Bunnings Strategy Day 2023

Replay of familiar hits

After a surge of interest in technology during the pandemic years, Bunnings has reverted to themes familiar from 2018, such as the "addressable market". The retailer seems surprisingly out of tune with Wesfarmers' general approach to retail.

Australian retail, mining and healthcare conglomerate Wesfarmers held its 2023 Strategy Day briefing on 30 May 2023. HNN will be covering this in-depth in the upcoming issue of HI News, but we wanted to provide a brief summary of the key points from the perspective of the broader hardware retail industry.

Overall, the Strategy Day was a curiously mixed experience. In some ways it seemed to HNN to be something of a "breakthrough" event, in that the pieces of the strategic development Wesfarmers managing director Rob Scott started assembling five years ago are now coming together, and it's possible to see more detail of his vision for the company.

In the face of that, it was a little surprising to find that Bunnings, in its presentation, seems to have taken more of a step back than a step forward. Where the Strategy Day presentation from 2022 had a clear focus on digital technologies, these played more of a minor role in 2023. In 2022 there were four presentation slides clearly addressed at technology. In the 2023 presentation there was perhaps one - though technology was mentioned elsewhere, incidentally.

Newly revived in the presentation were those staples from pre-pandemic Bunnings, most notably the "addressable market" slide, which now states this market is worth $100 billion. There was also quite a focus on the past, with 2023 marking the 30th anniversary of Bunnings' core strategies. One slide provided a timeline of developments at Bunnings going back five years.

It is just a little like Fleetwood Mac getting back together to sing "Dreams". Nothing wrong with it, really, but it's not, you know, Expired Candy, or even The Civil Wars.

Despite that, however, Bunnings managing director Mike Schneider did offer a glimpse of some changes to come at Bunnings that could heavily influence the overall hardware market.

  • The launch of Bunnings' pet range seems to be successful: "The launch of our pet range is a great example that's been our most significant category reshape in two decades. We're seeing an excellent response not only from customers, but also suppliers."
  • Bunnings has launched another captive brand, CITECO. "Our newest brand, CITECO, is a great example of where our team identified an opportunity in the market to build range authority, and offer customers really attractive price points across ladders, site safety and PPE."
  • Cleaning: "Cleaning is another area where we have strengthened our range of authority in response to the elevated and sustained customer demand we saw emerge during the pandemic. We've introduced more market leading brands that consistently attract higher frequency purchases."
  • Rural supplies: "Bunnings operates in and is a part of many rural communities across Australia and New Zealand, and we're looking at how we can refine and tailor the Bunnings offer in these categories to meet the needs of customers."
  • Trade paint: "For our builders and tradies we see a real opportunity to expand our commercial paint offer as well as others so we can better address the finishing stages of their projects." And later: "We're increasingly interested in the commercial paint space. And we'll explore opportunities with paint suppliers across the market to build a credible, trusted and value accretive offer."
  • Frame and truss: "The way we're growing our frame and truss offer is a deliberate initiative to reach customers early, and it gives us the opportunity to really understand the products of building needs for their entire project, and consider how we can best provide these."
  • Store-based order fulfilment: "We're piloting our own last mile delivery by having team at selected stores complete same day and next day deliveries as part of their broader store duties. So far, this pilot has been really successful achieving very high customer satisfaction scores at a lower cost to serve than existing last mile options."
  • Analysis

    We'll provide far more detail in our upcoming June edition of HI News on this Strategy Day.

    To pick up on one theme, it does seem that we are now more than ever living in the world described in the 1990s by US/Canadian author William Gibson as a place where "The future is already here; it just isn't evenly distributed."

    For businesses, especially in Australia, that tends to lead them to follow one of two potential paths. The first path is to take advantage of that situation by using "future" technology themselves to produce a less-technological experience for customers. This is the path we could call "optimisation", which relies on existing products, existing markets, and existing marketing techniques, supercharged by available technologies.

    The second path is to get into the business of being a "future distributor". That means developing new products in new markets by introducing new technologies or new uses for existing technology.

    It seems pretty clear that while Bunnings is avidly pursuing the first path, Wesfarmers - at least in the rest of its retail division - is pursuing the second. A good reason for that is a better understanding of the risk/reward ratio. The first path is a safer and more conservative approach, but it is also inherently low-growth. Bunnings, in Mr Schneider's words seeks to outperform the market - which it definitely does. But the second approach suggests a truer metric for success that is less relative and more absolute: how much of the total business potential can be realised. As technological and social changes lifts that potential higher, the balance of acceptable risk also shifts.

    To look at this in slightly different terms, much of retail exists on a continuum between logistics on one end ("how do I get what I need?") and experience on the other ("how do I know what I need?"). A good part of Bunnings' success - based largely on some brilliant insights by former managing director John Gillam - was to make the logistics solution part of the experience solution, largely through the raw tool of unexpectedly low prices.

    That worked 30 years ago, but will it work as well today - especially in a world where general retailers, such as Amazon, compete in the home improvement sector?