Big box update

Bunnings Mount Isa store gets ready for opening

Wesfarmers provides an earnings update and could be entering the pet supplies category through a potential acquisition of Greencross

The new Bunnings 5607.5sqm store site in Mount Isa (QLD), located on the corner of West and Alma streets, is set to open in mid-February and replace the existing Bunnings on Camooweal Street, according to the North West Star.

Bunnings Warehouse regional operations manager, Marg Walford, said she was excited to confirm the store preparations were on track. She told the North West Star:

The new Bunnings Mount Isa will create around 50 new jobs in the local community, over and above our existing team, and represents an investment of around $19 million...
The new store is more than double the size of the existing store and will provide customers with a much wider range of home and lifestyle products. Features include the main retail area, a fully enclosed timber yard, an outdoor nursery and over 150 on site car parks for customers.
It will also feature a new building materials landscape yard and a bagged goods area in the nursery, both features not seen at the existing Mount Isa store.

The new store was announced in 2017 when the plans went out for review. It was only in March 2021 that the builder was appointed to the construction, after a delay due to sewer and stormwater mains plans.

Related: Building is taking shape at Bunnings new Mt Isa store.

Bunnings Mt Isa store on track for 2022 opening - HNN Flash #66, October 2021

Wesfarmers update

Bunnings continues to deliver strong results for Wesfarmers as householders take on another round of DIY projects at home and avoiding shopping centres, outdoor activities and eating at restaurants because of the perceived higher risk of being exposed to the COVID-19 Omicron variant.

The company said while there had been a weakening of overall retail trading conditions in the final two weeks of December after rising COVID-19 case numbers in most states, the hardware segment remained solid.

In the Australian Financial Review (AFR), JP Morgan analyst Bryan Raymond said Bunnings has a robust outlook for the June half, with demand in the trade business strong and DIY spending underpinned by "customers spending more time at home through the Omicron wave".

Bunnings is currently playing to its strengths in the face of COVID-19: a big box format and stores outside major shopping centres with a drive-in and drive-away model, according to The Australian.

Along with Bunnings, Wesfarmers owns the Kmart, Target and Officeworks retail chains. In a recent earnings update to investors, Wesfarmers said customer traffic to stores has softened in the first half of January, and higher levels of staff absenteeism because of COVID-19 are causing increasing pressures in the supply chain and distribution centres, impacting stock availability and forcing some of its retail outlets to cut their trading hours. Wesfarmers told investors:

These issues are expected to persist while COVID-19 cases and the number of team members requiring to isolate remain elevated.

Overall sales for the Kmart Group, which comprises Kmart and Target, fell 10.3% in the December half from the year-earlier period.

Wesfarmers said the extra supply chain pressures had resulted in higher costs, with international freight charges rising and inventory costs increasing because of decisions to carry higher stock levels as a buffer against uncertainty in delivery schedules.

However solid results in its chemicals, energy and fertiliser businesses, as well as good performance from Bunnings, meant Wesfarmers should still deliver a first-half profit for the financial year ending June 30, in line with market forecasts. The company expects to report net profit between $1.18 billion and $1.24 billion for the six months ended December 31.

Wesfarmers is scheduled to provide an update on its results on February 17.

Pet supplies

Wesfarmers has also emerged as one of the major contenders to acquire Australia's biggest specialist pets and vets retailer, Greencross, according to the AFR. This will allow the conglomerate to enter the pets sector in what would be a big way.

Wesfarmers is said to be one of a handful of potential trade suitors left in the process. It has intense knowledge of Australia's retail sector, the changing consumer spending habits that have boosted revenues at Greencross, and the power of customer loyalty.

Greencross owner TPG Capital is understood to have been talking to potential suitors in an effort to bring its review closer to a conclusion.

It comes as TPG's Australian team works through options for Greencross, which was acquired in February 2019. The review included confidential talks with potential buyers or minority stake investors, and assessing other options including a refinancing, a break-up or an initial public offering.

Greencross has been pitched as a $300 million-odd a year business in terms of earnings, making it three times bigger than when TPG invested three years ago. It owns Petbarn and City Farmers, which have pet supplies shops and online stores, and Greencross Vets, which has a national network of around 150 sites.

  • Sources: The North West Star, Australian Financial Review, Sydney Morning Herald, The Australian and Townsville Bulletin.
  • bigbox

    USA update: Home Depot

    DCs and new credit options for pro customers

    Home Depot and HD Supply will be stocking PPG's pro paint range at all their US locations

    The Home Depot is investing in its distribution centres to keep its lucrative pro (tradie) customers happy, according to Bloomberg News.

    Pros' needs are very different than the average customer's, and while they make up only 5% of Home Depot's shoppers, they account for 45% of its USD132 billion in annual sales. They often buy bulky items in vast quantities and want - or rather demand - to receive the orders on a stringent timeline. That has become an especially intense problem for Home Depot amid the supply chain crunch that's upended stocking and transport around the world.

    The new DC facility in Stonecrest, Georgia, which is a flatbed distribution centre, is designed with contractors and professionals in mind. The hub is the centrepiece of Home Depot's plan to ease the complexity of direct-to-consumer sales - and win market share from both its main rival, Lowe's, and independent distributors.

    Home Depot has built similar distribution facilities in major markets such as Dallas, Baltimore and Miami and more are coming. It's part of USD1.2 billion of investment over five years on supply chain improvements that started well before the COVID-19 pandemic roiled the world's shipping markets. The company is betting that if it can keep contractors happy, other customers will follow.

    Home Depot's DC made for trucks - HNN February 2020

    Additionally, funnelling the direct-to-contractor business to the facilities is meant to simplify store operations.

    In Home Depot's Georgia hub, most orders move in and out on flatbed trucks, with merchandise heading to stores or job sites up to 200 miles away. The Georgia centre is also located on a rail line, so boxcars carrying as much as four times what a flatbed truck can hold arrive directly.

    Prior to these distribution centres, orders for professionals were mostly filled from stores. This depleted inventory and put pressure on workers. Sometimes, purchases would have to be completed from two or three different stores, meaning that different parts of the order could arrive on different days, much to the chagrin of backlogged contractors.

    With the flatbed facilities, Home Depot is betting it can control last-mile delivery to earn its pro shoppers' trust. Stephanie Smith, senior vice president of supply chain, said the centres aim to carry everything that a contractor or pro might need. If Home Depot meets that goal, it expects broader success to follow, she added. Ms Smith said in an interview:

    In our history as a company, if we develop something for our contractor pro customers and get it right, then it really generally works well for our DIY customers as well.

    The initiative was well timed. As retailers struggle to adjust to widespread logjams, Home Depot is well into its overhaul. After the investment is fully deployed, Home Depot will have around 150 distribution facilities in its network. About 30 to 35 of those will be flatbed distribution centres.

    The investment in its supply chain is one of the biggest initiatives Home Depot has taken on since building out HD Supply in the early 2000s, said Keith Hughes, managing director of equity research at Truist Securities.

    The challenge, Mr Hughes said, is that there's no single solution to meeting the needs of contractors, whose work ranges from lawn and landscaping to drywall and demolition. He told Bloomberg News:

    I think one area where Home Depot has struggled is with time delivery. There are all these little idiosyncratic things you have to do around the pro that is very job-specific or trade-specific. The cookie-cutter approach doesn't always deal with it.

    Ms Smith said that since the flatbed facilities have opened in other markets, the company has been able to notch better on-time and complete orders. And the relieved pressure on store employees lets them "focus on the customers that are shopping there - and that's a better experience for them as well."

    Related: The Home Depot has been making major investments in supply chain distribution and delivery since 2018.

    Home Depot in the delivery economy - HI News, page 81

    Credit card for pros

    The Home Depot is expanding its commercial credit offerings for its pro customers and introduced the Pro Xtra Credit Card. It can be linked with the Pro Xtra loyalty program to earn registered users perks four times faster on card purchases.

    The Pro Xtra loyalty program provides member-only benefits, including volume pricing, exclusive product offers, paint rewards, and other perks. The company will reward Pro Xtra members with a USD100 credit on registering for the new credit card.

    The Pro Xtra Credit Card is a new iteration of the retailer's Commercial Revolving Charge, as well as an update to its Commercial Account Card. Both credit options are powered by Citi Retail Services, one of North America's largest and most experienced retail credit solution providers.

    To help ease the shopping and billing process, the Pro Xtra Credit Card and Commercial Account Card provide the following features:

  • The ability to issue cards to entrusted employees to make purchases on their behalf
  • An extended return period of up to a full year, four times longer than a non-commercial credit purchase
  • Easy-to-read itemised billing statements and simplified purchase tracking options.
  • Online account management including the ability to view, manage and make online payments from anywhere.
  • Additionally, Commercial Account Card members will receive flexible billing preferences including a 2% early pay discount if the bill is paid online within 20 days or an extended 60-day payment window.

    Home Depot's pro customer segment has been witnessing robust sales growth for the past several quarters. Pro sales growth outpaced DIY sales in the fiscal third quarter.

    Growth in the pro segment reflects significant demand for larger projects in the home improvement industry. In the quarter, the retailer experienced in several pro categories like drywall, pipe and fittings, and millwork. The company expects continued sales growth from pros as project demand is strong and their backlogs are growing.

    PPG Pro paint

    Paint and coatings company PPG is offering a line of PPG paint products and services designed specifically for professional customers through The Home Depot and HD Supply. It began rolling out on shelves in the fourth quarter of 2021. Jaime Irick, vice president, architectural coatings - US and Canada, said:

    We look forward to utilising PPG's team of paint experts, leading professional paint products, and national, digital fulfillment network in combination with The Home Depot's vast national store footprint to service the professional and drive strong growth for both organisations.

    The full product range will also be available through HD Supply, a wholly-owned subsidiary of The Home Depot and a national distributor of maintenance, repair and operations (MRO) products.

    Pros shopping The Home Depot and HD Supply will benefit from PPG's more than 135 years of expertise and product knowledge, network of knowledgeable sales representatives, same or next-day delivery, free professional colour rendering services, easy-to-use colour tools, and more. Chris Waits, vice president, merchandising, The Home Depot, said:

    We're proud to expand our relationship with PPG to ensure The Home Depot is a one-stop-shop for paint, supplies and other items to help pros complete their projects with ease and convenience. Our enhanced relationship with PPG will allow us to further deliver on the needs of our pro customers.
  • Sources: Bloomberg News, Industrial Distribution and The Home Depot
  • bigbox

    Big box update

    Bunnings' customers in data breach

    They have been caught up in a cyber security breach affecting 3.7 million people worldwide through online booking system FlexBooker

    Customers who have used Bunnings's contactless drive and collect service may have had some of their personal information stolen after the software firm behind the service experienced a major security breach.

    FlexBooker is a popular tool for scheduling appointments used by Bunnings for its drive and collect orders.

    A few days before Christmas, FlexBooker sent a data breach notification to customers, confirming the attack and that the intruders "accessed and downloaded" data on the its Amazon cloud storage system.

    "On December 23, 2021, starting at 4:05 PM EST our account on Amazon's AWS servers was compromised," reads the notification, adding the intruders did not access "any credit card or other payment card information".

    In the "incident alert", FlexBooker said it worked to restore a backup within 12 hours. It also said customer passwords included in the data were encrypted and the encryption key was not accessed or downloaded, and "will continue to work with Amazon to maintain security".

    Bunnings chief information officer Leah Balter said the company was aware of the FlexBooker data security breach, which might include the data of some customers who had booked a time slot with its drive and collect service. Ms Balter told 9News:

    The customer information shared through this third party provider is limited to full name and email address only. Bunnings' customers are not required to enter sensitive personal information through this provider, such as passwords, mobile numbers, or credit card information, so we are confident that none of these categories of customer data have been compromised.

    The retailer is working with Flexbooker to understand how the breach occurred and determine the extent of its impact.

    Bunnings also encouraged its customers to be cautious of any unusual activity in their email accounts and to regularly change passwords "as a precaution". Ms Balter said:

    Bunnings takes the security of our customers' and team members' personal information very seriously, and will carry out a thorough investigation into this incident.

    Bunnings said it had notified the Office of the Australian Information Commissioner (OAIC). It introduced the drive and collect service in April 2020 at 250 stores across Australia in response to the COVID-19 pandemic.

  • Sources: The Canberra Times, 9News, Bleeping Computer and Waikato Times (Stuff NZ)
  • bigbox

    USA update: Lowe's

    Lowe's wants to help its customers age in place

    The retailer also says pandemic-fuelled home improvement demand could cool in 2022

    Hardware-home improvement chain Lowe's recently formed a two-year partnership with AARP (the largest non-profit organisation in the US that has been serving people 50 years and older along with their families for more than six decades) to provide ideas and information for older adults ageing in their homes.

    During its third-quarter conference call, Lowe's chairman and CEO Marvin Ellison directly addressed this market segment. He said:

    For the past 18 months, the home has increased in importance for all of us and perhaps especially for our baby boomer customers, who are increasingly interested in ageing in place in their own homes.

    The partnership with AARP is an "online and in-store collaboration in customer education" and part of Lowe's Livable Home initiative that should help position it as the leading retail destination for aging-in-place and life-change solutions. It will offer tips and how-to information and inspiration through a library of articles and videos featuring ideas around smart home technology, lighting, kitchen and bath design, and topics such as caregiving, preventing falls and promoting independence.

    There will be guidance around home improvement and design techniques to support older adults and family caregivers to help make living spaces more accessible for everyone, and allow older adults to stay in their homes safely and comfortably as they age.

    A click into will take visitors to a virtual library of articles and videos that will be updated regularly.

    Lowe's collaboration with AARP comes at a time when less than 1% of US homes have particular features needed to support ageing in the home, according to AARP, while 77% of people aged 50 years and older would like to stay in their current home as long as possible. Eight in 10 adults aged 50 years or older want to stay where they live, but many people lack the expertise or resources to adapt their home.

    There is also an increasing need for functional and stylish home spaces designed with an eye toward accessibility for residents of all ages, as people spend more time in their homes, working, shopping online and socialising. In addition, households headed by people aged 65 and older are expected to grow from 34 million to 48 million in the next 20 years, according to the US-based Urban Institute. Mr Ellison said:

    Nearly every family in America at some point, including my own, faces the important and often intimidating responsibility of preparing a home for life's changes.
    Lowe's Livable Home is uniquely positioned to help address the customers' desire for a one-stop destination with trusted resources and affordable solutions they need throughout every step of the journey. It's a commitment to our customers who turn to Lowe's to make their homes better no matter what change they face in life.

    Lowe's said the in-store enhancements are underway in nearly 500 stores and are expected to continue expanding throughout 2022.

    In select locations, customers will be able to access free virtual assessments with Lowe's ageing in place specialists. Lowe's store staff and independent service providers network of professionals will provide ongoing customer service support for installations and remodelling ranging from low-threshold shower installation to more simple installations of grab bars and temporary or permanent stair lifts and ramps.

    Store staff and managers will participate in AARP training to better understand the needs of consumers aged 50 and above when it comes to home fixes, upgrades and renovations with long-term living in mind. Once complete, they will wear an AARP-branded badge that communicates to customers that they can help them find age-friendly options.

    Lowe's and AARP will also co-develop a "Livable Home" in-store resource guide for customers. Mr Ellison said:

    AARP's more than 60-year legacy of helping families 50 years and older brings a deep level of expertise and knowledge to Lowe's Livable Home.

    Rodney Harrell, vice president of family, home and community at AARP, said:

    This process of sharing information and articles with Lowe's is going to help people make better, more informed decisions about trying to meet their needs today, but also help people think ahead.
    You may not know that you will have a fall six months from now or six years from now, but you might think ahead about that rug that's a trip hazard or that doorway that is hard to get through.

    This collaboration, Mr Harrell said, will help people "take a lifetime approach to housing."


    Retailwire asked a number of marketing, retail and communications experts about Lowe's move to target the specific home improvement needs of baby boomers who want to age in place.

    David Naumann, marketing strategy lead - retail, travel & distribution for Verizon, said:

    The aging population represents a niche that retailers may not have paid special attention to with custom products and services. Many older adults can afford premium priced products and customised services and they appreciate new ideas that can help them enjoy living in their homes as long as possible. The older generation may be a prime opportunity for retailers that offer creative products and services that address their unique needs.

    David Spear senior partner - industry consulting, retail, CPG and hospitality, from software company Teradata, said:

    Most certainly this category or genre of products/services will grow consistently for many years, and it's a smart move by Lowe's...One of the biggest opportunities is "sensorized" products that enable digital connections so individuals can view, understand and leverage huge amounts of knowledge right at their fingertips. Retailers will be well served to not only offer unique IoT products, but also deliver analytical services in support of them. There is a long tail to this.

    DeAnn Campbell, chief strategy officer, Hoobil8, said:

    Seniors today are ageing up, not out, and are remaining more engaged and active well into their golden years. Baby boomers still control over 70% of discretionary spending in the US and are willing and able to spend money on products and services that help them live well and remain in their home. But at present there is still no place for people to view, test and understand how smart home products, services, monitoring devices or other "ageing wellness" solutions function or work together. This is relatively untapped white space for products/services that will see surging demand in coming years, especially as services like telemedicine become more user friendly. More retailers need to develop showrooms and display systems that demonstrate how smart aging ecosystems can work to improve life at home for this growing demographic.

    Bob Amster, principal, Retail Technology Group, said:

    This is a good idea with some runway, since the US population is getting older...The sector will travel less than they did and resist the idea of senior living facilities and thus will spend more on maintaining and improving their homes.

    Cathy Hotka, principal, Cathy Hotka & Associates, said:

    The success of this program will depend on the publicity that Lowe's can generate. A quick visit to doesn't reveal it and a search for "age in place" doesn't provide relevant results. I love the idea, but wonder about the execution.

    David Slavick, co-founder & partner, Ascendant Loyalty Marketing, said:

    Wow - everyone is on the bandwagon here. Do you think targeting the older segment of society is something new? Do you think Lowe's Home Improvement has had difficulty "finding" older consumers in and around their store trading radius? Do you think suppliers have somehow just started manufacturing goods and services for this segment? Partnering with AARP is a natural given their credibility with this segment which by the way "starts" at 50. It used to be that retirement age had you qualified to own a membership. Becoming a trusted destination for goods and services catering to a segment of the population with particular needs, and with buying power is all part of the format dynamic. In this case, seniors with specialised needs. Incorporating a service model to support the specifications, build and servicing of those needs - now that would be a very nice enhancement to this construct.

    Cooling DIY demand

    Lowe's recently indicated that the robust pace of home improvement sales could decrease during 2022, according to CNBC. The retailer said same-store sales could drop by as much as 3% or be roughly flat in fiscal 2022 compared with 2021 fiscal.

    Mr Ellison said the company can keep driving growth by launching new private labels, expanding its e-commerce business and becoming a one-stop shop for supplies to help older adults age in their own homes.

    For example, he said it is debuting a modern decor brand called Origin 21. He said it is speeding up deliveries of big and bulky purchases, such as appliances, with a new pilot in Florida and Ohio. That more efficient process is boosting profits and customer satisfaction, he said.

    Together, he said, those efforts will "expand our share of wallet with both the DIY and pro customers."

    Mr Ellison said the retailer will benefit from a favourable backdrop, too, including more money in consumers' savings accounts, historically low interest rates, rising home values and an aging inventory of US homes. About two-thirds of the company's sales are driven by repairs and maintenance, he said.

    Mr Ellison also said the pandemic has inspired people to invest more in their homes, from millennials who are buying first homes to baby boomers who are adapting an older home. He told CNBC:

    There's been a longer-term shift in the consumer mindset about the importance of the home. Our view of the home is a sanctuary that may need to serve several multiple purposes: residence, office, school, gym, and a gathering place for indoor and outdoor entertainment. And given the extension of remote work, we're expecting a permanent step up in repair and maintenance cycle.

    Lowe's sales outlook disappointed investors and raised concerns the pandemic-fuelled boom in DIY and decorating projects is cooling. It is estimating overall sales of about USD95 billion for the 2021 fiscal year, which is one week shorter than the 2022 fiscal year. Total same-store sales will range from USD94 billion to USD97 billion in its upcoming year. That fell below analysts' estimates of USD97.64 billion, according to Refinitiv Financial Solutions.

    During an analyst meeting, chief financial officer Dave Denton acknowledged that Lowe's is preparing for a "modest sector pullback in 2022" when compared with a year of such high demand and sales boosted by government stimulus.

    Lowe's sales have gotten a lift from Americans who fixed up their yards, tackled DIY projects and redecorated rooms during the COVID-19 pandemic. Even as some of those "nesting trends" recede, however, its sales have been buoyed by the strong real estate market.

    Separately, the company said it plans to buy back about USD12 billion in shares both this year and next year.

  • Sources: Retailwire, AARP, PRNewswire, Lowe's Home Improvement and CNBC.
  • bigbox

    Big box update

    More Tool Kit Depot stores open in WA

    Bunnings Group managing director Michael Schneider spoke to The Australian about the tradie market and how the hardware retailer dealt with some of its supply issues during the pandemic

    New Tool Kit Depot stores have opened in Western Australia in the suburbs of Rockingham and Malaga with a fourth soon to open soon in Mandurah, according to (NCA NewsWire).

    There are plans for the Bunnings-owned specialty stores catering to tradies and DIY prosumers to grow to 75 stores around Australia, but the retailer will first add more stores in WA. Commercial chief operating officer Ben McIntosh told NCA NewsWire:

    Remember that Bunnings has a very, very strong DNA in Western Australia. We know the market well.
    It goes without saying from a macroeconomic point of view that the West Australian economy is booming ... the mining influence is strong, it was obviously sheltered from a lot of the Covid shutdowns and uncertainty, which is obviously an advantage.

    The Adelaide Tools acquisition in 2019 included five tool stores and a mowers outlet in South Australia. Bunnings tested out new concepts in the Parafield location before launching as Tool Kit Depot this year. Mr McIntosh said the first few months were spent understanding the Adelaide Tools business and its customers. He said:

    I am very passionate about being a leader that inspires a team to earn our way into a market, not just arrogantly expect to win. It was a successful business - hence why we liked it, hence why we wanted to buy it. We then thought, 'What is the future, where do we take the business for the next generation?'
    We want to make sure we are doing this in the way that is right and that is earning our stripes with our customers first, then talking about bold expansion after that.

    The initial expansion only came after the experiments in Parafield proved successful, he explains. COVID-19 restrictions also meant that Mr McIntosh has been unable to re-enter WA since March this year. He said:

    It's all about giving that specialised knowledge, that specialised service and also the full range of both brands but the commercial-grade models of the brands (and) highly specialised woodworking equipment that the Bunnings environment just doesn't cater for.
    We have specifically trained team members that know woodworking, that woodworking is their passion and they can have a good conversation about all things woodworking.

    Mr McIntosh did not confirm how long it would be before stores started opening up on the east coast, saying "a good amount" would open their doors in WA first. He said:

    We're not going the popular trod path [yet], which is Sydney or Melbourne. We didn't want to follow a normal formula. We wanted to invest where we think we can earn people's trust and we think Western Australia ticked that box. It's not an eastern-focused company. We've got more stores to open in Western Australia first.
    We've got more stores to open in South Australia - that's focused on rounding out the network in SA more than just Adelaide.

    Related: Tool Kit Depot store in Belmont (WA) caters for Perth tradies.

    Tool Kit Depot opens first store in Western Australia - HNN Flash #69, October 2021

    Related: Could Bunnings' acquisition of Adelaide Tools be the first step in establishing a new sub-brand?

    Adelaide Tools acquisition sees Bunnings set to sell Milwaukee brand tools - HNN Flash #10, October 2019

    Bunnings MD on tradies, supply and more

    In his role as the boss of Bunnings, Michael Schneider, recently told The Australian that he wants to build a tradie business as big as its DIY business. He said:

    We have had a great decade of really building trade credibility with trade customers through our PowerPass account program and our 2019 acquisition of Adelaide Tools is morphing into Tool Kit Depot.
    Our aspiration on the trade side is to have a business that is as big as our consumer business without actually slowing up on growth on the consumer side.

    The plans to roll out 75 Tool Kit Depot stores across the country is just part of the way for Bunnings to grow its share of the trade market. They will compete with Metcash-controlled Total Tools, privately-owned Sydney Tools, Queensland-based Trade Tools and Hardware & Building Traders' (HBT) Industrial & Tool Traders group amongst others.

    Mr Schneider sees the Bunnings brand of long trading hours, the trade reps on hand and local access to stores as the right foundation to build up and out. Another bolt-on acquisition, Beaumont Tiles, creates another pathway to customers who are builders.

    According to The Australian, Mr Schneider's growth principles are straightforward and involve growing the market, the ability to participate in that market; and then outperforming the market.

    In the last two years, the number of Bunnings staff have increased subsstantially from 45,000 to 55,000. Data analytics and a rethinking its floor space is refreshing familiar product categories and pointing to new ones.

    Related: In 2018, HNN reported on Bunnings potentially turning to the tradie market for growth.

    Bunnings goes shopping for tradies - HI News Vol.4 No.5

    Supply management

    At the height of COVID-19, Bunnings had to manage 13 or 14 different settings of how stores operated. Except for Victoria, hardware and home improvement retailing was classed as essential, but when the Delta variant surged in western Sydney LGAs (Local Government Areas), the directive came to shut down in those areas. Mr Schneider chose to close all stores across Sydney. He explains:

    In other markets where a local store was closed, customers would move about because they would still want the products we were selling, so we made the decision to close for about 10 days and purely trade online.

    When stores were closed to DIY customers, they remained open for tradies. He said:

    Even in Victoria we were allowed to be open for the trade customer and then the DIY customer could come up to the store and we'd pop their product in their boot in our contactless drive and collect model. We saw huge volumes go through that.

    Behind the scenes, the Bunnings team worked to convince governments of the important role the retailer plays in domestic production. Mr Schneider said:

    Being open meant suppliers like Dulux or PPG that manufacture paint or Seasol, that manufactures the fertiliser for your garden, or the hundreds of small businesses that are providing plants to us have the confidence to continue to stay open and keep their own manufacturing going.

    Within stores, the pandemic challenge has been inventory management. When Mr Schneider noticed elevated demand for home improvement products in April 2020, Bunnings made a sizeable bet on inventory investment even if it meant product being held at third-party sites. He said:

    We asked our suppliers to go the extra mile for us in having the confidence to bring more product into the country and that has paid dividends.

    However, access to structural timber remains difficult. Mr Schneider sees pressure on timber supply continuing. When timber product is available internationally, a lack of shipping containers prompted Bunnings to think laterally. He said:

    We have just brought a ship down from PNG with well over 100 containers worth of Merbau decking. Instead of containers, it was an open-air ship which was different but what it meant was you could problem solve for the lack of containers in that part of the world.

    Bunnings also had its own approach on last mile logistics, deliberately partnering with smaller delivery companies like ANC (Australian National Couriers) - Bunnings is its largest client - for what Mr Schneider believes is better service for customers. He said:

    We have avoided some of the challenges we know other retailers have faced with some of the bigger names in last mile logistics.

    To keep pace with online orders, Bunnings has a pilot site at North Laverton (VIC) for rapid fulfilment to take pressure off stores. It has focused on getting product to customers safely and quickly. Solvents, chemicals and big and bulky products don't easily fit into last mile logistics, which has made click-and-collect and drive-and-collect more popular.

    However, there are no plans for any major new distribution centre. Mr Schneider said:

    The team are out there having a really good look and also trying to understand what the cycle looks like. Supply is quite tight and demand is quite high which is good if you are a landlord. Those conditions probably won't remain as intense as they are now and as we think about evolving our network, that will undoubtedly create opportunities.

    Local community

    Bunnings has been redefining the idea of the "local hardware store" for almost three decades. The Bunnings brand is consistently pitched at the community level, and its car parks became mobile vaccination hubs during the pandemic. Mr Schneider explains:

    We had well over 140,000 people vaccinated at a Bunnings site, including somewhere where you could get a jab and a snag at the same time, very much the case in Queensland and WA. So the fact that people see Bunnings as a genuine part of the community gave many people the confidence to say, 'you know what? I should get vaccinated'...
    People are curious as to which store you work in. They don't see a big business, they see the store they shop at in the local community and the things that store does for its local community. If you've got that sort of brand recognition, it's hard not to be proud of it. I'm part of the Wesfarmers leadership team with fantastic access to capital to do the things we want to do.
  • Sources:, NCA NewsWire and The Australian
  • bigbox

    Big box update

    Green light for Bunnings Warehouse in Wagga Wagga

    Before construction starts, the hardware retailer must design traffic lights for a nearby intersection

    Wagga City Council has approved an application to build an 18,000sqm Bunnings store on the corner of the Sturt Highway and Pearson Street, subject to certain conditions, according to the Daily Advertiser. These conditions include multiple tweaks to the current plans, as well as the design and configuration of nearby traffic lights.

    Significant upgrades to the intersection were deemed necessary as the council has called for the only customer exit to the warehouse to be located on Saxon Street, which connects to the road network through Bye Street.

    Submitted plans for the development included entries and exits for customers on the Sturt Highway and Pearson Street. But to preserve traffic flow, the council has said the highway access must be entry-only and the Pearson Street accessway must be removed entirely.

    Bunnings' director of property and store development Andrew Marks said the company would review the conditions. He told the Daily Advertiser:

    We're pleased to have received development approval for a new warehouse in Wagga Wagga, however there are a number of conditions that require consideration. We are committed to bringing a bigger and better store to the local Wagga community ... however, we need to ensure an appropriate traffic outcome is achieved to allow customers safe and efficient access.

    Mr Marks said there was no timeframe for the development at this stage.

    The new Bunnings store is only 500 metres away from the existing Wagga Bunnings, but it will be 5000sqm larger and have parking for more than 400 cars.

  • Source: Daily Advertiser
  • bigbox

    Big box update

    Construction starts on Bunnnings Frenchs Forest store

    Fund manager Newmark Capital's first listed real estate investment trust that includes several Bunnings stores made its debut on the ASX

    Demolition has begun on a vacant two-storey office block on the corner of Warringah and Allambie Roads in Sydney's northern beaches to make way for the new $48 million Bunnings store, according to a report in Manly Daily.

    The Frenchs Forest outlet will span more than 20,000sqm and it will be first time in NSW that Bunnings will offer three levels of retail with two levels of parking for almost 400 vehicles.

    An Australia Post distribution centre will also be taken down to make way for the hardware store.

    The Bunnings development application was approved by the NSW Government's Sydney North Planning Panel in February this year. There were delays to the approval because of issues relating to safe vehicle access to the site due to the building's proximity to the busy intersection of Warringah and Allambie Roads.

    There was also another conflict over the size of the Bunnings Warehouse logos and signs, as well as the building's predominantly green colour scheme. The retailer agreed to reduce the size of the logo by 33% on Rodborough Road, remove a number of hammer logos from the rest of the building and restrict the amount of green paint is used on the facades.

    The opening hours will be finalised closer to the store's opening.

    Related: Bunnings has gained approval from NSW planning authorities for a store earlier this year.

    A five-storey Bunnings Warehouse is planned for Sydney's northern beach suburbs - HNN Flash #34, February 2021

    Newmark's Bunnings REIT listing

    Securities in the Newmark Property REIT (real estate investment trust) - trading under the ticker NPR - closed up 2¢ or 1 per cent at $1.92, after Newmark raised $129 million through its initial public offering at $1.90 per share, according to the Australian Financial Review.

    At a closing price of $1.92, the trust, which owns eight large format retail properties, mostly leased to Bunnings, closed with a market capitalisation of just under $350 million.

    Three-quarters of the trust's income is derived from leases to Bunnings. Prior to floating, Newmark bulked up the trust, acquiring three Bunnings with an end value of more than $200 million. These include Bunnings Eastgardens in Sydney's eastern suburbs, a new Bunnings being constructed in Preston (VIC) and another in Melton in Melbourne's outer west.

    Newmark, which created the REIT after combining two unlisted property trusts, the Newmark Hardware Trust and the Chadstone Trust, remains its largest shareholder with an 18.2% stake held across a number of entities.

  • Sources: Manly Daily and Australian Financial Review
  • bigbox

    Bunnings links to data through Flybuys

    Bunnings signs up to data resource

    Why did Bunnings sign on for Flybuys? As privacy becomes more of a concern online, loyalty programs such as Flybuys offers better access to customer data.

    After Wesfarmers spun off the supermarket chain Coles in 2018, the company took steps to set up the Coles-based loyalty scheme Flybuys as a separate entity. Coles and Wesfarmers split the ownership at 50% each.

    Since that time, it has been something of a puzzle to commentators as to why Wesfarmers did not move to expand Flybuys to cover more of the Wesfarmers-owned retailers - in particular its primary business, the big-box home improvement retailer Bunnings.

    The puzzlement ended on 9 November 2021, when Wesfarmers announced that Flybuys would be extended to both Bunnings and the company's office-supplies business Officeworks. That means that Flybuys will now be partnered with 25 businesses. According to Wesfarmers, as of the 30 June 2021 Flybuys is used by 6.4 million active households.

    Why now?

    One reason for the delay is likely the problem that Wesfarmers has struggled with for 20 years, but with more intensity over the past 10 years. As a conglomerate, it has gained strength from being able to buy businesses that were in a down-cycle, bring them into and up-cycle, and then sell them. Coles supermarkets is the most recent example.

    However, to maintain that flexibility, the company has had to retain each business in its own silo. That lack of integration means its easier to sell of these assets without other assets suffering any harm.

    While that's good from a demerger perspective, it is less good from an efficiency perspective. For example, if you order goods online from the range of Wesfarmers-owned retailers, you can get a separate delivery from Bunnings, Officeworks, Target and Kmart all on the same day. Wesfarmers clearly has enough delivery business it could set up an entire business segment to handle this - but that would make its individual businesses more integrated, and thus more difficult to sell.

    Perhaps just as pressing, the Bunnings culture that was initially developed under former managing director John Gillam and ably continued by current managing director Michael Schneider made keeping your cards close to your chest into something of an art form. The idea of sharing data from Bunnings customers with any exterior organisation, even a 50% partnership, does not sit well with that approach.

    So what changed? There's a hint to what changed in the very lucid statement made by Wesfarmers managing director Rob Scott in the press release making this announcement:

    Bunnings and Officeworks joining Flybuys will expand the value of the Flybuys program for members and provide exciting new opportunities to support customers. This partnership will complement the development of Wesfarmers' data and digital ecosystem, providing insights that enable our businesses to offer more relevant, personalised customer experiences.

    It's that second sentence that matters. At the moment, the internet world is on the cusp of a major change, where users of browsers and other means of information access will find their personal data is being protected by default. Up until now, those protections were available to users, but this often meant going outside the "safe" world of familiar software. For example, the Brave browser offers a wide range of data protections and ad-blocking (including a facility to make micro-payments to some websites as an alternative funding mechanism outside of advertising). But downloading that browser, and setting it up was something that just made users a little uncomfortable.

    The first big company to make a significant change was Apple. Its protections are quite comprehensive. For example, its Mail app will make it so that companies using email for marketing cannot track when mail messages are opened, and also hides the internet protocol (IP) address of the computer, iPhone or iPad that may click on any links.

    Apple also enhanced its feature that prevents apps from obtaining any information from users without the users granting explicit permission. That means that, for example, your Bunnings iOS app cannot tell Bunnings anything about you, unless you grant permission.

    Then there is a new feature to Apple's online storage service iCloud called Private Relay. This is something like a virtual private network (VPN), but easier to implement. Any web request is encrypted on the Apple device, then sent to a relay server, which assigns a random IP address, and spoofs the request to a random geographic location. A second relay then decrypts the request, and forwards it to the correct server.

    One thing to remember about Apple is that while it does not have a controlling share of the smartphone market, it does have a controlling share of the market revenue derived from smartphones. iPhone owners simply spend more than Android users do.

    If that isn't enough, the parent company of Google, Alphabet has also announced that it will no longer serve ads to users based on their browsing history. The company announced it would remove the core technology that enables that tracking, so-called "third party cookies", and then replace it with an anonymised service that grouped users in cohorts with similar profiles.

    Many observers believe that even this privacy hedge will not work, and that the drive for user privacy will simply steamroll such efforts. While Alphabet's Chrome browser has a large market share, the privacy issue might be enough to drive users to adopt alternatives, such as Firefox, or revert to operating system-linked browsers, such as Apple's Safari and Microsoft's Edge browser.

    The value of data

    Given that push many companies, especially in the US, are accelerating efforts to obtain data from users through other means. This includes competitions, polls, membership deals - anything they can use to secure personal information about their customers.

    Part of that has to do with a fear they will soon lose the kind of data they need to make personalised marketing work, but there is also a cost factor involved. If their own systems of information gathering break down, then they will need to rely more on providers such as Alphabet, and it's likely that will become costly.

    Against this background, it becomes clear exactly why Bunnings would see a strategic advantage in sharing data with a loyalty program that will aid it in contacting and reaching existing and new customers.


    Big box update

    Bunnings MD discusses digital transformation with AFR

    IKEA Australia has introduced an app through its stores in Queensland that will cut wait times at the checkout

    Bunnings Group managing director, Michael Schneider said the retailer's digital makeover is about improving the customer experience as well as encouraging a friendly environment for "digital natives" - people joining the business who are accustomed to digital - and existing employees. He recently gave an interview to the business column Chanticleer in the Australian Financial Review (AFR).

    Part of the retailer's tech transformation has been targeted towards its trade customers. It recently launched a new website for tradies that is mobile friendly, replacing the old process of an email system with a click and collection option through a smartphone.

    Bunnings' product finder app has also been updated with interactive store maps that show customers the best and fastest course around the stores.

    Mr Schneider said Bunnings is gradually moving all of its customer data to a cloud-based platform, which will support the entire group's operations, including inventory management. This project is due for completion by June next year.

    It was reported that most of the digital transformation is being done by an in-house Bunnings team, not an outsourced IT provider. Mr Schneider told the AFR:

    We partnered up with some fantastic external partners, but we also built this wonderful team in-house, which shows a different way of thinking about it. We've now got just over 500 team members in our tech and digital division under a dedicated chief technology officer, Leah Balter.

    Bunnings' digital investment has been about building deeper engagement with its employees. Mr Schneider said:

    This thing for us is not about maximising sales online. It's about improving our business so the next generation of people who are working here can put down roots and grow and build a career.
    Sure, we want to give our customers a compelling offer. But what's been fantastic in doing the work we've done in the digital space, has been thinking about the customer journeys and the blend of our long-term team members and our new people.
    People who understand the Bunnings way understand our product and understand the way that the customer experiences feel, [and] are sharing their knowledge with people who are joining the team.
    We've now got really fantastic tech skills, digital skills, code-writing skills, digital marketing skills and data personalisation skills. That sort of collaboration between the long-term Bunnings team members and newer team members is giving us a best-of-breed when it comes to the customer experience.

    Bunnings has been using social enterprise tool, Workplace by Facebook which developed it as a way of creating online communities within companies and facilitating greater co-operation among staff. Mr Schneider said:

    We've got over 40,000 of our 53,000 team members really active on their platform [and] that's allowing us to keep them informed on what's going on. We've built two production studios in our national support centre where we develop training material, deliver live content, and really connect and engage.
    If you're a buyer, and you bring a new product to life, you can speak directly to the team members who are selling that product and hear feedback on what's working, what's not working with your customers.

    Mr Schneider spoke at the Workplace Transform APAC 2021 Facebook live event earlier this year.

    Facebook's Workplace for employee engagement at Bunnings

    Mr Schneider said he wants to send a "subliminal message" to employees that Bunnings is "a place you can actually hang around for a while and have a bit of fun and do something different". He said part of the challenge of digital adoption within companies is demystifying technology for staff members who have been there for 20 years while making it a place tech-savvy young people want to work.

    The new Bunnings tech support centre is based in the inner Melbourne suburb of Cremorne which has been developed as a technology precinct by the Victorian state government. Mr Schneider said he is keen for Bunnings to be on the radar of graduates considering a career in tech.

    ...We are deep in a really genuine tech transformation - we're going pretty solidly at it, both from a resourcing point of view and an investment point of view.
    Those are the sorts of things that when you're wanting to build your career in the technology space, you're really looking for, and Bunnings is providing that, alongside all the things that we're famous for in terms of culture.

    Related: HNN has reported previously that as Bunnings launches into digital, it's likely to encounter the need for deeper change.

    Bunnings upshifts digital - HNN Flash #17, October 2020

    Related: Bunnings has produced another strong result.

    Bunnings results FY2020/21 - HNN Flash #60, August 2021

    IKEA app in QLD stores

    IKEA's mobile checkout technology allows customers to scan products on their phone and pay on the way out without needing to unpack their trolley. It is being used at its Logan and North Lakes stores in Queensland in the lead up to Christmas.

    The home improvement retailer plans to roll out the technology across all Australian stores in 2022, according to The Courier-Mail.

    IKEA's country customer manager Christian Becker said it took an average of six minutes to stand in line and unload and reload items. The app should make shopping easier for customers. He told The Courier-Mail:

    Our co-workers can now also support more customers where their help is most needed, which is super important in the busy Christmas shopping period. Our goal is to provide our customers with a consistent, seamless, and efficient shopping experience across all channels.
    Mobile check-out is a first for home furnishing retailers in Australia, and we're proud to lead the way with this initiative with the aim of creating a no-wait checkout experience for our customers.
  • Sources: Australian Financial Review, Motley Fool and The Courier-Mail
  • bigbox

    Big box update

    Bunnings "hotel" expected to open before Christmas

    A Mercure brand hotel in the Melbourne suburb of Doncaster will open atop a Bunnings store

    Construction works are progressing at the multi-level Bunnings Doncaster site, next to Westfield Doncaster shopping centre, according to a report in the Whitehorse Leader.

    The new warehouse store sits below a high end Mercure Hotel, which is also preparing to welcome guests in December. Bunnings area manager Craig Bleksley said the store would include familiar features such as a main retail area, timber and building materials yard and an outdoor nursery. He told the Whitehorse Leader:

    It represents an investment by Bunnings of more than $90 million and will span just over 11,000sqm, with over 300 carparking spaces.
    We're excited to be creating 180 new jobs in the local community, with recruitment now complete.
    We look forward to opening the doors and welcoming local residents to the new store, offering a wide range of home and lifestyle products, backed by great service from our team.

    At the time of its announcement, Bunnings acting general manager - property, Garry James, said:

    We identified a need for Bunnings in the Doncaster area and this site provided an opportunity to build something in line with Manningham Council's vision for Doncaster Hill.
    We are always looking at opportunities to innovate the design of our stores and we have a number of different formats that cater for the local markets where we operate. There's no cookie cutter approach - we always assess the local need and what can be achieved in a space.

    The Mercure Melbourne Doncaster has 183 contemporary guest rooms along with an elite fitness centre, expansive outdoor terraces and indoor/outdoor swimming pool. The property will also host functions, with One2One Events to be launched on level three of the hotel, with the space offering views over the city skyline and Yarra Ranges.

    Mercure Melbourne Doncaster will also introduce contactless options for room keys, parking, minibar and room service along with environmental initiatives such as the elimination of single use plastic bottles and guest amenities.

  • Source: Whitehorse Leader
  • bigbox

    Home Depot, Lowe's show growth

    Third quarter shows expansion beyond pandemic

    Both The Home Depot and Lowe's Companies showed growth as the US economy moves into autumn. There is some optimism that this represents positive structural change in both DIY and build/trade markets.

    The two largest home improvement retailers in the US, The Home Depot and Lowe's Companies, have released their results for the third quarter of 2021. Both showed unexpectedly strong growth, and both support - to some extent - the idea that demand for DIY and renovations in general might have grown in ways initially stimulated by the COVID-19 pandemic, but which have now become more structural than episodic.

    The Home Depot

    For the three months ended 1 November 2021, sales at Home Depot were USD36.82 billion, up 9.8% on the previous corresponding period (pcp), which was the three months to 31 October 2020. Operating income - essentially earnings before interest and taxation (EBIT) - was USD5.80 billion, up a substantial 19.4% on the pcp. Overall net earnings were USD4.13 billion, an increase of 20.3%.

    Customer transaction numbers actually fell, from 453 million to 428 million, but the average "ticket" (transaction value) was up by 12.9% to USD82.38. Overall sales per retail square foot were USD587.28 (USD54.56 per square metre), an increase of 6.2%.

    Comparing the year-to-date numbers, over the first nine months of 2021 to the first nine months of 2020, sales grew by 15.6%, operating income by 28.3%, and net earnings by 30.7%.

    The Home Depot results for Q3

    The company's chief operating officer, Ted Decker, made the point in remarks to investors that the comparisons to pre-pandemic results showed especially strong gains:

    On a two-year basis, each of our departments posted healthy double digit positive comps. Our comp average ticket increased 12.7% and comp transactions decreased 5.8%. Growth in our comp average ticket was driven in part by inflation across several product categories. Our commodity categories positively impacted our average ticket growth by approximately 70 basis points in the third quarter driven by inflation in copper and building materials, which was partially offset by deflation in lumber.

    Mr Decker also pointed to space optimisation as a key area for future growth:

    While we navigate these challenging environment, we continue to invest in our business to enhance the customer shopping experience while also driving productivity and efficiency. We believe we have a significant opportunity to further optimize space productivity in our stores by balancing the art and science of retail. This is a continuous process that we believe leads to better, more productive assortments and space allocations, which ultimately drives value for our customers.


    Simeon Gutman from Morgan Stanley started off the analyst Q&A session with the burning issue for home improvement and hardware retailers:

    My first question is actually something I've asked last quarter and it's around demand reversion and whether the industry goes through some digestion phase or it continues to compound. And just to add, this quarter, it looks like there was very little reversion and demand seems to be holding even though we're probably getting out of stimulus. So curious if you have any different thoughts about the demand progression.

    Home Depot CEO Craig Menear responded in part:

    I wish we actually knew the exact answer to that. Clearly, we don't. And so one of the things that we've stayed focused on as a result then is how do we make sure that we're as flexible and agile as possible and deal with whatever comes our way. That has worked well for us so far.
    Demand continues to remain strong. Customers continue to tell us that they have projects on their list. Pros tell us that their backlogs are significant. So we're going to stay focused on filling that demand.

    Home Depot's chief financial officer, Richard McPhail added a comment as well:

    Just to add something, obviously, we saw acceleration in October. What's interesting to note is that we saw improvement in both ticket and transactions sequentially from September to October. So we think that's a sign that the customer is engaged and demand is healthy.

    Later in the session, Karen Short from Barclays asked a further question on consumer demand:

    So one bigger picture question is just, I think I've definitely heard from investor pushback that this elevated demand that we've seen is basically just going to be reduced back to the normal TAM [total addressable market] once we get into 2022. And I'm wondering what your perspective is on that because that doesn't seem likely.
    It just seems to me that the actual TAM is significantly higher on a much more permanently embedded basis.

    Mr Menear responded by largely agreeing with her:

    Karen, I think most people and if you looked at what economist were saying as the year started, everybody believed during 2021 that we'd see a significant shift away from goods back to services as the economic environment opened up as we got our arms around the pandemic. Clearly, we have not seen that. I say that from the standpoint that yes, you've seen things like travel and restaurants open up, but the customers continue to spend in the home improvement space. And to date, we have not seen that dramatic shift back that everybody predicted.

    Asked about cost pressures driven by inflation and how that affects growth, Mr Decker pointed to innovation as providing a balance to this:

    So think of things like appliances, the technological features and benefits that have been introduced into appliances, grills and pellet grill smokers, our outdoor power equipment and power tools with our battery platforms. We just launched a new exclusive paint from Behr and DYNASTY. This is the best paint that Home Depot has ever introduced. It's over $50 a gallon on shelf.
    It's performing incredibly well as customers trade up to the innovation, etc. So yes, there's cost pressures that the merchants have offset, but equally doing a terrific job finding new and innovative product that our customers are engaging in.

    Mr Decker also pointed to the growth potential that is being achieved with the pro customer through the use of Home Depot's specialist pro smartphone app:

    The Pro traffic on the app is growing. Basket sizes and tickets and engagement is growing. And our teams are doing an excellent job in stitching what we call households together. So our understanding and knowledge of all our customers, but particularly our Pro customers because they're engaging with us at a much higher frequency than the average consumer, we're able to stitch all that behaviour together in a much more robust understanding of that customer and able to make direct contact with them through our digital marketing channels and our outreach with our field sales teams, as well as our Pro associates in the store.

    Lowe's Companies

    Lowe's reported subdued growth in sales, but strong growth in profitability. Sales for the third quarter of 2021 were USD22.92 billion, up by 2.7% on the pcp. Operating income was USD2.79 billion, an increase of 23.2%, while net earnings grew substantially, boosted 174% to USD1.90 billion.

    In terms of the year-to-date numbers for the first nine months of 2021, sales stood at USD74.91 billion, up 8.1% on the pcp. Operating income was USD10.24 billion, up by 26.1%, while net earnings rose by 49.0% to hit USD7.24 billion.

    Lowe's results for Q3

    Analysts Q&A

    The key question was asked this time by Michael Lasser, an analyst with UBS:

    The traffic has been declining as the DIY - smaller DIY projects have been under pressure as we return to normalcy. Do you think that this is a good barometer, a good proxy for how traffic is going to unfold over the next few quarters? Or could you be in a prolonged period where traffic is going to be down for quite some time as we have this road back to whatever the new normal is?

    The CEO for Lowe's, Marvin Ellison, responded:

    2020 was one of the most unique periods, not only in retail but in the history of our country and our globe. And we saw a significant number of low-dollar transactions for cleaning supplies, for PPE and for other around-the-house-related projects. So when we look at traffic trends for DIY and for Pro, Dave cited the numbers on a two-year basis. The reality is the only way we can really get a true understanding of the trends of our business is to look at everything on a two-year basis because last year was such a unique anomaly when it comes to revenue and traffic and, quite candidly, as it relates to operating expenses.
    At a high level, we feel great about our performance. As a company, we feel great about the macro indicators that support home improvement. And as Joe mentioned in his prepared comments, our Pulse survey with our Pro customers give us enormous confidence that they're going to continue to see growth in their business based on what they're seeing in their pipeline. And as we look at initiatives like our Total Home strategy and our Lowe's Livable Home strategy, we think that we have great initiatives to support our DIY customers to create ongoing demand.

    Brian Nagel an analyst for Oppenheimer & Co. asked about how the company was improving its offering for the pro customer:

    Clearly, a lot of emphasis from the management team over the past several quarters to really improve the Pro offering. And you've talked about it in prepared comments, but the question I have is as you look at it now, is the infrastructure basically built? Or are there still tweaks you have to make in order to sort of, say, make your offering even more compelling to the professional customers?

    Mr Ellison responded:

    I would say the short answer is that the foundation of the infrastructure is built. If you think about it, we started with what we call retail fundamentals in Pro. And Joe and his team started with basic things like staffing at the desk, loading assistance, something as simple as having the ability for the Pro to actually check out at the Pro desk.
    We had no point-of-sale terminals at the Pro desk where Pro even check out. And so those things were just problematic. Then Bill, and in partnership with supply chain - and Joe has tried to work on things like job lot quantities. And then Bill and his team have been working tirelessly on improving the number of national brands.
    Over the past 10 years prior to coming here, Lowe's had diluted most of their national brands out of the assortment, supplementing them with proprietary brands. And we know that Pros are more attracted to national brands. And so Bill and his team - Bill gave the list that we're adding, and we're continuing to build on that. Now we're building our loyalty platform.
    And now we're building our CRM platform. And now we're going to be building fulfilment platform. So the foundation is in place. We just have to earn the Pros' trust and respect.
    Because for so many years, they would show up, service was terrible, were out of stock. And we couldn't allow them to get in and out quickly or to grow their business. Now that we have the foundational elements in place, it's all about consistent execution and reaching out and engaging the customers. And I give Joe, Bill and our Pro teams a lot of credit for getting us where we are thus far.


    The ongoing growth for the two biggest home improvement retailers in North America is heartening. At the same time, however, this comes tinged with some concerns.

    It is always somewhat risky to draw conclusions about the Australian market based on what is happening in the North American markets. That said, there are some strong similarities between US and Australian home improvement activity as we move to a post-pandemic status. In both cases, there has been considerable concern that the TAM would decline to below 2019 levels, due to homeowners "pulling forward" tasks while in lockdown. Instead, what the US market seems to be showing, is ongoing growth post-pandemic, in both the DIY and trade/builder markets.

    However, it is necessary to highlight that while these markets may be similar for the moment, the overall economies in which they operate are quite different, despite surface similarities. In both nations, the housing market has taken off in part because there has been a revaluation of the worth of dwellings. Yet in the US this is also being driven by both growth in productivity across many sectors, as well as massive government spending in support of infrastructure. In Australia, productivity has mostly gone backwards over the past 18 months, and government spending is set to be subdued, at least until 2023.

    There is a constant confusion in Australia, where the housing and construction markets keep being construed as productive sectors that generate national wealth. They certainly contribute something, but largely they are economically distributive rather than creative. Construction cannot drive success in an economy, but it can support success when it is driven by other sectors.

    In a brief speech to the Committee for the Economic Development of Australia on 18 November 2021, Reserve Bank of Australia assistant governor (economic) Luci Ellis made an effort to diagnose what seems to be lagging in the Australian economy (that is HNN's description; no doubt Dr Ellis would have a description at variance with that). Entitled "Innovation and Dynamism in the Post-pandemic World", she posited that this notion of "dynamism" might be used to describe the difficulty Australia is currently facing.

    Innovation and Dynamism in the Post-pandemic World, Luci Ellis

    In short form (to provide a parallel interpretation of this to that of Dr Ellis) the lack of dynamism mostly manifests itself in businesses that seek to increase profits by decreasing expenditures. They may invest in innovation, but this tends to be a very mild form of successive improvements, rather than the development of anything truly new.

    In short, real innovation and real dynamism can only derive from business activities directed not at attempting to serve existing markets in an improved manner, but rather at creating and serving entirely new markets.

    As Dr Ellis points out, finding a single source for this behaviour is not possible. While she does a good job of canvassing a number of potential causes (though HNN entirely disagrees with her stand on new technologies, such as artificial intelligence, being "too difficult" - it's a confusion between the world of software development and software usage), the one she omits is the role government has been unable to play. Australia has struggled for the past 20 years with the tensions between cultural imperatives and economic necessities, and the last five years have seen this reach a certain peak of ineffectiveness.

    The real question then, as Australia emerges from the worst of the pandemic, is when those necessities will exert more pressure than the imperatives. Until that point is reached, the nation will continue to see a low level of dynamism, simply because it will not be going in the best direction.


    Big box update

    Bunnings Hervey Bay store development sold

    In New Zealand, the Bunnings Trade Centre site in the suburb of Naenae is up for sale

    The Bunnings store being built in Hervey Bay (QLD) has been sold to New Zealand-based Cook Property Group for $58.6 million. The 17,421sqm store is due to be completed late next year. It has been sold on a 10-year lease to Bunnings with options extending until 2080.

    Bunnings itself is the developer and vendor in the transaction that was struck on a 4% yield, reports the Australian Financial Review (AFR). Garry James, Bunnings' general manager of business development and property finance, told the AFR:

    The Bunnings Warehouse is ideally situated to support the growing area of Hervey Bay, and we are pleased to have completed a successful sale at a yield that is reflective of the market on lease terms that take into account our operational objectives.

    The Bunnings Hervey Bay transaction was jointly negotiated by Stonebridge's Phil Gartland and Justin Dowers, and Savills' Peter Tyson. Mr Gartland said:

    The Bunnings covenant and asset genre continues to come to the fore for savvy investors. This was certainly reflected in the depth of bidding across private investors, syndicates and institutional capital alike.

    The offering attracted more than 200 buyer inquiries with interest from interstate and overseas investors.

    Naenae (NZ)

    Commercial real estate company CBRE New Zealand is selling the Bunnings Trade Centre property located in Naenae, a suburb of the city of Lower Hutt, New Zealand. Bunnings has leased it for 17 years with no plans to vacate.

    The lease area has a gross area of approximately 9385sqm and has 84 car parks.

    The building's trade layout is undergoing refurbishment to bring it up to Bunnings' current standards and the work includes major upgrade works.

    CBRE Wellington managing director Matthew St Amand said the trade centre sale gave a chance to enter into the investment market with a leading market retailer tenant, and the lease arrangement allowed for annual rental growth. The property currently draws a net income of NZD650,000 per annum plus GST.

    Mr St Amand said that with residential development continuing in the region and construction under way, Naenae was a growing area.

  • Sources: Australian Financial Review, The Dominion Post and Commercial Real Estate
  • bigbox

    Big box update

    Bunnings will join Flybuys

    Bunnings landlord Newmark REIT is preparing plans for an initial public offering and battery recycling program expanded

    Flybuys has opened up its rewards program to Bunnings and Officeworks; Bunnings property trust owner is launching an IPO; and national battery recycling program rollout across 338 Australian sites.

    Flybuys signs up Bunnings

    Starting in early December, Flybuys points will be able to be collected at more than 350 Bunnings stores. As part of the announcement, Wesfarmers managing director Rob Scott, said:

    Bunnings and Officeworks joining Flybuys will expand the value of the Flybuys program for members and provide exciting new opportunities to support customers. This partnership will complement the development of Wesfarmers' data and digital ecosystem, providing insights that enable our businesses to offer more relevant, personalised customer experiences.

    The addition of Bunnings and Officeworks is expected to boost the value of the loyalty program for more than eight million Flybuys members around Australia. Steven Cain, Coles Group chief executive officer, said:

    We know millions of our customers will be excited because Flybuys member research shows that Bunnings is the most preferred partner in Australia to join the program and we know that Officeworks is an essential part of helping Australians increasingly working from home...

    Flybuys is Australia's fourth-largest loyalty scheme, according to the Australian Financial Review (AFR). Bunnings and Officeowrks will increase the number of partners for the joint venture loyalty program between Coles and Wesfarmers to 25. Mr Scott said the addition of Bunnings and Officeworks "significantly strengthens the program".

    Not only is it an opportunity [for consumers] to earn more points at trusted retailers, but also an opportunity to redeem points through a much broader range of retailers [giving them] access to a whole lot of new DIY products and office and technology products that previously Flybuys members weren't able to redeem their points on.

    The expansion came after customers indicated they wanted a broader range of stores in the scheme. Mr Scott told The Australian:

    It's very much customer-led so customers have been telling us and Flybuys members have been telling us that their two most preferred new members would be Bunnings and Officeworks. So this is responding to very strong customer demand. But also it's an opportunity for both Wesfarmers and Coles to further strengthen our commitment and investment in Flybuys.
    Bringing Bunnings and Officeworks into the program gives us the opportunity with Coles to invest even more in the program to improve the redemption opportunities.

    Bunnings real estate trust

    Melbourne-based fund manager Newmark Capital as begun a $128.3 million initial public offering (IPO) for its Bunnings-anchored large-format retail property trust, according to the AFR.

    It comprises seven Bunnings warehouses held in its unlisted hardware trust and a homemaker centre in Chadstone anchored by Bunnings, Joint managing director Chris Langford told the AFR it was getting "exceptionally positive responses" from its initial IPO presentations. He said:

    This listing provides an opportunity to continue the expansion of our large-format retail holdings [which have] consistently delivered exceptional total annual returns.

    The trust, to be called the Newmark Property REIT and assigned the ticker of NPR, will have a market capitalisation of $344.6 million based on an offer price of $1.895 per unit.

    More than three-quarters of the property income generated by the trust will come from long leases to Bunnings, one of the most sought-after by property investors.

    The listing has been slated for December 6.

    Established in June 2014, Newmark's trust was bolstered this year with a Bunnings Warehouse in Sydney's Eastgardens acquired for $75 million, another in Preston in Melbourne's northern suburbs, acquired for $85 million, and a third in Melton (VIC) bought for $44 million in August.

    Used battery collection

    Bunnings' battery recycling program will have Australia's largest network of battery recycling locations and all stores will be on board by mid-November after a successful trial.

    The collection units at each store entrance have been designed to accept standard household and power tool batteries.

    The retailer has teamed with battery recycling company Envirostream Australia to manage the program.

    More than 240,000kg of batteries are expected to be recycled in the first year. According to the CSIRO, only 2% of Australia's annual 3.3 million kilograms of lithiumion battery waste is recycled each year. If recycled, 95% of battery components can be turned into new batteries or used in other industries.

    Related: Battery collection in Bunnings stores.

    Envirostream in battery collection deal with Bunnings - HNN Flash #68, October 2021
  • Sources: MediaNet, Australian Financial Review, The Australian and The West Australian
  • bigbox

    UK update

    B&Q will have more Speedy Hire store concessions

    The partnership between the home improvement retailer and provider of tools and equipment hire has been formally extended

    B&Q will be able to offer tool hire to its DIY customers through more stores across the United Kingdom after expanding its partnership with Speedy. The roll-out follows the successful trial in 16 B&Q stores with a further 23 in-store outlets scheduled to open by January 2022.

    B&Q said it is committed to making it easier for customers to improve their homes. Partnerships are an essential part of this, with shop-in-shop and concession partnership models enabling B&Q to adapt quickly to changing consumer demands. The Speedy Hire partnership demonstrates the pace, scale and agility that's central to B&Q's growth strategy to get closer to customers and ensure their needs are met. Chris Bargate, director of business development, B&Q, said:

    Our customers are continuing to adapt and change to new ways of living and shopping, and the Speedy concessions are just one way in which we're making it easier for people to improve their homes.

    The Speedy in-store concessions will give B&Q customers with access to the company's four-hour delivery promise on 350 of its most popular products. These range from angle grinders, floor sanders, hammer drills and mixers to tower scaffolds, generators, lighting and dust extraction units.

    Speedy's existing customers will also have access to the new trade counters seven days a week to order and collect products, adding to its existing 200-strong national Service Centre network. Russell Down, Speedy chief executive, said:

    We have seen growing demand from B&Q customers for our products since we opened our first in-store outlet last year, and we're excited about supporting more DIYers up and down the UK as we continue to grow.

    With sustainability high on the agenda, hiring tools that would be used a handful of times and then stored away, potentially destined for landfill will also benefit the environment. This reflects a more circular economy in the re-use of DIY tools and equipment, according to UK-based Building Design & Construction Magazine.

    Related: Speedy brings tool hire into more B&Q stores.

    B&Q expands its tools hire trial with Speedy - HNN Flash #32, February 2021
  • Sources: The Business Desk and Building Design & Construction Magazine
  • bigbox

    Big box update

    Opposition to Bunnings store plan in Glynde

    Bunnings has completed its acquisition of South Australian headquartered retailer Beaumont Tiles

    Local residents in the suburb of Glynde (SA) are concerned that a proposed two-storey Bunnings, with nearly 300 carparks, is too large for the area. Fourteen residents have raised concerns with traffic congestion on Glynburn Road, "rat running" and heavy vehicles in residential streets, reports the Eastern Courier Messenger.

    The hardware retailer has lodged a development application (DA) with Payneham, Norwood & St Peters Council's assessment panel to build on vacant land in Glynde.

    One resident submitted to the panel that "there is no need for another hardware store in this location". There is a large Mitre 10 store situated a few hundred metres away, on the corner of Glynburn Road and Montacute Road.

    The DA comes after two previous plans were rejected by the panel in May 2017 and January 2018. However, the new Planning and Design Code replaced the council's development plan as the "relevant instrument for the assessment of development applications". As a result, the subject land has been zoned for "Employment" rather than "Light Industry".

    Bunnings property and store development director Andrew Marks said the store would create more than 100 ongoing jobs and around 130 during construction. He told the Eastern Courier Messenger:

    The Glynde site is well positioned for a Bunnings store that will provide residents living in the area with a much wider range of home and lifestyle products ... We have been working closely with the relevant authorities throughout the development application process, and we look forward to learning the outcome of the application in due course.

    Related: Adelaide could be the next location to have one of the biggest Bunnings stores in the country, with a proposed build for Glynde.

    Big box update: Two-storey Bunnings proposed for Adelaide - HNN Flash #53, July 2021

    Beaumont Tiles acquisition

    Bunnings Group managing director, Mike Schneider, said of the acquisition:

    Beaumont Tiles is a trusted Australian business with a great team and a proud 61-year history, and we're really pleased to have completed the transaction...
    The acquisition will help us better cater to the needs of our builder and flooring trade customers who will benefit from Beaumont Tiles' specialist design knowledge and extensive hard surfaces range.
    Beaumont Tiles has a strong management team in place and will continue to be run as a separate and distinct business and we're looking forward to investing in the company's future growth.
    The Beaumont Tiles team and franchisees are known for their passion and dedication, and we're excited to welcome them to the Bunnings family. I'd like to thank Bob Beaumont and his family for building such a fantastic business and team and entrusting us with building on their legacy.

    Danny Casey, CEO, Beaumont Tiles said:

    We're excited to write the next chapter for the business while preserving the unique culture, service expertise and design knowhow that has made Beaumont Tiles such an industry leader.
    We know that with Bunnings' backing, we are well placed to continue to innovate and evolve for ongoing success and growth.
    The completion of the transaction gives the entire Beaumont Tiles team and our dedicated franchisees exciting new opportunities and we're pleased our national support office will continue to be based in Adelaide.
    On behalf of the entire team, I want to pay tribute to Bob Beaumont for his contribution and leadership for over 53 years. It's been my privilege to work alongside Bob who is an icon of the tiling and building industry.

    With a specialist offer across hard surfaces products, floor and wall tiling, bathroomware and other hard surfaces accessories, Beaumont Tiles has 116 outlets across Australia. It has company owned and franchised stores servicing trade, home builders and renovators, and the commercial sector.

    Prior to the announcements from Bunnings and Beaumont Tiles, the Australian Competition and Consumer Commission said it would not oppose the acquisition on the grounds that Bunnings is not already a strong competitor in the tile sector.

    Bunnings entered an agreement to acquire Beaumont Tiles in late April 2021.

    Related: As Beaumont Tiles becomes part of Bunnings, it will end the era of the Beaumont family's ownership.

    Beaumonts joins Bunnings - Tile Today, June 2021

    Related: Bunnings gets greenlight for Beaumonts.

    Big box update: ACCC does not oppose Bunnings' Beaumont Tiles acquisition - HNN Flash #65, October 2021
  • Sources: Eastern Courier Messenger, Bunnings Media and 9News
  • bigbox

    Big box update

    Tool Kit Depot opens first store in Western Australia

    The new Bunnings Campbelltown store is set to open and pop-up vaccination clinics will be placed in a number of Bunnings Tasmanian and Western Australian stores

    Tool Kit Depot in Belmont (WA) will cater for Perth tradies; official launch for Bunnings in Campbelltown (NSW); pop-up vaccination clinics to be set up at Bunnings stores in Devonport, Burnie and Invermay in Tasmania; and WA will also get Bunnings vaccination clinics.

    Tool Kit Depot Belmont

    Bunnings Group has announced the opening of its first Took Kit Depot store in the Perth suburb of Belmont (WA).

    The brand new professional tools store is carrying 10,000 products across power tools, outdoor power equipment, hand tools, storage, workwear, welding equipment, construction and safety equipment, all available under one roof.

    Spanning 2,000 square metres, the store represents a $6 million-plus investment and created 40 new jobs in the local community, according to the company. The store is the first of several Tool Kit Depot stores set to open in Western Australia before the end of the year, with more stores coming to Rockingham, Malaga and Mandurah (Meadow Springs).

    Bunnings Commercial, chief operating officer, Ben McIntosh said the team can't wait to welcome local tradies through the doors to see the very first store in WA.

    We're so excited to bring the first Tool Kit Depot store to life. Customers can drop in for anything as small as a tube of silicone or an extension lead through to the latest trade quality gear from familiar suppliers such as Festool, Husqvarna, Hard Yakka, Milwaukee and Makita.
    Customers will find the look and feel of Tool Kit Depot stores a little different to some other professional tool stores. The store design is more open and feature hands-on displays of a wide range of professional construction tools and gear.
    Earlier this year, we opened our first prototype store in Parafield, South Australia where we trialled some new store concepts. The response from customers has been very positive, which gave us the confidence to commence a wider rollout and position the business for further expansion outside of South Australia.
    We're looking forward to providing customers with a specialist range of trade products, paired with great service from our knowledgeable team.

    Bunnings said the arrival of Tool Kit Deport comes as the latest ABS data shows WA has led the way in terms of residential construction growth, with a 21% lift in dwelling approvals in August.

    The first Tool Kit Depot store in WA is located at 225 Alexander Road, Belmont 6104.

    The official launch will be held across 5-6 November featuring a special meet and greet celebrity appearance with AFL legend Dave Mundy on the second day of celebrations.


    Located at the corner of Blaxland Road and Farrow Road, the new Bunnings Campbelltown store sits on a 17,000sqm site and replaces the existing store on Kellicar Road. The site is owned by Campbelltown Council, according to the Campbelltown-Macarthur Advertiser.

    Construction on this store began in early 2020 and represents an investment of more than $40 million in the region. Bunnings Campbelltown complex manager Geoff Burnell told the Campbelltown-Macarthur Advertiser:

    The extra space in the new store has allowed us to bring new concepts to local customers for the first time, such as the kitchen design centre and an amazing (five-lane) timber drive through for tradies.
    The team has been working flat out to get the store ready for opening and I'm really proud of what they have achieved...

    The site also includes a huge underground car park, a unique feature for Bunnings stores. Mr Burnell said the car park would be perfect for escaping rainy days and the searing summer temperatures locals know all too well.

    Vaccination clinics

    Bunnings is supporting the Tasmanian Government's COVID-19 vaccination efforts, providing space in store carparks to host pop-up clinics in Devonport, Burnie and Invermay.

    Health Minister Jeremy Rockliff said it would be a convenient place to have clinics. He said:

    We're very thankful to Bunnings for allowing our Public Health vaccination teams to operate these Pfizer clinics at its Devonport, Burnie and Invermay (Launceston) sites.

    Bunnings managing director Mike Schneider said the hardware retailer is happy to help.

    We're really pleased to be supporting the Tasmanian Government with the rollout of community vaccinations ... by providing space in our carparks at our Launceston, Devonport and Burnie stores.
    We hope it makes accessing vaccinations as easy as possible for the community and customers."

    Tasmania's borders will reopen to all states - allowing fully vaccinated people to enter without restrictions - from December 15.

    Western Australia

    WA Premier Mark McGowan announced that his government will start rolling out the COVID-19 vaccine at Bunnings stores and mobile vaccine hubs.

    Mr McGowan said six or seven pop-up clinics would be set up at the hardware stores from the weekend of November 6-7. No bookings will be required at the clinics.

    These will be set up shortly - as soon as we can get the logistics in place - and they'll be capable of administering at least 250 vaccinations per day.
    It basically means that for those people who are time-poor - especially your tradies - they can come to Bunnings, pick up the goods from suppliers, get vaccinated at the same time and be on their way.
    It just makes it easier for those people out there who have had difficulty finding the opportunity or the time to go and get vaccinated.
    You can roll up here, you can buy your fertiliser, you can have a sausage, talk to a mate, and go and get vaccinated.
  • Sources: Bunnings Media, Campbelltown-Macarthur Advertiser, The Mercury and ABC Premium News
  • bigbox

    The Wesfarmers annual report 2021

    The future of retail at Wesfarmers

    While there is a certain corporate gloss to any annual report, look closely enough, and you will see the outlines of strategy. In this case, Wesfarmers' 2021 publication hints at a stronger alignment with digital technology.

    Part of the story of perhaps the best-known investment "guru" in the world, Warren Buffet, is that his first act on becoming a serious investor was to sit down and read through the annual reports of a range of companies. That's a good reminder that, while it is easy to dismiss annual reports as being positive spin delivered through platitudes, there is much more to them than that.

    The art of the annual report is to say things that are significant, without causing stress or concern on the part of the investors. After all, we all like a bit of excitement, but if Wesfarmers makes up a good chunk of your superannuation investment, you might not want to read its chairman of the board, Michael Chaney, writing "You know, I had this crazy idea the other day, and we've all decided to go with it. I have just one word to say to all you investors out there: Goldfish."

    Nope, that's not going to work. So, just as there is something of an art to producing an annual report, there is also an art to reading them. Generally speaking, that means picking up on what might be one of the central themes the company is going after, and then following that thread as it runs through the rest of the report.

    Michael Chaney

    The place you need to start with this is, nearly always, the chairman's report. That is especially the case with Mr Chaney (who, after all, was largely responsible for starting Bunnings in the first place).

    In this case after reading his opening remarks to the Wesfarmers 2021 Annual Report, there were two passages that caught our attention. The first was an indirect comment on some of the stimulus provided by the government:

    Pleasingly, the company's strong financial results this year have been achieved without resort to any Australian Government funding available as a result of the COVID-19 pandemic; and where prolonged lockdowns have occurred we continued to pay all permanent and many casual team members, even when there was no meaningful work for them.

    That's one of those "good to know" statements. It's this second passage, however, that really seemed significant:

    The transition from a physical world to a digital one provides an even clearer illustration of how muddied the waters have become with regard to what constitutes investment. Here, what would traditionally have been classified as capital expenditures are now often classified as operating costs, and are expensed in the income account accordingly. These include some software-as-a-service arrangements as well as components of investments in the development and operation of data analytics and e-commerce platforms across our businesses. In the 2022 financial year we will continue our investment in developing a data and digital ecosystem, with around $100 million to be accounted for as an operating expense rather than the investment that it really is.

    That is quite a mild statement, but appearing as something the chairman says in an annual report, it is virtually a manifesto. On the surface it seems to be a complaint about accounting practices. In general, most expenditure can be put in one of two categories: operating expenses (OPEX) which is the funds needed to keep a business running, and capital expenditure (CAPEX) which is investment in, usually, material goods that will be employed in the future to produce saleable goods and services.

    One of the difficulties with technology is that, increasingly, the most valuable part of it is not the tangible elements - such as computers, physical networks, etc. - it is the less tangible elements, such as software. But it is almost impossible, in accounting terms, to move intangible services from OPEX into CAPEX.

    This is important for two allied yet different reasons. One has to do with the way a business is managed, and the other has to do with the way investors (and investment analysts) view company performance.

    In terms of management, a key problem in many Australian companies today is that software technology (which includes, for example, artificial intelligence, machine learning and data analytics) is routinely seen as OPEX, which means it is an expense, which means the goal is to decrease its cost as much as possible. (OPEX most of the time - though not always - purchases highly commodified goods and services.) CAPEX, however, includes both a time and a quality factor. You might want value, but value depends on what the deliverables are from the CAPEX - how much it contributes to the business.

    In terms of investors, one of the struggles that Australian companies face is that the investors and investment analysts make a similar mistake. For example, with Bunnings the situation the company faced - for a number of years - is that if ecommerce capability is regarded as an OPEX expenditure, then it makes little sense. Essentially, the thinking would go, you are going to spend a lot of time and money to develop a system which in the end, because of the conditions in that highly competitive market, will mean you earn less margin on your goods, due to the complexities (largely but not only) of managing delivery.

    That would be crazy, of course. But the reality behind investment in ecommerce capability is that it can, long-term open up new markets, and opportunities for expansion. Like a CAPEX purchase, it shows up as a negative in the short term, but in the longer term, early investment in technology not only can turn out to be less expensive, it can be essential.

    And of course, there was probably just something a bit more behind this statement, because Mr Chaney may also have been signalling that he fully supports the Wesfarmers' managing director, Rob Scott, who has continued to make substantial investments in technology - and must continue to do so, even though Wesfarmers' earnings will come under pressure in the FY2021/22 year. Not that anyone is questioning Mr Scott, but, hey, just so everyone knows.

    Rob Scott

    This trend towards valuing the digital differently was also picked up, in a less direct way, by Mr Scott as well.

    In describing the performance of Bunnings, he wrote:

    Bunnings achieved strong sales and earnings growth, as people spent more time undertaking projects at home. The business evolved its instore and digital offer, which provided alternative ways for customers to shop through lockdowns and this also attracted new customers. Good progress was made executing Bunnings' strategic agenda, including through the expansion of capabilities in the commercial area and a deeper engagement with trades.

    Mr Scott doesn't have to emphasise the digital part of the business, but in this very brief mention of Bunnings he does. Later, in describing how he sees retail continuing to evolve at Wesfarmers, he revisits this theme:

    The Group's retail businesses will maintain their focus on meeting changing customer needs and delivering even greater value, quality and convenience. Investments in digital capabilities will accelerate and are expected to improve our customer proposition, expand our addressable markets and deliver operating efficiencies.

    The word "investments", again, picking up on Mr Chaney's theme.

    General comments

    Later in the annual report there is a section on future planning for the company. This is a list of the points it makes, in order:

    Our focus for the coming years

  • Continue to reinforce entrepreneurial initiative
  • Leverage assets and digital expertise across the Wesfarmers Group to broaden multi-channel offerings across the retail businesses
  • Develop a market-leading data and digital ecosystem that leverages a shared data asset spanning across the retail businesses
  • Accelerate investment in the Advanced Analytics Centre
  • Invest in a multi-year digitally enabled store operating model and supply chain at Kmart to transform the instore customer experience and deliver operational efficiencies
  • Align future growth opportunities with our target of net zero for Scope 1 and 2 emissions for our retail businesses by 2030
  • Explore climate-related technologies and opportunities across the Group
  • Continue to investigate opportunities to leverage existing infrastructure and expand production capacity in Chemicals and Energy businesses, including assessment of new technologies
  • So, in an eight-point list, points two through five are all about digital capabilities.

    Mike Schneider

    In the comments by the managing director of Bunnings, Mike Schneider, he brings up a number of general points, including this one:

    While the operating environment remains uncertain, Bunnings' trading performance in the 2022 financial year is expected to moderate following the extraordinary growth recorded in the 2021 financial year, which saw Australians and New Zealanders required to spend more time at home due to COVID-related restrictions.

    But he also devotes a paragraph to the technology at Bunnings:

    Bunnings will continue to accelerate the development of its digital offer, building on its new e-commerce platform in Australia and New Zealand, by providing retail customers a more personalised digital experience. This step up in digital investment will also enable us to better understand and serve our customers and includes a new e-commerce platform for trade customers that will make it easier for customers to transact.


    HNN would like to note here that there is nowhere we know of where Wesfarmers, and certainly not Bunnings, have ever made disparaging comments about competitors, or even other retailers (not even Grant O'Brien, ex-CEO of Woolworths). But we ourselves would point that this kind of strategy, applied to retail is not something we are seeing at David Jones, Myer, or any of the other contenders for top retail operators in Australia - including the operators of shopping malls.

    The point for hardware and home improvement retailers in Australia is that if Wesfarmers is developing along these lines, it could be really important for even quite small retailers to begin to think in terms of CAPEX rather than OPEX in investing in their own technology. At the moment what every hardware retailer dreads is a Bunnings store moving into their area. In five years time, what they may dread instead is every time one of their customers goes online instead.


    Big box update

    Envirostream in battery collection deal with Bunnings

    Australia's largest bird conservation group is calling on Bunnings to remove a popular range of pesticides from its shelves

    Lithium Australia announced that its 90% owned subsidiary, Envirostream has signed a collection and supply contract regarding used batteries with Bunnings.

    Envirostream will now work with Bunnings to collect spent batteries from all its stores, after trialling its spent-battery collection services in several Victoria-based Bunnings stores.

    The companies have executed a Supply of Services Agreement - Battery Stewardship Scheme for the collection of spent batteries from its stores in Australia and selected stores in New Zealand. It is expected to continue until June 30 2024, with Bunnings given the option to extend the agreement for a further 12 months.

    The services include, but are not limited to:

  • Provision and maintenance of suitable collection units for spent batteries;
  • Collection and transportation of spent batteries from all Bunnings sites;
  • Recycling of the spent batteries collected from Bunnings sites;
  • Education and participation in marketing campaigns, in conjunction with Bunnings; and reportin
  • The agreement comes ahead of the launch of the Battery Stewardship Scheme (BSS) to be rolled out by Australia's Battery Stewardship Council (BSC) in early 2022. Lithium Australia managing director Adrian Griffin said:

    The company is pleased to announce that Envirostream will commence a service contract with Bunnings, which is leading the way in the provision of convenient collection points for spent batteries ahead of the BSS.
    The creation of such a collection infrastructure is vital to improving Australia's battery recycling rate and preventing spent batteries from being consigned to landfill.

    It has been made possible via the Australian Federal Department of Agriculture, Water and the Environment which issued Envirostream with a Basel Import Permit that allows for the import of 100 tonnes of mixed-waste batteries into Australia from New Zealand.

    This permit, which allows Envirostream to service Bunnings' New Zealand stores, is valid until October 14, 2022. Once imported into Australia, the waste will be recycled at Envirostream's EPA-licensed Campbellfield (VIC) facility and its Laverton North (VIC) facility, which is in development.

    Envirostream has been issued an important planning permit for its battery recycling facility in Campbellfield. The permit issued by Hume City Council, allows a change in land use to that of a materials recycling facility. Mr Griffin said:

    Envirostream - now the first mixed-battery recycler in Victoria to be fully permitted - seeks to reduce the volume of waste batteries relegated to landfill as it gears up to meet the introduction of the Battery Stewardship Scheme early next year.

    Envirostream now has the formal approvals necessary to expand its operating throughput for the recycling of spent batteries at its Campbellfield facility. It is the first company to achieve these approvals, specifically for the recycling of spent batteries.

    The BSS is an industry-led initiative to provide free battery recycling to Australian consumers and counts Duracell, Energizer, Coles and Woolworths as industry partners working together to fund recycling and provide collection services for end-of-life batteries.

    Poisons displays

    BirdLife Australia is asking Bunnings to stop selling some rat and mice poison products, claiming that they are killing off native birds and wildlife, according to

    Rodenticide sales at Bunnings soared in the first six months of 2021 after eastern Australia experienced an extreme mouse plague, resulting in empty shelves in many stores.

    But now the BirdLife Australia says local birds of prey are dying after eating rodents that have been poisoned by some of these products.

    It has launched a petition calling on Bunnings to stop the sale of second generation anticoagulant rodenticides (SGAR), which have been restricted for sale in many parts of the world including the US, Canada and parts of Europe. The BirdLife Australia petition states:

    Owls, eagles, and other birds of prey are unnecessarily dying by ingesting rats and mice that have been poisoned.
    Rodenticides are poisons designed to kill pest mice and rats but they have other impacts too. Second generation anticoagulant rodenticides (SGAR) poisons are the worst.
    It is these products that we are asking Bunnings to remove from their shelves.
    SGARs work by causing internal bleeding, but when rats and mice eat baits poisoned with SGARs, they become poisonous themselves, harming and even killing other animals and birds that eat them...

    While the petition notes that mice and rat poisons are available at various retailers across Australia - including Coles and Woolworths - it has targeted Bunnings with its petition due to the amount of rodenticide products it sells.

    Bunnings has about half of Australia's DIY hardware market share and sells a larger variety of second-generation rodenticide products than any other major outlet.
    Bunnings can remove a huge source of poison by choosing to take these products off their shelves and instead providing consumers with alternatives that are just as effective.

    A Bunnings spokesperson has told that it offers many rodent control products that are natural and safe for wildlife. The hardware retailer also said that it was working with suppliers to help shoppers make informed purchases within the range. Bunnings general manager - merchandise, Adrian Pearce said:

    We always respect community feedback and we recently met with BirdLife Australia to understand their views and to explain the steps we are taking to educate customers about rodent control products.
    Like many retailers, we offer a range of rodent control products, including anticoagulant rodenticides as well as a number of non-poisonous alternatives, such as rodent repellers, live catch traps, regular rat traps and natural bait pellets such as the Natural range from Ratsak. This provides choice for the customer and a natural solution to any rodent problem.
    We understand there are risks associated with the use of second generation anticoagulant rodenticides (SGARs) for birds and some wildlife, and we proactively promote the safe use of these products and support customers in making informed purchasing decisions.
    Over recent months we have been working with our suppliers to include additional information on packaging, as well as making updates to our website to help customers identify which products are first generation or second generation rodenticides.
    In addition, we are creating further training for our team members to help improve their knowledge about this topic. We are also in the process of implementing the separation of first generation and second-generation rat poison varieties, along with naturally-derived rodenticides on our shelves to further assist with easier customer product selection.
    We will continue to closely follow the advice of the Australian Pesticides and Veterinary Medicines Authority (APVMA), and work with our suppliers to innovate in this area.
    Big box update: Pesticide displays - HNN, August 2021
  • Sources: Proactive Investors and
  • bigbox

    Big box update

    Bunnings South Lismore expansion plans

    Traffic plan for Tempe, vaccination hubs at Queensland store and Kyneton development goes to tribunal

    Plans to expand the Bunnings South Lismore store have been revealed; Sydney's Inner West Council will push to improve traffic arrangements at Bunnings' new Tempe store; Queensland Premier Annastacia Palaszczuk has revealed the Bunnings sites that will become pop-up vaccination clinics; and a proposal for a Kyneton store in regional Victoria has been rejected.

    South Lismore

    A development application has been lodged to expand the Bunnings store in South Lismore (NSW) on the Bruxner Highway. The application indicates that the works will bring a "greater efficiency" to store's operations, reports the Northern Star.

    According to development details, it would include an expansion of the timber trade sales section and more warehouse space. The South Lismore site is expected to grow by 2800sqm.

    Bunnings area manager Deb Thompson said the application was a modification to the existing approved development. She told the Northern Star:

    ...The works would include an additional retail area to the warehouse and a new drive-through trade area, adding over 2800sq m to the current store.
    While a start date is yet to be confirmed, we look forward to providing updates to the community as the project progresses.

    Other features include bicycle parking, additional trolley storage bays and a pedestrian access ramp to promote foot traffic between the Bunnings and HomeCo sites safely without needing to drive. An extra 120 parking spaces would also be included to take the total for the site to more than 330.

    The South Lismore store was last upgraded in a $5 million improvement in 2014 when there was a Masters Home Improvement outlet next door to it, now replaced by a Home Co centre.


    The Tempe Bunnings superstore will be the biggest in Sydney and is expected to see thousands of extra cars every week funnelled into narrow inner west streets, according to Inner West Council.

    The traffic study from the council showed negative impacts on 15 local streets and 1,400 cars a day down Union Street, right past Tempe Primary School. Inner West Mayor Rochelle Porteous said:

    Local residents have been campaigning strongly against this since the plans were first unveiled. And I don't blame them. The current plan will see delivery trucks and thousands of cars using already choked local streets and endangering the lives of residents. Tempe children deserve to be able to walk to school safely.

    A narrow residential street will act as the main entrance for the 20,000sqm store next to Ikea on the Princes Highway. Both entering and exiting cars will be funnelled down residential streets.

    At a recent council meeting, council voted unanimously to help fund a community campaign including advertisements in newspapers, social media and installing banners in high visibility locations.

    Council will also write to Minister for Transport and Roads Rob Stokes seeking approval for traffic signals on Princes Highway to provide controlled access to Bunnings.

    The council said all residents of Sydenham, Tempe and St Peters will be advised of its advocacy and will be asked to lobby the NSW Government for a better outcome. Mayor Porteous said:

    The Inner West is home to some of the most successful and tenacious community activists anywhere. I know that with their determination, and Council's support, we will get the right result.
    Transport for New South Wales and Bunnings need to work together and fix this problem for the Tempe community.


    Macedon Ranges council has knocked back two proposed commercial developments near a gateway to the Kyneton (VIC) township, according to Star Weekly.

    The two separate proposals for land at the intersection of Edgecombe Road and Pipers Creek Road detailed plans for a Bunnings Warehouse and a service station with an attached McDonald's restaurant.

    Both of these developments drew strong community interest, with a combined total of 618 letters of objections and 35 letters of support during the consultation process.

    At a recent meeting, residents voiced their concerns, with repeated mention of the development's impact on the natural environment and increased traffic congestion.

    Speaking at a council meeting, Macedon Ranges mayor Jennifer Anderson said the developers for both applications had not met the standards necessary for approval.

    This is the Macedon Ranges, we are a very special place and have a very sensitive environment.
    We are now declared an area of distinction and landscape, and we have a standard of planning policy and we must look at when we look at any application. It is mandated upon every authority to do so, and the officers have assessed this application against that and feel that it doesn't meet all those criteria.

    Councillor Janet Pearce said she was not opposed to having a commercial development at the site, but couldn't accept the conditions of these two submissions.

    This is a commercial zone and we are very interested in commercial businesses coming to this area. [But] I feel that there are too many points where, if more discussion could have occurred, then perhaps we could have come to an agreement.

    As the only councillor speaking against the officer's recommendation to reject the proposals, Cr Geoff Neil said despite traffic management being a "big concern" he supported the developments.

    At the submitters meeting in August, a spokesperson for site applicant said the commercial enterprises would bring 160 jobs across the McDonald's and service station, with a further 40 employment opportunities at Bunnings.

    The matter is subject to an appeal to the Victorian Civil and Administrative Tribunal (VCAT).

    Related: A planning tribunal will hear arguments for and against a mixed-use development featuring a Bunnings store.

    Big box update: Kyneton - HNN Flash #57, August 2021


    Around 33 Bunnings stores in Queensland will offer vaccinations, joining stores in NSW and Victoria which have been offering vaccinations since August. Health Minister Yvette D'Ath said:

    This partnership with Bunnings is terrific news for Queenslanders who want to get vaccinated and keep themselves safe.

    Clinics will be established at; Browns Plains, Morayfield, Brendale, Bethania, Mt Gravatt, Stafford, North Lakes, Maryborough, Bundaberg, Hervey Bay, Dalby, Smithfield in Cairns, Fairfield Waters in Townsville, Townsville, Townsville North, Mackay North, Paget in Mackay, Airlie Beach, Kingaroy, Gladstone, Rockhampton, Yeppoon and Gympie.

    Mike Schneider, Bunnings managing director, told the retailer is pleased to be helping QLD Health with the rollout of community vaccinations across South East Queensland. He said they were hosting pop-up vaccination clinics in about 30 store carparks.

    We hope it makes accessing vaccinations as easy and convenient as picking up an item for a weekend DIY project. We've always tried to play an active role supporting the local communities where we operate, so providing space to QLD Health to accelerate the vaccination rollout just makes sense.

    Clinics will be established at Browns Plains, Morayfield, Brendale, Bethania, Mt Gravatt, Stafford, North Lakes, Maryborough, Bundaberg, Hervey Bay, Dalby, Smithfield in Cairns, Fairfield Waters in Townsville, Townsville, Townsville North, Mackay North, Paget in Mackay, Airlie Beach, Kingaroy, Gladstone, Rockhampton, Yeppoon and Gympie.

  • Sources: The Northern Star, Inner West Council, The Courier-Mail,, The Chronicle and Star Weekly
  • bigbox

    USA update

    Home Depot co-launches flatbed marketplace

    The home improvement retailer is partnering with freight technology company Loadsmart to roll out an automated, supply-led flatbed platform

    The Home Depot has launched a platform in partnership with Loadsmart that helps facilitate flatbed backhauls by focusing on supply. Flatbed Messenger is an automated supply-led flatbed platform that pairs capacity and price to a shipment instead of the reverse.

    It provides dedicated flatbed capacity to other shippers at lower rates. Jim Nicholson, Loadsmart vice president of operations, told Transport Topics (TT):

    We are really excited to launch this and tackle this problem with our freight partner at Home Depot. The general truckload market is very fragmented, and there has been a lack of technology that really optimises the ability for both carriers and shippers to be able to transact more effectively. Now going directly into flatbed and open deck, it's even further fragmented.

    Loadsmart launched its digital flatbed capability platform early last year. But to overcome challenges in the digital flatbed space, such as empty miles on the return journey, dedicated capacity was needed. The Home Depot partnership provided that capacity alongside demand from its vendor network. Mr Nicholson said:

    What's so unique is we have all of the pieces here that are going to make this marketplace truly effective and able to accelerate really quickly. But the key here that we want to home in on is that this is absolutely focused on being supply-led. It's not where others have ventured, which is aggregating a bunch of demand and then trying to find that capacity.

    Shippers can access flatbed capacity that previously was earmarked for a dedicated shipper and which may be at a lower cost. At the same time, carriers in dedicated fleets can fill their backhauls to reduce empty miles. Felipe Capella, co-founder, co-CEO and president at Loadsmart, told TT:

    One of the differentiators of the way that we're doing things is that we're leveraging Home Depot's network footprint. They're probably one of the largest flatbed shippers in the United States. Therefore, they have really deep relationships with transportation providers.

    Home Depot has invited its transportation providers to share their capacity within the technology framework provided by the platform. The home improvement retailer is hoping to bolster its customer experience, reduce empty miles, lower its carbon footprint and help other shippers and carriers do the same by sharing truck capacity.

    Home Depot also helped develop the concept by designing the framework and rolling out the platform. Mr Capella said:

    Their plan is to become even larger with this project of insourcing procurement. They are starting to be responsible for higher capacities from their vendor network. So there again, they're becoming larger and larger.

    Mr Nicholson said the platform's foundation is based on technology that has been developed over years. Like other services, it tracks the location of the truck, expected destination, load availability and scheduled times to filter through an algorithm that facilitates shipments and backhauls. But the difference is it has been updated to be specific to flatbed, supply-led and include a dedicated shipper. He said:

    Nothing like this currently exists specifically in the flatbed space. This is truly unique and absolutely anchored with Home Depot's demand and supply, but can expand to other flatbed shippers and bring on other carriers outside of that carrier network that would create a critical mass to scale this rapidly.

    In 2020, Home Depot opened its first-ever flatbed distribution centre, an 800,000sq.ft. facility in Dallas. The company plans to eventually build 40 flatbed distribution centres in the 40 largest markets in the US, so it can bring bulk orders of construction and building materials to customers on a same-day, next-day basis. Robin Baggs, director of transportation for The Home Depot, said:

    Flatbeds are an essential transportation mode, yet the flatbed industry remains highly fragmented. This platform presents shippers and carriers a unique opportunity to increase communication and collaboration to move freight in an easy, user-friendly way that's more affordable, efficient, and environmentally friendly than traditional methods.

    Related: Flat bed DC for Home Depot pro customers.

    Home Depot's latest DC is made for trucks - HI News, February 2020
  • Sources: Transport Topics News and Chain Store Age
  • bigbox

    Big box update

    Bunnings Mt Isa store on track for 2022 opening

    Some Bunnings staff have indicated they will quit over vaccine mandate and sponsorship for Sydney motor sports event

    Building is taking shape at Bunnings new Mt Isa store; the vaccine mandate has led to a small number of Bunnings employees deciding to leave the company; and Bunnings Trade has taken official naming rights of the Supercars event in Sydney.

    Mount Isa

    Bunnings said its new Mount Isa store in Far North Queensland is on target to open in the new year. Michael Rodwell, Bunnings area manager, said construction was progressing as planned at the site on West Street. He told The North West Star:

    The building structure is now fully enclosed, and the internal floors and fit out have recently commenced. Car park works are expected to get underway soon, with opening still on track for early 2022.
    All team members from the existing Mount Isa store will transfer to the new store once complete, and will be joined by additional team members. We look forward to welcoming local customers to the new store next year.

    In addition to a 172-car park with two entrances from West Street and one from Alma Street, the store would operate from 6am to 9pm seven days a week.

    Related. Bunnings appointed Hutchinson Builders in March 2021 to begin work on the Mount Isa site.

    Big box update: progress on Mount Isa - HNN Flash #48, June 2021

    Vaccine mandate

    Bunnings managing director - Australia and New Zealand, Mike Schneider said a small number of employees have quit over opposition to the Victorian government's vaccination mandate, according to an exclusive report in The Age. He said that while the response from staff towards getting vaccinated had been overwhelmingly positive, the business had started to see some workers quit due to state government requirements that they get the jab. He told The Age:

    We've already had a very small number of team members here in Melbourne who've indicated that they're going to leave Bunnings. And we've heard the same from some of our trade customers with subcontractors and such that aren't prepared to get vaccinated.

    The Victorian state government requires authorised workers to be fully vaccinated by November 26 to come to work. This includes retail staff working at Bunnings. Some staff in certain local government areas in Sydney also must get vaccinated.

    Mr Schneider said the issue of mandatory vaccines was tricky, with Bunnings providing hesitant employees with ample time to get health advice and information about the vaccines before taking any further steps.

    Some are taking annual or long service leave, and we'll work with those team members to go and get that all-important health advice. After that, they can access leave without pay, but in Victoria, it's very clear you need to be vaccinated by November 26, or you can't come to the site.
    What we're not going out there and saying is: 'if you don't have the vaccination by the 26th of November, you're fired'.

    However, Mr Schneider acknowledged unless government mandates change, workers who are not vaccinated will not legally be able to work with the business. He said:

    We value our people, and we'll work with them as best we can. They'll make choices, and we'll need to make choices, and those will be hard ones, I suspect. We hope that people do the research, get the confidence, get the jab - that's our message.

    Bunnings currently has 14 vaccination sites across the country and has vaccinated more than 66,000 people through its sites so far. Mr Schneider said:

    What we've been very clear with all governments across Australia, New Zealand and health departments is if there's a way we can help, we are absolutely there to help.
    Wesfarmers CEO provides update on the vaccination hubs at Bunnings stores in Sydney - HNN Flash #61, September 2021

    There have been a number of protests in Victoria over vaccine mandates, most notably from the construction and trades industry which were told by the state government in mid-September that they must be vaccinated to continue working on site.

    Mr Schneider said while he acknowledged Victorians were fatigued and tired, he said it was "crystal clear" that vaccinations were the path out of lockdowns. He said:

    It doesn't do anyone any favours going out and then protesting in the way that people are protesting.

    Related: CFMEU building industry protests in Melbourne.

    Melbourne CFMEU protests indicate fading power - HNN Flash #64, September 2021


    Bunnings Trade is backing the first Sydney Motorsport Park event on the revised 2021 calendar. The Eastern Creek venue will stage four back-to-back weekends of racing.

    The first event, the Bunnings Trade Sydney Super Night, will play host to a trio of sprint races. Two of the races will be held under lights, marking the first night racing since 2020.

    Bunnings Trade announced an expanded partnership with Supercars for 2021 and 2022 earlier this year. The new deal incorporates the Bunnings Trade PowerPass Power Play, which is seen on Supercars' broadcast and digital platforms.

    It also includes naming rights to the popular Supercars' tipping competition that offers a variety of prizes for fans, headlined by a $1000 Bunnings Gift Card and 2022 Supercars event package for the overall winner. Penny Gray, head of Bunnings Trade solutions said:

    Bunnings Trade is thrilled to support Supercars highly anticipated return to racing with the Bunnings Trade Sydney Super Night. Our team and PowerPass customers are passionate racing fans, and we know the wait will have been worth it with a show-stopping first event back at the Sydney Motorsport Park.

    Supercars CEO Sean Seamer added:

    I'd like to thank Bunnings Trade for coming on board as the naming rights partner of our spectacular return, under lights at Sydney Motorsport Park from 29-31 October. This event is significant for our category and our sponsors. Fans around the world will be tuning in to see our return to racing.
    Bunnings Trade has been an extremely flexible partner of Supercars throughout 2021 and we are thrilled that as an industry leader, they are continuing to support our sport as the naming rights partner of this event.

    Related: Phillip Island in Victoria will host the ninth round of the 2021 Repco Supercars Championship with Bunnings Trade the naming rights partner.

    Big box update: Bunnings Trade Supercars - HNN Flash #60, August 2021
  • Sources: The North West Star, The Age and Supercars
  • bigbox

    USA update

    Home Depot hires Walmart to handle local deliveries

    It is the first retailer to use the new delivery service which uses Walmart's expansive network to provide white-label delivery for businesses of all sizes

    The Home Depot and Walmart are working together to expand same-day and next-day delivery capabilities for home improvement customers in the US. They are teaming up to give Home Depot's customers another way to have their online orders delivered on the same or next day. Stephanie Smith, senior vice president of supply chain for The Home Depot, said:

    The Home Depot is continuously working to give customers the most convenient shopping experience in home improvement, and that includes providing a wide range of fast and reliable delivery options. This partnership brings us even closer to our goal of offering same-day or next-day delivery to 90% of the US population.

    The two companies did not specify details, such as the length of the agreement or their financial arrangement.

    Home Depot will initially offer delivery with Walmart GoLocal in select markets, with plans to expand to multiple markets across the country by the end of the year. Products that qualify for this scheduled delivery, including tools, fasteners, paint and other supplies that easily fit in a car, will have that option enabled at online checkout.

    In response to the announcement by both retailers, Neil Saunders, managing director, GlobalData told RetaiWire:

    Convenience and speed are key in home improvement as people doing tasks often need products in a timely manner. As such, this is a good move that gives consumers another option to quickly get Home Depot orders. It also saves Home Depot the hassle of building out all the capacity to offer fast local delivery. For Walmart, it's a good win that adds a lot of volume to its new service - which it needs if it is to build out fulfillment capacity in a way that competes with Amazon.

    Walmart debuted GoLocal in August and is a white label service, which uses third-party drivers, delivers orders for other businesses across the US. It offers delivery on a range of items, including those with size and complex requirements, as well as the flexibility to meet varying delivery timelines, such as express, same-day and next-day delivery.

    John Furner, president and CEO, Walmart US said Home Depot shares his company's goal of "making fast and reliable local delivery available in every community" it serves.

    Home Depot-Walmart merger?

    A recent opinion piece in Bloomberg suggests that a Walmart and Home Depot merger would make sense since the two companies represent the biggest importers of goods through container ships in the US. (Walmart is the top US importer of goods by container ship, followed by Target Corp. and then Home Depot, according to the Journal of Commerce's annual ranking.) Their combined strength would give them the ability to lay claim to containers at a time when many retailers are struggling to get goods into the country.

    The idea for Walmart and Home Depot to potentially merge comes from Brittain Ladd, an industry analyst with supply chain solutions company Kuecker Pulse Integration and a longtime consultant to the retail industry. Mr Ladd said in a phone interview with Bloomberg:

    Imagine their combined ability to collaborate on procurement.

    Not only could they negotiate better rates, but they could even acquire their own ships and sell excess capacity to other businesses by forming a logistics unit. This is a bit like the vertical integration Amazon has started assembling. Mr Ladd said:

    Supply chains have always had an element of risk to them because supply chains in most cases are truly global. But what we're also seeing today are supply chains that are in many ways too lean and paying for it. This is one of the best reasons for very large retailers and other companies to say, 'We need to start thinking big in our M&A and use it to reimagine our supply chains.'

    The strategic rationale for a Walmart-Home Depot deal extends beyond that, though. Walmart stores could use a refresh, and as groceries increasingly drive Walmart's revenue, Home Depot could become the overarching label or overseer of non-grocery items. Mr Ladd envisions a Home Depot-branded DIY section at Walmart.

    But there are obstacles. For one, their size - Walmart and Home Depot are valued at more than USD340 billion each. And antitrust regulators may take issue with the idea.

    For huge retailers, there could be an added incentive now to assert greater control over their supply chains, and takeovers could be the way to do it. If Walmart wants to think outside the cargo box, Home Depot is an option.

    To read more, go to the Washington Post:

    A Walmart-Home Depot merger makes shiploads of sense

    Mr Saunders from GlobalData has the opposite view of a merger between the two retailers. He told RetaiWire:

    As for a merger between Home Depot and Walmart, predicting this on the basis of the current supply chain crisis makes no sense at all. Supply issues are a difficult temporary problem, not a reason for companies to undertake mega-mergers which should be based on much wider commercial and strategic considerations.
  • Sources: RetailWire, Walmart and Washington Post
  • bigbox

    Big box update

    ACCC does not oppose Bunnings' Beaumont Tiles acquisition

    Store developments in Port Augusta and Jimboomba as well as real estate sales

    Bunnings' acquisition of Beaumont Tiles is not opposed by ACCC; plans move ahead for Port Augusta development; Bunnings said it will add approximately $36 million to the local economy with its proposed store in Jimboomba (QLD); Kempsey store site in New South Wales has been sold; and a yet-to-be-built outlet in Hervey Bay (QLD) has been placed on the market.

    Beaumont Tiles

    The Australian Competition & Consumer Commission (ACCC) has found that Bunnings' proposed acquisition of Beaumont Tiles is not likely to substantially lessen competition. In a statement, ACCC chair Rod Sims said:

    At first glance, Bunnings taking over a major tile retailer appears concerning, but our investigation found that Bunnings is not a strong competitor in tile sales. This is not a case of a close competitor buying up its rival.
    However, the ACCC's decision not to oppose this deal is based on the specific circumstances and should not be read as any indication that the ACCC will reach the same conclusion in relation to future possible acquisitions by Bunnings.
    The way in which Bunnings is competitively constrained by specialised retailers, and the potential impact on customers and manufacturers, varies depending on the product and market circumstances. Any future expansion by Bunnings into more specialist retailing categories through acquisition of existing competitors will be very carefully considered by the ACCC.

    In this case, the ACCC found that specialist tile retailers compete much more closely with each other than with Bunnings. Mr Sims said:

    Specialist tile retailers have a far more extensive range, displayed in dedicated tile showrooms with specialist staff who can provide design and product advice to customers and referrals to tilers. Specialists also have stronger relationships with larger builders, and usually deliver tiles direct to work sites.
    By contrast, Bunnings generally sells small volumes of tiles in-store to DIY customers, and tilers and other trades people undertaking small jobs.

    Industry participants who spoke to the ACCC highlighted Bunnings' lack of services offered by specialist retailers such as product or design advice as a particular reason Bunnings is not a strong competitor to specialist tile retailers. Mr Sims said:

    Following the acquisition, several large and small specialist retailers will remain to compete with Bunnings in every state and territory.

    However, the ACCC did hear some concerns, primarily from other tile retailers, that a combined Bunnings-Beaumont Tiles would come to dominate tiling retailing. These concerns include, for example, that the combined firm could prevent or hinder rivals from easily accessing tiles on comparable terms, or from easily serving a significant body of customers.

    The ACCC undertook extensive inquiries with customers, local and overseas tile suppliers and competitors, and examined financial information and company documents to inform its assessment.

    Ultimately, the ACCC found that these concerns were not likely to eventuate because of the availability of many alternative manufacturers and suppliers of tiles globally, and a diverse customer base for tiles in Australia. Mr Sims said:

    There is little doubt that the proposed acquisition will allow Bunnings to compete strongly with specialist tile retailers, particularly in supplying larger builders who Bunnings has struggled to attract to date.
    Stronger competition may pose challenges for some tile retailers, but it is unlikely to lead to a substantial lessening of competition in this market.

    In considering the proposed acquisition, the ACCC has applied the legal test set out in section 50 of the Competition and Consumer Act. In general terms, section 50 prohibits acquisitions that would have the effect, or be likely to have the effect, of substantially lessening competition in any market.


    The ACCC considered the impact of the proposed acquisition in markets for the retail supply of tiles and tiling ancillaries (such as glues, grouts, sealants and tools), as well as competition at national, regional and local levels.

    The ACCC said it did not reach concluded views on the precise definitions of the markets, as it would not significantly alter the assessment.

    In its analysis, the ACCC found there are significant differences between the offerings of specialist retailers and Bunnings, meaning that specialist tile retailers, like Beaumont Tiles, compete most closely with each other and are more important to competition in tile retailing.

    While Bunnings' aggregated sales of tiles are significant, its sales on a per-store basis tend to be quite small and mainly to DIY and similar customers "off the shelf". In comparison, Beaumont Tiles and other specialist tile retailers offer a much more extensive range exhibited through dedicated tile showrooms, and they offer additional important services, such as design advice and referral to tilers. They generally also deliver tiles to customers. Some specialist retailers also have stronger relationships with larger builders, particularly residential builders, which typically involves delivering tiles directly to work sites.

    Post-acquisition, other significant competitors, as well as smaller competitors, will remain in most urban areas and will continue to compete with a combined Bunnings/Beaumont Tiles. This includes larger chains like National Tiles, regional-level chains in some states, large single-site retailers in some state capitals, online retailers and a large number of small individual retailers.

    The ACCC also considered whether, over the long term, a combined Bunnings/Beaumont Tiles may frustrate or hinder rivals from readily accessing some inputs or a significant group of customers, for example through bundling products, potentially leading to a reduction in competition.

    The ACCC concluded that the proposed acquisition is not likely to substantially lessen competition in relation to inputs, as there is a range of alternative manufacturers and suppliers of tiles globally and most tiles sold in Australia are imported.

    In relation to the potential for competitors to be frustrated or hindered from accessing customers, the ACCC noted that there is a very diverse customer base for tiles in Australia, including customers who do not require any hardware or building products beyond tiles and tiling ancillaries. This means that, even if a bundling strategy was adopted, there will remain a large proportion of customers who are not interested in a bundled offer, limiting any potential anti-competitive effect.

    Related: Earlier this year, HNN reported the move by Bunnings to acquire Beaumont's is surprising, in that this will involve Australia's largest hardware retailer in a business highly unlike its warehouse-based stores. It's possible the real growth opportunity is a move into bathroomware, taking on companies such as Reece Group.

    Bunnings to buy Beaumont Tiles -HNN Flash, April 2021

    Port Augusta

    The Upper Spencer Gulf Regional Assessment Panel (RAP) in Port Augusta (SA) recently met to discuss and approve planning consent of the proposed Bunnings store, and to hear any opposition, according to The Transcontinental.

    There was mixed support for the project, with the RAP report stating it had received 439 representations in support of the development, 11 representations of support with concerns, and six representations opposing the development.

    Of those with concerns about the project, the main points expressed included inappropriate location; high vehicle movements at proposed location; local businesses suffer; problems with design, and impact on land. It will not be a low impact business.

    Despite opposition presented, the RAP approved the planning consent. Port Augusta Mayor Brett Benbow said he was hopeful the project will have a positive impact on the community. He told The Transcontinental:

    There was some really good submissions for and against, but the panel decided it fell in line with what was required. I am happy that it has gone through for the community, and for employment, and for activity around our region.
    I think it is fantastic for the whole region, we will have people coming to our city instead of going to Adelaide. Hopefully the business will help more kids find casual work, and older people to find full-time work.
    It is a good shot in the arm, for the industry and the region itself.

    At the same time, Mayor Benbow did sympathise with local businesses that will be in direct competition with the new Bunnings. He said:

    I do feel for some of the businesses that will be impacted. It was suggested at the meeting they may need to think outside the box now and start to adjust their business to see what is coming.

    Related: Bunnings confirms its plans to enter the Spencer Gulf region.

    Port Augusta Bunnings proposal confirmed - HNN Flash #56, July 2021


    Despite the development application for the Bunnings Jimboomba store gaining approval, the retailer is currently working through some amendments to the conditions. This is a typical part of the development approval process.

    Logan City Councillor for Division 9 Scott Bannan said council and Bunnings were still negotiating. Cr Bannan told The Courier-Mail:

    The warehouse has been approved but they haven't actually bought the land yet. There is still some back and forth on the traffic management plan too.
    TMR [Department of Transport and Main Roads] hasn't approved that part yet either.

    Andrew Marks, director of Bunnings property and store development said he could confirm the development application for a new Bunnings Warehouse in Jimboomba had been approved. He told The Courier-Mail:

    However we are continuing to work with the relevant authorities on the conditions of the development approval, including roadworks. The new store would be located on Anders Street, Jimboomba and the site was chosen to service the growing areas of Jimboomba, Yarrabilba and Flagstone.
    The development is expected to create more than 95 team member positions for locals, as well as approximately 105 construction jobs.

    Mr Marks said Bunnings would invest approximately $36 million into the development.

    Cr Bannan said he believed there could be some backlash with the hardware giant moving in next door to the existing Mitre 10 outlet.

    But I ultimately believe this will be positive for the local community. Nothing wrong with a bit of competition. And it's bringing jobs which is always a positive.

    The Jimboomba Mitre 10, next to where the new Jimboomba Bunnings will be, is owned by the Woodman family, who also own the Beenleigh Mega Mitre 10.

    Before this, the Woodman family ran a Mitre 10 in West Mackay, which they have owned since 1976. Their West Mackay Mitre 10 shut down in 2017, with the Woodman family blaming the opening of a new Bunnings near the Mackay store.

    In 2017 Kerry Woodman announced the Mackay store would remain a head office for his other trade supply businesses, while Woodman's Mitre 10 stores in Sarina, Marian, Proserpine and Cannonvale would be rebranded as Porters Mitre 10.

    Related: Porters buys four Woodmans Mitre 10 stores.

    Store consolidation in Mackay, QLD - HI News, page 13

    Related: Jimboomba will be home to Bunnings' fifth store in the region.

    Bunnings store to be built next to Jimboomba Mitre 10 - HNN Flash #64, September 2021


    Bunnings has sold its unbuilt South Kempsey store on the NSW mid-north coast for $28.55 million to a Victoria-based syndicate led by real estate developer, The Lowe Group.

    Bunnings offered the property with a 10-year leaseback starting in mid 2022, when the outlet is scheduled to open. The vendor has put construction costs at $12.5 million, according to the Real Estate Source website.

    Located on 2.983 hectares at 320 Macleay Valley Highway, around 3kms south of Kempsey's CBD, the 10,999sqm warehouse will replace the Kempsey Rose Motor Inn. The region is about 420 kilometres north of Sydney, between Port Macquarie and Nambucca Heads.

    According to the Australian Financial Review, 11 freestanding Bunnings Warehouse outlets worth more than $412 million have changed hands so far in 2021.

    In June, the Bunnings Young store in NSW was bought for $11 million by a Sydney-based private investor

    A Bunnings store in Horsham (VIC) also changed hands for $9.8 million on a yield of about 5.9% in July. The 7465sqm property with a lease to Bunnings until 2025 was bought by an offshore private investor from a consortium of New Zealand-based investors.

    In June, a newly built Bunnings warehouse west of Brisbane changed hands on a benchmark yield of 4.2% after selling for $22.2 million at a portfolio auction. The 9421sqm Bunnings on a 2.17-hectare site at Plainland (QLD) sold 11% above its reserve following a bidding war between two Melbourne-based families.

    Hervey Bay store

    Bunnings is offering another unbuilt outlet in Hervey Bay (QLD) for sale, reports the Real Estate Source.

    The hardware retailer can expect about $55 million for the Pialba property, sources told Real Estate Source, which would reflect a yield of 4.2%.

    The 17,421sqm retail complex with 451 car parks, will be developed on a 4.72 hectare block at the north east corner of Main and McLiver streets, beside its existing store. Bunnings Hervey Bay is due to be completed in late 2022.

    The vendor will pay starting annual rent of $2.34 million, and with options, it can stay until 2080.

    Related: Bunnings has been given the green light for a $56 million development in Hervey Bay (QLD).

    Hervey Bay to get a new Bunnings - HNN Flash #24, November 2020
  • Sources: Australian Competition & Consumer Commission, The Transcontinental, The Courier-Mail, Australian Financial Review and Real Estate Source
  • bigbox

    Kingfisher results for H1 FY2021/22 soar

    The home improvement group's quick pivot during the pandemic worked

    Kingfisher's move to online and digital capabilities across its UK and EU retail banners worked to boost retail profit during H1. However, Q2 results were substantially down on Q1 results, signalling tougher times ahead.

    EU- and UK-based big box hardware retailer Kingfisher released results for its first half FY2021/22 (six month to 31 July 2021) on 21 September 2021. The results were highly positive, and show that the retailer has, like many essential hardware retailers around the world, managed to prosper through the difficult times of the COVID-19 pandemic.

    In terms of sales, for the entire group these came in at GBP7101 million, up by 19.9% over the previous corresponding period (pcp), which was the first half of FY2020/21. In constant currency terms, sales rose by 22.2%. The star division for sales increases was Screwfix, which produced sales of GBP1192 million, an increase of 30.4% on the pcp. DIY retailer B&Q was close behind with an increase of 29.3% on the pcp, with a total GBP2378 million in revenue.

    Overall, Castorama and Brico Depot also performed well in the half. Castorama produced GBP1237 million, up 17.3%, and Brico came in with an even GBP1200 million, an increase of 23.3% on the pcp.

    The good result for the half was the result of an overall sales increase of 60.0% by Kingfisher in the first quarter. The two French banners did very well during this quarter, with Brico Depot more than doubling its comparable revenue, and Castorama close behind at 94.5% up. In the UK, B&Q was 82.7% up, and Screwfix revenues grew by 42.5%.

    This high level of growth tailed off in the second quarter, with only Screwfix showing strongly positive, at 19.6% growth, while B&Q fell by 0.8%. In fact, Kingfisher has plans to expand Screwfix to a total of 1000 stores in the UK and Ireland, up from a previous target of 900. Launched as an online-only store in France, there are now plans to open the first physical Screwfix store there in 2022.

    In terms of profit, Kingfisher produced GBP767 million, up by 44.1% on the pcp (45.1% in constant currency terms). UK and Ireland were up by 40.8%, while France recorded profit growth of 104.1% (109.3% in constant currency terms) on the pcp.

    At the conclusion of the half there were 305 B&Q stores, 741 of the smaller Screwfix stores, 93 Catorama stores and 123 Brico Depot outlets. Kingfisher has a further 154 stores throughout other regions of the EU.

    In its trading update, Kingfisher stated:

    The third quarter has started positively, with Q3 21/22 LFL sales (to 18 September [seven weeks]) down 0.6% and the corresponding 2-year LFL [like-for-like] up 16.1%. E-commerce sales continue to progress well with 2-year growth of over 130%. The 2-year growth rate reflects resilient levels of demand in all markets, particularly the UK & Ireland.


    The company highlighted ongoing growth in e-commerce:

    E-commerce continued to be the Group's fastest growing channel in H1 21/22, with e-commerce sales in constant currency up 21%, and up 216% on a 2-year basis (excluding Screwfix: up 36% YoY, and up 258% on a 2-year basis). This resulted in e-commerce sales accounting for 19% of total Group sales in H1 21/22 (H1 20/21: 19%; H1 19/20: 7%). Excluding Screwfix, e-commerce sales penetration grew to 9% in H1 21/22 (H1 20/21: 8%; H1 19/20: 3%).

    One of the most popular parts of e-commerce for Kingfisher retailers has been click-and-collect. Kingfisher stated:

    Click & collect (C&C) sales, the largest online fulfilment channel, grew by 10% in H1 21/22, and by 277% on a 2-year basis. C&C accounted for 87% of Group e-commerce orders (H1 20/21: 90%) and 73% of Group e-commerce sales (H1 20/21: 79%).

    One of the more interesting developments is an accelerated launch of more e-commerce lockers in Poland. In answer to an analyst's question, the CEO of Kingfisher, Thierry Garnier, said:

    On Poland, you're right that it's a great country for online, so what we did already the past few months first is to add more store hubs, so now because of the geography of Poland, every store is a hub and they bring an area around stores, and allows us to operate faster, to make a faster delivery. We are operating in one hour click and collect in Poland.
    Poland is is a country that is very special because it's relies a lot on lockers. It's one of the European countries where the number of lockers is the most developed - it's really a habit. We did already test last year on lockers and we were happy, so we are currently rolling out 4000 lockers in Poland.


    Part of the increase in profit is also down to the increasing influence of Kingfisher's own exclusive brands (OEB). The company says that sales of these brands rose by 22.8% for the half, for around GBP3200 million in total sales.

    The company plans to launch an additional 10 OEBs in the second half of FY2021/22.

    Hire and services

    Another area of expansion for Kingfisher has been hire services, and home improvement services. According to the company:

    Following positive results to date from 16 tool hire concessions with Speedy Hire (located adjacent to TradePoint), B&Q is extending the service to 39 stores from September 2021. In partnership with Crystal Direct, B&Q is also testing "Made to Measure" doors and windows concessions, initially in four B&Q stores. Castorama France is piloting an equipment hire service in 40 stores, and Brico Depot France and Castorama Poland are trialling online van rental services with an app-enabled key.
    Speedy brings tool hire into more B&Q stores - HNN Flash #32, February 2021

    There is also Kingfisher's acquisition of NeedHelp, which is a marketplace for home improvement services (like Hipages). Founded in France in 2014, it was acquired for EUR10 million in November 2020. According to Kingfisher:

    The marketplace will benefit from in-store advertising and lead generation at B&Q and Castorama Poland, and the significant volume of website traffic that these banners generate, while leveraging the tradesperson network of Screwfix and TradePoint on the supply side. Early take-up has been encouraging. Brico Depot France is piloting an in-store installation service utilising NeedHelp "jobbers".
    Kingfisher acquires online DIY marketplace - HNN Flash #25, November 2020

    The company is also looking at store-in-store expansion on a concession basis with smaller B&Q outlets located inside ASDA supermarkets. The first two trial stores have opened in Roehampton and Edmonton.

    B&Q mini stores in ASDA supermarkets - HI News 6.3, page 88


    Many people in Australia's hardware retail industry found themselves schooled somewhat in how kitchens worked in the UK when Bunnings UK & Ireland launched. It turned out that kitchens made up a very complicated business, largely because British homeowners would, after a kitchen was installed, insist on a wide range of modifications - all of which would be carried under the original installation contract.

    Kingfisher's B&Q likewise struggled with kitchens while Veronique Laury was CEO. According to Mr Garnier, Kingfisher now has a profitable business in kitchens.

    B&Q after having relaunched our installation services for kitchen [found] first of all you are able to sell more. You have extended ranges and six standard categories. You could sell when you are talking to a customer on kitchen.
    Another technical thing we discover, for example, is that if a customer wants to [obtain] credit if he's able to have all together the cost of the installation, the cost of your kitchen in the [one] credit proposition, it helps. So all that are critical things to [help] develop the basket, and overall we are very happy with the basket, with the profit with all the programs of B&Q.
    On quality it's very much a question of model and execution. In the past we had our own colleagues doing installation and [this was] managed centrally. So in fact [now] we are doing exactly the opposite. We are using third party [installers] and it's managed locally. Therefore you have a small number of fitters, of trade people, managed by your store team, creating strong relationships. Today we are very, very happy with the result.


    It's interesting to contrast Kingfisher with Australia's Bunnings. In terms of overall revenue, Kingfisher will likely make around AUD23 billion in the current financial year, which means Bunnings is about 70% the size of the UK and EU retailer. Yet the two companies have very different approaches to business strategy, market development and, especially, risk taking.

    That's only to be expected because they operate in very different economies, across different demographics, and in very different competitive environments.

    During Mr Schneider's term as managing director, revenue has increased from $11.5 billion for FY2016/17 (he was appointed managing director of Bunnings Australia in March 2016) to $16.9 billion for FY2020/21. Allowing for inflation, that's a net gain of 40%, or an average 10% per year - a record any CEO at a major Australian retailer would be very happy to have.

    So there is good evidence that the innate conservative nature of Bunnings is not misguided. It is very much a "heads down, stick to your business" type of a company. Its most recent strategy is to take on risk via acquisitions and expansions, as with Beaumont Tiles (recently approved by the Australian Competition and Consumer Commission) and Tool Kit Depot, its trade-tool competitor for Total Tools and Sydney Tools.

    The real surprise is that potential competitors to Bunnings have not seen what companies such as Kingfisher are doing, and developed these strategies as an answer to the dominance of Bunnings.

    The main reason for this is, perhaps, that the primary insight Kingfisher has to offer is that the hardware store as store is no longer the primary area for expansion. The store remains a crucial contributor to overall revenue, but growth resides more in services, or, ideally, in a combination of products and services, such as is represented by B&Q's kitchen sales. Not to mention rentals, and the potential to effectively combine NeedHelp services with store sales. Add in online, and it could be a matter of ticking a few boxes, paying via credit card, and having a tradie show up at your door with the purchases and a brief to install them.

    What prevents this migrating as a competing business model to Australia are two things. First of all, this model just doesn't appeal to the "traditional" hardware store retailer - and most current owners of hardware stores are more in that traditional mould.

    Secondly, even though it has great potential for earnings, and has demonstrated good security of investment, hardware tends not to attract many younger businesspeople, even those with a speciality in retail. The supplier industry is so geared towards the "traditional" store, that it can be hard going for newcomers.

    As US big box chain Lowe's Companies' experiment with Masters Home Improvement in Australia, and Bunnings experiment with Homebase in the UK indicate, trying to expand hardware retail across divergent cultures is a very big risk. That means it's unlikely Australia will see a foreign competitor emerge.

    However, what we could see would be a hardware-adjacent company expanding into the hardware market, using the same service-oriented tools and techniques that Kingfisher is developing. A Screwfix-like company, but oriented towards DIY, for example, might have real potential in this market.


    USA update

    Lowe's at Goldman Sachs retail conference

    Home Depot has launched a smart home app that is meant to be an all-in-one for smart appliances and accessories the big box store sells

    Lowe's president and chief executive officer, Marvin Ellison along with executive vice president and chief financial officer, David Denton presented a "progress report" of the retailer's transformation program at Goldman Sachs' 28th Annual Global Retailing Conference.

    Among the issues discussed, Goldman Sachs analyst Kate McShane asked about demand in 2022 on a macro level and how it planned to maintain its revenue gains from the pandemic.

    Mr Ellison responded by saying:

    ...We think our results, not only the first half of this year but throughout last year, reflects that this is a new focus, this is a new commitment at Lowe's to being consistent and having a high level of execution, and serving our customers well. We also look at macro indicators that really have little to do with the pandemic that will continue, we believe, to create a little bit of a tailwind not only for the back half of this year but going into next year.
    We look at macro indicators specific to the age of housing stock. We look at the fact that we still have historically low interest rates. We look at the end supply for homes that is currently in an imbalance that is driving customers' desires to move into homes and there's just not a large supply on the market which leans customers to want to invest more in their existing homes.
    We look at home price appreciation. And we said in many years in home improvement, you can always determine the health of the market when a customer installs a granite countertop and they see it as an investment and not an expense...
    And so when we look at the macro indicators, we feel really confident that the home improvement marketplace is going to be rather robust going into next year and ... for years to come. It's our objective to execute our Total Home strategy in a way that we can drive Pro, DIY, online, installation services and continue to elevate our product categories to just take advantage of the demand and we feel confident we can do that.

    Mr Denton added by saying:

    ...I just would also just add a couple of things to Marvin's point, that the home is becoming such a critical asset to almost everyone as people now are, despite people coming back to work, there's still going to be a lot of flexibility to be able to work from home. And so the utilisation of the home is much more intense now.
    And roughly two-third of the products that we sell are some type of repair and maintenance type products. So I think the demand for those kind of products are going to continue to be elevated and so a nice tailwind for the sector.
    And then secondly, I do think through this whole process over the last 24 months, consumer behaviour has changed. I think those companies that are well capitalised, that are invested in the omnichannel capabilities, like Lowe's is doing, are going to have an advantage.
    At the same time, consumers have very specifically consolidated trips into bigger boxes. And I think those two trends from a macro perspective are likely here to stay. I think we're nicely positioned to capitalise on those trends as we lean into the back half of this year and into the next couple of years into our business.

    Ms McShane points out that Lowe's was in the middle of a transformational strategy during the pandemic, and asked about how the events of the last 18 months have impacted it.

    Mr Denton said:

    The good news is, as we looked at our plan prior to pandemic and we look at our plan now, the road map's pretty consistent on the items that we're executing upon. So we feel really strong that our plan is accurate, correct [and] appropriate to drive a lot of value over time.
    We did pivot our plan from a timing perspective. We pulled forward ... investments in the omnichannel space that were on the road map two and three years from now into 2020 and into '21 to make sure that we now have touchless lockers across our entire platform. We have curbside across our entire platform. We've increased our assortment online really dramatically through this period of time.
    And so, we've really pivoted to make sure that we're meeting our customers' where they want to be met ... I think that's one pivot that we've made. Absent that, our road map still maintains largely intact as we think about the back half of this year or into the next couple of years.

    Ms McShane asked about the customer dynamic between the Pro (tradie) and the DIY customer. She said:

    For a long time, you've talked about the Pro being 20% to 25% of your sales. And I think on the Q2 [investor] call, you mentioned you were closer to 25% of sales. I know the overall pie has been growing, given the strength of the business over the last 18 months. But what is the linchpin or maybe multiple linchpins getting Pro to be a bigger piece of the overall pie?

    Mr Ellison responded by referring to the retailer's "foundational elements". He said:

    ...We called it retail fundamentals. And it would simply be what are some of the things that every great retailer does consistently well.
    And so we wanted to start by just creating what I'll just describe as a stable foundation. And when you think about the Pro, as we surveyed our Pro customers three years ago and asked a simple question, 'What do you need from us, from Lowe's, so that you can put us back in your consideration as a place where you can shop?' And from that, we narrowed the focus down to the small and medium-sized Pro because we felt as though we had a greater opportunity to gain share with that specific segment out of Pro.
    And we also felt that the opportunity was available for us to address needs that we felt were not being addressed in that customer segment. And they basically said to us at that time, you need better, more consistent service levels, basic things like loading assistance when we pull up to a store, like having consistent staffing at your Pro desk with someone that actually has basic knowledge that can help us solve some of the problems that we need.
    We need to have job lot quantities. Your inventory levels are too low, they're too inconsistent, too sporadic. It was those kind of baseline things. And so we made investments in getting those things done. And then they said to us, 'We need to have more pro-related national brands.'
    Lowe's had pivoted some years back to put private brands to try to serve the Pro customer and Pro customers are really reluctant to switch from a national brand to a private brand. And so we had to start to remedy some of those bad merchandising decisions that had taken place over the last 5 to 10 years. So, we call those things retail fundamentals.
    And so now the question is, now that we have a good baseline in place, how do we take share? How do we continue to grow? So we now are launching Pro Loyalty. We were operating in a segment for a customer that is really interested to earn points and save based on the volume they spend, and we couldn't even address it because we had no really credible program. So now we're rolling out Pro Loyalty.
    In addition to that, we're rolling out a CRM tool that's best-in-class, designed specifically for the Pro customer for a couple of reasons. Number one, if you go back in the past, our associates working in our Pro business in the store had no idea the value of a customer when they walked in. They couldn't tell you if that customer was a multimillion-dollar annual spend or a new customer. They couldn't tell you if it was an electrician or a plumber. And they couldn't tell you, equally as important, what the customer was buying, what they should be buying and what they were not buying.
    So now we're rolling out a CRM tool that'll give us the ability to know the customer intimately and serve them a lot better. You will continue to see us enhance our credit offering which for a small and medium customer is a really important part of their business. And we're going to just aggressively go after additional national brands for the Pro customer ... as we continue to add these different brands to our assortment.
    We think by doing these things really well, in addition to things like re-platforming our LowesForPros website to the cloud that just happened the first half of this year and continuing to improve our job site delivery, we think we have nothing but increased opportunity to continue to take share with this segment of Pro and to continue just to drive overall top and bottom line performance in our stores.

    Ms McShane also asked about brand initiatives at Lowe's. She said:

    I know that's been something that you've been building on. It goes to something pretty broad like CRAFTSMAN but then you have some very specialised brands for plumbers, electricians, et cetera, that you're building back. So I wondered if you could maybe tell us how that's going, how big of an ask has it been to go back to some of these brands and ask them to come back to Lowe's? And where do you think you are in that journey?

    Mr Ellison responded:

    Well, it's all about credibility and I'll just be very candid. I mean relationships matter and credibility matter, doing what you have stated you will do and making sure that you're committed to helping these various suppliers grow their business.
    Lowe's made decisions in past management teams to transition to private brands to chase a gross margin rate, not understanding that this is a customer segment that is highly dependent and highly committed to a national brand because of familiarity and comfort level. So, we've had a chance to bring brands like Simpson Strong-Tie, SPAX fasteners, Bosch, Spyder, SharkBite, LESCO.
    We just launched FLEX which is a large power tool brand in the UK that we think can have relevance here in the US. And I can go on and on. These brands were in a very small presentation assortment to now we're making large commitments.
    DeWalt is still the largest pro power tool brand. We're working to continue to expand our assortment in that category. And so we've made great progress. We have a couple of coveted brands on our list that we continue to work. And we're not going to stop until we feel confident that we are giving our Pro customers what they need...

    Ms McShane asked for elaboration about Lowe's focus on the small and midsize Pro.

    Is that the long-term strategy? Is there any interest or would you ever look towards a larger-sized Pro?

    Mr Ellison said:

    I think the short answer is we want to start with what we think is the foundational segment in the Pro space and the foundational segment is small and medium-sized. In my estimation of working with this customer for many years, if you can't serve that customer well, you have no chance of serving the larger Pro. And so what we didn't want to do is ... to start to chase a larger customer, trying to go after a larger fish, so to speak and we're not taking care of the fundamental baseline of the customer segment.
    And so we think when we can get to a comfort level and a market share level with the small and medium-sized Pro, we think we earn the right then to pursue a larger, more industrialised customer. But one of our key objectives and one of the key things we've done the last three years, we've been very disciplined around not trying to overreach or trying to add too many elements to our strategic plan.
    We feel like the reason why we performed so well during the pandemic in 2020 and we've outperformed in the first half of 2021 is because we've been very disciplined around the customer segments that we're going to pursue and we've been very disciplined around our initiatives and how we service those customers, and how we execute on a daily basis. So we'll earn our way to a larger customer but for now, the small to medium-sized customer is our target.

    Seeking Alpha provides the full transcript of the Lowe's presentation at Goldman Sachs here:

    Lowe's CEO presents at Goldman Sachs' 28th Annual Global Retailing Conference

    Related: Lowe's "Total Home" strategy is about growing the retailer's market share.

    Lowe's unveils "Total Home" strategy - HNN Flash #27, December 2020

    Home Depot smart home app

    The big box retailer said its new app, Hubspace, is designed to make smart home setup seamless for the average consumer, and easier to control devices from anywhere.

    Home Depot product development/smart home merchant, Nick Millette discussed its main benefits with Yahoo. He said Hubspace promises to simplify the smart home experience, and requires no additional equipment to run. It works with a large number of compatible devices that are built to be easy to install in homes. All users need to do is scan the QR code of the device they wish to connect with and this takes them to a few steps away from smart home integration. Once the products are set up within Hubspace, users can also easily integrate them with an Amazon Alexa or Google Home smart assistant. Mr Millette said:

    While studying the space we found that one of the main issues with smart home was the product setup process. Once you take it out of the box, getting [a product] connected to where you can actually use it was something that for the general population was a little bit too complicated.
    There were too many failures, too many things that could go wrong. So we spent a lot of time making sure that our solution would be as seamless and easy as possible for your average non-techy consumer.

    He explained that more affordable price points, and the desire of Home Depot's consumers for a cheaper smart home alternative, led to the creation of the app.

    One of the true driving values of Home Depot's proprietary brands is we make great products at great prices. So we've made smart home more affordable for the average consumer.
    There's big sustainability benefits to smart home, convenience, and savings benefits that our customers have recognised over the past couple years. We've really seen strong growth and adoption of smart home and we're just trying to follow the customer with where they take us and provide them a great option.

    Home Depot has also built the ability for customers to use third party apps if they want to. Alongside the app launch, the retailer has released a line of compatible products that include smart light bulbs, smart plugs and ceiling fans. Mr Millette sadi:

    We've started out with products in our lighting and electrical department. Lots of lightbulbs, recess lights, ceiling fans, smart plugs, landscape lighting transformers. The way we've built the Hubspace app and platform was really to be able to grow over time to all the product categories in our store, but we've started with lighting and electrical.
  • Sources: Seeking Alpha, Goldman Sachs and Yahoo
  • bigbox

    Big box update

    Bunnings store to be built next to Jimboomba Mitre 10

    Bunnings in NZ found not guilty of misleading customers, according to a ruling by the Auckland District Court

    Jimboomba is set to be home to Logan's fifth Bunnings store, with a development application recently being approved by Logan City Council in Queensland, reports The Courier-Mail.

    The Bunnings outlet will be situated next door to the locally owned Mitre 10 by brothers, Kerry and David Woodman. They also own the Mitre 10 store based at nearby Beenleigh. Jimboomba Mitre 10 has been open since 2018.

    The development application indicates the new 15,776sqm Bunnings store will be moving into 22-26 Anders Street in Jimboomba (QLD). There will 379 carparking spaces, a dedicated service vehicle laneway, and the building will not exceed 15 metres in height.

    There are plans for the store to operate from 6am to 9pm, seven days a week. Included on the site will be a main warehouse area, main entry, bagged goods canopy, outdoor nursery, timber trade sales area and a cafe.

    As part of the development, the intersection between Spring Street and Anders Street will have a variety of changes, including the addition of traffic islands.

    New Zealand pricing

    The Auckland District Court has ruled that Bunnings' "lowest prices" advertising is not misleading for customers in New Zealand, based on a report in the Waikato Times.

    New Zealand's Commerce Commission had brought 45 charges alleging that Bunnings had breached the Fair Trading Act by making false or misleading representations as to the price of its goods, and that it engaged in conduct liable to mislead the public.

    It said its "lowest prices" claims in advertising gave the impression that all of Bunnings' products would be cheaper than its competitors'. But the Commerce Commission said price comparisons showed that was not always the case. Bunnings had denied that its claims were false or misleading.

    Since 2002, the hardware retailer had offered to beat a competitor's lower price on the same stocked item by 15%. In 2011, the commission wrote to both Bunnings and Mitre 10 (separate to Independent Hardware Group's Mitre 10 group), warning that claims of having the lowest price could breach the Fair Trading Act.

    Mitre 10 stopped its advertising with a lowest price tagline but Bunnings did not. In 2014, Mitre 10 complained to the commission.

    The commission carried out two informal price checking surveys in 2015 and then commissioned a survey to conduct a comparison. The results were provided the following year and the commission then wrote to Bunnings. It said there was a risk of its representation being false or misleading because Bunnings' prices were not always lowest. It also pointed to Bunnings' own data that showed it did not have the lowest prices on 18.6 per cent of products surveyed.

    The commission also said the "lowest price guarantee", in which Bunnings would beat a lower price from a competitor by 15%, was misleading because a customer would assume it would be rare for Bunnings to be beaten by price.

    It asked Bunnings to stop advertising with the "lowest price" claims but the company did not. It said its own reviews showed it had the lowest prices on 90% of products and the steps it would take to adjust prices when a competitor offered something cheaper allowed it to be confident its advertising was not false or misleading.

    It reviewed its prices twice a year and checked pack sizes to ensure that matches with competitors were "like for like".

    The judge said in his decision that there was no evidence that there were complaints from members of the public or other competitors.

    The judge said the lowest price guarantee made it clear to consumers that it was possible there could be lower prices elsewhere.

    It is a clear signal to consumers that not everything at Bunnings stores will be at the lowest price. It provides a consumer with a remedy in the event the consumer finds that to be and wishes to take advantage of the [guarantee].

    The judge also said the customers targeted by Bunnings' advertisements would be aware of the type of stores that Bunnings operated and would know that it was not possible for the stores to know on a daily basis exactly what competitors were charging.

    He said there was no evidence that any item identified in Bunnings' advertisements was not available at the cheapest price possible.

    Expert evidence was that none of the price comparison surveys would be considered reliable statistical evidence. The judge said:

    Overall, I am not willing to draw a conclusion that the evidence from the surveys is sufficiently robust and statistically reliable for me to extrapolate a conclusion that Bunnings prices were not the lowest, so as to conclude that the advertising was liable to mislead.
    The flaws in the various surveys are such that I am not prepared to accept that the Commerce Commission has met the evidential burden of proving the advertising, for the purpose of the charges, was liable to mislead the public.

    He said the "lowest price" advertising were taglines, and often accompanied by displays of specific products for sale at prices specified.

    These are not deceptive ... the remedial nature of the [guarantee] means a consumer would accept there may be other retailers selling products sold by Bunnings for a lower price.

    All charges were dismissed.

    The Commerce Commission works in a similar way to the Australian Competition and Consumer Commission. It is a New Zealand government agency with responsibility for enforcing legislation that relates to competition in the country's markets, fair trading and consumer credit contracts.

    Related: Background information on Bunnings' pricing dispute in New Zealand can be read on page 28 here:

    Bunnings' ongoing legal battle over price in NZ - HI News 6.2, March 2019
  • Source: The Courier-Mail and Waikato Times
  • bigbox

    Home Depot presents strategies for investors

    Goldman Sachs 28th Annual Global Retailing Conference

    The big box retailer remains focused on how it will be a great everyday low-price value retailer for the customer

    As part of the Keynote Lunch, Home Depot's chairman and chief executive officer, Craig Menear spoke about store investment, product innovation and digital at the annual Global Retailing Conference held by investment bank and financial services company, Goldman Sachs.

    Kate McShane from Goldman Sachs asked Mr Menear about Home Depot's ability to continue to grow market share after likely winning a good amount during the pandemic.

    Mr Menear responded by saying that market share is the reason why it made accelerated investments in the business from 2018 to 2020. He said:

    We did that to position ourselves to be able to continue to grow share at an accelerated rate.
    If you look at that time frame in that period by triangulating multiple points of data, our best guess is that we gained about 275 basis points of share which translates to about USD10 billion of incremental volume per year.
    You throw out about USD2.5 billion off on that. That's a heck of a return on the investment that we made. And so one of the things the pandemic taught us was that the areas that we were making those accelerated investments actually were critical to us being able to serve and grow the business the way we did over the last 18 months.
    And so as we look forward, we'll continue to invest at more of a steady rate, I think 2%-ish of sales on a CapEx (capital expenditure) basis and we'll do that in areas that the customer continues to take us as it relates to engagement in an interconnected way. We really believe that the customers are blending the physical and digital worlds to complete their projects. And we want to make that as seamless as possible.
    If you think about the second quarter, we ended the second quarter at USD660 per square foot of sales. Part of the investments that we'll make going forward is to make sure that we're building out capabilities so that we never hit an operational cap on our ability to grow sales.
    And so you can expect for us to continue to invest and that includes continue to invest in the supply chain, continue to invest in our digital capabilities, continue to invest in operational capabilities within the store, to be able to handle those increased comp flows as we try to grow this business beyond where we are to 200 billion in sales.

    Ms McShane referred to Home Depot's ability to improve the productivity of the store, because it has been quite some time since Home Depot has opened more bricks-and-mortar stores. She asked:

    So that seems to have been like the biggest driver of your comp for the last couple of years?

    Mr Menear provided the following answer:

    For sure, and we're not done there. We believe that we still have opportunity through both process improvement, technology to continue to drive efficiency in how we operate our stores, and how we do that for the customer when they choose to blend the physical and digital worlds together, buy online and pick up in store. We know there's opportunity there. I would say that, with a supply chain that we're building out, we're done with the supply chain. And the goal is to be done at the end of 2022 that would be in many ways the equivalent of adding almost 200 stores to our network, if you think about it from the capability standpoint of driving sales. It's just sales happening in different way, being delivered to the customer, and engaging in the capability for big and bulky with our pro customers through flatbed delivery. So think of that investment as a, give or take, 200 store equivalent opening.

    Ms McShane asked about product innovation after seeing a good degree of innovation with cordless and battery-operated tools. She said:

    I wondered if you could help us categorise the level of innovation currently, how important innovation is to the business today or what you're facing next year versus how it's been in the past, and just how does the innovation pipeline look?

    Mr Menear said:

    Sure. It's incredibly important. It's a hallmark of Home Depot and our merchants. They are always looking for great product, innovative product at a great value. And we talk a lot about major technological advances in cordless technology. For several years now, the batteries and the motors and the electronics and these tools are really at the point that you can cut the cord in power tools and many of our customers are.
    In the further development of these tools, you're not just replacing the cord, you're replacing, in many instances, a gas engine. So the same technology is going across outdoor power equipment. So you're seeing lawnmowers, you're seeing riding lawnmowers, and certainly string trimmers and blowers.
    So the cordless technology is one of our larger innovation categories. But I love the fact we see it across the store. There are so many areas that we don't talk about. And we go bay through bay in the store, there is exciting innovation throughout the store ... The appliance industry ... it's incredible technology that's going into appliances. We just launched a new paint with Behr, we believe it is the best paint in the market, scoff-resistant, stain-resistant, one-coat coverage et cetera. This is brand new ... But you go through areas like building materials, whether it's mould-resistant drywall, lighter drywall, insulation that is adding higher R values at less cost and noise reduction, faster setting concrete at higher PSI levels. [Also] integrated LED lighting. The flooring category - you can get an incredible value tile or wood-look flooring and now laminate flooring that's easier and faster to install, all in lowering the cost of the project for either the DIY or the Pro customer.
    So innovation is incredibly important. Our merchants are working with our supplier partners, working with our customers, customer-backed innovation, deep integration in development with our key supplier partners. To the extent, we're signing NDAs [non-disclosure agreements], we're going way up the funnel in terms of raw customer research and use case development of what kind of solutions we want to provide for the customers. So super important. We have all sorts of measurements, the famous 3M model, a percent of sales from new products, new products that we've introduced. And all are very, very robust and something we watch very carefully.

    Ms McShane asked about Home Depot's digital penetration in 2022 compared to its current efforts in 2021.

    Mr Menear explained:

    Yes, we never actually talk about digital penetration from a planning standpoint, whatsoever. Our belief is always that the customer will ultimately determine what that is, based on how they choose to engage with the Home Depot. And you know ... obviously when the when the pandemic was really hitting hard - you know we constrain customers in store - we kind of forced the customer to go to the digital world, so that we could serve more customers.
    We saw our penetrations last year peak in the 20s range. By the end of the year, that was back down to about 14.5% and we've hovered in that 14.3%, 14.4% range for the first half of 2021. We really look at it as a capability in a way for a customer to engage with a Home Depot, more so than it's a separate business model. And we really believe that customer will choose how they want to engage with us. And so we don't plan a penetration at all. We're building up capabilities to enhance the digital experience. As Ted [Decker] mentioned, we've got opportunity with the core side of the business as we build out HD Home and products that finish rooms.
    We know that the customer engages the store in about 55% of the orders to be able to pick up product. And many times, that's because they want something online for their project. But then they go into the store and buy more products to complete that project as well. So, it's really how we approach it ... is to let the customer determine where that ultimate water line flows.

    Ted Decker, president and chief operating officer, added:

    And I think when the dust settles, certainly we accelerated it [by] a year or two. With that digital engagement, as Craig said, it peaked at 20-ish. It's come back down in the mid-teens. When it's all said and done, we might have advanced a year or two.
    What we like about it though is getting that digital engagement to our app in particular. And through even first half of this year traffic to the Home Depot app, which we've continued to upgrade and build out capabilities certainly for our Pro and our loyalty customer, in particular the engagement with our app in terms of downloads, in terms of traffic growth, in terms of engagement and purchasing on the app itself, that has all continued to expand through 2022. So we love the engagement with our app particularly with our Pro customer.

    To read the full transcript, go to:

    Home Depot at Goldman Sachs 28th Annual Global Retailing Conference
  • Sources: Seeking Alpha and Goldman Sachs
  • bigbox

    Big box update

    Bunnings Jolimont store gains approval

    Adelaide Tools to become Tool Kit Depot as the business expands into Western Australia

    Bunnings' proposed store in Jolimont (WA) has gained approval from state planners, following a meeting by the Inner North Joint Development Assessment Panel (JDAP).

    The West Australian reports that Metro Inner North JDAP members - including Subiaco councillors Matt Davis and Rick Powell - unanimously agreed that owner Bunnings Properties Pty Ltd could build a four-storey building with two basement levels of parking, a bulky goods showroom on the first floor and ground floor, along with a cafe or restaurant and shop. Third specialist member John Syme said:

    This might end up being one of the best Bunnings stores in Australia ... there are no reasons why we shouldn't approve this.

    The hardware retailer will move from its Salvado Road, Subaico location to 616 Hay Street in Jolimont.

    However there was opposition to the store development including from residents at the neighbouring St Ives Centro retirement home. Many aired their concerns at the meeting, including St Ives Centro resident Michael De Leo, who said it would bring an "inevitable considerable increase in traffic and consequently pedestrian safety".

    His view was Bunnings warehouses belonged in commercial areas, not in an area with "mainly residential with a mix of small and low activity businesses". He said Bunnings should stay at Salvado Road.

    St Ives Centro resident John Carroll said planners made no allowance for the elderly yet "active" people living at the retirement home.

    City of Subiaco acting manager of planning services Anthony Denholm told the panel that traffic had been "duly considered".

    Related: Retirement home residents oppose the Jolimont store.

    Big box update: Jolimont - HNN Flash #62, September 2021

    Tool Kit Depot

    Bunnings recently announced that Adelaide Tools will become Tool Kit Depot, positioning the professional tools business for expansion into Western Australia starting in October. The first Tool Kit Depot store will open in Belmont with a further three stores expected to open this calendar year in the Perth and Peel regions.

    The Tool Kit Depot sites will average about 2000sqm in size and stock about 10,000 product lines across power tools, outdoor power equipment, construction and safety equipment.

    The Tool Kit Depot name was chosen because it creates instant familiarity for trade customers, positioning the store as a destination for their needs, while a new logo, featuring a dog, conveys the qualities of partnership, loyalty and trust the business aspires to. Mike Schneider, Bunnings managing director, said in a statement:

    We're really excited about our plans for the future of the business under the new name, Tool Kit Depot. Earlier this year we opened a new Adelaide Tools store in Parafield where we trialled new concepts and the response from customers was incredibly positive. It's given us confidence in the evolution of the format that we need to take the business into WA and beyond.
    Our first four stores will launch before Christmas in WA creating over 150 team member roles, and we're really proud to be creating opportunities for locals to join our really experienced team.
    These stores will build on the success of Adelaide Tools in South Australia and the full-service offer and genuine expert advice the team are renowned for.

    The stores will sometimes be near Bunnings warehouses, but will be differentiated from the hardware giant, according to The West Australian. He told the newspaper:

    We want to make sure it is a distinctly separate business from a trading point of view and a customer experience point of view because we are really conscious that the customers going there are going to be shopping at Bunnings for other products.

    The WA openings will allow the group to test its plans over a bigger base. Mr Schneider said:

    If there are things that need to be ironed out in WA, we're clearly going to need to address those. But we have a really good level of confidence. The rollout once we leave WA will be into the markets where we think we can have the greatest impact.

    He has said there is potential for as many as 75 stores across Australia and New Zealand.

  • Sources: The West Australian, Bunnings Media and The Australian
  • bigbox

    Big box update

    Bunnings store build in Caboolture

    Objections to Jolimont development and legal exchange over potential names for Adelaide Tools business

    Construction plans for a Bunnings store in Caboolture (QLD); concerns over proposed Jolimont development in WA; family members with links to the Adelaide Tools acquisition are concerned about the potential future use of the family name; and a number of community clubs are recipients of Bunnings Rugby Assist in New Zealand.


    Major construction is due to start soon on the Bunnings store that is part of the Big Fish Business Park located on Pumicestone Road, Caboolture (QLD). Moreton Bay Regional Council approved a plan for a $32 million Bunnings Warehouse in January 2021.

    Bunnings area manager Andy Stewart told the Caboolture Shire Herald the store is expected to open late 2022. It will include the main warehouse, outdoor nursery, timber trade sales area, cafe and playground on more than 13,000sqm with parking for 400 cars.

    The business park is on a 15ha site has a retail precinct that will be anchored by Coles and Chemist Warehouse. It will service not only the growing Caboolture region but also the future residents of Caboolture West, a new suburb-sized greenfield development project north of Brisbane.

    Related: Bunnings gains approval for a store in Caboolture (QLD).

    Caboolture (QLD) will get a Bunnings store - HNN Flash #31, February 2021


    The four-storey Bunnings store proposed for 616 Hay Street in Jolimont (WA) is on a site next to a retirement home. The project has received more than 165 submissions, including 135 opposing the development, with many of the objections coming from the 300 elderly residents at the neighbouring St Ives Centre retirement home, according to The West Australian.

    Most complaints focus on noise and traffic, with claims speed humps in the area do little to deter hoons, putting those using walking frames and wheelchairs at risk when trying to cross Hay Street.

    The development plan includes two basement levels of parking for about 420 cars, a retail store, and a mezzanine level for offices. The ground floor would include a playground, a nursery, a bagged-goods area and two commercial tenancies.

    It was being considered by the Inner North Joint Development Assessment Panel on Friday, 10 September 2021.


    Subiaco council recommends approval for Bunnings store - HNN Flash #61, September 2021


    It has been reported that Bunnings is considering using the name of the Dontas family, well-known in Adelaide, as part of a major expansion of a new tool retail brand across Australia and New Zealand.

    However members of the Dontas family have objected to Bunnings' potential use of its name, according to The Australian. The family, which has interests in the hardware and racing industries, said plans by Bunnings to use its name "has serious implications for us, our children and future generations".

    The Dontas brothers - Mark, Troy and Supercars driver Craig - have historic links to the Adelaide Tools business, now part of Bunnings. The business runs deep in the family after their grandfather, Sam Dontas, founded Western Auto and Electrical Service in 1936, and the name was subsequently changed to Electric Power Tool Services.

    Following Sam's death in 1991, their aunt, Marissa Peach (nee Dontas), and husband Robert took control of the business in 1996, with the Adelaide Tools brand name launched in 2012.

    Bunnings completed its acquisition of Adelaide Tools from the Peach family in May 2020 for an undisclosed price. (Marissa and Rob's son Adam Peach remains involved with the business.) Bunnings announced that it will be rebranded and expanded to as many as 75 outlets across Australia and New Zealand.

    The new name has not been revealed but a search of the IP register by The Australian shows Bunnings' trademark applications for "Dontas", "Dontas Tools", "Dontas Workgear" and a Dontas logo, "Onya Tools", "Project Tools" and "Benchmark Tools".

    The use of the family name is the bone of contention for the family and lawyers' letters have been exchanged. Trademark lawyer Dave Stewart, of Bennett + Co, said in a statement to The Australian:

    This [use of the Dontas name] is contrary to the wishes of a significant part of the family who had a historical part in establishing the iconic South Australian business over 70 years ago.

    Troy Dontas told The Australian:

    Bunnings purchased the business named 'Adelaide Tools'. I don't feel they have the right to use our family name nor should it have been part of any transaction. We don't think Bunnings knew what they were buying.

    Bunnings' commercial chief operations officer, Ben Mcintosh, said new names were being considered to help the company's growth outside SA.

    One of the names is Dontas which recognises Adelaide Tools' founder Sam Dontas and the company's proud 70-year history.
    We're disappointed that some members of the family aren't supportive of this option. However, Dontas is just one of a number of names we're considering.

    In addition, Mark and Troy separately own three Stihl dealerships in SA, which they said is "perpetuating the association" of their family name with trade and retail customers. Mark, who appears in the national Stihl television campaign, said the situation was "unacceptable". He said:

    Bunnings don't sell Stihl products, but it will be perceived that we have a connection to our opposition by way of our family name. Our family name is rare, so it's only natural these perceptions will happen. Bunnings seem determined to profit from our family name.
    They really don't have right to use our family name, and I feel they don't understand the goodwill that our family name has in the South Australian tool industry connected to our businesses.

    Craig is very recognisable in the Supercars racing scene and has built a sports commercial business. He carries endorsements by conflicting brands such as Total Tools, Bosch Tools, and other tool trade-connected brands. He said:

    It doesn't help anyone for Bunnings to be selling under the 'Dontas' name while I am an ambassador for Total Tools. This will create a lot of confusion. It has already been flagged as a conflict, and I am set to lose hundreds of thousands of dollars in endorsements.

    In an exchange of lawyers' letters, the Dontas brothers learned Bunnings regarded the purchase of Adelaide Tools entitled them to use the "Dontas" name. Mr Stewart said:

    Bunnings' purchase of Adelaide Tools would have included Adelaide Tools' goodwill. But Adelaide Tools was never known as 'Dontas Tools'.
    Either the Peaches or Bunnings seem to have made a mistake in thinking that the purchase of the goodwill included acquiring the right to use the surname of the founder of the business.
    The Dontas brothers don't think Bunnings started down this path deliberately intending to profit from the industry-famous Dontas name, but they think Bunnings has taken things a step too far.

    Related: In June, Bunnings managing director Michael Schneider unveiled the growth plans for Adelaide Tools during his presentation at Wesfarmers' strategy day.

    Bunnings Strategy Day 2021 - HNN Flash #48, June 2021

    Bunnings Rugby Assist (NZ)

    Twenty community rugby clubs in New Zealand will receive a share of NZD300,000 worth of Bunnings Warehouse products and materials after being selected as the inaugural recipients of Bunnings Rugby Assist. They will be able to improve their facilities including repairs to flood damage, leaking roofs and upgraded bathrooms for women's players.

    Five clubs have been selected to receive support to the value of NZD30,000 and another 15 will receive support to the value of NZD10,000 as a result of Bunnings' partnership with New Zealand Rugby (NZR) as the naming rights sponsor for the National Provincial Championship, Farah Palmer Cup and Heartland Championship.

    New Zealand Rugby general manager - community rugby, Steve Lancaster, said the response to Bunnings Rugby Assist has been very positive with a third of New Zealand rugby clubs applying. He told Sun Live:

    Grassroots rugby plays a vital role in the game we love, it's fundamental to keeping the game strong. We're thrilled to have Bunnings Warehouse in our corner, providing some extra support to club rugby in the form of Bunnings Rugby Assist.

    Bunnings currently employs over 4,900 team members in New Zealand. In FY20, the big box retailer participated in more than 5,200 community activities, helping to raise and contribute more than NZD1.1 million dollars for local community groups. NZ Bunnings director Ben Camire said:

    The passion and dedication shown by the club volunteers and communities who applied for Bunnings Rugby Assist is really encouraging. They share our goal of helping to build grassroots rugby, which is at the heart of every community in this country.
    Bunnings has a longstanding commitment to making a meaningful contribution to the wider community, so we are really excited to be able to make a positive difference to grassroots rugby through Bunnings Rugby Assist.

    Bunnings Rugby Assist ambassador and All Blacks legend Stephen Donald said he is looking forward to seeing the positive impact of the program on local rugby clubs and their communities.

    The support I've experienced and witnessed from local club rugby is so important to the players and keeps the sport thriving. It's crucial for the next generation of rugby legends that we support grassroots rugby.

    Related: New Zealand Rugby and Bunnings Warehouse announced a three-year deal earlier this year.

    Bunnings sponsors New Zealand Rugby - HNN Flash #40, April 2021

    Related: In Australia, the Bunnings Helping Hand program has been giving community AFL clubs the opportunity to access grants worth AUD30,000

    Bunnings grants for women's football - HNN Flash #43, April 2021
  • Sources: Caboolture Shire Herald, The West Australian, The Australian and Sun Live (New Zealand)
  • bigbox

    Big box update

    Subiaco council recommends approval for Bunnings store

    Vaccine hubs have opened in select Bunnings stores that are available to all staff and tradie customers

    After a long debate, councillors from the City of Subiaco in Western Australia have recommended the development application (DA) of a Bunnings store for approval to the Metro Inner North Joint Development Assessment Panel.

    POST Newspapers report that residents packed the public gallery and raised their concerns about the store development at the meeting of Subiaco council held recently.

    Last year, Bunnings lodged plans for a $28 million store after it purchased a site on Hay Street, Jolimont (WA) in 2017 for $13 million. The retailer withdrew plans for the Jolimont site after it received strong objections from the local council and community over traffic and design issues.

    At the time, regional operations manager Hayley Coulson said there had been extensive community consultation for the new store, which will replace the Bunnings at Homebase in Salvado Road, Subiaco. She told POST Newspapers:

    Bunnings has substantially modified the design from the original DA lodged in 2017 to address the feedback on our previous planning application. These modifications include the addition of a customer vehicle entry and exit point in Hay Street and the installation of gates at the rear laneway...
    The rear building facade is proposed to be heavily landscaped with greenery, and building levels have also been adjusted along Hay Street to allow direct pedestrian access to the front of the store.

    If approved, Ms Coulson said the store would represent an investment of more than $55 million, create 120 jobs during construction and employ 30 extra people when completed.

    All team members from the existing Homebase Subiaco store would transfer to the new store once complete.

    Related: Bunnings Subiaco could move location and into larger store.

    Big box update: Subiaco - HNN Flash #59, August 2021

    Vaccine hubs

    In an interview with ABC News, Wesfarmers CEO Rob Scott, provided an update on the vaccination hubs at Bunnings stores in Sydney. He said:

    ...So we have started off with some pilot programs at our Kings Grove store in Bunnings in Sydney, and we've opened that up to all Wesfarmers team members across all of our businesses in Sydney, but also to tradies. That is a really important segment of people that do travel around the community, and we really need to help them get vaccinated. So there's been good take up, but it's still early days. And we if there is good support there, then we'll look to roll that out more broadly.

    When asked whether it would be rolled out on a national basis, Mr Scott said:

    Well, at this stage just in Sydney...this is something that we're working on hand in hand with the state health departments. And it's really based on need. So if we look at Western Australia, for example, there are plenty of opportunities to get vaccinated. There's no real urgent need around having other sites available.
    But in places like Sydney, where the state health departments are trying to stop people travelling too far, and there is just such high demand for vaccination there at the moment. We're looking at any way that we can help.

    Wesfarmers will also keep paying workers who cannot work because of COVID-19 and said it will spend between $2 to $4 million a week, extending an earlier pledge to keep paying workers self-isolating or left with no meaningful work by COVID. The company will pay all staff until at least December. Currently there are 2000 employees in isolation, mostly in NSW.

    In terms of having to stand down staff and store closures in NSW and Victoria, Mr Scott told ABC News:

    ...[W]ith some of the stores that aren't able to be open, there isn't meaningful work available for some of our teams. But fortunately, we have had the opportunity to do click and collect which is creating jobs. So...we have made a commitment to all of our team members, if they're required to isolate or if there's no meaningful work available, then we will continue to pay them through to the end of this calendar year.
    And there's various reasons for that, but a big part of it is that it's our team that has helped us deliver such a phenomenal result over the last year. It is our team that we rely on to get through COVID and come out the other end in good shape. And we can just see firsthand the incredibly difficult toll that extended lockdowns are having on our team members and their families...

    Click here to watch the video:

    Bunnings launches drive-through vaccines as Wesfarmers warns of lockdown effect - ABC News

    Related: Earlier this year, Bunnings offered the use of its car parks as mass vaccination hubs.

    Bunnings car parks as vaccine hubs? - HNN Flash #42, April 2021
  • Sources: The Australian, POST Newspapers, ABC News (The Business) and Sydney Morning Herald
  • bigbox

    Bunnings results FY2020/21

    Big-box retailer maintains pandemic gains

    While Bunnings maintained the high level of sales from the pandemic boost, the second of the year showed limited growth on the previous second half. Bunnings continues to grow its digital services and to expand its trade offer.

    Wesfarmers, the parent company of big-box home improvement retailer Bunnings, has released its results for FY2020/21. The company produced strong results, driven by a solid contribution from Bunnings, and a surprising performance by its low-cost department store division, Kmart.

    Overall Wesfarmers revenue was $33.9 billion for the year, up by 10% on the previous corresponding period (pcp), which was FY2019/20. Earnings before interest and taxation (EBIT) was $3.8 billion, an increase of 18.8% over the pcp. Net profit after tax (NPAT) came in at $2.4 billion, up by 16.2%.

    Kmart produced relatively modest growth in its revenue, which increased by 8.3% to $9,982 million. EBIT, however, came in at $787 million, up a considerable 53.7% on the pcp. As analyst David Errington of Bank of America Merrill Lynch commented, Kmart's performance was in some ways the "star" of these earnings results.


    Bunnings produced performance that was strong, but within expectations for the year. Revenue was $16,871 million, up by 12.5% on the pcp. EBIT increased by a healthy 18.4% to $2301 million. Total store sales growth was 12.4% (a figure which excludes sales related to Trade Centres, Frame and Truss and Adelaide Tools), down from 14.7% in the pcp. For the year, online penetration - the percentage of revenue that originates in online purchases - is recorded as 2.3%, up from 0.9% in the pcp.

    Some of the highlights touched on in the prepared remarks of the managing director of Bunnings, Mike Schneider, include adding 10,000 additional employees, as demand increased during the year, launching a new version of the website in April 2021 in both Australia and New Zealand, which made over 100,000 products available for online purchase, the launch of a new trade desk format, and the success of the company's enhanced Power Pass app, which processed 2.1 million transactions during the year.

    A tale of two halves

    Exceptional events such as the COVID-19 pandemic tend to disorient expectations, so it's useful to quickly rehearse the expected pattern of performance from Bunnings. "Typical" years see the first half of the year - which includes both the strong demand for renovations and DIY running from (roughly) September to December, with Christmas and other holiday purchases - outperforming the second half of the financial year. For example in FY2017/18, the first half was responsible for 52.3% of the revenue, and 63.4% of the EBIT, while in FY2018/19, the first half produced 52.3% of revenue, and 57.3% of EBIT.

    For FY2019/20 this shifted around, with the first half producing only 48.5% of revenue and 51.2% of EBIT. That bulge in revenue and EBIT in the second half was caused, of course, by accelerated buying during the period from March 2020 through to June 2020, as the initial lockdowns in major cities sparked high levels of DIY purchases.

    In the reported year, FY2020/21, there is something of a return to the "typical" pattern - though it is a little more complex than just seasonality. The first half did produce 53.7% of the revenue and 57.9% of the EBIT, but this had more to do with complex interactions within a COVID-19 economy.

    In pure revenue terms, the first half saw sales increase by 24.44%, while EBIT grew by 33.87%. In the second half, revenue grew by 1.22% and EBIT grew by 2.22%. It is this kind of performance which gave rise to this fairly complex statement by Mr Schneider during his prepared remarks:

    In the second half total store sales increased 0.7% or 25.3% on a two-year basis. Store-on-store sales declined by 2.1%. Consumer sales moderated from mid-March as the business began to cycle the elevated growth in the prior year. We saw continued strong demand from commercial customers in the second half as our focus on our trade business continued to gain traction.

    The underlying suggestion here is that it's better to reference the results from two years prior, rather than the immediately prior year. There is some validity to that, as pandemic spending lifted revenue and EBIT to a higher overall level. On that measure, revenue in the second half increased by 24.93% and EBIT was up 39.63%.

    Mr Schneider also did go into more detail about the second half in answer to an analyst's question.

    I think it's fair to look at the second half of the year just ended first. You know, we certainly saw strong commercial performance throughout it, we did sort of call out the moderation in consumer sales. I think the second half of the FY2020 year was sort of growing mid 20%. And obviously, we were comping some pretty big numbers in the second half of FY2021. But commercials remain strong.
    We've got quite a significant sort of impact right across the Bunnings network at the moment in terms of stores that have got different trading restrictions. We've just got about 45% of our network currently trading on online only, which is it was 169 stores this morning, but five more in ACT have moved across to that, in the course of the morning. We've got all of our Victorian stores trading, for trade, open for trade, but closed for retail and online. About 45% of our New South Wales stores, 100% of their New Zealand stores.
    So you can sort of imagine that there are going to be some significant impacts. New Zealand is virtually closed, we've got probably, you know, maybe 100 lines that we can provide, which are only essential and emergency repair products for customers in our home [section].

    The reality, of course, rests somewhere between the two views. One way to effectively manage what are close to "windfall" gains is, of course, to invest the excess funds in acquisitions, to expand the business and hopefully come closer to matching future expectations. While Bunnings' proposed acquisition of Beaumont Tiles was more complex than that, it would certainly have fit somewhat in that mould.

    However, the Australian Competition & Consumer Commission (ACCC) has extended its review of the acquisition. It was originally scheduled for resolution by 5 August 2021, but has now been delayed - for the moment - indefinitely. HNN is aware that ACCC researchers are currently seeking more information from a range of sources in the tile industry.

    There is also, of course, Adelaide Tools (and we still don't know what it will eventually be called), but that will be developed slowly. Mr Schneider did reference this during his prepared remarks:

    Adelaide Tools helped us cater to more of the products specialist trade customers need. The team opened its first new format store in Parafield, South Australia, which has traded strongly. It's provided us with confidence in the evolution of the format that we'll be taking into Western Australia in the next few months.


    While Wesfarmers has, in general, always been very cautious about forecasts, in this case the company has released a more comprehensive view. The formal accounting results document contains this statement:

    Bunnings' sales for the 2022 financial year to date declined 4.7 per cent on the prior corresponding period, with solid growth from commercial customers, offset by a decline in consumer sales as the business cycled elevated demand in the prior period. Sales growth remained strong on a two-year basis at 24.4 per cent.

    Mr Schneider expanded on that statement in his prepared remarks:

    Bunnings' trading performance in the 2022 financial year is expected to moderate following extraordinary growth recorded in 2021 financial year. The operating environment is challenging with state based lockdowns, supply chain constraints and price inflation on some materials or products, creating complexity and uncertainty.
    Recent and current government restrictions have impacted trading and sales declined 4.7% in the first seven weeks of the 2022 financial year. Pleasingly, sales growth remained strong on a two-year basis. In the long term, we remain confident in our strategy and the opportunities ahead for our team and business.
    We're focused on evolving our home and lifestyle offer in store and online, deepening relationships with commercial customers, delivering an even better service experience across every customer touchpoint, while maintaining strong cost discipline.
    We will continue to accelerate investment in our digital offer by providing retail customers with a more personalised digital experience, and introducing a new fully transactable website for commercial customers.


    One of the most interesting aspects of the Wesfarmers results presentation was that analysts seemed to more fully engage with the digital plans of Wesfarmers. In part this was triggered by the managing director of Wesfarmers, Rob Scott, announcing an investment of $100 million in building a digital framework for the overall business. That effort is to be overseen by Nicole Sheffield, who will come onboard as a managing director in November 2021. According to a statement by Mr Scott:

    This is a new role for Wesfarmers, reflecting the strategic importance and growth potential of our data and digital strategies, and Nicole will work in close partnerships with the divisions.

    In response to an analyst's question, Mr Scott went into more detail about the digital transformation Wesfarmers has planned.

    So each of our retail businesses has had their own ecommerce systems and each have gone through a fairly significant investment, there have been some pretty significant replatformings. A business like Officeworks has been on this journey for a very long time. All the work that's going on in the supply chain side also has a view on how do we keep optimising outcomes for ecommerce as well as the store network.
    So all of that is progressing. And it's progressing really well from my perspective. The broader investment around ecosystem, particularly relates to the, you know, the customer data interfaces and flows. Some of the additional functionality and enhancements that we're thinking are going to be important for the future. But ultimately, the core ecommerce capabilities, are delivered within the divisions.

    One data point that Mr Schneider revealed in answering an analyst's question was this:

    We're processing something like about 40,000 to 45,000 online orders a day across Sydney and Melbourne, which is a real testament to the work that the team in store is doing and digital team have done and the success of the replatforming that I talked about in our notes.

    This is an indication of just how well Bunnings has done in transforming into an active provider of ecommerce services. It's not just a matter of whacking a payment system onto an existing website, but rather involved substantial repurposing and training across a large network of stores - in the middle of a pandemic.


    The difficulty with the current moment in retail is that there are a range of factors at work. Just as a start, the pandemic itself has created a field of great uncertainty. One of the major questions at the moment is how much of that uncertainty is due to the characteristics of SARS-CoV-2 and the disease it causes, COVID-19, and how much is it down to the governmental response to the pandemic, and the politicisation of that response?

    Primary pandemic effects

    In terms of the challenges of SARS-CoV-2 itself, these have been fairly accurately described in what has become known as the "Doherty Paper", more formerly named the "Doherty Modelling Report for National Cabinet" (DMRNC). The diagram below (which HNN previous published) represents a narrow slice of the modelling provided in the DMRNC, but makes, we believe, the central point of the report.

    Note that one of the pre-conditions for this particular modelling to apply is that it takes place against a background of low- to moderate-level Public Health and Social Measures (PHSM) - which is all the social distancing, mask-wearing and QR code check-ins practices.

    The important point made by this chart is that, in just about all things pandemic, while governments tend to think in binary terms, the reality of the pandemic is that it exists more in a continuum. There is a continuum of practices from 50% vaccination through to 80% vaccination. The only difference between the 60% mark and the 80% mark is the frequency and duration of lockdowns. There are no magic numbers. A community is not sitting at 69% vaccination, then goes to 70%, and everything changes.

    What should stand out in this diagram is that even with 70% of the populace vaccinated, if you have non-optimal test, trace, isolate and quarantine (TTIQ) levels, you would still need to spend at least 22% of the time in strict lockdown. That would mean two weeks of lockdown out of every nine-week period. So, in terms of general freedoms, effective TTIQ is very important.

    Further, if we look at the current situation in Sydney and, increasingly, all of New South Wales (NSW), arguably this chart really doesn't apply. That's because in at least the Greater Sydney region there is not "non-optimal" TTIQ - there is virtually non-existent TTIQ. Once caseloads go over 5000 a week, the exponential nature of contacts mean tracing coverage will be inadequate.

    That's because TTIQ doesn't reflect the transmission potential (TP) or the "R" number that track actual rates of spread, it reflects the number of contacts. With a conservative contact number of just two, 5000 cases leads to 10,000 first generation contacts, so 20,000 second generations contacts, and then 40,000 third generation contacts, for a total of 75,000. It's not possible to manage that many.

    While this situation may seem dire, there is a way out that does not involve simply giving up - which is close to what both the NSW state government and the federal government seem to be suggesting. Very simply there needs to be a drive to get all of Australia to at least a 50% vaccination rate, and move Victoria up to a 60% rate as quickly as possible, but to focus as many resources as possible on getting greater Sydney (at the very least) to a vaccination rate of between 85% and 90%.

    That means concentrating more federal government resources on NSW, to the apparent detriment of other states and territories. However, the fact is that NSW is a problem for all of Australia, as it is the main source of contagion for the entire nation.

    The difficulty with this commonsense approach to the problem is mostly political, at the moment. The federal government did not manage vaccine acquisition well, and suggesting such a plan highlights this failing. However, as we can expect adequate vaccine supplies by the end of September 2021 (they will not magically appear on 1 September, as seems to have been suggested), HNN is optimistic that something like this plan will be adopted by early October 2021, which means some resolution may be in place by January 2022.

    Doherty modelling rewards consideration - HNN Flash #58, August 2021

    In terms of Bunnings, this could mean that the coming "high" season for renovations will be more subdued than in past years, driven also by a degree of "pull forward" tasks such as house painting. In the past, lockdowns did help to drive DIY, but it seems this effect has diminished, and might even have reversed. It does seem to HNN that, on balance, at the very least a high level of restrictions on gatherings will be in place over Christmas 2021.

    There is also the possibility that there will be harsher restrictions on construction activity on both big and small builds.

    On the more positive side, families might also start to conserve funds for the possibility of going on holidays in 2023, rather than spending more on their homes.

    Secondary pandemic effects

    While the primary effects of the pandemic are very, very important over the short term of the next six months through to February 2022, it is the more medium- to long-term effects that will influence the hardware retail industry.

    These secondary effects are complex. Take, for example, what we can expect to happen to the housing industry - an important driver for sales, especially for independent retailers, but also Bunnings as well. The Housing Industry Association (HIA) has declared that there will likely be a slowdown at the start of the 2022/23 financial year. HNN expects that slowdown to being earlier than that, at around March 2021. It is driven by a range of factors, including increases in house prices, backlogs in construction creating lengthy completion delays, and the end of effects from government stimulus programs such as HomeBuilder.

    Another non-pandemic factor to take into account is that there will likely be a federal election sometime between March and May 2022, which tends to create a period of uncertainty.

    Where things get really complex, of course, is when we come to issues such as how much of the secondary pandemic effects really reflect something more of a structural change in markets. For example, we've seen a sharp rise in work from home (WFH) activity since mid-2020. Families spending more time at home, and using the home for a wider range of activities, including home schooling and entertainment has been one driver behind elevated spending on renovations.

    A big question remains, however, over how much of WFH will be retained through 2022. Studies would seem to suggest that WFH is popular with a majority - though certainly not all - of workers under 30 year old, but it is less popular with more traditional managers. Conservative forecasts estimate it will work out to around 20% of total work hours, of the equivalent of employees spending one day a week in WFH.

    That will have consequences not only for how much people depend to spend on their homes, but also the distribution of working families. With fewer days (or even no days) spent commuting, there could be a population shift of particularly higher-paid families to the outer suburbs and ex-urban regions. That could mean that Bunnings finds it has more stores in some areas than are needed, and new areas where it needs to establish coverage.

    Background changes

    With all this activity created by the pandemic, it is easy to forget about some of the ongoing societal changes in Australia, which will (hopefully) have more influence in 2022. The major change that HNN believes is becoming more pressing in home improvement is that the market is splitting. It's a situation where 85% to 90% of all revenue comes from the "traditional" hardware market, but over 80% of future growth comes from that other 10% to 15% of the market.

    This is beginning to create difficulties in the home improvement industry on a global basis. Most retailers, for the moment, are choosing to concentrate on the traditional market - understandably, though this means that some growth opportunities are missed. For example, it is arguable that hardware retailers were unable to retain more of the new DIY customers that came their way in the pandemic because they could not pivot to meet their needs.

    That said, the one retail-focused company in Australia that has grasped some aspects of this problem is actually Wesfarmers. What Mr Scott seems to have understood, and analysts are now coming alive to, is that digital commerce, including ecommerce, represents a way to accommodate this shift in the market.

    In dealing with purely traditional markets, ecommerce is hard to justify, as it essentially involves selling the same products to the same people at a lower rate of profit as you have to employ expensive delivery services at a discount to the customer. Or, to put that another way, companies have invested heavily in a specific delivery technology, the store itself, and ecommerce discounts the effectiveness of that investment.

    In reality, though, digital commerce is a way for retailers to access entirely new markets, as well as providing extra services to existing markets. One part of the emerging DIY market, for example, is heavily invested in things such as 3D printing, CNC routers, electronics and next-generation smarthomes (which rely on central processing more than the internet of things).

    Bunnings might not want to sell 3D printers in-store, but there would be a viable market for the retailer to sell these online. It's just that the relationship shifts with those customers from being a physical operation with a virtual addition, to being a virtual retailer with a really useful physical operation on the side.

    In HNN's view, Mr Scott's central insight is that this form of digital-enhanced retailing is set to deliver a significant advantage through the 2020s. We saw Wesfarmers take a big leap forward in retailing when it developed, under the guidance the company's current chairman of the board Michael Chaney, the Bunnings model. It seems likely Mr Scott will develop what amounts to the digital equivalent to that model - one which has a much wider and more significant place in Australian retail in the decade to come.


    Lowe's results of FY2021 first half

    Revenues increase even as DIY sales drop

    In Lowe's first half revenues rose by 11% while net profit grew by 28%. Transaction numbers fell, but average value rose, with an increase in higher-value tickets. Online penetration increased to 9% of revenues, with 60% of online orders picked up.

    US-based big-box retailer Lowe's Companies has released its results for the second quarter of FY2021, completing its first half results. Net sales came in at USD52.0 billion, up by 10.68% on sales for the previous corresponding period (pcp) which was the first half of FY2020. Operating income was USD7.5 billion up 25.34% on the pcp, while net earnings were USD5.3 billion up by 28.21%.

    Looking at results for the first quarter of FY2021, comparable transactions rose by 11.3%, with the average ticket (invoice) at USD93.81, a 13.1% increase. Transactions over USD500 rose by 47%, transactions between USD50 and USD500 were up 15%, and transactions under USD50 were up 9%.

    The same numbers in the second quarter showed a reduction. Comparable transactions fell by 12.5% (though Lowe's points out that compared to the second quarter of 2019, they rose by 8%). The average ticket increased by 10.3%, to reach USD93.68. Transactions over USD500 were up 17%, but those for the range USD50 to USD500 fell by 10%, and those under USD50 also fell, by 14%.

    Delivering his opening remarks for the second quarter results, the company's CEO, Marvin Ellison, stated:

    As anticipated during the quarter, we saw a decline in DIY demand versus last year, as many families transition back to pre-COVID purchase patterns and weekend mobility after Memorial Day. But because of the agility of our Total Home strategy, we were able to capitalise on Pro demand.

    One of the achievements that Mr Ellison chose to highlight for Lowe's was an improvement in the company's delivery model.

    In this new delivery model, product flows from the bulk distribution centres to cross-stock terminals directly to customers' homes, bypassing the stores altogether. This replaces a legacy store delivery model, where we hold appliances in stock rooms and storage containers behind our stores and then leverage store-based trucks and associates to deliver these products to customers' homes.
    To say this legacy process is inefficient would be an extreme understatement. The new market-based delivery model is already driving higher appliance sales, improved profitability, lower inventory, higher on-time delivery rates, and improved customer satisfaction.

    Joe McFarland, executive vice president - stores, outlined some of the progress Lowe's has made in online retail:

    Our online penetration for the quarter was 9%. And with approximately 60% of online orders picked up in the store, our dedicated in-store fulfilment teams are an integral part of Lowe's omnichannel customer experience.
    We are continuing to leverage technology to improve efficiency in the customer experience. Whether customers get their orders at the front desk or through curb-side or do their favourite option, our new pick-up lockers.


    Analyst Michael Lasser from UBS asked how Lowe's would handle a forecast slowing of the DIY market, given that most analysts predicted the company could be disproportionately affected by that event. Mr Ellison responded:

    I'm not saying that is wrong. I think that also may consider that we're not going to improve our Pro business. As I mentioned in my prepared comments, we've been working diligently for 24 months to really have a solid Pro business. One of the reasons why we delivered a 32% two-year comp, is because 49% of our Pro comp drove that on that two year basis.
    So if you look at it in isolation, Michael, that probably is a true statement. But it's a dynamic business, dynamic in the nature that we're improving our Pro business. Reflected by the results, dynamic in the nature that we're going to continue to take market share with the DIY customer.
    With the things that we're launching in Decor, how we're enhancing the Allen + Roth brand. We just acquired Stainmaster as a brand that we're going to expand. I think that the dynamic nature of DIY and our growth in Pro, I think we'll put that synopsis into question.

    Mr Ellison's answer was backed-up by David Denton, the company's chief financial officer.

    Just don't forget that what has happened here over the last 18 months is a re-emphasis back on the home, and what you're seeing is, despite the fact that the market is open - or the US market is opening up - you're still seeing a large contingent of work-from-home, school-from-home, utilising the home for other activities other than a just dwelling.
    So I believe that over time, there is a secular trend and tailwind to this industry, both from a Pro and from a DIY perspective. I assume demand will mitigate a little bit, but it's not going to fall off the floor either.

    In response to a question by analyst Steven Zaccone of Citigroup about online sales, Mr Ellison affirmed a commitment to omnichannel.

    On the penetration question, we'll probably end the year around 10% and we are purposely not trying to set penetration targets. We're really trying to be more customer-centric and create an environment for customers to shop any way they choose.
    When we talk about omnichannel, that's an overused term lately, but in essence, we just want to give the customer choices to shop in-store, online, pick up in a locker, curb-side, in-store, ship from store, and just provide a multitude of options. And we'll let the penetration land where it lands.


    Every hardware retailer in the US (and most other developed markets) is today facing the problem of determining the nature of the changes that have been caused by the COVID-19 pandemic. While there has been (and continues to be) some wishful thinking that DIY purchases will maintain an elevated level as compared to 2019, there's little evidence to support that view.

    It is true that some homeowners have picked up the "DIY habit". The majority, however, used the pandemic lockdowns to perform tasks they had put off for some time, or to make transitions that they had already planned.

    One of the real difficulties - in Australia, the UK and the US - has been that retailers have not really changed much about their stores or retail methods to better suit the potential markets that are emerging. To cite one simple example of that, as people have moved to working from home (WFH) during the COVID-19 pandemic, they've found it necessary to upgrade their home technology resources.

    With many virtual meetings being conducted over services such as Zoom or Microsoft Teams, one important upgrade is the home network. You will find that the "instant upgrade" many people in the tech industry made was to move from WiFi links to their router to Ethernet cable - Cat5e or Cat6. That is a classic DIY project - just about no one is going to hire a professional cabling service to add a couple of 10m long links to a router. Yet there has been little if any push to enable projects of that kind at hardware stores in the US, the UK or Australia.

    What we're seeing here is much less a business problem, and much more of a cultural problem. The emerging reality is that the hardware retail market is dividing along lines which are difficult for traditional retailers to navigate. On one side of the divide is the "traditional" market, which is responsible for perhaps 85% to 90% of all sales volume. On the other side is the "non-traditional" market, often more associated with tech industries and skewing younger, which makes up the remainder.

    There are two factors which make this a difficult situation. The first is that the non-traditional market is responsible for 90% of the market growth potential, while the traditional market has been in slow decline since 2010 or so. The second factor is that the non-traditional market also represents a much higher level of profit margin associated with higher value products.

    One glimpse into what is being suggested here is represented in the two maps of the US in the image below. The top map is taken from a Houzz study in the US, looking into demand for architectural and interior design services for the third calendar quarter of 2021 based on its own surveys. The bottom map is provided by the Computing Technology Industry Association (CompTIA) and relies on US government statistics to represent the employment density of workers in technology industries.

    Houzz research CompTIA research

    There are some caveats to this comparison. The top, Houzz map is based on US Census regional divisions, not states, while the bottom map is based on states. There is not an exact correspondence in any sense. Yet it is evident that those places with higher level of tech employment tend to have a higher demand for design services in 2021. That feeds directly into demand for home improvement products, in both the DIY and Pro markets.

    What makes the effects of the COVID-19 pandemic so confusing is that they have intersected with both markets. The traditional market received a boost, and so did the non-traditional market. It is possible that more than the DIY versus Pro growth arguments, the key to the future is working out the balance between trad and non-trad markets.

    To take one category where this division can be seen clearly, let's look at office chairs. This is evidently an expansion market, as homeowners discover that spending 10 hours a day sitting in their old office study chair leads rapidly to various forms of discomfort. Both Lowe's and its main competitor, The Home Depot, offer a wide range of ergonomic office chairs, but none of these chairs has a truly recognisable brand name. Even worse, there seems to be almost no online reviews for these chairs - even though the ergonomic chair review is a popular topic on YouTube.

    This brings up a really wide range of factors that affect home improvement retail merchandise and sales. The one established chair company that has really "stepped up" to the home office market is Steelcase, with its Series 1 and Series 2 chairs. These offer a sturdy, durable and ergonomically refined task chair for between USD400 and USD600. There are multiple, highly positive reviews of these chairs online.

    But would Steelcase really want its chairs to be sold by Lowe's? And would Steelcase, under any circumstances, offer the kind of margins Lowe's might insist on?

    While we've seen a shift over the past eight years, and accelerating over the past three, to move to towards a better omnichannel experience, many of the questions about how to achieve that have been, to a large extent, answered. The next challenge to improving revenues and EBIT is likely to come from understanding how to integrate divided markets, from both the retailer to customer and retailer to supplier perspectives.


    Big box update

    Facebook's Workplace for employee engagement at Bunnings

    Munno Para West store sells for $48.8 million and Supercars will return to Victoria in late October for the Bunnings Trade Phillip Island SuperSprint

    Bunnings managing director - Australia and New Zealand, Michael Schneider, recently spoke at the Workplace Transform APAC 2021 Facebook live event, according to a report in Mumbrella. Some of his comments include the following:

    Coming into 2020, there was a really strong sense of positive momentum and great engagement with our customers, and with our team. We were really driving a medium to long-term strategic agenda of business evolution and improvement. During March to April 2020, the pandemic came to Australia and business was quickly turned on its head.
    In times like that, you really need to find the strength and the resilience to be able to support your team, care for the people around you who you love and really make sure that you're making good business decisions. As a company we've been able to pull together to support our team, with a focus of keeping our customers and teams safe, particularly in our retail stores. There's a need to be really resilient, really focussed, and stay very committed to that idea of caring for the people around you, because in doing that, they're caring for you as well.

    Mr Schneider also spoke about creating the 'Challenge Accepted' initiative and how it contributed to the workplace remaining "fun and safe" during unprecedented times, which sees Bunning's employees from across Australia and New Zealand compete in competitions and challenges for the chance to win prizes, and donate to communities in need.

    On one of the many live streams that Bunnings has done, one of our young managers in one of our stores actually asked a question on whether or not we were really live-to-air during the livestream, and the challenge he put to me was that presenting on camera, would I drop down and give him ten push-ups, and that really got us thinking about ways that we could create challenges within our business to engage our team, but also to use that as a way to reward and recognise a team through monetary prizes and other gift incentives.
    Some prizes you were able to donate to different community groups to support them through various challenges. It's given the team a great opportunity to be competitive with one another right around Australia and New Zealand, but also do a lot of good for their mental health by staying active, having fun and having a laugh, and also providing funds to much-needed community groups across Australia and New Zealand.

    Mr Schneider said it was Workplace from Facebook which has helped lead the internal teams at Bunnings to a more engaged and happier work environment.

    During 2020, we recruited close to 10,000 new team members, growing our workforce by 25%. Tools like the Workplace provide a really important role, because they allow us to connect and engage with all of our team members, share content that's relevant, share information that's really important for our team members to be hearing.
    Particularly changes with our operating model, when governments introduced different restrictions, to make sure our team members know we are on top of things. More importantly, it's an opportunity to listen to our team members and hear from them what's on their mind, ways that we can support them, and also to create that care and culture that's vital right now. We have managed to stay really connected and engaged by using tools like Workplace for Facebook.

    To read more about the event, go to:

    Workplace Transform APAC 2021 Facebook live event - Mumbrella

    Related: Bunnings uses social enterprise tool, Workplace from Facebook.

    Employee engagement gets social - HI News, page 19

    Munno Para West store

    Property fund manager, Charter Hall has paid $48.8 million for a Bunnings Warehouse facility located on a 4.11ha site on the corner of Frisby and Curtis Roads in Munno Para West, approximately 40 kilometres north of Adelaide (SA).

    It is fully leased on a 12-year lease expiring in August 2028, with options to extend to 2064, and generates annual net operating income of $2.075 million, according to a report in the Adelaide Advertiser.

    The property has been added to Charter Hall's Direct Industrial Fund No.4 (DIF4), which targets fully leased properties with long leases and structured rental increases. The deal was brokered by Colliers' James Wilson out of Sydney, Brisbane-based Chris Maher and Adelaide agent Alistair Mackie.

    Mr Mackie said the tight yield set a new benchmark for South Australian Bunnings warehouse investments.

    The market-leading Bunnings Warehouse covenant, combined with its strategic location within Adelaide's booming northern growth corridor, generated unprecedented purchaser engagement.
    The campaign highlighted the significant amount of unsatisfied local high net worth investor and fund capital looking to be placed into the local South Australian market.

    So far this year, 11 Bunnings warehouse sites have been sold, at an average yield of 4.55%.

    Related: The Bunnings Munno Para West store is located in a fast-growing commuter suburb.

    Big box update: The Munno Para West (SA) outlet is up for auction - HNN Flash #56, July 2021

    Bunnings Trade Supercars

    Phillip Island in Victoria will host the ninth round of the 2021 Repco Supercars Championship, with Bunnings Trade the naming rights partner of the three-race event in late October. It will mark the first Supercars round at Phillip Island since 2019.

    The two-day event will be the final hit-out before the Repco Bathurst 1000, which will be held across November 4-7.

    The Phillip Island round will also headline the Bass Coast Festival of Motorsport, which will be a three-day celebration of Phillip Island's rich history of racing on both two-wheels and four dating back to 1927.

    Supercars CEO Sean Seamer thanked the Australian Grand Prix Corporation (AGPC) and the Victorian Government for their support of the category's return to one of Australia's most historic circuits. He said:

    We are thrilled to be able to confirm today that we will be returning, with fans, to Phillip Island in October. Working with AGPC and the Victorian Government, the Bunnings Trade Phillip Island SuperSprint will feature something for all fans.
    ...We hope to see fans line the circuit in October for what promises to be two action-packed days of racing. We're very pleased one of our long-standing partners, Bunnings Trade will be our naming rights partner for the new event and we're grateful to have them on board for our trip to Phillip Island in October.

    The 2021 season will resume at Winton (VIC) in early October.

    Related: Bunnings Trade announced an expanded partnership with Supercars, taking on naming rights for key events.

    Bunnings Trade sponsors Perth SuperNight event - HNN Flash #35, March 2021
  • Sources: Mumbrella, The Adelaide Advertiser, Australian Financial Review and Supercars
  • bigbox

    The Home Depot FY2021 H1 results

    Home Depot sees sales up over 18%

    Home Depot saw DIY sales dip, but sales to the "pro" (tradie) market pick up as homeowners bought into larger projects, and high timber prices inflated invoices. The company is positive about future growth, though it expects a shift in successful categories.

    US-based big-box hardware retailer The Home Depot (HD) has released its results for the first half of its FY2021. Sales for the half were USD78,618 million, up by 18.6% on the previous corresponding period (pcp), which was the first half of FY2020. Operating income (EBIT) was USD12,420 million, up by 32.9% on the pcp. Net earnings for the period were USD8952 million, an increase of 36.1%.

    The average ticket (transaction cost) increased by 11.3%, while the number of transactions went down by 6%. One driver behind the increased transaction cost value was higher prices on items such as timber. There was also a shift during the second quarter towards bigger projects, with the number of transactions worth more than USD1000 increasing by 24%. This is seen as a sign of increased activity by "pro" (tradie) customers. In particular, these larger transactions featured products such as timber, vinyl plank flooring, gypsum and pipe and fittings.

    Prepared remarks

    During the conference call announcing the results, Craig Menear, the chairman and CEO of HD commented that there had been an ongoing shift in the sales pattern during the half:

    During the second quarter, we did observe some changing consumer patterns in the US as the US economy opened up. This has manifested itself in several ways.
    We have seen a shift in pattern of sales within the week as our weekday sales performance has actually strengthened relative to the weekend. We attributed this to consumers returning to travel and other recreational activities. And while the consumers return to pre-pandemic activities, we continue to see them engage in home improvement projects. We also see customers more comfortable taking on larger projects as evidenced by the continued strength with our pro customer, which outpaced the DIY customer for the second quarter in a row.

    Ted Decker, HD's chief operating officer, commented on the performance of some categories:

    During the second quarter, 10 of our 14 merchandising departments posted positive comps, led by kitchen and bath and timber. During the second quarter of this year, we saw single-digit negative comps in paint, hardware and indoor and outdoor garden. It is important to note that these were some of our strongest performing departments during the second quarter of last year. On a two-year stack basis, each of our departments posted healthy double-digit comps.

    Mr Decker commented that there was positive momentum when it came to professional purchases.

    We're encouraged by the momentum we are seeing with our pros. Growth with our larger pros continues to outpace that of our smaller pros, and they tell us that their backlogs are long and growing. In fact, the National Association of Home Builders remodelling index hit all-time highs during the second quarter. And during the quarter, we saw many of our customers turn to pros to help them with larger renovation projects.
    This can be seen in the strength of several of our kitchen and bath categories, like in-stock kitchens, tubs and showers and vanities, all of which posted one- and two-year comps above the company average.

    Richard McPhail, the company's chief financial officer, saw positive signs in the construction market and the overall economy, but admitted that uncertainty was still a key factor:

    Customer engagement and demand for home improvement is healthy. Housing remains strong, and we see a supportive environment for home improvement spending as we look out over the next several years. That said, there is still a significant amount of uncertainty in the broader environment as it relates to the evolution of the COVID-19 pandemic and the new and spreading variants. As we've previously shared, we do not believe we can accurately predict how the external environment will evolve and how it will ultimately impact consumer spending.

    Investment analysts

    Michael Lasser of UBS asked one of the most critical questions, which is how the medium-term market in DIY would likely develop. Mr Menear fielded that question, and replied:

    Michael, it's a great question. It's something we're watching carefully as the consumer gets back to more normal environment. What we did see is - the consumers in our research would suggest this as well - consumers are taking on more projects. They are larger projects and have a tendency to hire a pro to do them.
    And as a result, we've seen our pro business strengthen for several quarters in a row, with the last two quarters where the pro outperformed the DIY customers for the first time since the pandemic started. And so, we're very optimistic about where the pro business goes and the strength of that pro business, and we're focused on making sure that we can take care of those pros along with our DIY customers but feel like there's solid opportunity to continue to grow.
    Pros tell us their backlogs are bigger than ever. Consumers continue to tell us the home is more important than ever and that they have a longer list of projects.

    Kate McShane of Goldman Sachs asked if customers were tending to trade up in their purchases, replacing existing items with upgraded versions.

    Mr Decker replied that this was a trend he could see:

    I would say, yes, we continue to see the trading up. It's not as clear as I used to report on it just because of the inventory situation, and we're seeing lots of substitution of goods, depending on what's in stock on the shelf that particular day. But if you look at power tools, for example, outdoor power equipment, the appliance category, grill category, riding lawnmower and zero-turn category, just as a few examples, Kate, people are trading up to innovation in all those categories. So just more powerful, longer run time on batteries, that's moving over to outdoor power equipment.
    The design aesthetic and the features of modern appliances, people are happily trading up to quite strong price points in appliances. LED lighting that's going through, not just light bulbs but integrated in ceiling fans and fixtures, that trade-up is innovation and newness-driven, and we are seeing that as strong as ever.

    Laura Champine of Loop Capital Markets asked about categories that had seen demand diminish. Mr Decker replied that a lot of the falloff came in categories that were directly related to the COVID-19 pandemic.

    One of our single biggest drivers of the falloff is people coming in for masks and hand sanitisers. The four departments that we did see negative sales, hardware, outdoor and indoor garden and paint, those are - can tend to be more consumer-oriented, lots of units in mulch, in soil and things and paint is - that DIYer was home, not doing other activities on the weekend. So we're not alarmed by that falloff at all.
    We'll get through that. I'd say that - take a category like paint. I mean, paint had been a one- or two-unit grower for several years up until the pandemic. And painting is one of the initial home improvement projects that a customer engages in and starts to build confidence in home improvement.
    And while we saw a dip in Q2, the levels in unit volume that we're seeing in paint is well above 2019. And I've talked about the millennials before, and the millennials are engaged in housing. They're engaging in home improvement. They've done that first project, which is painting and some gardening work generally.


    The US hardware market has found itself in a unique position as the general economy emerges from the primary effects of the economy. While price appreciation continues apace across much of the US, levels are not as high as they are in Australian markets. Plus, the economy is receiving a base push both from increases in productivity, and increases in wages.

    That said, it is notable that the pandemic is still far from over. While some regions, such as Northern California, have attained high vaccination rates, others, such as Louisiana and Arkansas, continue to resist vaccination. There are also states such as Florida and Texas where state governments have rejected measures designed to limit the spread of COVID-19.

    However, while uncertainty is an ongoing drag on the economy, investment in housing remains at the very least a comfort to consumers, and is likely to continue even if there are dips in the overall economy.


    Big box update

    Greater Sydney Bunnings stores closing to retail customers

    Bunnings Subiaco could move location and into larger store and the outlet in Toombul Shopping Centre has permanently closed

    All Bunnings stores in Greater Sydney will be closed to retail shoppers and open only for trade customers. In a similar situation during Melbourne's major lockdown in 2020, retail customers can pick up online orders through click & collect.

    Until now, Bunnings has been able to trade in Greater Sydney despite being a non-food retailer because its products and services were deemed essential. According to the Australian Financial Review (AFR), the company's decision to close stores to retail shoppers came after NSW authorities extended the Greater Sydney lockdown until the end of September. There are much tighter restrictions for businesses and mobility, including compulsory mask wearing outside and curfews in the highest-risk areas.

    Bunnings managing director Mike Schneider said the retailer had decided to close all Greater Sydney stores, not just those in the local government areas (LGAs) of greatest concern, to help protect the safety and wellbeing of staff and customers. He told the AFR:

    ...With the new restrictions on retail spanning a large part of Sydney, Bunnings has made the decision to temporarily close all its stores across Greater Sydney to the general public.
    We know from experience that applying a consistent approach across a metropolitan area is easier for our team to manage and helps reduce travel by residents between LGAs.
    Our team are doing an amazing job adapting our business in line with government advice and we thank them for all their hard work in keeping customers supplied with the things they need.

    It is understood that Bunnings staff were becoming increasingly concerned about stores in Sydney remaining open and had launched a staff petition on social media. Many Bunnings staff are former tradespeople who have had to stop manual work because of age and health.

    Over recent months, Bunnings has stepped up its COVID-safe measures, introducing notifications on its Bunnings Product Finder?App to remind customers to get in?and out of stores as?quickly as?possible, upping security to promote COVID compliance and continuing to encourage customers to shop online wherever possible.

    In line with government guidance, Bunnings stores in regional NSW will remain open with strong COVID-safe measures in place.


    The City of Subiaco in Western Australia will consider amended development plans from Bunnings Properties Pty Ltd to move its Subiaco store to Jolimont and build a larger store. The $28 million relocation would provide a "much wider range of home and lifestyle products, along with a larger nursery, and a full cafe and playground", according to Bunnings Properties.

    The development is expected to span four storeys, with basement parking, a bulky goods showroom proposed for the first floor and ground floor, along with two commercial tenancies yet to be determined.

    Changes were to the original submission made in August 2020. They include moving the customer vehicle entry and exit points, and there are plans for the rear building facade to be heavily landscaped with greenery. Bunnings regional operations manager Hayley Coulson told PerthNow the company made changes to the store's design to "better fit" with local surrounds and improve the streetscape. She said:

    These changes were made based on feedback received through consultation and include the use of various building materials such as brick, steel framing and glazing along with additional landscaping design features.

    Bunnings has leased the Salvado Road site, the current location of the Subiaco store, from Homebase Management for almost 30 years. The initial development plans indicated the new, proposed site in Hay Street, Jolimont would sprawl over a 10,000sqm space.


    Bunnings' small format store located in the Toombul Shopping Centre, Nundah (QLD) has officially closed its doors. Retail expert from Queensland University of Technology Professor Gary Mortimer, told 4BC Radio host, Scott Emerson:

    This is Bunnings' first attempt at a small format store ... it was in the Toombul complex ... [and] was in the site of an old Bi-Lo supermarket.
    They have decided to exit the lease or the lease has coming to an end, and they have got a big one up in Virginia, New Farm and Stafford as well.

    The store did not have large trade component but it was great for the area, providing local convenience, Prof. Mortimer added.

    Bunnings announced the Toombul closure earlier this year. It said:

    The final day of trading will be 15 August, which will give the team time to make sure the Toombul store is packed down and ready for exit at the end of the lease. All of the current Toombul team members will be offered transfers to nearby stores and Bunnings' focus is on working with them and supporting them throughout their transition to new sites.

    Nearby "destination" stores at Newstead, Virginia or Stafford will be able to service regular Bunnings customers.

    Related: Bunnings closed the Toombul store ahead of its lease expiring in October 2021.

    Small format store closure - HNN Flash #49, June 2021

    Pesticide displays

    Concerns expressed by 11-year old Lorelei Smith about potent pesticides being ingested by owls and other wildlife has led Bunnings to change the way rat poisons are displayed in its stores and provide better information on their use.

    According to a story in Southern Gazette in South Perth, Lorelei came across a sick boobook owl while walking in Copley Reserve with her younger sister, Phryne and father Damien. They took the animal to the Native Animal Rescue where a rescuer said it was likely the owl had ingested rat poison.

    A blood-thinning chemical used in second generation anticoagulant rodenticides (SGARs) is known to stay active for months and can pass through the food chain, causing secondary poisoning of animals that eat the dead and dying.

    After researching the issue, Lorelei said she wrote to Bunnings' CEO calling for the company to clearly separate first- and second-generation rat poisons on its shelves and provide better information to the public. She wrote in her letter:

    We went to Bunnings and found that on your shelves first generation rat poison boxes are mixed in with the second generation and you can't tell them apart. This is bad because people can't tell the difference and there is no information in your stores on how to use the poison so it doesn't harm owls.
    We think you should make it as hard to buy second generation rat poison as it is to buy a can of spray paint. We should protect our owls so future generations can see them in the wild.

    In response, Bunnings general manager of merchandise Adrian Pearce said the retailer is currently in the process of rolling the precautions out in all stores across Australia, and is due to be completed by the end of September. He told Southern Gazette:

    Bunnings will be implementing the separation of rodenticide varieties on our shelves, grouping relevant products including naturally-derived rodenticides.
    We'll also be working with our learning and development team and our suppliers over the coming months to develop further training for team members, as well as making more information available to customers on how to best use rodenticides and the different products available.
  • Sources: Australian Financial Review, PerthNow, 4BC Radio and Southern Gazette
  • bigbox

    Big box update

    Inverell to get a bigger Bunnings store

    A new development in the central Victorian town of Kyneton that includes a Bunnings is facing a mixed reaction

    Inverell Shire Council is moving to the public consultation phase in relation to Bunnings' plan to build and relocate its store; a planning tribunal will hear arguments for and against a mixed-use development featuring a Bunnings store; ownership of the Bunnings Baldivis property has changed hands; and Bunnings real estate is increasingly being targeted by investors.


    Public agencies are being consulted by Inverell Shire Council about the plan to change the zoning on the Jardine Road and Gwydir Highway parcel of land. The change is required for Bunnings to build and relocate its store. This will be followed by consultation with Inverell residents, allowing people to have their say on a decision, according to The Inverell Times.

    In its Gateway Determination requested by council, the Department of Primary Industries and Environment (DPIE) have recommended changing the current residential zoning in the Local Environmental Plan (LEP).

    This rezoning would create a parcel of B5 zoned land approximately 3.24 hectares, ideal for the larger store, which would secure approximately 45 new jobs and come close to doubling the size of the current Oliver Street Bunnings outlet.

    In early July, the DPIE issued an alteration to its original October 2020 determination, removing the need for council to consult with the NSW Division of Biodiversity and Conservation. It also extended the deadline until April 1, 2022, to amend - or not - the LEP.

    The development representative for Bunnings, Insite Planning Services, updated its ecological assessment report by May and made minor amendments to the planning proposal.

    Related: Bunnings said it has outgrown its current location in Inverell (NSW).

    Store buildout in Australia and New Zealand: Inverell - HNN, September 2020


    The Victorian Civil & Administrative Tribunal will consider a development that includes a Bunnings store in Kyneton (VIC) after the Shire of Macedon Ranges received 500 objections.

    However, developer Goldfields Group said it found most of the community supported the project planned for the Edgecombe Road site that also includes a petrol station, second fast-food outlet and housing. A spokesperson told the ABC:

    Research by an independent firm showed 77% of locals supported the Bunnings, [and] 76% supported the petrol station and 66% support the proposed fast-food outlet.

    Community group Keep Kyneton Country has protested the 165-acre development in the town. Group spokesperson Lenka Thompson told the ABC that residents wanted the site preserved and protected, not overdeveloped. She said:

    We know through the cultural heritage management plan, the site is highly significant, with potential Indigenous artefacts.

    And it appears the local council supports their fight, with its officers reportedly set to recommend the application be rejected.

    Local business owner Irene Thompson said she had found overwhelming support for the development, especially the 200 jobs it would create. Kyneton's growing population was crying out for new businesses, Ms Thompson said.

    We're growing and we're going to need that infrastructure.

    Kyneton resident Brian Wilson lives near the site and said the development could be economically beneficial for the town. He said:

    This is an opportunity for the town. It creates local jobs, funds environmental works [that] ratepayers can't afford and puts dollars into the local economy - but it has to be done well.


    In June, real estate funds management group Acure Asset Management announced the sale of its Bunnings property located on the corner of Safety Bay Road and Baldivis Road in WA to Charter Hall.

    After purchasing the property for $29.25 million in 2015, it was subsequently sold for $49 million.

    The property is home to Bunnings Baldivis and pet retailer PETstock and has total gross lettable area of 15,443sqm and a site area of 34,000sqm.

    Acure managing director Angelo Del Borrello said that the sale made good sense for investors in Acure's Hammersley Unit Trust, especially in light of market conditions and historically low interest rates. He explains:

    This journey was not without challenge, as when we purchased the property back in 2015 via our Hammersley Unit Trust, it was originally a Masters Home Improvement site, and that business exited the market late in 2016 ... When Masters exited the market, we were able to negotiate a new lease agreement with Bunnings to come into the space, which was absolutely critical for our investors.

    Real estate portfolio

    Bunnings properties have enhanced their appeal to investors because of the big box retailer's strong performance during the coronavirus pandemic.

    REA Group economist Anne Flaherty said Bunnings appeared to have been largely immune from the fallout of the COVID-19 pandemic. She told The Australian:

    Bunnings ... have been an extremely strongly performing network of stores.

    Bunnings investments were already highly sought-after before the pandemic, but COVID increased demand for the warehouses and large-format retail in general, on the back of the home improvement trend and housing boom. Ms Flaherty said:

    Even before the pandemic, Bunnings was performing really well and when the pandemic happened, we saw demand grow. People were shopping at Bunnings more than in the past. Part of that was that there were more home renovations happening last year and more people doing their DIY projects.

    The properties are sought after for their long leases to the hardware chain and certainty of income at a time when other areas of retail are struggling. Ms Flaherty said the pandemic had increased the investment risk for commercial property classes such as offices and other parts of the retail sector.

    But if you have property that is tenanted by a business like Bunnings you can be very confident in the quality of that tenant. You can be confident that they'll be able to continue paying their rent.
    Having said that, opportunities to purchase a building with a tenant like Bunnings in it aren't opportunities that come up every day. When they do, they are in really high demand from investors who may be looking to diversify their portfolios or get a portfolio that has a mixture of assets with good reliable rental income.

    Institutional groups with a long-time interest in Bunnings have been active buyers of the warehouses during the pandemic.

    Property investment management company Charter Hall, which started buying Bunnings stores in 2006, was behind the biggest deal, acquiring a $353 million portfolio of six Bunnings assets in November 2020.

    Launching the sale of an Adelaide Bunnings in July, Colliers national director of retail investment services James Wilson said 17 freestanding Bunnings Warehouse assets had sold across Australia in the past 18 months for more than $900m in total.

    Property investment manager Newmark Capital now owns six Bunnings properties after buying the Eastgardens store in April. Newmark is behind a deal with Bunnings to develop a $85 million, three-level store in Preston (VIC) due to open in May 2022.

    BWP (Bunnings Warehouse Property) Trust has improved Bunnings Warehouse properties and re-purposed ex-Bunnings properties in the portfolio during the year. A non-binding agreement has been entered into for its Cairns property to be used as a film studio, and the trust struck a deal with the NSW government for the recently vacated Belmont North property to be used as a COVID-19 vaccination centre for up to two years. The property has also been rezoned and works are underway to determine its best longer-term use. The trust's Midland property has been leased to a car dealership on expiry of the Bunnings lease in September. It has also upgraded properties in Croydon and Port Melbourne.

    Bunnings has also extended leases around the country at properties including Belmont, Caroline Springs, Cockburn, Fairfield Waters, Mount Gravatt, Pakenham, Smithfield, Wagga Wagga, Broadmeadows and Dubbo.

    BWP's property portfolio increased by $149.2 million on the back of the ongoing attractiveness of Bunnings Warehouse properties to investors. Bunnings was able to operate on an unrestricted basis from the properties leased from the trust for most of the pandemic and it received 99.6% of rent.

  • Sources: The Inverell Times, ABC Premium News, Midland Express, The Industrialist and The Australian
  • bigbox

    Big box update

    Port Augusta Bunnings proposal confirmed

    Bunnings gets more time to develop new Toowoomba (QLD) store and the Munno Para West (SA) outlet is up for auction

    South Australia-based area manager for Bunnings, Justine Burrage recently confirmed the big box retailer's plan to enter the Spencer Gulf region. She said that Port Augusta had been chosen as it was centrally located in the region, servicing Port Pirie, Whyalla and the surrounding areas. Ms Burrage told The Recorder newspaper:

    We believe the site is well positioned in a central location that will give local residents in the Spencer Gulf region access to a wide range of home and lifestyle products.

    The closest Bunnings stores to Port Pirie are located in Munno Para West, approximately 204kms, which means a significant drive for locals. Ms Burrage also said:

    A development application has been lodged for a new Bunnings store in Port Augusta to be located on the corner of the Stuart Highway and Daw Street. If approved, the store would represent an investment of more than $10 million...
    Spanning more than 5000 square metres, features would include the main retail area, an outdoor nursery, a timber and building materials yard and around 140 car parks.

    The plans are under assessment with public notification closing on August 4.

    Once planning is approved, the company will need building approval before they can progress. Bunnings said it is not yet able to confirm when the new store may be open at this stage.

    The proposed store will be the 22nd location in South Australia.

    Related: A proposal to build a Bunnings outlet along the Mid North Highway at Port Augusta is under assessment.

    Big box update: Proposed Bunnings store for Port Augusta - HNN Flash #54, July 2021

    Toowoomba extension

    The first two stages are either completed or under way, according to The Chronicle.

    RPS Group town planner Harry Connolly said the only element left to start was the planned drive-through eatery. In his letter to the Toowoomba Regional Council in June, he said Bunnings needed more time to find the right tenant for the project.

    Completion is dependent upon tenant demand, noting also that careful selection of the right tenants is important to the building design and requirements. The extension is sought in order to provide time for the tenant identification and selection process and for the building works.

    Council senior planner Rodney O'Brien approved the request, giving the applicant until late 2023 to make substantial headway on the final stage. He wrote:

    Assessment of the request has found that the remaining stages of development that have not lapsed under the approval are generally consistent with the current policies applying to the land and it is recommended to approve the request to extend the currency period for a further two years.

    Munno Para West store

    Real estate company Colliers has been appointed to sell the Bunnings Warehouse premises in Munno Para West (SA) on behalf of the Cromwell Direct Property Fund, which is managed by Cromwell Funds Management. Colliers' James Wilson said:

    The Bunnings Warehouse is secured by a long term and attractive net lease structure, on a strategic and substantial land holding within Adelaide's booming urban growth corridor.

    The 16,936sqm (approx.) facility is situated on a 4.11ha site and is leased to Bunnings on a 12-year lease expiring in August 2028, with options to extend to 2064, and currently generates annual net operating income of $2.075 million. Chris Maher from Colliers said:

    The strong transactions recorded for freestanding Bunnings Warehouse assets and proven resilience through COVID-19 is driving continued investor demand, as buyers seek to deploy pent-up capital and take advantage of the low interest rate environment...

    Bunnings Munno Para West is located around 38km north of the Adelaide CBD and about 13km south of Gawler, the gateway to the Barossa wine region. Colliers' Alistair Mackie said:

    This substantial land holding is strategically located within the booming northern growth corridor of Adelaide, forecast to benefit from significant population growth and infrastructure spending.
    Bunnings Munno Para West ... sits within the heart of Playford, Adelaide's fastest and largest growing Local Council Area. By virtue of land locking with coastline to the west, foothills to the east and metropolitan Adelaide to the south, the Playford growth corridor is optimally placed to service the state's population growth.
    The Northern Expressway connects with the State Government's recently completed $850million Northern Connector, creating a major arterial link road between Adelaide's regional north and the CBD. This will significantly increase traffic volumes and exposure along the Northern Expressway, directly benefiting Bunnings Munno Para West.
  • Sources: The Recorder, The Chronicle, Colliers and The Adelaide Advertiser
  • bigbox

    USA update

    The Home Depot doubles down on cloud computing

    Google Cloud and The Home Depot have extended their multi-year partnership to expand on the retailer's digital transformation, and provide customers with enhanced shopping experiences by blending physical and digital environments

    While experiencing 86% growth in digital sales in 2020 at the height of the COVID-19 pandemic, Home Depot relied on Google Cloud's technology infrastructure to meet an unprecedented surge in online customer demand. The company's CIO, Matt Carey, said:

    To provide our customers with the flexibility to shop whenever and however they want, we've been intensely focused on building an innovative foundation for our systems and applications.
    We've built on Google Cloud since 2015, giving us the scalability and flexibility we need to meet growing demand and quickly introduce more personalised experiences for customers.

    The home-improvement chain credits the cloud with helping it move fast in response to shifting market trends and plans to extend its cloud-services deal with Google Cloud.

    Mr Carey said pushing deeper into the cloud will allow the company to enhance existing digital services and support new ones, like a recently launched tool that generates more accurate cost estimates for kitchen renovation projects.

    Cloud computing has become essential to mining sales, website traffic and other data sources for customer insights, and responding to rapidly changing market trends, he added.

    Home Depot has already rolled out a number of cloud-based services this year including a rental system for heavy equipment, accessed by a mobile app.

    Other new capabilities include the use of artificial intelligence and natural-language recognition software to support voice-activated product searches, which can identify groups of items that would be typically needed for specific projects.

    On the operational side, the company is using AI-enabled software to predict inventory shortages and pinpoint products that need to be restocked before they run out. Smart software is also being used to keep closer tabs on supply chains, by tracking and analysing larger amounts of logistics data. Mr. Carey told the Wall Street Journal:

    Right now, we are in hurricane season and have a number of models actively watching weather activity and inventory.

    As demand rises in some areas for things like chain saws and generators, "our replenishment teams can quickly identify where we can reroute those types of products to areas in greater need," he explains.

    The big box retailer had begun shifting its information-technology systems and customer-service software into the cloud - and out of its own data centres - before the pandemic hit. Currently it uses Google Cloud to host its website and operate a structured enterprise data warehouse. It taps other cloud providers for a range of other services, like "data lakes," or vast repositories of raw data.

    The continuing shift to the cloud, which has provided near limitless computing storage and power, has enabled Home Depot to handle sharp spikes in online traffic, Mr. Carey said.

    More robust cloud systems helped IT teams quickly spin out apps designed to meet coronavirus safety guidelines and store restrictions such as services like curbside pickups, he said.

    At any given point during the pandemic, we were responding to more than 600 local regulations across the country. Our infrastructure was key to helping us stay nimble.

    For the quarter ended May 2, Home Depot's tally of customer transactions - both in-store and online - rose to 447.2 million in the quarter, from 374.8 million a year earlier, the company said.

    Carrie Tharp, vice president of Google Cloud's retail and consumer unit, said the pandemic supercharged the shift to e-commerce and omnichannel services, spanning everything from websites and online stores, to mobile apps, emails and texts. She told the Wall Street Journal:

    Customer expectations are higher than ever. Shoppers are expecting new contactless ways to make in-store purchases, and personalised, seamless online experiences.

    According to Google's own data, roughly half of consumers say they intend to shop both in stores and online, more than double the pre-pandemic average, Ms. Tharp said.

    Related: Home Depot launches "rent online, pick up in-store" technology.

    Home Depot customers can now reserve and rent equipment online up to 30 days in advance - HNN Flash #52, July 2021
  • Sources: Wall Street Journal and PR Newswire
  • bigbox

    Big box update

    Proposed Bunnings store for Port Augusta

    Macquarie has identified that Seven's Coates subsidiary could have AUD150m opportunity through Bunnings' rental shops

    A proposal to build a Bunnings outlet along the Mid North Highway at Port Augusta is under assessment by Port Augusta City Council.

    This Bunnings store would have a total 5132sqm of retail area and 142 carparks. A portion of the land has already been granted planning consent for a petrol station, which is being appealed.

    The development application has been submitted by Augusta Collective Pty Ltd, and the proposed site for the hardware store sits adjacent to the junction of Stuart and Eyre highways, next to the iconic Standpipe Motel. The report said:

    We are advised that the owner of the Standpipe Motel has signed off on the overarching concept plans which form a part of the sales contract and are unable to object to the plans.

    Public consultation for this development closes on August 3.

    Coates rental opportunity

    Seven Group's Coates Hire subsidiary could have a AUD150 million revenue opportunity from distribution through Bunnings' hardware stores, according to Macquarie Group.

    The investment bank is looking to Home Depot's rental business in the US for a clue on the size of the opportunity, and believes it can be somewhere between AUD60 million and AUD150 million. The upper estimate is based on 50% of Bunnings stores stocking the equipment.

    Macquarie said it will revise its forecasts on the conclusion of Seven's bid for shares in building supplies company Boral.

    Most recent reports indicate that Seven Group has picked up more than half of the takeover target's shares.

    Seven Group's $7.40 a share offer, originally due to expire at 7pm on 15 July, has found favour with Boral's shareholders and has triggered an automatic two-week extension. The extension is aimed at giving minority shareholders the chance to accept the bid now control has passed.

    Seven Group's stake in the building products group is now 52.65% - including a 3.33% equity swap with Macquarie. While that doesn't currently give Seven voting rights with these shares, the company can easily bypass that technicality. This has placed Seven very close to taking full control of Boral.

    Boral's management has maintained that it would keep an independent chair and have a majority of independent directors on its board, even after Seven Group takes a majority stake in the company.

    In response, Seven Group's Ryan Stokes has promised to maintain a board with a majority of independent directors.

    Related: In the US, The Home Depot has been developing its rental business for some time.

    Home Depot's evolving rental strategy - HNN Flash #30, January 2021
  • Sources: The Adelaide Advertiser, Dow Jones Institutional News, Sydney Morning Herald and The Australian
  • bigbox

    Big box update

    Two-storey Bunnings proposed for Adelaide

    The location of the planned store is on the corner of Glynburn Road and Penna Avenue in the suburb of Glynde, and looks to occupy more than a hectare of land

    Adelaide could be the next location to have one of the biggest Bunnings stores in the country, with a proposed build for Glynde. Applications for the store have been submitted as the big box retailer works with developers to obtain planning and building consent.

    The store would have two levels of retail and include a main warehouse, an outdoor nursery, a timberyard and underground parking for nearly 300 cars. If approved, it would represent an investment by Bunnings of more than $48 million.

    Director of property and store development, Andrew Marks said Bunnings welcomes the recent planning system reform which has given the retailer confidence to pursue the project. He told the Adelaide Advertiser:

    We hope it will simplify the development application process for projects such our proposed Glynde Warehouse. We believe the Glynde site is well positioned for a Bunnings store that will provide residents living in the area with a much wider range of home and lifestyle products.
    We will continue to work with the relevant authorities throughout the development application process.

    Pictured is the proposed multi-level Bunnings store for Brunswick East (VIC).

  • Sources: Glam Adelaide and The Adelaide Advertiser
  • bigbox

    USA update

    Home Depot and Lowe's try to extend the home improvement boom

    Customers tackled DIY projects during the pandemic but are now inviting contractors back into their homes and spending time dining out instead of painting. Both retailers have sought to attract professionals with services like tool rental and perks like bulk discounts.

    In 2020, Home Depot and Lowe's reported huge sales gains on the backs of people spending more time - and subsequently more of their money - at home. Now, the question is whether or not these gains can continue well into 2021.

    The pandemic fuelled a hot real estate market and a penchant for "nesting", creating tailwinds for Home Depot and Lowe's. As COVID-19 cases fall in the US and homeowners spend more time on planes or at parties, the biggest business opportunity is sales growth from home professionals.

    In recent months, executives at both companies have said they are seeing pent-up demand for professional projects as people feel comfortable inviting contractors (tradies) back into their homes and dine out and travel more instead of ticking off a list of DIY projects.

    During their first quarter earnings calls, Home Depot and Lowe's laid out their strategies for retaining customers this year. So far, shoppers' enthusiasm for home improvement projects isn't waning - Home Depot's sales were up 32.7% year-over-year during its first quarter, while Lowe's sales were up 24.1% year-over-year.

    Home Depot executives said that a big area of focus for the retailer is to grow its professional business by adding more products for contractors, as well as expanding services like tool rental. It is also betting on its online businesses to drive growth.

    Meanwhile, Lowe's is trying to capitalise on the sales growth it saw last year by marketing itself as more of a home decor destination, while also trying to take more business from contractors away from Home Depot.

    Over the past year, Lowe's has been adding more products on its website in categories like fitness equipment and bedding. Home Depot and Lowe's are betting that these respective strategies will help drive up average order values and keep customers coming back to their stores.

    Sales growth

    Both Home Depot and Lowe's reported that sales were growing more quickly compared to the same period last year.

    Home Depot's key stats: Home Depot reported net sales of USD37.5 billion during its first quarter, up 32.7% year-over-year. Online sales were up 27%. Home Depot's net income for the quarter was USD4.15 billion

    Lowe's key stats: Lowe's reported net sales of USD24.4 billion during its first quarter, up 24.1% year-over-year. Online sales were up 36.5%. Lowe's net income for the quarter was USD3.2 billion.

    Though Home Depot and Lowe's are the two biggest players in the home improvement space, their customer base differs slightly. Bryan Gildenberg, senior vice-president of commerce at Omnicom Consulting Group told Modern Retail:

    Home Depot has leaned in more [to focus on] contractors while Lowe's is a little more focused on the end consumer and decor.

    Historically about 45% of Home Depot's revenue has come from contractors - which both chains refer to as their "Pro" business. At Lowe's, it accounts for 20-25% of sales. Neil Saunders, managing director of GlobalData Retail, said:

    The biggest advantage for Home Depot is that it has been in the professionals' space for longer and so has built up a solid customer base.

    The Home Depot's chief operating officer Ted Decker said that for the company's Pro customers, "we know that brands matter," so a large focus for Home Depot has been trying to land exclusive products and tools for its Pro customers. For example, the company said it now carries 200 exclusive products from the electric tool brand Milwaukee.

    Another focus for Home Depot is adding more e-commerce features - the company is rolling out the ability to rent tools online and pick them up at 1,300 stores. Home Depot has also said it plans to increase its fulfillment square footage by over 70% this year, in order to serve more e-commerce orders.

    Mr Decker said Home Depot anticipates the biggest year-over-year growth numbers will come from Pros in the coming quarters, particularly after a year when construction sites shut down, consumers postponed remodels, and DIY projects soared.

    For Lowe's, revving up the pro business has been a piece of CEO Marvin Ellison's turnaround plan. He has said Lowe's sweet spot is "the pick-up truck Pro" rather than large companies.

    Though its Pro business has historically been smaller than Home Depot's, growing it has remained a focus at Lowe's for the past several years. Mr Ellison said during the company's first quarter earnings call that Pro sales growth outpaced sales growth from DIY customers during the first quarter. And, that the company is hoping to grow the size of its Pro business to eventually account for 30-35% of its sales. Lowe's did not give an exact timeline for when it hoped to hit this metric.

    Like Home Depot, Lowe's has tried to grow its Pro business by acquiring more exclusive brands and products. In April, Lowe's announced that it was acquiring carpeting company Stainmaster.

    Lowe's has also been trying to market itself as more of a home decor destination, by carrying more products like fitness equipment, cookware, bedding and towels mostly on its website. Since the end of 2018, Lowe's has more than tripled the amount of SKUs it carries on its website, chief merchandising officer Bill Boltz told Modern Retail.

    Mr Boltz said during Lowe's first quarter earnings that sales in decor, kitchens, and bath increased during the first quarter, but declined to give specifics.

    Like Home Depot, Lowe's has also been focused on building out its e-commerce fulfillment options, though it has lagged behind Home Depot in that regard. Lowe's said that it now has in-store lockers for buy online, pickup in-store orders rolled out to all of its US stores, something that Home Depot started doing in 2018.

    Despite all of these investments, Lowe's sales growth still lagged behind that of Home Depot in the first quarter - which in Mr Saunders' eyes, bodes well for Home Depot for the rest of the year. He said:

    At some point, consumers will curb spending on home improvement and the growth of individual players will become much more dependent on their ability to compete with each other rather than relying on organic growth. Given the evidence we have seen, Home Depot appears to be in a much more favourable position.
  • Sources: Modern Retail and CNBC
  • bigbox

    Big box update

    Bunnings trade centre in Invercargill (NZ)

    Bunnings in New Zealand has also signed up to the equivalent of the living wage

    Bunnings is set to open its trade centre in Invercargill located on New Zealand's South Island by the end of the year.

    Bunnings New Zealand general manager Ben Camire said construction of the store was progressing as planned at the site. He told the Otago Daily Times:

    We believe the site is well positioned for a Bunnings trade centre in the growing area of Invercargill, and we're really looking forward to opening the doors and getting to know tradies in the area.

    Spanning about 4000sqm, the new trade centre will have a fully covered trade drive-through and more than 20 on-site car parks. It will be able to bulk deliver trade quality and quantity orders to site, and will offer products relevant to local trade customers such as Clever Living Co. homes, AEG tools and a farm building range.

    This trade centre represents an investment of NZD7 million by Bunnings and will be located at 22 Bill Richardson Drive, Invercargill West.

    With seven other locations around New Zealand, Bunnings' trade centres are dedicated stores designed to help trade customers from the building and construction industry, specialised trades such as electricians, landscapers and plumbers as well as farmers and the rural community.

    Related: The big box retailer announced plans to build a trade centre in New Zealand in late 2020.

    Bunnings trade centre in Invercargill, New Zealand - HNN Flash #26, December 2020

    New Zealand living wage

    First Union secretary for retail, finance and commerce Tali Williams said Bunnings New Zealand has inked a new national collective agreement that would put long-term staff on levels at least equal to the living wage from September 2021. The living wage jumps at that point to NZD22.75 an hour. The rate applies to staff on the payroll for 12 months or more. Ms Williams told the Waikato Times:

    Bunnings staff have been busier than ever since the first wave of the pandemic and we have heard that their workloads have never quite returned to 'normal' again.

    Only about a fifth of Bunnings' staff are unionised and New Zealand general manager Ben Camire said most permanent staff were on pay bands above the current living wage. Other staff benefits included share options and bonuses. He also disputed the union's claim that his staff were busier than ever, saying the company took care to roster the right number of staff.

    The union also called out a group within the Mitre 10 co-operative (no affiliation with Metcash-owned Independent Hardware Group) which owns four stores in New Lynn, Albany, Warkworth and Whangaparaoa, where union members had unsuccessfully been trying to get beyond the NZD20 an hour minimum wage. Senior staff were paid a little higher, at NZD21.30, but the process of becoming a senior there appeared arbitrary, Ms Williams said.

    Riviera Hardware Holdings, which owns the four Mitre 10 stores, said it had been "meeting with the union in good faith", and had worked through and resolved a range of claims already. It also said:

    Some we are yet to reach agreement on. We are willing to attend another bargaining round and continue negotiations but we are not able to promise outcomes at this point.

    The first major New Zealand retailer to sign up to a living wage component in its agreement was Kmart in April, putting established staff on at least NZD22.10 an hour.

  • Sources: Otago Daily Times and Waikato Times
  • bigbox

    USA update

    Home Depot launches "rent online, pick up in-store" technology

    The big box retailer has expanded its "buy online, pick up in-store" technology to the rental sector

    The Home Depot has implemented its new "rent online, pick up in-store" technology at its 1,300 rental locations. From demolition tools such as breakers and concrete saws to landscaping tools like tillers and sod cutters to trailers and moving vehicles, customers can now reserve and rent equipment online up to 30 days in advance. Richard Porter, vice president of Home Depot Rental, said:

    This new online technology saves Pro and DIY customers time and trips to the store because they can conveniently check equipment availability and reserve what they need in advance to get in and out of our rental centres more quickly than ever.
    For urgent needs at the jobsite or in the midst of that weekend project, customers can also check availability at multiple locations and make reservations on their phone or other mobile device.

    After piloting online reservations in the Atlanta, Charlotte and Houston markets, The Home Depot has made the system available to rental customers across North America.

    The Home Depot has opened eight new rental centres since January. It has positioned its rental business as a business partner for its Pro (tradie) customers with a flexible rental process.

    It said it is a "single source for large equipment, general tools, trucks and trailers all in one location", and offers transportation solutions with truck and van rentals. Customers buying materials and supplies at Home Depot stores can also rent the equipment, tools, trucks and trailers needed to complete the job.

    For added reliability, its rentals are backed by the retailer's preventative maintenance program, which uses technology to ensure the machines consistently perform at a high level.

    Related: In January, Home Depot discussed its "Three Stages of Rental Evolution" which involved getting into larger equipment.

    Home Depot's evolving rental strategy - HNN Flash #30, January 2021
  • Sources: RER Magazine and The Home Depot
  • bigbox

    Home Depot charts its future

    Project-based sales and strong logistics

    Home Depot has managed to beat its forecasts for its FY2020, and the first quarter of FY2021 is strong. Behind that success were some serious gambles on investment in infrastructure, and inventive thinking about markets.

    Back in mid-May 2021, US big-box retailer The Home Depot (HD) released results for its first quarter of 2021 (February to April) which would once have seemed extraordinary. Sales increased by USD9.2 billion to hit USD37.5 billion for the quarter, an increase of 32.7%. Operating income was up 77%, and net earnings rose by 85%. The number of customer transactions grew by 19%, and the average ticket was USD82.37, up 10%. US store-on-store (comp) sales rose by 30%.

    Those results followed on from the 2020 results (to January 2021) which showed a 20% increase in annual sales to USD132 billion, a 15% boost in operating income, and net earnings of USD12.9 billion, up by 14%. This was a substantial rise from HD's results for 2019, where sales rose by 1.8% for the year, with a forecast of 4.0% growth for fiscal 2020. The result is also much stronger than that forecasted in 2018, which called for 2020 revenue of USD120.4 billion.

    In the months since the results came out, the company has attended a couple of investor conferences, and outlined how it achieved those results, what the consequences were, and how it sees the market in the US continuing to develop.

    Project-based DIY

    In the transcript of HD's fourth quarter and annual results announcement for 2019, DIY projects were mentioned only twice, while for the most recent 2020 transcript they rated nine mentions. It is certainly true that HD has long held a focus on seeing itself as the best solution for more serious DIY projects, but the COVID-19 pandemic both boosted that part of the business, and affirmed for HD that this focus is a key to its future growth through the rest of the current decade.

    The focus on projects is determined by a number of market factors that HD faces. From abroad it can sometimes seem that hardware retail in the US is dominated by three or four major brands - HD, Lowe's, Menards, and Ace Hardware. However, there are many other large to mid-level brands as well, including True Value, Harbor Freight, Tractor Supply and Pacific Sales (a subsidiary of Best Buy), as well as many small local chains and individual stores. To give some idea of comparative scale, Tractor Supply, which does not even make the top 10, had revenues in 2020 of AUD14 billion, more than the Wesfarmers-owned Bunnings earned for its FY2019/20. The US home improvement market is estimated to be around USD690 billion (AUD910 billion) annually.

    In competing outside of big-box, HD's major benefit is that it can provide customers with everything they need for a major project, such as a kitchen or bathroom refit. Additionally, HD has become more focused on aspects of productivity in its operations. Where other home improvement retailers look at costs as a "basket" of factors that are subject to reduction, HD is aware that costs are best regarded as the operational leverage that results in different amounts of sales. The expenditure on costs such as staff time for the sale of complete projects is far more effective than the same expenditure split across several less intense but minor sales. HD staff are trained to spot "project behaviours", and to more deeply engage those customers.

    Appearing at the RBA Capital Markets conference (RBACMC) on 2 June 2021, the HD team of chief operating officer Ted Decker, Jeff Kinnaird, executive vice president merchandising and Isabel Janci, vice president - investor relations, answered questions posed by Scot Ciccarelli, a well-known retail analyst specialising in hardlines (hardware). Mr Ciccarelli asked:

    Then something you guys had referenced before is, the ability to sell projects rather than products, rather than single SKUs. I guess the question is, is there a way for us to kind of think about the revenue opportunity with that? Like how people are starting to shop across the store, is there any way to kind of quantify that, number one? And then number two, is that just a behavioural change that people have to kind of take on themselves? Or is there a way that Home Depot can help influence that project mentality?

    Mr Decker replied:

    At the highest level, it's been something we've been working on for 42 years. We always think of ourselves as a project business where while we sell a lot of items and happy to sell an item, we always think of ourselves as a project retailer, not an item retailer. And whether it's a painting project, or a gardening project, or putting in new hard scape patio, any trip to a Home Depot entails a project and we'd love to build that basket.

    Mr Kinnaird followed up that answer:

    I'll start with portable power and power tools. You look at the capabilities that ... we're developing in terms of our tools, and how that's empowering consumers. I mean, it's just incredible.
    And then, if you ... think about [it], we always relied on paint as the simplest project in our stores. That's really shifted. I mean, you look at luxury vinyl tiles, one of our large categories today that is now probably one of the simplest floor surfaces to install. You can do it over the weekend. You can buy them in-store and online. We've got all kinds of fulfilment options in terms of getting that project to the customer and it's an easy-install.
    You look at a faucet install today versus yesterday, it's a simpler install. A couple of examples. So, our goal is to really make it easier for the Pro to do their install, but also for the consumer. There's a real opportunity for us to continue to teach consumers how to take on projects across the store. We're seeing more and more of that.

    Mr Decker took up some of those points:

    On big-ticket for example, we call it our big-ticket, which are, say, transactions over USD1,000, comped 50-odd percent in the first quarter. What's interesting about our big-tickets, I often have to stop and refresh my understanding of the data, you would think that is driven by appliances, by the cordless outdoor power equipment or tools that Jeff referenced, because we have seen people trading up to innovation for years now. And we're on ... a very steep innovation curve with cordless technology.
    But when you look at our large tickets, this isn't [about] a very expensive appliance or a combo kit, these are still tickets with, 50, 60, 70 plus units in the basket. So, our large transaction while they benefit from a USD2,000 or USD3,000 refrigerator, they are still very much driven by the project business. That's where our big-ticket comes from, 50, 60 items in cart which speaks out the profit.

    There is a lot to unpack in those statements. The first thing to note, in the comments of Mr Kinnaird, is the idea of what we might call "project creep". In the US market, at least, homeowners are finding it possible to take on larger and more ambitious projects, because those projects are becoming easier for the average DIYer to complete.

    Partly that is because, as Mr Kinnaird points out, there has been an ongoing project in the industry to make the work of "pro's" - tradies - easier and faster. As tasks have been simplified and end-quality improved, more DIYers have been able to achieve results similar to installation and repair specialists.

    Additionally, however, as is implied in these comments, there have been considerable advances in the tools used to perform these tasks. It's difficult to imagine now, but even as recent as the early 1980s, corded electric drills were not really that common a household tool (as those of us who remember using a brace and broad bit to get through a bit of Jarrah can attest). DIYers today may not have tools as sturdy as those of a tradie, but they are nearly as capable.

    As Mr Kinnaird points out, there is likely nowhere this applies more clearly than in flooring. Laying a timber floor remains a difficult and quite technical task - you need not only a decent foundation in carpentry, but also in coating wood surfaces with a durable finish. Putting down laminate floors is much easier, while vinyl "plank" floors relies on even fewer tools.

    From an Australian perspective, HNN would argue that many hardware retailers are not comfortable with that approach. Certainly there are some tasks - tiling floors with tiles over 30cm a side, for example - where you really benefit from the talents of a skilled and experienced craft worker. But for hardware stores that are over 70% focused on trade sales, there is a sense that boosting more advanced DIY is antithetical to their main source of revenue.

    The final point from these comments, made by Mr Decker, is that the core of customer engagement and profitability doesn't necessarily come down to large item purchases - it's really the number of items, adding up to a decent total that counts. If we're looking at the costs of customer engagement through staff time and attention, it's vital that project purchases are pushed to completion. The staff needs to work out everything the customer might need for the project, and offer convenient, immediate solutions to those needs.

    The other point that emerges from this is that the path to DIY competency has also changed. There was, eight or nine years ago, quite a bit of lamenting about how the Millennial generation would never graduate to DIY because they were not taught the basics by their Gen X parents. The fact is, though, that power tools and other changes have altered the kinds of information and experience that are needed. It takes some practice to be able to cut a straight line through a 250mm plank with a handsaw. Doing the same with a decent sliding mitre saw needs a bit of practice, but it is a much simpler skill. Mr Decker commented on this in response to a question about the ongoing future of DIY:

    Clearly, there's a lot of do-it for me and pro activity on projects. But Millennials themselves are behaving much like the DIY phenomenon of the baby boomers, where you start with that first project. It might be a gardening project, or it might be a paint project. Paint remains the number one DIY project.
    And as you do your first project, you gain confidence, you take on the second one, you gain confidence and you just start doing larger projects and bigger projects with as your confidence level and the interest in the category grows.
    We are seeing that with the Millennials. So, super excited about medium and long term.

    What's not mentioned here, though it has an increasingly significant effect, is the availability of DIY instruction videos through channels such as YouTube and Vimeo. It's amazing how the quality of these has increased sharply over the past five years, to the point where even "amateur" attempts feature graphics along with good sound, camera work and editing. In fact, most of these "amateur" videos are better than the supposedly "professional" efforts of most hardware retail chains.


    The focus of logistics for hardware retailers has changed sharply over the past two years in Australia. Prior to that, the focus was mainly on how to get goods delivered to stores in the most efficient manner possible. Operations such as Mitre 10 and Home Timber & Hardware - now part of Metcash's Independent Hardware Group (IHG) - relied on a central warehouse to dispatch goods to stores (supermarket style).

    Bunnings has instead relied on (for the most part, excluding some of its captive brand products) direct transfer from the supplier to stores, effectively outsourcing much of those logistics. That's beginning to shift somewhat, brought on by the major change, which is a focus on store to consumer deliveries.

    Benedict Evans, a well-known commentator on ecommerce, has suggested that the final kilometre logistics are so important they should be used to categorise goods sold.

    For Amazon, makeup, books and shoes are all just interchangeable SKUs with the same buying journey that can all be stored in the same fulfilment pod and all go into the same brown cardboard box, but a cucumber, a stove, a bag of cement or a bowl of soup do not fit this model at all - they might need a different buying journey, but they definitely need a different logistics model. So, as well as thinking in terms of hardline versus softline, or high touch versus low touch, we should also think of parcels versus collection or delivery versus bikes.
    [T]he base model for a weekly grocery shop, a fridge, or a garden project is that you go to the store, or the store brings it to you, and it doesn't go through the mail, but that doesn't mean it can't be 'ecommerce' and doesn't mean you can't buy it online. You can - you just need an entirely different supply chain and delivery model, with different unit economics.
    Ben Evans on retail logistics

    It's no coincidence that Mr Evans mentions "a bag of cement". The issue of what is and is not directly deliverable has become a pressing concern for home improvement retailers. What has really happened, arguably, is that ecommerce has highlighted the total cost of goods sold for homeowners, in a manner that is more familiar to businesses. Ten years ago, people would have questioned your mental stability if you were to draw up a spreadsheet listing all the expenses incurred through transporting shopping home - the petrol, time on the road, car maintenance, having to buy a station wagon or SUV, etc.

    Yet today, effectively, that is just what many consumers are doing. The COVID-19 pandemic has, most agree, simply accelerated a trend that was already taking hold. It's not just down to the "convenience" factor of online shopping itself, it's also that many of Australia's major cities - certainly both Sydney and Melbourne - have become so congested that what was once a quick trip to the shops on a Saturday morning is now a major undertaking.

    This is actually a quite complex set of considerations. Take, for example, garage shelving. This is provided today, in Bunnings and elsewhere, as a system of components that can be transported by the customer in their car, and assembled in their garage at home. If delivery becomes more common, will we see fully assembled systems become available? What effect does that have on the overall supply chain, not only store to customer, but also supplier to store?

    That need for convenience and ease of access is taken seriously by HD. Following on from the comments about growing project-based sales, Ms Janci pointed out that access was an important part of this.

    One thing to add, to facilitate the project business we have made significant investments to remove friction regardless of how you shop with us. In the store, online through fulfilment options, and so that also helps promote that and facilitate that project business.

    Mr Decker took Ms Janci's comment as an opportunity to pivot to the importance of a new development at HD, the "flatbed distribution centre".

    When you think about our supply chain build-out ... one of the platforms we're building [is] the flatbed distribution centre. That is really about two things.
    One, it's about relieving the store - the pressure from the stores. We're now USD550-odd a square foot in sales, USD55-odd million on average a store, staging all those deliveries in the store, those project big-ticket [items].
    Again, think, 40, 50, 60 items per transaction. That staging and loading in the store is a heavy burden on our store. So, job critical, number one, for the flatbed distribution centres is to relieve the stores of that activity.
    The second thing is customer experience, whether it's Pro, or DIY, those flatbed distribution centres offers speed, certainty of delivery, on-time and complete orders and broader assortment that we're able to stock in the facilities that we wouldn't have the room to stock in the store. So that again, is all about supporting that project business, both DIY and Pro.

    The flatbed distribution centres refer to what are essentially very large scale facilities designed to handle semi-trailer flatbed trucks. While HD has many of these planned for the future, the facility that is currently completed is based in Dallas. The Dallas News reported on the opening of the facility in late January 2020:

    Flatbed trucks roll through the middle of the massive building as heavy products such as lumber, ladders, pipes and roofing materials are added from either side.
    Flatbeds can hold multiple deliveries, and the facility can handle up to 65 to 75 trucks going out per day. That's thousands of deliveries per week to customers within a 75-mile (120km) radius of Dallas, [Stephanie Smith, Home Depot's senior vice president of supply chain] said.
    That compares with smaller trucks loading a couple of orders from each store and then returning and doing it again and again, she said.
    Stores try to make next-day deliveries, she said, "but now we can guarantee it."
    The flatbed fulfilment centre at 9222 W. Jefferson Blvd in Dallas is on a rail line that's been extended into the building and can hold 10 railcars. An outside yard can handle 20 more railcars.
    The system allows Home Depot to take control of that entire supply chain, from the lumber mill all the way to the customer, Smith said.
    Home Depot launches a new Pro customer delivery system in Dallas

    That need for convenience has also seen HD combine online and in-store purchases, as was pointed out by Mr Decker in his comments on 2021 Q1 sales:

    We continue to rollout new capabilities, such as mixed cart selling from store that remove friction for both our customers and associates. The mix cart feature enables associates to more efficiently and effectively serve the total project needs for a customer, as products from both the website and store can be added to a single transaction.

    The CEO of HD, Craig Menear, also spoke at Alliance Bernstein 37th Annual Strategic Decisions Conference on 3 June 2021, and added what we might think of as the strategic layer to the practical work of getting goods to the HD customers.

    We are building out a network of capabilities to better serve, not only the Pro customer, but the DIY customer as well. And these capabilities are really important when you think about growing with a planned purchase with our Pro customers, which is a larger opportunity for Home Depot. We're investing, and we called this out at the beginning of our incremental investment cycle in 2018, we're investing about USD1.2 billion in a supply chain that will give us the capability to serve roughly 90% of the population with same day next day capability or delivery on every type of product we sell, whether that's something that's going parcel to a customer, or whether that is a pallet of goods that need to go on a flatbed ... to a job site.
    I'd say we're in the kind of the early middle innings of that. We're following a very similar pattern to what we did when we built out our RDC network, our Rapid Deployment Centre network. In the first year, we actually - you create the concept, you open a facility, you work through the operational aspects of that and fine tune.
    So we have - we've opened every type of building that we intend to open. We are at different stages in that. We have full direct fulfilment centres. We have a number of those open and have for a few years. And those are all going well. We have our market delivery operations facilities, which are smaller facilities that are kind of cross docks that were product comes in and they move on to a delivery truck direct to a customer's home or job site. We have a number of those that are open. We are running about 38% of our deliveries through those facilities at the end of 2020 that will accelerate in 2021.

    Future market

    As with most home improvement retailers, the executives of HD have been reluctant to make firm forecasts for even the medium-term. While there is some certainty that current high spending in the sector does have some elements of structural change, there is debate over how much is also pull-forward spending, with investments made today meaning there will be less spent in the future. However, in his remarks at RBACMC Mr Decker did sound a note of hope for the future:

    I think that the big news for us in our industry in Home Depot, as an individual company, the really big exciting news is that the Millennial is engaged in housing. There has been a question mark, was this now largest generation in America going to engage in housing the same way the baby boomers did? And that is baby boomers retire, and maybe downsize and not engage as much where you are going to have in participation to drive the demand at that same level. And the great news for medium long-term is, yes, the Millennial while a bit delayed because of the great housing recession in job market et cetera, they're forming households, they're forming families, they're engaging in single-family housing, and as exciting, they're actually engaging in home improvement. Clearly, there's a lot of do-it for me and proactivity on projects. But Millennials themselves are behaving much like the DIY phenomenon of the baby boomers.


    It's interesting to note that the report on the Dallas flatbed distribution centre from January 2020 included this note about HD's investment in logistics infrastructure:

    Last month [December 2019], Home Depot lowered its sales targets for the year, saying some of its investments are taking time to pay off. It has missed sales targets in recent quarters but said the housing market remains healthy.

    Things changed rather rapidly on that issue.

    One of the major factors that is starting to play out across all forms of retail is that we're beginning to see a big difference in response between companies that have what we might term "extreme scale", and those that "merely" have very large scale operations. Extreme scale companies such as HD, Lowe's, Amazon and Wal-Mart are able to incorporate supply chains and operations that enhance digital commerce in a way that can bring medium-term gains.

    Effectively what they are doing is changing the actual markets themselves. Despite its large size relative to the available market, Bunnings in Australia does not have that capacity, at least not in this area. The real question to ask about Bunnings at the current moment is, if you were building it from scratch in 2022, how would it differ from its current form? The delta between that vision of the company and its current status amounts to the negative effect of its legacy systems.

    It's possible that what we could see develop in Australia is competition not only to Bunnings but to hardware retailers in general from the equivalent of so-called "dark" restaurants. These are restaurants outfitted in (less expensive) industrial areas that are geared to home delivery of meals, without any actual restaurant location open to the public. The next successful hardware chain might consist of a series of anonymous warehouses and timber yards ringed around a capital city, where ordering is done entirely online, and all goods sold are delivered.

    Which is a way of outlining that digital is not merely an "add-on" for retailers. It is a structural change. Within the next five years, even smaller retailers will be faced with the choice of either adapting to that change, or becoming smaller businesses.


    Big box update

    Sale of Bunnings Plainland store

    The NSW government is working with Bunnings to give away more than 25,000 trees to homes in Western Sydney to make suburbs greener and reduce heat build-up

    The recently opened Bunnings Warehouse built by De Luca Corporation in Plainland (QLD) has been sold for $22.2 million at a portfolio auction. The 9421sqm Bunnings store located on a 2.17-hectare site sold 11% above the reserve following a bidding war between two Melbourne-based families, according to the Australian Financial Review (AFR).

    The winning buyer acquired the property with a 10-year lease locked into Bunnings. Managing director, Nic De Luca told the AFR:

    We focus on developing properties for trophy companies that offer good covenants. Investors are buying those rather than the properties. That's my view.

    Mr De Luca said his company focused on developing Bunnings priced below $30 million, where there was a large demand but limited buying opportunities. He said:

    We had 13 registered bidders for the Bunnings in Plainland...

    Burgess Rawson selling agent Billy Holderhead said all 13 were first-time Bunnings investors, including eight from Melbourne who all bid sight unseen due to interstate COVID-19 border closures.

    The Bunnings in Plainland sold on a new yield benchmark of 4.2%.

    Related: Plainland Bunnings opened in early June 2021.

    Bunnings Plainland opening - HNN Flash #48, June 2021

    Related: De Luca Corporation had plans to sell the Bunnings Plainland store at auction earlier this year.

    Plainland store is being prepped for sale - HNN Flash #46, May 2021

    Free trees

    From June to October this year, the NSW Department of Planning, Industry and Environment is partnering with Bunnings to give away trees to Sydney households. These trees have been supplied by Bunnings Warehouse and IndigiGrow Nursery.

    Planning and Public Spaces Minister Rob Stokes visited the Bunnings Narellan store recently to launch the initiative. He said:

    Our Free Tree Giveaway with Bunnings is open to all 33 local government areas across Greater Sydney, giving 10,500 eligible households a tree to plant in their yard.
    Trees make a huge difference to our lives ... and are the best way to manage the urban heat island effect which we know is a particular problem in western Sydney.

    The free trees are open to people living in the 33 specified council areas (which include Campbelltown, Camden, Fairfield, Liverpool, Wollondilly, Bayside and Georges River) who haven't previously applied for a free tree this year.

    Trees can be collected from Bunnings once an online application is submitted, and applicants receive a notification of collection. There are more than 40 participating stores, including at Bonnyrigg, Campbelltown, Caringbah, Crossroads, Gregory Hills, Hoxton Park, Kingsgrove, Kirrawee, Narellan, Rockdale, Smithfield and Villawood.

    Different trees are on offer each month via the NSW Planning Portal. The program has proved so popular that stock for June (the bottlebrush - Callistemon Endeavour and Callistemon Hanna Ray), Lilly Pilly and Lilly Pilly Winter Lights) has already been exhausted. The Department of Planning, Industry and Environment said more trees would be available by early July.

    More than 29,000 trees have already been given away and planted in backyards across the Greater Sydney region.

    Mr Stokes also announced $9.9 million in grants as part of the Greening Our City program, which will see 20,000 trees planted in 23 council areas. The program was first launched in 2018 and has since delivered more than $15 million to local councils for planting 66,000 trees, he said.

  • Sources: Australian Financial Review, Campbelltown-Macarthur Advertiser and
  • bigbox

    Kingfisher on change in COVID-19 times

    More small stores, own brands and ecommerce

    Kingfisher has seen sales soar during the pandemic, and is hopeful some helpful shifts in buyer patterns will persist. Underlying this, however, is the need to find further profit sources in the face of high investment in technology.

    One big question that troubles many Australian hardware retailers is what comes next, once the pandemic plays less of a role in private and commercial life. It's worthwhile going back to some of what was covered earlier this year, when UK and EU retailer Kingfisher - owner of B&Q, Screwfix, Castorama and Brico Depot among other brands - reported on its results for 2020.

    As with many well-positioned home improvement brands, Kingfisher experienced a good year in terms of its financials. Total sales came in at GBP12.34 billion, up by 6.8% on the previous corresponding period, with like-for-like (comp) sales up 7.1%. Retail profit grew by over 27% to reach GBP 1.00 billion, with the retail profit margin lifting from 6.8% to 8.1%. Much of that growth took place in the UK and Ireland, with regional retail profit reaching GBP681 million, up by over 36%. That growth continued into the first quarter of the company's 2021 sales as well.

    Retail channels

    While the focus for many hardware retailers has been on how the boost to ecommerce sales has altered the balance between offline and online, Kingfisher is looking beyond this to ask how it will change store formats as well. The company is betting heavily on speed and convenience as being the main drivers in the future.

    That means boosting the capability to deliver direct to customer from store, but also having more but smaller stores within easy reach of the customer base. That not only means it is easier to drop by a store to pick up the necessities, but also provides a big boost to click-and-collect convenience - offering more cost-effective ecommerce for both customer and retailer.


    More so than with any Australian retailer, Kingfisher found its ecommerce operations boosted, and assuming a new importance. In his prepared remarks at the results briefing for analysts, the company's CEO, Thierry Garnier, described what happened:

    Starting with B&Q and TradePoint ... the team did an excellent job managing unprecedented levels of demand in 2020 while moving all their key priorities forward at pace. E-commerce sales grew by 117% and penetration doubled to 10%. This was supported by rapid changes to [B&Q] operations and a focus on picking from our stores for click and collect. We successfully launched next day delivery from store and have started several innovative trials for last-mile delivery. The group next-gen digital stack was fully implemented without disruption and now supporting enhanced mobile and web capabilities.

    At Screwfix, operations were altered even further:

    The [Screwfix] team adjusted its operating model overnight during the first lockdown, shifting to nearly 100% online and mobile is now the biggest channel in the business accounting for 62% of online transactions.

    This has changed much of the company's operations, Mr Garnier explained:

    This has been completely transformed over the course of 2020 with penetration now at 18%. Group e-commerce sales grew by 158% and by 144% excluding Screwfix. Click and collect sales has become the largest and fastest growing fulfilment channel at group level with 226% growth. Supported by our newly implemented group digital stack, our platform has scaled rapidly and is now supporting 500,000 click and collect orders per week across B&Q and Casto France. Stores now sit firmly at the centre of our e-commerce proposition providing support for a very significant proportion of retail online orders.
    We have now rolled out digitally enabled picking for all fulfilment routes for B&Q and Castorama France and introduced a digital hub model at B&Q where 56 stores service the vast majority of our home delivery orders. We expanded our last-mile delivery options. Our partnership with DPD has enabled next day delivery by B&Q with 98% of the UK population. B&Q, Castorama France and Poland are trialling click and collect lockers and we have implemented drive-through and car park collections in France.
    Looking ahead, we remain committed to delivering strong growth in e-commerce sales through providing speed, convenience and choice to our customers. Our key focus this year will be implementing a new IT and digital operating model, to increase our agility and lower costs. Overall, we are moving towards home delivery for full store ranges with faster last-mile options. In Poland, we are rolling out the new group digital stack enabling stronger digital capabilities. In Castorama France we are implementing the same digital hub model used at B&Q. And finally, we are continuing to explore the merits of building a marketplace model which could further support our e-commerce ambitions.

    In response to an analyst's question, Mr Garnier went into detail about one of the changes Kingfisher is making to its B&Q UK brand, transforming it into an operation more geared towards delivering goods ordered online direct from store to customers:

    Your question on hubs and dark stores is very interesting, very, very important for us. The 56 [B&Q] hubs are stores that have been chosen for two reasons: because of their location, because we wanted to cover a large part of the UK and we today cover 98% of the UK population; and that some [have] surface space available to run a kind of "dark store" without reducing the [current] store area.
    So today, [a hub is] really a store where we have large warehouses and we build small dark stores, small warehouses inside their existing operation, and therefore, being able to cater probably regularly over 1,000 [online] orders, or 1,500 [online] orders a day, which is pretty good for a store operation.

    Asked by an analyst whether Kingfisher had specific ranges available only for online orders, he indicated that, while Screwfix was an exception, the goal was primarily to deliver orders related to in-store stock:

    Online today the range is firstly focused on store. I would put Screwfix aside. I mean, if I look at B&Q, it's really to deliver the full store range on click and collect and home delivery from store.
    We have a few exclusive ranges online, that are delivered directly by vendors, but they are a relatively small number of SKUs. At Screwfix the model is slightly different because we have a very large central warehouse in Trentham, where we have about 25,000 to 30,000 SKUs that are not in stores. In Screwfix you have 11,000 SKUs, and in addition to that, you have 25,000 to 30,000 SKUs in this central warehouse in order to deliver to all of our customers, that's for the online range and again, our first focus is around speed.

    Store formats

    While the ecommerce side of the business is making better use of large warehouse sites, Kingfisher is also moving to open more small format stores. As Mr Garnier explained in his remarks:

    Smaller and more localised store formats are also becoming vital to serving the increased customer demands for speed and convenience. While Screwfix is already addressing this shift, there is a huge opportunity for our other banners to widen their reach.

    These smaller stores include what he described as "an innovative new compact format in central London". This is an element of the plan which Kingfisher will roll out over several years, as part of an ongoing expansion plan which already saw the company open 38 new stores in the UK and Ireland during 2020.

    We plan to increase our overall store count while in parallel reducing their average size. We will achieve this by a combination of opening more compact stores, rebalancing towards medium box stores and rightsizing some of our larger format big box stores. On this slide you will see all the tests we have completed in 2020, including compact stores at B&Q and Casto France, store in store concessions within Asda and one new Screwfix compact format.

    Mr Garnier stated that early results from this shift were "encouraging". One recent example of "rightsizing" existing stores has been the transformation of B&Q in Canterbury. Some 33% of the store has been taken over by the Aldi supermarket chain.

    Customer changes

    While ecommerce might have been accelerated by the COVID-19 pandemic, more fundamental changes have also taken place. As Mr Garnier describes it, our sense of "home" is also evolving:

    During lockdown our homes have effectively been transformed into hubs where we work, exercise, entertain and rest. Longer term, we believe that more working from home is here to stay. There is no doubt that the trend of flexible working arrangements has accelerated forward many years. Over time these factors will lead to material changes such as more wear and tear on the home and the need to organise living space differently, thereby creating a structurally supportive shift for home improvement.

    In answer to an analyst's question, he went into further detail about these expected changes:

    We see clearly, in the future people working a bit more from home. I don't know if it's 10, 5, 15 or 20%, but this will have a material impact on many businesses and including on our business. It will be more wear and tear, people reorganising their space.
    I think the second big trend is the new DIYer we saw during the lockdown. We all see people doing more cooking at home and, we saw a lot of people doing more DIY, and when we try to learn new skills usually, part of it is staying and we believe part of it will stay with us. So, we could have ups and downs in the short term, but in the medium term we feel there are new supportive trends.

    Changing markets

    Kingfisher is very clearly in the camp of those who see the change wrought by the COVID-19 pandemic as being largely positive for home improvement retail. In his prepared remarks, Mr Garnier stated:

    With a total addressable spend of GBP130bn, the home improvement markets in which we operate are attractive, growing and have many structural drivers supporting long term growth. It is a relatively high margin industry, resilient against e-commerce pure play competitors, and has proven robust through previous economic downturns. The key point on this slide [slide 7], however, is that over the course of the COVID crisis we have seen the development of new longer-term trends that are clearly supportive of our industry

    While a good deal of these changes are positive, there are also some concerns for areas of the market, such as do-it-for-me:

    On your ... question on project, trade and DIYers, I would say we have been still impacted by the lockdown, so meaning you have people that are afraid to have trade people inside their home, so the 'do it for me' part of the business has still been impacted especially during H1 and at Screwfix.

    Yet, on balance, Kingfisher is clearly coming out ahead, according to Mr Garnier:

    Our customer net promoter scores show a sharp increase in the awareness and reputation of our banners and along with a reconnection with DIY I mentioned earlier, we also saw a step-change in digital adoption across our banners with ten million new customers shopping with us online.

    Move to DIY

    Kingfisher clearly sees the market shift to DIY as being strongly positive, and makes a case for this shift possibly lasting beyond 2022. As Mr Garnier describes it:

    One of the most interesting things we have seen in the last year is also the emergence of new cohorts of young DIYers with a big increase in motivation, new skills and enthusiasm for DIY. Recent surveys we undertook across our markets highlight that 18 to 34 year olds have done more home improvement than any other age group with 20% doing DIY for the first time, 55% doing more than they have previously done and 65% more confident to take on home improvement and learn new DIY skills. All of this is very encouraging for the future of our industry.

    In response to an analyst's question, the Kingfisher CEO unpacked some more details about the company's surveys:

    We ran a comprehensive two sets of surveys, one last year, September/October and we did it again earlier this year in February ... A very significant proportion [of the new DIYers] explained they are learning new skills and are enjoying it. In our surveys asking on 2021, overall we have as well a much higher proportion of people saying they will do more home improvement in 2021 than in 2020, still back in February [2021].

    He went on to characterise the type of DIYer Kingfisher is seeing more often in its stores:

    Clearly the boom and the largest trend is around new DIYers - I would say beginner DIYer. I know people that do painting, decoration, flooring, but not necessarily very large projects. And because the showrooms have been closed in the past weeks in the UK, as well the big projects are still growing, but a bit more impacted, that is your projects. So clearly what we saw in the past months is the demand around new DIYers starting a new project.

    Exclusive brands

    With smaller, more convenient but also arguably less efficient (in cost terms) stores, and the move to channels with higher "last mile" fulfilment costs, the question could be asked, where does Kingfisher expect further profit growth to come from? One of the key answers to that would seem to be what the company calls "own exclusive brands" or OEB.

    The shift towards OEB predates Mr Garnier's term at Kingfisher, and was originated by Veronique Laury when she was CEO. Mr Garnier describes the need for OEB by placing it in a European context:

    Across Europe discounter format stores have been growing in line with a rising focus on value for money. Our own exclusive brands or OEB products, now 44% of group sales, enable us to capture this trend. In addition, we are well placed in this area of the market with our Brico Depot discounter banner as well as our overall focus on attractive price positioning.

    He went on to describe the OEB category in more detail:

    Kingfisher's OEB product sales are now GBP5.3 billion, up 7.5% last year and represent 44% of our total sales. OEB provides a strong point of differentiation for our retail banners, and here I mean affordability, functionality and innovation and sustainability as well as supporting our gross margin.
    In 2020 we saw a strong increase in the awareness of our brands and our five leading OEB brands alone contributed around a quarter of our total group sales. The rollout of Kingfisher's new OEB kitchen range completed in B&Q in H1 2020 and will complete in France and Poland this month.

    Mr Garnier described his vision for the future development of OEB:

    Looking ahead, the move to our new commercial operating model is driving focus on innovative OEB product development, on sourcing and engineering, as well as enabling faster speed to market. We plan to extend our ranges and tailor them to the specificities of our different banners' customers.

    The question that needed to be asked, and was asked by an analyst, was just how far OEB would go in Kingfisher? The CEO responded:

    Today, we have reached 44% of the group sales [from] OEB, and that's pretty impressive. I must admit that [is] not only the job done in 2020, but all the past years by building, you know, sourcing offices, designers, engineers across the group, and that's really a group, - well, we call it "Group Power" to be able to produce OEB.
    We have clearly an ambitious plan. I would not give you a precise target today, but we consider we can continue to grow from 44%. We will not grow to 100%, you know, they are very strong brands, very strong vendors, and we need as well to have choice and open our ranges to many vendors, but we consider we can still grow from 44%.
    As you mentioned, the margin of OEB category by category, is above the average of our business, so we have a clear margin contribution from OEB that's why our plan by growing OEB is as well, not only to push ourselves to provide differentiation, but as well to provide more margin ...


    The history of big box retail - and therefore much of retail in general - in the 20th Century is largely all about the rise of logistics as an economic force. We need only look at the Wesfarmers-owned Bunnings in Australia to see how well that worked. Bunnings not only moved rapidly to adopt a global supply chain, but it also implemented some innovations in store delivery and warehousing, reducing its need for any kind of distribution centre to the bare minimum possible.

    Under former Bunnings managing director John Gillam's management, its stores ceased to be so much the "main event" and became instead functional endpoints to a highly efficient supply chain, where the primary instigation to buy came from often surprisingly low prices on goods favoured by home DIYers.

    In the case of Kingfisher, when Ms Laury assumed the role of CEO in 2015, the company was somewhat "Balkanised", with multiple redundancies in product lines across its many brands and geographic locations, managed by an inefficient internal organisation. When she was forced out of her position in 2019, and replaced by Mr Garnier, the foundations of what she developed were retained, but the brand-by-brand implementation was changed, with more flexibility.

    At the current point in the post 2020 era, there is an increased focus on logistics from the warehouse/store to customer perspective. The simple fact is that for retailers formerly focused on stores as the main location of sales and goods delivery, adapting to the logistics needed for online ecommerce has been both messy and expensive.

    With the possible exception of The Home Depot in the US (which made major investments in these logistics since 2014), none of the big-box retailers have really come to terms with the complexities of "last mile" delivery.

    The reason why final delivery is so expensive is that all retailers are now in clear competition with more "pure play" online retailers, the most prominent of these being Amazon. The standard that Amazon has set is for very rapid home delivery of goods at a very low cost. That has been picked up by all pure-play online retailers, and has become a cost and logistics burden that most retailers have had to shoulder.

    Warehouses as conceived by Amazon bear little resemblance to traditional warehouses, which rely on batch dispatch of bulk goods to selling/distribution points. To match Amazon in logistics would require a parallel set of warehouses built to pick and send small quantities of unique goods.

    As that does not (yet) seem possible, traditional retailers have instead often opted to adapt their larger stores to function as fulfilment centres for online orders. This is still very inefficient as compared to Amazon warehouses, as store warehouses are designed for small batch/restocking dispatch. Store warehouses are organised by categories of goods, where Amazon stock is organised in terms of frequently picked and complementary picked items. It's about speed, accuracy, and keeping the workforce as small as possible.

    With those kinds of complexities, the next truly effective shift in logistics could still take place at the other end. There is a real possibility for demand models built through data analytics to mate up with lean manufacturing practices and deliver significant supply cost savings.

    Lean manufacturing is frequently misunderstood. The insight behind it is that the cost efficiencies brought about by high volume, batch manufacturing process are frequently illusory when factors such as quality, on-time delivery and stocking costs are taken into account. Lean manufacturing, as pioneered at Japanese car manufacturer Toyota, relies on small batch processing, where, theoretically, every part that is made is "pulled" through the build process by received demand.

    Data analytics has the capacity to determine levels of demand on a container-by-container basis, which would mean that supply could be finely tuned. The ultimate end-goal of those processes would be some distribution that goes directly from container to customer.

    Today, of course, that doesn't seem possible, but as analytics continues to improve, and much of the supply chain moves from ownership by wholesalers and retailers to systems of services "hired" by retailers, it's a likely evolution.


    Big box update

    Customer satisfaction retail award

    Bunnings customer is successful in a discrimination complaint against the retailer and IKEA will roll out more small format stores in Australia

    Bunnings has been named Hardware Store of the Year for the fourth year in a row, in the annual Roy Morgan Customer Satisfaction Awards.

    It was among the seven repeat winners led by Myer as Department Store of the Year for a sixth straight year, Rebel as Sports Store of the Year for the sixth consecutive year and The Reject Shop as the Discount Variety Store of the Year for the ninth year running (2012-2020).

    The new sponsor of the V8 Supercars Series Autobarn has now won four Auto Store of the Year Awards in 2013, 2014, 2018 and 2020 and been matched by ALDI's fourth victory as the Supermarket of the Year following wins in 2012, 2014, 2016 and now 2020.

    Other returning winners include Jeanswest as the Clothing Store of the Year for the third time (2016, 2017 & 2020), Muffin Break with a third victory as the Coffee Shop of the Year (2016, 2017 & 2020) and both Costco (Department Store of the Year) and JB Hi-Fi (Furniture/Electrical Store of the Year) both winning for a second time. JB Hi-Fi also won the relatively new category of the Major Furniture/Electrical Store of the Year for a first time. Michele Levine, CEO, Roy Morgan, said:

    There has never been a period like the last 18 months for the retail industry with some businesses booming on the back of record spending and others, more reliant on bricks-and-mortar stores, facing the most challenging market circumstances imaginable.
    The onset of the COVID-19 pandemic in mid-March 2020 seemed set to lead to a tremendous level of disruption to Australian retailers, however there have been 'winners' and 'losers' in the industry just like in any other with those able to respond quickly to the changing landscape able to deliver higher levels of customer satisfaction and prove their adaptability.
    The 15 retailers presented with Annual Roy Morgan Customer Satisfaction Awards ... have topped their competitors in providing a high level of customer satisfaction to consumers and proven their 'mettle' in dealing with the extreme challenge of the pandemic.
    There were several retailers to win all 12 months in 2020 including Department Store of the Year Myer, Discount Department Store of the Year Costco, Discount Variety Store of the Year The Reject Shop, Hardware Store of the Year Bunnings and Sports Store of the Year Rebel...
    The first-time winners Schnitz (Quick Service Restaurant of the Year) and Chemist Warehouse (Chemist/Pharmacy of the Year) are two very different businesses but both have benefited from the pandemic with the rapid growth of food delivery services in 2020 ... while the desire to keep safe and protected from COVID-19 drove many to buy disinfectants, gloves and other medical supplies from Chemist Warehouse.
    We are now half-way through 2021, and well into the second year of the COVID-19 pandemic, but the same skills and commitment to providing high levels of customer satisfaction to customers during 2020 is set to prove valuable again this year as international borders remain closed, and Australians are 'forced' to spend their 'discretionary leisure dollars' here at home...
    Congratulations to all 15 winners for not losing sight of the importance of the consumer despite the myriad of distractions, disruption and widespread uncertainty faced by all in 2020.

    In addition to its Customer Satisfaction Awards, Roy Morgan tracks customer satisfaction, engagement, loyalty, advocacy and NPS (Net Promoter Score) across a wide range of industries and brands. NPS is a customer loyalty and satisfaction measurement taken from asking customers how likely they are to recommend a product or service to others on a scale of 0-10.


    A regular Bunnings customer, Gail Suttor, who uses a wheelchair, was left embarrassed and humiliated after an encounter with staff while shopping for plants at an ACT store, according to findings from a tribunal.

    The Canberra Times reported that Ms Suttor complained to the ACT Human Rights Commission after her Sunday morning shopping trip went awry and she alleged she was discriminated against because of her disability.

    At the time, because of new COVID-19 requirements, this particular Bunnings store had new rules in place about entering and exiting the store. Ms Suttor did what she normally did and after her daughter parked the car near the garden centre and picking up some plants, they went to enter though the centre.

    However Ms Suttor was stopped and told she could only come in through the main entrance. In her complaint, she said she was assertive but not aggressive when telling staff about her difficulties with access.

    Ms Suttor, who is partially blind and deaf, said she was shouted at when she didn't immediately leave. Feeling overwhelmed and frightened, Ms Suttor moved further inside to try to turn the unwieldy electric wheelchair around, fearing it tipping over. She said another employee stationed there also yelled at her, saying: "I don't care, I don't care." Ms Suttor paid for her plants and left.

    Bunnings denied it was a case of discrimination and said instead it was poor customer service. But Ms Suttor felt it was discrimination and the service lacked the usual kindness, understanding, compassion and empathy she was used to from the Bunnings staff.

    In May 2020 Bunnings was in the beginnings of introducing its COVID-19 safety plan. Witness statements from staff said the woman and her daughter responded aggressively to being told they couldn't enter through the garden centre.

    The employee who said "I don't care" told his supervisor he said he didn't care if the shopper called his manager, not that he didn't care about her disability.

    The case was referred to the ACT Civil and Administrative Tribunal. In a decision published recently, the tribunal found Bunnings had illegally indirectly discriminated against the shopper because of her disability.

    Senior member of the tribunal, Professor Tony Foley, said the staff had the discretion to allow certain customers in through the garden centre but only exercised it when Ms Suttor asserted herself. Mr Foley said this escalated to a "nasty exchange".

    The tribunal found Ms Suttor was treated unfavourably because of a lack of understanding about how a person with a disability might enter the store. Mr Foley said:

    As a consequence, the applicant could only access the goods and services being provided by the respondent in the face of certain conduct. This conduct had the effect of disadvantaging her by the distress, embarrassment and upset it caused her, and I find this disadvantage was because of her disability.

    Mr Foley said there was a mitigating factor, being the COVID-19 pandemic was in its early stages and the store's focus was on new public health measures. He awarded the shopper $500, saying while nominal it recognised the genuine distress and humiliation she suffered.

    Toowoomba location

    Bunnings has submitted an extension request with the Toowoomba Regional Council, asking for an extra two years until 2024 to finish the final stage of its store on the corner of Ruthven and Bridge streets near the CBD.

    The development, which is located behind the old Toowoomba Foundry, was approved in 2015. The extension relates to an as-yet uncompleted food and drink outlet with 25 carparks on the southeast corner of the site facing Ruthven Street.

    According to RPS Group town planner Harry Connolly, the delivery of the eatery is based on tenant selection. In a letter to council, he wrote:

    Completion is dependent upon tenant demand, noting also that careful selection of the right tenants is important to the building design and requirements. The extension is sought in order to provide time for the tenant identification and selection process and for the building works.

    The council has yet to respond to the application.

    IKEA small format strategy

    The home improvement giant is adjusting its business model and switching from its familiar large-format warehouse-destination store, IKEA Australia CEO Jan Gardberg recently revealed to the Australian Financial Review's BOSS magazine.

    Although IKEA has 10 super stores across Australia, there will soon be smaller shopfronts, and the first four or five are expected to open across Melbourne in the next 12 months. Mr Gardberg told BOSS:

    In the beginning, the strategy was to create our destination stores, which meant very large and instant gratification, cash and carry for the whole range. That proposition has worked very well for more than 60 years. But that value proposition has been challenged.
    Today, to get a full-fledged kitchen or a big wardrobe solution, of course it consists of many different components. We are finding more people don't want to spend that extra half hour running around in a self-serve warehouse to pick up 50 different items, so we want to offer more services for the future.

    It is a big change for a business that has traditionally owned most of its stores outright, securing an almost billion-dollar property portfolio, according to financial records with the regulator, ASIC (Australian Securities and Investments Commission). But Mr Gardberg says the data is clear - consumers want IKEA's products to be more conveniently accessible. He said:

    We need to find a way where we can get smaller footprints, either extra small stores or, as we are going to do, introduce plan and order studios.

    IKEA already launched its first pilot studio store on a "micro scale" in 2019 in the Warringah Mall in Sydney's northern beaches - a pilot that will now go mainstream. The studios will be staffed by highly trained IKEA experts, who can help plan someone's kitchen, wardrobe and bathroom needs, and then have the orders fulfilled and delivered. He said:

    We have tested this plan of order point studios across many different markets. We have tested in Sweden, Denmark, Spain and France, so now it is conceptualised and we can see what is working and really scale it up.
    We are looking at metros, so that means Melbourne, Brisbane, Adelaide, Perth and Sydney. Melbourne is a $5 billion home furnishing market, it has close to 5 million people and growing.
    The density of living is about 450 people per square kilometre, we also know the average income is just above $100,000.
    We know the average house size is 132 square metres and about 68% of the people in Melbourne own their own home; 45% are living with children.

    Mr Gardberg said that although Melbourne will be the first cab off the rank, each state and city will be treated uniquely. Travelling anywhere over 30 minutes is now considered far, he said.

    Solutions will come in different ways. Perth is expanding along the coast, it is very narrow but extremely long, so it needs a different approach. Then Brisbane, with the river dividing between north and south, and also the demographics and expectations are very different."

    Another key aspect of IKEA's changing strategy will be more options for the affordable end of the home-maker market, putting it against Kmart and Target, as well as Bunnings. Mr Gardberg said:

    We all can see that affordable homes are not coming forward, prices are just continuing to go up ... we believe people will continue to want a home but will demand more value out of every dollar spent. That means for the future we will see much more competition into the affordable and smart home solutions.

    Also on the agenda for IKEA is a major push into New Zealand, in another sign of the retailer's ambitious growth strategy for the region.

    Related: IKEA's first, small format pilot store is in a Sydney shopping centre.

    Ikea's digital-first, small format store - HNN
  • Sources: Roy Morgan, The Canberra Times, The Chronicle, Toowoomba and Australian Financial Review
  • bigbox

    USA update

    Home Depot contracts its own container ship

    Walmart-owned Sam's Club is trying to nab a share of the US home improvement market amid the busiest season for renovations

    The pandemic has created many supply chain challenges for hardware retailers in Australia. For customers, retailers' logistical woes are playing out in the form of out-of-stocks, long delays before a purchase's arrival and higher prices.

    In the US, Home Depot has reserved its own ship as it deals with its supply chain problems.

    The home improvement big box retailer is one of the largest importers in that country. Yet with congested ports, container shortages and COVID-19 outbreaks slowing shipments, the company made a decision to get its own boat. It is the first time the company has taken such a step. President and chief operating officer Ted Decker told CNBC:

    We have a ship that's solely going to be ours and it's just going to go back and forth with 100% dedicated to Home Depot.

    Mr Decker said the contracted ship, which will begin running in July, is just one example of the unusual measures that the company is taking as it copes with the ongoing challenges across the global supply chain.

    On rare occasions, Home Depot has also flown in power tools, faucets, electrical components, fasteners and other "smaller, higher value items" by air freight, he said. In other cases, it has opted to buy items on the spot market - even though it can cost as much as four times more than contracted rates.

    US retailers are heading into peak season for shipping holiday merchandise, which usually begins in August. Jonathan Gold, vice president of supply chain and customs policy for the National Retail Federation, told CNBC:

    Right now, they are all trying to figure out, 'How do we mitigate that risk to make sure that we've got the product here in time for when those holiday season sales start?' That could mean moving up timing for when you bring your product in, which could further lead to additional congestion and delays.

    More than a year into the pandemic, Mr Gold said retailers continue to deal with a revolving set of problems. Soaring demand has also contributed to the problem, as people have spent money on goods rather than services like dining out and traveling while stuck at home for months.

    Home Depot was caught by surprise, Mr Decker said, when consumers' extreme appetite for home improvement took off during the pandemic. With same-store sales rising over 30% in the first quarter of 2021, Home Depot has a massive appetite for merchandise to keep its stores and warehouses full. Each store stocks approximately 35,000 products, the company has reported, with a total of more than one million items listed in its online store.

    A recent COVID-19 outbreak in southern China is a new concern. As Chinese authorities try to stop the spread, they have restricted the number of vessels that can access ports in the major exporting hub. That's forcing some ships to skip over the ports or anchor offshore as the boats wait to dock. Large shipping companies, such as Maersk, have warned clients about delays. It has caused the biggest backlog since at least 2019, according to a Reuters report.

    Costs have risen due to the issues, too. Nathan Resnick, CEO of Sourcify, a company that connects companies to manufacturers, said freight rates have "spiked significantly". He estimated that companies may have to raise prices between 5% and 20% to offset that increase.

    A lot of that cost may be passed down to consumers where there may be higher prices this holiday season.

    Mr Gold said since the pandemic, coming up with quicker and more efficient ways to move goods across the world has become an urgent priority.

    Among the strategies retail executives are exploring are diversifying supply chains by importing materials and merchandise from other countries outside of Asia or closer to the US, adding air freight to the mix and placing orders even earlier, said Mr Gold.

    For companies like Home Depot, Mr Decker said size has been a competitive advantage. It is the third largest US importer by volume of ocean containers, according to the most recent annual ranking by the Journal of Commerce, a magazine and website that covers global trade. Home Depot rival, Lowe's, is fourth largest.

    We have a solid, contracted amount of capacity that our suppliers have largely honoured. [It's] long-term thinking, 'Covid doesn't last forever so keep your best customers happy'.

    Related: In its first quarter results, Home Depot's same-store sales soared 31% year-over-year.

    Home Depot's Q1 gets another boost from the pandemic - HNN Flash #46, May 2021

    New competitor

    Sam's Club, a members-only retail warehouse club owned and operated by multi-national, Walmart is getting into home improvement business and competing with Home Depot and Lowe's.

    The Home Depot, and Lowe's only account for 30% of the US home improvement market, according to Liz Suzuki, senior hardlines (hardware) retail analyst at Bank of America Securities.

    To try and catch up, Sam's Club, in collaboration with Service Finance Company, announced plans to launch Sam's Club Home Install Experts by Service Finance. The service is said to connect members with local home improvement contractors who offer a range of services from HVAC, roofing, siding, window and door installation to bathroom and kitchen renovations and flooring products.

    To lure in more consumers, Sam's Club is offering members an additional discount on everyday dealer pricing as well as a financing option through Service Finance Dealers.

    Ms Suzuki estimated that US home improvement sales and services hit approximately USD767 billion throughout 2020, which is "equivalent to about the 20th largest economy in the world".

    Home Depot and Lowe's pulled in USD132 billion and USD90 billion, respectively, according to Ms Suzuki, in a research note:

    As a result of a combination of more time at home, favourable household formation trends, and strong household balance sheets, demand for a wide range of home improvement projects has remained at elevated levels over the last year.

    Sam's Club is now trying to take a bite out of the trend and executives say its "relationship with Service Finance will be a gamechanger". Kevin O'Connor, Sam's Club senior vice president and general merchandising manager, said:

    With access to Service Finance's network of reputable dealers, our members can have confidence knowing they're not only getting additional value from their membership, but they're also getting the reassurance of a trusted provider.

    Sam's Club members across the US will be able to select a product and service and schedule a free consultation with a Service Finance Dealer.

  • Sources: CNBC, Maritime Executive and Fox Business
  • bigbox

    Big box update

    Small format store closure

    Bunnings Modbury site in South Australia has been sold, and the buyer is leveraging its prominent position on a major carriageway and proximity to the state's largest regional shopping centre by area

    The Bunnings store located in the Toombul Shopping Centre in Brisbane (QLD) is set to close after five years.

    The small-format Bunnings outlet is accessible from within the shopping centre and opened in August 2016. However regional operations manager Margaret Walford said reviews of the company's place in the local community revealed the Toombul site was no longer needed. She told the Northside Chronicle:

    As our store portfolio evolves and new investments are made, we continually review our network and our needs in the local areas in which we operate and our stores play an important role as part of that.
    Because our lease expiry was nearing, we've made the decision to cease operations at our Toombul smaller format store and service the local community from our nearby stores in Virginia, Newstead and Stafford. Both our Virginia and Newstead Bunnings Warehouses opened in 2019 and offer customers a newer, wider and improved offer.

    Staff at the Toombul store had "done an incredible job serving customers and the local community... and we thank the team for their commitment", said Ms Walford. She confirmed all staff would be offered transfers to nearby Bunnings stores.

    She also said the closure did not affect plans for opening stores in other locations and said news of the closure followed development plans for an expansion of the retailer's Stafford store.

    The significant expansion of the Stafford Road site was put before Brisbane City Council last year and would include an additional 6000sqm of additional retail space and 180 new car parks.


    The site where the Bunnings store is situated in Modbury (SA) has been sold to Inheritance Capital Asset Management (ICAM). It is leased to Bunnings until at least 2025 with four, five-year renewal options thereafter. The vendor was Adelaide Property Management.

    Located in close proximity to the Modbury Triangle Shopping Centre and Westfield Tea Tree Plaza, the Bunnings-tenanted asset is viewed as "Covid-proof" because of its stable, long-term income stream.

    Freestanding Bunnings-leased freehold properties are highly sought after by investors due to the certainty of income. Only 22 warehouses were brought to market between 2016 and 2019 ahead of Charter Hall's acquisition of a portfolio of six Bunnings assets in late 2020 for $353 million.

    ICAM, which has $395 million in assets under management, said the site also had strong prospects for population growth.

    The transaction was negotiated by Jamie Guerra and Ben Parkinson from JLL. Mr Guerra said Bunnings assets continue to attract core capital. He told The Australian:

    Investors are particularly attracted to secure, well-leased retail opportunities in South Australia providing attractive yields and no stamp duty on commercial transactions.
    ICAM recognised the value of the Bunnings lease and with their existing retail expertise were attracted to the tightly held Modbury precinct.

    Related: Charter Hall Group and two Australian superannuation funds have acquired a portfolio of six Bunnings hardware stores.

    Big box update: Real estate sale - HNN Flash #24, November 2020
  • Sources: Northside Chronicle and The Australian (Online)
  • bigbox

    Bunnings Strategy Day 2021

    Bunnings quietly heads in a different direction

    The question about whether the pandemic has brought permanent changes has been answered: it has, at least for Bunnings. The strategy day set out the markers for a rapid evolution of one of Australia's largest retailers.

    On 3 June 2021 Wesfarmers held its strategy day focused on the 2021/22 financial year, which took place at the Fullerton (formerly Westin) Hotel in Sydney, Australia.

    For Bunnings, looking back over the previous 10 years of these strategy days, this is probably the second most significant such event, over-shadowed only by the strategy day in June 2012, when Bunnings released details of its response to the launch of Masters Home Improvement, a retail venture by Woolworths.

    This is also only the third strategy day since the failure of Bunnings' attempt to enter the United Kingdom (UK) and Ireland markets through the acquisition of the retailer Homebase.

    It is worth briefly revisiting that history because it has indirectly influenced this strategy day. There has been a number of journalists who have made a complete hash of covering the rise and fall of BUKI. In terms of the operation of Homebase itself, there is really nothing complex about it.

    In January 2016 Woolworths announced that Masters would be shut down, and Bunnings announced the formation of Bunnings UK & Ireland (BUKI).

    The original plan was to acquire Homebase, make a few improvements, but concentrate on developing a Bunnings-branded offer for the UK market. This was a classic Bunnings strategy: develop a prototype, test it in the market, make improvements, and eventually roll it out.

    Instead, Wesfarmers chose to make a substantial investment in Homebase stores, without any testing, and with a very poor understanding of the UK market. (Somewhat ironically, Bunnings' understanding of the UK was slightly worse than that of US retailer Lowe's understanding of the Australian market when it partnered with Woolworths in Masters.) This lack of knowledge was exacerbated by the wholesale dismissal of almost all of the Homebase management staff (including its very competent CEO). It was a case of a company being caught out by the "unknown unknowns" - it did not even realise the extent of its lack of expertise.

    The question is, of course, why did Bunnings choose such a risky venture? In HNN's analysis, it's important to understand the situation of Bunnings at the end of 2015. The company's strategy - to face-off against the expansion of Masters through its own expansion - was incredibly successful. To achieve that goal, it had built up an outstanding management staff, capable of rapid and effective execution. With Masters defeated, what was going to happen to all that expertise and capability?

    There really were only two ways for it to go. Either Bunnings would have to take the essentials of its current business and break these to reform into an even more successful company, or it would have to find new markets to enter with the existing model, and expand through access to more customers.

    In 2016, Bunnings chose the latter.

    What Bunnings managing director, Mike Schneider, announced on 3 June 2021 was, essentially, Bunnings choosing the former path. In typical Bunnings style, this was done in an understated manner. But it is, nonetheless, strategically very significant.

    The reasons for this are fairly evident, and it is largely down to two influences the COVID-19 pandemic has had on the business. The first influence is simply that revenues have increased strongly- due both to the pandemic boosting stay-at-home DIY projects, and the increasing value of dwellings. The difficulty this creates is that Wesfarmers and Bunnings will be cycling these high numbers, probably not just for one year, but for three halves. To continue to "deliver shareholder value", the company needs to at the very least retain those retail sales, if not increase them by percentages somewhere in the mid-single digits.

    The second influence is the type of customer who has been coming to Bunnings during the pandemic. Where the standard Bunnings customer is somewhat value-conscious, the most recent surge has seen growth in consumers willing to pay more. Bunnings has had the opportunity to introduce its offer to a wider market than before, and its future growth is partly based on keeping those customers coming back.

    The situation of Bunnings pre-pandemic was similar to that of many larger Australian retailers: a relatively static market - demographically - to sell into, with the main task being how to derive the best sales from that market. Post-pandemic, Bunnings is closer to the situation of retailers in the North American markets, where engagement, bringing newer customers back to the store, has increased in importance.

    What we will present here is a quick summary of the major points of what is new, and a roundup of the more familiar. More in-depth analysis will appear in the forthcoming edition of HI News digital magazine.

    The new stuff

    While much of this is new, it does build on existing structures, but takes those in unexpected directions.

    Quality ranging

    According to Mr Schneider:

    Our focus is ensuring we have a true ranging diamond - entry, good, better and best - introducing products in line with customer aspirations and needs.

    The big change here appears to be the addition of "entry [level]" goods. In the past, the Bunnings range has been mostly described as only "good, better, best".

    It would be tempting to see this as being the introduction of a new "sub-level" of goods, but the truth is that a better description of much of what Bunnings has to offer is "entry level, good, better". So what this extra level really likely indicates isn't a new sub-level, but rather a new top level - which is reflected in the next point.


    According to Mr Schneider:

    And we're upping our focus on stylish on-trend products, recognising our customers desire not only to access essential products for home repair or maintenance, but also to be inspired to undertake more diverse projects.

    That's a clear reflection of a shift in market strategy. While Bunnings intends to stay with its "warehouse" look and feel, the retailer realises it needs to offer facilities for a wider range of projects, especially at the premium end.

    Store layout

    Commenting on changes to the display of goods, Mr Schneider said:

    You can see an example of this on this slide where we've located all the products a customer needs to move their home or business in one aisle. This space optimisation work is enabling us to introduce inspiring new store layouts.

    While this type of project-based layout is something we have seen before at Bunnings (the Chadstone, Victoria store had a similar area for moving supplies at launch), the fact that this is being called out indicates it will become more common.

    Customer contact

    Commenting on the influences on the in-store service teams, Mr Schneider states:

    And when in store, we want our team members to spend more of their time with our customers to help them with the advice and materials they need.

    From some comments HNN has heard from Bunnings workers, part of the training at some points in the past has included making sure staff minimises time spent with customers, so that they can perform a full range of duties, including restocking. That is a contrast to what is regarded as best practice at US retailers, where work systems are developed to minimise time staff spends on tasks that are not directly customer-facing.

    Market segmentation

    Discussing Bunnings' renewed focus on commercial customers, Mr Schneider commented:

    Our commercial business continues to be a significant growth opportunity. We take a segmented approach to the market, with our three primary commercial customer groups. Regardless of the segment, we ensure we use a mix of leading brands and channels to serve our customers.

    The previous managing director of Bunnings, John Gillam, was always very clear that Bunnings did not do segmentation. In his view, Bunnings functioned as a kind of endpoint to a global sourcing/supply chain operation. While this is perhaps the most "abstract" change, it is still an important one.


    In responding to a question from Brooke Campbell Crawford, an analyst with JP Morgan, Mr Schneider said:

    We're also interested in categories like appliances that are sort of fitted to the home so we're not really thinking as much you know, TVs and sound systems, but more in sort of fridges and dishwashers. We do have a small range of those but clearly there's opportunities to look for growth in those, as we see our global peers do so you know, it is it is within that ranging lens. We're very focused on that. You know, we're not sort of considering homewares Or some of the softer furnishings. That's not what we sort of see in our purview.

    First of all, this was perhaps one of the real "bombshells" of the presentation. Bunnings has for years been questioned as to whether it intends to go into appliance sales, and has always demurred, citing intense market competition and poor range fit. That kind of change will have reverberations across the appliance retail sector.

    Secondly, it is couched clearly in terms of Bunnings moving more towards some of the strategies used by North American home improvement retailers.

    There is just a little bit more going on here as well, though. The "announcement" was placed into the very last answer of the day, in such a way that HNN expects many analysts might miss it.

    Business (more) as usual

    To just quickly run through some of the other significant statements:


    Mr Schneider reported Adelaide Tools was trading well, with a new store launched in Parafield, South Australia, which is trialling some new layout ideas. On expansion, he said:

    We'll open our first stores outside of Adelaide later this calendar year. These will be in Western Australia where we see strong prospects for growth with a new brand that will be announced in the next few months. A staged rollout across Australia and New Zealand will follow over the next 12 to 18 months.

    On the Beaumont Tiles acquisition, he was just a little cautious, repeatedly stating that this was not yet a "done deal". Thats down not only to needing Australian Competition & Consumer Commission (ACCC) clearance, but also to some "internal steps" that need to be taken. At a guess, Beaumonts is a private, family company, and Bunnings was probably only granted access to the full accounting numbers post agreement of intent, so it may be processing some unexpected accounting practices.

    In discussing the strategy behind the acquisition, Mr Schneider said:

    Beaumont Tiles operates in a large competitive category that has the opportunity for strong growth. And this acquisition would allow us to build on the success of the Beaumont Tiles business and invest in its future growth. It's also a great opportunity to better address the needs of our builder customers and flooring trades as we help them with more of their build. Beaumont Tiles has a great leadership team in place and will be run as a separate and distinct business, much like Adelaide Tools.

    (It's worth pointing out that Beaumonts is also a part-franchise operation, unlike Adelaide Tools, so it will be interesting to see how that plays out.)

    It came down to Michael Simotas, head of consumer equity research at Jefferies (and the source of many an intelligent question) to ask the Total Tools question without mentioning Total Tools:

    If you look at you guys, as well as a couple of the other bigger players, there are plans to put a lot of professional tools stores on the ground over the next three to five years, across the industry. Stores seem to be doing quite well at the moment. Where do you think the sales will come from and where do you model the sales to come from? Or is it expansion in the market?

    Mr Schneider replied:

    I think the way we've sort of thought about the business for a long time is grow the market and grow the opportunities that present within the market. It's really clear there's a very strong demand across Australia for trades and clearly a lot of pressure on different markets [to] actually get trades into that.
    So we're seeing a lot more being done at the sort of apprentice level to sort of grow employment within the sector. And I think that's one of the elements. And then you know, it is really clear that across housing construction, there is real demand. And whilst from a Bunnings trade point of view, we don't play in that heavy construction trade market, the trades, they're actually working on those sites, you know, are very professional operators and they're looking for the sort of products and brands that specialist trade players are able to offer and we're able to do that through Adelaide Tools.

    It seems quite likely that these predictions of an expanding market will hold true, at least into 2022. However, most industry analysts would also say that Bunnings will end up competing directly with Total Tools by the end of 2022. Though, the reality is that both Wesfarmers and Metcash are likely counting on taking a great deal of market share from smaller retailers in the specialist tools market.

    Digital and supply chain

    The overall approach to digital ecommerce, according to Mr Schneider, is to assume the company will have to support at least 5% of its overall sales through that channel. The peak, so far, has been just over 3%, and that has dropped back down to 2%. The 5% number is a decent target however, and, as Mr Schneider pointed out, at that level, fulfilment direct from stores to customers will not be possible.

    One of the surprises of the day that arose from this is that Bunnings revealed it has a fulfillment centre set to begin operations in Melbourne.

    A good example of this is our upcoming trial of a rapid fulfillment centre in the western suburbs of Melbourne to test and learn around more efficient online fulfillment for our customers. The site will also trial the central dispatch of items customers purchase in store, or decide to have home delivered with expected benefits to include removing tasks from stores, freeing up space and reducing manual handling for our team.

    While that is a welcome direction of strategy, the analyst Ben Gilbert of Jarden Australia pushed the company a little on the possible need for deeper changes to the supply chain in the future. Mr Gilbert asked:

    Just interested in supply chain, and also right to play categories. If you look at what Home Depot has done, the US, and I've spent a lot of time looking at some of these players, they've increased their SKU count to sort of a million odd when they look at dropshipping, and those sorts of things...How are you thinking about supply chain investment, increasing range and moving more aggressively into these right to play categories?

    Mr Schneider responded:

    I'll start with supply chain. So for me, the thing that sort of occupies our thinking is what happens is, as online penetration grows, I think we talked at the half about online penetration, sort of peaking it, just over 3% of revenue, it's dropped back down under, under 2%. At present, but that is going to grow, it's going to flow the global trends. And, you know, I think one of the things that you know, lock down does is push people to look, look to different channels, and you will eventually get some more stick from things like that as well. And we recognise that once we're sort of getting up above 5% of revenue coming from our online channel fulfilling from store becomes much less efficient than it is today. So you know, what we were looking at in in the western suburbs of Melbourne is: what's that going to look like? And it really is in a very Bunnings way, a test and learn environment.
    And we're also looking, as I said in my presentation at, you know, are there opportunities to improve efficiency in store by having products that customers want to have home delivered big bulky products, kitchens, barbecues, and things like that, that they're purchasing in store, delivered to their home in a more efficient way. So that's that formed one part of our thinking. We do know that we've still got opportunities from back-dock to shelf, if you like, in terms of install logistics.

    Mr Gilbert followed up on his question by further asking:

    Just on that, do we need to be thinking about the next 12/24 months, there's going to have to be some, some firmer news around some larger centralised distribution points to then support those distribution centres that then allows you to push that range and bring more products in. Because it seems likely given the nature of the models historically, you probably need some bigger centralised sheds and some automation to do more of the cross stock, etc.

    Mr Schneider responded:

    Yeah, look, I think certainly over the next 12/24 months, we'll have we'll have more to say, you know, based on the things that we're doing now to sort of learn from it. So yeah, I think it's certainly going to be a stay tuned, there's more to come down the track.


    That's pretty much just the highlights from what was said at the strategy day. As we said in the introduction to this piece, we'll be offering a more comprehensive analysis in the next edition of HI News.


    Big box update

    Bunnings Plainland opening

    The development application for a new Dubbo store has been withdrawn and building has begun on Mt Isa outlet

    Bunnings Plainland is expected to open shortly; a planned store in Dubbo (NSW) will no longer be built; construction has started on the Mt Isa store; and a traffic plan was revised for proposed Wagga Wagga store.


    The team at Bunnings Plainland is preparing for the official opening of its store. Complex manager, Simon Funk spoke exclusively to the Gatton Star about welcoming the first customers through the door, and leading a large team of locals, at the age of 22. He said:

    The team have been working tremendous amounts of hours and putting in a huge effort to get the shop to where it looks today, and even more when it opens.

    The Plainland store will cater to a regional and rural demographic. Mr Funk said:

    Inside the store it's a bit more compact, but we have absolutely everything we would offer in a bigger warehouse but backed by an oversized timber and nursery.
    We're carrying items that we might not carry in our metro stores - like ride-on mowers, rural fencing supplies, Besser blocks and bigger bags of products.

    The store spans more than 9000sqm and has about 200 car parks. Having worked with Bunnings for six years, Mr Funk said the best part of the job was helping the customers.

    We are here to help our customers and it's a business that's been built on that.
    Also for me, I've got the opportunity to bring on more than 100 locals and provide them with careers. It's not just a job, but a career that is hopefully meaningful to them.

    The Plainland store is also set to go up for auction through Burgess Rawson in late June. Real estate agents anticipating a sale fetching close to $20 million, according to The Queensland Times.

    The store is part of the Plainland Crossing master planned community, which will have hundreds of new houses, school, childcare centre and an upcoming Aldi supermarket. The project is being delivered by development and construction company De Luca.

    Bunnings Plainland is located at 4404 Warrego Highway, Plainland (QLD).


    Dubbo Regional Council were recently notified that the development application (DA) to build a Bunnings store located on the old RAAF base site has been withdrawn.

    The withdrawal comes after the Heritage Council of NSW refused to grant General Terms of Approval, according to a report in the Daily Liberal and Macquarie Advocate.

    A statement from council said those who made a submission during the public exhibition period would be advised in writing of the withdrawal.

    Several residents voiced their concerns over the proposal, with a petition started to stop the application. Over 200 people signed the petition which highlighted concerns over increased traffic, associated noise and safety issues for residents and businesses in the area.

    Controversy has surrounded the DA since March, when deputy mayor Stephen Lawrence and councillor John Ryan called for then mayor Ben Shields to resign over a press conference he held about the DA.

    At the time, Cr Lawrence said the mayor's conference had undermined public confidence in the process. The mayor responded to the allegations, saying he had not undermined council processes or misled perceptions in the community. Cr Shields said in March:

    I've always welcomed a proposal if it goes to plan, so this nonsense that I've circumvented process is insane.

    More recently, Councillor Stephen Lawrence has been elected as mayor of Dubbo with Anne Jones elected as deputy mayor following Cr Shields resignation.

    Mt Isa

    Old buildings have now been demolished as construction work for a new Bunnings Mount Isa store begins. It is expected to open its doors in early 2022.

    This store will span more than 5500sqm, more than double the size of the existing store located on Camooweal Street. The new site is at 89 West Street.

    Features include the main retail area, a fully enclosed timber yard, an outdoor nursery and 150 on-site car parks. It will also have a building materials landscape yard and a bagged goods area in the nursery, both not at the existing Mount Isa store. Bunnings area manager, Michael Rodwell, told the North West Star:

    Bunnings Mount Isa has been part of the local community for about twenty years so we're really excited we'll be able to give customers a fantastic offer with the widest range of products.
    The existing Bunnings Mount Isa team will transfer across to the new store once complete and will be joined by new team members, who will be recruited closer to store opening.

    Hutchinson Builders are developing the site in a project estimated to be worth over $20 million.

    Related: Progress on the Mount Isa and Plainland stores have been ongoing.

    Big box update, HNN Flash #37 - March 2021

    Wagga Wagga

    An updated traffic plan for the Bunnings store relocation project in Wagga Wagga (NSW), on the corner of Pearson Street and the Sturt Highway were released for public review.

    Last year the public was invited to have their say on the plan, with a number of concerns raised about road safety and congestion in the area.

    Bunnings property director Andrew Marks said the company had listened to the feedback and adjusted the plans accordingly, providing three exit and entry points for cars and one for trucks. He told the Daily Advertiser:

    We have taken on board feedback from the local community and council, and the amendment will provide an additional exit only onto Saxon Street, providing improved traffic flow and safety for Wagga locals.

    Access will include left turn only entrances and exits for cars on both the Sturt Highway and Pearson Street, with an additional deacceleration turning lane constructed on the highway border. Trucks will have one separate entrance off the highway and one exit onto Saxon Street.

    Additionally, car park spaces will be reduced to 421, inclusive of accessible and trailer parking. In the original report, which was lodged in 2020, 449 spaces were proposed for the new development.

  • Sources: Gatton Star, The Queensland Times, Daily Liberal and Macquarie Advocate, The North West Star and The Daily Advertiser
  • bigbox

    Big box update

    Gardening tops Bunnings' survey

    Bunnings maintains its timber ban despite a Federal Court decision upholding an appeal by VicForests over alleged breaches of the Environment Protection Biodiversity Conservation Act

    In a recent survey commissioned by Bunnings, almost a third of respondents placed gardening at the top of their home "to do" lists. But many shoppers are taking shortcuts and opting for plastic plants. Bunnings' general manager of merchandise, Tracey Lefebure, told News Corp:

    Paint and decorating products are always in demand, with the introduction of our new artificial flowers range...receiving very positive feedback with people creating everlasting statement floral arrangements that look just as good as the real thing.

    The survey indicates many customers are enhancing their outdoor areas to enjoy during the colder months. Ms Lefebure said outdoor heating, outdoor lighting, and fire pits were among some of the top performing product categories.

    Following the impacts of COVID-19, almost 60% of Australians (according to the poll) say they enjoy spending more time at home than they did prior, and customers are telling us that they are looking for ways to get the most out of every space of their home - including their outdoor area during winter.

    The survey of 1000 Australians, conducted by Antenna Insights, also found almost half of Australians were planning to complete more DIY projects in 2021 that the generally would have outsourced.

    More than 40% of respondents said they were more willing to start a renovation project since the pandemic started. Australians are planning on spending $4,100 on home improvement this year on average, and homeowners are set to spend $5,500. Ms Lefebure said:

    As we get closer to winter, customers will shift their focus to indoor projects and products to make their homes feel warm and cosy including rugs, indoor lighting, indoor heating options like wood-fire and panel heaters, as well as insulation products to help keep in the heat.

    Bunnings timber

    Bunnings has also responded to a union plea for the Victorian government's help to negotiate with the hardware store chain over a ban to stock local hardwood on its shelves.

    In a statement provided to The Mandarin website, Bunnings general manager merchandise Toby Watson said the store would not be reversing its decision to ban the use of trees logged in Victoria at this time.

    Mr Watson explained that Bunnings' timber policy required suppliers to source from legal, responsibly sourced and well managed forest operations. While the recent Federal Court decision to uphold VicForests' appeal meant it had acted according to the law, this did not necessarily mean the operations met other standards under the store's policy. He said:

    We've reviewed the court's decision in detail to understand the implications in relation to our timber policy. While the court reversed a single finding relating to the EPBC (Environment Protection Biodiversity Conservation Act) Act, it upheld the trial judge's 21 other findings regarding the effect of VicForests' forestry operations on the environment.

    VicForests' current practices continued to fall short of the requirements of Bunning's timber policy, Mr Watson noted, saying that the store was open to working with stakeholders to find some future solution. He added that Bunnings remained committed to sourcing most of its timber supplies from within Australia and New Zealand.

    We're committed to working closely with industry, government and environmental organisations to continue to improve our timber sourcing and help ensure the long-term sustainability of Australian forestry.
    This includes continuing to purchase the majority of the timber we sell from sources within Australia and New Zealand that meet our policy requirements for legal, well-managed and responsible forest operations.

    CFMEU Manufacturing, the union representing timber workers, said Bunnings exploited the original court decision to justify a ban on VicForests' timber and appease environment groups.

    The union said it is asking the state government to put pressure on Bunnings to reverse the ban on timber from Victorian managed forests. In an interview with The Ballarat Courier, CFMEU Manufacturing national secretary Michael O'Connor said the ban introduced by Bunnings had affected timber workers and their communities.

    [Bunnings] is a huge network, it's got a high profile. A ban from Bunnings is important symbolically. It could cause, and it did cause, grief for timber producers and people who work in the timber industry.

    Mr O'Connor said it's unlikely overseas timber sourced by Bunnings to replace Victorian timber would have the same level of sustainable management.

    We are calling for a reversal of Bunnings' unfair ban on Victorian grown, sawn and manufactured hardwood timber and wood products.

    Bunnings implemented the ban in July 2020 after an initial decision by Federal Court Justice Debra Mortimer found VicForests had breached federal law by logging "66 areas of habitat critical to the vulnerable greater glider and critically endangered Leadbeater's possum.

    That decision was overturned recently on appeal to the full bench of the court. Three justices found if logging is conducted within a Regional Forestry Agreement (RFA) zone it is exempt from federal law, even if that logging breaches Victorian law and the RFA.

    Related: In mid-2020, the hardware chain said it would stop selling timber logged by VicForests.

    Bunnings drops VicForests wood products - HNN Flash #16, July 2020
  • Sources: Herald Sun (online), The Mandarin and The Ballarat Courier
  • bigbox

    Big box update

    Bunnings Preston store being built

    Plainland store is being prepped for sale and Wagga Wagga site is encountering legal problems

    The Northland Preston store is closing, and a new outlet is scheduled to open in 2022; construction company De Luca Corporation plans to sell Bunnings Plainland in Queensland at auction; and land for a new Bunnings store in Wagga Wagga (NSW) is caught up in legal dispute.


    Bunnings area manager David Roddis recently told the Whittlesea Leader that construction had started on the Bunnings store at the corner of Bell St and Chifley Drive in Preston (VIC).

    It will span 18,000sqm of retail area, and will be more than 5000sqm bigger than the existing Northland store. The store being built is expected to open in May next year.

    It will also have a fully enclosed trade yard and drive through and about 500 car parks for customers, 170 more than the Northland store.

    Existing Northland staff members will be transferring across to the new store and additional jobs will also be created for locals, said Bunnings.

    Related: In February, Newmark Capital announced it has purchased the Bunnings store being built in Preston (VIC).

    Big box update: Preston - HNN Flash #33, February 2021


    De Luca Corporation is selling three properties - including Bunnings Plainland - in the next Burgess Rawson auction series, according to a report in The Courier-Mail.

    Managing director Nic De Luca said it has already fielded off-market offers for Bunnings Plainland in the mid 4% yield mark, but he expects the auction to produce a better result. He told The Courier-Mail:

    Upon securing the Plainland asset last year, we were always committed to run an auction process as sub $30 million Bunnings assets are extremely rare.

    Bunnings entered a 10-year lease on the Plainland site, where construction began in early October 2020. The new store is expected to open in the second quarter of 2021. Mr De Luca told the Unwrap Large Format Retail website in December 2020:

    The Plainland site was a strategic acquisition for our business, following the successful Kingaroy and Lawnton Bunnings developments.
    We are extremely excited and proud to be delivering new Bunnings stores in Queensland, particularly during these challenging economic times. It is testament to our long-standing relationship with Bunnings.

    The Plainland project adds to De Luca's previous experience with Bunnings, having constructed over 20 stores since 2011 and complementing De Luca's current construction pipeline, with new Bunnings Warehouses also being constructed in Pimpama and Yeppoon.

    Plainland is a rural locality within the Lockyer Valley Region in Queensland and is 75km west of Brisbane. The town has been identified as a growth hub and the preferred location for several services to support the growing needs of the Lockyer Valley Region.

    Related: Real estate company, Plainland Crossing recently posted an update (May 8, 2021) on the progress of the Bunnings Plainland store.

    Plainland Crossing posts Bunnings store progress on its Facebook page

    Wagga Wagga

    Bunnings is continuing to plan for its Wagga relocation in NSW despite the Sturt Highway land set aside for the project being caught up in a legal dispute over a deceased's estate, according to a report in The Daily Advertiser.

    In January last year, the hardware retail chain lodged a development application for a $47 million store on Wagga's Pearson Street at the Sturt and Olympic Highways roundabout. It is approximately 500 metres north of Wagga's current Bunnings store.

    The proposed site is owned by Maria Limberger who died in January 2018. The property is currently occupied by her family's Rivcrete concrete business.

    Mrs Limberger's three adult children, Joseph Limberger, Catherine Oakman and Steven Limberger, have been involved in legal action over the past two years over various claims to her estate.

    Recently, the NSW Supreme Court handed down an interim determination that valued the Pearson Street property at $8 million and cleared the way for a sale in order to settle the inheritance claims.

    Justice Justice Philip Hallen stated that the Pearson Street property would be sold along with some of Maria Limberger's other Wagga properties and the money distributed according to her will, subject to further legal proceedings.

    Bunnings Warehouse is not involved in the Supreme Court case. Bunnings' property and store development director Andrew Marks said the company's "development application for a new store located at the corner of Pearson Street and Sturt Highway is still undergoing assessment by Council".

  • Sources: Whittlesea Leader, The Courier-Mail, Unwrap Large Format Retail and The Daily Advertiser
  • bigbox

    Big box update

    Store opening in Central Queensland

    Bunnings owned land located in Mill Park (VIC) and Gatton (QLD) have been placed on the market

    Bunnings' newest store that has just opened to the public is located in the 9000sqm facility next to its previous store on Yeppoon Road on the Capricorn Coast in Queensland.

    It has been about seven months of construction for the $23 million complex after the first sod was turned in October 2020, according to The Morning Bulletin. Complex manager Kath Dingley told the newspaper:

    We've got a five-lane timberyard, we've got a dedicated nursery with an undercover landscape area, we've got a dedicated tool shop, and obviously we've got kitchen and bathroom displays, and a really good paint offer.

    The store has 240 parking spaces, and the timberyard is bigger than the Rockhampton store.

    Land sales

    Bunnings is selling a 13,800sqm parcel of land in Mill Park behind its Plenty Road store in Victoria, according to a report in The Age.

    It is understood the land located at 18 Bush Boulevard was originally intended as expansion space for the Bunnings but a newer store was instead built further up Plenty Road in Mernda.

    Gorman Commercial agents Jonathon MacCormack and Stephen Gorman are running the expressions of interest campaign which closes on May 26. The land is expected to fetch more than $7.75 million.

    Property at the busy Mill Park town centre is highly prized. The Bunnings store was bought by investor David Feldman in 2009 for $16.2 million.

    In February 2021, the Gatton Star reported that Bunnings was planning to sell its block of land in Gatton in the Lockyer Valley region (QLD), which previously sold $1.6 million.

  • Sources: The Morning Bulletin, The Age and Gatton Star
  • bigbox

    Bunnings to buy Beaumont Tiles

    Will combine top two retailers in tiles

    In a surprise move, Bunnings announced it intends to buy the tile and bathroomware retailer for an as yet undisclosed sum

    On 28 April 2021, Wesfarmers announced that its big-box hardware retailer, Bunnings, had entered into an agreement to acquire Beaumont Tiles. The managing director of Bunnings, Michael Schneider, was quoted in a Wesfarmers press release as stating that:

    Beaumont Tiles is a well-run business with a proud family history that will remain separate and distinct to Bunnings, as is the case with Adelaide Tools which was acquired by Bunnings in April 2020.

    Wesfarmers has released very few additional details, other than noting that the deal will have to pass regulatory requirements.

    Beaumont Tiles is not a public company, so financial details are hard to come by. Estimates for revenues at Beaumont Tiles range from around $270 million to $290 million for the projected FY2020/21. As it is partly a franchise business, a slightly optimistic estimate of earnings before interest, taxation, depreciation and amortisation (EBITDA) would be $38 million to $45 million. Given its unique position in the Australian market, it's possible to guess at an acquisition price of between $180 million and $210 million.

    By Wesfarmers standards, that is not an especially large acquisition. As with recent acquisitions by Wesfarmers (such as that of, the question to ask is how, strategically, will the acquisition help to boost earnings from Bunnings? In HNN's opinion, looking at the next five years or so, that can be largely summed up in one five-letter word: Reece.

    However, it's best to leave that speculation for later, and begin with a more general overview of tile retailing and wholesaling in Australia.

    Australia's tile market

    In top order, the three major retail/trade sellers of tiles in Australia are Beaumont Tiles, Bunnings and National Tiles. As mentioned, the revenue for Beaumont Tiles is around $290 million, and for National Tiles it is estimated at $100 million. Estimates for revenue generated through tile sales at Bunnings vary widely, but the best estimate would seem to be around $170 million to $190 million.

    Beaumont Tiles was started in 1960 (according to the company's website, though some sources suggest 1962). Company lore has it that the idea for the company came about when Ray (RJ) Beaumont, a well-known entrepreneur in Adelaide, was chatting with a tiler working on a house - another one of RJ's endeavours, an up-market construction near his own home, which he planned to sell. One version of the story is that the tradie was complaining about the poor availability of tiles, while another version has it that RJ complained about the poor quality of the tiles being used.

    In any event, the story goes that RJ set out for Japan to find his own tiles, and was so enthusiastic that he bought an extra 2500sqm of tiles. While it is rumoured RJ's family was not keen on the investment, it soon proved to be a success. What began as a one-shed business soon expanded into a shop (the Grote Street showroom is still there, and viewed as the company's flagship retail outlet) and warehouse in Adelaide, which employed four staff. By 1967, when RJ's son Bob Beaumont joined the company, annual turnover was $120,000.

    Mr Beaumont eventually took over as managing director in 1978. The next major change to the company started in the 1990s. It was at that time Mr Beaumont began to pursue what would become a decades-long vision to consolidate smaller tile retailers. He explained his reasons for this in a 1993 article published in the Australian Financial Review (AFR):

    Buying tiles at the nearest hardware or small tile shop is most often the way it happens in Australia. But for customers, whether they are tilers, builders or home handymen, it does not allow for choice, large showrooms of ideas, or exclusive ranges at competitive prices. At any time we stock more than $5 million in tiles, slate and marble from around the world, which our franchise members, and therefore their customers, can have next-day access to.

    By 1993, the company had sales of around $36 million, and operated 15 stores in South Australia, which controlled about half the state's market. The company employed 150 staff, and relied on trade sales for 75% of its business. Its innovations included having tile makers produce custom tiles to which Beaumont Tiles held exclusive rights - partly in a bid to boost Australian-made tile sales - and setting up their own testing to give tiles a slip rating, to ensure customers could choose the best tile fit for purpose.

    One of the company's riskiest moves came in that year, when Beaumont Tiles moved into the Victorian market in a two-stage push. That began with Beaumont Tiles establishing its first franchise operation, of some 20 owner-operated retailers. Added to that, the company took over the longest established tile retailer in the state, Crosby Tiles, which had five outlets. Describing that development on the company's website, Mr Beaumont stated:

    My father and I had always been keen on the idea of grabbing an opportunity when it presented itself. In the early days, we were offered the Victorian outlets of a failing tiling business, which we decided to go ahead and buy.
    It was very risky because it was losing a lot of money. However, we gradually built on it until finally, we became the biggest in Victoria. That then enabled us to leap frog into Queensland and other parts of the country.

    Never one to shy away from a challenge, Mr Beaumont declared the company would have sales of $100 million in the year 2000. In FY2013/14, the company was estimated to have revenue of $200 million, with 100 outlets and 50,000sqm of total retail space, and opened warehouses in NSW and QLD with over 10,000sqm each. That success continued. The company claimed growth of 12% in retail sales during FY2016/17 to $275 million (implying sales in FY2015/16 were $246 million), with the company having a total of over 110 retail outlets.

    However, in 2018 Beaumont Tiles began to speak of a possible decline in the Australian market, while at the same time insisting Beaumont Tiles had firm plans to expand. According to an article published in the AFR during March 2018, Mr Beaumont stated that the housing market had peaked at a point in the previous financial year, and he expected it to decline in the future. However, he also stated that the market could support a total of 180 stores, 65 more than it had at the time, and that it would reach that goal by 2022. In an article published by Inside Retail in 2018, Mr Beaumont stated he expected annual revenue in 2022 to be over $500 million.

    In parallel with this, Beaumont Tiles began to suggest it would also consider expanding overseas. Asked about which markets the company would consider, Inside Retail quoted Mr Beaumont as stating:

    It will depend at the time what opportunities and partnerships are available to us...we're very open to the US or Canada and we're very open to some of the Asian countries too.

    It's perhaps a real testament to Mr Beaumont's business acumen that the proposed international expansion never took place. As the US big-box home improvement retailer Lowe's Companies learned with its partnership in Masters Home Improvement, and Wesfarmers learned with its attempts to enter the UK market through Homebase, national home improvement markets are intimately tied to local cultures, and this makes international expansion difficult.

    Perhaps the best insight into what the company was going through during 2018 comes from a quote that appears in the tiling industry's leading publication, Tile Today, where Mr Beaumont is quoted as saying:

    For Beaumonts to achieve greatness, we will become a very different business in some ways over the next couple of years, but we will also stay, in many ways, exactly the same, building on our tremendous strengths.
    Over the next two years, I consider "greatness" as our warehouses achieving almost Amazon levels of effectiveness, a totally integrated computer system that talks to both suppliers and customers, new and spacious warehouses in all states, expanded stock and range and a company covering all states, including Western Australia.

    (It is perhaps not at all coincidental that the number three tile company, National Tiles, had also begun exploring a different future around about the same time. According to the AFR's "Street Talk" column, National had hired financial group Flagstaff Partners to investigate different capital structures that could help it invest more in growth.)

    It seems very likely that Mr Beaumont's entrepreneurial instincts were, again, spot-on. The fact is that Beaumont Tiles, on its own, was simply unable over the two years after those remarks, to make the kinds of transitions it needed to in order to become a company better suited to the new retail environment.

    All this culminated to some extent in Beaumont Tiles' annual presentation for customers and media, held virtually in March 2021, where Mr Beaumont restated some of these optimistic growth forecasts, but over a longer term. These remarks were then repeated by the national buyer for Beaumont Tiles, Dean Booker, for an article in the Herald Sun of 6 April 2021. He predicted a further 50 stores would be added over the next five years - essentially 10 per year.

    Obviously, Mr Beaumont was aware the acquisition was a strong possibility when he made his remarks - though that might not be true of Mr Booker. In any event, it seems pretty certain that this expansion will finally take place – but under the auspices of new ownership.

    The market

    The big question that looms over the tile market is whether some of the low growth it has experienced since 2017 is really due only to the housing market itself, and the way that drives demand for both new builds and renovations, or if there are also structural problems at work.

    It is certainly true that, for example, the ability to do tiling on a DIY basis has become more accessible. As Mr Beaumont puts it on the company's website:

    We were the drivers of switching the whole industry over to adhesives from the traditional "mud mix", which is what they all called it. This meant that DIYers could do tiling quite easily themselves and this certainly drove the renovation market.
    Looking at the product itself, it's not only changed in look but in composition. Most of the tiles these days are porcelain, which are far less porous than the old tiles. However, the greatest change is in the evolution of digital glazing, where you can take almost any surface - timber, stone, slate or concrete - and duplicate it on the surface of a tile. This gives you an extremely durable, easy to clean surface which looks the same as timber, for example.

    At the same time, virtually all of us have seen tile floors that were installed on a DIY basis, or even by a "handyman" which are simply atrocious. It's barely possible that a DIYer can get away with tiling a bathroom wall, or even the floor to a laundry area, but the complexities of alignment and grouting on a floor are more bewildering - especially when it comes to tiles 60cm a side and larger.

    Meanwhile, much more accessible ways of laying attractive floors have continued to develop. Almost any DIYer should be capable of laying a laminate plank floor, and these have continued to improve in quality. The real "game changer", however, is the category now known as "resilient flooring", which includes vinyl planks. It's not only easier to lay than laminate, it is also 100% waterproof, making it ideal for kitchens and other wet areas.

    We could be looking at a future, in other words, where the only commonly tiled areas will be bathrooms - and that largely due to our association of tiles with things sanitary. This means that even if spending on new house builds and renovations continues to grow, a smaller share may go to tiles.

    The challenges at Beaumont Tiles

    While the market has had its effect, it's also true that Beaumont Tiles seemed unable to do what it needed to do in order to unlock more growth. One clear point of reference on this might be the company's website itself. Website designs such as the one used by Beaumont Tiles are referred to in the tech industry as being "opinionated" designs. That means they make certain pre-decisions for the user, and insist interactions will follow a very set pattern.

    The Beaumont Tiles website insists on slotting the user through a survey-like tile personality test.

    Beaumont Tiles

    A range of choices are posed to the user (along with personal questions such as age and gender), and at the end of that process the user is assigned a style. There are nine styles: Coastal, Classic Traditional, Eclectic Bohemian, Global Fusion, Modern, Scandinavian, Country Chic, Retro Vintage, and Contemporary.

    The problem comes when a user dislikes the style to which they get assigned, or simply does not fit, in terms of taste, within any one of these categories. At that point, navigating the site becomes quite difficult.

    By contrast, the National Tiles website provides a much simpler, cleaner interface to the tiles.

    National Tiles

    A drop-down menu lists, as the three top navigation choices: "shop by type", "shop by look" and "shop by room".

    Regulatory hurdles

    The acquisition of Beaumont Tiles by Wesfarmers is likely to end up facing more serious questioning by the Australian Competition & Consumer Commission (ACCC) than many other acquisitions in recent times. Essentially, this is about the two largest competitors in a market joining forces to take a commanding position.

    This also comes at a time when previous definitions regarding what should trigger anti-trust considerations are being challenged. The previous standard was that such acquisitions should be judged on whether they did, or could in future come to disadvantage consumers. That disadvantage was thought of strictly in terms of price, quality and supply.

    As concern has grown over the looming power of tech industry behemoths such as Facebook, Alphabet (Google) and Apple, attention is shifting away from pure consumer-based disadvantage, to look at the overall competitive situation, the need for consumers to have viable alternatives, and whether companies dominant in markets can stifle future innovations by smaller businesses.

    The company that is likely to come under the most pressure is, of course, third-place National Tiles. It will be left with revenues of around $100 million a year, and earnings that have been estimated at around $14 million a year, facing a company with combined revenues of close to $500 million a year. All this in a market which is facing challenges when it comes to overall growth over the next five years.

    While HNN believes that the ACCC will in the end approve the acquisition, we don't see this happening as rapidly as some past decisions have been made, which means it will likely be 2022 before it is completed.

    Why Beaumont? Why now?

    The most surprising thing of all about the acquisition is that it doesn't fit into the operational model that Bunnings has been pursuing for the past couple of decades. Particularly over the past decade, the company has been very concentrated on keeping its processes and models as simple as possible. Adding Beaumont Tiles to the mix stands starkly against that.

    Not only will it add a highly complex retail model, with high levels of expected customer service, but there are also a number of entanglements the company has assiduously avoided. Warehouses, for example. Not to mention franchisees, with all the complexity of dealing with independent entities who can largely set the tone for the entire business.

    What is understandable about this, however, is that Bunnings has few other choices. One way of reading what happened in its acquisition of UK retailer Homebase was that it was seeking a way of expanding without departing from its basic business model. As any expansion inside Australia would have meant adopting a different model, it chose to instead take the existing business model and apply it overseas. The purchase of Beaumont Tiles does represent something of a hard-earned maturity.

    Just as pressing, however, is where does Bunnings see the growth coming from? The managing director of its parent Wesfarmers, Rob Scott, has been very cautious in investing in new businesses, despite the company being somewhat "cashed up" after the de-merger of Coles. Why did Beaumont Tiles get the green light?

    As we mentioned at the start of this article, we think the real game for Bunnings is not just tiles - though that will be valuable - but rather bathroomware (and hence plumbing itself). It's interesting that Beaumont Tiles describes itself as a "tile and bathroomware" retailer. It is perhaps from bathroomware that Mr Beaumont in his earlier optimism expected additional revenues to eventuate.

    The problem there, what would have blocked those efforts, is the colossus that sits over that area of retail, namely the Reece Group. Reece has annual revenues in Australia of around $3 billion, and about the same from its US operations. It has a lot of experience, expertise and capital for anyone in the tile industry to go up against. But it is certainly a market well within the capability of Bunnings and Wesfarmers to compete with.


    How will this acquisition affect independent hardware retailers? As tiles do not typically form that much of an income stream for most of them, it's unlikely there will be too much of an impact. Where the impact does come will be more in those supplies that support tiling, such as adhesives, waterproofing, and tiling specific tools.

    The secondary concern this does bring up - which is really two concerns - is this: does this development really represent the kind of hardware industry that Australia should be developing? And the concern that is triggered by that one is: where and how and should independent hardware retailers be able to express what they think should be developed? Where is the concerted, developed voice of the independent industry, and how can that be used to better express broad industry concerns? What would the industry do if Bunnings were to buy a central supplier business, such as an Australian paint company?

    Also, what is really surprising about this acquisition is that had the situation been described to many of us in the hardware industry, the position of Beaumont Tiles, of National Tiles, Bunnings and even Reece, how many of us would have instead picked National Tiles as the "natural" Bunnings acquisition? It isn't, of course, when you really think this through, and the reason is Bunnings has simply grown so big it doesn't need to take that kind of risk anymore. Instead, it can rely on scale.

    Perhaps that's just good business sense. But to survive the kinds of challenges retail will develop this decade, something other than scale is going to be needed, and Beaumont Tiles may not be an acquisition that will deliver that.


    Bunnings does "Make it Yours", the at-home edition

    Influencers invade homes of innocent Bunnings employees

    Bunnings continues to surprise with its efforts to better communicate through videos. It is bringing out a second season of its successful "Make It Yours" series, with internet influencers going to work on the homes of people who work at Bunnings

    The Australian Financial Review (AFR) provided a glimpse into the current Bunnings video production underway. The company's previous effort made two years ago, titled "Make It Yours", managed to lift production values and content high enough that it actually ran for a period on free-to-air TV.

    At times the purpose of that production did seem a little muddled. It began as a series about how to renovate a space even when it was simply rented, and soon devolved into the kind of renovations only an owner could do. It also was aimed at neophytes to DIY who might not have that many tools - and yet just about every project ended up being reliant on using a $400 nailgun.

    Make It Yours

    In that sense, as the AFR article suggests, it followed very closely to the formula made famous by the long-running Channel Nine renovation series, "The Block" - a lot of inspiration, but not all that much common sense. Or, in other words, it had all the probity and attention to important detail you would expect from any YouTube series.

    As HNN has commented in the past, it was a vast improvement over some previous renovation DIY video efforts performed by Bunnings staff, where the DIYer would stop and do a bit of quick arc-welding when it was needed. (And very good welding it was, too.) The focus was as much on how different "influencers" would go about making specific rooms look better. Aimed at the "young people", it managed to evade the more difficult DIY tasks, while making styling up a space look fun and exciting.

    According to the AFR, Bunnings has continued in its most recent series to rely on the communication, styling and DIY skills of yet more influencers, which include interior designer Lucy Glade-Wright, the founder of online publication "Hunting for George", Az and Jamie from Haus of Cruze, DIY style diva Geneva Vanderzeil, and organisational dreamer/YouTube star Rachel Lee.

    The big changes for the current series in that instead of buying a house and renovating it, the renovations are being done to the houses of Bunnings employees.

    HNN has to confess that we find that a difficult concept to imagine actually working, but we won't judge the results until we actually see them. We just hope that no housing was harmed during the production of these videos.

    Related: Bunnings has launched different versions of "Make it Yours".

    Bunnings reaches out to Gen M with "Make It Yours" Bunnings reno series on free to air TV - HI News 6.2, page 31

    Big box update

    Bunnings grants for women's football

    General interest magazine Reader's Digest has proclaimed Bunnings as "Australia's Most Trusted Iconic Brand"

    The Bunnings Helping Hand program is giving one community AFL club from each state and territory in Australia the opportunity to access grants worth $30,000 to help upgrade their facilities to be more user-friendly for female footballers. (Applications for the program close on June 9, 2021).

    Since the establishment of a national competition in 2016, the number of girls and women playing football has increased from 194,952 to 586,422, according to the Bunnings Helping Hand website.

    With such rapid growth, sporting facilities at community clubs are struggling to meet demand; in fact, a recent audit of facilities showed less than 30 per cent were considered female-friendly. So the inaugural provision of Bunnings Helping Hand grants will be entirely dedicated to the build and upgrade of infrastructure for female footballers.

    AFL executive general manager of customer and commercial, Kylie Rogers, said the support and investment is significant in helping the future of the game.

    Bunnings' support of female football has been significant, not only at the elite level with its sponsorship of the NAB AFLW competition, but at the grassroots level through its new Bunnings Helping Hands initiative.
    Through the introduction of new female football initiatives like the Bunnings Helping Hands program, we hope more women and girls feel inspired to get involved in our game and be part of the continued growth of the NAB AFLW competition for many years to come.

    Bunnings managing director, Michael Schneider, said:

    We know the important role local footy clubs play in bringing communities together and through our partnership and support of the NAB AFLW competition, we hope to demonstrate our commitment to women and girls in sport and make a meaningful difference to the wider community.
    Achieving change requires commitment from many and as a proud AFLW partner it's just a small way we can lend a hand.

    Melbourne AFLW captain and Bunnings Helping Hands ambassador, Daisy Pearce, said this program is chance for community clubs to show their inclusivity and appeal more to female footballers.

    Grassroots football clubs are the heartbeat of local communities everywhere and the place where I first developed my passion for the game, so I'd encourage all community football clubs to apply for the Bunnings Helping Hand program to make their clubs more inclusive of the next generation of female football stars.

    The AFLW's popularity continues to grow with its fifth season selling out 13 matches and reaching a record number of 24,423 memberships, according to the Ministry of Sport.

    Brand status

    Bunnings has topped the list of "trusted iconic brands" in Australia, based on information collated by Reader's Digest Asia Pacific. Its report said:

    With over 300 outlets, and employing tens of thousands of locals, Bunnings is part of Australian culture.
    According to Harvard Business School professor Douglas Holt, few brand marketers know how to secure their brand that illusive iconic status. Why? "Because icons are built according to principles entirely different from those of conventional marketing."
    Iconic brands like Bunnings, as well as Vegemite, the Royal Flying Doctor Service, WeetBix, Qantas, Bega, AVJennings and Victa are Australian icons with deep connections to our culture and lifestyles. They each enjoy culture share, as well as market share, and are tethered by history and symbolism that states what the brand stands for, not just how it performs.
    Among the winning trusted brands in 2021, our iconic brands stand out in the market because of their place in Australian history - they are trusted icons as well as a source of national pride.
  • Sources: Ministry of Sport, Bunnings and Readers Digest Asia Pacific
  • bigbox

    USA update

    Lowe's buys Stainmaster carpet brand

    The purchase expands Lowe's private brand offering, and the retailer sees an opportunity to extend its high-performance characteristics into other product categories

    Lowe's recently announced it has acquired the carpet cleaning brand Stainmaster for an undisclosed amount from parent company, Invista. Lowe's president and CEO Marvin Ellison said in a statement:

    ...At a time when home has never been more important, customers are increasingly looking for high-performance products to meet their evolving needs and expectations.
    We see great potential to leverage and extend the Stainmaster brand into other product areas to further serve our customers and deliver on our Total Home strategy.

    The strategy has four key areas: focusing on the pro market, improving installation services, offering popular products in local markets like Stainmaster and investing online.

    Sarah Dodd, senior vice president of global merchandising for Lowe's, said the Stainmaster acquisition should strengthen Lowe's family of private brands.

    Research shows Stainmaster is the soft-surfaces brand customers trust the most when shopping for flooring. This acquisition further demonstrates our commitment to deliver a compelling product assortment for customers wherever they choose to shop with us.

    Invista, which was formed from DuPont Textiles and Interiors in 2003, sold the Stainmaster brand including related trademarks such as Pet Protect.

    Lowe's was the only home improvement store in the US to carry the brand exclusively for over a decade.

    Bill Boltz, executive vice president of merchandising for Lowe's, told The Charlotte Observer the acquisition is also part of the company's ongoing market share rights with main rival Home Depot. He said:

    It's important to know we're going to continue to invest in the (Stainmaster) brand and that Stainmaster and Lowe's are now one entity.

    Stainmaster joins Lowe's private brand portfolio including Moxie cleaning supplies, Kobalt power tools and allen + roth home decor.

    About Stainmaster

    Stainmaster was started by DuPont in 1986, in a launch that shook up the flooring industry. The brand was built on stain-resistant technology, which wasn't new and, in fact, had been around a while. What set Stainmaster apart, however, was how much money went into advertising it to the consumer. The unprecedented USD85 million, three-year campaign made the treatment, in many instances, better known than the carpets that use Stainmaster.

    Tom McAndrews, then-president of DuPont Flooring, said the initial USD5 million in advertising grew to USD15 million. Mr McAndrews challenged its advertising agency BBD&O to put the ads everywhere. He told Floor Daily, "It was a massive success", catching fire not only in the US, but also in Europe, the United Kingdom, Australia and Japan.

  • Sources: Chattanooga Times Free Press, Floor Daily and The Charlotte Observer
  • bigbox

    Big box update

    Bunnings car parks as vaccine hubs?

    A clone of Bunnings Warehouse outlets has been identified in the Philippines and a Bunnings store in Sydney sold to Newmark Capital

    Bunnings recently offered the use of its car parks as mass vaccination hubs if the federal government requested assistance, according to a report in The Guardian Australia. Bunnings' chief operating officer, Deb Poole, said:

    We've previously supported the government and the community by hosting COVID-19 testing in some of our store car parks and we're always open to discussing further support directly with the government.

    Using Bunnings car parks to vaccinate Australians en masse has the support of a few leading epidemiologists. Hassan Vally, an associate professor in public health and an epidemiologist with La Trobe University in Melbourne, said hosting mass vaccination centres in Bunnings car parks could provide a "nudge" to large sections of the population who would visit the stores and see jabs being administered. Mr Vally told The Guardian:

    Everyone in the population seems to end up at Bunnings with some frequency ...they're convenient for people to get to. Most people haven't seen a vaccination occur in person, so if you're going into a Bunnings a few times and you keep passing the vaccinations, then the next time you're on your way out with your potting mix, you'll go up and ask.

    Mr Vally also noted the "credibility heuristic" - a rule of thumb concerning vaccine hesitancy where epidemiologists observe "we trust people we can relate to - people in our social network". Bunnings has been rated as Australia's most trusted brand, based on research by Roy Morgan.

    Mr Vally said religious and community leaders were best placed to address vaccine hesitancy but Bunnings stores would have an advantage when it came to promoting COVID vaccination.

    If people go to Bunnings and can get their sausage sandwich after their vaccine on the way out, that's a good thing.

    Prof Catherine Bennett, chair of epidemiology at Deakin University, said once Australia's vaccine supplies significantly increased using Bunnings car parks could help "normalise the vaccination process".

    She pointed out that mass vaccination hubs identified by state governments so far were mostly in city centres and Bunnings' suburban locations would make logistical sense when rolling out Pfizer vaccines en masse later in the year.

    That's because one way of avoiding wastage once multi-dose vials are open, is to offer the vaccine to anyone nearby who can quickly come in for a jab. Prof Bennett said:

    For testing, Bunnings car parks worked really, as people could get tested in their cars. [It's] an identifiable site, it's got the space and can be adapted for this.

    She said a sterile environment and waiting area would need to be cordoned off to administer jabs and provide recipients an area to wait the required 15 minutes following their injection.

    Prof Bennett also said such a vaccination site would work best if it used a combination of bookings and walk-in appointments to avoid vaccine wastage.

    Bunnings is an identifiable site, it's got the space and can be adapted for this. People are comfortable there and this type of plan would leverage Bunnings' presence in the community.

    A number of Bunnings stores hosted testing clinics in carparks in the early weeks of the pandemic. National Australia Bank and the Business Council of Australia is also offering to help speed up the vaccine rollout and reopen the economy.

    Related: In 2020, Bunnings car parks in Victoria were an option where people could

    get tested for coronavirus.

    Contactless service at 250 Bunnings stores - HI News 6.2, page 28

    Philippines version of Bunnings

    Philippines-based Builders Warehouse is a close clone to Bunnings using its familiar red and green branding as well as the hammer icon but with a different tagline, "You build. We provide".

    A direct comparison of the two types of stores was made by PEDESTRIAN.TV, a youth-focused online news and entertainment website.

    Builders Warehouse has far fewer stores in its network than Bunnings with five locations in Dau, Mabalacat, Pampanga, Malolos and Bulacan in the Philippines. In addition to selling hardware and building products, the stores also offer groceries.

    According to its website, Builders Warehouse was established in 2018 by the Racal Group of Companies with the "aim to be a purveyor of top quality yet economical products and services". It also says:

    Builders Warehouse aspire to be a competent, well-founded home building institution by putting its employees under constant training to ratify professionalism, furnish every home with its trusted local and global brand suppliers, deliver remarkable services to its customer and trade partners, and above all, maintain a harmonious relationship with its company employees by creating a healthy corporate working environment.

    For more information, visit the website in the following link:

    Our Builders Warehouse, the Philippines answer to Bunnings

    The Racal Group of Companies also owns My Home Depot in the Philippines but has little resemblance to US hardware retail giant Home Depot event though it sells similar products.

    Bunnings Eastgardens sold

    The $75 million Bunnings store located in Eastgardens, about 9km south of the Sydney central business district, has been purchased by fund manager Newmark Capital.

    It has been added to its portfolio of hardware stores, Newmark Hardware Trust, according to The Australian Financial Review (AFR). The acquisition of the Eastgardens Bunnings on 4.14% initial yield follows its deal in February to acquire a Bunnings outlet under construction in Preston (VIC) for $85 million.

    The Eastgardens site spans 2.3 hectares. The Bunnings store, comprising 14,920sqm, began trading in mid-2017. It was developed by Bunnings and then sold ahead of its opening in 2015 to a private investor. The property serves a large catchment area in Sydney's east, including nearby suburbs of Maroubra, Pagewood and Botany.

  • Sources: The Guardian Australia, PEDESTRIAN.TV and The Australian Financial Review
  • bigbox

    Big box update

    Construction will start on new Bunnings outlet in Mount Isa

    Bunnings leads in "digital interest", according to Google Trends research by Macquarie

    After a builder was appointed for its store in Mount Isa (QLD), Bunnings anticipates construction will get underway in early May, with the new store opening its doors to local customers in early 2022.

    Bunnings said it will invest more than $19 million in this store, located on West Street, and will span more than 5500sqm. It will be double the size of the existing store on Camooweal Street.

    The store will include the main retail area, a fully enclosed timber yard, an outdoor nursery and over 150 on-site car parks for customers. It will also have a building materials landscape yard and a bagged goods area in the nursery, both features not seen at the current Mount Isa store.

    Related: Bunnings in Mount Isa and Plainland

    Big box update - HNN Flash #37, March 2021

    Google search trends

    Research conducted by Macquarie found that Wesfarmers-owned Bunnings led the way - along with Metcash-owned Mitre 10 - in terms of online search activity (for hardware) on Google Trends. Macquarie said in its report:

    Wesfarmers has seen favourable momentum in Bunnings and Kmart for online search activity as value remains a key driver for consumers.
    As expected, Easter long weekend led to heightened search interest, as people continue home improvement projects.

    The researchers added that strong turnover in a booming housing market was also a factor.

    American online retail giant Amazon has started trending higher, Macquarie said, as it gained traction in Australia.

    It said JB Hi-Fi-owned The Good Guys also fared well but suffered a notable decline in the first week of April, below pre-COVID levels. After reaping bumper revenue from December's holiday-season spike in spending, digital interest in JB Hi-Fi and Harvey Norman has diminished, close to pre-pandemic levels in January last year.

    Interest also fell for Wesfarmers' online retailer Catch since the heights of Black Friday sales in November, while its Officeworks chain has continued to trend lower due to softer demand for school and office supplies after the back-to-school season in January and CBD offices opening up.

  • Sources: The North West Star and
  • bigbox

    USA update

    Lowe's launches Pro Zone

    It is a dedicated area situated near the Pro entrance for grab-and-go convenience with specially selected products and value packs for professionals

    Lowe's Home Improvement has unveiled a number of perks for its professional customers, including a dedicated Pro Zone that makes high-demand items more accessible, free phone charging and air stations, extended trailer parking spots, and flexible credit.

    Store staff have also been equipped with technology to improve the shopping experience for tradies. Fred Stokes, senior vice president of Pro Sales and Services for Lowe's, said:

    We want to make sure any time spent away from the jobsite is efficient and productive for the Pro customer, especially small- to mid-size companies. We've enhanced our shopping experience, bringing in new products and services that help add value to each trip Pros take and cut down on the number of stops they make throughout the day.

    Lowe's has placed increasing focus on the professional market in recent years, introducing more items that meet the needs of a professional customer and launching the Lowe's for Pros loyalty program in 2020.

    Though there are concerns that businesses that did well during 2020 will see declines as consumers venture out and shift their spending once again, there's confidence that businesses related to the home will continue to do well. Speaking at the recent UBS Global Consumer and Retail Virtual Conference, Lowe's chief financial officer David Denton, said:

    We still see the housing sector, the home improvement sector still very frothy at the moment, in the sense that demand continues to be robust across categories and across geographic markets, we continue to see interest rates, although they're ticking up, relatively at historic lows.
    We see the consumers' balance sheet pretty healthy, still a lot of savings rate from a consumer perspective, so cash is building up into consumers' bank accounts.

    And now that there is some distance between now and the beginning of COVID-19 when shoppers wanted to isolate themselves as much as possible, work involving professionals can take place. Bill Boltz, Lowe's executive vice president of merchandising, told MarketWatch:

    Early in the pandemic, consumers didn't want someone in their home.

    As time went on, Mr Boltz said consumers became more comfortable with tackling these bigger projects.

    Outside projects, like decks, take precedence now with more comfort in having an installer in the home.

    During its fourth-quarter earnings announcement, Lowe's said that DIY comparative sales "outpaced" professional comparative sales, but the pro business was still in the mid-20% range for the quarter and nearly 20% for the year.

    With so much uncertainty across the retail landscape, Mr Boltz said the company is trying to control what it can, and the company's data shows that 90% of respondents who took on a project last year have plans to take on another this year.

    Moreover, professionals are reporting that "their bookings are full". Mr Boltz said:

    We know we still have a lot of room for growth, both online and store level. The market is very fragmented, there's lots of share to get ... There are a lot of pieces in motion and it's early innings in terms of being relevant to the pros.
  • Sources: MarketWatch and PR Newswire
  • bigbox

    Big box update

    Bunnings sponsors New Zealand Rugby

    Bunnings (NZ) takes over from hardware retail rival Mitre 10 (NZ) when it did not have its five-year deal renewed

    New Zealand Rugby (NZR) and Bunnings Warehouse recently announced a three-year deal to sponsor domestic competitions and support community rugby throughout New Zealand.

    Bunnings Warehouse will be the primary partner and naming rights sponsor of the Bunnings Warehouse National Provincial Championship (NPC), Farah Palmer Cup (FPC) presented by Bunnings Warehouse, Bunnings Warehouse Heartland Championship and Super Rugby Aotearoa Under 20s presented by Bunnings Warehouse.

    The new three-year sponsorship gives Bunnings naming sponsor rights to the men's provincial competition, which has returned to being the NPC after being called the Mitre 10 Cup and ITM Cup in recent times.

    The last main sponsor of domestic rugby, Mitre 10 (NZ) saw its five-year deal run out this year. Mitre 10 took over sponsorship in 2016 from another hardware company, ITM. (Mitre 10 New Zealand has no affiliation to the Independent Hardware Group's retail banner, Mitre 10, in Australia).

    NZR chief executive Mark Robinson said the Bunnings partnership was part of a shift in priorities for rugby's national body. He said in a statement:

    The past year has provided us with an opportunity to pause and reflect on our priorities and in Bunnings we have found a partner who shares our goal of putting rugby at the heart of every community.
    We are thrilled to have a partner who wants to help us grow the game and support the pathways that give the talented young people in our clubs the opportunity to represent their communities, whether it's through the Bunnings Warehouse NPC, the Farah Palmer Cup, Super Rugby Aotearoa Under 20s or the Heartland Championship.
    Bunnings Warehouse are synonymous with DIY, so I guess it's fitting they have decided to roll their sleeves up and support our clubs, and NZR and our provincial unions will be right there with them.

    After announcing the new partnership at the Ponsonby Rugby Club in Auckland, Bunnings head of trade Paul Connolly said the deal was about giving back. He said:

    Our team live and work within the communities we operate and our focus has always been on contributing to our local communities in meaningful ways, so it was a no-brainer for us to get behind a sport that shares and values the importance of local community connection and teamwork.

    NZR general manager community rugby Steve Lancaster said 2021 was shaping up as a special year for provincial rugby.

    We're seeing a resurgence in interest in our communities after a tough year for everyone. A lot of people are going back to their clubs to connect with friends and whanau and no doubt that support will transfer into our flagship domestic competitions.
    After looking at some format changes, the Bunnings Warehouse NPC will remain in its current 14-team premiership-championship format in 2021, including crossover matches between the two divisions. The Farah Palmer Cup presented by Bunnings will revert to the same format after splitting into north and south pools for the COVID-disrupted 2020 season.

    The new sponsorship was revealed prematurely with an early update of the old Mitre 10 Cup website. Following this, NZR confirmed domestic rugby in New Zealand would now fall under the Bunnings Warehouse Provincial Rugby banner.

  • Sources: Bay of Plenty Times, New Zealand Media and Entertainment and TV New Zealand
  • bigbox

    USA update

    Home Depot testing technology to combat organised retail theft

    Outfit is a startup that sells "DIY home renovations in a box". It formats architect-designed templates to a customer's space and buys all the materials needed on their behalf, and ships it to their door for them to build. The experience is accompanied by an app that guides users from start-to-completion of the project.

    Home improvement giant, The Home Depot is trying a different approach when it comes to curbing what it believes has become a growing problem with crime within its stores.

    The crime typically involves an individual or team walking into a store, grabbing a stack of power tools, and then heading to the front of the store. Next, they either ring up a few smaller items in the self-checkout lane to mask the crime or simply walk straight out the door.

    Either way, the tools are never paid for, and the individual or team will repeat the crime at the same store or various locations.

    To combat such organised retail theft some power tools at Home Depot are kept on locked shelves, some are wrapped with security devices around the boxes, and security cameras keep watch on the aisles. But those tactics haven't stopped organised theft. Scott Glenn, Home Depot's vice president of asset protection, told local TV station, 11Alive:

    We are working on a very strong strategy to, what we like to refer to as harden the target against these types of folks.

    An evolving anti-theft strategy the big box retailer is now using involves a chip being inserted into power tools from DeWalt and Milwaukee brand tools.

    Similar to how gift cards need to be scanned and paid for at a store to activate, the power tools need to be paid for, and then - using Bluetooth technology - the tool is activated. Tools that haven't been activated won't turn on, according to The Home Depot.

    The technology is currently part of a pilot program in select stores in Atlanta, Georgia and in other Home Depot markets. The goal is to discourage thieves, while keeping employees and customers safe and keeping costs low, according to Mr Glenn. He said:

    Theft and fraud are a pressure to those cost concerns, and we want to make sure we don't have to do anything to affect that pricing for our customers.

    Mr Glenn added that often power tools stolen from The Home Depot end up in a few different places. For example, pawn shops and online marketplaces, from eBay to Craigslist, Facebook Marketplace, and a growing list of others. He said:

    Ten, fifteen years ago, there were really one or two online resellers out there, and now we can think of 50. It is a fast, easy way to dispose of a stolen product.

    Mr Glenn said if the technology proves successful during testing in select power tools, it could eventually be inserted into other products with an on and off switch. He said:

    We want to lead in this space. We want to make sure the technology is not only where we want to be today, but where we are going in the future.

    A recent survey conducted by US-based National Retail Federation found in 2020, organised retail crime increased significantly for 31% of retailers surveyed. Forty-four per cent reported a slight increase, 2% reported a decrease and the remainder reported no change compared to 2019.

    Currently, lawmakers in Washington DC are considering legislation to target high-volume sellers of stolen retail items. The INFORM Consumers Act introduced in March 2021 in the US Senate aims to "prevent organised retail crime rings from stealing items from stores to resell those items in bulk online".

    It describes "high-volume" sellers as people who make more than 200 sales or have more than USD5,000 in revenue during a 12-month period on a marketplace. The act would require such sellers to supply the marketplace with bank account information, government-issued identification, a working email address and phone number, along with a business tax identification number.

    Home reno startup

    US-based startup, Outfit wants to make DIY home improvements easier to tackle. Founder and CEO, Ian Janicki, said he has always wanted to make architecture and design more accessible to people. He told TechCrunch:

    I realised I could leverage my knowledge of being handy to create a product that scaled.

    For people who want to go through the Outfit process, the first step is submitting information about the space they're looking to renovate, such as dimensions and photos, as well as the maximum amount they're looking to spend. Outfit then provides information about the expected cost of the project, the handiness level required to complete the project and everything that would need to be done in order to complete the project. Mr Janicki said:

    We make sure it's transparent and that you understand the amount of time that might be required.

    Once someone decides they want to move forward, Outfit then sends all the necessary tools and materials to the customer. Through the app, Outfit offers a step-by-step guide for completing the project. In the event someone gets stuck, they can chat with Janicki or someone else from the Outfit team for support.

    Outfit has had a small set of pilot customers - some who have completed their projects and some whose projects are still underway. Mr Janicki said:

    The millennial generation is now starting to purchase their homes and has been accelerated because of remote work and COVID. They're the Ikea generation and can put together bookshelves and are really used to digital experiences and are now demanding this digital solution.

    So far, the projects have ranged in cost from USD1,000 to USD15,000, but it depends on things like how invasive the project is, how big the space is and more, Mr Janicki said. In general, Outfit charges customers the cost of the actual materials (for eg. power drills, wrenches, cabinets, tiles, etc.) and then adds a percentage of the total on top as a surcharge to the customer.

    Down the road, Outfit envisions offering rentals of the tools themselves, but Mr Janicki said he just wanted to streamline everything in the early days.

    Reverse logistics is complicated to we're trying to take it one step at a time.

    There are a number of home improvement startups out there such as Eano, Renno and others, but Mr Janicki said he's not aware of any direct competitors. He said he recognises that there are some people who are fully capable of buying all the necessary items themselves, watching a video on YouTube and then completing the project.

    Meanwhile, homeowners are also just as capable of hiring someone to do the project for them. But with Outfit, Mr Janicki sees it as somewhere in between. He calls it "DIY plus".

    In terms of being handy, it's a rare trait that everyone appreciates. If we can elevate people in their handiness level, I'm going to be super happy. It's that pride that you were actually able to accomplish that.

    To date, the company has backing from Y Combinator, and previously raised about USD700,000 from investors like GitHub CEO Nat Friedman, B Capital Group's Crissy Costa, Gumroad CEO Sahil Lavingia and others.

  • Sources: WXIA-TV (11Alive), Yahoo News and TechCrunch
  • bigbox

    Big box update

    Opposition to Bunnings store plans in Dubbo

    Bunnings said it uses data to optimise "drive & collect" ordering service and for its supply chain teams. In the US, The Home Depot is gaining data insights by working with Google Big Query to meet changing customer demands.

    Petitions to oppose the proposed Bunnings Warehouse at the former Dubbo RAAF Stores Base site in NSW have attracted almost 500 signatures; and data plays a critical role in the execution of both Bunnings' and The Home Depot's digital strategies.

    Dubbo development

    An online petition on against the Bunnings development application (DA) for a new store in Dubbo has attracted 428 signatures in the four weeks it was live, reports Dubbo Photo News.

    Dubbo Regional Council (DRC) also confirmed that 57 submissions and a hard-copy written petition objecting to the proposal were received during the feedback period which recently closed. However, there was one submission that supported Bunnings' DA.

    Those against the proposed new store cite safety, noise and traffic concerns for the South Dubbo area. Palmer Street resident and creator of the petition, John Gibson, labelled the project as being "totally out of character" for the neighbourhood. He told Dubbo Photo News:

    The proposed development will create significant safety issues for residents, businesses, including childcare and schools in the immediate vicinity...There will also be heavy vehicle movements along Palmer Street from 7am to 10pm every day and the only exit for trucks delivering goods will be via Palmer Street.
    This huge increase in traffic threatens the safety of pedestrians, including children, and other local road users. The associated noise will destroy the amenity of the area for local residents.

    Mr Gibson has also accused the developers of attempting to use a heritage conservation clause in their Local Environment Plan to gain approval for a building which otherwise would not be allowed to be constructed on R1 (general residential) zoned land. He said:

    The original master plan for the RAAF depot redevelopment was largely residential. This proposal will take most of the residential zone and will pave the way for the developer to create a big box retail complex, in a totally inappropriate location.

    Given the RAAF Base is a heritage listed site, DRC director of development and environment, Stephen Wallace said submissions will now be provided to Heritage NSW for consideration.

    Heritage NSW will provide a response to council within 21 days to indicate whether they support or do not support the application. The DA, which includes Heritage NSW'S response, will be presented in a report at a council meeting thereafter.

    Related: Locals have signed a petition calling for the proposed Bunnings Warehouse at the former RAAF base in Dubbo to be stopped.

    Big box update: Dubbo - HNN Flash #33, February 2021

    Big box data

    As first reported in IT News (Australia), Bunnings said its "drive & collect" contactless pickup service launched during the pandemic is "here to stay" to cater to the changed expectations of customers.

    Drive & collect is a drive-through pickup option for customers who place orders online.

    Speaking at the University of Melbourne Business School's business analytics conference, Bunnings director of digital and analytics, Leah Balter said data and agile ways of working had led to optimisations of the retailer's "drive & collect" offering. She said:

    We had to design a whole new model for customers to shop in anticipation that stores might be closed.
    We collaborated across teams to design the 'drive & collect' model in three days, rolled it out to three stores in five days and trained 46,000 team [members] in the model in three weeks to get it out in time before the first lockdown.
    The 'drive & collect' program initially took two days to get an order, really helped our team and store be informed in terms of the orders as they were coming in, and helped our merchandise team get supply and demand [right] - what essential items were people looking for during this time, and to get the right stock into the right location.
    We couldn't have gone through last year without the underlying data and the agile ways of working across the team to pivot and move really quickly.

    Ms Balter said the past year had improved internal appreciation of the importance of data analytics.

    Last year we couldn't have done it without the amazing team that we've got in, and we're still looking for a whole lot more.
    I think the rest of the business got a whole newfound appreciation for the data and analytics team and what they can do, and...[for] building the underlying platform for them as well to work off.

    Ms Balter also said the retailer introduced some analytics self-service capabilities for internal teams, particularly supply chain.

    Supply chain has been really important over the past year in terms of getting the right products into the stores where customers wanted them.
    For us it was about [the data and analytics team] not being effectively the nerve centre for that...but actually upskilling the supply chain team and working with them in partnership.
    So we moved to a self-service model which I think was really key for the supply chain team over the last year in particular.

    The Home Depot

    Everything around digital transformation at The Home Depot comes back to analysing and understanding data, according to senior vice-president of IT, Fahim Siddiqui.

    It begins with understanding what needs to change and how customers want to engage with an organisation. The retailer is tapping into Google analytics technology to gain this type of data and knowledge.

    Google Cloud's BigQuery is used to provide up-to-date data to help manage 50,000+ items stocked at over 2,000 locations, ensure website availability and provide accurate and appropriate information to customers via the corporate call centre.

    Mr Siddiqui is leading a team that is charged with application development for Home Depot's online, marketing, merchandising and supply chain functions. Its role is to create and support technology platforms that provide the retailer with an interconnected and seamless experience, both for employees and external customers. This was vital during the COVID crisis when Home Depot stores were able to remain open and it experienced a hefty uptick in demand. Mr Siddiqui explains:

    As an essential retailer, we must be able to provide our customers with the critical items they need and what they need most. In facing those challenges, our ability to quickly adapt our operations to meet those objectives was quite important. This was really based on a strong culture, our dedicated associates and our flexible and scalable technology. And when all that came together, we were able to pivot adopt and meet the needs of our customers as well as of our associates.

    Everything comes back to the underlying data. He said:

    When we think about digital transformation, a lot of time our eyes are drawn towards what systems changes are we going to make and what is it that we are going to automate? But really, the journey of digital transformation starts in all the different areas of the business. So as we start, we'll start really looking [from] the 'customer back' view and how customers are choosing to engage with us. What do we need to change to really connect with the customers in terms of our processes, our platforms and also, just how the work gets done together?

    This is a long game, he adds, and one that involves a degree of re-evaluation and re-appraisal of established practice. Mr Siddiqui said:

    It's not easy, because you have to unlearn a lot of the things that made you successful and to learn new things. The Home Depot has been on a digital transformation journey for a few years. Within that context, not only have we invested in new systems, we've also closely re-evaluated our legacy systems and understood what to retire, what to re-architect, and, more importantly, how to create an interconnected ecosystem, so that we can actually bring together the install journey, the online journey, the in-app journey, as one customer journey end-to-end. When all of that ties in together, you really can do magic.

    Magic was in demand when COVID hit. Although Home Depot was able to keep its doors open, it wasn't a case of business as usual, explains Mr Siddiqui. There was an acceleration of transformation activities. He said:

    For instance, our teams were able to deploy curbside delivery in a matter of days, and in some cases in hours. That's just something that we had never done before...
    As home became a place where you are actually teaching and working, people started looking at their spaces differently. And as they did, that inspiration to action, identification of projects, identification of products, the selection of vendors, became a continuum and we started seeing more and more of the journeys starting in the digital channel.

    This resulted in a philosophical change in terms of how customers engaged with the retailer online. Mr Siddiqui said:

    When we talk about e-commerce generally, we think of 'Hey, I need this product, I click here and it gets delivered'. Now it's about, 'I have an inspiration. How do I connect that inspiration to what will fit?'. More of our customer journeys are inter-connected, meaning they start digitally, but the purchase may be completed online, in the app, or somebody might go to the store.

    Such a shift put additional demands on the fulfilment capabilities of Home Depot and its IT team as provider of the underlying tech enablement. He said:

    We had to really grow our technical capabilities. For instance, in a store you have a limited assortment. You still want to see that faucet, but you want it shipped in carbon black. Probably we won't carry carbon black in the store. For customers to know what's available in store, what can be delivered to them and by when and to bring all this information together really was a continuance of our online capabilities and our supply chain capabilities.

    Once again, it all comes back to data and how Home Depot understands and manages it. Mr Siddiqui said:

    Our merchandising data really becomes the fuel for this. This whole experience and connecting it all together becomes quite important. Many times, it's not about a family of hardware that you want to buy. You may end up buying five different products from five different vendors, but they're all connected through our AI/machine learning project graph, so that you can know that they'll come together. We partner with Google to make sure that we bring those best practices in and really deploy the pipeline, using BigQuery [in] our data analytics pipeline.
    We are on a journey of really consolidating our data, from real time to historical, in one place. We actually migrated all of our data warehouse to BigQuery over the last three years. The upside of that is now we have a lot more of this data together. There's only one place of truth, so there's never an argument in our organization about whether your copy of the data is the real truth or my copy of the data is the real truth. Once you agree on that basic principle, everything else becomes much easier, because now you are actually tying real time analytics to the view of the customer to the view of the product to the regions.

    What this means it that Home Deport can have access to genuine insights into what is it that customers are looking for today and what they will - perhaps - be looking for tomorrow, something that has come in particularly handy over the past several months of the COVID outbreak. Mr Siddiqui recalls:

    As we started in the pandemic, we were very concerned how many of our stores would be shut down and maybe only could do deliveries. To react to that, for instance, we looked at the trends on online. Our online business grew by more than 80% year-over-year, which was amazing. But over a period of three weeks, we actually took a market delivery centre and changed it to a parcel delivery centre. Those are the types of things you really get to know when you have confidence in the data and you have confidence in the truth and you can then interpret and project.

    Mr Saddiqui took part in the US-based National Retail Federation's Big Show - Chapter One virtual event in late January 2021. This interview originally appeared on

  • Sources: Dubbo Photo News, IT News (Australia) and
  • bigbox

    Europe update

    Kingfisher beats analysts' FY forecasts

    A pandemic-inspired DIY boom and ecommerce sales contributed to the home improvement group's annual results

    Kingfisher, parent company of the B&Q and Screwfix retail brands, has reported a surge in sales and profits for 2020 as a locked-down United Kingdom turned to home improvements.

    At the announcement of its latest results, Kingfisher chief executive, Thierry Garnier said the company has seen "extraordinary demand" in the past year as people adapted and updated their homes and gardens to cope with new demands prompted by restrictions on travel, socialising, schools and leisure.

    Mr Garnier said that a "younger generation of DIYers" emerged as people turned to home improvement projects in months of lockdown. He highlighted that 18-to-34-year-olds had done more home improvement than any other age group, with 20% doing DIY for the first time.

    He also suggested that increased home working after the pandemic would prompt living space adjustments and would create more wear and tear throughout the home, encouraging further investment in home improvement.

    The pandemic supercharged its digital business, accelerating the shift to online shopping by two years and attracting 10 million additional online customers.

    As stores were forced to close in the UK, B&Q employees started picking online orders straight off shelves. The retailer expanded click-and-collect to hundreds of sites. At the peak of the pandemic, one store in south-west London handled 1,500 orders in a day. It typically does about 200.

    Ecommerce sales rose by 158% last year, powered by growth in click-and-collect and faster home delivery. Click and collect sales surged 226% to account for more than three-quarters of all e-commerce sales, up from 62% in the previous financial year. Online now accounts for 18% of total group sales, up from its 8% share the prior year.

    Full-year like-for-like sales rose by 7.1% compared with the previous year, and were up by 15.5% in the fourth quarter, Kingfisher said.

    The home improvement group reported an adjusted pre-tax profit of GBP786 million for the year to January 31, up from GBP544 million a year earlier. Analysts had expected GBP757 million.

    Sales climbed to GBP12.3 billion from GBP11.5 billion. Kingfisher's statutory full year profit was GBP756 million, up from GBP103 million a year earlier, when the company suffered charges relating to the exit from its Russia business, restructuring and other matters.

    Mr Garnier said sales growth would continue over the next five or six months but was then likely to go into reverse in the second half of 2021, as the company would struggle to beat nearly 17% sales growth in the second half of 2020.

    ...[T]he exceptional demand we have seen over the past year may moderate as vaccines are rolled out and restrictions for our customers become less prevalent.

    The company also flagged "continued uncertainty related to Covid in continental Europe". Nevertheless, Mr Garnier said he was "confident of continued outperformance of our wider markets" despite the uncertain outlook.

    Since the end of January life-for-like sales have risen more than 24% compared with the same period in 2020. Mr Garnier said:

    The Covid crisis has established new longer-term trends that are clearly supportive for our industry - including more working from home, the renewed importance of the home as a 'hub', and the development of a new generation of DIYers - and we expect these to endure. With our strategic progress, we are well positioned to capitalise on these new and positive market trends.

    Kingfisher is among retailers in the UK that have returned emergency taxpayer support to the government. In December, it pledged to repay GBP130 million it received in business rates relief and GBP25 million of furlough payments.

    While his predecessor Veronique Laury had been trying to better integrate its many businesses across several countries, Mr Garnier has been undoing those efforts and the group is now working to decentralise its decision-making and empower local teams. There has been a renewed focus on clear branding and e-commerce.

    Kingfisher said its own exclusive brand ranges, which make up just under 40% of sales, have been popular with customers, too. Mr Garnier said:

    We rolled out our 'Powered by Kingfisher' strategy without delay and even accelerated in many areas. Our distinct retail banners are now empowered and much more agile, which enabled them to react quickly in what was a volatile situation last year, supported by the scale, strength and expertise of the Kingfisher Group.
    We continued to 'focus and fix' key aspects of the business. We have now finalised the fundamental reorganisation of our commercial operating model, and introduced new trading approaches tailored to local markets...
    Throughout this year, we have remained committed to making the right decisions for our colleagues, customers, and our communities. This has included upgrading our safe operating standards, ring-fencing and donating PPE, supporting our colleagues and rewarding frontline staff, returning government support, and developing our plans to help tackle climate change and deforestation.

    Kingfisher has about 1,390 stores in Europe including Castorama and Brico Depot in France, its second largest market after Britain. It employs 27,400 people in the UK of its 62,500 staff worldwide. The company has been allowed to remain open during the pandemic because it is deemed to be an "essential retailer".

    Related: Kingfisher is hoping to cash in on the trend of a younger generation returning to DIY.

    B&Q looks to Instagram generation - HNN Flash #29, January 2021
  • Sources: The Times, Financial Times, The Guardian, RTE Ireland, Shropshire Star and
  • bigbox

    Big box update

    Progress on Mount Isa and Plainland stores

    Bunnings responds to concerns from a Tasmanian environmental group that is against the practice of removing tree ferns which are sold through a number of its retail outlets

    A builder has been appointed for the construction of the new Bunnings Mount Isa store in North West Queensland. Bunnings area manager Michael Rodwell told The North West Star it has appointed a builder and expects to "provide the local community with an update on construction timelines in the coming weeks".

    In 2019, Mount Isa City Council said the old council works depot and storage yard site at 89 West Street was purchased for about $500,000 and had a development permit valid until 2022.

    Council had discussions with Bunnings back in 2009 for the purchase of the site, and the big box retailer lodged a development application (DA) in May 2017 to build a store on the site.

    The original DA said the build would include a main warehouse, timber trade sales, a building materials and landscape yard, bagged goods canopy, an outdoor nursery, main entrance and outdoor display areas.

    In the Lockyer Valley (QLD), the Gatton Star reports that staff are being hired for the Bunnings Plainland store.

    The store is expected to open in the second quarter of 2021, as long as weather does not impact construction by delaying it.


    Mount Isa City Council confirmed that an agreement was in place to sell the former works depot site located close to the current Bunnings Mount Isa store.

    HI News 5.4: Big box update - Mount Isa, page 24

    It has been stated previously the $19 million Bunnings store being built at Plainland was expected to open by Easter 2021.

    Hi News 6.3: Big Box update - Plainland, page 18

    Tasmanian tree ferns

    Environmental group, Blue Derby Wild recently met with Bunnings representatives via Zoom to protest against the practice of removing tree ferns. These ferns are sold through a number of Bunnings stores, according to The Examiner.

    Since the virtual meeting, the group has sent Bunnings an open letter with about 3000 signatures. It has also carried out a state-by-state audit of Bunnings websites and outlets, claiming the tree ferns were only for sale in Tasmania and not on the mainland. However, Bunnings confirmed it has not changed its sales policy.

    Blue Derby Wild's opposition to the practice centres on the ancient role of native tree ferns in Tasmanian rainforests and its claim that their removal is unnecessary as they often grow in areas with little timber value, and can die once harvested. The tree ferns can be hundreds of years old and grow between 3.5 and 5 centimetres per year.

    Bunnings merchandise general manager, Adrian Pearce said they were continuing to consider the invitation from the environmental group. He told The Examiner:

    We have met with Blue Derby Wild to understand their concerns and we have received their invitation to visit, which we thank them for, and are currently reviewing that option.

    Bunnings sells the Tasmanian tree ferns - Dicksonia antarctica - to be planted in gardens, and also sliced as stepping stones as well as tree fern planter garden features.

    While they also grow in Victoria and NSW, Tasmania is believed to be the only state that provides them to Bunnings for sale, largely from the state's North-East.

    Blue Derby Wild co-ordinator Louise Morris said the group would continue to lobby Bunnings to stop selling the tree ferns, but the retailer has stated the harvesting sites had Forest Practices Authority approval.

  • Sources: The North West Star, Gatton Star and The Examiner
  • bigbox

    Big box update

    Bunnings Trade sponsors Perth SuperNight event

    Woolworths is developing a one-stop shop for pet insurance, veterinary services, food and other pet-related products

    Bunnings Trade recently announced an expanded partnership with Supercars, taking on naming rights for key events; and Woolworths is launching a new initiative targeting Australia's $10 billion pet industry.

    Bunnings Trade

    The popular Perth SuperNight motorsport event will be known as Bunnings Trade Perth SuperNight in 2021 and 2022 as part of a two-year deal with Supercars.

    The event is Western Australia's largest motorsport event, with Wanneroo Raceway to light up later this year, according to Supercars.

    In 2021, the circuit will feature night-racing again during 11-12 September. The Perth event in 2019 was contested under lights and proved enormously popular for fans and competitors alike.

    Fans will also see the Bunnings Trade PowerPass return in 2021. The PowerPass highlights the best overtaking moves in each race of the Repco Supercars Championship.

    The official Repco Supercars Championship tipping competition is now open for 2021, with the largest prize pool ever on offer for the top tipsters. Supercars Tipping presented by Bunnings Trade allows fans to start or join a league to compete against family, friends and colleagues, or go head-to-head with thousands of other Supercars fans.

    Related: In 2019, Bunning Trade was a partner in Supercar events.

    Bunnings targets tradies with Supercars - HI News 5.2, page 19


    Woolworths has entered into a joint venture with South African billionaire entrepreneur Richard Enthoven called PetCulture that is 60% owned by the supermarket retailer, according to an exclusive report in The Australian.

    Over the past year, Woolworths said it has witnessed growth in the pet category in its supermarkets and Big W businesses, and PetCulture has been tasked with building a digital platform to provide dog and cat lovers in Australia with a personalised experience in how they explore, shop, learn and provide health and wellbeing for their pets.

    The PetCulture site is still in the early stages of beta testing, which will allow Woolworths and its joint venture partners to learn from customers to better shape the offering to the community of pet owners in Australia.

    PetCulture is different from what Woolworths already offers in-store and online, with a focus on providing dog and cat owners with premium support. It is being operated as a start-up digital business and the management is separate to Woolworths and PetSure.

    Woolworths chief executive Brad Banducci told The Australian the supermarket group was already one of the nation's biggest pet insurers, with Mr Enthoven's PetSure a long-standing underwriter of its insurance products for several years.

    Mr Banducci said there had been strong growth in the pet industry, insurance and pet food during the pandemic. A huge uptake in pet ownership through lockdowns saw the price of purebred cats and dogs skyrocket and many pet stores sell out of animals.

    ...There have been a lot of COVID-19 pets and we are one of the biggest insurance companies, and what we wanted to do was share our joint knowledge and really do a better job of engaging with pet owners and providing them with a very holistic experience for food, or veterinary advice or whatever the case may be for the members of their family, the furry members of their family.

    Mr Enthoven is the founder and CEO of global insurance company Hollard Group, and sits on the board of the Insurance Council of Australia. His family also owns the Nando's restaurant chain.

    The PetCulture joint venture was formalised in September and its directors include representatives of PetSure and Mr Enthoven, as well as key Woolworths executives including Woolworths director of people reward, risk and compliance Marcin Firek, Woolworths venture capital arm W23 managing director Ingrid Maes and Woolworths digital arm WooliesX director of digital and media platform Faye Ilhan.

    Documents lodged with ASIC show Woolworths' shareholding in PetCulture is owned via its W23 incubator.

    In other related news, Australia-based Mad Paws is a pet care services marketplace that includes sitting, walking, grooming and boarding.

    The company is aiming to raise $10 million as part of an IPO and start trading on the ASX in late March with a market cap of more than $40 million, according to The Courier-Mail.

    Launched in 2014, the business connected more than 70,000 customers with 20,000 pet carers in its first five years in operation. That translated into about 180,000 services booked via either its app or website. It turned over almost $2 million in the last financial year.

    The Mad Paws business model is very similar to Seattle-based Rover, which launched in 2011 and is now active across North America and Europe. It will start trading on the NASDAQ soon, valued at USD1.6 billion.

    Related: In 2019, HNN looked at the growing pet industry in Australia.

    Big business in pet care - HNN Flash #3, July 2019
  • Sources: Supercars, The Australian and The Courier-Mail
  • bigbox

    The Home Depot results FY2020

    Sales, earnings surge

    While the future is less certain, 2020 proved a strong year, with comp sales reaching new highs

    The world's largest home improvement retailer, The Home Depot (HD), released the results for its most recent fiscal year, the 12 months to 31 January 2021, on 23 February 2021.

    As expected, the company showed strong growth in both sales and profits compared with the previous comparable period (pcp), which was the year-ended 31 January 2020. Sales came in at USD132.1 billion, an increase of 19.9% on the pcp, while gross profit was USD44.9 billion, up by 19.4%. Operating income (EBIT) was USD18.3 billion, an increase of 15.4% on the pcp, while net earnings rose by 14.4% to USD12.9 billion. Diluted earnings per share increased by 16.4%.

    One reason why earnings growth did not keep pace with sales growth was that HD chose to invest in its staff - much as Australia's Wesfarmers' owned big box home improvement retailer Bunnings did. As Craig Menear, chairman and CEO of HD stated in his prepared remarks at the results conference for investment analysts:

    During fiscal 2020, in addition to record success sharing payouts, we invested a total of approximately USD2 billion on enhanced compensation and benefits for our associates. As we announced last quarter, we transitioned from temporary COVID-19 benefits to permanent compensation enhancements for our frontline, hourly associates.

    Richard McPhail, executive vice president and chief financial officer, added some additional details during his remarks as well:

    In fiscal 2020, we incurred approximately USD2 billion of expense related to enhanced pay and benefits for our associates. Last quarter we transitioned away from our temporary support programs in response to COVID, and increased permanent compensation for our front-line, hourly associates by approximately USD1 billion on an annualised basis.

    Commenting on the sales results, Ted Decker, president and chief operating officer, pointed to the ongoing increase in demand from customers:

    During the fourth quarter, we continued to experience unprecedented levels of demand across our business. For the third quarter in a row, comps in the US have been approximately 25%. With remarkable consistency, comps in the US were at or above 20% for 36 of the past 39 weeks. And as you might expect, this level of demand pressured our supply chain, but our supply chain teams and supplier partners responded and continue making progress.

    Results for the fiscal year saw customer transactions increase to 1756 million, up by 8.7% on the pcp. Average ticket (receipt) size grew from USD67.30 to USD74.32, an increase of 10.4%. Commenting on selling space, Mr McPhail said:

    During the year, we opened five new stores and ended the year with a store count of 2,296. Retail selling square footage was approximately 239 million square feet [22.2 million square metres]. For the fiscal year, total sales per retail square foot were USD544 [USD5856 per square metre], the highest in our company's history.

    Mr Decker commented that the popular sales categories had been somewhat constant throughout the year:

    During the fourth quarter, our customers exhibited a lot of trends similar to what we saw throughout 2020. For instance, we saw continued strength in outdoor living categories like patio furniture, grills, and outdoor power equipment, as our customers tried to extend the outdoor living season. We also saw strong performance from popular interior project categories like vanities, faucets, mouldings, and interior lighting.

    Mr Decker is particularly optimistic about the growing market share for cordless outdoor power equipment.

    As we've discussed, the cordless outdoor power market continues to outpace growth of the gas [petrol] market. Cordless tools are easier to use, more environmentally friendly, and have the power and run time to get most jobs done. Like we have done with our tool department, we are resetting our outdoor power equipment bays by branded battery platform. Customers can now shop our leading and exclusive line up by platform, including Makita, Milwaukee, Ryobi, Toro, and DeWalt. We are thrilled with the results and expect these resets will be complete in the first quarter.

    DIY customers

    As with Australia, HD saw increased involvement and expenditure from DIY customers, as Mr Decker described:

    We continue to benefit from heightened engagement from both new and existing customers. As our customers continue to spend more time at home, they are telling us their project lists are growing. After completing a project, we see many of our DIY customers take on additional, and often times more complex, projects with a renewed sense of confidence.

    That said, however, HD remains uncertain how much of that sales growth will prove to be structural in the longer term. In response to an analyst's question, Mr Menear remarked:

    I think the thing that is really interesting is the fact that on the DIY side, we've seen the acceleration of the millennial generation engagement with home improvement and home ownership. And over time, the thing that will be interesting to watch is, has that in fact expanded the market? That's an interesting question that we don't know the answer to, but we're watching carefully. So we think there's a lot of opportunity as we go forward.

    Pro customers

    On the Pro (tradie) side of the business, Mr Decker noted that overall sales growth had continued into the fourth quarter, with conditions improving for the larger Pro customers as well:

    Sales to our Pro customer continued to accelerate, posting the best quarter of growth in 2020. As we've mentioned all year, our smaller Pro customers maintained consistent growth and posted strong, double-digit growth in every month of the quarter. Growth from our larger Pro customers continued to accelerate, also growing double-digits each month of the quarter. While the operating environment is still recovering for many of our larger Pro customers, we're encouraged by what we are seeing and hearing, as backlogs are growing.

    Karen Short, an analyst with Barclays asked for more detail on the Pro and DIY markets:

    Is there any way to quantify the Pro backlog, and then is there any way you could frame how you think about the DIY versus the Pro comp in 2021?

    Mr Menear responded to her question:

    Karen, it's really difficult to try to quantify a Pro backlog. The only thing we can share with you is what our Pros tell us and that their jobs are building. We've seen an acceleration of the Pro business from quarter to quarter. And as it was called out in the fourth quarter, we actually had our best quarter ... with the Pro.

    That backlog would also have a seasonal component in the US market. With a moderately cold winter in the Northern states, and an extremely cold winter in the Southern states, it's unlikely that larger construction work can get underway until later in March. However, in the Southern states there will also be an increased need for repairs, both to plumbing and areas such as roofing.


    HD has long been a leader in digital retail, not just for home improvement, but for all categories of retail in the US. In his prepared remarks, Mr Decker stated that:

    During the quarter, our interconnected and digital assets continued to perform well. Over the last several years, we've rebuilt our website and invested across our platforms to upgrade our infrastructure and improve the shopping experience. These investments allowed us to handle the enormous growth in web traffic and convert more of that traffic into sales. During fiscal 2020, had more than 3.6 billion visits, and our conversion rate increased double-digits across all platforms, including our app, mobile, and desktop.


    Perhaps the most interesting element of this results release was that HD permitted a deeper view of its strategic thinking. Mr McPhail introduced the topic near the end of his prepared remarks:

    As we look back on our investments from 2018-2020, we believe that we focused on the right areas, improved the customer experience, and grew significantly faster than our market. As we move forward, we are committed to investing in our business to stay ahead of customer expectations and further enhance the customer experience, with two main objectives in mind:
    First, to deliver returns by driving growth faster than the market in any environment. And, second, to further strengthen our position as the low-cost provider in home improvement, with a relentless focus on productivity and efficiency.
    This approach will result in a steadier level of investment in both capital and expense going forward. For fiscal 2021, we estimate capital expenditures of approximately 2% of sales. It is our intent is to make those investments on a steadier cadence, and drive operating expense leverage, while preserving the ability to adjust our investments as needed.

    In response to a question by Morgan Stanley analyst Simeon Gutman, Mr Menear expanded further on this strategy:

    Number one, we wanted to be able to grow faster than the market, gaining share in the marketplace, and then accelerate our incremental op margin dollar growth. Since we started the program in fiscal 2017, through 2018 to 2020, and market share is a little elusive in our market. But based on the best data we can get, we believe that we've captured about 275 basis points of share growth during that timeframe. And so that has - during the whole investment we were taking share.
    And so going forward, our approach is to make sure that we are investing on a more steady cadence what we need to in the business to make sure that we can stay ahead of the customer and we can continue to gain those kind of accelerated share growth opportunities going forward. And our focus is around really optimising [operating] margin dollars. And if we can do that and drive incremental [operating] margin dollars, we'll let rate fall where it falls.

    Mr McPhail extended those comments:

    Just to add to Craig's comment about market share capture, if you take that 275 basis points and translate that into dollars, that share gain represents USD10 billion of incremental sales annually to our top line versus where we were in 2017. So as you heard from Craig, scale matters. Our position as low-cost provider matters, and our investments put us in position to extend both.


    As with the Australian hardware retail market, the US market finds itself in something of a difficult position. On one hand, sales have grown and seem set to continue to grow, at least until June 2021 or so. The question that looms in the background is whether the current relatively rosy economic conditions are the result of various stimulus packages, or whether recovery from the COVID-19 pandemic is already underway, and a future lack of stimulus will have some effect, but not enough to create a recession.

    One economic theory suggests that what we are seeing, in both Australia and the US, is that economies are performing a little better than expected because the upside of the COVID-19 pandemic is that it has enabled some technological transformations that had been resisted for more than a decade. Both virtual meetings and work-from-home practices have the capability to reduce stress on infrastructure, reduce expenses and to improve overall productivity - as one example.

    The core question, really, for hardware and home improvement retail is to determine what the correct level of risk should be to match the current environment. One reason why traditional retail has been dying, in both Australia and the US, is a reluctance to take on an adequate amount of risk. Time and again, we've retailers collapse and fail by taking too "safe" a path into the future.

    With that as a background, we would have to say that The Home Depot has probably managed to take on just enough risk over the past three to four years for it to stay viable. If that sounds like "damning with faint praise", it really is not. The many abandoned malls and empty storefronts in the US are testament to a high level of failure to understand the need for risk and transformation. HD has done well, but it also really needs to do still more.


    Lowe's Companies results for 2020

    Strong boost in its numbers, but a less certain future

    Lowe's has managed to increase its EBIT by over 50% for the year on the back of improved demand, and some very good strategy shifts.

    US big-box home improvement retailer Lowe's Companies released its results for its 2020 fiscal year ending on 31 January 2021, on 24 February 2021. Sales revenue for the company was USD89.6 billion, up by 24.2% on the previous corresponding period (pcp), which was the 12 months ending on 31 January 2020. Operational earnings (EBIT) came in at over USD9.6 billion, a substantial increase of 52.8% on the pcp. Diluted earnings per share increased by 41.2% to USD7.75.

    As with the company's main rival, the company has invested in supporting its sales reps, spending USD900 million for the year.


    As with most home improvement retailers through 2020, the increase in sales was driven mainly by an expansion of the DIY business. According to Lowe's CEO, Marvin Ellison, in his prepared remarks for the results announcement conference for investment analysts:

    Once again, DIY comps outpaced Pro comps in the quarter, driven by consumer mindset that remains focused on the home. During the pandemic, the home has come to serve four primary purposes: a residence, a home school, a home office and the primary location for recreation and entertainment.

    Lowe's estimates that the DIY market makes up between 75% and 80% of its sales.


    While Pro (tradies) constitutes a smaller market at the moment for Lowe's, the company sees regaining this market as key to its expansion plan. Mr Ellison said:

    Our continued focus on the Pro is a very important component of our total home market share acceleration strategy. And Pro continues to show strong momentum, evidenced by the mid-20s comp in the quarter and nearly a 20% comp for the year. Part of our Q4 success in Pro was driven by our steps to tailor our service offering for these busy customers, even redesigning the footprint of our stores to facilitate a fast, intuitive shopping experience for our small and medium-sized Pro.

    Later in the presentation, Joe McFarland, Lowe's executive vice president - stores, detailed some of the steps the company is taking to expand its Pro business.

    [In terms of] our performance with the Pro, as Marvin mentioned, we delivered mid-20s comps in the fourth quarter. We continue to enhance our Pro Loyalty offering by providing Pros with the tools they need to get the job done. This time of year, our Pros are focused on not only their project pipeline, but they also need to close their books just like any other business. As a true partner to the Pro, we are now providing our Pro Loyalty members with a USD100 discount on TurboTax. Our Pro Loyalty members can also export up to 24 months of transaction history, expediting their year-end close process. It's value-added offers like these that truly differentiate our Pro Loyalty offering.
    Throughout 2020, we continued to raise the bar on our offering for the Pro with better service levels, the right brands and products and the job lot quantities they need. Every day, we are demonstrating that Lowe's is executing our commitment to be the new home for Pros, which is reflected in the strong repeat rates that we're earning from new and existing customers...And one way we will drive greater Pro penetration is through our newly launched Pro Customer Relationship Management, or CRM tool.
    Rolled out to all stores in late January, this new technology provides our Pro desk with the tools to manage grow and retain Pro accounts through consistent and data-driven selling actions. We will also be able to associate any transaction regardless of tender type to a specific Pro account, allowing us for better record-keeping for their business.
    Store associate training is currently underway, and we expect that the targeted outreach enabled by this tool will facilitate stronger and more personal relationships with our Pro customers.

    Asked by the analyst Seth Sigman of Credit Suisse about how he saw the Pro and other markets developing, Mr Ellison responded:

    We feel great about the mood of the customer. We feel great about the trends relative to big ticket, small ticket, Pro and installations. And all the work that we put in place the last two years in our retail fundamental strategy just gave us a good position and platform to service the customer effectively across all those different categories.

    Responding to a question by analyst Kate McShane of Goldman Sachs, Mr Ellison went into some detail as to why the company remains focused on the Pro market:

    One of the key things that we focused on arriving at Lowe's a little over two years ago, is one of the main reasons why we had a gap relative to sales per square foot productivity and operating income by store was because the Pro penetration was significantly less than what it should have been. Pros drive productivity in multiple product categories throughout the entire store. And so part of our focus on the Pro is because we know it's going to be critical for us to improve overall productivity from a space perspective as well as driving operating income throughout the store... The key is we're going to be focused on it, and we think we're making great improvements.


    Bill Boltz, Lowe's executive vice president - merchandising, reported on the category performance at the retailer.

    Lumber was, once again, the top performer, driven by strong unit demand across Pro and DIY customers, as well as commodity inflation. Our merchants and our supply chain teams did an exceptional job in working with our vendor partners to keep up with demand and to ensure that our stores were stocked with job-lot quantities.
    Several other categories posted comps above 30% [for the fourth quarter], including building materials, which was driven by strong demand for roofing and gutters. An improved level of in-stock and an exceptional customer service have allowed us to continue to grow our Pro business in these pro-focused building product categories. Our seasonal and outdoor living, lawn and garden and paint categories also delivered comps above 30% in the quarter, reflecting the consumers' continued focus on the home.
    The team also leveraged our selection and key brands to drive strong sales in grills, patio heaters and fire pits. As these categories were strong throughout the quarter as consumers continue to enjoy their outdoor spaces. Outdoor power equipment was driven by sales of chore-related product, such as snowblowers, generators and pressure washers as customers navigated the weather and worked to maintain their outdoor areas. Continuing the theme of enhancing the outdoors, we saw strength in lawn and garden, with notable outperformance in holiday-related live nursery, along with growth in hardscapes, outdoor planters and cleaning products. And finally, our paint category also continued its strong performance with both interior and exterior stains delivering strong comps as the weather early in the quarter remained favourable.

    One factor driving category performance, according to Mr Boltz, was the ongoing process at Lowe's of resetting layouts in its US stores.

    We have been resetting the layout of our US stores with approximately 95% of our resets now complete. We expect to drive greater sales productivity per square foot by achieving three key objectives with this investment. First, driving Pro sales through a more intuitive and faster shopping experience as we've now placed relevant products adjacent to each other and added a Pro flex area for grab-and-go products at the front of the store.
    Second, increasing our localized product assortment by eliminating unproductive bays without planograms or what we call junk bays, which now opens up space for new products, better tailored to the local market. And then finally, third, driving more transactions by moving the basket-building category of cleaning products to the main power aisle of the store.
    We're confident that our stores are now easier to shop for both Pro and DIY customers, which positions us well to accelerate our market share gains.

    Mr Boltz also pointed to improvements in brands and products.

    We are continuing to build on our position as the leading appliance retailer in the US with the addition of Midea and Hisense appliances to our stores. And Lowe's will soon become the exclusive home improvement provider of Mansfield Plumbing Products. This addition will make Lowe's the only home improvement retailer to offer customers the top three toilet brands in the US: Kohler, American Standard and Mansfield.

    Other brands that he listed as important to Lowe's included EGO battery-powered OPE, John Deere, Craftsman, Husqvarna, Honda and Aaron's.


    As with most home improvement retailers, 2020 saw an acceleration in the growth of online sales. According to Mr Ellison:

    On, sales grew ... as customers shifted more of their shopping online, especially over the holiday season. We continue to enhance our omnichannel retailing capabilities in store operations, on and across our supply chain, with our goal to meet customer demand to shop, however, whenever and wherever they choose.

    Mr McFarland expanded on that:

    2020 changed the way the customers shop with Lowe's. Nowhere is this more evident than the 111% sales growth on for the year. And with roughly 60% of these online orders fulfilled in our stores, we needed to dramatically expand our ulfilment capabilities to support this increased demand.

    Mr Boltz pointed to changes to online that helped to boost those sales:

    We continued to enhance the user experience as we simplified the search and checkout features to speed up the process for customers shopping online. And we are also now working on replatforming LowesForPros to the cloud to be completed in the first half of this year, which will significantly enhance the features that we offer to these time-pressed customers and then further build out our loyalty with the Pro.

    In response to an analyst's question, Mr Ellison also commented on how fulfilment had changed to cope better with the digital marketplace:

    We opened up a dot-com fulfilment DC in Southern California this past year. It gives us the ability to have two-day delivery from an e-comm perspective to every US location. We're also opening up three additional e-commerce fulfilment centres. That's relatively new to our strategy, to answer your question, and that's going to give us the ability to create more same-day next-day delivery opportunities.
    And we're aggressively building out our bulk distribution centres and our cross docks to help with the market delivery. In addition to that, we're going to be leaning into Pro job site delivery, and we have a couple of initiatives underway that we're working on to make that a reality.

    Mr McFarland noted that the company is also enhancing its technology backend for fulfilment, to deliver a better service in a more productive way:

    This quarter, we began rolling out geofencing technology that alerts our stores when customers are on their way to pick up their orders, enabling quicker fulfilment when they arrive at the store. Last quarter, we announced that we were standing up dedicated fulfilment teams to handle all in-store fulfillment orders.
    All of these enhancements, from the easy to use BOPIS [buy online, pickup in store] lockers and the new geofencing technology to the focus on the fulfilment teams, have already driven improvements in customer satisfaction and speed of service.
    Importantly, the fulfilment teams are also improving productivity as they leverage enhancements that we've made to the picking app. This is evidenced by a dramatic reduction in the number of hours needed to fulfil orders for pickup. In fact, we can now fulfil orders six times faster on average than one year ago.

    Total Home

    One of the initiatives that Lowe's has launched is its "Total Home" concept, where the company is seeking to supply more goods to both DIY and Pro customers. Mr Ellison quickly outlined how that program works:

    Our Total Home strategy will drive market share acceleration by enhancing our investments in pro, online, installation services, localization and elevating our product assortment. We are confident that these initiatives will allow us to drive sustainable market share growth as we deliver a total home solution for our Pro and DIY customers.

    Mr Ellison sees that as developing well during 2020:

    We're gaining traction with our new Total Home strategy, which is our commitment at Lowe's to provide everything a customer needs for their home. As an example, during the quarter, we quickly pivoted from a successful holiday "Season of Savings" event to launch two events to support our Total Home strategy in January: an Home Organization event and a Bath event.
    During the Home Organization event, we provided our customers with storage solutions for their home and garages, freeing up valuable space for other activities. The Bath event helped our customers find everything they need from paint to fixtures to toilets and tubs and even towels to upgrade their bathrooms. And for the customers who didn't want to do-it-yourself, we provided installation services, truly a total home solution for a dream bathroom.
    Both events helped us to close out the fourth quarter with very strong sales in January. Looking forward, I am confident we're making the right investments to leverage our total home strategy, while we shift our focus from retail fundamentals to accelerating our efforts to gain marketshare.

    The future

    Impressively, Lowe's was also very down-to-earth about future prospects, and how it sees the market in 2021 playing out. David Denton, Lowe's executive vice president and chief financial officer painted a cautious view of where Lowe's is likely going:

    Like many companies, we have limited visibility into future business trends. It remains unclear when there will be a widespread availability of the COVID vaccine and whether there will be additional COVID-related restrictions like we're experiencing in the Canadian business today. Given the near-term uncertainty at our December investor update, we outlined three different market-based scenarios on how the mix-adjusted home improvement market might perform, be it weak, moderate or robust performance levels. Keep in mind that our business is more heavily weighted in DIY and less penetrated in online than the broader market, both of which create modest downward pressure on the Lowe's home improvement market outlook.
    These three market scenarios would result in total sales expectations ranging from USD82 billion to USD86 billion for the year. While each scenario represents a top line decline from 2020 as we cycle this unprecedented industry growth, we continue to expect that our sales result will outperform the market as our initiatives are focused on delivering marketshare gains.

    That said, however, Mr Ellison was very clear that Lowe's does not see its 2020 results as a kind of "one off", and based purely on work. He sees it instead as the reward for several years of hard work:

    What I'll add to that is, we'll go back to the same theme that you'll probably hear us say all morning. Obviously, we can't predict with any high degree of precision what 2021 macro will look like. But we're confident in two things: number one, that we're going to take market share; and number two, we're going to improve operating income.
    And I think for us, we're just planting our flag on those two things. We believe that 2020 was not an anomaly. We believe it's a reflection of a lot of hard work and retail fundamental implementations we put in place across, pro, merchandising, store operations, IT infrastructure. And we believe that those initiatives and our Total Home market acceleration strategy is going to allow us to continue to take market share and, at the same time, improving operating income.


    While Mr Ellison is no doubt right, and the company has improved greatly over the past couple of years under his stewardship, it still does face considerable problems. Its work on delivering better fulfilment is taking place perhaps five years behind its chief competitor, The Home Depot, and Lowe's must be considering how, as Home Depot continues to build out its systems, it can catch up.

    That said, Lowe's has always been slightly more willing to experiment with more edgy technology than Home Depot - though sometimes in a more distracting than substantial way. But the development of what amounts to a predictive system based on geofencing - and yes, it likely features everyone's favourite two-letter acronym, "AI" - indicates a more practical and useful bent.

    The real challenge for Lowe's, perhaps, is in working out how to build its strategy so that it takes account of both a very broad strategy and a very precise implementation. At the moment, it's not clear how sharp that focus really is.


    Wesfarmers-Bunnings 2021 H1 results

    Bunnings headlines with 34% EBIT growth

    Bunnings has shown outstanding growth for the half, increasing sales by $1.7 billion, and comp sales by nearly 28%. Both trade and DIY sales showed strong growth

    Wesfarmers released its results for the first half of FY2020/21 (six months to 31 December 2020) on 18 February 2021. As expected, the results were highly positive for its retail operations, and especially so for its home improvement division, Bunnings.

    For Wesfarmers overall, revenue for the half was $17,774 million, up by 16.6% on the previous corresponding period (pcp), which was the first half of FY2019/20. Earnings before interest and taxation (EBIT) came in at $2171 million, up by 25.2% on the pcp, while net profit after tax (NPAT) increased by 25.5% to reach $1414 million. Statutory NPAT, taking account of discontinued operations and significant items, was up by 14.9% to $1390 million.

    For Bunnings, the headline numbers were revenue of $9054 million, an increase of 24.4% on the pcp, and EBIT of $1332 million, a lift of 33.9%. Total stores sales growth went up by 24.8%, and store-on-store (comp.) sales growth was up by 27.7%, a steep climb from the pcp number of 4.7%.

    To put that growth in some perspective (in a way that Bunnings never would), revenue grew by $1778 million over the pcp, meaning that a cautious number for full-year revenue increase would be $2500+ million. Or, if you like, Bunnings is likely to grow the equivalent of all the revenue produced by the Independent Hardware Group (IHG) for the year.

    Staff contribution

    While there are some years when acknowledging staff as the source of success can seem a little pro forma (though it also really never is), this result really does rest firmly on the efforts of Bunnings' line staff to meet a series of successive challenges. Quoted in a press release Bunnings' managing director, Michael Schneider, said:

    I would like to thank our team and our suppliers for their contribution to the result. They have done an outstanding job minimising disruption with changing rules and regulations, keeping stores stocked and looking after our customers, while keeping each other and the community safe.

    That included not only creating processes and procedures to minimise the risk of COVID-19 infections, but also developing innovative ways of getting product to customers, including contactless curbside pickup and scaling up the whole process of online ordering.

    In response to a question from investment analyst Phil Kimber from Evans & Partners at the end of the results presentation, Mr Schneider mentioned that at the height of the COVID-19 lockdown period, Bunnings in metropolitan Melbourne was cycling 30,000 online orders through 50 stores each day.

    That's a real indication of the depth of line staff talent at Bunnings, both floor staff and store management. It is also likely a reflection of Bunnings choosing to continue paying staff through the lockdown period, providing vital support during a time of great vulnerability.

    The company continues to grow in staffing terms. As Mr Schneider mentioned in his opening remarks:

    We also recruited over 6,000 additional team members across Australia and New Zealand to service higher demand, and I welcome these team members to the Bunnings' family.


    Mr Schneider stated (as usual) that growth had been spread throughout the Bunnings range, but also mentioned that gardening and outdoor living products had been doing particularly well. That included, he said, barbecues, furniture and lighting.

    In terms of in-store presentation, garage organisation and kitchen design had received particular attention, and the website had also gained a number of design tweaks.

    Bunnings has continued to develop its relationship with commercial customers, as well as expanding the product range on offer. That includes more facilities for builders, including support for retirement living refurbishment, building on support offered in areas such as kitchens, fast food retailers, insulation and staircases.

    Trade business

    In response to a question posed by Shaun Cousins of JP Morgan, Mr Schneider was clear that the ratio of sales between trade and DIY/consumer had remained at 35/65, with both growing more or less in step through the half. Going into more detail, Mr Schneider said:

    I think that on the trade side, there's certainly a lot of activity both on new starts and on alts/adds, [alterations & additions]... So we're really well-positioned.
    We've been working really hard over the last 12 months to improve the capability of the Trade team. We've got a new Trade chief operating officer, Ben Macintosh. He joined us last year, [along with] a number of new leaders across the three categories of Bunnings Trade, which is really helping us focus on sales and relationship management, alongside the technological developments [and] improvements in PowerPass.
    It's great to see so many trades and small businesses using the [PowerPass] app. It increases convenience and speed and time in store. [There has also been] a lot of really good work on product innovation and the in-store experience. I think the new trade service desk that I touched on earlier creates a much better experience for tradies when they're in-store and on the way through.
    And, obviously, during periods of lockdown, we're fortunate that the business can be open for the Trade to do emergency repairs and things like that. So that's been a benefit during the first half.
    But yes, we've got a really positive outlook for what we can do in Trade in terms of improving the way we go to market and the quality of the service offer, and I think that will benefit us in increased sales.

    Adelaide Tools

    In his prepared remarks, Mr Schneider briefly mentioned developments at Adelaide Tools, the tool specialist supplier Wesfarmers has acquired:

    The performance of Adelaide Tools was pleasing, and we're excited to be opening our newest format store in Parafield, South Australia. Our locally based Adelaide Tools team is doing a great job, and we anticipate more stores opening late in 2021.

    In response to a question by Bryan Raymond of Citi, Mr Schneider went into some more detail.

    So it's still very early days on Adelaide Tools. Adelaide Tools will be the brand in South Australia. It has good brand awareness and it has a fantastic family business history in that community.
    Once it moves outside of South Australia, we'll have a different branding proposition. It won't be Bunnings at all.
    This is very much in line with our strategy of trying to bring competition and customer value into sectors where we've got very low penetration. Industrial Tools is one of those. The Parafield store will open in about six weeks or so, it's really bringing some of our current thinking and sort of global research around specialist tool businesses to life.
    Once we've sort of proved that up, we've got plans in a couple of different markets to get going.

    Market shape

    Perhaps the most interesting and nuanced response Mr Schneider had to offer originated with a question from Richard Barwick of CLSA. He asked about how Bunnings saw its development during the second half of FY2020/21, especially as sales were likely to fall off from March 2021 onwards.

    Mr Schneider replied:

    Yes, it's a good question, Richard, and certainly has occupied our thoughts. And I think one of the things that we've been cautious on all the way through in our own internal thinking and forecasting has been around what happens if something changes, and that doesn't just happen to be cycling strong growth. [It] could [be] further lockdowns or disruption, and we've seen a small burst of that already this half in a few jurisdictions. So the team has done a lot of really good planning.
    I think one of the advantages for our type of retail business and in the home sector [in general] is going to be that at least until there's a widespread vaccine rollout, there's going to be an apprehension to travel domestically, and you certainly can't travel internationally.
    So people being home, the housing market being strong, interest rates have been historically low, we think the attributes of the market for home improvement are positive.
    I think also from an inventory point of view, one of the things that I'm particularly proud of both of the Bunnings team, but also our extended Bunnings team, our supplier base, has been the flexibility in accelerating stock into the business.
    Also, a lot of those products don't have the sort of sharp seasonality that other retail businesses face into. So we've got the opportunity, if sales, for example, in barbecues were to come down - and they'll come off anyway because summer comes to an end - there is not the same sort of fashion or change in that product. So we can sell products through over a longer period of time. So we might end up with a little bit more stock than we want short term.
    But I think the other piece is we've got good flexibility in the way that we roster and resource our stores. So we'll continue to invest in service, continue to invest in keeping our team and customers and community safe. We do have the ability to sort of flex that up and down as we need.
    I think one of the things we're really just focused on is to do the basic things right, do them really, really well, make sure we've got stock availability, make sure that the website performance is where we want it to be, and we've got things in play that will see that improve in the months ahead.
    And really just continue to invest in the customer experience. The customers are choosing Bunnings. They trust that when they come in that they're safe. They trust when they come they are getting the value proposition they're looking for because we do think that their interest in doing things around the home is going to continue for some time to come.

    To some extent, this picks up on one of the points that was raised during the full year results announcement for FY2019/2020, which was how much of the retail spike for Bunnings was due to purchases brought forward, and how much of it was genuine new demand. Mr Schneider made the point that people who bought paint where unlikely to repaint their house twice in the same year - which was well taken.

    However, it is evident based on the results numbers and Mr Schneider's comments, that we are seeing a genuine real increase in overall demand, as families repurpose funds that might have been spent on travel (for example) to making their homes more liveable.

    Mr Schneider's point here is that even as that spike in demand fades, the after-effects - aside from the accounting factor of apparently falling sales - will likely be minimal. Suppliers have scaled up, but can also scale down. The products being sold do not rapidly go out of fashion, and so can be carried over from one season to the next.

    Understanding EDLP

    It's interesting that over the past three years there seems to have been a degree of drift when it comes to an understanding in the financial community about what everyday low price (EDLP) means, especially in relation to Bunnings. That might be, perhaps, because Coles is no longer part of Wesfarmers, and while EDLP principles might apply to the Kmart group and Officeworks, they are less prominent (as both deploy discounts more widely).

    In his prepared remarks, Mr Schneider clearly stated:

    To improve the customer experience, we continue to proactively lower prices across a wide range of categories and products.

    Despite this, and the long history of EDLP at Bunnings, there were questions from analysts that pointed to what they regarded as "lost" profit opportunities. Some of them were understandable probes into what was going on, such as this one from Michael Simotas, an analyst with Jefferies:

    You've given us some very useful commentary on margins for Officeworks. So I was just hoping you could give a little bit of qualitative colour on gross margin performance across the other retail businesses, please?

    To which Mr Schneider replied:

    For us, as I said in my opening remarks, for us, we've been continuing to invest in price as an EDLP retailer. It is something we are fixated on in terms of delivering for customers. So yeah, for us, it's been more about leverage than margin.

    Other questions, however, went more to fundamentals, such as this question from Ben Gilbert, an analyst with Jarden:

    [Y]our EBITDA was up pretty much in line with revenue. And even if you make the rental adjustment, it looks like you sort of grew about 1.3 times. It just suggested that there wasn't a lot of fixed cost leverage through the business. And I suppose my question there is, do you think you over-invested in projects or maybe put them into OpEx? Because you had the opportunity to give them the strength? Is it dilution from online? I'm just trying to understand, because, I would have thought you'd probably be comparable with JVs, which still managed to grow at two times, even with the gross margin decline?

    To which Mr Schneider replied:

    Yeah. Ben, we certainly don't compare ourselves to the other businesses. We focus on, what's right for Bunnings. And what's really important is to sort of look at the fact that with a top line growth in the mid-20s and a bottom-line growth close to 40%, when you back out property, we're happy with the leverage position, certainly investing in price. Nothing, you know, of note that we've sort of pulled forward or done differently, but we are very much as focused on that long-term performance. And that's what we sort of have stuck to through and through.

    Mr Schneider later expanded on that answer:

    But in terms of what we can do with cost going forward, there is always going to be opportunity for improvement, and there's going to be opportunity to reap the benefits of some of the investments we've been making into digital over time. So, I'm confident in the long run, we'll continue to deliver really solid results, both top and bottom line.

    The part of EDLP that is not commonly understood by analysts is that it is really based on a particular approach to product acquisition. The alternative, High-Low pricing (HiLo), is more based on constancy of product, and the variable factor is stocking intensity. Under HiLo, the goal is to create a buying surge through discounts, which drives profit both through introducing scale in purchasing on a narrow range of products, and by creating additional incidental consumer purchases.

    In contrast, every successful EDLP retail operation will eventually go further up the supply chain, with the goal of finding those products where there is either excessive profit-making, or a lack of consolidation, leading to diffusion of production diminishing the advantages of scale. Classically, this can be clearly seen in Bunnings' Tactix range of inexpensive storage containers and toolboxes. Bunnings consolidated its orders to a narrow focus from a single supplier, introducing scale. For suppliers, while margin might diminish, they receive the benefits of more certainty in the production/supply part of the business, enabling better planning, and the opportunity to innovate.

    To put it more bluntly, EDLP requires a "whole of market" approach. With that perspective, the supply chain doesn't begin with a forklift and a truck, it begins with an engineer or a designer sketching a new design a year or more before production begins.

    It isn't that analysts such as Mr Gilbert do not have valid points to make - they do. Bunnings could likely have made a higher profit if it had increased its margins in the face of restricted supply and increased demand. But that would have led to increased vulnerability when this surge in demand eventually diminishes.


    It is always difficult to read from the outside some of what is going on inside a company. However HNN would say that it seems to us there has been a profound change in Wesfarmers that took place over calendar 2020. We would have said that in calendar 2019 Wesfarmers was in some respect more Rob Scott's (and possibly Michael Chaney's) company than it was anyone else's. Coming into 2021, however, it's evident that Wesfarmers has absorbed the needed changes that Mr Scott brought, and now presents a very unified and confident (but not arrogant) team of managers.

    What is marking Rob Scott as an outstanding CEO today is the sense of evident caution in Wesfarmers. There was a degree of disquiet among the analysts about whether Wesfarmers is making the best use of its capital. The half-year dividend, though numerically high, tracked to the low part of the range proportionate to earnings. Analysts pointed to capital reserves which should be, in their view, either invested in new ventures, or returned to investors.

    That caution is in part about how the Australian economy is going to develop through to the end of 2021, but it is perhaps about a much larger issue. Even before COVID-19, Australia was stuck in a phase of very slow growth, and the issues that created that situation - in particular an inability by the government to incentivise a move to a more productive economic basis - have persisted. That caution is likely about waiting for the Australian economy becomes more biased towards growth before investing heavily.

    Which is, of course, both pessimistic and optimistic. Probably 2021 and 2022 will be difficult years to get through, but beyond that there is a chance for a more modern and forward-looking economy to emerge. HNN's guess is that Mr Scott is focused on making sure Wesfarmers is in the best possible position to take advantage of that growth economy


    Big box update

    Camo look for proposed Bunnings Dubbo

    A Bunnings store has been acquired while it is being constructed and extension for Indooroopilly development

    The exterior of the $30 million Bunnings store proposed for the former RAAF base in Dubbo (NSW) would pay homage to its past and be painted in a camouflage design; property fund Newmark Capital has bought a new Bunnings Warehouse being built in Preston (VIC), according to an exclusive report in The Australian Financial Review (AFR); and Bunnings has been granted an extension for its store development in Indooroopilly (QLD).


    Applicant for the Bunnings development and director of Igloo 5 Pty Ltd, Mark Stanford, said as the former RAAF base site is being redeveloped for adaptive reuse, the project team want to design buildings that give a nod to the base's history. He told Dubbo Photo News:

    The proposed Bunnings building with camouflage details complements the original large, isolated building layout and maintains the sense of scale and industrialisation of warehousing and construction.

    According to Mr Stanford, the original igloo store buildings had jagged edge roof profiles and barrel-vaulted ceilings to cast broken shadows. The camo paint was to resemble hills. He said:

    The site was a coherent 1940s cultural landscape that combined forestry remnants with the careful placement of large buildings to result in a site that was innovatively camouflaged to reduce the risk of aerial attack.
    As the only World War II stores depot to remain in military service until the 1990s, the former RAAF [site] is important for its historic association with the development of Australia's defence over 50 years.
    The site also has heritage significance for its association with Aboriginal relics, previous forestry uses of the landscape and its use as a makeshift camp during the Great Depression.


    It is a big 38-hectare site, and it needs big business.

    A development application for the 17,500sqm facility will include a 500-space car park and was lodged with Dubbo Regional Council (DRC) in January. If approved, it would replace the existing Bunnings, currently located on Sheraton Road.

    Related: Building plans lodged for a larger store in Dubbo (NSW).

    Big box update - HNN Flash #30


    The AFR exclusively reports that Newmark Capital has struck a deal to acquire an 18,626sqm Bunnings store on completion. The warehouse store, being built on a 2.05 hectare island site on the corner of Bell Street and Chifley Drive in Preston, will be leased by Bunnings once finished on an initial 12-year term.

    The new Bunnings is forecast to bring in $3.75 million in annual rent representing a yield of 4.4% on an $85 million acquisition price. Currently under construction, it is being developed by Bunnings at a forecast cost of $43 million with an opening that is scheduled in 2022.

    The three-level Bunnings Preston will replace an existing warehouse at Northland Shopping Centre, approximately 700 metres away.

    The AFR's Street Talk column earlier revealed that Newmark Capital was looking to float its Newmark Property REIT this year.


    Brisbane City Council has given Bunnings an extension to a previous development application for its Indooroopilly store. Plans were originally approved back in 2017 for the development but work to extend the store had not begun.

    According to the application made by RPS Group on behalf of Bunnings, "timing for construction of the approved extension to the store is dependent upon a variety of factors, including commercial considerations and customer demand".

    The works would see the store expanding the warehouse floor space over three levels to include a nursery, bagged goods area, and building materials and landscaping yard.

    Bunnings will now have until July 2023 to complete the works under the current approvals.

  • Sources: Dubbo Photo News, The Australian Financial Review and The Courier Mail (Online)
  • bigbox

    Big box update

    Bunnings Port Kennedy to shut down

    Caboolture (QLD) will get a Bunnings store and the big box retailer will spend $30 million on a bigger warehouse in Dubbo (NSW)

    The Bunnings Warehouse in Port Kennedy (WA) is set to close its doors permanently; Moreton Bay Regional Council has given approval for a Bunnings store in Caboolture (QLD); and the proposed Dubbo (NSW) development marks a major investment in the region.

    Port Kennedy

    The final day of trading for Bunning in Port Kennedy will be March 21 ahead of its lease ending with BWP Trust, the largest owner of Bunnings Warehouse sites in Australia with a portfolio of 68 stores.

    It is understood all of the current Port Kennedy team members will be offered transfers to nearby stores with Bunnings' main focus to support them throughout the transition.

    Bunnings regional operations manager Hayley Coulson said as the store's lease expiry was nearing, the retailer made the decision to cease operations at Port Kennedy. It will serve the local community from surrounding stores in Baldivis, Rockingham and Mandurah. She said:

    Both Baldivis and Mandurah opened in 2018 and offer customers a newer, wider and improved offer [sic]. The Bunnings team in Port Kennedy has done a great job serving customers and the local community since 2008, and we thank the team for their commitment.


    The new 13,000sqm Bunnings Warehouse in Caboolture will be built on the corner of the Bruce Highway and Pumicestone Road - now known as the Sungate Business Park. This development is expected to include other retail outlets, a supermarket and multiple food outlets.

    Moreton Bay Regional Council approved the development application in December. Bunnings area manager Emily Sweet told The Courier-Mail:

    Features will include the main warehouse, outdoor nursery, timber trade sales area, cafe and a playground ... and have parking for over 400 cars.

    Ms Sweet said construction was due to start mid-year and the aim was to open the doors in the first half of 2022.

    Related: The Bunnings Caboolture store was first proposed on mid-2020.

    Bunnings buildout continues - HNN


    The proposed $30 million Bunnings store in Dubbo will be the largest in the Central West of NSW if approved, according to Dubbo mayor Ben Shields.

    A development application (DA) for the hardware store - which will be 68% bigger than the city's current outlet - is before Dubbo Regional Council. Developer Mark Stanford said the former RAAF base where the proposed store site is located is 100 acres, and suitable for a big business. A 500-space car park will also be constructed. He told the Western Advocate:

    The total spend in the entire project is over $60 million, so it's a fair investment. The Bunnings building itself is over $30 million. There won't be too many private projects in 2021 that are over $30 million in the city.

    The Bunnings DA needs to be approved by council before work can begin. Cr Shields told the Daily Liberal and Macquarie Advocate:

    I believe the zoning is already appropriate. There are a number of processes that this has to go through before final approval but for a major company to see Dubbo as a place to continue and expand on their already significant investment is a good thing.

    Bunnings regional operations manager Robyn Hudson said this Bunnings outlet will offer customers "an even wider range of home and lifestyle products".

    Spanning more than 17,500sqm, the new Bunnings will include the main warehouse, outdoor nursery, timber trade sales area, cafe, and a playground. This store would also feature a 1,600sqm specialised bulk trade offer.

    If approved by Dubbo Regional Council, work on the Bunnings store is expected to start in July.

  • Sources: 917 Wave Radio, The Courier-Mail, Western Advocate, and Daily Liberal and Macquarie Advocate
  • bigbox

    Big box update

    Bigger Bunnings Dubbo store proposed

    New Seymour outlet is about to welcome customers and there are no longer plans for a new warehouse store on at Carrara on the Gold Coast

    Building plans lodged for a larger store in Dubbo (NSW); the Bunnings store in Seymour (VIC) is on schedule to open soon; and a Bunnings Warehouse and garden centre will not be built in Carrara (QLD) after all.


    There could be a bigger Bunnings store in Dubbo if plans are approved by Dubbo Regional Council. The proposed store would be more than 17,500sqm in size and built on the old RAAF base which is 5000sqm bigger than the existing site located on Sheraton Road.

    Andorra Developments is redeveloping the former RAAF base which has not been used for more than 15 years, according to The Daily Telegraph.

    About 400 homes are expected to be constructed on the site along with a tourism and industrial precinct which could include cafes, pubs, accommodation options and other retail outlets.

    Dubbo Chamber of Commerce President Matt Wright said the investment Bunnings was prepared to make in Dubbo was good news for other businesses in the city. He told The Daily Telegraph:

    Confidence breeds confidence. A lot of businesses who are smaller and already established may be able to take confidence away from the fact a big company like Wesfarmers is prepared to invest in Dubbo.
    It does present another opportunity for another retailer to take on the empty space left by Bunnings and that could be even more good news.

    Dubbo's existing Bunnings store opened in 2008 and has been part of the growth of the Blueridge Business Park precinct in East Dubbo.


    The new smaller format Bunning store in Seymour (VIC) represents an investment of more than $9 million and spans more than 4500sqm, and is expected to open soon.

    Features include the main retail area, outdoor nursery with an undercover bagged goods and landscaping area and access to services such as key cutting, timber cutting. There is a hire shop where customers can hire out products such as carpet cleaners and trailers. The location will also feature parking for about 70 cars.

    Trade customers will have access to a revamped trade desk and an undercover timber drive-through with eight indoor car spaces for easy loading facilities. Bunnings Seymour store manager, Ruben Anderson said the warehouse was purpose-built and it took six weeks to turn it from an empty warehouse to store-ready. He told the Seymour Telegraph:

    It takes two weeks to get the racking up and four weeks to fill. It's coming along really quickly, and we can't wait to open for the Seymour community. They are already shopping at Craigieburn and Shepparton and now they have their own store. 'I'm very excited.

    As part of the store opening, the team has provided support to local community groups with product donations and hands-on support. Mr Anderson said:

    Team members from Seymour have already worked together to assist in local community projects such as helping Seymour Health's Goranwarrabul House plant new vegie gardens ... The team have also offered a hand to The Salvation Army's community garden by refreshing their front gardens, making way for a children's play area which will replace an empty unused space that was previously there.


    In 2016, Bunnings had plans to build a 16,000sqm warehouse and garden centre backing on to the Palm Meadows golf course in Carrara on the Gold Coast in Queensland.

    According to the Gold Coast Bulletin, the flood-plain land had problems and there was the major issue of entry and exit off Nerang-Broadbeach Road, which feeds into the major roundabout that also serves Gooding Drive and Robina Parkway.

    After battling for four years to get its plans approved, Bunnings has pulled the plug. Its conditional deal to buy the 10.8ha site, believed to be for in excess of $7 million, lapsed and the land is back on the market.

    Bunnings said that while it's decided not to pursue the project, the area remains "of interest".

  • Sources: The Daily Telegraph, Seymour Telegraph and Gold Coast Bulletin
  • bigbox

    Home Depot's evolving rental strategy

    Starting to offer larger equipment

    The Home Depot Rental has also opened eight new rental centres following the recent launch of two rental operations facilities

    The executive in charge of Home Depot Rental, Richard Porter recently spoke to Rental Equipment Register (RER) about what he regards as the "Three Stages of Rental Evolution" at the big box retailer. It is starting to get into larger equipment. Mr Porter said:

    It's been an evolution ... Home Depot has been engaged in rental for 25 years and in the early days of rental we were trying to empower those DIY customers that were coming into Home Depot to really do the projects that they wanted to try in a lot of cases for the first time. So the emphasis was really on what can we provide, how can we encourage customers that they have the ability to do those projects in a safe way, and to do it themselves. And in that way, I think we had [an] influence on the rental market, expanding peoples' confidence in their own abilities to take on projects where they might not have the tools at home and we can rent those tools to them.
    Over the course of the time that has begun to expand into more and more pro customers [tradies] and those pros have told us what they want. And we have a robust pro community that depends upon the convenience of Home Depot for their businesses ... [T]hey began telling us, 'If you carry this tool or this piece of equipment, it would my life easier because I could pick up the products and I could pick up the tools and the piece of equipment all in one spot, take it to my jobsite, and be done'.
    So we began to expand into the pro categories and with the acquisition of Compact Power Equipment Rentals in 2017, we were more able to connect with the pros through larger equipment classes and categories that they had previously needed to rent through other rental companies. And that was very successful.
    People think of our evolution in three stages: First product tools for DIYers; second, larger towable equipment that they could put in the parking lot and your average F-150s could pull; and now larger equipment that larger pros are telling us that they need and they want in order to keep their business going with Home Depot Rental.
    We take ... a significant amount of research as to each individual geographic location and determine whether we feel like that category of equipment would do well. There are some obvious geographic influences that determine what mix you're carrying in a specific store. For a simple example, I would say you're going see a lot more tile saws in South Florida than you'll see anywhere else within the country because of the use of tile in that geographic area. Or the basic composition of soil in an area determines what people need. Aside from that, each store gets input from the customers that shop there, and the fleet customises according to what the customers need over the course of time.

    Delivery vehicles are available at most of Home Depot's rental departments. Mr Porter explains:

    We can deliver a piece of equipment from most of our locations across the United States and that has been a very fast-growing part of our business. We typically have about a one-hour radius around a store but we've been expanding that in some geographic locations.

    In 2017, The Home Depot acquired Compact Power Equipment Rental, a national provider of equipment rental and maintenance services that has been its commercial partner since 2009. The transaction was for USD265 million in cash. Part the of acquisition included a number of the pro shops across the US and Canada.

    Rental centres

    Home Depot now rents large equipment, tools, trucks and trailers from eight newly opened rental centres in Georgia, Arkansas, Montana, Florida, Wisconsin and Texas.

    They came after Home Depot developed and launched the concept of Rental Operations Facilities that allows for a larger range of rental equipment for its pro consumers. While not open to the public, these equipment facilities enabled fleet growth in many new and larger equipment classes - such as 24metre boom lifts and 4,500kg telehandlers - while improving efficient fleet management. This has allowed the business to better meet customers' rental needs, according to the retailer.

    The first Rental Operations Facility was introduced just outside of New Orleans in late 2019 and was followed by a second location in Los Angeles in 2020. Mr Porter said:

    ...2020 was a challenging year but both of those locations have continued to grow and they really provide some strategic infrastructure for us. Our retail stores are where all of our rental centres are, and those stores need to grow and add customers every year. And as we've grown, we've added a great number of categories of equipment in the parking lots of those stores as well as "Load and Go".
    We used to have only the one traditional "Load and Go" F-250 traditional offerings, we now have four or five different options in the parking lot ... so now we are starting to have space constraints.
    As we get into the larger categories of equipment, we have very specific functional needs from a preventive maintenance and a repair capacity that the operations facilities provide along with additional capacity for delivering equipment.

    Home Depot Rental is also looking at enhancing its reservation process. Mr Porter said:

    We are currently working on a reservation project for our customers, and we know that our customers are looking to shop in more and more convenient ways ... so that is a clear focus for us into 2021.

    Mr Porter said there is a rental presence in about half of Home Depot's 2,200 store locations in the US and Canada.

    I say approximately because that number is changing every day. Our customers, particularly our pro customers have made it clear to us that geographical proximity is important for them because it means convenience and for a busy pro or busy DIYer, time is money.
    With 2,200 stores in the US and Canada, there's a store within 10 miles of 90% of the population...[W]e will look at every opportunity that makes sense based on the community and what our customers are telling us, we'll provide rental presence to more locations.

    There has been a lot of attention on providing the right kind of training for staff in Home Depot Rental. Mr Porter said:

    ...We know that part of the customer value proposition is in having competent technicians or sales associates who can engage the customer, answer their questions competently and make sure they are being matched for the right tool or equipment to ensure the success of the job they are working on. We have worked very hard to standardise training for our associates who work in the rental centres as well as to bring some of the industry experienced folks who came with through the Compact Power Equipment Rental acquisition to the locations to help train our rental associates.
    Each location has at least one onsite technician and I can tell you that we have the very technicians in the industry that have been with us a long time and have significant experience. We also have associates who engage with the customers, get to know those customers, particularly those who are coming in on a regular basis, really try and provide the best experience that that customer is looking for.
    We have some customers who are very experienced and their focus is to get in and get out in a hurry and we have others who are looking for that competent advice and we are focusing on providing that training across all of our locations.
  • Sources: Rental Equipment Register and KHL
  • bigbox

    Lowe's digital transformation continues

    National Retail Federation 2021 virtual event

    The home improvement retail giant said it has moved on from being a conventional brick-and-mortar retailer with an outdated tech infrastructure and an obsolete e-commerce program

    Speaking at NRF 2021: Retail's Big Show Chapter 1, the virtual version of the retail industry's biggest annual event in the US, Lowe's CEO Marvin Ellison said the company's digital transformation journey was all about staying focused on the fundamentals. He said:

    Two years ago, we couldn't even provide our customers with an e-receipt. Our e-commerce platform was on a decade-old infrastructure. Think about what your computer was like 10 years ago: That's the equivalent of what our e-commerce platform was built on. We really hadn't made any significant investments in merchandising systems or supply chain technology. I felt it was critically important that we focus on the core retail elements and get those operational underpinnings in place.

    It's not clear what position the company would be in today, in the midst of a global pandemic and widespread shutdowns of storefronts, had it not pivoted aggressively toward e-commerce and omnichannel experience technology in 2019. But because of those efforts, Lowe's emerged as a retail winner in 2020, delivering a 30% increase in sales in the third quarter compared with the same period in 2019.

    Lowe's capitalised on increased demand for home improvement goods at a time when millions of consumers were stuck at home. But had the company not shifted away from its store-based merchandising approach, it would have missed its opportunity, Mr Ellison said. He told Matthew Shay, president and CEO of the National Retail Federation:

    One of the most difficult things to do for any company in the middle of a transformation is deciding what your priorities are. For us, we were a very large company with a great brand and a strong balance sheet, but we'd made limited investments in the fundamentals of the business. So we'd been working on those things for two years, and because we'd been doing that, we were able in 2020 to meet this unprecedented demand we saw as an essential business, with everyone staying at home.

    Lowe's digital transformation efforts seem to have it well placed for the future, if a new survey of more than 4,000 consumers around the world - more than half of them in the US - is any guide. Melanie Noronha, senior editor at The Economist, which conducted the survey, said:

    Our research shows that once restrictions ease, new online shopping behaviours look likely to continue, particularly for younger consumers. Once restrictions lift, you will see some return back to stores, to a certain extent. But about 60% of respondents will retain some of their new online shopping habits, and that includes about 55% of baby boomers.

    In fact, said Ms Noronha, the most dramatic shifts toward online shopping during the pandemic took place among older shoppers, with baby boomers increasing their online spending (as a share of their total spending) from 25% to 37%, followed by Generation X, whose share of online spending climbed from 39% to 47%.

    Overall, retail spending dropped by 9% during the pandemic - but online spending increased by 15%. Retailers around the world, recognising this big flip in their industry, have responded by aggressively accelerating their digital transformation projects. Ms Noronha said:

    We're seeing there's now a seamless experience between on- and offline shopping. For instance, a consumer could go in-store, discover a product and then place the order online, or they could discover it online and then go in-store to test it and purchase it.

    For Lowe's, Mr Ellison said, the goal is to simply deliver on customer expectations.

    It's not about our competition or what will happen in the macro environment. It's about being customer-centric: If a customer wants a simple in-store transaction, how do we execute that in a way that's flawless and frictionless?
    If a customer wants to buy online and pick up in-store, buy online and pick up in a locker, buy online and we'll ship to your home - as we think about all the ways customers want to shop and the ways they'll shop in the future, that dictates our capital spend and our innovation strategy.

    Lowe's has built a store navigation app to help in-person shoppers find what they need. It is offering secure lockers outside retail locations where customers can pick up online orders. And it's been following the buy online, pick up in-store trend, as well.

    Whatever the tech solution, Mr Ellison said, the key is to remove all friction from the shopping experience.

    As my CIO, Seemantini Godbole, says to me often, the most effective technology is the technology no one sees. It's always behind the scenes. And all the customer knows is, 'This was really simple, this was so easy, I had so little effort to get this transaction processed.' And the associate in the store, in the distribution centre and in the corporate office is saying, 'This system works so well and is so intuitive.' So our innovation is focused making things simple without putting anything in front of the customer or associate.That's what good innovation looks like.

    At its most recent investor update, Mr Ellison announced the company's "Total Home" strategy that will focus on making it easy for consumers to use Lowe's as a means of creating the household they envision. He explains:

    We're thinking about things beyond getting your bathroom remodelled. We want to provide all your textiles as well. If you're going to get your kitchen remodelled, we want to provide you every element you need to make that kitchen functional, make that kitchen something that will meet your dreams and inspirations.
  • Sources: Biz Tech Magazine and HomeWorld Business
  • bigbox

    B&Q looks to Instagram generation

    The UK falls back in love with DIY

    Parent company Kingfisher hopes the tide has permanently turned after decade of decline

    Home improvement has become the national pastime in the UK during the coronavirus pandemic as people spent more time at home - and rediscovered a passion for DIY renovations after a decade of decline.

    The closure of pubs, restaurants and sporting venues, financial pressures and the need to adapt houses and flats to cope with changed circumstances and working from home, prompted a boom in DIY and gardening during 2020, particularly among 18-34-year-olds who previously shunned such activities.

    B&Q's parent company, Kingfisher, which also owns Screwfix, is hoping to cash in on the trend, which has reversed years of gradual shifts towards relying on professional builders and tradesmen. It is investing in digital marketing, home delivery and new products that can capture the imagination of the Instagram generation. Kingfisher chief executive, Thierry Garnier, told The Guardian:

    There is a proportion of customers who have said that for the first time in my life: 'I am doing DIY, I learned new things from the internet or my parents and I enjoyed doing it.

    He hopes research suggesting that many of those who try out one job will go on to do more is correct and the trend is here to stay, even when under-35s have more sociable alternatives available. Mr Garnier said:

    We are adjusting to the way they shop, with Instagram and Pinterest, click and collect and online.

    While there are fears that sales will be hit in 2021 when job losses are expected to mount, Mr Garnier said that will not necessarily translate into falling sales.

    The majority of people can't afford to [hire in a builder]; they have got to do it themselves.

    Mr Garnier said he has plenty of data to prove how consumers fell back in love with DIY in 2020. It began during the spring season - with painting fences and sprucing up patios, walls or cars. Sales of pressure washers soared by 80% at B&Q.

    Then people moved on to gardening, kitchen refurbishment, creating home office setups and outdoor entertaining.

    The second wave of Covid-19 prompted consumers in the UK to buy early Christmas decorations - so early that lights, trees and baubles sold out at B&Q two weeks earlier than normal.

    It has been the same story in other countries. Demand for fencing, decking and sheds in Europe and the US has put such a strain on timber supply chains that sawmills and manufacturers are working flat out to cope.

    Paint suppliers to B&Q are concentrating on the most popular shades, reducing the product range so they can keep up with the demand for high volumes.

    Mr Garnier, who joined Kingfisher just over a year ago from the French supermarket Carrefour, where he ran the Asian arm, wants to revamp the business, which owns 1,370 stores across eight countries, to pull in newly houseproud millennials and generation Zs.

    Environmental and social concerns, which younger shoppers expect to be taken into account, are being given new impetus with a partnership with Shelter (a housing and homelessness charity in the UK) to improve poor housing, and there is also a pledge to create more forests than it uses by 2025, partly via a new scheme with the Rainforest Alliance.

    But the big focus is on digital. The Frenchman is heavily influenced by his time in China, where Mr Garnier said rapid adaptation is the norm and all kinds of goods - "from a glass to a fresh lobster" - can be delivered to homes in 30 minutes in most cities. He said:

    I believe the younger generation is looking for speed. You see that in TikTok and every trend. I would like to be like China. It is not for everyone, but I think the need for speed is not going to disappear.

    He said stores will remain central to delivering these services as only operators such as Amazon have the scale to make swift deliveries from centralised distribution centres.

    It is a better option than a fulfilment centre. When you have stores, you have the assortment and the team. If you organise yourself well, you can achieve that [speed].

    During the pandemic, when the demand for home shopping rocketed, B&Q began using its stores to help pick and pack home deliveries - a move that had already been planned but was accelerated. The group now handles 1.5million orders a week - 90% of which are picked up from stores.

    Online accounts for 17% of group sales, up from 8% before the pandemic, and Mr Garnier wants to expand further. Further digital plans under consideration include an Amazon-style marketplace, where other brands could sell goods.

    It is also opening smaller stores in convenient locations where goods ordered online can be picked up, including outlets in Asda supermarkets and a click-and-collect Screwfix store near Victoria station in London.

    The B&Q in St Albans, which at 5,100sq ft is half the size of the group's largest stores, is home to a design centre where shoppers can get advice on matching paints and wallpaper. B&Q is also testing out tool hire, in partnership with rental specialist Speedy, in 10 stores.

    Mr Garnier wants "more services, more tests and more new". He said:

    We need to be comfortable with uncertainty and, very important in a new world where we are never perfect in our life, we need to be comfortable with constant change.
    If it is not Covid it will be something else - a new competitor or government decisions or social media's way of getting information.


    In a recent trading update, Kingfisher said sales soared in the 10 weeks to 9 January, jumping almost 17%. Online sales rose more than 150% compared with the same period a year ago.

    The company benefited from being given "essential" retail status in the UK, which allowed its 1,380 stores to remain open during the second lockdown in the UK and subsequent tiering in the run-up to Christmas. Mr Garnier said:

    While the strength of our Q4 trading, to date, is reassuring, uncertainty over COVID-19 and the impact of lockdown restrictions in most of our markets continue to limit our visibility. Longer term, we are confident that the strategic and operational actions we are taking are building a strong foundation for sustainable long-term growth.

    Kingfisher has already announced that it will give back some GBP130million in business rates relief received from the British government.

    Related: Kingfisher chief executive Thierry Garnier gave an interview to The Times about his online strategy.

    Kingfisher online: the need for speed - HI News, page 86
  • Sources: The Guardian and City AM
  • bigbox

    Big box update

    Sponsorship deal with league football

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

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

    Leagues sponsorship

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

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

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

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

    Keith Murray, Bunnings general manager of marketing said:

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

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

    Bunnings re-signs NBL sponsorship - HNN


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

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

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

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

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

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


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

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

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

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

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

    The matter goes before VCAT some time this year.

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

    Big box update: Brunswick - HNN


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

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

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

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


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

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

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

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

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

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


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

    Bunnings Seymour complex manager Ruben Anderson told the Seymour Telegraph:

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

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

    Big box update: Seymour - HNN

    Real estate sales


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

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

    Seven Hills

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

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

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

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

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


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

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

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

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

    Big box update: Alexandria - HNN

    New Zealand

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

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

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

  • Sources: Herald Sun, The Daily Telegraph (Online), A League Football, Albany Extra, The Gold Coast Bulletin, Seymour Telegraph, The Courier-Mail, The Australian Financial Review and Timaru Herald
  • To read the latest edition, please download HI News:

    Download hinews-6-04


    USA update

    Home Depot adds more home decor to its online offer

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    Lowe's home services

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

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

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

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

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

  • Sources: USA TODAY, Yahoo Finance, HomeWorld Business and Chainstore Age
  • To read the latest edition, please download HI News:

    Download hinews-6-04


    Biggest Bunnings store in WA opens

    Replaces current Midland store

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

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

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

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

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

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

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

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

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

    Other features include a landscaping materials section and a nursery.

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

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

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

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

    Lowe's unveils "Total Home" strategy

    Plans to capture market share from rivals

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

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

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

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

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

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

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

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

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

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

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

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

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

    Home Depot offers skilled trades education

    Tradies in training

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

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

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

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

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

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

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

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

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


    Big box update

    Bunnings Young store has opened

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

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


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

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

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

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


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

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

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

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

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

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

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

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

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


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

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

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

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

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

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

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

    Home Depot buys HD Supply Holdings (again)

    Pandemic brings another strong quarter

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

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

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

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

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

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

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

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

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

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

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

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

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

    Q3 results

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

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

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

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

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

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

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

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

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

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

    Disruption 2020: Home Depot - HI News, page 70

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

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

    Big box update

    Hervey Bay to get a new Bunnings

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

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

    Hervey Bay store

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

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

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

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

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

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

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

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

    Future growth

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

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

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

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

    Real estate sale

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

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

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

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

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

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

    Big box update

    Trading update

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

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

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

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

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

    Nowra store opening

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

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

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

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

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

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

    Stafford location

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

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

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

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

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

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

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

    Big box update

    Bunnings works towards 100% renewables

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    IKEA in Adelaide

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

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

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

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

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

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

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

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

    Retail optimism

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

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

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

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

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

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

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

    Keeping hardware customers post-pandemic

    The Home Depot's tech investments pay off

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

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

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

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

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

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

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

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

    WSJ: What was happening at the online store?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

  • Source: Wall Street Journal
  • bigbox

    Big box update

    Bunnings responds to restrictions in Victoria

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    Yeppoon store

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

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

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

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

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

    Mental health initiative from Bunnings

    Founding member of Corporate Mental Health Alliance Australia

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

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

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

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

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

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

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

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

    Non-profit alliance

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

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

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

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


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

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

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

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

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

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

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

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

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

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

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

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

    US retailer lessons from the pandemic

    Lowe's and Home Depot

    The top two US retailers have done very well in their second quarter, but will they retain the new customers?

    What lessons can Australian home improvement retailers glean from the recent experiences of the US home improvement industry?

    There have been both strong contrasts and strong resonances between the two national industries during this pandemic year of 2020. What is different is that many areas in the US have been directly affected by the pandemic, with more than 210,000 dying nationwide. In Australia the main effect has come from severe restrictions, aimed at preventing a similar ratio of deaths.

    What is very similar, however, is the strong performance of the DIY retail segment, though the US retailers also report a surge in "pro" (tradie) sales as well.

    That increase has given rise to the key question the industry faces in both nations: will this surge in sales prove to be a pull-forward of regular annual sales? Or does it represent real, incremental growth, as the pandemic makes customers reconsider the role of their dwellings in their lives?

    Speaking to Australian retailers, from Bunnings all the way down to smaller independents, the overall sense is that what we're experiencing is more of a pull-forward than an incremental change. They expect some increase in sales, but they also expect to see a moderation in some of the seasonal summer activities. When Bunnings managing director, Michael Schneider was pressed on this issue during the company's recent full-year results announcement, he noted that paint had been selling well in May, but that people tend not to paint their houses twice in rapid succession.

    The view from the US is, however, notably different. The top executives at both the Home Depot and Lowe's Companies see signs of what is almost a generational shift. It's as though the pandemic has kickstarted the Millennial generation's interest in home DIY projects, as well as motivated a broad range of homeowners to make significant changes to their houses.

    The results

    In looking at the US experience, we have the benefit of both the results for the second quarter (roughly from May to July) for both Lowe's Companies and the Home Depot, as well as a conversation each company recorded at a Goldman Sachs Retail Conference in early September 2020.

    Looked at in overview, the two companies are in quite different situations. Lowe's is in a turnaround situation with Marvin Ellison brought in as CEO in May 2018. The situation he inherited included some fraught personnel problems (including the disastrous investment in Woolworths' Masters Home Improvement), and a company that tended to publicly pursue far-fetched technologies (store robots, etc) while not getting the basics of near-field technologies to work, including its ecommerce website which failed under high demand loads.

    But, certainly, Mr Ellison is viewed as being motivated. A long-time executive at rival Home Depot, he left after being passed over for the top job there, moving to JC Penney, the struggling US mid-low range department store.

    The Home Depot, on the other hand, has made all the right investments in ecommerce and technology, but somehow has not always managed to take best advantage of them. It has performed better than Lowe's overall, but has yet to establish a significant lead. Alongside the well-established CEO Craig Menear, Home Depot has recently moved Ted Decker up to the position of chief operating officer (COO).

    Lowe's Companies

    Lowe's had a truly outstanding Q2. The company reported USD27.3 billion in sales, an increase of 30.1% over the previous corresponding period (pcp) which was Q2 of 2019. US comp (store-on-store) sales were up 35.1%. In terms of ticket (basket) sales, the USD50 to USD500 range grew by 43.5%, while sales over USD500 and under USD50 both grew by over 20%. Growth in online sales was particularly strong, at 135%, reaching 8% of total revenues.

    According to the company's executive vice president for merchandising, Bill Boltz:

    We delivered strong growth across all merchandising departments. In fact, all 15 merchandising departments generated positive comps exceeding 20%. As customers continue to spend more time at home this quarter, we saw an acceleration in both indoor and outdoor project activity, including core repair and maintenance, along with projects to repurpose home space for work and study, as well as discretionary indoor and outdoor projects to increase customers' enjoyment of their homes.

    Two new services that Lowe's has rolled are JobSIGHT and program to rent tools. JobSIGHT is a video streaming service that enables pro's to conduct virtual onsite visits with customers, enabling them to develop a quote without having to arrange a visit. The company sees tool rental as not only useful to pro's, but also offering the potential of a higher return on capital.

    The Home Depot

    While Home Depot did not reach quite the percentage growth of Lowe's, it did report some outstanding numbers. Sales reached USD38.1 billion, with comps up by 23.4%, and US-only comps up 25%. Digital sales grew by around 100%, with 60% of orders picked up in store by customers.

    According to Mr Decker, speaking at the results announcement:

    During the quarter, comp average ticket increased 10.1 percent, and comp transactions increased 12.3 percent. The growth in our comp average ticket was driven by both an increase in basket size, as well as customers trading up to new and innovative items.
    During the second quarter, big-ticket comp transactions, or those over USD1,000, were up approximately 16 percent. We saw very strong performance across a number of big-ticket categories like appliances, riding lawn mowers, and patio furniture; however, this strength was partially offset by softer performance in certain indoor, installation-heavy categories like special-order kitchens and countertops.
    We saw strong sales growth with both our Pro and DIY customers, with DIY sales growing faster than Pro sales. Sales to our Pro customers accelerated meaningfully compared to the first quarter, and grew double-digits compared to the second quarter of last year. Looking deeper into our Pro sales, we saw notable strength with our smaller Pro customer. As markets continue to reopen, we see increasing demand from all our Pro customer cohorts.

    Company commentary

    The well-known Goldman Sachs hardlines retail analyst Kate McShane played host to the executives from both US companies during a virtual retail conference on 10 September 2020.

    Lowe's Companies

    Describing the situation when he first came to Lowe's, Mr Ellison said:

    When we arrived [in 2018], Dave Denton [chief financial officer] and I, along with other members of management, it was very obvious that fundamental things that really world class retailers do very well were absent here. You know, things like an efficient supply chain, a robust and dynamic e-commerce platform, having good operational mechanisms to manage labour effectively based on a rate of sale, having efficiency around how we operate to drive productivity.

    One of the key changes Mr Ellison brought in was to modernise Lowe's online platform, and that proved to be strong growth driver during the first half of 2020. This has encouraged the company to invest more in omni-channel sooner than initially planned, according to Mr Denton:

    So as we think about the next several years, we're pulling forward some of those investments, getting them done more rapidly so that we can come out of this pandemic [with] a better company having better service levels and actually working to capture additional market share in the future.

    Asked about the key question, whether DIY spending would prove "sticky" for 2021, or if it was more circumstantial to the pandemic, Mr Ellison responded:

    Well, [that spending] remains high. And you don't have to take an overly sophisticated analysis to understand why. I mean, most of us are spending more time in our homes than we probably ever have. And so as you spend more time at home, as a do it yourself customer, you're going to find projects that you are going to invest in to make your home more functional. If you just take a snapshot of the normal American household right now, you have individuals finding ways to repurpose their home. They have to create a workspace because many people are fortunate enough to work from home. They have to create space for their kids in many cases to go to school from home. So they're repurposing space for that.

    One pointer towards the spending being maintained, Mr Denton suggested, was the change in the overall pattern of expenditure:

    The only other thing I'd add to this is it's not so much the home environment, but if you look at discretionary spending and you look at what's happened, there's been a reallocation of the discretionary spending [that] used to go to restaurants, entertainment, maybe travel. Now for households, the opportunity to do that is limited. So you're seeing a pivot, if you will, to moving discretionary spending more into the home.

    One area where Lowe's sees continued growth is in gardening, and particularly cordless outdoor power equipment (OPE). Mr Ellison made much of the exclusive deal that Lowe's has closed with cordless OPE company EGO:

    We just announced that we're going to have the number one brand in outdoor power equipment in battery operated. EGO will be exclusive to Lowe's starting in December. We're extremely excited about that because it's going to give us the ability to have in our assortment the number one brand in battery operated push-mowers, riding lawnmowers and all outdoor power equipment exclusive to us.

    One of the very interesting outcomes for Lowe's has been that the pandemic has reduced both the desire and the need for promotional activities, helping it to change up its pricing model, as Mr Denton explains:

    The environment has enabled us to pull back a little bit from a promotional cadence perspective. Our plan historically was always to move more to an EDLP [everyday low price] platform. The current environment has allowed us to accelerate that movement. So I think we're never going to get back to this high-low environment again. We clearly want to be relevant and be promotional in certain holidays and events. So we're not going to back off completely. But I do think the level of promotions and the quantity of promotions will be modest compared to what it was last year.

    The Home Depot

    One of the points that Mr Menear made was just how difficult it was to gear up a supply chain to account for an additional USD9 billion of growth over the first half of 2020. That was particularly the case with the company's online business, causing it to repurpose some of its distribution assets, he told Ms McShane:

    I think when you think about the tremendous growth in the digital space, having the flexibility to be able to adjust to handle that kind of volume, particularly the volume that we've seeing not only through the stores with BOPIS (buy online, pickup in store), but direct to customer, having the flexibility to adjust and deal with that volume was pretty important as well.
    We did that by shifting a fulfilment centre that we had opened in the Chicago area that was going to be a market delivery centre and in a matter a couple of weeks, we converted that temporarily to a direct fulfilment centre shipping product direct to customers from our dotcom business so that we could support the triple digit growth.

    Asked about the growth in DIY, and if this is sustainable, Mr Menear's answer was similar to that of Mr Ellison:

    I think I'd start with the pro customer is always an important customer at the Home Depot, but we never lose sight of the fact that we have a USD60 billion DIY business that has been pretty important to the company for its 41 year existence. And so we're excited about seeing the engagement of the DIY customer in our space. And, you know, over the years I've been asked a lot about what this ... looks like long term at the Home Depot with all this focus on the pro customer. And my answer to that always is that, today we have kind of a 55/45 DIY mix. And at the end of the day, if we end up with an 80/20 pro, we haven't really done our job because we want to grow the DIY business at the same time we're growing the pro business...
    So we're super excited to see the engagement from the DIY customer. I think that customer has spent a lot of time around their home. They see a lot of things that they want to do. And at the same time, there's more wear and tear in the home. Our customers tell us from surveys that home is never more important than it is today.

    Mr Decker followed up that answer by outlining how digital is changing the way the company sees the DIY customer:

    There's so many good things going on in our segment with the DIY customer engaging. You've heard us talk a lot about pro over the years and the things we're doing with pro customers. Craig just said DIY is the hallmark of the company and still [represents] the majority of sales. We need to keep that business growing. And the engagement we're seeing with DIY customers and with the engagement with interconnected and digital, it's allowing us to know that customer better than we have in the past.
    The DIY customer, had traditionally been sort of a "mass anonymous". But with the advent of interconnected and digital, we have a lot more signals now that we can start to know the consumer customer to a much greater extent ... As we build out abilities to track engagement, we like to see new customers, we like to see what customers talk about, are they shopping one aisle over, are they shopping two aisles over? Are they engaged in projects? How many items per basket per transaction are they purchasing with Home Depot?

    The information Home Depot is able to track has convinced Mr Decker about one thing: the Millennial generation is on track to follow a similar pattern the Baby-Boomers when it comes to DIY - albeit at a comparatively older age.

    As you can imagine, as people start to engage with more capabilities, as they start to shop one and two aisles over, as they start to gain the same confidence of the newer DIYer, [we see] the millennials launched on their journey. We're starting to see that same behaviour as the baby boomer back 30 and 40 years ago. And as they engage their spend and share of wallet goes up with the Home Depot.

    Later, when asked whether the changing demographic patterns in the US, particularly urban vs suburban was having a material effect on Home Depot's strategy, Mr Menear picked up this theme related to the Millennials.

    You know, it's interesting because there's a lot of talk and a lot of dynamics, and it takes me back to 2015 and earlier when there was a lot of conversation around the fact that, you know, the whole Millennial generation, everybody is going to move to inner cities and the Millennials are never going to own anything, they were only going to rent. They would never have a car. They would never have a tool. You know, that's what we heard through all of this. And our deep research in 2015, indicated that that none of that was actually factual based on the research that we had with the millennial generation, and that they would, in fact, act the same way other generations had. It was just a delayed cycle.
    And we're actually seeing that play out, by the way. So as the Millennial generation got married, kids come along, you need more space, they moved from the city centre to a more suburban environment.

    Home Depot has long been known for its approach to innovation, and both Mr Menear and Mr Decker helped to spell out what that means in the current era. Mr Menear boiled down what the core purpose of innovation needed to be for the retailer:

    So when you think about innovation and what the merchants are focused on at Home Depot, it is: how do you bring product to market that makes it easier for the consumer to be able to do a project? And/or how do you bring product to market that allows the pro to be more efficient and gives them confidence and no call backs? And that innovation is hugely important in the business.

    Following on from Mr Menear, the statement that Mr Decker made about innovation was seeming simple, but very interesting:

    So in product, authority is what we stand for in merchandising at Home Depot. Innovation is the hallmark of that.

    Mr Decker went on to describe the new innovations coming in areas such as cordless OPE, and then - in that half-embarrassed way familiar to everyone in hardware - described one of the exciting innovations that had come to Home Depot in grout.

    We just - I mean, something you might not get that excited about, but we do at Home Depot. We just reset our entire grout bay, and we have an exclusive relationship with Custom Building Products, which has by far the largest share in the category. And they've just come up with an incredible array of floor levellers, large format tile, quick adhesion, grouts that are ANCI approved for dust emissions, which is required for nursing homes and hospitals, premixed grout for either a quick job for a DIYer or making a job easier for a pro. We have colour consistency, all the great values. So we just finished resetting our entire grout in the tile set material bay over the last several weeks. The performance is incredible.

    One of the most interesting comments that Mr Menear had to make, however, was about the independent hardware retailers in the US.

    We've shared in the past that when you aggregate up independents in pretty much any category that we play in, they own the lion's share of the market. And so that's always an opportunity and part of what we're investing in to create this interconnected experience, hopefully will give us an edge to be able to gain share and grow faster than the market.
    Second comment that I'd have is, look, when you when you look at independents and independents that came through in the 2008, 2009, 2010. Right. Those are really good business operators, people that survive that environment, people that will survive this Covid environment are really good operators that have to gain a lot of respect for. And so there's always going to be independents and competition. But we're investing to position the Home Depot to grow faster than the market in any environment that we get thrown into, whether it's good or whether it's bad. And that's really what we're trying to get done.

    Asked about promotional events, the Home Depot executives agreed with what the Lowe's executives had said in terms of promotions. But Mr Decker added a further comment, about the responsibilities of the retailer during the pandemic:

    The other thing we're doing is we're expanding the timeframe. So you think of a Black Friday, while we're not as big a Black Friday player as some other retailers, we've built up quite an amount of business and foot traffic and excitement around Black Friday. We'll try to limit that single day focus, and you'll see us having that product in those values over a much longer period of time.
    There'll be a few things that we do on Black Friday, but things like you having to come to the store during this specific period of time, with very short quantities. We just think today that that might not be as responsible from a safety perspective as it could be.
    So we'll still have events. We'll still have great innovative product. We'll still have great values. They'll just be shown over a longer period of time. And be an opportunity to really leverage our interconnected experience. So all these are available online as well for ship to home or buy online and pick up in store. So we'll have events just slightly different going forward.

    Another very interesting bit of real retail wisdom was offered by Mr Menear when he was asked about the retailer's plans for the holiday (Christmas and Hanukkah) season.

    One of the learnings we've had over the years from storm situations - in the earlier days, we used to think about a storm hitting a particular area that we would go in and extract holiday decor from those markets, thinking that for those customers that's not where their mindset was going to be. And what we learned over the years is actually where they're headed is they want some form of normalcy in their life. And so they actually focus in that area.
    So we didn't really pull back our thought process around the events in Q4 as it relates to holiday, because we suspected that the customer would react in the same way that they do in a storm situation and that they'd want that kind of normalcy overall.

    Asked about how Home Depot continued to improve its offer for the pro market, Mr Decker mentioned the move the company is making into deliveries from flatbed trucks.

    We're really excited about the capabilities that we are building out around delivery for our pro customer and particularly in the flatbed network that will allow us to deliver big and bulky type products for them.
    That will also take pressure off of our stores. If you walked our stores any morning at six o'clock, you'd see lots of deliveries lined up in the aisles of the store, which isn't great for the pros that are actually shopping in those aisles during that morning. The flatbed delivery network that we're building out will give us the capability to remove that pressure from the stores to be much more efficient and be able to open up capacity for delivery and begin to narrow down windows to get to specific time slots for our pros. That's the work that we're doing over time. So we're super excited about that. We've got a couple of these facilities up and running and there will be more coming towards the latter part of this year. Plus expansion in the next year.


    Overall, the attitude of the two biggest home improvement retailers in the US is broadly similar: they remain hopeful that the upsurge in DIY sales will prove to be something of a structural change, and they see their pro businesses hopefully continuing to thrive.

    However, neither retailer is counting on DIY sales as their sole source of growth. Both realise that they need to improve certain fundamentals, and both see opportunities in introducing new products and services, and, most importantly, better embracing digital opportunities.

    Yet, as good as their plans are, one has to wonder if they are good enough. Looming in the background of these results are those for Amazon in the same quarter: A sales increase of nearly 50%, and revenue of USD90 billion for the quarter, more than the two companies combined.

    While it is tempting to see this in terms of digital versus physical stores, it's possible there is a more serious pattern at work here. The level of innovation in home improvement, by current standards, is good, but it's really not great. To get where it is today, Amazon had to do more than just make the best use of available innovations on the market, it had to go out and innovate itself.

    Take, for example, the Kindle book reader. Amazon couldn't wait for another company to develop that reader for two, interconnected reasons. The first was that the problem with book readers wasn't really the hardware that reads books, it was the software, the actual books themselves, which Amazon was uniquely positioned to provide.

    The second was that no one was going to innovate a book reader for Amazon. That is because its business model called for the reader, at least the most basic model, to be as cheap as possible, with next to no margin.

    The same thing held true - only more so - for Amazon's range of Echo personal assistant devices. The real value of those to Amazon wasn't the device itself, but the way in which it further integrated the user into Amazon's shopping systems.

    In a different form we've seen the same thing take place at Microsoft. Pretty much the last thing Microsoft wanted to do was to get into making actual laptops, tablets and desktop computers. Yet it had to, because, for a time, laptop manufacturers had ceased to be competitive with Apple.

    What has happened in each of these cases is that one part of the manufacturer-to-consumer supply chain begins to capture way more of the real value of a product than any of the other participants.

    There is a real danger that hardware-home improvement retail, especially where larger retailers are dominant, is heading in that direction. This applies especially to the DIY part of the business. There has been some innovation at the trade end of the business, but innovation in DIY has slowed dramatically over the past decade. Retailers have become more powerful than manufacturers in that area and they always demand the same things: low prices, good margins, and familiar tools that are easy to sell to familiar customers.

    The truth likely is that the burst of DIY activity is, for the moment, neither a temporary phenomenon or a structural change. It's really going to depend on what retailers offer DIYers, and if it is not really innovative and engaging, then this opportunity well end up being squandered - until Amazon or another tech company gets serious about the category.