ABS hardware retail stats: Sept 2023

Surprising boost to sales in September

In trailing 12-months to September terms, Australia is now in negative growth territory. Yet that decline is largely an east coast story, with the rest of Australia performing relatively well. Given the RBA's determination to slow consumer spending, calendar 2024 could see further market contraction.

The Australian Bureau of Statistics (ABS) has released stats for hardware retail turnover through to September 2023.

We can treat the trailing 12-month through to September as periods, which we denote with a "p" prefix. So p2022 refers to the period from October 2021 through to September 2022.

The ABS data shows us two major points: on that trailing 12-month basis, turnover for Australia as a whole has now entered negative growth. This is by a small amount, but given underlying inflation, it is likely indicative of a larger market contraction.

The second point, however, is that across Australia results for both August and September 2023 have been broadly positive. Up, as we all know, is good, in any circumstance.

In terms of how much direct inflation there is in the hardware retail market, that remains difficult to determine. In our recent article on the ABS stats for the Producer Price Index (in this e-newsletter) as it relates to construction, we indicate that this is broadly flat. However, if you consider the categories listed, many of those that more directly relate to hardware retail have trended down. It is somewhat likely as a consequence that inflation for hardware retail is below the 5.4% consumer price index (CPI) increase for p2023 - but will still be significant.

The overall numbers

Australia overall saw sales of $25.46 billion for p2023, down $21 million from p2022, a decline of -0.08%. That contrasts with an increase of 7.54% for p2022 over p2021.

In both percentage and dollar terms, Queensland (QLD) saw the steepest fall for p2023. Revenue was down $85 million, representing a decline of -1.58%. Both New South Wales (NSW) and Victoria (VIC) were close to that, with declines of $81 million/-1.05% and $72 million/1.08% respectively. Tasmania (TAS) also recorded a fall for p2023 over p2022 of 0.93% and $6 million.

In both percentage and dollar terms, South Australia (SA) had the steepest increase, gaining 6.28% and $103.9 million. Western Australia (WA) was just slightly under that with $103.4 million, representing an increase of 3.88%. Northern Territory (NT) grew by 3.05%/$8 million, and Australian Capital Territory (ACT) went up by 1.35%/$7million.

The chart below illustrates the specific revenue comparisons between the states:

The chart below shows the shift in growth from the three major east coast states to the rest of Australia, in dollar and percentage terms.

While the east coast dominates in terms of market size, the rest of Australia has been outgrowing it in percentage terms.

New South Wales

In the contrast between p2022 and p2023, the decline in revenue over April, May and June have dragged down performance in the most recent period. While August 2023 came in marginally below August 2022, September 2023 has seen revenue nudge past September 2021 to provide an all-time high for the month.

The question that remains is whether revenues over the coming quarter will run high, following the December quarter over the two previous years, or if it will fall back to 2020 levels. Based on a range of factors, HNN expects the results for the three months of the quarter to be around the $1.9 billion to $2.0 billion mark, averaging just above December quarter 2020.

To add some overall context to this result, it's worth noting that from p2019 to p2023 retail turnover in NSW increased by 33.1%.

Victoria

Of all the states, VIC has actually benefitted the least from the COVID bump to hardware retail. That's largely down to its subdued performance in p2021, when sales increased by only 0.1%, a period when both NSW and QLD boosted sales by over eight percent. The gain from p2019 to 2023 for VIC is the lowest for all states and territories, at just 17.1%.

Given that, it's a little surprising that in a time where p2023 sales trailed those for p2022 consistently, the state outperformed p2023 throughout the September 2023 quarter. That was especially true for September itself, with sales up 8.9% over September 2022. That's not against a weak comparative either, as sales in both August and September 2022 were the highest to date, a feat obviously repeated in 2023.

While this is encouraging, HNN still expects total retail turnover for the current December quarter to come in just below that of NSW, at $1.8 billion to $1.9 billion.

Queensland

QLD began p2023 by setting record highs in sales for October and November 2022, and just nudged a new record in February 2023. However, from June through to September 2023 the state has underperformed the previous period.

Again, to provide some perspective, sales for p2023 were up over 30% on those for p2019, increasing by $1.3 billion.

South Australia

Every single month of p2023 has seen SA set a new record for hardware retail sales, with September's increase of 9.2% over September 2022 only the fourth highest percentage gain for the period.

It's difficult to predict what December quarter of 2023 will bring, but it is likely to be over $500 million in total revenue. SA has been the state to most benefit in percentage terms from the COVID bump, with hardware sales up over 50% for p2023 against p2019.

Western Australia

Like SA, p2023 was a good year for WA hardware retail, with only April 2023 dipping below results for p2022, and every other month setting a new record for the state.

The overall COVID bump from p2019 to p2023 has been 39.5%.

Australian Capital Territory

Through until April 2023 performance for p2023 closely followed that of p2022, but since May 2023 the territory has outperformed the previous period. That culminated in a 10.4% lift for September 2023 over September 2022.

ACT saw a COVID bump of 45.7% from p2019 to p2023.

Tasmania

As we've started to fully cycle out of the data blackout that happened for the state during the COVID years, we can present at least the two post-COVID years.

As the chart indicates, p2023 followed p2022 very closely.

Northern Territory

NT also has enough data available to now present the two most recent periods.

In part due to its size, NT tends to be volatile in its results, but these do indicate that p2023 outperformed p2022 until July 2023, and has underperformed p2022 for all of the September quarter. However, that is in part due to an exception p2022.

Analysis

The primary fact to understand about the current Australian economy is that it is the intent of the Reserve Bank of Australia (RBA) to create conditions where Australians will spend less, especially on housing.

The overriding influence on the economy is a shortage of supply, which means that even moderately high demand can lead to inflation. As mentioned in our analysis of the ABS Producer Price Index numbers for construction, the ABS sees demand in construction for the September 2023 quarter as being split. While supplies used up until first fix have seen diminishing demand, and hence price reductions, second fix supplies continue to see high demand, and hence price increases. This would indicate that the RBA has started to achieve its goals.

Where HNN sees real concern for hardware retailers is in how the more DIY market plays out over December 2023 and March 2024 quarters. As we mentioned in our analysis of the DIY market, we've grown used to both analysts and corporate CEOs relying on a model that sees DIY pick up when house sales slow. There has always been some truth to that, but it has become an increasingly simplistic analysis as other factors come into play. It might have been a leading market modality back in 2018, but in 2023 and 2024 it is just one factor among equals.

One of those factors is that HNN is seeing increasing anecdotal evidence that DIY has become less popular. It seems to be moving to a more narrow focus. We do think one area that could see growth is in repair as opposed to improvement, with an increased willingness among homeowners to take on annual, seasonal tasks to ensure their homes stay in good shape.

All that said, it is true that Australia's hardware retail industry has managed to stay surprisingly robust and resilient through some quite turbulent economic times, as the chart indicates.

Even if revenues pull back to the levels of p2021, the industry will have retained much of the growth experienced during COVID. While that won't be good news for corporate hardware retailers, for independents there have been real gains in both market size and share. As we also expect to see the number of business exits from hardware retail increase through calendar 2024 (as owners seek to exit on a high), we see conditions continuing to improve for those independents.

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ABS Construction Price Index trends flat

16 categories fell, 8 categories stable, 19 categories increased

The ABS analysis is that decreased demand for new houses has seen products used up to first fix decline, while second fix products remain high. Both steel and timber frameworks are down, along with ceramic tiles, but plaster, pipes, sanitaryware and waterproofing supplies continued to rise.

The Australian Bureau of Statistics (ABS) has released its stats for the Producer Price Index (PPI) through to the September quarter of 2023. The ABS has recorded a zero percentage gain, after four years (16 quarters) of continuous increases going back to December quarter 2019.

Overall, the prices of "inputs" - such as construction materials - into house construction have flattened. However, this is something of a split situation, according to the ABS. With demand for new housing easing during the most recent quarter, prices have declines on materials used during the initial phase of construction, but those needed during second fix - such as paint - continue to trend high.

On the other side, output from house construction, labour costs continue to rise, and are the main reason why house construction prices rose by 1.0% for the quarter. For the four quarters to September 2023, prices rose by a cumulative 3.9%.

Category performance

We can roughly classify the construction material categories into four groups: where there has been a substantial price index fall to a level going back more than 12 months: where there is some price decline in the most recent 12 months; and where there is a near-flat or only very small increase in price; and where there is a substantial increase.

Overall, as the ABS states, there has been a near flat performance for September quarter 2023, as shown below:

We've chosen to break the data into periods from December quarter to September quarter not because it is seasonal (as with retail sales and building approvals), but because the 12-month-on-12-month comparisons make it easier to understand what's going on.

Substantial price falls

To start with the good news first, there have been substantial price falls in six categories:

  • Ceramic Tiles
  • Other Electrical Equipment
  • Reinforcing Steel
  • Steel Beams and Sections
  • Steel Products
  • Structural Timber.
  • ABS PPI for construction: Ceramic Tiles

    Other Electrical Equipment

    Reinforcing Steel

    Steel Beams and Sections

    Steel Products

    Structural Timber

    Mild price falls

    Not quite as great, but still very encouraging, there are a further 10 categories which have undergone slight price falls and indicate in most cases a stabilising market. These categories are for:

  • Aluminium Windows & Doors
  • Carpet & Other Floor Coverings
  • Ceramic Sanitaryware
  • Electrical Cable & Conduit
  • Electrical Equipment
  • Fibrous Cement Products
  • Plywood & Board
  • Switches & Distribution Boards
  • Termite Barriers
  • Timber Board & Joinery
  • Aluminium Windows & Doors

    Carpet & Other Floor Coverings

    Ceramic Sanitaryware

    Electrical Cable & Conduit

    Electrical Equipment

    Fibrous Cement Products

    Plywood & Board

    Switches & Distribution Boards

    Termite Barriers

    Timber Board & Joinery

    Stable prices

    In this group are categories that were either flat, or had only mild deviations from flat, representing price stability. There are nine categories included:

    Copper Pipes & Fittings

    Cupboards & Built-in Furniture

    Metal Garage Doors

    Mirrors & Other Glass

    Other Metal Products

    Plumbing Products

    Shower Screens

    Timber Windows

    Increasing prices

    Then there are the 19 categories that did actually increase.

    statistics

    Engineered quartz banned by big boxes

    Bunnings and IKEA just say "no" to EQS

    After Safe Work Australia released a paper suggesting EQS should be banned due to its role in causing silicosis, and unions accelerated their demands, both Bunnings and IKEA have announced plans to ban the benchtop granite alternative by the end of 2023.

    On 15 November 2023 both the Wesfarmers-owned Bunnings and Swedish furniture group IKEA announced they would no longer sell engineered quartz stone (EQS) products. This came in the wake of a report from Safe Work Australia which recommended a nation-wide ban on the product by early 2024. Unions have also been active in campaigning for such a ban.

    This relates specifically to kitchen benchtops, where EQS is used as an artificial manufactured alternative to natural granite (and other stone). It has many advantages, in that it is both less expensive and requires only minimum maintenance.

    The bans will be completely in place by the end of 2023, though it's likely the effective date will be earlier than that.

    However, working with EQS without safety precautions and with a degree of carelessness can result in stonemasons contracting silicosis. This has been known for some time, but efforts to reduce exposure have proven ineffective.

    While the debate over what to do with EQS had developed over more than the past two years, there remains a good deal of inaccurate information about both the product and its situation in Australia.

    Silica and the problem with EQS

    Perhaps one of the biggest problems with EQS is that the hunt for a more familiar analogue to the material and its problems have led people to compare it to asbestos - which it, pretty much, in no way really resembles. Equally, people seem very confused about what actually causes the danger with EQS.

    The main difference between EQS and asbestos-based products is that there are no circumstances under which EQS becomes friable, and a source of simple contamination. In some forms asbestos crumbles to dust, and contamination can occur by simply moving the product around, or cutting a board product with a handsaw.

    Where asbestos releases very fine fibres, the contamination by the silica in EQS is the result of very small particles. These particles are known as respirable crystalline silica (RCS). The only way of producing those particles is to work on the substance with some kind of power saw, drill or grinder. Having finished EQS benchtops in a house or commercial business produces zero risk in everyday use.

    What is not broadly understood in the tradie community is that RCS is not the dust you see, but particles so small they are all but invisible. These particles really cannot be seen without some form of vision magnification, as they are much smaller than the diameter of a human hair. So if you are controlling only for visible dust in your work practices, you have somewhat missed the point.

    In the realm of lung disease, the size of particles is measured in terms of the "Particle Matter" index (PMx). Larger particles in dust might have a PM of 100, and these are the ones that get stuck in your mouth and the top of your throat, and can be spat out. Particles with a PM of 10, will get down into your throat and the top of your lungs, and probably make you cough, until they are in your mouth and can also be spat out.

    The ones that are of concern are those with a PM of less that four. These can go down all the way into your lungs, and are too small to make you cough. It is also the case that not all particles of the same size will behave the same way. Heavier particles will tend to fall to the ground, and lighter ones to float on air currents.

    This is where the really bad news about RCS comes in: silica dioxide forms relatively low-density particles. Once they've been formed and released into the air, they are going to drift around for some time. If you want to read more details on this Microanalysis Australia - a commercial material analytics firm - has a very accessible guide at:

    Microanalysis Australia

    If you are looking for an analogy that works, you could think of RCS as being more like a poisonous, odourless gas that gets released whenever you work on tiles with a power tool. You're not going to see it, and it's not going to have an immediate effect, but cumulatively, over time, it could first disable you, then kill you. It really is that serious.

    In its simpler form, silicosis is caused by the lungs trying to wrap the particles up so that they are harmless to the body. When the particles are some kind of bacteria this works great, as the bacteria eventually dies and breaks down, the threat is eliminated, and the inflammation goes away. Unfortunately, as the RCS particles are somewhat "unnatural" and cannot break down, their ongoing presence triggers an over-response, somewhat like an auto-immune disease, and that wrapping up becomes so widespread that it eventually destroys the lung.

    In a more complex form, if the RCS particles are small enough, they can go deeper into the respiratory system and directly interfere with the way the lungs transfer oxygen to the blood. It is very, very unfortunate, but patients with this form of the disease literally suffocate.

    There are also additional bodily functions that can be impaired. This can lead to cardiovascular diseases, as well as pulmonary tuberculosis, additional autoimmune diseases and kidney disorders.

    It's also very unfortunately the case that once it gets started the process cannot be entirely reversed. That said, if silicosis is detected early enough, there are some treatments that can provide relief from silicosis symptoms. Whole lung lavage - effectively "washing out" the RCS particles from the lungs - was a treatment originally tried in China, and has now been further developed in Australia, with some apparent success (though longer-term benefits remain to be determined). More details of this are available at:

    MetroNorth Health QLD

    There has also been some success with various medications to help inhibit the inflammation.

    At the moment the only known treatment for end-stage silicosis is a double-lung transplant, which is itself a difficult operation to undergo. The three-year survival rate for the surgery is around 76%, and typically life is extended for a total of another six to seven years.

    Preventative measures

    Again, unlike working with asbestos, actually preventing the spread of RCS when working with EQS is not all that difficult. In general, silica is hydrophilic (water-absorbing), as its surface typically has silanol groups on its surface - though it can be made hydrophobic through the use of additives. This means that techniques such as wet-saw cutting are highly effective in all but eliminating the risk from RCS.

    In other words, it is possible to handle EQS safely, and the real failure has not been with the product itself, but rather with getting tradies to understand the risks and to alter their behaviour.

    That failure really comes down to three different parties: the tradies themselves, the various WorkSafe entities around Australia, and the manufacturers of EQS. In a better situation, all three of these would have come together to find a solution. Instead, we've seen comparative inaction.

    The real problem with this failure is that it indicates how broken safety systems in the construction industry really are. We don't know what new products and construction techniques will be developed over the next decade, but we do now know that the existing safety systems simply cannot cope with any complexity, and that links between manufacturers and safety organisations are precarious at best.

    The second risk: tiles

    One reason this systemic failure is so important is that there is a second front in the spread of silicosis through exposure to silica-rich products: tiles.

    One marker of just how pervasive silicosis is now thought to be in tilers comes from WorkSafe Victoria. The following chart illustrates the increase in rates tilers are required to pay for coverage.

    This chart shows the rates for tilers and stonemasons in the set of industry rates that are over 2.5%:

    Tilers now have the second highest rate in Victoria - second only to stonemasons. WorkSafe Victoria has admitted this is mostly down to an increase in silicosis among tilers.

    The big question with tilers is: why now? There has not been an introduction of a radical new product, such as EQS into the industry, so what has gone on?

    It's also evident that the actual work safety practices of tilers have not deteriorated over the past five years or so (in fact, they've improved). Also, there have not been any radical innovations in how tiles are handled (except more wet saws, which is a good thing).

    So we've been left with one central suspect for the increase in silicosis: the tiles themselves. Have the tiles in use in Australia somehow increased their concentration of silica to the point where the safety of tilers has been endangered?

    One factor that indicates this may be the source of the problem is the commonly listed of ranges for silica content in tiles. The figures most often quoted for ceramic tiles is between 5% and 45%. That's one heck of a range. It would be evident that tiles with 5% of silica would pose a minimal risk, and those with 45% could pose a substantial risk for RCS. Less alarming, but still indefinite, porcelain tiles are typically listed as having a silica content between 15% and 25%.

    If we wanted to get more definitive data on silica content, we would need the sales figures from at least Australia's top two tile retailers/wholesalers for each line of tiles, along with the silica content of each of those tile lines. We would need that data for 2010, 2015 and 2020. Then we could compare how what we might call the "tile demand silica loading" varied over time, and draw conclusions as to whether the exposure had shifted.

    Unfortunately, though that data exists, there is no way we will ever get access to it. So, absent the perfect, "definitive" data, we need to see if we can develop some kind of "indicative" data in its place.

    What we came up with was this: we started with the tile products listed by several of Australia's top tile retailers, and downloaded all of the available product data sheets (PDSs) from their websites for current products. Then we processed those PDFs to extract three pieces of data: the product name, country of origin and declared silica content (where listed).

    What that provides us with is what we might call the "tile supply silica loading". There are a lot of caveats that come with this. It's likely that, as several tile suppliers were used, that some product lines will be repeated, with the same product being listed under different names. That could lead to over-representation of some tile lines.

    The other glaring problem is that, without adequate weighting for the number of tiles actually sold and installed, we could uncover higher levels of silica in tiles that had low distribution, and were thus over-represented. That's a very real problem, but as it turns out the tiles with higher levels of silica fall into a group that is know to be widely popular.

    The chart below shows two graphs. The doughnut graph on the left shows the proportion of tiles on sale by country of origin. The doughnut graph on the right shows the same data, but only for tiles with over 37% of silica content.

    Not only is a substantial portion of the high-silica tiles sourced from China, but taking all the low-wage producing countries together, they account for 73% of all the high-silica tiles (Spain is also a major contributor).

    So, one of the most likely scenarios is that, as tile imports from China - and other low-wage nations - radically increased from 2015 onwards, the tiles most tilers used in their daily work ended up increasing in silica content. That has meant that the safety practices most tilers learnt as apprentices prior to 2015 are simply no longer adequate for the materials they now work with.

    Analysis

    What the silicosis situation has done is to, once again, illustrate that the current relationships between industry, government bodies and unions representing trades is not in a good place. There has been a great deal of dithering over the past three to four years - while more tradies became ill with a disease that is not only devastating to the patients, but to their families as well.

    The decision to ban EQS is being portrayed as being equivalent to banning asbestos, even though the two situations are widely different. The ban on EQS is very evidently about how dysfunctional the industry/government link has become. The real solution was to convince trades to follow basic safety precautions when working the EQS. That failed. That has left only the current draconian solution.

    If there is a pathway back to a more sane situation, it may emerge out of the tile industry. There is no way to ban tiles, though there might be additional restrictions placed on tiles with more than 35% silica content. But overall the only solution is to mount an effective campaign that gets trades to better follow safe practices.

    bigbox

    Metcash gets 100% of Total Tools

    Cost is set at $101.5 million

    Metcash has bought out the final 15% of Total Tools, bringing its stake to 100%. The current CEO of Total Tools, Paul Drumbrell, will be stepping down from the role in April 2024.

    On 13 November 2023 Australian retail conglomerate Metcash announced it would acquire a further 15% of Total Tools Holdings (TTH) later in the month, bringing its stake to 100% in the trade tool retail franchise. The price ticket runs to $101.5 million.

    This follows on from the initial acquisition of a 70% stake in December 2020 for $57 million, followed by an increase to 85% ownership near the start of FY2022/23 for $59.4 million.

    The ASX announcement trumpeted the success of the operation:

    The business has delivered remarkable growth with annual sales in the retail network almost doubling from $585m in FY20 to $1,085m in FY23. In addition to strong demand, the growth has been supported by an expansion of the retail store network from 81 to 112 stores, with plans to add around 10 stores a year for the foreseeable future.

    Associated with this, the current CEO of TTH, Paul Dumbrell announced he will be leaving that role, which he has served since 2018, effective some time in April 2024.

    Contrasts

    The ongoing growth of TTH stands in stark contrast to the relatively slow growth of the Wesfarmers rival in the tradie tool market, Tool Kit Depot (TKD). This currently has only 16 stores nationwide, mostly in South Australia and Western Australia.

    An article on News.com.au by Rebecca Le May quoted Ben McIntosh, chief operating officer, commercial at Bunnings, as setting out somewhat more ambitious plans back in December 2021.

    Tool Kit Depot in 2021 - News.com.au

    Ms Le May reports that he laid out a plan to build a network of 75 stores around Australia. As TKD grew out of the acquisition of Adelaide Tools in 2019, 16 stores would seem to be a relatively slow pace of development.

    Analysis

    Perhaps the most amazing element of the competition for this market is that no competitor has thought to emulate the highly successful Kingfisher owned Screwfix, which originated in the UK. Screwfix began as a catalogue-based trade tool supplier, then moved online. It has expanded into physical retail stores, but some 60% of its orders still originate online.

    What differentiates Screwfix from the online offerings of companies such as Total Tools is that it has moved to ultra-fast delivery, managing one-hour delivery times across 45% of the UK. For busy tradies on a worksite, it solves the supply problem when a job needs to be completed rapidly.

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    Big box update

    Bunnings loses bid to change access plans to new Wagga site

    Neighbouring properties in Wollongong (NSW) owned by Bunnings have been sold and the two largest Bunnings stores in New Zealand are on the market

    Wagga City councillors recently voted to reject Bunnings' proposed amendment to its $24.9 million development on the corner of the Sturt and Olympic Highways in Wagga Wagga (NSW), reports The Daily Advertiser.

    The current approved plans for the 18,000sqm site allow customers to enter the site from Pearson Street and the Olympic Highway. But while customers may exit onto the Olympic Highway, council ruled light vehicles could not exit from Pearson Street when the development application (DA) was approved, citing "road safety and efficiency reasons".

    Bunnings asked council to reconsider, to allow light vehicles to conduct left-turns only onto Pearson Street. It also called for an extension to the median strip along Pearson Street, which would inhibit drivers from turning right at the location. (See more at the link.)

    Bunnings development proposal back before Wagga Council - November 2023

    Councillors rejected that option seven to one.

    While councillors agreed more had to be done to fix looming traffic issues when the new Bunnings store is built, there was disagreement on the best way forward. Tabling an amendment to defer the decision, Cr Richard Foley sought to allow more time for consultation, but Cr Rod Kendall argued the request should be put to bed.

    The meeting heard the council had received correspondence from Bunnings raising the prospect that if councillors deferred the amendment, the company would be open to negotiations. However, general manager Peter Thompson argued councillors could reject rather than defer Bunnings' DA request, a point backed by Cr Kendall.

    Cr Kendall argued it was important "the traffic issues be addressed holistically once and for all before [the new Bunnings] is built". He said with traffic issues seemingly the "only sticking point", rejecting the request would clear the way for another solution to be found.

    In its resolution against Bunnings' request, councillors also called on Mr Thompson to contact Bunnings and request discussions between it, council and Traffic for NSW. Cr Georgie Davies, who supported deferring, was the only councillor to vote against the final motion.

    Wollongong

    Sydney-based property development group, Level 33 has purchased adjoining sites in Wollongong (NSW) owned by Bunnings.

    Level 33 was the successful purchaser of the former site of the North Wollongong Bunnings store, located at 73-75 Gipps Street. That 2.73-hectare site was listed for sale earlier this year, and sold for $40 million.

    The Gipps Street site was sold by Perth-based company BWP Management Limited, the property trust which owns a number of Bunnings sites throughout Australia and is itself part owned by Bunnings' parent company Wesfarmers.

    The property was bought by the Trust in 2003 for $12 million. In mid-2022, Bunnings indicated they would be vacating the store when the lease expired in early 2023.

    Bunnings in North Wollongong to close - HNN Flash, September 2022

    BWP Management Limited managing director Mark Scatena said the Trust identified the best use for the site was high density residential redevelopment.

    More recently, the 5152sqm site at 60-72 and 74 Flinders Street was for sale via an Expressions of Interest campaign. Level 33 purchased this site for an undisclosed price. CoreLogic records show the site was owned by Bunnings Properties Pty Ltd, according to the Illawarra Mercury.

    Level 33 managing director Eddy Haddad told the Illawarra Mercury the plan had always been to purchase both sites. Mr Haddad said they had purchased the latest property to "connect it to our current site", in accordance with their plans for the Bunnings site, which were to create "a mixed use village".

    It will expand on what we've currently got there... To build off the community we're looking to build on Gipps Street.

    New Zealand

    Bunnings' biggest store in New Zealand, located in Westgate and seen as one of Auckland's fastest growing regions, is for sale. Bunnings' second-largest New Zealand store in New Lynn, is also for sale.

    Westgate

    Located at 21-33 Fred Taylor Drive, Westgate, the building has 16,001sqm of gross lettable area on a 20,724sqm freehold site. The main retail area spans 9278sqm, while there is a 1876sqm timber yard, 1093sqm building materials yard and a 1133sqm crop cover nursery. It is zoned Business-Mixed Use under the Auckland Unitary Plan.

    Surrounded by a host of national-brand tenants, the property is part of a prominent commercial development, which includes West Auckland's major retail and commercial hub and occupies a pivotal position in the heart of Westgate.

    As an emerging metropolitan centre, it is set to become the primary destination for the surrounding community.

    Next to the property, Universal Homes is actively developing 1400 homes with additional parks and walkways. Just 1km north a major development from the Hugh Green Group will cover approximately 256ha and include up to 8000 homes.

    Directly north, the Sonn Group is embarking on the development of their 27ha site, where they plan to construct 1800 terraced homes and apartments.

    New Lynn

    The Bunnings store in New Lynn is situated on a 2.2ha site. The property features a net lettable area of 10,722sqm made up of a large-format store and associated facilities including retail, timber yard, garden area, cafe, offices, canopies and inward goods area.

    The store services the high-growth catchment of New Lynn and was purpose-built for hardware retailer in 2014.

    Bunnings New Lynn is being offered via an international expressions of interest campaign, closing on December 6, unless sold prior.

  • Sources: The Daily Advertiser, Illawarra Mercury, Real Commercial, The New Zealand Herald (Colliers and JLL)
  • bigbox

    Retail update

    Mackenzies Home Timber and Hardware wins QLD award

    Dongara Mitre 10 is for sale after winning a WA award and K and B Timber and Hardware in Mt Gambier (SA) has opened its doors. PETstock also welcomes customers in Dubbo (NSW).

    Mackenzies Home Timber and Hardware (HTH) has taken out the Independent Hardware Group (IHG) QLD Trade Centre of the Year award for the second time in five years. There were 149 HTH and Mitre 10 stores across QLD that were judged for this year's award.

    Mackenzies general manager Cameron Quartermaine said the award is for the whole team. He told the Goondiwindi Argus:

    It is fantastic to be recognised for the hard work every member of our team puts in to keep our store at the highest standard. It is a great representation of our community and highlights the community support we receive, and it also helps put Goondiwindi on the map.

    This is the second time Mackenzies have won this award, winning it four years ago. It comes off the back on winning both the national Home Hardware Store of the Year and the Hardware Australia QLD Trade Store of the Year in 2022.

    Dongara

    The Dongara Mitre 10 business -not the land - is for sale. Trading as Dongara Building and Trade Supplies, it recently won IHG's best medium store in WA award for the second time in five years.

    Located in the historic Dongara region known for its fishing, farming and tourism industries, the store offers a diverse range of hardware, building products and general trade supplies. According to the agent, Elders Real Estate:

    Dongara Mitre 10 is a great opportunity to own an outstanding hardware business that provides a profitable return for its owners...The owners have operated the business for many years, and under their stewardship, it has flourished and shown increased profitability year-on-year.

    Mount Gambier

    Mitre 10's K and B Timber and Hardware store, located on the Jubilee Highway in Mount Gambier (SA), has opened its doors to customers.

    Regional operations manager for the K and B Timber and Hardware Group, Bob Jones said he was thrilled the store was ready to go, and the new space allowed them to expand their services. He told The Border Watch:

    We have a fantastic drive-through for builders, it's all undercover. [There's a] new outdoor area with our new stockists...
    We have a vastly bigger improved garden centre and large outdoor offering, and the actual hardware itself is a far greater range than we've ever seen before.

    The store is co-located with Total Tools, which has been open for several months.

    Related

    New location for Mitre 10 Mount Gambier and Total Tools - March 2023

    Dubbo

    PETstock Country Dubbo is the latest to become part of the pet store group's 268-location portfolio. Husband and wife team Darren and Kristy Bayley are the managers behind the store.

    Ms Bayley said the store has a wider range of products than what people would usually find in city stores, including a selection of premium dog food, horse food, good quality hay and horse riding apparel. She told the Daily Liberal and Macquarie Advocate:

    It does have a little bit more of a country feel, we've got a lot more equine products and cattle product and feed out the back for the chooks and the sheep - a much larger range than the normal Petstock metro stores.
    We want to work with our customers too, if they have a specific budget we can steer them in the direction of the best quality food for that budget, we're not here to upsell, it's all about the pets.

    Related

    Pet supplies store to change hands - HNN Flash, November 2022
  • Sources: Goondiwindi Argus, Farm Weekly, The Border Watch, and Daily Liberal and Macquarie Advocate
  • retailers

    New product

    Fire-retardant paint at selected Bunnings stores

    The paint, branded as FSA FIRECOAT, is the result of a partnership between UNSW Sydney and Flame Security International

    A new fire-retardant paint, formulated by engineers at UNSW Sydney, has become the first to pass a rigorous Australian standard test that simulates a bushfire attack.

    It has achieved the Bushfire Attack Level (BAL) 40 standard which assesses the bushfire resistance of buildings and construction materials. BAL-40 indicates that a building or material has been tested and approved to withstand higher levels of radiant heat (up to 40kW/m²) and ember attack during a bushfire, and therefore provides increased protection against bushfires in areas prone to extreme fire conditions.

    To pass the BAL-40 test, an external windowed building facade was treated with the paint and exposed to the flame attack of a BAL-40 furnace for 10 minutes.

    The facade consisted of timber weatherboard, specifically radiata pine which is the most combustible and commonly used timber in Australia. FSA FIRECOAT paint was applied as a primer and undercoat paint, before a standard commercial Dulux topcoat was added.

    During the flame attack, the facade was monitored using thermocouples to test the internal and rear temperatures and to determine the ability of the UNSW-developed paint to protect the structural integrity of the building facade, as well as prevent the flames from spreading to the inside and rear of the facade over 60 minutes.

    The paint succeeded in passing all six of the stringent criteria, the first time any paint has achieved the BAL-40 rating.

    Professor Guan Yeoh, from UNSW's School of Mechanical and Manufacturing Engineering, led the team that spent nearly five years perfecting the formula to ensure the paint incorporates the best fire-retardant properties.

    The resulting product is a type of intumescent paint which means it is designed to expand as a result of heat exposure.

    The specific chemicals in the paint also produce a thick layer of char which offers an insulating barrier and effectively deflects the heat from the fire away. Prof. Yeoh is also director of the ARC Training Centre for Fire Retardant Materials and Safety Technologies at UNSW. He said:

    The special additives we include in the paint mix formula promote the growth of the char, which is the important insulating element. The char is what helps the substrate, that is your house or your building, stay protected from the fire.
    In the rigorous tests you can see this char being created, but at the end you can just wipe it away and the wood underneath has virtually no damage.

    One major challenge for the research team was to ensure the all-important char, once produced, would not simply fall off vertical surfaces such as external walls. The char needed to remain firmly in place to continue to work as a fire barrier. Prof. Yeoh explains:

    Forming a char on a horizontal surface is fine, but for this application we needed to include additives into the paint formula to ensure the char would also hold very well on vertical surfaces. Which is a challenge.
    If it just falls off, that defeats the whole purpose. The char - which is basically pockets of air and carbon - can be more than 50mm thick, so retaining it in place can be tricky.
    But it's so important because it's providing the insulation and preventing the penetration of the heat.

    One of the big advantages of the new paint is that it does not need any special equipment to apply it, meaning it can be brushed or sprayed onto a variety of surfaces - including existing render, timber, aluminium, steel, concrete, plasterboard and brick - in the same way as normal paint.

    The carbon ingredient means the FSA FIRECOAT product is only available in grey, but any standard coloured topcoat can be applied without affecting the fire-retardant properties.

    Prof. Yeoh said the new fire-retardant paint could help prevent bushfires from spreading over a wider area, given the fact it protects buildings from burning down.

    If a building is not protected in any way and it starts to burn then it can become a source of heat for the fire to continue, like a chain reaction. So we can say this paint assists in limiting the spread of bushfires because it prevents a building from igniting and therefore compounding the original fire.
    Many people are saying that we are currently experiencing a dry season. But when it is a dry season, that often means that bushfires are just around the corner.
    We wanted to push the boundary with this paint so we did tests on probably 200 different formulas in the first couple of years of research before we arrived at the best one.
    That was using very high-grade materials, which would have made the paint too expensive to produce, so we then tested again with more commercially available ingredients to ensure we got the same performance in a final product that people can afford.

    Tony Overstead from Flame Security International, which has secured an initial order from Bunnings to supply 80,000 litres of FSA FIRECOAT paint, said:

    The release of this fully accredited BAL-40 rated fire retardant paint, we believe, will better protect buildings and other assets from direct exposure to flames and extreme radiant heat. This will make a significant difference not only to the cost of building in affected areas, but also the potential risks to life and property.

    Flame Security International is pleased with the strong collaborative research partnership established and the safety products achieved through the support of the Cooperative Research Centre project (CRC-P) Round 5 grant with UNSW.

  • Sources: University of New South Wales and News.com.au
  • products

    The future renovation market

    ABS stats indicate uncertainty

    As the influence of COVID-19 wanes, and concerns about a house price bubble take over, where will the renovation market trend? HNN takes a deep dive into ABS stats to find some guidance.

    Forecasting in the post-COVID world remains difficult. Paradoxically, that's partly because the influence of COVID-19 itself is rapidly waning. What we've been left with is a confusing picture where the aftereffects of COVID intermingle with changed global dynamics for commerce.

    For example, it has become evident that the supply chains we knew pre-COVID are, for the most part, not coming back. 2023 was supposed to be the year we saw that return progress, but instead we've seen a range of new circumstances – including global unrest, notably in Russia/Ukraine and Israel/Gaza, but also in the economies of China and several south-east Asian countries. All that has been topped up with ongoing climate-driven disasters and stress, including the real threats of fire and flood in Australia.

    What has defined hardware retail throughout calendar 2023 (so far) has thus been what economists refer to as the supply-side, rather than signals originating in the demand-side.

    In the past, when supply chains were super-charged, the struggle was getting people to buy what could be supplied. Today, there are many willing customers, and the restraints are all about providing them with the goods. This does create price rises (as restraints on supply echo some of the effects of increased demand), but it also creates switching behaviours, not only between products, but between types of demand as well.

    The housing market is one area where we can clearly see these influences play out. Chart 1 shows data from the Australian Bureau of Statistics (ABS) Total Value of Dwellings report for Brisbane, Sydney and Melbourne. It maps median prices to number of transactions for established houses.

    As marked on the chart, the tipping point in terms of a decline in the number of transactions is March quarter 2022.

    Chart 2 shows the lending rates in Australia as provided by the Reserve Bank of Australia (RBA).

    Lending rates began to rise sharply in May 2022, up 21 basis points, followed by a rise of 45 basis points in June 2022, and ongoing increases thereafter.

    What stands out in these charts is that they show relative purchase price stability for houses, despite a very strong – indeed, historically unique – increase in the actual cost of home ownership through interest rates rises.

    Economists expected a sustained decline in prices. Instead what happened was that the number of transactions declined, but prices did not.

    As the housing website Domain commented in an article from 3 November 2023:

    The lift in auction listings is driven by prices close to new records and improved property market conditions, motivating sellers to list. However, the recent performance of [declining] clearance rates seem to indicate a more balanced market.
    Domain commentary

    The prices charted above are for established houses, rather than new builds. Part of what drives the evident market confidence, where house sellers are less inclined to reduce prices to secure sales, is the awareness that new house construction (the ultimate supply-side of the housing market) continues to struggle. Supply constraints continue, but more importantly the industry has demonstrated it lacks the capacity to grow in terms of scale and/or productivity.

    The renovation situation

    It has become something of an "old saw" of hardware retail that when the housing market goes into decline, sales for renovations – "alterations and additions" (alt-adds) in the ABS lexicon – pick up. Of course, no market is ever that perfect, but it's made a nice line for the CEOs of both Wesfarmers' Bunnings and Metcash's Independent Hardware Group to trot out for investment analysts – with some justification.

    Looking at the market situation described above, it is arguable that FY2022/23 should have produced stimulus in alt-adds. The drop in transactions coupled with the persistently high house prices and steadily increasing interest rates should have seen more families opt to improve, not move.

    The difficulty is that actually tracking alt-adds through stats is not an easy task. There is no single, fully reliable source of data on alt-adds available from the ABS (or anywhere) – but we can, by combining several, arrive at some kind of reasonable overview.

    One of the most useful sources is from the ABS national accounts data. This is where the government gets its numbers for gross domestic product (GDP), and a range of other fundamental measures as well. One part of this dataset is household consumption, and this includes data on alts-adds, which is gathered via a surveys.

    It's best to see the national accounts data in contrast with one of the most popular sources of alt-adds data, which is building approvals. The main advantage of the approvals data is that it is very accurate, as it relies on approvals that have been registered with state and territory governments. However, these approvals only capture alt-adds that take place above a set dollar value, which means that the large number of smaller alt-adds are missed.

    The national accounts data does capture alt-adds of all sizes – but is captured via survey data, that is then extrapolated, making it less accurate. That said, however, when dealing with an organisation as capable, professional and ethical as the ABS, while the numbers captured by the survey may not result in absolutely accurate data, they will be reliable in relative terms – in other words, they will accurately capture fluctuations.

    Next there is the lending data, which provide a view of the loans taken out by homeowners to finance alt-adds. Again, this captures only a proportion of all alt-adds, but understanding the propensity of homeowners to take out loans is useful.

    Finally we come to one of the more difficult statistics from the ABS, for building work done. The first two datasets to pay attention to are for work commenced and work completed. These both relate to the total cost for a project. When work commences, that total cost is recorded, and when work completes the total cost is again recorded. HNN adds its own simple, derived stat to this, which is just work commenced minus work completed, which gives a general sense of "loading".

    The third dataset is for actual work done during a quarter. This is very useful in judging how well the construction industry is faring at any particular moment, but it does also rely on survey data estimates, so, like the national accounts data, it might not always be definitively accurate, but it does reliably provide a sense of fluctuations.

    Taking all that data together, we can derive, state-by-state, a sense of what is happening with alt-adds. And that will, hopefully, give us some insight into the current state of the overall industry, and hence what we can expect in hardware retail.

    In this series, we will be looking at the five major states. We are developing a series specifically for Tasmania, the Australian Capital Territory and the Northern Territory. In assembling these stats we realised that, given their smaller size, and highly unique nature, we needed to provide additional statistics to really make sense of these smaller, but very important markets.

    New South Wales

    New South Wales (NSW) continues to be the state with one of the most robust markets for houses in Australia. However, we are likely to see that shift somewhat over the course of the current financial year.

    National Accounts

    To begin with the national accounts for current prices in alt-adds:

    This shows a familiar story: there is a stone increase in expenditure in December quarter 2020, and then this continues progressively through to March quarter 2023, with June quarter 2023 slightly below June quarter 2022.

    Building Approvals

    Next, it's helpful to look at the building approvals for alt-adds that do not result in a new dwelling being created:

    These are for the period from October to September, which we refer to with a "p" prefix, so p2021 would be the period from October 2020 to September 2021.

    This echoes the national accounts pattern, with increased levels of approvals from September 2020. The results for p2023 do show more volatility – generally towards the upside – than is p2021 and p2022, but the three periods are mostly in range.

    We're including the generally smaller category for alt-adds that create dwellings because we think this is something to watch over the coming years.

    The pattern here is a general low-level of activity, along with one or two anomalous spikes, usually relating to very large renovation projects on major buildings.

    Lending

    The stats for lending directed at alt-adds projects show a slightly different pattern than that of approvals.

    The value of loans begins to increase in February through April of 2021, then increases dramatically in May and June 2021. From November 2021 through to August 2022 new highs are reached in value, but, except for October, all of p2023 underperforms p2022, albeit only marginally in three months.

    Looking at the number of loans, there is also interesting activity:

    The over-performance of p2022 is more marked. Also, while the value of loans for May through September almost converged for p2022 and p2023, in numbers p2023 had significantly fewer loans, indicating the loans that were taken out had a higher value in p2023 than p2022.

    Building Work Done

    With the building work done stats, the commenced data is some of the most important as it represents the uptake of projects. To outline these clearly, we provide chain values along with regular values.

    Chain values are a statistical measure, where the dollar amount does not directly relate to the cost of the projects, but is adjusted to provide a measure of the level of activity. They are adjusted to filter out most of the effects of movements in inflation and supply prices.

    This chart does show some interesting activity. There was an acceleration in activity starting in December quarter 2020, and continuing through to March quarter 2022, with a peak in June quarter 2021. However, from June quarter 2022 through to June quarter 2023 the trend has returned to that of the pre-pandemic years.

    This is something of a contrast for the non-chain values for building work commenced.

    Here we can see that FY2022/23 remains somewhat elevated above the pre-pandemic years, and much more in alignment with FY2021/22 in particular.

    Building work completed is also interesting.

    Here we see two almost mirror symmetrical lines for FY2021/22 and FY2022/23. FY2021/22 somewhat underperformed for its December and March quarters, while FY2022/23 over-performed for those same quarters.

    We can see the results of that in the chart for Work-Loading.

    The loading for FY2021/22 reaches a peak in the December quarter, and there is a low for this eight-year series in the March quarter of FY2022/23.

    Driving these numbers is the actual value of work done during each quarter.

    Starting with March quarter 2021, there is a substantial increase in the value of work done, right through to the end of FY2022/23.

    Analysis

    If there is a single clear sign that NSW is into its post-pandemic phase in construction, it's the high volume of completions for alt-adds, a consequence of the high value for quarterly work done.

    Coupled with that transition is likely a transition slightly away from alt-adds that are related to house sales – both the pre-sale and the post-sale bump – and a shift to a market more driven by "improve, not move".

    What needs to be figured into this, of course, are the continued increases in interest rates. While there has been speculation from the more "populist" writers on economics at some news organisations that these increases are "meaningless" – as they are aimed at reducing demand, when inflation is largely driven by supply at the moment – it is evident that they are targeted at preventing the current nascent house price bubble from getting worse.

    Also, while it is true that higher interest rates have a minimal impact on spending on "essentials" such as food, they do impact not only non-essential spending, but also encourage behavioural shifts. For example, petrol might be an essential purchase to some, but petrol usage, for many, is a choice. The lower rates of public transport post-pandemic indicate there is room for lower rates of consumption.

    As it seems highly likely rates will reach around the 4.9% level by the end of the current financial year, they will begin to affect spending on alt-adds as well as houses. That effect will be increased if house buyers are ultimately discouraged from their purchases, and/or switch to alternative markets (non-urban and multi-dwelling). In a market where house prices enter some decline, spending on alt-adds will likely fall.

    Victoria

    Overall, Victoria (VIC) stands in somewhat stark contrast to NSW. There is a range of circumstances that saw COVID-19 have a more severe impact on the state, and that impact has carried over to some extent to its post-COVID-19 economy as well.

    National Accounts

    The first half of FY2022/23 carried on some of the exuberance of the final quarter of FY2021/22, but this ended in the second half of FY2022/23, with alt-adds as measured in national accounts essentially tracking the previous year.

    That said, the rate of expenditure remains far above the pre-COVID and early-COVID rates.

    Building Approvals

    Building approvals not creating dwellings shows a slightly mixed aspect. While most of p2023 closely tracks p2022, there is a breakout at the end of the period for September 2023, posting a strong decline over both p2022 and p2021.

    For building approvals creating dwellings, there is some noticeable activity for p2023, but this is less than that for p2021 and p2022, even without the anomalous boost in May 2020.

    Lending

    For the most part the value of lending for alt-adds in p2023 trails that of p2022 – the most notable exception being the final month of the period, September 2023.

    As with NSW, the number of loans in the latter half of p2023 declines more sharply than the value, indicating a shift to fewer loans of higher value.

    Unlike NSW, however, the decline in the number of loans is quite sharp, falling far below the level for p2021 in the final six months.

    Building Work Done

    Perhaps the most significant number for VIC is the result for building work commenced measured as chain values, which shows a very low result for June quarter 2023. Is is the lowest such number for the past eight financial years.

    The result for regular work commenced values at the end of FY2022/23 is not quite so dire, but it does reflect something of a slowdown, coming in below FY2020/21 and FY2021/22.

    As with NSW, the work completed values show a sharp upward arch through FY2022/23.

    That arch provides a work loading value that stayed in the negative region for the last three quarters of FY2022/23.

    A major contributor to the decrease of work loading is the high value of work done in the quarter, especially during the first two quarters of FY2022/23.

    Analysis

    It is fairly clear that, in contrast to NSW, VIC seems to be heading into a more uncertain time when it comes to alt-adds. That said, the overall levels appear to be higher than those before COVID-19.

    It's notable that VIC has seen a lower resurgence in house prices over the past year, though this does seem to be accelerating. To some extent that could mean the state will be less affected than NSW if interest rates do continue to rise through the financial year.

    However, there are distinctly fewer indications that the "improve, not move" effect is much in evidence.

    Queensland

    It is often tempting to approach Queensland (QLD) as something of a hybrid of NSW and VIC, but it's clear from these numbers this is really not the case.

    National Accounts

    In terms of national accounts, spending on alt-adds has been for the most part slightly elevated in FY2022/23 over FY2021/22. That's important, because FY2021/22 was considerably higher than FY2020/21.

    Building Approvals

    QLD is quite unique in terms of building approvals, with p2021 being the peak period, and p2022 underperforming that period for 10 of 12 months. P2023 manages to outperform p2022 for all but two months, and even outperforms p2021 during May and June 2023.

    QLD is also quite different from NSW and VIC when it comes to alt-add approvals that seek to create new dwelling. There is substantial activity in this sector through p2021, p2022 and p2023. P2023 was especially active from February 2023 through to September 2023.

    Lending

    While the value of loans for alt-adds in QLD has declined for p2023 over p2022, overall this still remains at a high level, continuing to outperform p2021.

    Unlike NSW and VIC, there does not seem to be a shift to fewer higher value loans, with the number of loans closely tracking the value.

    Building Work Done

    As with the other states, the chain value for work commenced is somewhat interesting. For QLD this has retreated in FY2022/23 below the level for the previous two financial years, and close to the pre-COVID values.

    In regular value terms, there is a close convergence between FY2021/22 and FY2022/23, and only slight variance from FY2020/21.

    Work completed for alt-adds in QLD shows a steep rise in the second half of FY2022/23.

    That in turn has seen the work loading enter negative territory, after spending all of FY2020/21 and FY2021/22 in positive territory.

    That has been a result of the combination of a steady rate of work commenced, and the higher level of work done in the quarter.

    Analysis

    One difficulty in analysing QLD is its diverse geographical and demographic makeup. Where VIC is very much all about Melbourne, and NSW remains dominated by Sydney (though with growing regional centres), QLD has Brisbane, and then a large coastal region that mingles high-value and low-value areas.

    One aspect of the state's market might be ongoing growth in alt-adds that create dwellings, as it moves to increase density in some of its regional areas. That, along with a general move to improve existing dwellings, could continue to drive activity, even if rising interest rates cause house prices to stall.

    South Australia

    While we wouldn't describe the alt-adds situation in South Australia (SA) as "rosy", it certainly seems overall to be positive.

    National Accounts

    While the extent of growth has tapered slightly for June quarter 2023, the national accounts figures overall show steady and constant growth in alt-adds expenditure since March quarter 2021.

    Building Approvals

    Approvals alt-adds not creating dwellings for p2023 tended to follow the previous two years closely, but with reduced volatility, mostly on the downside.

    Interestingly, as with QLD, SA has shown higher levels of alt-adds creating dwellings, especially in p2023.

    Lending

    Lending for alt-adds showed steady upward progression through p2021, and then became more volatile in p2022. It has been a little less volatile in p2023, tracking overall between the two previous periods.

    While there was a shift to higher average value loans at the end of p2022, that seems less the case for p2023.

    Building Work Done

    As with the other states, the chain values for building work commenced do signal a decline in real value for FY2022/23, especially in the final quarter.

    In simple value terms, there is also something of a decline for June quarter 2023, back to values for June quarter 2021. That said, the values remain well above those pre-COVID.

    Value of building work completed for SA remained at pre-pandemic levels through to September quarter 2021, and returned to those levels for March quarter 2022, before lifting again in the next quarter. However the levels have remained high throughout FY2022/23.

    That behaviour has seen the work loading fluctuate as well, though the definitive shift is far into negative territory for June quarter 2023.

    The work done per quarter values show that the alt-adds industry has been progressing to deliver an ever-increasing level of value.

    Analysis

    The sharpest brake on alt-adds spending for FY2023/24 is likely to be a slowing economy, as the post-pandemic stimulus wanes, and state-wide growth returns to levels closer to 1.0%. There are some early signs of that in the alt-adds stats, but it likely that growth will continue through to the end of March quarter 2024.

    That shift to slower growth could very well see a further shift in alt-adds, as spending moderates, but remains supported by the past years of growth.

    Western Australia

    One of the distinguishing characteristics of Western Australia (WA) is that it has experienced housing booms in the past, largely driven by mining development.

    National Accounts

    The national accounts figures for alt-adds shows that demand in FY2022/23 was generally above that for FY2021/22.

    Building Approvals

    Unlike in other states, alt-adds approvals for non dwelling creation have remained somewhat closer to past levels. There is also a great deal of volatility, especially for p2023.

    For p2023 the stats reflect five eight-year highs, mixed in with four three-year lows. As that indicates, the trend is more positive than negative, especially since May 2023, but it remains unclear.

    In approvals for alt-adds creating dwellings, WA – like SA and QLD – shows a surprising amount of activity, especially post June 2023.

    Lending

    Lending represents a clearer picture, with the value of loans for alt-adds reaching six-year highs during p2022 and p2023. That is more evident in the second half of p2023.

    With the number of loans for p2023 going below those for p2022, even as value increases, it is clear WA also experienced a period of fewer loans be granted, but for higher amounts. The peak period for reduced value loans would have been March 2022.

    Building Work Done

    There is no other state which has quite the startling results for building work commenced chain values as WA.

    What is indicated here is that the chain value – the basic throughput – for commencements fell to a very low level during FY2022/23. It is substantially lower than in the two preceding financial years.

    The stats for standard values do not show quite that break, but they do show a substantial decline from FY2021/22 to FY2022/23.

    Work completed for alt-adds presents, however, somewhat the reverse picture, with FY2022/23 substantially outperforming the two prior financial years.

    That has contributed to a lower work loading, though this does remain historically high.

    Work done per quarter for FY2022/23 does outperform the two previous years.

    Analysis

    The situation for alt-adds in WA remains somewhat unclear. The very low value for chain values of building work commenced could indicate that this sector is under more stress than other stats indicate. Approvals for alt-adds seem good, but that depends if the optimism expressed post May 2023 is really justified.

    Of course what makes WA so unique is that its overall economy is directly dominated by the export of commodities, which fluctuates strongly. This is likely to be as much a determining feature for calendar 2024 as interest rate rises.

    Overall analysis

    The dominant sensibility running through most of these stats is that the alt-adds market is undergoing some kind of a change. The post-pandemic currents that have been driving it through FY2021/22 and FY2022/23 are fading out. Rising interest rates are likely to see the property market start to fade, and it is simply unclear whether that will translate into greater activity in alt-adds.

    HNN's current estimation is that we are likely to see some expansion of the alt-adds market as the housing market fades in calendar 2024. However, we expect that market growth to develop in certain very narrow areas. One such area we have identified (through the use of additional sources) is for decks.

    One reason for this is that we've identified some shifts that indicate a move towards in-home entertaining, especially outdoors. We think this shift will be boosted by features that make decks usable for something close to nine months of the year.

    We also see a move towards the installation of simplified security systems. These would fill the space between the doorbell-with-a-camera and walls bristling with CCTVs. The new systems will be small and discreet.

    While there are major economic shifts likely to occur throughout calendar 2024, the market will also be very responsive to what it sees as good value propositions which help homeowners to improve the quality of their experience of their homes. By the end of 2024, we think this trend will help to usher in the first real wave of integrated smarthome appliances, driven in part by better more integrative communication protocols.

    In short, it's understandable that over the past three years the hardware retail industry has seen real growth, but it has also lost something of its sense of direction. The externalities, including COVID-19 – as well as the societal and governmental reactions to it – have been overwhelming. But we are moving now into a period where shifts will be less deterministic, and where the market will change based as much on internal feedback.

    statistics

    SequenceRokset: Opportunity to grow

    A paint accessories powerhouse

    Two Australian businesses with long established histories unite to make many top quality brands available

    Almost four years ago, Sequence and Rokset were brought together because they recognised the strong synergies they shared could be combined to better serve the market. As SequenceRokset Consolidated (SRC), the companies have moved successfully from being fierce rivals into one customer focused enterprise, with an emphasis on innovation.

    Both businesses have a rich history independent of each other, and as Rokset celebrates a century of expertise supplying, and Sequence nears its 50th anniversary, together they have been serving Australians for almost 150 years.

    Rokset is known for being at the forefront of paint brush technology on an international level. Sequence has been recognised for its customer service, having been awarded supplier of the year many times by different retail groups over the years.

    Kris Gammaldi from Victoria-based Inspirations Paint Moorabbin (and another store in Camberwell), has been stocking SequenceRokset products for 20 years. He told HNN:

    For us, one of the big benefits dealing with SequenceRokset is that they're actively involved in our business. They're not a big corporate so we have a great one-to-one relationship with them over the history of our reps and sales managers. We have interaction directly with Ian (Green) and Peter (Clausen) as well. [Ian Green and Peter Clausen are both SRC directors and Ian is also CEO.]
    They'll present opportunities rather than products. They're very good at identifying a product that would be an opportunity rather than just saying, 'Here's something else that you've already got'. They like innovating. So often we'll have conversations about thinking about getting this product in, and discussing how do you think that would go? And they're always looking for something new. Like I said, it is more about opportunity than just selling a product.
    They understand margins so when they present products as opportunities, they have done the analysis and believe these are the things that can do well in the market. Rather than saying, 'Here's this and it's the cheapest version of this'.

    Since coming together, SequenceRokset's product offering has grown substantially by incorporating the individual brands that were previously distributed separately.

    The main ranges now include Sequence (surface preparation and protection, tapes, PPE, and workwear), Rokset (brushes, rollers, and buckets), Red Devil (caulks and fillers), Klingspor (abrasives), OLFA (knives & blades), Shurtape (tapes and accessories), Mirka (sanders and polisher, dustless extractors, and abrasives), as well as a number of other smaller brands.

    Australian Made mission

    Rokset has never lost its passion for supporting Australian manufacturers and continued these ideals into the SequenceRokset merger.

    In October 2023, SequenceRokset officially launched its Made in Australia range. Wherever possible, products are sourced or manufactured locally, including the huge task of shipping SRC moulds back to Australia. This can also mean reduced lead times and no shipping delays.

    Furthermore, 100% recycled plastic is used for many of the products these moulds produce. For retailers, this commitment to Australian Made and being environmentally minded has enormous market benefits.

    According to new consumer research from Roy Morgan (February 2023), Aussies' preference for Australian-made goods hasn't wavered. Data collected by Roy Morgan found that more than four in five (86%) Australians say buying Australian-made products is important to them. Few people, only 2%, said buying Australian-made wasn't important to them.

    Most Australians (67%) stated in the latest survey that they "often" or "always" buy Australian-made products, citing supporting local jobs and the economy as their reason for doing so, followed by the quality or reliability of Australian-made products. Over one-third (35%) of Aussies also claimed to purchase more Australian-made products now than before the pandemic. The research also found that buying Aussie products made shoppers feel good.

    From a branding perspective, almost all (99%) Australians aged 18 and over are aware of the Australian Made logo, with the logo having the highest recognition of any certification mark in Australia. Trust in the Australian Made logo is also high. 93% of Australians are confident products displaying the mark are made or grown in Australia, according to Roy Morgan.

    SequenceRokset packaging features the green and yellow Made in Australia kangaroo in large size and an enhanced recycled materials logo.

    Inspirations Paint Moorabbin

    For Inspirations Paint Moorabbin, working with SequenceRokset has provided opportunities for growth. Mr Gammaldi also has a long history in the paint industry that gives him additional insights in terms of suppliers. He explains:

    I've been around paint my entire life even though it was unintentional. My dad worked for Dulux for 25, 26 years so I grew up around paint. I had a couple of part-time jobs working in Dulux stores and for a period of time after I finished uni, I was working in head office at Dulux, then worked as a rep before leaving to go do something totally different. I was doing some part-time working in stores when John, my business partner, and a mutual friend, and I decided to get together to do this. John had previously worked as the Berger brand manager back when Dulux first bought Berger Paint.

    Mr Gammaldi said the last six months have been more challenging after the highs of the COVID and post-COVID periods.

    There's been a lot more issues coming into the marketplace of labour. Obviously interest rate rises, they haven't helped at all because the reality of what we sell is it is very much discretionary spend. Nothing goes wrong if you don't paint.
    But the coming 12 months will be a bit different. I know there's a lot of major construction work that's going on in Melbourne and we supply a number of large contractors. [Both stores are 80-90% trade.]
    But retail, unfortunately we're going to have to wait until probably next year when we start getting a little bit of rate relief when people start feeling as though things are moving in a positive direction, and they start feeling more positive about their homes and their surrounds.
    During COVID, a lot of money was spent on homes and people got things done. Now I think people tend to spend money on themselves like the holiday that they haven't been able to go on for three years or a nice dinner. But that will also wane, and once people have done a lot of that, they'll start getting back to purchasing habits of the past.

    SequenceRokset's relationship with Inspirations Paint Moorabbin shows that it delivers genuine value to its retail customers. Retailers will be able to consolidate suppliers when dealing with SequenceRokset and partner with a business that has a long, established reputation for supporting Australian communities.

    Visit the SequenceRokset website for more information:

    SequenceRokset Consolidated
  • Additional Source: Roy Morgan
  • Four in five shoppers believe buying Australian-made is important - Roy Morgan
    companies

    Big box update

    Bunnings developments in Wagga and Noosa

    Roy Morgan reveals the 2022 winners for customer satisfaction and Bunnings wins Hardware Store of the Year

    Almost four years since it was first released, plans for a $24.9 million Bunnings development on a proposed new site on the corner of the Sturt and Olympic Highway in Wagga Wagga (NSW) has been back before Wagga Council.

    The current approved site plans for the 18,000sqm site allow customers to enter the site from Pearson Street and the Olympic Highway. But while customers may exit onto the Olympic Highway, council ruled light vehicles could not exit from Pearson Street when the development application (DA) was approved, citing "road safety and efficiency reasons."

    Bunnings is now asking council to reconsider, to allow light vehicles to conduct left-turns only onto Pearson Street. It is also calling for an extension to the median strip along Pearson Street, which would inhibit drivers from turning right at the location.

    Bunnings regional manager David Williams said the business recently submitted a "proposed modification" to the DA to allow customers to exit the store via Pearson Street. He told The Daily Advertiser:

    This change is about creating a convenient access point which is something we know is important for the community.

    However, in a recent council report, it recommended the council reject the request, arguing approval is "not in the public interest". It gave several reasons including the move would "result in increased and unacceptable traffic impacts on the road network ... in particular on the performance, efficiency and safety of the roundabout at the intersection of Pearson Street [and] Edward Street."

    The report found impacts on that intersection would "accelerate the need for a substantial upgrade to this intersection, which would be at considerable cost to the community, and may result in removal of U-turn opportunities at this point."

    It said the solution to those impacts would be replacing the roundabout with traffic lights, but found funding for those works has "not been clearly identified." Further, it said the "modification is not supported by Transport for NSW." In a statement, a Transport for NSW spokesperson said:

    On this occasion, Transport advised the council it did not support this modification as the application did not adequately address potential impacts to the existing roundabout at the intersection of the Sturt Highway, the Olympic Highway and Pearson Street.

    In December 2021, Wagga Council approved an application for a new Bunnings development just 500 metres from its existing store. It was approved with the condition one of the only exits to the 400-space car park would be through Saxon Street - a small road which connects to the south side of the plot.

    Related

    Modifications requested for planned Bunnings Wagga store - HNN Flash, September 2022

    Noosa

    Noosa Council staff has recommended giving the green light to Bunnings' proposal to build an adjoining trade centre alongside its current warehouse store in Noosaville, QLD -despite it not meeting shire height restrictions and a councillor questioning the colour scheme.

    The council only allows local businesses to colour their building's exterior in "muted tones". That clashes with the traditional paint job sported by Bunnings Trade stores, which is white with green lettering. The matter came up for discussion at Noosa Council's latest meeting of its planning and environment committee in early October.

    It was also found the proposed expansion would be two metres taller than council's 10 metre limit, which Bunnings said was needed for its stock, noting that the build site is lower in elevation than the existing building.

    Council documents showed the 1087sqm two-level building would have parking on the lower level and a trade area on the upper level, according to the Sunshine Coast Daily. The documents state:

    The applicant intends to provide timber and trade supplies primarily to professional builders and trades customers and is expected to operate independently of the existing Bunnings Warehouse with no changes proposed to this store.

    Noosa Council staff recommended approving the development, with conditions. Planning acting co-ordinator Nadine Gorton said the trades supplies store had different branding, a different colour scheme and provided access for people with trailers.

    Noosa Councillor Brian Stockwell asked why the council staff was recommending approval for the building with certain characteristics.

    I wonder why we're going down a path of approving an aesthetic that is over height and is inconsistent in terms of colours to allow a business to once again do what the signing policy and signing law tried to avoid.
    Commercial enterprises will want the corporate colours spread over their buildings. In Noosa, we don't, we want what our scheme says, which is muted tones, and I think they could do better.

    Roy Morgan winner

    Research firm Roy Morgan polled 60,000 shoppers from around the country to find out which brands they loved best, and Bunnings took home the trophy for Hardware Store of the Year. Australia's most popular retail brands for 2022 include the following (in alphabetical order):

  • Auto Store of the Year - Supercheap Auto
  • Coffee Shop of the Year - Muffin Break
  • Clothing Store of the Year - Suzanne Grae
  • Department Store of the Year - Myer
  • Discount Department Store of the Year - Costco
  • Discount Variety Store of the Year - The Reject Shop
  • Furniture/Electrical Store of the Year - JB Hi-Fi
  • Hardware Store of the Year - Bunnings Warehouse
  • Chemist/Pharmacy of the Year - Chemist Warehouse
  • Quick Service Restaurant of the Year - Zambrero
  • Major Quick Service Restaurant of the Year - Subway
  • Liquor Store of the Year - Dan Murphy's
  • Shoe Store of the Year - Skechers
  • Sports Store of the Year - Rebel
  • Supermarket of the Year - Aldi
  • Roy Morgan chief executive Michele Levine said brands at "the forefront" of the country's rising cost-of-living crisis scored well in the survey. She said:

    The newest class of award winners in the retail categories have been at the forefront of dealing with the issue of cost of living amid high inflation and rising interest rates over the last year.
    As the country emerged from the pandemic restrictions during 2022, Australians went on an unprecedented spending spree which drove record retail sales and record profits for many retailers but also led to new challenges as supply chains were tested like never before.
  • Sources: Sunshine Coast Daily, News.com.au and The Daily Advertiser
  • bigbox

    Retail update

    Sydney Tools store in Kalgoorlie-Boulder, WA

    Haymes Paint stores open in Devonport (TAS) and Rosebud (VIC), and Hollimans Mitre 10 owner looks to build housing

    Sydney Tools has opened a branch in Kalgoorlie-Boulder, a city in the Goldfields-Esperance region of WA, around 595km northeast of Perth. The outlet is the retailer's 83rd Australian store and its only WA location outside of Perth. Operations manager Anthony Elias told the Kalgoorlie Miner:

    We stock a range of products which will see the local tradies and the DIY person have a one-stop shop in town. What they won't have seen in Kalgoorlie before is the range that's actually carried in the store.
    We're hoping that we will have a trade with mining companies or construction companies ... that are looking for quality products and accessibility of those product pretty quickly.

    Mr Elias also said the Kalgoorlie-Boulder store experienced an "exceptional" response to their grand opening.

    Based on our initial opening, it suggests that the town's been hanging out for it because we've had very good (trade) over the first couple of days.

    HR business partner Christopher Huntington said the Kalgoorlie-Boulder outlet currently employs 10 local staff.

    We've been able to acquire some great talent from the local area of Kalgoorlie which is great. We've got established people who already know the market, we haven't brought in outsiders.

    The Sydney Tools can be found at Tenancy 2/141 Boulder Road, Kalgoorlie-Boulder (WA).

    Haymes Paint

    The network of Haymes Paint shops has expanded with store openings in Devonport (TAS) and Rosebud (VIC). Both stores marked the occasions with special promotions, free coffee and big breakfast BBQs for customers. Devonport store manager Lauren Phillips said:

    I'm really delighted to be leading the team in Devonport. I love the mix of trade and retail customers that visit the store - no one day is the same. I'm passionate about colour and I enjoy inspiring customers to work with bright bold colours. My own home features red, black and white!

    The Rosebud store became part of the Haymes Paint retail network earlier this year. While the local community may notice a name change to the shop, previous owner and manager Tracey O'Shanassy has remained. With over 30 years of experience and a fascination with colour, Tracey is dedicated to giving customers outstanding service and expert guidance. She said:

    The transition to Haymes Paint Shop has been very smooth. I am proud to work with such a dedicated and enthusiastic team.

    Rosebud store manager, Tim Nichols, said:

    Our store opening has been incredibly fulfilling. Overseeing our wonderful team here in Rosebud as we work to achieve the goals we've set is truly gratifying. We look forward to welcoming the Rosebud community to our grand opening events.
    Paint has been an integral part of my career thus far, so joining a business with proud family values like Haymes Paint makes a lot of sense. I love helping customers make the right colour and product decisions and it's fantastic when they come back and tell you it looks great!

    Hollimans

    Charters Towers business Hollimans Group in regional Queensland has successfully sought approval from the Flinders Shire Council for residential blocks in nearby Hughenden.

    The company - which owns Hollimans Rural Mitre 10 and Hollimans Home Timber and Hardware - has formally expressed an interest in purchasing 22 blocks on which to place two and three-bedroom transportable houses.

    Hollimans managing director Ben North said the housing initiative was part of its strategy for business expansion in Hughenden and stable, good-quality housing was crucial to gaining and retaining staff.

    So far, Hollimans has identified 12 adjoining blocks of interest. However, purchasing blocks directly from a council and bypassing the auction and tender process requires ministerial approval.

    Flinders Shire councillors agreed to seek this ministerial approval at a council meeting in September. The council report noted:

    Employee housing is in short supply in Hughenden, but there is significant stock of vacant residential blocks. The provision of employee housing is crucial to the realisation of council's economic development plan.

    Councillors voted unanimously to seek a ministerial exemption for the direct sale of land to Hollimans. The sale will need to follow certain conditions, including the land being valued by an independent valuer to decide the sale price, and for council to retain a buyback provision in the event that residential development is not commenced within a time period "acceptable to council".

    Hollimans also owns Viper Water Solutions, Hollimans Transport (Weston's Transport), Wide Span Sheds, Pioneer Water Tanks and GoWild Outdoors (formerly Hollimans Gun Shop).

  • Additional sources: Kalgoorlie Miner and Townsville Bulletin
  • retailers

    Supplier update: Nippon Paint

    Melbourne-based Pental sells cleaning products to Nippon Paint

    The Japanese paint and chemicals giant continues to expand in China despite the country's property market slowdown

    A number of Australia's popular cleaning products including White King bleach, as well as laundry and cleaning brands Lux, Country Life and Velvet, will be owned by Nippon Paint after a deal to buy the portfolio from Pental. The paint company will also take over Pental's manufacturing plant in the regional town of Shepparton in Victoria, according to The Australian.

    Pental's other well known brands include Little Lucifer and Jiffy firelighters, and cleaning brands Martha's, Sunlight and Softly.

    Under the deal, Pental said it had agreed to sell the bulk of its consumer products business and the Shepparton plant to Selleys, a division of DuluxGroup, for $60 million. Nippon Paint bought the then listed Dulux for $3.8 billion in 2019. (See more at the link)

    The new face of DuluxGroup - HNN Flash, April 2021

    Pental will maintain control of its Duracell battery operations and its Bondi Soap brand, and will also keep its e-commerce hampers arm, Hampers with Bite. It intends to focus on online retail and consumer retail opportunities outside of its traditional household cleaning, disinfectant, laundry powders and soaps business.

    Following the sale, Pental is expected to have a healthy positive net cash position. In its announcement to the ASX, Pental boss Charlie McLeish said:

    What we are announcing ... creates a simplified and more focused business, while also realising value for shareholders.
    Selleys is a highly regarded business with significant capabilities within the consumer products space, including household cleaning. We believe they are well equipped to continue to enhance the reputation of our products, including our flagship brand White King, as well as provide great opportunities for our employees.
    Selleys is committed to retaining manufacturing in Shepparton, offering employment to all current employees and growing the Pental consumer products business over time.

    China market

    Nippon Paint is heavily exposed to China's faltering property market, but betting it can still make "good money" by rapidly expanding its market share even as the country's developers flirt with default. In the Financial Times, Nippon Paint's co-president Yuichiro Wakatsuki said he remains "cautiously optimistic" about China despite investor concerns about the impact of the slowdown for the Japanese group, which makes 35% of its revenues in the world's second-largest economy.

    By selling lower value paints to a growing DIY market and focusing on home renovations, Mr Wakatsuki wants to rapidly grow the company's market share in China. He said:

    You have to be very agile, you have to adapt to the market, you have to know what's going on. You have to know what our competitors are trying to attack.

    Mr Wakatsuki's goal is to expand the market share of various business lines from between eight and 24% to 40% "relatively quickly". He added there is potential for growth through acquisitions:

    If there's an opportunity to buy companies, I will buy China.

    As Chinese property developers started collapsing two years ago, Nippon Paint began shifting its business model away from large-scale projects, writing down its exposures to developers and demanding cash on delivery instead of extending credit.

  • Sources: The Australian and Financial Times
  • companies

    Property update

    Hardware supplier buys office-warehouse

    Investment and development company Pelligra Group has secured Mitre 10 for its West Melbourne location

    A privately held hardware products supplier has purchased a new freestanding office and warehouse in an industrial area of Dandenong South in Melbourne for $31.5 million, reports The Age.

    The 23,476sqm property, with a building area of 13,154sqm, sits among well-known brands in the industrial and logistics hub at 25 Glasscocks Road.

    Gordon Code, Colliers' joint head of the Victorian industrial business, said the buyer was interested in the site due to growing occupancy costs in NSW, which incentivised the group to focus on expanding its Victorian footprint. Mr Code told The Age:

    It decided to double its local manufacturing base in metro Melbourne.

    Colliers data show the average south-eastern prime grade rent was $130 a square metre in the second quarter of 2023, up from $100 a square metre in the first quarter of 2021. Colliers' national director James Stott said:

    Prime-grade assets are the most sought-after by tenants as the buildings offer greater environmental performance. Adherence to organisational ESG, such as energy efficiency and carbon footprint, have shifted occupational demands and companies are seeking newer and updated assets.

    Mitre 10

    Mitre 10 will expand its presence in Melbourne's west, leasing a Laverton North property 18kms from Melbourne's CBD, developed by Pelligra Group and Citinova, according to Real Estate Source.

    The hardware retailer has committed to the 3661sqm office/warehouse as part of a complex at 1-11 Little Boundary Road, for an initial 10 years. The site is spread across 8500sqm, close to the other properties the group occupies.

    Other businesses in the estate, include Clennett Hire, Sydney Tools and Totally Workwear.

    Traditional office, industrial and retail projects are family-run Pelligra's bread and butter, and is headed up by Ross Pelligra. Mr Pelligra also believes he can make money, or at least break even, in the notoriously difficult financial world of sports club ownership. He recently acquired the Adelaide Lightning women's basketball club and Adelaide Giants baseball franchise, and is also rumoured to be closing in on a deal to take over the Adelaide United soccer club.

  • Sources: The Age and Real Estate Source
  • companies

    Supplier update: Iplex

    Ongoing dispute that involves BGC Housing in WA

    Iplex owner Fletcher Building was forced to temporarily halt its shares from trading to brief investors, analysts and media after BGC went public with its claims that Iplex pro-fit pipes was to blame for leaks and the product should be recalled

    BGC Housing estimates the cost to fully re-pipe its impacted homes to be about AUD700 million, which extrapolated equals about AUD900 million and about AUD1.8 billion to refit all the homes in WA and around Australia, respectively. According to BGC's findings, released in October 2023, a change in resin and formulation led to Fletcher Building's Iplex pipes failing.

    However at its recent AGM, Fletcher Building chief executive Ross Taylor said the cost to repair affected houses in Western Australia, the only area impacted, would be more like AUD50 million to AUD100 million for a fault he blames on "shoddy" installation practices.

    Mr Taylor told shareholders that BGC's cost estimate was based on removing Iplex pipes from all houses across Australia but said that was "sensationalist" and "a little bit fanciful", given there were no abnormal leak rates with the 15,000 houses on the East Coast, and only 10.9% of the 17,000 homes in Perth in Western Australia known to be affected.

    To date, the repairs had cost an average AUD4000 each, and were caused by issues such as over-bending pipes, he said.

    Wherever there's been a leak, there's been an installation failure. What that does is it puts extra stress on the pipe and it just takes time then for that to manifest itself in a leak.

    Mr Taylor said the issues were concentrated to two plumbers and one builder.

    Background

    BGC's independent experts say the problem is the pipe itself, and not its installation as Fletcher continues to claim.

    The average BGC house build will have about 90 metres of the Iplex Pro-fit pipe in it, carrying hot and cold water through the home. It estimates on average 6.7 of these Iplex pipes are bursting each day and it is peaking on homes built in 2019.

    Through its remediation programme, BGC has re-piped six homes completely, which took more than six months and cost on average AUD60,000, of which 25% came from relocating residents. Based on this, it claims the cost alone of repairing BGC housing stock is AUD709 million.

    It also claims it discovered problems with Iplex pipes in Victoria, suggesting it's not just a Perth issue.

    BGC is warning there are not enough workers to fix all the pipes and it claims what's been discovered so far is the tip of the iceberg. The company also said it wants the product safety regulator to issue a recall.

    Our advice is that litigation at this time will result in the regulators stepping away, so we encourage affected parties to let the recall process play out rather than engage in a three-to-seven-year litigation process.

    Fletcher maintains there is no valid basis for a recall.

    BGC's experts found the failure of the pipe was due to "environmental stress cracking" and the cause of that was the resin used to make the pipe. BGC told BusinessDesk:

    Its particular physical properties meant that it is not able to cope with reasonable bending stresses, or stresses expected for a pipe of this type. Essentially instead of a flexible, bending pipe we've got something that is behaving more like glass, particularly when it gets cold.

    BGC's experts hypothesise the problem started in 2017 when Iplex started using a different supplier of resin.

    Fletcher said BGC's report, supporting the allegations of a manufacturing defect, lacked credibility and relied on flawed methodologies and so could not be relied on for causation. According to Fletcher:

    To date we have also collected evidence from 270 individual inspections of homes in Perth constructed by 12 different builders and plumbers. This has conclusively identified significant installation failures, in breach of Australian Standards, the Plumbing Code and installation guidelines.
    Those failures are the type that generate the plumbing failures that have been experienced by homeowners.
    Despite being offered access to the AUD15 million fund that Iplex established to assist builders and their homeowners to fix plumbing failures that occur and in turn help to establish the root cause of the failures which have occurred in Perth, BGC has refused to access the fund and refused to facilitate Iplex's technical teams access to homes that they have constructed.

    Fletcher said its fund was planned to support repairs for one year and to date it has done 383 homes and used around 20% of the fund.

    Related

    In April, Fletcher Building set aside AUD15 million in a fund to help establish the cause of the leaks and appropriate fixes, and help Perth builders and plumbers complete repairs.

    Iplex is under investigation in WA for leaky water pipes - HNN Flash, April 2023
  • Sources: The Press (NZ), The Australian and BusinessDesk (Wanganui Chronicle)
  • companies

    Supplier update: Brilliant Lighting

    The company admits to engaging in resale price maintenance

    It has committed to sending corrective notices to all affected retailers and distributors as well as establishing a compliance program

    In late September 2022, Brilliant Lighting wrote to 42 retailers and distributors attaching a price list for 116 Brilliant Lighting products. The company informed them that they should not display headline prices on their websites below certain prices. It told retailers and distributors the right to distribute its products was based on adhering to these prices.

    Under Australian competition law, it is illegal for suppliers to prevent, or attempt to prevent, resellers from advertising or selling goods or services below a specified minimum price. This conduct is known as resale price maintenance. Australian Competition & Consumer Commission (ACCC) acting chair Mick Keogh said:

    Resale price maintenance is illegal because it can stop retailers from competing on price, which means consumers pay more for goods and services. This is particularly problematic at a time when many Australians are facing increased cost of living pressures.
    Businesses need to be aware that the ACCC takes resale price maintenance very seriously. Suppliers cannot maintain price premiums by setting minimum prices. Nor should they bow to pressure from resellers to impose minimum prices on competing resellers, particularly, those with lower-cost online business models.

    In the court enforceable undertaking accepted by the ACCC, Brilliant Lighting has committed to sending corrective notices to all affected retailers and distributors, establishing a compliance program, and not to enforce minimum resale prices.

    As a wholesale supplier of fans, lighting, and electrical products, it sells these products to a network of at least 1,439 retailers and distributors.

    Resale price maintenance is strictly prohibited by Australia's competition laws. It occurs when suppliers:

  • make it known they will not supply goods or services unless a reseller agrees to advertise or sell at a price below a specified minimum price;
  • induce, or attempt to induce, resellers not to advertise or sell below a specified minimum price;
  • enter into agreements, or offer to enter into agreements, for the supply of goods or services on terms including that the reseller must not advertise or sell below a specified minimum price;
  • withhold supply of goods or services because a reseller, or a purchaser from the reseller, has not agreed to not advertise or sell below a specified minimum price, or has advertised or sold (or is likely to sell) at a price below a specified minimum price;
  • use, in relation to goods or services supplied or that may be supplied, a statement as to price which is likely to be understood as the price below which the goods or services are not to be sold.
  • Source: Australian Competition & Consumer Commission
  • companies

    USA update

    Ace Hardware experiences cyberattack

    The cyberattack crippled the hardware retail group's internal systems, resulting in shipment delays, and suspended online orders

    Ace Hardware's IT systems including 196 servers and more than 1,000 network devices have been directly affected by a cyberattack. More than half of those affected servers have been restored and are being certified by Ace's IT department.

    Describing the attack as a "fast-moving, dynamic situation" with details "changing rapidly", Ace CEO and president John Venhuizen sent an email to its more than 5,800 retailers to explain the systemwide outage. It said:

    ...We detected a cybersecurity incident that is impacting the majority of our IT systems. As a result of this incident, many of our key operating systems, including ACENET, our Warehouse Management Systems, the Ace Retailer Mobile Assistant (ARMA), Hot Sheets, Invoices, Ace Rewards, and the Care Center's phone system have been interrupted or suspended...

    In another update on the same day, the company urged stores to stay open, as point-of-sale systems, credit card processing, and Ace Hardware bankcard programs were unaffected.

    Leading up to the holiday season, scheduled deliveries are adversely impacted and customers unable to place online orders. There have also been multiple incidents of store owners experiencing follow-on phishing (fraud emails and texts) attacks.

    A cautionary notice reportedly warned Ace Hardware retailers of two different scams attackers are perpetrating, possibly with the information gathered from their initial breach. The notice said:

    Specifically, one involves a criminal sending a spoof email asking the retailer to send electronic payments meant for Ace Hardware Corporation to an alternate bank while we work to restore our systems. The email looks legitimate and appears to be coming from someone in the Ace Finance Department.
    The second instance ... involves a cyber criminal calling an Ace store posing as an Epicor employee asking for permission to gain access to the stores [sic] computer system through passwords, password resets and other remote means.

    Epicor Software Corporation is a Texas-based business software company focused on retail, manufacturing, and distribution - and presumably, an Ace contractor.

    Darren Guccione, CEO and co-founder at Keeper Security told the Dark Reading website:

    Breaches like this must serve as a wake-up call for organisations large and small to implement a zero-trust architecture, enable MFA [Multi Factor Authentication], and use strong and unique passwords.

    In addition, employees should be trained to identify suspicious phishing emails or smishing text messages.

    Related:

    Ransomware - Is your POS safe?: HI News, August 2019
  • Sources: Dark Reading, Bleeping Computer and Cyber News
  • retailers

    ABS hardware retail stats to July 2023

    East coast flat, Rest of Australia (RoA) shows mild growth

    Hardware retail revenues have stayed strong through July 2023, though trailing 12-month comparisons show some declines. Overall revenue for Australia grew at close to one percent.

    Hardware retail sales slowed considerably for the 12 months ending July 2023, according to figures from the Australian Bureau of Statistics (ABS). While growth did not go negative for the nation as a whole, given ongoing inflation, it's likely the general market has retreated over the past year.

    For July 2023 itself, however, there was a degree of mild positivity for most states, with revenues for the most part matching to revenues for July 2022, or even lifting above those. (There are anecdotal reports of a more generalised slump for August 2023.)

    Looking at the trailing 12 months, the two states that did well were South Australia (SA) and Western Australia (WA). SA produced 7.95% growth, for a total increase of $128.9 million, while WA grew by 5.0% and an increase of $131.2 million. Close behind in percentage terms was the Australian Capital Territory (ACT), with 5.0% growth, and an increase of $25.3 million.

    Queensland (QLD) was almost flat with a 0.01% increase. Victoria (VIC) continued to see declining revenues, down by -0.26%. New South Wales (NSW) is also showing a decline for the 12 months, down by 1.3%, a reduction of $86.3 million.

    As a whole, Australia saw a 0.8% uplift, and a net gain of $207.9 million.

    New South Wales

    As Chart 2 illustrates, NSW was one of several states that saw July 2023 come close to matching July 2022.

    Taking a wide perspective, NSW had its second best results for July in 2023, just a shade off the results for July 2022. Again, it's difficult to statistically account for inflation, but even with that discount, the month performed relatively well.

    Victoria

    Surprisingly, given that 2023 has seen a general slowdown in hardware revenues for VIC, the July 2023 result was the second-best historically, beaten only by the huge result for July 2020, as seen in Chart 3.

    This does come at the end of a year with a definite slide in comparative revenues since January 2023. The real test of the VIC market is what happens in November and December 2023.

    Queensland

    Making comparisons with the somewhat "zany" three years since COVID-19 is not always useful. The pattern we may be seeing in QLD from April 2023 onwards is a return to the pre-COVID-19 patterns, albeit at a higher level, as shown in Chart 4.

    Again, the result for July 2023 is the second-highest ever for the state, and it follows on from a steady increase in revenues over the prior three months.

    South Australia

    SA has had its best 12-month period ever for hardware retail revenues, though the result for July 2023 just edges ahead of July 2022. Chart 5 shows this outperformance, especially from August 2022 through to January 2023.

    Western Australia

    Like SA, WA is having its best 12 months ever for hardware retail revenue - though by a small margin. In fact, 11 out of the twelve months have set new records for the state as shown in Chart 6.

    The state is very much a tell of two halves when it comes to hardware revenue, so the real test will come over the next six months.

    Tasmania and Northern Territory

    The lack of data through the COVID-19 years still makes individual comparisons for Northern Territory (NT) and Tasmania (TAS) difficult. We can derive an estimate of the total for the state and territory, but it's not really of much use statistically. So we present this chart for completeness sake.

    Analysis

    Generally speaking, the results for July 2023 are encouraging, and show a resilient market that is softening, but also holding up under pressure from high interest rates and inflationary pressures.

    One element that might be helping to boost it a little is that other areas of expenditure - such as international travel - remain expensive. That's not just a matter of airline ticket prices, but also the AUD (somewhat paradoxically) remains devalued against currencies such as the USD and the Euro. It's cheaper to renovate the bathroom than to visit Italy or Los Angeles.

    statistics

    Indie store update

    Bailey's Key Hardware listed for sale

    The Toowoomba-based store in regional Queensland is considered a local icon and will change hands for the first time in 17 years

    Bailey's Key Hardware which has been a fixture on William Street in Crows Nest, a rural town in Toowoomba for 90 years, has been listed for sale through Hampton Realty, reports The Chronicle.

    The hardware store is set to stay, with owners Peter and Dianne Nightingale-Smith selling the 790sqm property, business and stock as a going concern.

    Mr Nightingale-Smith said the former English couple, who bought it 17 years ago as part of a business visa arrangement, had been well supported by the town. He told The Chronicle:

    The only way we could come out here was with a business visa, so we had to buy a business over here. We had to run that business and achieve a certain turnover, and after those two years we could do what we liked, but we're still here 17 years later. We just love the town, the people have been pretty good, and it's a nice place to live.

    Mr Nightingale-Smith said Crows Nest was lucky to still have an independent hardware store, at a time when the industry continues to experience consolidation mainly at the hands of big box retailers such as Bunnings.

    We still feel the impact from the 'big green shed', it still hurts us a bit, but especially after COVID, people are coming into us who haven't been there before.

    Selling agent and Hampton Realty principal Craig Allen said the offer was even more attractive thanks to increased investment in Crows Nest since the end of the pandemic.

    Crows Nest is really taking off, and there are more opportunities, so I think someone will head in there and grow this business even more.
    There are people moving to Crows Nest from the coast and wanting to get out of the hustle and bustle of the city.

    The couple plans to remain in Crows Nest and keep running the neighbouring gifts and homewares business Nightingale Crafts, in between travel.

    Bailey's Key Hardware was originally established by Arthur Bailey in 1933, before his sons Terry and Arthur took over the reins and the business remained in family hands until 1998.

  • Source: The Chronicle
  • retailers

    Big box update

    Noarlunga Bunnings to move and re-open

    Bunnings store approved in Victoria and production begins at a timber and truss plant in Melbourne's west

    A Bunnings Warehouse in the southern suburbs of Adelaide is set to relocate to be part of a local retail hub with more space. The Noarlunga Bunnings store will close in early-2024, with a new branch opening in the Colonnades shopping centre. Bunnings regional manager Tom Miller exclusively told the Adelaide Advertiser:

    The proposed new store ... will feature an additional 1400sqm of retail space, a much-improved five-lane drive-through timberyard, as well as an additional 60 car spaces.
    The existing Noarlunga team will transfer to the new store, as well as the creation of around 20 new local jobs. Works have commenced at the new site to convert the vacant building into a Bunnings Warehouse, which is expected to open in the first half of 2024.

    Mr Miller said the current location will continue to operate until the new location is ready to open.

    Manor Lakes, Victoria

    A Bunnings store will be part of a new retail and trade supplies precinct in Manor Lakes, a Melbourne suburb located 33km south-west of the CBD, in the City of Wyndham local government area.

    Wyndham council's planning committee unanimously approved a development application for the construction of Manor Lakes Town Centre 2A.

    The proposal from Ranfurlie Asset Management involves a Bunnings store being built on the site at 485 Ballan Road, adjacent to Ranfurli's existing Manor Lakes Central shopping centre. Ranfurlie Asset Management CEO Cameron Male said:

    It will cement the precinct as a key retail and lifestyle asset for the area. Manor Lakes Central boasts over 75,000 visitations per week and is established as a retail & commercial focal point not only for the local community, but for the surrounding population.
    This development will generate construction jobs and inject increased dollars into the local economy with additional spend by workers and consumers alike.

    In the Wyndham Star Weekly, local councillor Pete Maynard said:

    This permit application will ensure timely access to goods, services and employment of in excess of 600 ongoing jobs and approximately 200 with construction to existing and future residents in the area.

    Along with construction jobs and Bunnings Warehouse, other large retail outlets, showrooms, restaurants, convenience stores and a service station are also expected to provide ongoing employment.

    Timber and truss plant

    Bunnings has begun production at a 31,000sqm just-in-time timber and truss plant in Truganina, a Melbourne suburb located 22.4km west of the CBD.

    When operating at full speed, it is expected to produce 2800 home lots -trusses and frames - a year, according to a report in The Australian Financial Review (AFR).

    It is part of the $75 million the hardware retailer is investing in plants to manufacture timber wall frames and roof trusses for houses, townhouses and low-rise apartment buildings.

    The plant at Truganina Business Park follows a similar one opened in outer Sydney's Minto in July and precedes a third due to open in south-western Brisbane's Wacol early next year.

    Bunnings plans to expand its footprint of frame and truss plants - HNN Flash, April 2022

    Bunnings is three years into a five-year plan to make its commercial business as big as the retail arm. As cited in the AFR, Bunnings chief operating officer for commercial Ben McIntosh is reported as saying:

    There was always a trade or commercial part of the business, but it was never the focus. We can do two things at once.

    According to the AFR, the strategy behind selling frames and trusses - which make up about 15% of the cost of a home - is that it establishes a supplier's relationship with a builder at the start of construction and makes it easier to sell other products throughout the typical nine-month construction process.

    Some analysts, such as Tim Moore from consultants Industry Edge, have seen fit to portray this as somehow being the first step towards pre-fab builds. While pre-fab certainly makes sense, it has long been much more of a demand problem - with tradies loathe to set aside their 1970s era production techniques - than a supply issue.

    It's also worth noting that pre-fab - if and when it comes at scale to Australia - is likely to be boosted by major investors in large mid-size to smaller large-size construction companies, while Bunnings has repeatedly asseverated that its target market is the same as that of the Independent Hardware Group (IHG): house-by-house builders working with small teams of sub-contractors.

    That said, it's possible Bunning might tap into a slight expansion of pre-fab as a shortage of qualified tradies becomes less a matter of better efficiency and more about just getting a build completed. As Mr McIntosh is quoted as stating:

    [Builders] are time poor, they need efficiency - it is harder and harder to get skilled labour on site, and it's getting more expensive.

    Bunnings managing director, Mike Schneider, has commented that the ongoing demand for more dwellings will help to fuel the bottom line at the big box retailer. However, if you look over the plans by Victorian government, and other solutions provided for the housing crisis, the more is towards larger, multi-dwelling construction - which will be the only way to supply affordable housing in Australia's major cities.

    That's a category which Bunnings (and IHG) have all but excluded themselves from. Certainly, there will be ongoing strength in single-house builders, but it's not going to be quite the boom for retailers that many seek to portray this as.

  • Sources: Adelaide Advertiser, Wyndham Star Weekly, The Australian Financial Review and The Age
  • bigbox

    Retail update

    Deniliquin Mitre 10 sold to Dahlsens

    In Tasmania, contractors have begun work on the Clennett's Mitre 10 store in inner-city Hobart

    Deniliquin Mitre 10 owners Katrina Knuckey and Alan Braybon will hand over the ownership of the business to Dahlsens on November 15, 2023. The store will operate in addition to the existing Dahlsens store in Deniliquin, NSW.

    Mr Braybon, known as Bluey, will retire after 38 years as an employee and owner. Ms Knuckey will be staying on with the new owners, leading the team as manager of Dahlsens Mitre 10, as it will be known. Speaking for both of them, Ms Knuckey told the Deniliquin Pastoral Times:

    We don't make this decision lightly, with our priority always being the ongoing service to our customers and jobs for our team. We are staying where we are, as your local Mitre 10, with more support to better help you...

    Ms Knuckey also said she is "excited for the opportunity" to work for Dahlsens.

    I am also excited for the change and the challenges that will come with providing our customers with the same great service. The change is good for everyone. Dahlsens will be supportive, and I am looking forward to the future of the business.
    Geoff Dahlsen is a fifth-generation family member and is leading the commitment by the Dahlsens team to continue everything we've started.

    Mr Dahlsen said the good news is that the store will continue to service the Riverina community in an "even stronger capacity for many years to come".

    Very little will change. You will still see the same happy faces and great products you're used to, with Katrina Knuckey leading the team.

    Deniliquin Mitre 10 will be added to the more than 60 other Dahlsens sites located around Australia. The closest Dahlsens store is located at 205-207 Barham Road in Deniliquin, and managed by Doug Miller. The Deniliquin Mitre 10 and Dahlsens Barham Road trade sites will remain trading in their separate locations.

    Mr Dahlsen said to expect a "seamless transition" with business operations being largely unaffected during this period. He also expressed gratitude to Alan and Katrina for entrusting his family with the business and the team.

    We commend their leadership and commitment to the Deniliquin community. Our utmost priority is to honour and strengthen the foundation they have laid.

    Mr Miller said the change will be "great for Deni".

    I'm excited, and with the acquisition Dahlsens is securing the sustainability and future of the town. Katrina and I both live in the community and look forward to making things bigger and better, servicing our community.
    One thing I love about the family-run business is that we get such a say in how we run the business at our local level. We get to influence the way things are run. The stores are not just a cookie-cutter box version. They all look different, but we work together to bring in new ideas and the best service we can offer.

    Clennett's Mitre 10

    Construction has begun on the Clennett's Mitre 10 store in Hobart, Tasmania. Previously home to an automotive service department, the Patrick Street site will soon house the "much needed" and only city-based hardware store.

    The location, which will join the several existing Clennett's stores in Kingston, Huonville, Sorell and Swansea.

    In 2020, the company said the development would fill the void left by the demise of K&D, which closed its final store that year.

    At the time, the new site was described as 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.

    Related

    Mitre 10 store planned for Hobart CBD - HNN, July 2022
  • Sources: Deniliquin Pastoral Times and Pulse Hobart
  • retailers

    USA update

    Lowe's solution to increasing theft

    CEO Marvin Ellison has attributed low theft rates at the home improvement retailer to investing in the company's workers

    Like many retailers, home improvement retailer Lowe's has reported increased losses from missing or damaged inventory over the past few years, reaching nearly USD1 billion by one estimate.

    But unlike dozens of other retail executives, Lowe's CEO Marvin Ellison said the losses from retail theft this year are not expected to have a material impact on the company's profits. Speaking at Goldman Sachs Global Retailing Conference recently, Mr Ellison said:

    It is one of the areas of the business that we're most pleased with as a major big box retailer.

    Lowe's inventory shrink as a percentage of sales last year was just over 1% - at the low end of the typical industry range of 1% to 1.4% - and that's after an uptick from a 2016 low of 0.57%, based on an analysis by CNBC. Mr Ellison highlighted technology investments and his stores' more rural and suburban locations as factors that help reduce shoplifting and organised retail crime.

    More than the cameras, sensors, and secure merchandising displays, Mr Ellison said investing in human capital provides the most bang for retailers' buck in keeping crime out of stores.

    Having spent my entire adult life in retail at every level, the one thing that I understand clearly is that the greatest deterrent for any type of theft activity is effective customer service.

    In other words, having more employees engaging with customers in stores goes a long way toward preventing losses.

    Earlier this year, Mr Ellison said Lowe's spending on employee compensation had increased by USD3 billion since 2018, and would grow by another USD1 billion over the next three years. He also said that Lowe's is the highest-paying retailer in certain smaller markets.

    Joe McFarland, executive vice president of stores at Lowe's, said in another interview:

    We are awarding over USD100 million in bonuses for our frontline hourly associates in recognition of their hard work and dedication during the second quarter. Our investments in our associates are paying off as we continue to elevate the customer experience with a 200 basis point improvement in both our DIY and Pro customer service scores this quarter as compared to last year.

    Lowe's spends "a lot of time" training employees, Mr Ellison said, and he described the company's asset protection team as "best-in-class in retail." Strong local partnerships with law enforcement also factor into the equation.

    So when you take all of those things together, they've been incredibly beneficial to us even in the second quarter. It's a difficult environment - I've never seen anything like it - and we're incredibly pleased that we're able to have a differentiated performance relative to the other major retailers.

    Related

    Curbing retail theft - HNN Flash, June 2023
  • Sources: Business Insider and Infotech Lead
  • bigbox

    Bradford Insulation supports NCC 7-star rating

    Redefines energy efficient homes

    The introduction of the NCC 7-Star rating will rely heavily upon the insulation sector, yet achieving this rating does not mean completely changing the way building and construction is implemented, according to Bradford Insulation

    As Australia continues to move towards a more sustainable future, it's likely that energy efficiency standards will continue to rise. The new NCC 7-Star rating not only demonstrates a commitment to energy efficiency stewardship but also presents many opportunities for better practices in building design and construction.

    The insulation industry in Australia is stepping forward to a 7-Star rating and, with it, the future of sustainable living.

    Insulation for the roof, walls and floor, is a cornerstone of energy-efficient building design. Proper insulation reduces energy consumption for heating and cooling, along with a comfortable and healthy living environment. It can significantly contribute to noise reduction, leading to quieter interiors.

    Given Australia's diverse climatic zones, insulation has to work both ways by keeping homes cool in the summer months and warm during the winters. A well-insulated home reduces reliance on air conditioning and heating systems, cutting energy consumption and greenhouse gas emissions.

    The new NCC 7-Star rating is a major step forward in promoting more energy-efficient and durable systems with a longer-term net zero goal design and construction practices in Australia. This standard primarily affects the residential sector, pushing the building trade to adopt new approaches and techniques to achieve higher energy efficiency levels.

    In addressing the forthcoming introduction of the NCC 7-Star rating, Kathy Hocker, general manager of marketing & customer operations at Bradford Insulation, said:

    We are at a pivotal point in the industry. The advent of this new rating is set to bring about a significant change in insulation installation and usage across Australian residences. We foresee a boost in demand for sophisticated insulation materials, to meet the increased energy efficiency standards. However, before we go through this transformation, there are a number of factors that builders, specifiers and architects should understand and which homeowners of new builds should also be across.

    With the new NCC 7-Star rating, buildings will need to have even higher insulation, glazing, sealing, design or layout and passive solar design to meet the increased standards. This update represents a 18-25% improvement for homeowners on the base energy efficiency requirements as compared to the older NCC 6-Star rating. (Sourced from "Shoot for the stars: Top tips to improve your home's energy efficiency" by the Climate Council)

    The following are practical tips and strategies designed to help industry professionals including hardware retailers to effectively explain these changes, enabling them to make well-informed decisions about their insulation choices.

  • Don't ignore R-values: An R-value is a measure of thermal resistance; a higher R-value is likely the most cost-effective choice for achieving energy efficiency in any design. Regardless of the climate zone, building orientation, or construction type, prioritising a higher R-value insulation should be a fundamental part of a building plan and recommendation to homeowners.
  • Look for quality products: Quality is key in insulation products for their effectiveness and longevity. Bradford Gold[tm] and Bradford Gold[tm] High Performance Insulation is designed for Australia's unique climate and has been independently tested for performance under various conditions. They are certified to Australian standards, meeting or exceeding compliance guidelines for thermal performance. Bradford products are also accredited for fire safety, environmental sustainability, and health considerations.
  • Don't overlook acoustic insulation: Alongside thermal insulation, consider the benefits of acoustic insulation to help reduce noise transmission between rooms and from external sources. Some insulation materials such as Bradford SoundScreen provide both thermal and acoustic benefits.
  • Install properly: Even the best insulation won't perform well if not installed correctly. It's essential that insulation fits snugly between studs, joists, and beams, without gaps or compression so it retains its design thickness. Installation in accordance with the NCC and Australian Standards is always recommended.
  • Seal it up: A well-insulated home isn't just about the insulation itself; it's also about preventing air leaks and minimising hot and cold draughts blowing through the home. Builders should ensure gaps around windows, doors, and other areas prone to air leaks are properly sealed.
  • Don't forget condensation control: While sealing a home for energy efficiency is important, so too is ensuring sufficient moisture control and ventilation to reduce the risk of condensation, mould growth, and poor air quality. Vapour permeable wall wrap and ventilation solutions should be considered as part of the overall design.
  • Understand the full cost: The cost of insulation isn't just about the price of the product. It also includes installation costs and the ongoing savings in energy costs that the insulation will provide over its lifetime. Optimising insulation is more cost-effective compared to enhancing other more expensive building components, as it provides an overall Star rating gain for less than the cost of other building elements.
  • Related: The National Construction Code (NCC) 2022 energy efficiency provisions for new homes is set to take effect (with various State transition periods) from October 1, 2023.

    Seven-star energy ratings for new homes - HNN Flash, September 2022
  • Source: Bradford Insulation, part of CSR Building Products Ltd
  • companies

    Haymes Paint launches latest colour library

    Colour Library Vol.17 is named Origins

    Colours that evoke security, comfort and belonging will be the most popular hues in 2024, according to the company's latest expert colour forecast

    Origins is a "transformative fusion of past wisdom and futuristic potential, designed for the architect, innovative interior designer, and discerning design enthusiast" according to Haymes Paint. At the heart of Origins lies "the courage to explore and adapt".

    The collection has been crafted in collaboration with muti-disciplinary design studio Nexus Design, home decor and furnishings brand Adairs, as well as design duo @joshandmattdesign.

    The Colour Library Vol.17 - Origins, offers six different colour palettes:

  • New Narratives
  • Heritage Hues
  • New Terrain
  • Retro Mash-Up
  • Solid Ground
  • Strong Haven
  • Interior design specialist at Haymes Paint, Erin Hearns, said:

    The company is delighted to launch Haymes Paint's Colour Library Vol. 17 for 2024. At Haymes Paint we understand the world around us constantly evolves, and there's a growing need for sanctuary in every space we occupy. The 'Origins' collection aims to provide that refuge, grounding us with a return to timeless essentials while infusing contemporary trends.

    Erin's career encompasses interior design, retail, and visual merchandising. This diverse background allows her to strike an ideal balance between colour and architecture in every project that crosses her desk. Working in harmony alongside builders, architects, painters, and DIY customers, she has a wealth of knowledge that enables her to bring out the personality in any space.

    To celebrate the release of Origins, Haymes Paint is set to host a panel event that will explore the scientific underpinnings of the forecast. This year's panel of experts, which includes its collaborators behind Origins will take an in-depth look into the intricacies of how colour, tone, and texture influences not only the look and feel of an environment but also the mood and intention for people in the space.

    About the partners

    Nexus Designs - Haymes Paint engaged the design studio to develop the colour palettes. Experts in providing analysis of global trends, coordination of colour ranges, colour advice and analysis, Nexus Designs used its extensive industry and consumers insights to develop these palettes. Multi-disciplinary to the core, Nexus Designs drew on its integrated offering including interior design, product development and visual communications to bring an innovative and nuanced response to the brief.

    Adairs - A leader in shaping the dreams of home enthusiasts, Adairs creates design solutions that transform ordinary spaces into dream havens. Leveraging over a century of expertise, Adairs leads the way in offering on-trend home decor and furnishings, blending luxury with affordability to elevate everyday living spaces.

    Josh & Matt (@joshandmattdesigns) - Josh Jessup and Matt Moss are a Melbourne-based couple who have gained traction on TikTok due to their eclectic and unique interior design style. With a following of 839k on TikTok and 633k on Instagram, Josh & Matt have a loyal fan base that values their talent and style.

    With their style revolving around curated maximalism, infused with a blend of postmodern and retrofuturism elements, Josh & Matt's aesthetic embodies their identity. Their content lets them use their space as an extension of themselves, connecting with people all over the world.

    Josh and Matt's eye for design and style allows them to see beyond current trends, their love of colour makes them a great collaborator for Haymes Paint.

    companies

    HBT 2023 Conference Member Highlights

    Innovation and execution highlights

    HBT has introduced "Member Highlights" at its 2023 Conference. The four stores which were the subject of a Member Highlight all bring something new to retail in 2023.

    At its 2023 Conference the HBT National Buying Group (HBT) introduced "Member Highlights". These enable HBT to highlight those stores that have made significant changes, and helped to introduce new retail ideas.

    The four stores to receive the first Member Highlights were, for the most part, highly innovative, and had undergone significant transitions during 2022 and early 2023. Presenting these stores, HBT provided a short, high-quality video introducing the store, followed by a question and answer session with the store owners, including questions generated by the attending HBT members.

    K&K Steel

    K&K Steel is located in Hastings, Victoria, which is 70km south of the Melbourne CBD (about an hour's drive), on the eastern side of the Mornington Peninsula. One of the owners of the store, Bill Heyblom spoke with HBT's Andrew Graham, one of HBT's managers of member services, about the recent deep-reaching changes to the store.

    Those changes really arose from an understanding that in order to grow, the store needed to change its focus so as to attract more customers. As Bill told Andrew:

    When we bought the business, it did a little bit more in the job lots and that sort of thing, house lots ... but we're not set up to actually move heavy material. We also lost a few of our tradesmen [customers]. They retired and we had to sit down and decide what we wanted to do.
    We've got a really great fabricator who is very artistic and very creative and he loves the challenge. So we've found that we are getting people in that will ask for a weird job. They've gone to other places and said, no, we can't do that. That's not in our capabilities. So we embrace the difficult, we go down and we grab our fabricator, we have a chat with the customer and say, this is what you want, is this how you want it done?

    Bill provided an example of the kind of work they moved to doing, to the delight of their customers:

    We had one lady come in [whose] grandfather used to race speed cars. She had the tail section of his speedway car and wanted to make a TV table out of it. They didn't know how to do it, so they brought us a photo of what his speed car looked like. With a bit of thought, the fabricator managed to fabricate it so that it looked like the bump bar on the back of the speed car. When they left, they were just ecstatic. The father came in after that, he just said 'amazing'. Couldn't believe that this could be done.

    While that goes to the substance of how K&K changed its business model, much of the substantial change has been about how the store has changed its appearance in terms of product display and placement. One of the major changes was reducing the height of shelving. K&K wanted a clear line of sight across the store. However, they found it difficult to source the kind of shelving they wanted - so they built it themselves., developing mobile shelving on wheels.

    We had a need to be able to display a lot of things in a small area while keeping with this height limit. We had to think about how we did it. So we designed the shelving ourselves. The beauty of using them is that we can change the store around in half an hour. We now have the ability, if we want, we can shuffle things around. We can move one item, we can move rows of items so that the store doesn't get stale, so that people don't come in and walk right past things they might need because they know where the other thing is.

    One result of these changes is that Bill has noticed a shift in the customer base.

    We found that we are actually getting more female customers come in now. It used to be that they only came in if their husband sent them in for something, but now we're getting the females that come in and go, oh, can you help me with this and do that? I need something like this. So it's all tied into making [the store] more inviting for people to come into.

    Such a transition needs lots of help, of course. K&K benefitted from the support of many of its major suppliers.

    We spoke with our major suppliers, Bordo, Klingspor. They jumped on board straightaway, said, yeah, what do we want from us? How can we help you? ITM were another one that said, great, let's do it. We're also Metabo dealers. And they jumped in and said, alright, we can do something for you there. Most of the people that we consider our main suppliers jumped in. They jumped on board and gave us extra bits and pieces. We got in with Allstate Trailer Parts and they were great.

    At the core of the changes, however, was K&K's relationship with HBT. In fact the initial impetus for change came from Bill's business partner overhearing a remark at an HBT Conference that if you hadn't changed your store much over the past five years, you likely needed to make changes as a priority.

    I've been working at the business for 20 years and the previous owner was reluctant to do anything. We talked about we needed to change things, but he didn't want to put the effort in.
    HBT has, from day one, opened doors for us that we couldn't get to otherwise. It's been a good asset to get ideas from. We've been able to approach people and say, what can we do here? We're in discussions at the moment on how we can improve the outside of the building. The outside is tired and we need to do something there. And Andrew and I, and Roger and Jane, we've working out what steps to take next. So it's been great in helping us to look for ways forward to change the product range, and to expand on what we are doing.

    One question that came from the floor was about what K&K did to retain staff - a common theme at the 2023 Conference. Bill admitted he didn't have any real solutions, especially as much of the longer-term staff had reached retirement age.

    We've had nothing but trouble getting staff. We were down to one fabricator and I get a phone call on a Saturday morning when I wasn't working, from Roger saying, just had a guy drop off a resume. I said, did you let him out the door? So we quickly rang him up and got him back in, and by 11:30 he had a job. He's turned out to be the best person we've employed. He's just so creative. He's incredible.

    Earlier in the conference in a keynote speech by Bernie Brookes, former CEO of Myer, the concept of "Uber" staff, who want to work retail as almost part of the gig economy had come up, and Bill confessed that much of his current staff followed that model.

    Talking about the Uber personnel. We've actually gone basically to that by default, where you've got four staff members and none of them are full-time. They all wanted to just do casual or part-time work.

    Cooma H Hardware

    The town of Cooma is located about 115km due south of Canberra (about a 90-minute drive). It's also located close to the Snowy River 2.0 project, which has become a major driver of the Cooma economy, and of sales at Cooma H Hardware.

    Two of the owners of the hardware store, Jannene Rixon and David Van der Plaat, spoke with HBT's Jason McElligott. Jannene began by explaining how important customer service is to the store:

    A lot of people say they come back because of our customer service. I had a girl in probably about two weeks ago, she'd been down to Mitre 10. They didn't have the screws she needed. She was trying to put her kids' bunks together. She couldn't do it that night. They were devastated. She came and got the screws from me. I saw her in Woolies that afternoon, and she said, 'Oh thank you. The service out there was so good. The bed got together, the kids were so happy!' So that's what we like to do and in a small community you get the feedback.

    While Cooma has benefitted substantially from the Snowy River 2.0 project, David does point out there are some downsides, especially when it comes to hiring staff.

    It's a double-edged sword. It's created something like a mining boom. Property prices went up, things got really busy, but it's created major issues with staffing and stuff as well because they've come in and they're paying money. So they've got guys out there, out of school, they are earning $3000 a week in the factory, for an 18 year-old. Made it really hard to retain staff.

    According to David, they've given up trying to directly supply the main contractor on Snowy, Future Generation. Instead they service the contractors working for Future Generation.

    What we've found a really growth area for us is servicing the contractors because you're dealing with people who know we're talking about and we're doing very well with that.

    Jannene also points to growth in their core building sales as well.

    At the moment, our trade business is sort of growing. A while ago we had a change in staff and one of our guys stepped up and has started doing a lot of our quoting and is getting back to our builders in a really timely manner. So we are sort of growing the trade section because we're getting back to builders. Up in the Jimenbuen area, there's a fair bit of building work happening. So we're getting a lot of work up there that we weren't getting before, as the person in the role previously wasn't getting back to people quick enough.

    Recently HBT helped Cooma move to the H Hardware livery for their hardware store. Much of the inspiration for the redesign came from David.

    With the new building, I designed it all myself. I love looking around hardware stores. So when I travel around, I find a hardware store to walk into. I've been doing it for years, so I sort of knew what I wanted. I just sat in with a piece of paper and drew a box and started from there, sort of thing. And then we sent our plans to HBT, they did the H Hardware, logos and that design all that up the outside.

    Fix & Fasten

    Fix & Fasten is a fastener specialist retailer, with stores in Sunshine West to the west of the Melbourne CBD, and another in Campbellfield, to Melbourne's north. Andrew Graham spoke with the retailer's two principals, Jason Filia and David Sevrakov. F&F is part of the Industrial Tools & Trades (ITT) division of HBT, and both Jason and David participate in HBT's steering committee.

    One of the most interesting aspects of F&F is that the retailer utilised the Toyota-inspired "kanban". Taiichi Ohno, an industrial engineer at Toyota, was essential to its development during the 1950s. The system originated with Toyota emulating some of the stocking practices of supermarket systems.

    At the most basic level, kanban helps to aligns inventory levels with actual consumption. When the manufacturing area has consumed its stock of a part, a signal is sent to its local inventory for replenishment. The inventory sends a signal to the external supplier, and it is restocked.

    While that seems almost obvious, many inventory systems still work through bulk orders, which are replenished on a schedule, rather than through demand signals, often resulting in either overstocking or understocking.

    The insight that F&F brought to the market is that by interlocking with customers via kanban, they create a system that provides a strong barrier to entry for competing suppliers - it's not enough to just have a screw or bolt that is fractionally cheaper, an entire system would need to be replicated. As David describes it:

    Our kanban system is a supply solution that we've developed into the market. It allows us to manage our major accounts in a controlled fashion, taking the urgency out of what's always urgent, which is workshop consumables. You know, a $5 thing can stop a whole workshop. So what we've developed is the kanban, which is a bin rotation system.
    The cost savings that has not only through our customer but through our own business is amazing. Procurement, the old fashioned walk around with pen and paper to take in the weekly order that they would do is eliminated. To be honest, sometimes we almost make some positions redundant because it just looks after itself. It allows us in our business to actually control the purchasing, allows us to buy better, we know what's coming and yeah, it's a really good system the customers love, and it locks the customer for forever.

    HBT has been one of the core pathways to success for F&F. As Jason explains:

    The HBT supplier base being so large and various has provided us with product ranges that traditionally we haven't had any exposure to. That broad buying range has allowed us to be competitive, and, with our service offering, our customers are actually potentially forcing us to take on extra product range because of that service and the way in which we're delivering the product.

    David was especially full of praise for HBT's online portal that links suppliers and members.

    The online portal that's been developed over the years, especially now, is a great asset to our business. Even just to search products, to search suppliers. We've got our own signings from our sales teams, our purchasing officers, so they can really just jump on and work through the portal and find out what they're after and that sort of stuff. Accurate pricing, notifications and communication through the portal is second to none.

    While F&F faces the same problems with staff as other retailers in hardware, the company has developed a more active approach to managing the situation, according to David:

    Something else we've taken care of is, I suppose with our staff, we've sort of thought outside the box and instead of getting traditional fastener staff, we sort of look for specialists. So currently we've got a hydraulic specialist within our business. We've got a sealant specialist that we've gathered from outside our traditional industry and rely on them to help us build that category. So we've built this, I suppose, structure of specialists within our own business through the sales team that we can lean on when we get a certain, I suppose, lead into silicone we'll take that account manager with us and help us.
    The other thing we've identified is obviously [the current staff] are not going to be around forever, so we've got to bring the new generation through. So we started a skill-invest type scenario for succession. We're bringing teenagers through the business. They do a 12-month course, they get a certificate at the end of it and then, if they're up scratch, we retain them as a full-time employee And we've had some great success with that. We've got some young kids within our business that I suppose have got the "want" to move through the business. The old-school heads have got all the knowledge, but bringing those young ones through means they can feed off that knowledge for the next generation.

    Hoadley's Hardware

    Definitely one of the strong crowd favourites at the Conference was the presentation of the Hoadley's, who are a delightful young couple who decided to open a hardware store in Blayney, a town in New South Wales, west of Sydney, between Bathurst and Orange.

    It seems to have been a long time since younger people could just open such a store, with little knowledge about how the retail end of thing works, and go on to enjoy some success. But Tayla and Blake Hoadley, with their two young children, have managed to do exactly that.

    One key to this was the amount of help the couple received from HBT's general manager - member services, Mike LoRicco. Blake is frankly honest about is lack of experience when he describes the process of getting going:

    I was going to start a hardware shop. I knew there were buying groups, but I didn't know where to start. So I was ringing Bremick or Macsim or anyone. I rang directly and said, "I'm starting a hardware shop will you, supply me?" And they all said, oh yeah, we should be able to.
    So I was ringing all these people going, well how am I going to work all this? Anyway, long story short, I was scrolling the internet trying to find a buying group, and found one, which was IHG actually. I got in contact and that worked, I had my hopes up, but then I started getting suppliers in and got talking about HBT. So I looked HBT up on the website, sent an email and, funnily enough, the next day, Mike actually rang me. Yeah, we got talking and then Mike came out to see me.
    It's all started from there really. It's been good.

    As a native son of Blayney, and a tradesman (plumber), Blake was aware that there was a real need for another hardware store.

    It was hard to get materials if you needed them. And then because the [existing] shop that was there was never, well they had stock, but they didn't always have the right amount. If you needed 10 fittings, it might've only had four. So I'd find myself going to Orange or Bathurst to get materials to do my jobs. Every tradesman you talk to in Blayney would say that and they just get someone to deliver it from Orange or Bathurst, which is half an hour away. So I talked to dad about it early on, probably two years before we actually did it, and said we should do a hardware shop in Blayney, but we never sort of did it. And then here we are, we're doing it.

    Even though Blake has an "in" with the trades, the store still balances more towards DIY.

    Well, we're sort of probably 40% trades, 60% DIY at the moment. So we don't have heaps of trades and we've got a lot of up and coming tradesmen similar to my age that are coming through. All the older tradesmen haven't been to my shop because they don't like change. They're stuck in their ways and where they shop. But all the younger ones, I'm starting to get along with them really well, making friendships coming in. It's been great.

    Not only has HBT helped out, but so have the suppliers.

    Suppliers been really helpful actually. Setting up core ranges or top sellers because I'm new to this game, I didn't know where to start. When I first thought I was just starting a few screws, different varieties, but we got 10 bays of screws, all different screws and I didn't think I'd have to have that many screws, but it's surprising it's your bread and butter stuff, that turns over really quick, but you've got to have the screws to be able to sell the screws so you if you are going to have only a small range, probably going to lose some of the customers, we'll lose some sales.

    While Blake is busy building relations with the suppliers, his wife, Tayla, helps to make the store friendlier.

    I pride myself more on the customer service side. We are very family orientated and Blayney's such a small community, tight knit, everyone loves that sort of feel. So I'm in there to be bright and bubbly to say hello to everyone to stop Amelia, our daughter, running down the aisle past someone and knocking them over or something. So yeah, Blake's the guy with all the answers to all the questions and I'm the one to just be there for everyone and greet them and make them feel welcome. And as Blake said, I feel like that's why people come back is that we try hard to help everyone where we can, we can order things in or at least try our best to. But it's just that nice small community feel and we feel that that's what everyone loves and that's what I sort of stick to.

    That said, Tayla has definite plans for a more involved future.

    We have a seven month old baby. I'm technically on maternity leave still. But once he's in day care and that sort of thing, I'd love to get into the shop and really dive into that side of the shop. But until then, I definitely have lots to learn. Lots to learn, but we complement each other in that way. Blake has such a background in the industry and I'm there to be bright and bubbly. So yeah, we complement each other.

    Blake, like any good hardware retailer also has his eyes fixed on the future, and it's no surprise what he most wants: more space.

    Bigger shop, big area because we're only in probably a thousand square meter area, including the outside yard. So we're limited to the room and we'd love a bigger shop to do more things. Such as pet stuff or nursery, maybe going to the mower side of things as well. When ee took over, it was a mower shop and there's very much demand for that in Blayney. Time will tell. If we run into a heap of money, it'd be good. See what happens.
    retailers

    Bunnings full-year results FY2023

    Gains are subdued

    With inflation taken into account, Bunnings contracted over FY2023. This is most likely due to contraction in DIY sales over the second half of the year.

    Wesfarmers released its results for FY2023 on 25 August 2023. Overall revenue was $43.6 billion, up by 18.2% on the previous corresponding period (pcp), which was FY2022. Excluding the acquisitions making up Wesfarmers Health, revenue was up by 7.4% on the pcp to $38.2 billion. Net profit after tax (NPAT) was $2.5 billion, up 6.3%.

    While HNN will be providing a full analysis of the results for Bunnings in the next edition of HI News, we will provide a brief look at the results here.

    For the company's Bunnings division, revenue was $18,539 million, up by 4.4% on the pcp. Earnings before interest and taxation (EBIT) was $2345 million, up by 1.2% on the pcp. Store-on-store (comp) sales growth came in at 1.8% for FY2023, down from 4.8% in the pcp.

    In his opening remarks, Wesfarmers managing director Rob Scott stated:

    Bunnings delivered solid sales growth reflecting the resilience of demand across its offer and strong execution of its strategic agenda. Bunnings again demonstrated its capacity to grow its proposition and addressable market whilst maintaining strong returns during the year.
    This included the successful pets launch and continued advancement of their whole of build commercial strategy. Bunnings also continues to make significant progress on its digital agenda with increasing engagement through the Power Pass app, Bunnings marketplace and OnePass and Flyby programs.

    These remarks were later followed up by Wesfarmers CFO Anthony Gianotti:

    Bunnings sales growth of 4.4% was supported by growth across both consumer and commercial segments. Bunnings continued to demonstrate the resilience of its operating model with all trading regions delivering sales growth for the year. Despite the impact of prolonged wet weather across the east coast during the 2022 spring trading season, Bunnings sales were supported by continued building activity and robust demand from commercial customers, which was offset by slightly lower consumer sales.
    In the second half, Bunnings has seen some good consumer demand continue for necessity products that support recurring home repairs and maintenance and for smaller scale DIY projects. But compared to the second half last year, consumers have demonstrated a more cautious approach to bigger ticket purchase decisions and the commencement of larger projects. Overall, Bunnings earnings of $2.2 billion represented an increase of 1.2% or 1.9% after excluding the net impact of property contributions. This result continues what has been a remarkable period of growth for the business with earnings up 42% since 2019.

    Analysis

    It is somewhat predictable that after the strong growth across the major COVID-19 years, Bunnings would see some decline in growth for FY2023. Given the inflationary background to these results, there is little doubt that these results represent a net contraction.

    That is highlighted by the growth of comp sales of 1.8%, while the background sales growth for hardware retail was 4.3%, according to Australian Bureau of Statistics (ABS) numbers. This most likely reflects a stronger contraction in DIY-based sales over the second half of FY2023.

    It is notable that for the year penetration of online sales is now at 1.7%, down from 3.0% in the pcp.

    bigbox

    Retail update

    "The Other Hardware Store" campaign continues

    Queensland based Sunshine Mitre10 has produced videos of its store in North Lakes and recently opened outlet in Aura

    Back in 2021, Mitre 10 invited Australians to check out the "other" hardware store, through an advertising campaign created by Dig agency.

    Mitre 10 recently launched the latest iteration of "The Other Hardware Store" campaign. The agency said:

    This new work builds on the 'why' showing how you can trust Mitre 10 to deliver the care and expert advice you need to get the job done right, first time.

    Marketing manager at Mitre 10, Kath Carroll, also said:

    It's customer service and expert advice that drive a strong point of difference for the Mitre 10 brand. Our customers repeatedly tell us that when you visit a Mitre 10 store you get all the information you need so you can avoid the back and forth. This new creative builds on the work we've done since launching The Other Hardware Store and acknowledges the relationship and trust we have with our trade customers.

    David Joubert , executive creative director at Dig, said:

    There's nothing worse than struggling on a DIY job and feeling like the world is watching. So, in true Mitre 10 style, we delivered a simple message with distinction: you can trust Mitre 10 to get the job done right. First time. And save yourself from a little... scrutiny.

    A video of the campaign can be viewed on the following link:

    Mitre 10 advertising campaign on Vimeo - August 2023

    Related

    Mitre 10 positions itself as "The Other Hardware Store" in a series of ads - HNN Flash, May 2022

    Sunshine Mitre 10

    The Sunshine Mitre 10 superstore in Northlakes opened in 2022. General manager Neil Hutchins said his team is proud to be part of one of the fastest-growing areas in Queensland.

    More than two years before the store opened, the Sunshine Mitre 10 team saw the potential of the North Lakes location and Mr Hutchins is pleased with the results so far. He told the Moreton Daily:

    We recognised early that North Lakes would be a great location for another store in our network, which now includes over 20 locations throughout Queensland, from Weipa in the north, to St George in the west, and south to Brisbane.
    Moreton Bay is recognised as one of the fastest growing regions in Australia with a population of over 490,000 people and predictions of up to 30% more over the next decade.

    The North Lakes store is more than 8400sqm, with more than 3400sqm under roof. It is located at 49 Stapylton Street, close to Ikea and the Westfield shopping centre and easy to get to from the Bruce Highway. Mr Hutchins said:

    That makes it super easy for our customers to get in, get out and get on with it, especially with our great Trade Drive-Thru.

    He said the Sunshine Mitre 10 team is also getting involved in the local community, not just by employing locals but also through community and sporting sponsorship.

    What is now Sunshine Mitre 10 was started by the Lanham family on the Sunshine Coast more than 110 years ago. Being a part of and supporting the communities in which we operate is really important to us.
    That's why in North Lakes we have already created sponsorship partnerships with North Lakes Leopards Rugby Union, Hammerichs Coffee and various local schools and retirement villages.

    A video of the North Lakes store can be viewed at the following link:

    Sunshine Mitre 10 North Lakes store on Vimeo

    A video of the Aura store can be viewed at the following link:

    Sunshine Mitre 10 Aura store opening on Vimeo
  • Sources: Mumbrella and Moreton Daily
  • retailers

    Home First Services relaunched

    One-stop tradie shop with same-day service

    Under new ownership, the group has almost 250 staff across Melbourne, Sydney and Adelaide offering home maintenance

    In a related sector to hardware retail, Home First Services is made up of a group of plumbing, electrical and home improvement companies that fell into administration after the COVID-19 lockdowns.

    James Hetherington co-owned the three companies - PlumbFirst, ElecFirst and Comfy First - which went into administration the week after builder Porter Davis collapsed, having been unable to meet the increased costs of materials, soaring wages and labour shortages brought about by the pandemic.

    One of his competitors, Australian Home Services group, saw an opportunity to bring these entities together under the one umbrella, refine the business model, rework the loss-making parts of the business, and re-brand it in Victoria and South Australia. It has plans to grow quickly to become a national business.

    Mr Hetherington was retained to lead the transition as chief executive of the new Home First Services organisation. He said:

    We're relaunching the Home First Services brand with a much more sustainable business model so we're planning to come back stronger, bigger and better than before. Most of our staff stuck by us through thick and thin during COVID so, as much as anything else, we're doing this for them. Now, they should all have great job security.

    A key differentiator is the company's guarantee of same-day service and if it doesn't live up to that promise, it will take $100 off a customer's bill.

    Mr Hetherington said he (and his customers) became so fed up with "the tradie experience" such as leaving messages on answering machines, having calls returned a day later, putting up with shoddy workmanship that he resolved to try and change that with his offering.

    We want to serve our communities and ensure our clients receive a level of service that's unmatched. That means breaking the traditional stereotype of the 'tradie' experience.
    If you make a promise that you'll give a customer same-day service, you've got to live up to it. We've all been there, booked in a trade only to have them not show up, cancel on us or just aren't as professional as we'd expect, so we're trying to make the whole process much more customer-friendly.

    Background

    Earlier this year, Melbourne-based Plumbfirst became the third major contractor to run into trouble with Victoria's largest privately-owned contractor Richstone Group also calling in voluntary administrators, and CDC Plumbing and Drainage placed in liquidation in February, with the loss of 197 jobs.

    WLP partners Alan Walker and Glenn Livingstone were appointed as administrators of Plumbfirst and five other group entities. At the time, WLP said:

    The administrators are now seeking urgent expressions of interest from suitable parties to recapitalise or purchase the group and its assets, or both. While that process advances, the administrators will continue trading the group with no interruption to ordinary operations expected at this stage.

    Mr Walker said the company's directors decided to place it in voluntary administration after rising materials costs adversely impacted its performance.

    The group comprises one of the largest plumbing and electrical contracting operations across southeast Australia with a well-established 170 strong workforce and customer base.
  • Sources: Australian Home Services and The Australian
  • companies

    US update

    Lowe's tops quarterly estimates, slightly misses on revenue

    Spending on small-scale repair and maintenance work has helped Lowe's counter a fall in demand for big-ticket items, amid a challenging housing market and inflation

    Home improvement retailer Lowe's reported mixed results for its second quarter as US consumers tackled springtime projects and helped offset weakening home improvement demand.

    A delayed spring season pushed demand for goods such as garden equipment and outdoor supplies into the quarter from earlier in the year.

    In addition to spring projects, Lowe's said it got a lift from online growth and momentum with home professionals.

    As a result, the company topped Wall Street's earnings estimates, but fell slightly short of expected sales.

    Revenue reached USD24.96 billion compares to the expected USD24.99 billion. Net sales fell from USD27.48 billion a year earlier.

    Comparable sales in the second quarter decreased 1.6% but that is better than the 2.6% decline that analysts expected, according to FactSet.

    Lowe's has been working to attract more home professionals, which tend to be bigger and more steady spenders. Only about a quarter of Lowe's sales come from home professionals, while they account for about half of sales at Home Depot.

    On a call with investors, chief executive Marvin Ellison said those professionals tell Lowe's that they still have a healthy amount of projects in the pipeline. That helps drive purchases of paint, plumbing tools and more.

    But after a period of higher costs and out-of-stock items, falling prices are now contributing to lower sales, Mr Ellison said. Not only have timber prices dropped significantly, but appliances have come down in price, too.

    Mr Ellison also said Lowe's feels good about the long-term outlook for home improvement because of the older age and low availability housing in the US. But, he added, the business will have a tougher time in the short term.

    When you look at consumer sentiment, we noted that we're seeing a pullback in DIY discretionary spend. And that's really for us the overall theme of how we see the second half of the year.

    Mr Ellison added he expects Lowe's to outperform the home improvement market in the second half of the year "irrespective of what the macro environment presents," citing strong online sales and growth in the company's Pro-customer business that caters to professional builders, contractors and handymen.

    While the pro-customers were working on slightly smaller projects, they still had a healthy backlog of projects left, Mr Ellison noted.

    Rural offering

    In May, Lowe's announced "a new one-stop shop concept" tailor made for shoppers living in rural communities. New or revamped stores would cater to that market's indoor and outdoor needs with expanded product categories in pet, livestock, trailers, fencing, utility vehicles like ATVs, clothing and specialised hardware.

    The company's enthusiasm for pushing aggressively into smaller rural communities comes as its sales in larger metropolitan markets have slowed as the pandemic emergency has come to an end.

    Lowe's told analysts that it had piloted the rural store concept a year ago with successful results and has been expanding the idea into existing Lowe's stores, primarily in the South, Midwest and Northeast throughout the US summer. Mr Ellison said:

    While in years past, our penetration of rural and remote stores was viewed as a competitive disadvantage, we now expect that these stores will be a key component of our operating profit growth over the next 3 to 5 years.

    Lowe's said it was scaling its rural store format to as many as 300 additional stores by year end for rural customers. Mr Ellison said:

    When we look at the pilot stores where we've been very diligent on going after those specific categories of apparel, farm and ranch types of items as part of our expansion opportunity, we actually saw sales per square foot improve.

    More recently, he told CNBC:

    I grew up in a town of less than 10,000 people with two stoplights, and I lived 12 miles in the country from the 10,000 people, so I understand the rural experience really well, and this is passion project for me. Our goal is to give these customers a one-stop shopping experience.

    Mr Ellison said he heard from customers in rural areas that they sometimes had to travel to multiple locations to find products they needed, especially related to pets and livestock. In late July, Lowe's said it was expanding its store-in-store pilot program with Petco, aiming to give customers easier access to pet supplies.

    We have the unique ability to execute both urban and rural and do it in a way when a customer walks in, it feels like their hometown store.
  • Sources: Reuters, CNBC, Business Insider and CNN
  • bigbox

    Want Home + Gift

    Homewares create a welcoming store

    More independent retailers are broadening their ranges to include home decorating products. Want Home + Gift has found a niche with hardware stores by offering products that appeal to customers through authenticity.

    More independent retailers are revisiting their in-store stock, and exploring new options. That is largely because independent retailers have seen increases in general store foot traffic since the end of the COVID-19 restrictions. That is largely down to an increase in overall sales, with more people fixing up their homes. There have also been some shifts in the market dynamics between Bunnings and the independent market.

    One area they are keen to explore is the more decorative, homewares oriented area. At the same time, they have something of an aversion to goods that belong more in a gift shop, where all too often the twee meets up with the kitsch.

    Enter Want Home + Gift. A new supplier to the HBT National Buying Group, and exhibiting at the 2023 HBT Conference for the first time, they've attracted outsized interest to their small stand.

    HNN spoke with the two owner/directors of the company at the Conference, Mark Woolfson and Alan Duhamel. According to Mr Woolfson, while the company has been around for 25 years or so, the current owners acquired the company back in 2006. The reason behind their current success has been a crucial pivot from being all about "gift" type products, to products that customers would want to buy for themselves and their own homes.

    When we bought the company, just the fact that it had so many customers diluted the risk a lot. And we saw an opportunity to not narrow it down just to giftware, but to [open it up to] more decorative products, everyday products for anybody. Not just someone looking for a gift. This is just an easier purchase, so that if someone walked into a store they could purchase it not strictly as a gift. Narrowing it down to just strictly being a gift item was restricting.

    With that shift in purchase basis, this meant there was a whole new range of retail customers interested in stocking the products.

    We definitely got a different type of customer. More the garden centres and the hardware stores, which was much less "gifty" than going into a gift shop. Traditionally, if you're looking for a gift there is a gift shop or a newsagent, even a pharmacy. And so it just opened up completely. It's even the garden centre started and the hardware stores followed and we've been very successful and they've become our key customers, our core customers.
    So we tend to buy what our customers buy from us. We follow what they need. We followed them down that rabbit warren, it's gone down the garden and then hardware route. So our product is more applicable to hardware and garden centres than it is to gift shops.
    It's an easier sell for everybody, if that makes sense. If you're looking for a gift, that's more specific. It's more complicated. Will the person like it? Is it enough money? Maybe you should spend more money? So many questions. If someone falls love with a piece, it's a much easier sell.

    While that is a good beginning, Mr Woolfson points out that the company has also used the changed market conditions over the last year and more to improve the position of Want Home + Gift. As Mr Duhamel describes it:

    Some of the feedback we've been getting today is that we've continued to do business as usual. We have kept the same people, same level of service. We actually heard this from quite a number of visitors today. They were saying to us some of the other competitors in a similar space have just hiked their prices up. A lot of businesses have changed hands. The prices have really gone up and the level of service has fallen. So that was a good thing for us to hear. We've been consistent.
    We pride ourselves on talking to our customers and trying to do what we can for them. An example is freight. We'll work with them. If they have a forwarder, we'll work with them. We do what we can to make things work.

    Want's supply chain runs through China, but also through Indonesia. While they tend not to specify products from scratch, they take existing products and change some of their features to better suit the Australian market, such as colour, materials and textures.

    The company doesn't see itself as being any kind of a "wheeler and dealer" in the market, but more as offering a product that has a natural appeal, and offers an opportunity for add-on sales. As Woofson puts it:

    We've got in different directions. The size of the business has changed, we've grown, but it's growth in terms of better product, better authenticity. There's not so much sales pitch involved. That's been the best growth for this business sector. We don't have to force it on deals and things.

    For hardware stores, one the best things about the product - aside from its strong appeal to customers - is that it also helps to make hardware stores a more pleasant place to visit.

    We had one lady who came in here, and she said, this is exactly what we're looking for. It's like solving a problem for them. It's also solving a problem for them more in decorating the hardware stores, making them softer.
    It softens everything. The plants further soften these products. So our product is softening all the hardware, it's just making for a softer store.
    companies

    ABS building approvals: Capital cities

    FY2023 is down, but how significant is this?

    There has been a widespread decline in dwelling building approvals across Australia's capital city regions. While some June 2023 results have been lower than in the previous three years, these don't seem predictive of a slump for first quarter FY2024.

    Economic forecasting has narrowed somewhat during August 2023 to focus on whether the Australian economy is seeing an abrupt slowdown in the first quarter of FY2024. With broader retail businesses reporting a slowdown in sales for the first six weeks of FY2024, and some hardware retailers seeing a similar trend, there is some confirmation that there is more of a drift downwards than upwards. However, most mainstream economic indicators show something of a more mixed "will we or won't we" trend.

    Building approvals are very much in that uncertain grouping. Looking at the Australian Bureau of Statistics (ABS) stats, you can certainly make the case for a slowdown, but the real case is perhaps more about volatility than decline when viewed on a state and territory basis.

    We're looking here at the ABS series that tracks building approvals for the greater capital city regions - including the Australian Capital Territory (ACT) - for all house and non-house building approvals through to June 2023. The 12-month periods thus correspond to the standard Australian financial year of July through to June.

    Greater Sydney

    The first thing that is clear about the Sydney numbers is that there is increased volatility for FY2024. January 2023 shows the lowest point for the four years - FY2020 through to FY2023 - under consideration. And May 2023 shows the highest point for that time period.

    Five of the 12 months in FY2023 represent highs or lows for the time period. While FY2023 represents a decline on FY2022, the largest decline is from FY2021 to FY2022.

    Likewise, approvals for June 2023 show a decline over May 2023, but remain above the level for June 2020.

    Greater Melbourne

    The stats for Melbourne in FY2023 show a distinct division into halves for calendar 2022 and calendar 2023, divided by the very common sharp slump in January 2023.

    For the first half of the FY approvals follow the average of the preceding three years, followed by a slightly lower number for January, and then four months from February through to May of below average approvals. Then there is a recovery back to near-average numbers for June 2023.

    However, Melbourne does show more certain signs of decline for FY2023, with approvals significantly lower than for the three preceding years.

    Greater Brisbane

    As often seems to be the case with Brisbane, the region falls somewhere between Sydney and Melbourne statistically. Total approvals for FY2023 are lower than for FY2021 and FY2022, but higher than FY2020.

    About the best that can be said is that the region remains volatile, but with the balance moved to the downside.

    Greater Adelaide

    Somewhat similar to Melbourne, Adelaide has seen a slightly stronger first half to FY2023, concluding in a somewhat lower slump in January 2023, and then a more subdued second half. There is a four-year high in approvals for November 2022, and then a four-year low for March and April 2023.

    In fact, the Adelaide numbers for FY2023 from November 2022 onwards track fairly closely those for mostly pre-COVID FY2020.

    Greater Perth

    In a more extreme version of Adelaide, Perth shows numbers for FY2023 that are similar but below those for FY2020, but this comes in the shadow of a very strong increase in approval numbers for FY2021.

    Australian Capital Territory

    FY2023 for the Australian Capital Territory (ACT) shows actually less volatility than the preceding three years, and this comes - mostly - at the expense of the highs rather than the lows.

    May and June 2023 are especially weak, showing low points for the four years.

    Hobart

    Conversely to the ACT, Hobart shows higher volatility for FY2023 than for the preceding three years. Four year lows were set for seven months during FY2023, including a significant slump in June 2023.

    Yet the larger overall slump for Hobart happened in FY2022, coming off the highs for FY2021.

    Darwin

    Given the smaller size of the Darwin market, it's volatility is has been relatively subdued. FY2023 has not been its best year, but it actually outperformed FY2022, and came close to FY2020.

    Analysis

    Chart 9 shows the total building approvals by financial year for the greater capital areas described above.

    It's always worth mentioning that there is something of a distortion in terms of comparing regional/urban areas for NSW, as it is the only state that has a number of significant urban areas outside of its capital city.

    What the chart does show is that FY2023 has been a slower year for approvals than the previous three years. That slump seems significant for Melbourne and Perth, but far less so for Sydney and Adelaide, with Brisbane somewhere in-between.

    Of course what we are really seeing in FY2023 is the tension between demand on one side for more dwellings, and increasing costs due to rising interest rates on the other. The real question is probably not whether the Australian economy will begin to decline in FY2024, but when and how interest rates might go down, and thus give more dwelling purchasers a path to market.

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