there is no dream run so this is just another one.

    Stores like Eastern Suburbs Hardware have found their niche as big box outlets continue to grow.

    Nutz and Boltz Hardware is another store that has secured a niche in the local market, something they have been doing for more than 23 years. Owner Lyn Willems said:

    We have had an increase in trade. The store continues to function within the government guidelines. We are allowing four people in the store at a time, and provide hand sanitiser and the like.

    Nutz and Boltz is a family business selling to the public with a trade customer base. Ms Willems is concerned that people are beginning to become casual around hygiene. However the business continues to keep strict controls in place.

    Hardware stores are enjoying the financial boost, but owners and managers are cautious about the duration of this phenomena. Mr Galligam said:

    A lot of the tradies are busy at the moment and that will last a few months, but things have been slowing up and it is the end of the year that is a challenge.
    I am not knocking the government. It would not matter what colour party is in, they have to make this up as it is unprecedented. I don't think they have hit the mark, especially not for this area. The price tag on a new home is a bit high for a lot of our community.

    Sunshine Mitre 10, in Ipswich, is heavily trade oriented store and shares these concerns for the remainder of the year. Spokesman Ernie Patterson believes the government support packages would help those moving into Ripley and Springfield as the funding was relevant to the price tag. He said:

    We have set up a 'click n collect' system so DIY clients can drive through and collect. This is proving very popular. The whole Sunshine Mitre 10 group is doing well and are very busy.

    Sourced from The Queensland Times

    Related: Eastern Suburbs Hardware featured in a previous story.

    Big boxes no problem for HBT store - HNN
    retailers

    Rural store investment

    Tom Grady Rural Merchandise

    During the coronavirus restrictions, it offered a drive-way service at both its locations that allowed customers to pay with EFTPOS from their cars to alleviate hygiene concerns and help comply with governments regulations

    Gympie businessman Tom Grady has made upgrades at his rural merchandise store. Earlier this year, Mr Grady announced a 3200sqm expansion to the family business.

    The long-established rural retailer, who also celebrated 40 years in the property market this year, said the expansions were all about offering more supplies and providing additional access for customers. Mr Grady told The Gympie Times:

    We reckoned we'd better make use of the land to try and help our business and basically that's what we're doing it for, mainly for better display and parking for customers.
    It will give us greater diversity in the product range, and the parking we've got now creates a bit of congestion at times.
    Compared with other businesses, even with the way it was, we're a mile in front, because we had a lot of parking for semi-trailers to unload.

    Mr Grady's son and store manager Jason Grady said early stages of the expansion would allow the company to stock more fencing materials, water tanks, agricultural products and livestock handling products.

    He said the business had also prioritised safety for customers.

    Sourced from The Gympie Times

    retailers

    Paint charity benefits regions

    PPG joins forces with not-for-profit GIVIT

    The "In It Together" campaign is helping ravaged communities make a recovery

    PPG Industries through its Taubmans paint brand is working with GIVIT on a national initiative to help regional areas that have been devastated by the recent bushfires, floods, prolonged drought and are now facing the additional pressures from the coronavirus.

    Until June 30, every four-litre tin of Taubmans Endure, All Weather, Easycoat and Sunproof paint bought from Bunnings, Bristol, Taubmans and participating independent hardware and paint specialist stores will support GIVIT's efforts to provide essential items to regional communities in need.

    The campaign Is expected to deliver at least $120,000 for essential goods and rebuilding projects in impacted communities.

    Anne Neeson, general manager, PPG architectural coatings, Australia and New Zealand, said:

    There's been a huge outpouring of support for bushfire-affected communities in recent times, which has been absolutely incredible.
    Sadly, many Australians are also experiencing hardship due to the relentless drought and previous damaging floods. During this extremely challenging time - with the coronavirus only making things harder - we want to ensure regional and rural communities continue to get the help they need to recover and rebuild. Our partnership with GIVIT will funnel support in the most effective, efficient and lasting way possible.

    GIVIT works with more than 3000 charity partners nationwide to match the donation of goods with the individual and specific needs of recipients. The GIVIT website acts as a virtual warehouse by removing the need for charities to physically collect, sort. Sarah Tennant, GIVIT CEO, said:

    Whether it's water tanks for a drought-stricken farming community or supermarket vouchers for families in need, we will put the donation to work to make an immediate and positive difference.
    We also buy locally wherever possible to help stimulate the recovery of regional economies, ensuring the impact is widespread.

    In addition to immediate assistance, the ongoing partnership between Taubmans and GIVIT aims to address the long-term needs of these communities by facilitating rebuilding projects that offer lasting and widespread benefits.

    Sourced from The Advocate

    companies

    Regional revival

    Mount Alexander H Hardware

    The team at Mount Alexander H Hardware revived an older store, and in the process changed it dramatically

    One of the main lessons of profiling hardware stores is that there is no real "centre" to the industry - you can't say that stores in inner-urban areas, stores in rural areas, or those in areas between these two in terms of population density and market diversity are the main sources of innovative ideas. Great stores pop up in a range of different places, and the only commonality between them is dedicated owners/managers who understand the industry and their markets.

    That said, HNN does think it is worth keeping an eye on one particular demographic area for hardware stores. These are what have come to be called the "exurbs", a mix of exurban and suburban areas. Located usually around 100km to 150km from a major city, these areas are heavily reliant on that city as both a market and the provider of tools and some raw materials.

    Elsewhere in the world exurbs have caused conflict between long-term residents with a small town focus, and newcomers from the adjacent city. In Australia, however, there's been a notable move to acceptance and adaptation, as these groups find shared values regarding quality of life, a desire to honour local history, as well as a love of the bush.

    One area that is something of a pioneer for this kind of combination in the state of Victoria is the town of Castlemaine, located in the Shire of Mount Alexander, about 120km to the north of Melbourne, and a 90 minute drive down the Calder Freeway. Artists have long been moving to the region in search of a closer link with Australia's pre-urban history - as well as cheaper rent - while still retaining close links with Melbourne itself. More recently they've been joined by both more mature people seeking a handy retreat, and younger families seeking an alternative to the high property prices of the city.

    Combined with the local manufacturing and agricultural markets, it is the kind of rich mix that hardware stores can do well in, so it's not much of a surprise to find the thriving Mount Alexander Timber & Hardware (known to locals by its acronym, "MATH"), a Hardware & Building Traders (HBT) H Hardware store located there.

    MATH is interesting for reasons that go far beyond its location, however. Just as the Castlemaine area may presage a change to the way Australian cities work (especially post-pandemic), so does MATH offer a glimpse into a new and different way to think about hardware stores, both from a business/economic outlook, and from a community involvement outlook.

    Insights into these areas has never been more important than they are now - and we mean, frankly, never before in the post-World War II history of Australian hardware retail. With an economy that will have a difficult job of spurring its recovery, the need to create better businesses by improving productivity has never been greater.

    Trevor Butcher, a long-time builder in the region, is one of the founding partners of MATH. Alongside him is a couple of married accountants, Lachlan Maltby and Jenna Maltby (nee Harding), and a very experienced hardware retailer, Rodney (Rod) Hickey.

    As Lachlan explains the situation:

    So I don't actually work here, this is Rod's sort of baby, you know. The other investor is a builder by trade, he doesn't work here either. But between the three of us gives us a good balanced approach. Plus, my wife Jenna Harding, she's also a CPA, with an IT background, which is interesting.

    Right from the start, of course, that's just a little bit of an unusual combination to find running a hardware store in regional Victoria. Lachlan and Jenna continue to work at an accountancy firm in Castlemaine, Smith & Maltby Accountants, and Trevor continues his building firm, Trevor Butcher Builders.

    Rod, as you might imagine, is constantly hands-on at the store, managing its daily operations. However, after five minutes or so of talking to Lachlan and Jenna, it is pretty evident that this is also something of a "passion project" for them. There are not only tales of just how much hard work and direct, physical effort they have put into the store, but a real sense of personal investment as well.

    The idea of entering into the hardware business by launching a new enterprise in Castlemaine was actually Rod's to begin with:

    I worked at another hardware store. I didn't actually know Lachlan prior to this venture. The key here, was Trevor. I knew Trevor. I first threw the idea at Trevor one day, when I saw him. With the other hardware store going [out of business], it seemed Castlemaine needed a hardware store. He said that he knew someone who might be interested. Then, it just sort of snowballed from there. So, here we are, two years later.

    To read the entire story, please download HI News:

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    ABS retail stats: March 2020

    Victoria gets big boost

    March retail surged by 18%

    Over the coming year, statistics has a particular role to play in Australia's efforts to recover from the pandemic. While we are likely to receive indications of shifts in hardware retail from anecdotal sources first, stats provides us with a broad-based background to see what really is happening.

    The big question that many hardware retailers have at the moment is how widespread and strong the initial surge in sales by hardware stores was at the start of the social distancing and shelter in place policies adopted across Australia. The Australian Bureau of Statistics (ABS) has released its 8501 series on retail revenue for March 2020. This at least gives us a glimpse of those retail numbers, as the "lockdown" got underway in March 2020.

    Chart 1 compares the historical sales for hardware retailers across Australia, solely for the month of March. Unfortunately, Tasmania and the Northern Territory are excluded, as neither of those two areas were able to supply the ABS with the required stats in a timely manner. As the chart indicates, across Australia sales increased at an unusual rate. The median year-on-year increase for March is 6.57%, but the increase from March 2019 to March 2020 was 18.05%. (The ABS does –- a little confusingly –- make the numbers for Tasmania and the Northern Territory available in total Australia numbers, and when those are included the increase from March 2019 to March 2020 is 17.95%.)

    As the chart also indicates, these increases are not evenly distributed through the states and territories. Victoria had by far the largest dollar value increase, of $109.4 million, up by 23.72%, though the Australian Capital Territory, had a higher percentage increase at 25.0%, which equates to $7.6 million.

    New South Wales (NSW) and Queensland (QLD) had a nearly equal increase in dollar terms, at $57.5 million for the former, and $57.3 million for the latter. This equates to an increase of 12.42% for NSW, and 18.46% for QLD.

    Chart 2 shows the historical March-on-March percentage increases across all the states and territories. To some extent, the increases for March correlate with the degree to which each state and territory was affected by COVID-19 infections.

    In a broader historical view, Chart 3 shows the comparative retail sales for the trailing 12 months to March. Even with the boost from March 2020, the year ending March 2020 only managed an increase of 2.98% over the year ending March 2019. Victoria performed the best, with a 6.83% gain.

    Chart 4 shows these growth figures for the comparative retail sales over the trailing 12 months to March. This very tight clustering of growth indicates there are prevailing national economic concerns that have outweighed concerns local to states and territories. Only Victoria seems to have broken away slightly from the pack, growing faster than the other regions.

    Analysis

    The period of the pandemic for Australia is likely to have three distinct phases. In the first phase we have just gone through, we've had intense shelter in place lockdown and rigorously applied social distancing measures. In the second phase, while there is no vaccine or even an effective viral treatment available, the shelter in place is being eased, and we will likely see some variance in how social distancing is applied. A third phase, when a vaccine is developed and distributed, is highly unlikely to begin until the second calendar quarter of 2021. One other possibility that could happen before the end of 2020, is the development of an effective treatment for COVID-19.

    The question that remains is how each of these phases will effect each individual state and territory. Looking at how the beginning of the first phase affected retail sales, we can see two influences. The first influence was how a region was performing prior to the pandemic, and the second influence was how much the pandemic directly affected the region.

    Victoria performed best because that has been its pattern for the last six months and more, but it was probably also boosted because there were fewer people coming down with COVID-19 during March 2020. NSW had been trailing Victoria in hardware retail sales for some time, and was also hit with more infections. QLD is somewhere between those two, with moderate past performance in growth, and moderate per-capita rate of infection.

    Chart 5 shows how these factors have already played out in the initial phase of the response to the pandemic. Victoria has garnered a large share of the boost to hardware sales in March. Part of that is the momentum the state has developed, but it is also likely to be due to a lower incidence of infections and a higher level of confidence in the actions the state government took in imposing restrictions.

    In the next phase, there will be two duelling economic factors to contend with. The first factor is the rapidity with which each region chooses to ease restrictions. The second factor is going to be, unfortunately, the rate at which infections begin to increase. The health services in all regions are geared up now to cope with more patients, but an infection rate of 50 or more a day is likely to trigger re-imposition of more restrictions.

    This is further complicated by the factor of the rapidity and effectiveness of responses to infection clusters in each region. For example, Victoria has received some criticism for not responding well to some early clusters, but the fact that it has pursued signs of clusters and followed this up with at least some effort at contact tracing may, in the end, be a good sign.

    It is a quite bewildering process for each state to judge just how much to ease restrictions, to maximise recovered growth, while maintaining a margin of safety in terms of the number of infections. It's pretty evident that at the moment the regions will thrive where individual businesses do everything they can to limit risks, and carefully balance risks versus returns. At the moment, in May 2020, caution seems natural, but there are questions whether after a couple months, a degree of reduced caution will set in.

    To read about retail stats, please download the latest edition:

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