Big box update

Bunnings Caboolture expected to open at the start of 2023

The new store, valued at $32 million is expected to create more than 100 jobs and will include the main warehouse, outdoor nursery, timber trade sales area, cafe and playground

The Bunnings Caboolture outlet will span more than 13,000sqm and have parking for over 400 cars.

Regional operations manager Margaret Walford said the new Bunnings would provide greater convenience to local residents living in the growing area of Caboolture and surrounding suburbs, and complement existing stores located in the Moreton Bay Council area. She told the Caboolture Shire Herald:

The opening will be celebrated with a range of events and in store activities...

Some delays were experienced due to COVID-19 related challenges and wet weather, but the store development will be completed not long after the previously announced time frame. Initially, the store was planned to open in the second half of 2022.

The new Bunnings forms part of the $80 million retail precinct at the Big Fish business park, on Pumicestone Road. A Caltex service station and McDonald's were built at the 15ha site in 2018 and 2020.

Plans for a shopping centre, which will be anchored by Coles and Chemist Warehouse and a Red Rooster have also been approved. Further plans for a PetStock retail centre and veterinary service were also lodged with Moreton Bay Regional Council in August 2021.

The huge retail centre will service not only the growing Caboolture region but also the future residents of Caboolture West - a satellite city set to be home to close to 70,000 people within the next 40 years.

Related

Bunnings store in Caboolture (QLD) - HNN Flash #62, September 2021
  • Source: Caboolture Shire Herald
  • bigbox

    Europe update: Kingfisher

    Sales boost from COVID-19 lockdowns could be over

    However, the energy crisis in the UK has pushed up demand for insulation products such as loft insulation

    B&Q and Screwfix owner Kingfisher has reported a significant drop in profits as it battled higher prices for raw materials such as metal and plastic and energy, as well as ongoing global supply chain disruption caused by higher demand, congestion at ports and the impact of COVID lockdowns. As a result, sales have slowed following the pandemic DIY boom.

    Pre-tax profits at the FTSE 100-listed company which also owns Castorama and Brico Depot in France, fell to GBP474 million in the six-month period to 31 July, an almost 30% decrease compared with GBP669 million a year ago.

    The DIY giant brought in GBP6.8 billion in like-for-like sales in the six months to July 31, a 4.1% fall from the GBP7.1 billion reported in the same period last year, but in line with analysts' expectations.

    Kingfisher had a very strong first half last year because DIY stores were allowed to stay open during COVID-19 lockdowns, and the move to home working prompted many people to make DIY improvements to their homes and gardens.

    This appears to be over, and Kingfisher chief executive, Thierry Garnier, warned of "a more challenging environment" as a recession looms and household budgets are hit by soaring energy and food bills. In The Guardian Australia, he said:

    The cost of living [crisis] probably is worse in the UK [than France]. The French government very early on decided to cap energy prices ... We are really welcoming the decision of the new [UK] prime minister [Liz Truss] in this area.

    At the same time, the company is benefiting from soaring demand for home insulation because customers had been keen to buy energy efficiency products. Mr Garnier said insulation sales were up 110% over the first three weeks in September compared to 2019, and are 82% higher year on year. Overall, across the group, insulation sales are up 70% from 2019, and 32% higher than a year earlier.

    Kingfisher said it has seen a shift back to DIFM - Do it For Me with household jobs outsourced to professionals - now the pandemic has mostly past.

    In the Evening Standard, Mr Garnier said sales were 16.6% ahead of pre-pandemic levels in the first half of the year.

    He said Kingfisher was back to "pre-pandemic levels for in-store product availability", after supply chain problems led to gaps on shelves, and there was good demand for outdoor and big ticket items such as kitchens and bathrooms. Mr Garnier added there were no signs of customers "trading down" to cheaper ranges.

    Kingfisher also warned that it expects inflation pressures to persist in the second half of the year even though raw material prices have dropped from recent highs and freight costs have slowed since January. This is because of the time lag between ordering more expensive products and subsequently selling them, the group said.

    Mr Garnier said Prime Minister Truss' first priority should be to support people faced with soaring energy bills, especially those on lower incomes, but he also stressed the importance of long term measures to improve homes' insulation and energy efficiency.

    The houses in this country are relatively poorly insulated. We need government decisions in this area.

    Kingfisher has sent a number of recommendations to the UK government such as reducing stamp duty for homebuyers who undertake energy efficiency work.

    Online sales

    B&Q's new online marketplace is performing ahead of expectations, with sales from partner brands representing 8% of its online sales in August, said Kingfisher.

    The move to enable partner brands to sell via the marketplace resulted in 100,000 product lines SKUs being added by about 200 partners in a month. The group now plans to launch additional marketplaces in France, Poland and in its Iberia market.

    Ecommerce group sales were 19% lower than a year earlier - but 156% ahead of the same period in pre-pandemic 2019. Some 16% of sales took place online - down from 19% last year, but ahead of 7% in 2019. Digitally-enabled sales accounted for 24% of sales. That's down from 26% a year earlier and up from 20% three years earlier. Kingfisher said in its half-year statement:

    Approximately a quarter of group sales are from ecommerce channels and online orders placed in-store, delivered through click and collect or to customer homes. We expect digitally-enabled sales to continue to grow over time, in line with the continued evolution of both customer behaviours and our in-store technologies and solutions.

    Click and collect remains the most popular online fulfilment channel - although sales via the channel were 22% down on last year but 195% ahead of pre-pandemic levels. Home delivery sales fell by 11% year-on-year - and rose by 97% on three years earlier.

    During the half-year, Kingfisher said it invested in faster fulfilment and in expanding product choice. To that end, it expanded its store-picking model to enable faster click and collect and last-mile delivery, managed orders through digital hubs - now present in 54 B&Q stores - to make home deliveries from store. It also rolled out click and collect lockers in Poland which are now being tested at B&Q in the UK, and expanded one-hour delivery in the UK through Screwfix Sprint to more than 300 shops, covering 45% of UK postcodes. The average delivery time is now 45 minutes, and its fastest delivery has been eight minutes.

    It has added mobile Scan & Go into the B&Q app, expanded its self-checkout terminals and offered a wider range of 3D design capabilities.

    Related

    Kingfisher provides a trading update.

    Kingfisher said demand for DIY remains resilient - HNN Flash #96, June 2022

    B&Q expands its e-commerce platform.

    B&Q's online marketplace - HNN Flash #86, March 2022

    Kingfisher saw continued growth in most segments during 2021.

    Growth at Kingfisher in the future will rely more on trade sales - HNN Flash #87, March 2022
    bigbox

    Lowe's and Home Depot at retailing conference

    The Goldman Sachs 29th Annual Global Retailing Conference

    The big question every home improvement retailer has is how the pandemic boom will change in 2023. Both Home Depot and Lowe's are optimistic, but both also see the need for ongoing change to retain market share and enhance margins.

    US investment firm Goldman Sachs held its 29th Annual Global Retailing Conference in early September 2022. This was attended separately by the CEOs of both The Home Depot and Lowe's Companies, who answered questions posed by the event's host, Kate McShane.

    The Home Depot

    Ms McShane started off the questions for Home Depot CEO Ted Decker and Jeff Kinnaird, the company's executive vice president of merchandising, by asking whether home improvement hadn't exhausted the market through the pandemic years.

    Mr Kinnaird outlined how he has seen consumer projects progress in recent years:

    In the early stages of the pandemic, I think everyone painted - we probably all painted something at some point in the early stages. That shifted to this investment cycle in the backyard and the entertaining in the backyard and we saw that in categories like grills and patio and landscaping and patio heaters and other categories that were about that backyard and about that backyard experience.
    That investment we still see a significant investment there. Past that, we are seeing this project-related investment ... this investment in finishing a basement and finishing a bathroom and repairing [an] issue in a home, replacing sinks and faucets and things that are seeing more wear and tear [as] the consumer spends more time at home. So we do see a transition in the business. It's a healthy transition.

    Mr Decker expanded on those comments by pointing out the evolution of home painting in the North American market:

    Paint is an interesting category in this dynamic ... As Jeff said, when the pandemic hit, everyone painted. The paint business and specifically the DIY - which we have pretty good visibility into if it's a Pro or DIY making the purchase. In the DIY, engagement in paint spiked in the early part of the pandemic and that reversed what has been a very long trend of painting ... It used to be a lot more, at least in our channel, used to be a lot more DIY and less Pro, but over decades now, the DIY share of actually painting has been coming down and the Pro has been going up, because most of us now hire someone to do the painting. That reversed in the first phase of the pandemic as DIYers were home, I'll paint. Now the Pro is re-emerging.

    Asked about how supply chain in changing for Home Depot, Mr Decker spoke about the evolution of three different types of facilities the company is building out:

    One is for big and bulky goods, which we call our flatbed distribution centres. And the great thing about those centres is, we always have had building material distribution centres for replenishment to the stores. And what we do is we move those into newer, larger, more optimised facilities and you can also deliver to job sites from those facilities.
    So you leverage huge inventory quantities that can replenish a store or go to the job site. Those are, I don't know, halfway built out at this point. That's where we are getting a lot of Pro share growth as we are now able to deliver the quantities and materials on time and complete to the job site.
    The second type facility that we are building, calling a direct fulfilment centre, these are both traditional pick, pack and ship e-commerce facilities, which, again, as we've started to build these out, we are about halfway built on these has been supportive of our e-com business. We've doubled our e-com business in the last two years, grew again 12% in the second quarter on top of that doubling.
    The third set of assets are what we call our market delivery operations and these are flow facilities for big and bulky product. So the big and bulky product will leave the FDC, flow to the MDO. Think of this as the last mile then when it goes on a box truck and has a dense route to either job sites or homeowners and the foundation of that flow is our appliance business.

    Mr Kinnaird added a comment about how these facilities were not just about throwing products on a truck.

    And just going back to the flatbed deliver centre as an example, our Pros are, in many cases, demanding deliveries from those facilities. It is not as easy as just putting a product on a truck and shipping it to a Pro. If there is a process of building an order, it's how it's packaged how it's positioned for that Pro. You can make a Pro's life much more productive just how you stack goods together. So, we have Pros demanding that delivery and that's creating a lot of energy around that opportunity.

    Asked about what Home Depot was doing to improve margins overall, the response was that increasing ticket size (order total cost) was important. Mr Kinnaird sees innovation as being an essential part of that.

    I'd also say that part of that ticket is innovation and we continue to see an enormous amount of innovation across our business and that's virtually almost every category. I mean, it's great to see that we've got many longstanding partnerships. It's great to see throughout the pandemic the innovation pipeline didn't slow down, and our merchants have worked alongside of our partners to build an opportunity to think of the continued electrification of tools.
    You think, there is dynamics changing there. I think we used the example earlier, the new Milwaukee M18 framing nailer is now the one tool you buy with the battery platform. Previously, you'd buy a nailer compressor, a cord, fittings and all the pieces that go with that process and today, it's a pneumatic nailer with this electrified nailer. That's changed the market.

    Lowe's Companies

    The CEO of Lowe's, Marvin Ellison, began by fielding questions about how Lowe's saw the overall market developing. He pointed to ongoing demand being driven by macro areas, such as the age of houses in North America.

    Roughly 50% of the homes in the US over 40 years old, and that's probably the largest number since World War II. And we are seeing a cycle where the big home building phase that took place in the early 2000s, those homes are now turning 20 years old, which means you are getting ready to hit a whole different investment cycle.
    And even though the work-from-home phenomenon is subsiding somewhat in certain sectors, I don't think any of us believe they will ever get back to pre-pandemic levels of people working in the office and not using their existing residence for home offices.

    Mr Ellison was also upfront about some of the mistakes that Lowe's has made over the years.

    One of the biggest mistakes that Lowe's made is that everything we did was store centric, everything we shipped, every system and every type of technology because we desired to serve the customers from our stores first. But when the customers decided that they wanted curbside and they wanted lockers and they wanted to bottom line, pick it up in store, we had to pivot. And at the time, we didn't know how to do it. And so now we've created a flexible agile model that we can easily or more easily pivot to the needs of the customer.

    Mr Ellison also pointed to some of the mistakes Lowe's made with its Pro (tradie) market. One of the advantages that Home Depot has over Lowe's is a market split 50/50 between Pro/DIY, while Lowe's is more 25/75.

    But then the question is, how do you serve the Pro? And so we're creating a fulfillment network of different nodes, including market delivery that will enable us to deliver products directly to the job site for the Pro.
    And over the course of the past 15 years, Lowe's exited a lot of the national brands that Pros really, really migrate to. Pros are extremely brand loyal and a lot of those brands had left for a variety of reasons and we've been bringing those brands back and now getting price right.

    One of the strengths of Lowe's has been its embrace of innovation in products, and the company sees this as an ongoing strength.

    And for DIY homeowners, we are trying to make projects easier by upgrading our digital experience with them on Lowes.com, investing in a broader set of direct-to-home fulfilment capabilities and enhancing all of our product assortments with new innovative easy-to-use products.
    ...
    We noted on our earnings call that one of our best selling outdoor power equipment SKUs was an EGO battery operated mower that reach out over USD700. We could barely keep it in-stock. And so what that means is that customers have a different definition of value. Value is not always just focus on price. It is focused on many other elements and we believe that if we stay closely engaged with our customers, we will always find the right level of elasticity from a pricing standpoint and we've done a really nice job so far this year.
    bigbox

    Big box update

    New Bunnings Ulladulla store plans in progress

    Bunnings Hoppers Crossing, one of the largest stores in the network, has been sold for $100 million: report

    Planning for the new Bunnings outlet in Ulladulla (NSW) is ongoing. Bunnings regional operations manager, Robyn Hudson, said the company is still working on the development with a number of agencies. She told the Ulladulla Times:

    Bunnings was pleased to receive development approval for a new store in Ulladulla earlier this year. At this stage, we don't have any firm timings on when construction will commence.
    We continue to work with Shoalhaven City Council and Transport for New South Wales and we look forward to keeping the local community updated with progress once we know more.

    The proposed Bunnings Warehouse will be located between 189 to 197 Princes Highway, Ulladulla and represents an investment of more than $16 million.

    The new Bunnings warehouse will include the main warehouse, outdoor nursery, timber trade sales area, playground and will span more than 11,000sqm, with carparking for over 180 cars. It is also expected to create more than 80 additional jobs for local residents.

    The current Bunnings Ulladulla is located at 131 St Vincent Street and the hardware retailer does not own the existing site.

    Related

    Decision on a new Bunnings store in Ulladulla (NSW) has been deferred - HNN Flash #84, March 2022

    Bunnings Hoppers Crossing

    The 21,670sqm Bunnings Warehouse in Hoppers Crossing (VIC) together with an Amart Furniture store was sold to ESCB Holdings, a company owned by Guirong Zhang, reports The Age.

    Beau Coulter, who negotiated the sale with colleagues Billy Holderhead, Yosh Mendis and Zomart, did not comment on or disclose the final sale price. However it was listed with expectations of around $100 million.

    Mr Coulter said recent interest rate rises were not dampening investors' interest in large format assets. He told The Age:

    People are looking for properties with long weighted average lease expiry (WALE). Money is moving out of the stock market and residential property, which has seen changes to tenancy laws.

    The properties return a combined annual income of $4,284,186, which would suggest a sharp yield under 5% for the transaction.

  • Sources: Ulladulla Times and The Age
  • bigbox

    Coroner reports on Bunnings-related death

    Fight with Bunnings LPOs has tragic consequences

    Anthony Georgiou passed away hours after loss prevention officers (LPOs) scuffled with the 31-year-old ex-brickie outside Bunnings Frankston in September 2016. Death was due to a medical condition combined with drug use, but the fight probably contributed to his demise, a report by the coroner found.

    The video footage, available through news.com.au, is highly confronting. Two men crouch on either side of another man held prone on the ground.

    Footage shows Anthony Georgiou pinned down, struggling to breathe, hours before death

    Both the prone man's arms are held behind his back, one by each of the other men, as he screams, "I can't breathe! Help! I can't breathe!"

    That took place around 11:00am on a Monday morning, 12 September 2016. (We note that this was three and a half years before the murder of George Floyd by police in the US, which renewed the efforts of the Black Lives Matter movement.) The location of the event was the Bunnings Warehouse store in Frankston, Victoria.

    The man being restrained was Anthony James Georgiou (friends called him "AJ"), a 31-year-old former bricklayer. The two men who restrained him were Abdul Brenzai and George Oyee. They were employed through an outside contractor as "covert operatives" to prevent loss through store theft in that Bunnings store.

    Police arrived at 11:12am. Mr Georgiou reported being "sore all over" his body, and the police called for an ambulance. Some 33 minutes later, at 11:45, Mr Georgiou was being triaged at Frankston hospital. The police spoke to him at 3:30pm that day. He died later in the day, though the exact time of death is not recorded in the coroner's report.

    The causative event behind Mr Georgiou's detention right before his death? Mr Brenzai and Mr Oyee believed Mr Georgiou had attempted to steal a saw blade.

    Obviously, that's not an outcome anyone wanted, including Mr Brenzai and Mr Oyee - as well as Bunnings itself. The medical forensics indicated what a specialist forensic pathologist called a "perfect storm" of medical conditions contributing to the death of Mr Georgiou. However this was paralleled - according to the coroner's report - by a process that seems to have nearly negated the series of safeguards Bunnings had attempted to put in place on the behaviour of its "covert operatives".

    For those of us who spent some time during Melbourne's initial long COVID-19 lockdowns watching the public state inquiry into the failures of the quarantine system, all this has a familiar echo. The Victorian Department of Health employed security guards to manage quarantine, as Victoria police refused participation. The result was undisciplined chaos. Who can forget, for example, the security guard who was placed in quarantine after exposure, got bored, and took up a job delivering takeaway food to households during his isolation period? As a workforce, they were utterly unsuited to their task.

    In a somewhat similar outcome, the coroner did not see any of the matters discussed below as being directly contributive to the highly unfortunate and very sad death of Mr Georgiou. Perhaps the most essential of his statements is this:

    Mr Brenzai and Mr Oyee gave evidence that they acted in self-defence. On the basis of the material before me I am unable to gainsay these assertions.

    That said, HNN still thinks it is worth pursuing this matter at some length. The reason for this is that there is an ongoing dispute, argument and, hopefully, discussion about hardware retail and the form it should take.

    Independent hardware retailers believe that to operate this form of retail successfully requires a depth of knowledge that exceeds that of other forms of retail. There is just too much at stake to do otherwise.

    Bunnings and other corporates tend to disagree. They believe that codes of practice, training, safe systems and good management can work just as well.

    There is much to be said on both sides, but HNN would suggest that the set of events surrounding the death of Mr Georgiou really does illustrate the limits to the Bunnings-style model. That's not because Bunnings was careless, or ill-prepared for what happened. On the contrary, the big-box retailer had Codes of Conduct and a training day for the employees engaged in "covert operations" around loss control.

    The most important thing the coroner has to say is that he is not convinced that even if Mr Brenzai and Mr Oyee had signed the Code of Conduct, attended the training day, and understood what was required in terms of avoiding physical engagement, that this would have made much difference.

    The reality is that probably Mr Brenzai and Mr Oyee should never have been put in the position they were in, not just as loss prevention staff, but also operating covertly. What was needed wasn't a set of guidelines, it was experience, and a real "feel" for the retail environment.

    Basically, if you actually have to tell a staff member "don't get into a brawl with a customer under any circumstances", then you've already made a mistake. Nobody in independent retail has a rule book that begins with Rule No. 1 "Don't punch the customers."

    The simple truth is that not everyone is cut out to work in retail, and that applies double to home improvement retail.

    The coroner's report

    Nearly six years after the event, the Victorian Coroners Court has released its findings. (That's not an uncommon delay for the Court, which has suffered a severe backlog for some time.)

    Coroner's Court findings (pdf)

    The end finding of that report is as follows:

    However, the coroner also acknowledges that there may be more to this death than a medical condition:

    66. Dr Brouwer's report sets out that medical cause of death and further explains the role of the struggle between Mr Georgiou and Messrs Brenzai and Oyee being at least a cause of the manifestation of the conditions which led to Mr Georgiou's death. That is, there seems little doubt that had Mr Georgiou not been involved in the struggle with Messrs Brenzai and Oyee he would have walked away from Bunnings that day.
    67. Submissions made on behalf of Bunnings support this conclusion.
    68. Such a conclusion is not a statement that anyone is, or may be guilty of a criminal offence, nor is it a determination of civil liability but it 'points up' the most significant issue in the Inquest - how the struggle involving Messrs Brenzai, Oyee and Mr Georgiou could have been avoided.

    That finding largely repeats the statement made by Dr H. Bouwer, a specialist forensic pathologist practising at the Victorian Institute of Forensic Medicine. In more detail, Dr Bouwer's report stated that the Mr Georgiou's death was triggered by electrolyte imbalance leading to rhabdomyolysis, which, as explained by Dr Bouwer, is:

    ...the break-down of cells which can occur after a violent, physical, activity or a struggle the effects of which can be complicated by methylamphetamines.

    Dr Bouwer explained that in the setting of physical exercise or strenuous activity the heart rate and blood pressure go up, adrenaline and noradrenaline are released causing stress on the heart. Methamphetamine increases the release of adrenaline and noradrenaline creating more stress and has a direct effect on the heart muscle.

    However, Dr Bouwer also left open the possibility that other injuries may have contributed to Mr Georgiou's death. In particular, he noted an unusual pattern of fractures in Mr Georgiou's thyroid area.

    Dr Bouwer described his examination of Mr Georgiou's body revealed bilateral superior thyroid horn fractures associated with haemorrhage, facial suffusion, bilateral conjunctival petechiae which he said is usually caused by pressure applied to the 'Adams Apple' area of the throat. Whilst Dr Brouwer was unable to describe how much pressure would have been necessary to cause the fractures to which he referred, he explained that in younger people, such as Mr Georgiou, the structures are more cartilaginous than in older people where they are more ossified and in younger people more pressure would be required to cause such fractures.
    Dr Bouwer commented that these injuries did not appear to be immediately fatal because the deceased spoke to police after Dr Bouwer thought that they occurred. Dr Bouwer gave evidence that if these injuries inhibited breathing, then they may have contributed to the cascade of events which resulted in Mr Georgiou's death. That is, a headlock, depending on how it was applied, may have caused the injuries, and if a headlock did cause the injuries and restricted Mr Georgiou's ability to breath, that this too may have contributed to the cascade that caused his death.

    This takes us to the description of the actual encounter between the "covert operatives" and Mr Georgiou. With the benefit of some CCTV footage (though the area where the scuffle occurred had only indirect coverage) the coroner was able to construct a step-by-step scenario. It goes like this:

  • The "covert operatives" say they observed Mr Georgiou remove the tag from a saw blade and place this in a pocket. He went to the register and paid for a number of other items, but was not seen to pay for the blade.
  • Mr Georgiou leaves the main store and enters the enclosed space outside the doors, where he stops for a drink of water.
  • The "covert operatives" approach him. They request that he return unpaid items and accompany them back into the store.
  • According to testimony by Mr Oyee, Mr Georgiou told them he didn't want to go back into the store, but agreed to give them the items he had in his pocket.
  • When the "covert operatives" insisted he return to the store, he told them to "F*** off", and started to force his way past them.
  • As Mr Georgiou pushed past them, Mr Oyee took a 25cm long gas cylinder from him. Meanwhile, Mr Brenzai ends up with his left arm wrapped around Mr Georgiou's neck, in what the coroner describes as a "head lock".
  • According to the coroner's interpretation of the CCTV: "A vigorous struggle ensues, and Mr Brenzai can be seen to punch and knee Mr Georgiou."
  • The struggle goes on from around 11:00am to 11:06am. The police arrive about 11:12am.
  • Testimony of the covert operatives

    Mr Brenzai and Mr Oyee were employed by security firm New Security Solutions (NSS), originally through a subcontracting arrangement with a man named Ali Haidar. In June 2016, the two men began working for NSS directly, an arrangement which was "formalised" in September 2016, but it's left less than clear exactly when that happened. Interestingly, when asked about his employment with Mr Haider by the coroner:

    Mr Brenzai said that he couldn't remember when he started work with or for Mr Haider or how Mr Haider paid him.

    It's perhaps helpful to add this rather short but pithy remark made by the coroner in the summation paragraphs of his report.

    Despite their best-efforts police have not been able to locate Mr Haidar.

    The three key points that were brought up by the coroner were: could Mr Oyee and Mr Brenzai have de-escalated the conflict; if they signed a copy of the Bunnings Covert Operative Instructions Code of Conduct and were therefore responsible for its content; and if they attended a training course held by Bunnings at its Melbourne head office for covert operatives on 19 August 2015.

    De-escalation

    When the coroner asked Mr Oyee why the two men didn't just step away from Mr Georgiou, Mr Oyee replied he didn't want to turn his back on the former brickie. The coroner pointed out that he could have stepped back without turning his back.

    Coroner: So, you could've stepped away from him while you were looking at him. Is that right?
    Mr Oyee: That's right. But the whole issue, your Honour, I wanted to prevent the product off him. I wanted to get the stuff off him.
    Coroner: Get the stuff off him?
    Mr Oyee: And wanted to take him up to upstairs to get the paperwork.
    Coroner: To get the paperwork?
    Mr Oyee: At the end of the week, you have to do the report to, ah, to NSS.

    In a slightly inchoate statement, Mr Brenzai declared that he did not simply let Mr Georgiou go because:

    We feared for our own safety with this gas bottle.

    This was despite Mr Oyee removing the gas bottle during the first minute of the attempted "arrest".

    Code of Conduct

    According to the coroner's report:

    Mr Oyee was shown the Bunnings Covert Operative Instructions Code of Conduct. Mr Oyee gave evidence that his signature was on the copy of this document at p.168 of the Inquest Brief but that he didn't remember signing any such document and that the document didn't look familiar to him.

    When shown a copy of the document, the testimony went like this:

    Coroner: And that's a document you signed? Is that right?
    Mr Oyee: Yes, Your Honour. I haven't directly signed.
    Coroner: I beg your pardon?
    Mr Oyee: I haven't directly signed.
    Coroner: Is that your signature?
    Mr Oyee: It looks like my signature, but I have a doubt.
    Coroner: I'm sorry, I don't understand?
    Mr Oyee: It doesn't look like my signature.

    It goes on like that.

    As the coroner sums up the exchange:

    Mr Oyee gave evidence that he had never seen the document at page 306 before and that it wasn't his signature at the bottom and that nobody from Bunnings had told him not to engage in arguments with a customer or physically restrain an offender except in self-defence.

    Mr Brenzai related a similar account, according to the coroner.

    46. Mr Brenzai was shown a document "Code of Conduct", attached to AM7, the same type of document that Mr Oyee was shown, this version of it ostensibly contained his, Mr Brenzai's signature. The Code of Conduct sets out Bunnings' expectations and instructions to 'convert operatives', that is 'plain clothes' security guards working at the stores looking for 'shoplifters' as Messrs Brenzai and Oyee were on 12 September 2016.
    47. Mr Brenzai gave evidence that the writing on the document was not his handwriting and that the signature was not his. He explained that points 1 - 4 of the document had been explained to him verbally by Mr Naffah, a then employee of New Security Solutions, his then employer although he could not remember when. Mr Brenzai gave evidence that he had never seen the "Code of Conduct" document at page 165 of the Inquest Brief, allegedly bearing his signature. Mr Brenzai gave evidence that nobody had given him any documents or instructions about how he was to perform his role other Mr Naffah explaining to him points 1 - 4.

    The importance of these signatures is laid out by the coroner, as he quotes these two key instructions from the document:

    7. Never attempt an apprehension unless I am 100% certain that the offender has stolen.
    8. Never engage in an argument of any kind with a customer or physically restrain an offender except in self-defence.

    The signatures were, of course, witnessed - but by Mr Haidar, who, as mentioned above, seems to have become somewhat unavailable. This meant the coroner could not make a final determination on these matters. As he reported:

    It is regrettable that Mr Haider could not be located - I can take this matter no further absent further evidence.

    However, in summing up his findings about this area, the coroner states:

    Even if the document had been signed by Messrs Brenzai and Oyee, and they had read Bunnings Covert Instructions I could not say with any degree of surety that what occurred, would not have. It is of course possible that having read those documents Messrs Brenzai and Oyee would have acted differently but on the basis of the evidence I cannot say with any confidence that this would certainly have been so.

    He goes on to comment:

    I am unable to be critical of Mr Brenzai or Mr Oyee for breaching the Bunnings Code of Conduct - and I am not. Their evidence is that they were simply not aware of it. As I have referred to above, even had they been, as the evidence currently stands, I am not clear that such knowledge would have made any difference to what happened.

    August training course

    While Bunnings might have held a training course for its "covert operatives" in August 2015, it seems this was not that memorable an event. Mr Brenzai has some recollection of attending something at Bunnings somewhere around that time, but he could not recall any of the content.

    When asked about whether he recalled attending any covert operative training conducted by Bunnings, Mr Brenzai said that he had attend a meeting in the Bunnings Head Office for which was late. He initially thought that he had attended after lunch although he could not precisely remember. He said that he thought that he attended this meeting while he was working for Mr Haidar and that he, Mr Brenzai was late - he didn't remember if he went back after lunch. He conceded that it may have been August 2015. Mr Brenzai was taken to the PowerPoint slides at pages 281-304 of the Inquest Brief and told that these were presented to students at the covert operative training in August 2015 and asked if the slides or their content were familiar to him. He responded that he didn't remember.

    Mr Oyee seems to have drawn a similar kind of blank regarding the Bunnings training, according to the coroner:

    Mr Oyee was also shown PowerPoint presentation slides said to have been used at a Bunnings training course conducted on 19 August 2015 for covert operatives in Bunnings Stores.
    Mr Oyee gave evidence that he could not remember if he had attended that training session and that the slides didn't look familiar to him. Mr Oyee gave evidence that he didn't recall going to any meetings of security staff or being provided any training at all by Bunnings.

    In the summation paragraphs, the coroner states:

    Mr MacDonald, the then National Investigations Security Manager for Bunnings gave evidence that Bunnings had no evidence that Mr Brenzai or Mr Oyee attended the training session on 19 August 2015.

    It's unclear whether attendance was taken, but the two "covert operatives" did not sign in, or if no efforts to record attendance were made.

    However, again, the coroner does not believe that attendance or non-attendance were determinative:

    There seems to be no controversy that Messrs Brenzai and Oyee didn't complete a full day's training on 19 August 2015. There is however insufficient evidence for me to conclude that if such training had occurred that Mr Georgiou would not have died as he did.

    Analysis

    Just about everyone in hardware retail - including suppliers - who reads this story is probably as much puzzled as horrified by these events. That is just not how you do loss prevention. Really.

    Why didn't the "covert operatives" simply calmly confront Mr Georgiou immediately after he made his other purchases, and say something like - pleasantly but firmly - "Mate, I reckon you might have forgotten to pay for the saw blade in your pocket, right?" That would have made the point, retrieved the allegedly stolen property, and burned up as few resources as possible.

    Or, later, after Mr Georgiou was confronted and offered to give the saw blade back, but refused to return to the store, why didn't Mr Brenzai and Mr Oyee simply accept that offer, and cut their losses? By all accounts, whatever his concealed ailments, he was, well, built like a brickie - a really big, solid guy. Plus, of course, he was under the influence of methylamphetamines. Most retailers know when they are dealing with a drug-addled customer.

    Every single independent retailer knows how to de-escalate and deal with that situation. You don't need to hurt anyone physically, when you can publicly shame or poke fun at the perpetrator. Often you just wait until the next time they visit the store - or try to.

    The odd thing is that HNN has been witness to just exactly this type of good judgement by Bunnings staff in the past. We've seen some young kid (probably a poor apprentice) get stopped on the way out of the Hawthorn Bunnings, and take to his heels, closely chased by a staff member - who was called back immediately by a manager.

    Afterwards, the manager and the staff member had a very quiet chat. The manager pointed out, very seriously, that the staff were under no circumstances to place themselves in that kind of danger, adding that they were also endangering the customer. As the manager said, very clearly, "It's never worth it".

    This also brings to mind, of course, the recent controversy about Bunnings using facial recognition over its CCTV systems to track loss prevention. As HNN wrote at the time, looking at the protections Bunnings has in place, these all seemed very reasonable, and almost a draft for future regulations. But are the assurances the company gives us about how it handles privacy going to result in better outcomes? Are they realised in place, or are they regulations that are seldom followed in a practical sense? The death of Mr Georgiou goes to how much confidence the public can place is guarantees issued by Bunnings.

    But beyond these abstractions, there is a single truth here. There is now an eight year-old Melbourne girl who has to grow up without AJ, her Dad. There's no way to ever make that really right.

    It would be good if everyone in our industry can just try to make sure this doesn't happen again. We can start by respecting expertise, training and experience, rather than just taking the cheap option.

    bigbox

    Big box update

    Bunnings Tempe superstore is greenlit

    Bunnings Group managing director Mike Schneider recently said in an interview there are still opportunities for growth, with a focus on the national roll-out of Tool Kit Depot

    The Sydney Eastern City Planning Panel has given the go-ahead for a huge Bunnings store to be built in the suburb of Tempe, on the Princes Highway in Sydney's inner west.

    It received approval with a local area traffic management plan (LATM) endorsed by the Inner West Council. However, the LATM was rejected and deferred by the same council's traffic committee due to a lack of traffic lights and a fear by residents that their narrow streets could turn into dangerous rat runs.

    Now the planning panel has given the all-clear for the megastore to begin construction with the LATM endorsed. According to the Inner West Courier, the determination stated:

    The panel is now satisfied that all relevant preconditions to consent have been satisfied and there is no reason that would warrant refusal of this modification application.
    The Local Traffic Committee had deferred or failed to decide on the (Inner West) Council's Officer's recommendation to approve the independent study and its recommendations, and both the applicant and the community should be able to expect certainty and timeliness in the planning system.

    The determination by the panel gives Bunnings permission to start construction. However some local community members said the outcome was "extremely disappointing". Local resident Jack Breen told the Inner West Courier:

    This is extremely disappointing news for the Tempe community. Bunnings has successfully used their bulldozer approach to push their way through the NSW planning system to get approval to start their build - opting for the quickest way, rather than the safest way.
    The one silver lining is that the need for a soft closure of Union Street from Smith Street has been agreed, although this is only addressing part of the challenges that remain about this problematic traffic plan for Bunnings Tempe.

    Bunnings welcomed the determination. Chief property officer Andrew Marks said:

    We welcome the Sydney Eastern City Planning Panel's decision to approve the LATM for the new Bunnings Tempe store, which we believe is the safest possible solution for local roads.
    Bunnings Tempe represents an investment in the community of approximately $100 million dollars and will create around 200 new jobs for locals.
    We look forward to being able to progress with the new Tempe store which will provide local residents with a wide range of home and lifestyle products, as well as ongoing local community support through hands-on projects, sausage sizzles and product donations.

    Related

    Decision pending on proposed Tempe store - HNN Flash #88, April 2022

    Tradie market

    Bunnings managing director, Michael Schneider has told the Australian Financial Review (AFR) it will soon open two "dark stores" on the east coast to service Tool Kit Depot (TKD) online orders, with the first stand-alone retail store to open before the end of the year in Queensland. WA already has six stores that are focusing on product categories in the landscape garden market.

    TKD is about landscaping power tools as a growth sector, expanding online before physical stores, and will include repair services. Mr Schneider said:

    The Tool Kit Depot business is helping us cater to more of the specialist trade customers. We're able to deliver even more choice including an expansive power garden range used for landscaping, as well as an onsite service and repair offer.

    According to the AFR, trade sales currently make up around 40% of sales but the goal is to reach 50% of sales compared to DIY.

    The retailer has made big investments in online commerce and is also looking to make a push into more personalised digital communications to consumers and expand Bunnings' marketplace offering.

    Wesfarmers-owned Bunnings will join the newly revamped membership program OnePass around November. Its stablemates Kmart, Target and marketplace Catch are already under this subscription umbrella.

    Related

    Bunnings has signed onto Flybuys as a loyalty program.

    Bunnings makes data play with Flybuys - HNN Flash #74, December 2021

    Bunnings FY2021/22 results.

    Bunnings posted modest gains in FY2021/22 - HNN Flash #108, August 2022
  • Sources: Inner West Courier and The Australian Financial Review
  • bigbox

    Big box update

    Bunnings in North Wollongong to close

    A super-sized Bunnings store in Sydney's inner west may get the green light for construction, as concerned local residents wait for a ruling on a contentious traffic management plan

    Bunnings is set to close its Wollongong (NSW) store in January as the lease comes to an end next year, according to the Illawarra Mercury.

    The store's last day of trade will be January 26, 2023 ahead of the lease expiring in March. Staff will be retained and redeployed at surrounding outlets.

    Bunnings regional operations manager Robyn Hudson said the company's outlets in Bellambi and Kembla Grange offered customers a newer and expanded site. She told the Illawarra Mercury:

    Because our lease expiry was nearing, and because North Wollongong is one of the older stores in our network, we've made the decision to close and service the local community from the nearby stores instead, rather than commit to a further lease term.

    Bunnings opened on the current site in 1997 and the North Wollongong store is one of the oldest Bunnings in NSW. Ms Hudson said:

    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 while many of our stores play an important role for a long period of time, we continually reassess operations based on lease arrangements and store location.

    The Wollongong location, which covers 27,320 square metres, delivers an annual rent of $1,501,165 to its owner BWP Trust and is currently valued at $26,100,000, according to BWP Trust's 2022 annual report.

    Michael Wedgwood, managing director of BWP Management - the company that manages the properties on behalf of BWP Trust - said the business would assess what is next for the site.

    We will undertake a detailed assessment of all potential uses to determine the best alternative for the site.

    The property was originally purchased in 2003 for $12 million from BBC Hardware Limited which developed the site.

    Bunnings thanked the staff at the North Wollongong store and said their work would be recognised in the coming months.

    Tempe

    The Eastern City Planning Panel in NSW is expected to hand down a ruling relating to the planned construction of a Bunnings store in the suburb of Tempe.

    Bunnings has proposed changes to approved plans to allow construction to begin with the approval of a traffic management plan by the planning panel. The traffic plan was made in consultation with Inner West Council and an independent traffic consultant.

    However the planning panel deferred a decision on Bunnings' proposed changes in March, to give time for council to notify residents of the company's amended development application.

    The Inner West Council recently released its Traffic Signals Feasibility Study (TSFS). Its findings include road safety such as Transport for NSW 'Warrants', traffic signals and road delineation. Physical constraint suggestions include a heritage wall and an IKEA service driveway. Councillor Mat Howard told Inner West Independent (City Hub):

    We have been pressuring Bunnings to improve traffic arrangements at their new Tempe store for close to a year...
    We wrote to the Minister for Transport and Roads seeking approval for these traffic signals almost a year ago, to no avail. Our independent and new feasibility study is clear that traffic lights is the safest option and will have the least impact on our community.
    The Minister for Metropolitan Roads and Transport for NSW owe it to our community to do their job, assess the feasibility study and confirm it is the safest option for our community. Bunnings should then do the right thing by the community they want to be a part of.

    City Hub reached out to Bunnings for comment and a spokesperson said they "remain committed to achieving a safe and efficient outcome for local residents, inclusive of traffic calming measures to minimise any impacts."

    The spokesperson for Bunnings also said:

    However, we're yet to receive approval of the Local Area Traffic Management Plan (LATM), which is delaying the implementation of our development consent issued three years ago. We understand the unchanged LATM will now be put out for consultation again.
    We continue to participate in the Sydney Eastern City Planning Panel process and are hopeful the matter can be resolved through the scheduled meeting on 1 September, so we can move the project forward and provide certainty to our contracted builder and hundreds of trades people who will be engaged to undertake the work.

    Related

    The battle against the proposed Tempe store is now in its sixth year.

    The Eastern City Planning Panel deferred a decision on Bunnings' proposed changes to Bunnings Tempe store - HNN Flash #88, April 2022
  • Sources: Illawarra Mercury, Inner West Courier and Inner West Independent/City Hub Sydney
  • bigbox

    USA update

    Lowe's is offering enhanced supply chain services

    The home improvement retailer is looking to better tap professional customer demand through new fulfillment and delivery pilots

    Lowe's launched its Pro Fulfillment Center in Charlotte, North Carolina in the second quarter, offering customers same and next-day deliveries directly from the facility.

    The company also expanded its fulfillment capabilities direct from its Charlotte stores in April this year, with the rollout of a gig delivery network offering professional customers same- and next-day delivery, a spokesperson told Supply Chain Dive.

    Lowe's and competitor The Home Depot have both invested in enhanced professional fulfillment capacity in recent months, building out operations to cater to the niche consumer segment.

    The Home Depot, which has dominated the segment in the past, began a plan in 2020 to build three Georgia-based distribution centres over the following 18 months, with a key focus on fulfilling large orders for the segment with same and next-day delivery.

    At Lowe's, the company hopes to make fulfillment faster and easier in a bid to be more competitive.

    The Charlotte facility is one way the company is looking to speed fulfillment. As part of the pilot's launch, Lowe's expanded the facility's ability to handle large orders on multiple flatbeds, a spokesperson said.

    In designing the pilot, the company increased inventory levels for pro customer specific SKUs, CEO Marvin Ellison said in June. The fulfillment centre is stocked with more than 1,000 professional-grade products, such as timber, building materials, roofing, sheetrock and insulation, according to a spokesperson. Mr Ellison said:

    This new Pro fulfillment centre combines all these functionalities under one roof. So we're excited about what we're seeing in the short run, and we have a long-term plan to take these facilities and build out a network.

    Retooling its delivery operations has been a focus for Lowe's since the early days of the pandemic, with a goal to simplify the process of getting products to customers. In doing so, the retailer aimed to free up space at stores and grow other supply chain activities, such as same-day and next-day fulfillment to job sites.

    Lowe's also expanded its delivery network to select Florida markets in early August. Mr Ellison said during the company's recent earnings call to investors:

    Because time is money for Pros, one of the most valuable ways that we can serve them is by saving them time with enhanced fulfillment.

    Related

    Lowe's is opening its first Pro Fulfillment Centre dedicated to serving professional customers - HNN Flash #95, May 2022
  • Source: Supply Chain Dive
  • bigbox

    Bunnings FY2021/22 results

    Results trend upwards, but at reduced rate

    Bunnings' results for FY2022 reveal a modest increase in revenues, and less than 1.0% increase in EBIT. However, this comes after two years of double-digit increases, and after a tough season of retail due to COVID-19.

    Australian retail and chemicals conglomerate Wesfarmers has released its results for FY2021/22. As expected, after two prior years of robust growth in many categories, the results were not quite as buoyant. Wesfarmers overall recorded revenue of $36.8 billion, up by 8.5% on the previous corresponding period (pcp), which was FY2020/21. However, that revenue includes inorganic growth from acquisitions in the health sector. Excluding those revenues, revenue was $32.6 billion, for growth of 4.9% over the pcp.

    Similarly, with earnings before interest and taxation (EBIT), after interest and lease liabilities, and excluding significant items from FY2020/21, this came in at $3.4 billion, down -3.8% on the pcp. Net profit after tax (NPAT) was $2.4 billion. After excluding significant items from FY2020/21, this indicates a decline of -2.9% on the pcp.

    While Wesfarmers' WesCEF (Chemicals, Energy & Fertilisers) and Industrial and Safety businesses reported strong gains in EBIT, Kmart Group saw EBIT decline by -39.7%, and EBIT at Officeworks fell by -14.6% on the pcp.

    Bunnings results

    The topline for Bunnings saw revenue grow by $883 million to $17,754 million, an increase of 5.2% on the pcp. EBIT was $2317 million, up by just 0.7% on the pcp. Total stores sales growth was up 4.2%, and store-on-store (comp) sales growth was 4.8% higher than the pcp.

    In terms of overall market performance, hardware retail sales across Australia grew by 5.3% according to Australian Bureau of Statistics (ABS) figures. Given Bunnings' concentration of stores in Victoria, which saw hardware retail sales fall by -0.2% for the recent year, that likely indicates that Bunnings kept pace with the market but did not outperform it.

    In terms of second half performance, Bunnings saw revenue of $8,545 million, and EBIT of $1002 million, which represents an increase of 9.3% and 3.4% respectively over the second half of FY2020/21. ABS figures indicate hardware retail sales grew by 8.5% for that half over the second half of FY2020/21. A note in the Wesfarmers Annual Report for FY2021/22 indicates that total store sales for Bunnings increased by 7.8% during the second half as well. This indicates Bunnings most likely did outperform the market from January to June 2022.

    The results presentation followed a different pattern this year, at the request of the investment analysts, with less time spent on direct company reporting, and more time given over to questions. However, in a change of format, most listed companies are bringing out their annual reports to coincide with the full-year results, and these have provided some interesting material.

    In outlining progress during the year, Mike Schneider, the managing director of Bunnings stated in the Bunnings section of the annual report:

    Strong progress was made on the commercial 'Whole of Build' strategy, with new product ranges, enhanced capability of frame and truss, and improved sales support. Bunnings also launched a new fully-transactable e-commerce platform for commercial customers, and made further improvements to the PowerPass app with increasing usage by commercial customers to support ease of shop.
    Tool Kit Depot expanded into Western Australia with six stores catering to local demand for professional tools and the acquisition of Beaumont Tiles completed in November 2021.

    Mr Schneider's vision of the business is:

    Over the past 10 years, Bunnings has evolved from a warehouse model offering around 34,000 hardware and home improvement products to an omnichannel business with over 110,000 home, commercial and lifestyle products across its in-store, online and marketplace offers.

    Among the items listed as a "focus for the coming years" in the annual report were listed:

  • Reinvest in price by simplifying processes and systems to lower costs
  • Improve customer order fulfilment efficiency
  • Deliver low prices by lowering the cost of goods
  • Own-brand products to provide greater value in selected categories
  • Leverage data investments to personalise customer experiences
  • Continue to enhance online search and functionality to improve ease of shop
  • Network expansion opportunities across Bunnings, Tool Kit Depot and Beaumont Tiles
  • More personalised digital communications
  • Expand Frame and Truss offering
  • Strengthen product range and offer within Tool Kit Depot and Beaumont Tiles
  • Evolve PowerPass membership program to include Beaumont Tiles and provide members greater benefits
  • Use space better to accommodate new ranges, layouts and product adjacencies
  • The path out of COVID-19

    As Bunnings and Wesfarmers were quick to stress, the increase in both revenues and EBIT has been substantial for the big-box retailer when viewed over a longer timeframe. According to the ABS, retail sales grew by 28.4% from FY2018/19 to FY2021/22. Sales at Bunnings increased by 34.8% over that time span, while EBIT absent property income increased at close to 40%.

    Laying out the results in that way indicates that the hardware retail industry has now come to the point that many - including HNN - forecast back in 2021, where the peak in growth has occurred, and the market will, at best, level off. There's little doubt that one reason for the apparent buoyancy in the current market is relatively high background inflation.

    As HNN said back then, the task for publicly listed companies such as the Wesfarmers' owned Bunnings has always been to invest those high-phase earnings back into the business in such a way that the inevitable swing back to more diminished growth - or possibly even negative growth - will be cushioned by new and broader revenue streams.

    How well has Bunnings managed to do this? In particular, what does the exceptionally low EBIT number mean for this context?

    It's a question that also taxed the thoughts of several analysts, with Craig Woolford of MST Marquee putting it into a succinct question:

    Just wanted to ask a question about the Bunnings...I guess I'd phrase it as the "EBITDA margin", particularly for the second half. To look at, I guess one of the measures you guys have looked at the second half 22 sales are up 36% [over three years]. But second half costs on a consistent accounting basis looks to be about 36% [over three years] as well. Unfortunately, we don't get enough disclosure to really understand whether that's product cost or cost of operating the business. But can you give us some clarity about, of that 36% cost growth, what is transitory in nature within that mix, and what is likely to be ongoing?

    Mr Schneider replied:

    We talked about the $71 million in extra costs [due to COVID-19], roughly half of that was in the second half. So that's clearly some, there's a little bit of cost in supply chain as well. And clearly, we're making some investments for the longer term as well, because that's the thing that, ultimately, we're really focused on, is long term growth and long term returns for the business.

    Anthony Gianotti, the chief financial officer for Wesfarmers, added some additional clarification:

    I think probably the only thing to add on there is there's probably a little bit of a mix change through that period. Because as Mike pointed out earlier, commercial has grown stronger through that period, particularly in the second half. And as we know, commercial is slightly lower margin, then consumer. And I think the only other thing is, there's been some investment through that period. So we've had [Tool Kit Depot] investments, and we've had Beaumont Tiles come on board. So I think there's a combination of things going on in there, as to the split in terms of there's obviously a level of investment that will continue. But there's a level of that that will actually reverse over time as well.

    Mr Schneider also added that an additional factor was earlier stocking up in seasonal supplies for the first half of FY2022/23.

    In fact, Bunnings has been investing in growth across four basic areas. There is the new tools business, Tool Kit Depot (TKD), which is designed to compete with Total Tools, Sydney Tools and a range of other trade tool specialist retailers. Secondly, there is the acquisition of Beaumont Tiles, which is an expansion not only into floor surfaces, but also bathroom fittings. Thirdly there is Bunnings ongoing expansion into trade and commercial business, with the company setting a 50/50 revenue goal, based on expanding both trade and DIY/consumer markets. Finally, there is Bunnings' ongoing expansion into online sales, and the further development of digital channels for sales, marketing and community.

    It's important to understand that these changes are not just about market expansions, they are also fundamentally about broad shifts in markets. That idea that the markets have to play a large part in all this was brought up by analyst Richard Barwick of CLSA:

    As you say, it's been a remarkable period of growth. Just be interested to hear your thoughts on how you can sort of work your way or cycle through this. Is there an inevitable slump in sales and earnings that we will be seeing in FY2022/23? And you will be restricted in what you can say, but perhaps if you can give some context around the shape of sales. So, obviously, in the second half, you saw trade outperform DIY. I just go back to one of your comments. I think you made it at the strategy day, wasn't this year but perhaps last year, talking about people that [won't] paint their house twice [in the same year]. So just love to hear your thoughts on how you think Bunnings will shape up over the next 12 months.

    Mr Schneider replied:

    We can see more clearly on the commercial side of the business because of the sort of pipelines of work, that one's a little bit easier to sort of see. And with availability now in categories like timber, insulation, board product, there's pent up demand. I think Anthony touched on that sort of mix in the second half, some of that is a little bit of catch up in the work that's outstanding.
    But talking about builder customers, strong pipelines, two and three years out, and the type of construction that we're focused on, the smaller builder, they're not managing some of these bigger projects, where you've seen some building companies get themselves into a bit of trouble. So I think there's a lot of opportunity for us to pursue there.
    The "whole of build" strategy, the team have sort of built into the way we're thinking about that through the different segments of Bunnings. Also TKD, and Beaumont tiles, I think gives us a great opportunity to really earn the right to be chosen by customers in that space.
    On the consumer side, I think there has been a structural shift in the way that that our customers think about their home, it's become a workplace, it's become a classroom, it's become somewhere that you're spending more periods of time. When you're working from home two to three days a week, there is more wear and tear on the house, you're seeing more things to do. And we saw also see that over the last few years, customers have actually really developed quite a new array of DIY skills. We've been able to bring new products and services and categories into the market to be able to meet those needs. So we sort of, you know, have a view that with people at home a little bit more, that is going to [grow].
    As I touched on earlier, we've got some parts of Australia and New Zealand where for the first time in quite a while we've got the ability to actually trade our stores through a spring and summer cycle, hopefully without interruption. So I think that that structural shift is there, and I'm really focused on driving strong growth as we move through this financial year and beyond.

    Analysis

    When we look back over the history of Bunnings, we see a company that began at the intersection of a number of trends that would help to define the first two decades of the 21st Century in Australia. There was the floating of the Australian dollar during the 1990s, the opening up of China as a manufacturing base, the increasing financialisation of home ownership as urban centres grew in importance, and the rise of new, more efficient logistics models.

    To a large extent, we seem set now to witness the beginning of the end or at least the transformation of most of those trends. That's not necessarily because any of those areas has grown all that less important, but because the potential for growth in all of them has diminished sharply in recent years.

    The question, then, for companies such as Wesfarmers and its subsidiary Bunnings is where is the growth - which is what is needed in order to continue as a viable investment vehicle on the Australian Stock Exchange - going to come from?

    At the moment, the answer that Bunnings at least is providing is to follow a "tried and true" pattern of expansion using Wesfarmers capacity to organise and efficiently scale businesses. The move into trade sales, for example, is something HNN predicted back when Metcash first decided to acquire Danks/Home Timber & Hardware and create the Independent Hardware Group (IHG). That merger was presented to the Australian Competition & Consumer Commission as a "hedge" against Bunnings' influence, but it also set up the trade market for more competition.

    That said, one would be forgiven for thinking that the approach that Bunnings has chosen to take to trade sales, what it terms "whole of build", is somewhat associated with IHG's "whole of house" strategy, first formulated by IHG CEO Annette Welsh in 2018.

    TKD may have some innovative ideas behind it, but it's also a straight competitor to an existing retail solution, already pioneered by Total Tools and Sydney Tools. We don't know exactly what Bunnings plans to do with Beaumont Tiles, but while it's certainly a worthy company, the only real innovation the tile industry has seen for some time is the spread of inkjet printed tiles which can better emulate other surfaces.

    Then of course there is online. It's difficult to think that anyone comparing the websites for The Home Depot, Lowe's Companies or Kingfisher's B&Q with Bunnings would see the Australian site as being anywhere other than at the bottom of that group. It's not a bad website, but it doesn't excel, either.

    What Bunnings did really well back around 2000 was to understand that there was an emerging discontinuity in the market. Taking advantage of that discontinuity disrupted standard hardware retailers then, and still continues to disrupt them today. But now there is a new discontinuity on the horizon, and there are few signs that Bunnings, or even Wesfarmers, are really positioned to take advantage of this.

    bigbox

    Big box update

    Murray Bridge gets new Bunnings store

    The hardware retailer also confirmed its Narrabri store development in regional New South Wales is nearing completion

    The new $16 million Bunnings outlet in Murray Bridge, located around 78 kilometres east-southeast of Adelaide in South Australia, has opened to customers.

    The new store replaced the existing smaller building, just down the road, which opened in 2009. It spans around 7500sqm - more than 3000sqm larger than the existing store.

    Features of the new location include a four-lane trade drive through, a larger nursery, and tool shop, plus an in-store cafe and playground. It also has a new Kitchen Design Centre, a newly laid out paint department, bathroom displays, new look trade service area, a wider range of site safety and workwear products, as well as an aisle for transport and moving needs.

    Bunnings complex manager Jade Sander is leading the Murray Bridge team of 95 and, according to Bunnings, the new store has created over 40 new jobs with around 50 existing team members transferring across from the existing store.

    Ms Sander said team included a number of skilled experts in areas such as timber, tools, paint, kitchens, plumbing, garden and outdoor living who will be on hand to provide residents with expert advice. She told The Murray Valley Standard:

    The new store offers a convenient option for locals who may have previously travelled to larger stores or placed orders with us to access our full range.

    In 2020, a report prepared for the council by consultants URPS described the new store as a "significant investment" in Murray Bridge, but one which would be justified as the city's population grew.

    Bunnings was encouraged by the local council's Make It Yours campaign, which predicted the district's population would reach 29,000 in a decade, the consultants said.

    URPS predicted the expansion would allow Bunnings to generate an extra $70,000 worth of investment for local community groups each year, including by hosting sausage sizzle fundraisers.

    Narrabri

    The doors of Bunnings' new store on the Newell Highway, north of Narrabri (NSW) are expected to open by October this year.

    Bunnings area manager Deb Thompson said recruitment for its local store had been completed, with around 40 new team member jobs created in the community. She told the Narrabri Courier:

    Internal racking, shelving and signage has now commenced, and car park and landscaping works are ongoing. We will soon be busy filling the shelves with thousands of products as we prepare for opening and we look forward to welcoming customers to the new store soon.

    External barriers have come down as the outside work of the store development nears completion. Workers are busily preparing the car park and vehicle entry areas ahead of the opening.

    While the external work nears completion, the focus is shifted on the internal fit-out in anticipation of the October opening.

    The development of a Bunnings store represents a $15 million investment in the venture, and it is anticipated the Narrabri store will cater for the North West region. The store will span more than 5000sqm on its highway site, on the edge of the Narrabri industrial estate. It will feature a main retail area, outdoor nursery, timber and building materials area, as well as parking for more than 80 cars.

    When Bunnings submitted its development application in 2020, it estimated that $15.1 million was spent at hardware businesses outside the region, including at Bunnings stores in Tamworth and Inverell. The company said in its response to submissions lodge in relation to the development in 2020:

    The proposed Bunnings Narrabri represents a tangible expression by Bunnings (and parent company Wesfarmers) in support of the economic potential of the town, and the important regional service role and function that Narrabri serves to surrounding areas...
    This includes the ability to attract customers seeking access to a Bunnings from other towns in the surrounding region, including Moree, Boggabri, Wee Waa, etc.
    Store data indicates customers from Narrabri and surrounds are ... travelling a significant distance to existing Bunnings stores (primarily Tamworth and Inverell), representing 'escape spending' from the region by customers seeking the popular Bunnings warehouse store format...
    The proposal reflects a strong level of confidence in the economic prospects of the town and region, rather than a concern relating to economic vulnerability.

    Of 35 submissions, 32 were in favour of the project, and three were against.

    As part of the development approval granted by Narrabri Shire Council in 2020, Bunnings will enter into a voluntary planning agreement to pay a contribution towards upgrades to the intersection of Newell Highway and Saleyards Lane to accommodate an increase in traffic as a result of the store.

    While the store will have prominent exposure with its frontage on the Newell Highway, access will predominantly take place from Saleyards Lane.

  • Sources: The Murray Valley Standard, Murray Bridge News and Narrabri Courier
  • bigbox

    Home Depot results FY2022/23 H1

    Positive outlook as high demand continues

    The US is facing a home improvement market similar to Australia's - and the same good fortune. Even as the economy reverts closer to 2019, high spending on homes continues.

    US big-box home improvement retailer The Home Depot (HD) has released its results for the second quarter of its FY2022/23, which means the results from the company's first half are available for comparison.

    During the more severe quarters of the pandemic, there was a broad divergence between the US and Australian home improvement markets, and the responses of retailers. For example, the US market had already heavily invested in online e-commerce, where the Australian market had not. It's also necessary to always point out that the US market is far more diverse than the Australian market, in terms of many factors, including weather and culture.

    However, as we begin to enter the pandemic exit-strategy stage, there are more similarities emerging, including inflation caused by both demand and supply shortages, and strong governmental action to curtail that inflation. In fact, Richard McPhail, chief financial officer at HD, summed up US situation that sounds familiar to Australian retailers:

    We find ourselves in a unique environment with many cross currents. We are operating in a broad-based inflationary environment not seen in four decades while managing through constrained global supply chain conditions, all against a backdrop of monetary policy shifts intended to moderate demand. We also see engaged and resilient homeowners who have strong balance sheets, consumers spending more time in their homes, and continued structural support for home improvement project demand.

    From that viewpoint, the results from US retailers provide some interesting perspective on past and emerging markets.

    The numbers

    While the quarterly numbers are interesting, we'll mostly look at the numbers for half, as these provide a more comprehensive overview.

    Sales at HD for the half ending 31 July 2022 were USD43,792 million, an increase of 6.5% over the previous corresponding period (pcp), which was the six months to 1 August 2021. Operating income (much the same as earnings before interest and taxation) was USD7210 million, up by 6.0% over the pcp. Net earnings were USD5173 million, up by 7.6% on the pcp.

    Interestingly, in terms of customer transactions, these fell by 3.0% to 467.4 million, but increased their average value from USD82.48 to USD90.02, up 9.1%. This resulted in an increase in sales per retail square foot of USD700.62, up by 5.7% on the pcp.

    According to Jeff Kinnaird, the executive vice-president of merchandising:

    Big-ticket comp transactions, or those over $1,000, were up 11.6% compared to the second quarter of last year. We saw big-ticket strength across many Pro [tradie] heavy categories like pipe and fittings, gypsum and fasteners.

    He said that the ticket gains were largely driven by inflation, but noted also that tickets were deflated by 0.14% due to falling lumber prices.

    Mr McPhail clarified in response to an analyst's question, that much of the growth in HD's Pro business was coming from larger Pro customers.

    According to HD's CEO, Ted Decker, there was disappointing growth in seasonal items, but this was made up for by ongoing growth in larger housing projects. As Mr Kinnaird pointed out, the seasonal areas that disappointed included BBQ grills, fertilisers, chemicals, and mowers. One reason these trended down was that the 2021 comps were quite high.

    The categories that did much better, according to Mr Kinnaird, included building materials, plumbing, millwork, paint and hardware, while electrical, de´cor and storage, kitchen and bath, outdoor garden, tools, appliances, indoor garden, lumber, and flooring posted positive gains, but were below the overall average for growth.

    In answer to an analyst's question, Mr Kinnaird also provided some details about shifting demand:

    As Ted [Decker] commented, there's COVID pull-forward, there's stimulus effect. We went from a very wet and cold spring, to a very hot summer in the majority of our markets, and the consumer is focusing on other projects... You think of the last year, it was all about the backyard. This year, it's about categories like paint and other large renovation categories, and we're seeing that across our business.
    And then, I'll also say we continue to see the consumer and the Pro trade-up around innovation, and couldn't be more proud of the merchants and our supplier partners on what we delivered around innovation for our customers. We've got a lot of products helping our Pros finish the job faster and simplifying the project for consumers, so no significant trade-down taking place.

    Mr McPhail also set out the forecast for FY2022/23. Sales are expected to be 3.0% up over sales for the prior year, with sales coming off their first half increase.

    Analysts questions

    Michael Lasser of UBS asked the core question that everyone in the industry asks, which is how are sales continuing to grow even as the demand for new housing contracts, due to higher interest rates?

    As Mr Decker stated:

    Our customer in our markets has been incredibly resilient. As Jeff said, project demand is incredibly strong. Our Pro in particular is very strong, and their backlog remains healthy. In DIY, we did see some seasonal weakness. But as we parse through that, it's difficult to say is that weakness in the seasonal businesses the overlap of the two prior incredibly strong years? Is it the weather where we had a really bad and late spring and then it turned incredibly hot across the country? Or are they fundamental demand pressures? Again, we have not seen a broad-based fundamental demand pressure in the business.

    Mr Decker elaborated further on this theme in response to a question about the potential for reversion to pre-pandemic levels of sales:

    Clearly, the US consumer has re-engaged in activities outside the house and travel is incredibly strong right now and eating out and hospitality... But home improvement in particular has been, again, just incredibly strong as Richard laid out, which led us to increase our guidance from what was essentially flat at the start of the year to the 3% we just affirmed.
    But we just don't - we don't see a slowdown from that and remain incredibly bullish about the engagement level. It's really all the dynamic of the home improvement. Again, so many cross-currents in the economy. But when you think of the wealth, our core customers, and their home equity up $9-odd billion; the excess savings rates; the strong jobs and earnings growth of wages; and the fact that we're just continuing to spend more time at home in general, people are still super-engaged in improving that home that they're spending more time in. So, we're certainly benefiting from that longer-term dynamic.

    Analysis

    Perhaps the most interesting section of the presentation, from an analytical perspective, was where Mr Kinniard detailed some of the newly released products that HD expects to perform well. There were four that he called out specifically: a paint, a bathroom shower/bath insert, a power tool series, and a smarthome system.

    The paint is Henry's Tropi-Cool Roof coatings, which increases reflectivity, to help keep buildings cooler. The bathroom kits are the Delta Classic 500 series, which is not stocked by rival Lowe's.

    The tool is Makita's XGT 40-volt and 80-volt system. According to Mr Kinniard:

    The XGT system is engineered to achieve the optimum power required for heavier load applications without sacrificing run time. And these one-battery solution tools are exclusive to The Home Depot in the big box channel.

    The smarthome system is HD's own Hubspace platform.

    These four products provide a look forward into where HD sees the market heading. While HD is careful to describe Tropi-Cool as being useful for reducing the electricity costs of air-conditioning, it is also, of course, and ecologically aware, global warming prevention product. That trend is likely to be a growing one through 2022/23.

    The bathroom kits are an interesting choice, as these are in the somewhat grey area between DIY and DIFM. The kits enable customers to put together complete waterproofing floor/wall systems made from acrylic. This is really a direct pointer to a reviving part of the market in both the US and Australia, which is the acutely cost-conscious DIYer.

    Obviously, the Makita XGT system is a trade product, but it's interesting that this won out for promotion over a Milwaukee/Ridgid tool system.

    As interesting as these are, it is actually the last product, the smarthome system, that is more revealing as regards HD. Smaller home appliances are rapidly approaching the stage where, if not all of them offer smarthome connectivity, that will at least be a range option. Hubspace is a loose alliance between some regular suppliers to HD to make their appliances directly network via Bluetooth or Wifi, and controllable through a shared smartphone app.

    What is surprising, however, is that by the end of 2022 the connected smarthome standard known as Matter will be available - indeed, serious smarthome companies such as IKEA have already announced their Matter hubs. Matter is an "everything" protocol, that will enable just about any smarthome device to communicate with any system.

    Matter uses a communication protocol known as Thread, which overcomes the difficulties inherent to Bluetooth and Wifi systems (such as poor connectivity response times), while also building in more functionality that the pre-existing low-power standard, Zigbee (such as direct internet connectivity).

    While HD has been clear that Hubspace is designed for people who want some connectivity without any fuss, it's just difficult to see those standard surviving very long. Similar standards, from both HD's main competitor Lowe's (Iris) and the electronics big-box BestBuy have failed in the past, angering customers who invested in them, even though conditional refunds were offered.

    The reality behind this is that the US market is set to not so much bifurcate in the future, as to develop definite clustering. One cluster is going to want the most advanced systems of smarthome management it can get, along with, most likely, more climate change aware products. The other cluster is going to want the benefits of technology without having to understand much about it, and probably not be that interested in climate change.

    It's being able to predict for than level and type of variance while will likely determine those home improvement big boxes prosper in the future.

    bigbox

    Big box update

    Bunnings Oxley warehouse to be demolished, rebuilt

    The flood-plagued Oxley store has been closed since the deluge in February this year. The hardware retailer hopes the new-look warehouse will reopen in 2024.

    Bunnings has lodged plans to demolish its flood-affected Oxley warehouse in Queensland and replace it with a raised building that can be reopened one day after waters recede.

    The existing store has experienced at least three major flood events since it was built, but Bunnings is confident the planned version will resist damage. The new store would be higher and much bigger - going from the existing 14,350sqm gross floor area to 19,344sqm. The new-look Oxley warehouse will also have two levels of shop space and carparking underneath, according to a development application (DA) lodged with Brisbane City Council.

    It will be based on a design similar to the warehouse in Bundamba (near Ipswich) which successfully resisted damage in the February flood, reopening 24 hours after floodwaters receded, and stores in Virginia and Acacia Ridge.

    Flood doors would protect the main and nursery entrances and essential services would be raised. It would also mean only the car park would go under water, as the suspended retail floors would be above the one-in-200-year flood level.

    The internal layout would be similar to the existing warehouse, including the main retail area, outdoor nursery and timber trade drive-through. But there would be a wider range of home and lifestyle products.

    Bunnings said it would spend $60 million on the new store. Bunnings regional operations manager, Jason Doyle, said he was hopeful the store would be open again to local customers in 2024, pending council approval. He told South West News:

    We have been working closely with the relevant authorities while preparing our application and we're hopeful of getting a timely approval so we can get on with construction and get back to serving the community, giving them access to the products they need.

    Town planners Property Projects Australia said in the development application (DA) documents that reopening a flooded warehouse could take up to four months. They stated:

    In addition to the impact on flood recovery, approximately 195 team members have been displaced (from at the Oxley store), having to be temporarily relocated to surrounding stores to ensure no significant job loss from the temporary closure.
    Bunnings Group Limited is seeking to replace the existing store to establish a flood-resilient Bunnings Warehouse to ensure the continuity of service and trade through major flood events and to maximise the utility of the land.
    This proposal is founded upon the principles that have been adopted at the (flood resilient) Bunnings Warehouse Bundamba store.

    In "pre-lodgement'' meetings, Brisbane City Council and the State Assessment and Referral Agency told Bunnings that a designated flood warden would have to be on duty at all times during opening hours,

    The existing Bunnings warehouse store is located at 32 Blunder Road in Oxley. Council officers pointed out during the meetings that both access points, on Blunder and Factory Roads, had flooded in January, 2011 and in February this year. They wrote in the DA documents

    To facilitate vehicular evacuation, it would be beneficial to provide a 3.5m wide flood emergency egress point (fitted with removable bollards or boom gate) at the higher part of Blunder Road.

    Bunnings offered to gift land to widen Blunder Road and its verge, to improve that exit. There would be an increase in parking spaces, but it submitted a traffic report on the impact of the extra car movements.

    The two existing access points would be retained, but the safety of a proposed new access to the Ipswich Road Service Lane would need to be considered, Council officers said.

    Council officers also raised concerns about visual screening of the taller building, which would be up to 15.5m high.

    Only 6.2% of the site would be devoted to deep planting (large trees with roots in the ground), less than the required 10%. Officers said the "undercroft'' parking area needed to be screened from the road by landscaping. Property Projects Australia said:

    Council raises no concern with the proposed uses in this location and the proposed redevelopment of the site to ensure the Bunnings is flood resilient providing the issues relating to the visual impacts to the street frontage, can be addressed through landscape screening/buffering.
    It is considered there is merit for a 'performance outcome' (exemption) regarding height as the raised structure is only slightly exceeding the preferred maximum to address the flood constraints affecting the site.

    The warehouse, which has flooded multiple times since it was built, was deemed a high risk stormwater area, but Bunnings said it should not have to submit a hazardous chemicals flood plan as all stock would be on the new, raised levels.

    In June, Bunnings reopened its flood-hit Rocklea store after major repairs, adding new features including a revamped cafe and kitchen design centre. It had to seek specialist advice to ensure the warehouse was structurally and hygienically safe to reopen.

    Related

    Bunnings Oxley store left devastated from February 2022 flooding - HNN Flash #94, May 2022
  • Sources: South West News (Brisbane) and Urban Developer
  • bigbox

    Lowe's FY2022/23 first half results

    Growth stutters, but maintains

    Lowe's has seen a difficult first half unfold for 2022, with the company claiming that poor weather limited seasonal sales. The big-box retailer points to ongoing development of its tradie sales as an indicator of a better future.

    US big-box home improvement retailer Lowe's Companies has reported its results for the first half of FY2022/23. Overall, revenues came in at USD51,135 million for the half, a decrease of 1.7% compared to the previous corresponding period (pcp), which was the first half of FY2021/22.

    Operating income (effectively earnings before interest and taxation) was USD7531 million, an increase of 1.0% on the pcp. Net earnings were USD5325 million, a decline of 0.3%.

    In describing the results, Lowe's CEO Marvin Ellison suggested that weather patterns had produced a less than ideal spring trading season, which resulted in poor sales of seasonal categories. He also pointed to cycling the strong comps from the previous year's pandemic buying sprees, which particularly affected categories such as BBQ grills and patio furniture.

    Lowe's executive vice president of merchandising Bill Boltz noted that there was increased demand for more innovative products.

    Another interesting trend from the quarter is the ongoing demand for innovation, reflecting underlying consumer strength. Rather than seeing trade down, in many cases, we are seeing customers trade up, spending more to purchase the latest technology like battery-powered products available in the EGO, Kobalt, CRAFTSMAN and Skill brands.
    In fact, one of our top-performing products this quarter was an EGO 56-volt self-propelled mower that retailed for over USD700. This unit dramatically outperformed our sales forecast despite being one of the most expensive battery mowers in our assortment, proven what we have said before that value doesn't have to be low priced.
    In refrigeration, we continue to see consumers trade up to higher-priced products in brands like KitchenAid, Samsung and LG, with features and benefits that serve a busy family's lifestyle. And while client sales were below our expectations, we continue to take incremental share and lead the market as the number one appliance retailer in the US.

    Mr Ellison pointed to strong performance in the Pro (tradie) categories, as Lowe's moves to increase its sales split from 25/75 Pro/DIY to better favour Pro sales. Lowe's executive vice president for stores, Joe McFarland, commented further on the development of the Pro market:

    We continue to deliver incredible results with Pro comps of over 13% in the quarter. In fact, this is the ninth quarter in a row that we have driven double-digit Pro comps. Even in a quarter that is traditionally our most DIY-heavy, we saw Pro penetration of over 23% in the U.S., an increase of over 500 basis points from 2019.

    Mr Ellison also went into some detail as regards the home improvement market in general:

    I'd like to address some concerns that I've heard from our shareholders about the home improvement market. I want to begin by clarifying that the market dynamics that pressure the home builder are not necessarily the same market dynamics that pressure the home improvement retailer. At Lowe's, the three highest correlating factors of home improvement demand are home price appreciation, the age of the housing stock and disposable personal income.
    While housing turnover is important, it does not index at the same rate as home price appreciation, housing age and disposable personal income. And while we acknowledge that housing turnover has slowed, home prices and home equity remains at record highs, which gives customers confidence that they will get a return on the investment that they make in their homes.
    And also importantly, those homes keep getting older. More than half of the homes in the U.S. are over 40 years old and millions more built at the peak of the housing boom in the early 2000s are now starting to turn 20 years old, which is a key inflection point for big ticket repairs.

    Lowe's is predicting sales in the range of 1.0% to -1.0% for its FY2022/23 as compared to FY2021/22.

    Analysis

    If there is a single noticeable difference between Lowe's and its main competitor, The Home Depot (HD), it's that you can discus HD without referring to Lowe's, but it's difficult to discuss Lowe's without referring to HD.

    The two companies have had a markedly different experience through the pandemic years. Comparing the first half results at Lowe's between FY2019/20 and FY 2021/22, Lowe's shows a 34% increase in net sales, and whopping 96% increase in net earnings. On the same comparison, HD saw a 37% increase in net sales, and a 49% increase in net earnings.

    One major contributing reason for that is Lowe's heavier orientation to the DIY market, which not only took off strongly during the pandemic, but also - of course - produces higher profit margins. Other reasons include Mr Ellison's astute management of the company, and the availability of new product lines, such as the Craftsman DIY tools from Stanley Black & Decker.

    This half could be a harbinger of what happens to Lowe's now that DIY is fading somewhat, and the Pro market is becoming more significant. There is little doubt that, given its troubled history, Lowe's made the right decision to pursue profits through the pandemic, but this has left it with what we might describe as a bit of a Pro headache after the DIY party.

    The difficulty is, of course, that winning over the Pro market requires deep CAPEX investment over a significant period of time. So Mr Ellison's task is now how to management that transition, while keeping earnings within an acceptable range.

    bigbox

    Big box update

    Kyneton locals considering court action to fight Bunnings development

    Victoria's planning tribunal has allowed a complex that includes a Bunnings to be built in Kyneton, but some residents fear it will detract from the town's country charm

    Macedon Ranges residents are considering Supreme Court action following a state planning tribunal decision to overturn a council vote to put a stop to a development for a Bunnings store, a McDonald's outlet, another restaurant, and a 24-hour service station. It was approved by the Victorian Civil & Administrative Tribunal (VCAT) after the applicant decided to challenge the council's decision and the conditions imposed.

    Susan McNab is one of the locals leading the fight against the development and said residents were disappointed by the tribunal's actions. She said the group would look at viable options to counter the decision, but accepted that a loss in the Supreme Court would be costly. She told ABC Premium News:

    Naturally, we don't feel the decision is to the benefit of Kyneton. That part of the town is the main access to nearby reserves and people often go out that way climbing and for classic car rallies and cycling. It's difficult for many residents to not be considered at VCAT.
    It's been about the economics of the matter. The council said that area would be developed at some point, but this particular style of development works against Kyneton's character.

    The decision almost confirms the introduction of commercial development in Kyneton, which one community group has labelled the "tide of overdevelopment". Residents fear the big brands will take away the small country charm that the town is known for, with small businesses and well-known eateries losing out. However VCAT's decision said:

    The proposal will not detract from the rural character of the Shire. The proposal will reinforce the rural character of the Shire by its location [in a commercial zone] within the protected settlement boundary; [and the] containment of its impacts within the subject land.

    The decision by VCAT attracted hundreds of submissions regarding concerns about traffic and safety, and the effect the development could have on the nearby environment and local economy. Ms McNab wrote to the group:

    Our options on a personal and group level are very limited. We can attempt to appeal the decision on a matter of law ... within 28 days. That is incredibly expensive, and we would have to pay the other party's costs if unsuccessful. It's down to what the shire council may be able to do now.

    Macedon Ranges Shire Council said it was not considering pursuing legal action. A spokesperson told the ABC:

    An appeal of a VCAT decision is made to the Supreme Court of Victoria and must be on a point of law. Council has received communication for the community expressing their disappointment in the decision.

    The council's design guidelines from 2012 showed the council's aim was to "reinforce" the rural character of the Macedon Ranges, particularly in areas that were visible from main roads, the Calder Freeway, rail corridors, and key public viewing areas and from adjoining rural and residential areas.

    Several residents have asked for a review of VCAT's decisions after a similar development in regional Victoria was not allowed to go ahead. Some also said it was difficult for small-town community groups and residents to fight organisations and businesses with access to a lot of money.

    The tribunal has ordered VCAT to remove multiple signs, and reduce the height of one, and resubmit the plans to show those and other changes.

    Related

    VCAT approves Bunnings build in Kyneton (VIC) - HNN Flash #105, August 2022
  • Source: Australian Broadcasting Corporation
  • bigbox

    Big box update

    VCAT approves Bunnings build in Kyneton (VIC)

    The tribunal disagreed with council the new store would be inappropriate for a site located on Edgecombe Road

    The Victorian Civil and Administrative Tribunal (VCAT) has dismissed a claim that a Bunnings store cannot be built in Kyneton (VIC).

    In 2021, developers took the Macedon Ranges Shire Council to VCAT after it failed to make a decision fast enough on their application for a Bunnings store 1.6km away from the centre of town in Kyneton. It would be the anchor tenant for a collection of retail premises.

    The council told VCAT that if it had made a decision, it would have opposed the Bunnings on a number of grounds, according to a report in the Bendigo Advertiser.

    It argued the Bunnings building would clash with the area's unique, rural township character and detract from a gateway into Kyneton, in part because motorists would be able to see it from the Calder Freeway. The council told VCAT:

    While the proposal is an appropriate use of the site, the development response fail [sic] to recognise the sensitivities of the site.

    Witnesses for the developers argued the building's design was one Bunnings had used at other regional locations.

    VCAT described the building as a generally typical Bunnings Warehouse design, with a low-pitched roof, dark green metal cladding walls and white panelling along the lower portion of the facades.

    VCAT said the land was not at the town's border and was in an area zoned for commercial use, with industrial lots already visible to people entering that part of town. It also expected the rural feel of the area would change over time, and that building designs and landscaping would soften the Bunnings' visual impact.

    The council lodged a number of other objections that failed to sway VCAT. They included arguments that more landscaping was needed, especially to soften the building and car parking from roads like the Calder Highway.

    The council also argued designs for a 190-odd space car park could be more pedestrian-friendly.

    VCAT found current landscaping plans and car parking would be appropriate. It ordered developers to submit updated plans to planning authorities.

    In Star Weekly, the council said it was "disappointing" a Bunnings is now on the way to the outskirts of Kyneton.

    Last year, the council knocked back two separate proposals for land at the intersection of Edgecombe Road and Pipers Creek Road, which included plans for a Bunnings Warehouse. It received more than 500 objections to the proposal.

    The decision was appealed at VCAT, and while the proposal for a service station and attached McDonalds at the same location is still pending, the tribunal granted a permit to construct a building, put up signs and create access and parking for Bunnings.

    The council's planning and environment director Rebecca Stockfeld said it had blocked the planning application for a range of reasons which had not been addressed by the VCAT decision. Ms Stockfeld told Star Weekly:

    The proposal had detrimental amenity impacts, a poor design and interface with its surrounds, inadequate landscaping, removal of native vegetation, and poor layout for pedestrians within the car-parking and access areas.
    The VCAT decision to approve the development with little change to the design is disappointing.
    The approved Bunnings will have a generic design, similar to many others in large cities, rather than responding to the unique character of Kyneton and the Macedon Ranges.

    A spokesperson from one of the four respondents to the VCAT hearing, the Macedon Ranges Sustainability Group, said they could not comment at this stage as an appeal for the second proposal was still underway.

    At a council meeting in September 2021, mayor Jennifer Anderson said developers for both applications had not met the necessary standards for approval. Cr Anderson said last year:

    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.

    Ms Stockfeld said council would "continue to push for new developments to comply with the design standards incorporated within the Macedon Ranges Planning Scheme" into the future.

    Related

    A proposal for a Kyneton store in regional Victoria has been rejected.

    Kyneton development goes to tribunal - HNN Flash #67, October 2021

    A new development in the central Victorian town of Kyneton includes a Bunnings.

    Bunnings proposed for Kyneton -HNN Flash #57, August 2021
  • Sources: The Bendigo Advertiser and Star Weekly (Sunbury & Macedon Ranges)
  • bigbox

    Europe update: Kingfisher

    Cost-of-living increases present opportunities for own brands

    Kingfisher believes own brands are becoming increasingly important in an environment of higher inflation. Price may be the reason shift, but own brands can offer much more than just cheaper products.

    In a recent edition of UK publication Retail Gazette, Kingfisher chief offer and sourcing officer Henri Solere writes that the cost-of-living crisis is "a moment for own brands to shine".

    Own brand products have a number of benefits for consumers, and against the current backdrop of rising living costs, affordability has leapt to top of the list, according to Mr Solere. He writes:

    At Kingfisher, our own exclusive brands - or OEBs as we call them - are 15-30% cheaper than branded products. Our OEBs have significantly grown in popularity in recent years, up 19% since 2019 and now account for 45% of Kingfisher Group sales.
    But while the affordability argument for buying own brand is clear, there remains a lingering perception that own brand can mean compromising elsewhere - whether that's on quality or on other considerations such as sustainability.
    That might have been true twenty years ago, but today's reality could not be more different.
    It is no longer about sourcing the same products for less, but instead about how we can add value as retailers who know their customers inside out, using that insight to design and develop products that truly suit their needs.
    With consumers thinking more about their finances, now is the time for retailers to step up and show what own brands can deliver.
    The truth is that most own brand products have gone through an exceptionally rigorous design, testing and development process.
    For Kingfisher, the development of any of our OEB product starts with our customers' home improvement challenge whether that's in DIY or trade - and we work back from there. We then find ways to develop and supply the product at scale, so great design is affordable and accessible to everyone.
    To give an example, through listening to our customers, we learnt that they need more space efficient, multi-functional areas in their homes, particularly in the kitchen. So, we created the Romesco smart space sink, which has the functionality for a work surface on top of the sink bowl for preparing food or drying dishes when it isn't in use.
    As retailers, we need to make sure we are not just thinking about now but pre-empting what our customers will need in the future.
    For example, our team undertake in-depth trend analysis to identify changes around how we live in and improve our homes, so we can design products that make customers' lives easier for the long term.
    The success of any of our OEB products is rooted in our ability to truly understand a customer's problem and create a product that fixes it, with our award-winning in-house design team dedicated to delivering just that.
    Having an own brand offer means that a retailer has complete control over the process of bringing products to market. Our depth of knowledge and expertise in home improvement means that we have the ability to create products that solve our customer's challenges, with the reassurance that they are buying from a business that they can trust.
    The 'no compromise' approach doesn't just apply to quality. We want to help customers live more sustainably, without a price premium.
    Our Erbauer 18V power tools are an excellent example of this. We know that most carbon emissions when manufacturing drills come from the battery and charger, so we've developed a product with a battery that can be used in multiple tools thanks to its modular design. In addition, the products' brushless motors mean they last longer between charges, use less energy and have a longer product life.
    Going forward, we're committed to making sustainable home products affordable and accessible to all.
    That's why, despite the cost-of-living crisis, we've increased our sustainable home product target to account for 60% of sales by 2025/26, 70% of which will come from our OEBs.
    As retailers, we need to tackle head-on the outdated myth that buying own brand means buying an inferior product.
    The innovation and expertise that goes into the development of own branded products is remarkable, and the cost-of-living crisis means it has never been important to show what they can do when it comes to affordability and innovation.
    It's time for retailers to rise to the challenge and prove what own brand is really capable of achieving for consumers.

    Related

    Kingfisher provides a trading update.

    Kingfisher said demand for DIY remains resilient - HNN Flash #96, May 2022

    Earlier this year, Kingfisher released its full year results.

    Kingfisher FY2021/22 - HNN Briefing No.5, March 2022
  • Source: Retail Gazette
  • bigbox

    Big box update: Store development

    Application for bigger Bunnings Lithgow store

    Bunnings in Hoppers Crossing (VIC) up for sale and Bunnings Timaru in New Zealand is expected to open in 2023

    A larger Bunnings store could be part of Lithgow's Pottery Plaza in NSW after a development application (DA) was lodged with Lithgow City Council. The proposed commercial premises would be located in Lot 26 DP 1244557 at 21 Willowbank Avenue, off Valley Drive, according to the Lithgow Mercury.

    Bunnings area manager Michele Ward said the new site would replace the existing Lithgow store which is currently located at 295 Main Street in Lithgow. She told the newspaper:

    The proposed store represents an investment of more than $13 million and would span more than 6000sqm, 1500sqm larger than the existing store.

    Ms Ward said the store would create 35 new jobs in the Lithgow community and feature an improved store layout, nursery, a timber trade drive through and car park dedicated for more than 100 cars.

    Bunnings has been part of the Lithgow community since 2010 and we look forward to providing local customers with a much wider range of home and lifestyle products. We will keep the community updated as our application progresses.

    The application and plans for the proposed site are available for public inspection at Lithgow Council's administration centre and on the council's website until August 5.

    Bunnings Hoppers Crossing

    The 55,000sqm Bunnings Hoppers Crossing store in Wyndham City (VIC) is being offered through an expression of interest campaign which closes on 11 August, reports The Property Tribune.

    The store is one of the largest in the Bunnings network, at 21,670sqm, and is complemented by an Amart Furniture outlet. Amart recently renewed its year, resulting in a weighted average lease expiry of seven years, and a total net income of over $4.72 million. Almost three-quarters of this is paid by Bunnings, owned by ASX-listed Wesfarmers.

    Billy Holderhead, a partner of Burgess Rawson, said investor appetite in this sector remains strong, with considerable interest from the top end of the market. He told The Property Tribune:

    Given the scale of the Bunnings store, the quality of its location, forecast growth in the trade catchment, size of the landholding and its robust lease structure, we've backed the property as the best Bunnings freehold ever offered on the open market.

    This Bunnings store is in a high-profile location in what is considered to be the fastest growing local government area in Australia over the past two decades.

    Business consultancy Deep End Services also said the property has the largest concentration of large format retail floor (LFR) space in Victoria. Harvey Norman, The Good Guys, JB Hi-Fi and Barbeques Galore are all located within 500 metres. Mr Holderhead said:

    With swathes of undeveloped residential land in Wyndham City there's still much more growth to come, and the Hoppers Crossing LFR precinct is strategically placed to benefit from this.

    The Bunnings store is being sold as part of a $350 million commercial property auctions and expressions of interest campaign beginning in August. This includes a Wattyl Paints store in Sunbury (VIC) which has signed a new seven-year lease to 2029, with options to 2034.

    Bunnings Timaru, New Zealand

    A Bunnings store located in Timaru, a port city in the southern Canterbury region of New Zealand, is expected to open next year. It is part of the Showgrounds Hill retail development site.

    Ben Camire, director of Bunnings New Zealand said work on the new store is progressing well. He told The Timaru Herald:

    The store's steel structure is now complete to make way for construction of the roof and store exterior, with concrete floor pours also underway. We anticipate the store opening in mid-2023...
  • Sources: Lithgow Mercury, The Property Tribune and The Timaru Herald
  • bigbox

    Big box update

    Bunnings consolidates its merchandising team

    Bunnings and Kmart Australia have paused the use of facial recognition technology while the Australian Information Commissioner investigates their personal information handling practices amid privacy concerns

    Recently appointed Bunnings merchandising director Jennifer Tucker has reduced her direct merchandise reports from three to two. This restructure means that dozens of categories will be grouped into two new portfolios: "building" and "home and lifestyle", according to The Australian.

    Adrian Pearce will lead the "home and lifestyle" portfolio and Cam Rist will lead the "building" portfolio. As a result, Tracey Lefebure will leave Bunnings after a career with Wesfarmers of 34 years.

    In a letter sent to Bunnings suppliers, obtained by The Australian, Ms Tucker told suppliers the change in the merchandising teams would help drive growth and "simplify the way we work". She wrote:

    This simplification of our structure will position us to accelerate our growth strategy in our commercial (tradies) business while also driving our core DIY business.

    Ms Tucker's rationalisation of teams that report to her replaces the structure set up by former Bunnings merchandise director Phil Bishop, who was recently appointed as CEO of discount retailer The Reject Shop. He was Bunnings' director of merchandise and marketing until early 2021.

    The Australian also reports Bunnings held a supplier forum in early July- its first in-person mass meeting with suppliers in more than two years - where issues around Bunnings' strategic agenda and the focus on merchandise strategies were fleshed out.

    For the suppliers who attended the forum, of which 450 were in person and 350 people online, Bunnings laid out merchandise growth opportunities around deepening and evolving its range for both consumer and commercial markets.

    Suppliers were told Bunnings was keen to expand its depth across existing product categories, with particular opportunities in room and furniture storage, garden and garden decor, and kitchen and bathroom. New growth opportunities were also revealed to be in in-home services, pet durables, recreation and the online Bunnings Marketplace.

    The suppliers were also told Bunnings believed that broader consumer growth would come from driving the core pillars across lowest prices, widest range and best experience. From a commercial range point of view, focused on tradies, it would be about better catering for each stage of the build and the needs of specialist trades.

    During the forum, Bunnings also discussed opportunities for its suppliers to partner with it on product innovation and new solutions to address the opportunities the hardware giant sees in the market.

    Related

    Bunnings plans trade revenue growth of $5bn - HNN Flash #97, June 2022

    Facial recognition tech on pause

    Bunnings and Kmart have stopped using facial recognition technology after CHOICE named large retailers that do not collect and use such biometric information, and have no plans to introduce it. Those retailers include Woolworths, Coles, Aldi, Target, Big W, Myer, David Jones, Dan Murphy's, BWS, Vintage Cellars, Liquorland, Rebel and Officeworks.

    Bunnings managing director Mike Schneider said facial recognition allowed the hardware retailer to identify when a banned person entered a store. He told the Australian Financial Review (AFR):

    When we have customers berate our team, pull weapons, spit, or throw punches, we ban them from our stores. But a ban isn't effective if it's hard to enforce.
    For absolute clarity, an individual's image is only retained by the system if they are already enrolled in the database of individuals who are banned or associated with crime in our stores.
    We don't use it for marketing or customer behaviour tracking, and we certainly don't use it to identify regular customers who enter our stores as CHOICE has suggested.

    In the Australian Associated Press, Mr Schneider said:

    If a particular Bunnings store has facial (recognition), and not all of our stores do, the camera will scan your face. It will map it back to the database, and if it doesn't recognise it, no data is held.

    If the camera does 'recognise' a face, their image goes back to Bunnings' loss-prevention team, which determines whether there is a genuine match and they should call the police. He said:

    That's what's been so frustrating for us in the way that this has been characterised by CHOICE. .It's not in any way designed to look at shopping patterns or anything else, it is purely there for the wellbeing of our team.

    It temporarily switched the technology off in stores ahead of a platform shift earlier this year, and has since informed the privacy watchdog it will not be reverting to it for the time being. Mr Schneider said:

    Given an investigation is underway, we won't be using it for the time being.

    CHOICE also polled 16,000 supporters in July that that indicated 80% of people want Bunnings and Kmart to stop using facial recognition in stores.

  • Sources: The Australian, Australian Financial Review, The Guardian Australia and Australian Associated Press
  • bigbox

    Big box update

    Bunnings store proposed close to South Australian cultural site

    There are plans for the site to be turned into a shopping hub after a developer from Victoria looks to buy the land

    Developer Troon Group has entered negotiations with the Indigenous Land and Sea Corporation (ILSC) to purchase the southern portion of the 707 Lot along Marion Road at Bedford Park in South Australia, reports the Eastern Courier Messenger.

    The site would encompass a Bunnings store, two fast food chains and hundreds of car parks.

    Bunnings regional operations manager Jessica Hitchin confirmed the company is considering the site. She told the Eastern Courier Messenger:

    We regularly review opportunities to improve our existing store network, but have no firm plans in place at this stage.

    The Troon Group also said no decision had been made on the development.

    However this has not stopped residents pushing back against the shopping hub proposal. Local resident Carolyn told the Eastern Courier Messenger that the site's cultural significance should be given first priority.

    Warriparinga is an important sacred site for the Kaurna people. The current proposal surrounds the Elders Village with businesses that operate until late at night, increasing noise and light pollution, and will not be the peaceful environment that was envisaged in the original plans.
    I am hoping the new [state] government can do better and quickly provide the means for a better quality of life for the Elders at Warriparinga.

    In June 2021, the-then Marshall Government announced a $10 million village next to the Warriparinga Wetlands that would create a purpose-built village for Aboriginal Elders living in Adelaide. At the announcement, former Premier and Aboriginal Affairs and Reconciliation Minister Steven Marshall said:

    ...Empowering Aboriginal South Australians by supporting them into home ownership, ensuring they have access to safe and secure housing and giving them a greater voice in determining their housing future is all crucial to helping them reach their housing aspirations.

    The 4.3ha vacant site next to the culturally significant Warriparinga Wetlands went on the market back in 2020.

    In documents supplied to The Messenger, the Kaurna Yerta Aboriginal Corporation (KYAC) have been working with the ILSC on a strategy for the land since 2013. An ILSC spokesman told The Adelaide Advertiser:

    ILSC purchased the land some years ago with an ultimate intent to benefit the Kaurna people of Adelaide.
    In 2019-20, the Kaurna Yerta Aboriginal Corporation, Kaurna's native title body, applied for authority under the Aboriginal Heritage Act 1988 to allow the sale and development of the Lot 707 and to specifically construct an Aboriginal Elders' Village on part of the land, and to provide an income stream for Kaurna people from the lease of buildings on the land.
    Most submissions received from Aboriginal people supported the sale and development of the land.
  • Sources: Eastern Courier Messenger and The Adelaide Advertiser
  • bigbox

    UK update

    Kingfisher adds 3D and VR planning tools

    The home improvement group is partnering with 3D Cloud[tm] by Marxent to roll out new 3D visualisation, planning, and design technology

    Kingfisher's latest initiative includes 3D and virtual reality visualisation, planning and design tools across a number of its banner stores. They offer what tech partner Marxent said is "a superior hybrid planning experience" that flows seamlessly between in-store colleague-led design systems and ecommerce.

    Kingfisher's B&Q and Brico Depot Romania stores have already launched the 3D room planning system in the UK, Republic of Ireland and Romania. B&Q UK also has a line-up of intuitive, mobile-first 3D product configurators for fireplaces and the Kingfisher-exclusive Atomia and Alara product lines.

    Using the Kingfisher 3D planning and design tools, shoppers are able to explore, design, visualise and checkout in a single app. Simple enough for consumers and sophisticated enough for experienced kitchen designers, even novices can draw a custom room layout, drag and drop products directly into the space, and customise finishes. More complex design features are available for experienced designers.

    The result is a realistic picture of any kitchen, bathroom, or storage project in both 2D and 3D. Finished designs or proejcts can be exported to HD renders or 360 panoramas for an immersive virtual reality experience. For those shopping from home, items can be added from the finished 3D scene directly to their e-commerce basket.


    Customers can book an in-store planning appointment, sharing measurements, budget, style preferences, and designs and collaborate on final project details.

    The suite of tools also offers the retailer localised to specific banners, markets and product lines, as well as personalisation and customisation options. It comes with auto room scanning and offers a drag-and-drop photo feature, millimetre perfect precision and an add to basket option for easy online check out.

    JJ Van Oosten, Kingfisher's chief digital and technology officer, said:

    At Kingfisher, we're focused on offering the best experience for our customers, offering greater convenience, choice and speed as part of our Powered by Kingfisher strategy.
    We chose 3D Cloud by Marxent because they have the tech, team, and experience to implement 3D experiences at enterprise scale. The 3D room planner tool in stores combines leading-edge visualisation and configuration technology and provides customers with a seamless and personalised shopping experience.
    In partnering with Marxent, it has enabled us to focus on our mobile first approach, with tools to allow our customers to design from pictures and room scanning. 3D technology is just one of the initiatives we have launched to ensure Kingfisher is at the forefront of innovation in retail.

    Related

    JJ Van Oosten at Retail Connected - HNN Flash #44, May 2021

    Sources: Internet Retailing and 3D Cloud[tm] by Marxent

    bigbox

    Big box update

    Investigation by federal Privacy Commissioner

    The probe into Bunnings and Kmart follows a report from consumer advocacy group CHOICE about the retailers' use of facial recognition technology

    The Office of the Australian Information Commissioner (OAIC) announced it will launch an investigation into the personal information handling practices of Bunnings and Kmart in how they use the facial recognition technology in store, and whether it is consistent with Australian privacy law.

    The retailers say facial recognition is being used in some stores to protect shoppers and staff, combat anti-social behaviour and reduce theft.

    Bunnings chief operating officer Simon McDowell said it is aware of the OAIC investigations into the use of facial recognition technology in its stores and would co-operate with them. He told news.com.au:

    As we've previously explained, this technology is used solely to help keep team and customers safe and prevent unlawful activity in our stores and we have strict controls around its use.

    In a previous email exchange with Electronic Frontiers Australia (EFA) chair Justin Warren, published on the EFA's website, the Bunnings Privacy Team said the company is "comfortable" that its use of facial recognition is "undertaken in accordance with the requirements of the Privacy Act".

    Bunnings explained how facial recognition software attached to CCTV systems is used to enforce bans on customers. It said only the facial images of targets are stored by the system to make sure that, if a banned individual walks into a store, the CCTV cameras can immediately notify staff or security. It said:

    The facial recognition technology checks for matches against these uploaded images, and where there isn't a match then no action occurs. No data relating to anyone other than these uploaded images are stored in the system.

    The Australian Information Commissioner and Privacy Commissioner Angelene Falk said before she announced the investigation:

    It is important that all retail stores, when they are deciding whether to use technology to collect personal information, consider the impact on privacy, the community's expectations and the need to comply with privacy law.
    The Privacy Act generally requires retailers to only collect sensitive biometric information if it's reasonably necessary for their functions or activities, and where they have clear consent.
    While deterring theft and creating a safe environment are important goals, using high privacy impact technologies in stores carries significant privacy risks. Retailers need to be able to demonstrate that it is a proportionate response to collect the facial templates of all of their customers coming into their stores for this purpose.

    The OAIC is the independent national regulator for privacy, and said no further comment would be made while the probe continued.

    The Commissioner is authorised to investigate an act or practice which may be an interference with the privacy of an individual or a breach of the Australian Privacy Principles under the Privacy Act 1988.

    Background

    CHOICE submitted a formal complaint to the OAIC, detailing how Bunnings, Kmart and The Good Guys may have breached the Australian Privacy Act through their use of facial recognition.

    Specifically, it said the retailers have broken Australian Privacy Principles 1, 3, and 5 which relate to the companies' privacy policies, the reasonable collection of sensitive personal information, and obtaining consent from people whose faceprints were gathered. In the complaint, CHOICE senior campaigns and policy advisor, Amy Pereira said:

    CHOICE is concerned that the retailers' practices related to their use of facial recognition technology pose significant risks to individuals.
    The social and economic risks include invasion of privacy, misidentification, discrimination, profiling and exclusion, as well as vulnerability to cybercrime through data breaches and identity theft.

    Businesses are generally allowed to use CCTV to photograph customers on their premises, but CHOICE raised concerns that privacy law has not kept pace with advances in facial recognition technology.

    While an investigation is underway regarding Bunnings and Kmart, the OAIC said "preliminary inquiries" have commenced with The Good Guys after the retailer said it will "pause the trial of the upgraded security system with the optional facial recognition technology".

    Analysis

    Journalists and publishers make mistakes. Often those mistakes arise not out of a pure drive for success or recognition, but because they believe passionately in something.

    It's that passion which might have caused Choice to commit what HNN would regard as a real error in covering the issue of facial recognition in retail environments. What is at issue is not actually the article that Choice published, calling out a range of retailers, including big-box hardware retailer Bunnings, for potential mis-use of FR. Instead, it has to do with the way in which that article was promoted to the press.

    In brief, the promotional media release provided information and opinion that was not present in the original article. As that information and opinion was largely negative in nature, this method of dissemination left Bunnings with less recourse to answer and address the insinuations and allegations made.

    It's bewildering that if Choice, a publisher, had important statements to make and facts to declare, they would not put this in an article, and instead use a media release to convey the message.

    The article

    That original article made a number of very good points. More than anything it did the research to show that Australian consumers have been largely unaware they are subjected to FR when shopping. While retailers (including Bunnings) did disclose that information, it was not done in a clear and thorough way. Information could be obtained by browsing the websites of the various retailers. In Bunnings' case, there was also a physical sign present at the entrance of stores using the technology. However, these signs and small and not prominent, according to Choice.

    A particular focus of the article was the use by retailers of what is know as "faceprint" technology, which essentially converts a facial image into a unique identifying set of numbers, making future recognition simpler and more reliable.

    As part of the article, Choice quoted Mark Andrejevic, professor of media studies at Monash University and a member of the ARC Centre of Excellence for Automated Decision-Making and Society, who stated:

    I think the other set of concerns is we don't have a clear set of regulations or guidelines on the appropriate use of the technology. That leaves it pretty wide open. Stores may be using it for the purposes of security now, but down the road, they may also include terms of use that would say that they can use it for marketing purposes.

    Choice did suggest that retailers such as Bunnings might have been in breach of the Privacy Act. Choice quotes its consumer data advocate, Kate Bower, as saying:

    We also believe that these retail businesses are disproportionate in their over collection of this information, which means that they may be in breach of the Privacy Act. We intend to refer them to the Information Commissioner on that basis.

    That's all well and good. Choice is doing a public service here by alerting both the public and governmental agencies to a developing problem with FR technology in large stores. Great.

    Reading the article alone, the general impression most readers might have had was that the principal "sin" of Bunnings was that it definitely needed bigger signs in front of its affected stores. A deeper reading is that the industry would benefit from the establishment of clear standards, and some kind of audit process, to ensure that this information was not abused in the future.

    It's very difficult, however, to condemn a retailer operating in what Choice admits, through quotes from experts, is not a very well-defined legal area, for what comes down to not guessing what form future legislation and guidelines might take.

    The press release

    The Choice media release of 15 June 2022 differed in some ways from that article. For example, where the quotes from Ms Bower in the article were somewhat guarded, the media release quotes were less so. For instance, the media release quotes Ms Bower as stating:

    The use of facial recognition by Kmart, Bunnings and The Good Guys is a completely inappropriate and unnecessary use of the technology.

    This is a little confusing as Ms Bower states elsewhere that only Bunnings responded to queries about the technologies, so it's not clear where the background research to that statement originates.

    The quote continues:

    Using facial recognition technology in this way is similar to Kmart, Bunnings or The Good Guys collecting your fingerprints or DNA every time you shop. Businesses using invasive technologies to capture their customers' sensitive biometric information is unethical and is a sure way to erode consumer trust.

    If these are such important points, why were they not included in the original article? Perhaps that's because it is something of a stretch to link gathering DNA to facial recognition. It's certainly evocative, but is supported by analysis?

    The real final point where it seems to HNN that Choice may have stepped over a line is in this statement quoted from Ms Bower:

    The technology is capturing highly personal data from customers, including infants and children.

    Bunnings has very clearly stated since the publication of the article - or, rather, media release - that it has no interest at all in using FR on minors. Presumably Bunnings would have answered that question the same way prior to publication - if the company was asked. And, again, apparently the other retailers did not provide any information. So it's simply difficult to work out to what facts Ms Bower is actually referring. Does she have an inside source? Or is it guesswork?

    If this is so important, why isn't it in the actual article? Why would you omit the important fact that FR was being used on "infants" from the article?

    It's good to be passionate about good causes, and it can be frustrating when the pubic pays insufficient attention to them. That frustration is just part of being a journalist. You just have to believe that even if an issue doesn't get the attention it deserves, it still matters, it still counts. Because the alternative is far worse.

    Related

    Bunnings uses facial recognition technology - HNN Flash #98, June 2022
  • Sources: The Guardian, News.com.au, Australian Financial Review, AAP General News Wire, Australian Computer Society Information Age and Gizmodo
  • bigbox

    UK update

    Kingfisher sets stronger zero-net targets

    It has unveiled a new wave of environmental targets as part of its annual report on responsible business

    Home improvement retail group Kingfisher - owner of B&Q and Screwfix - said it is bringing forward its net zero target to 2040.

    In its 2021/22 financial year, it reduced the carbon emissions - scope one and two emissions - in its own operations by almost a quarter (24.5%).

    At the same time, 44.1% of its annual sales - or GBP5.8 billion of GBP13.2 billion sales made in the year to January 31 - were from sustainable home products - a figure that the retail group now aims to raise to 60% by 2025.

    The group said that 87.2% of the wood and paper in its products, and in all of its catalogues, are now being responsibly sourced and will be Forest Positive by 2025/26.

    Kingfisher reduced its emissions this year by moving to 100% renewable energy, investing in energy efficiency measures and starting to use alternative fuels in its delivery fleets. The group now aims to cuts its operational emissions by 37.8% by 2025/26 and to reduce its scope three emissions - from the use of its products once sold, as well as from the goods and services that it buys - by 40% per GBPmillion of its turnover by 2025/26. Thierry Garnier, chief executive of Kingfisher, said:

    We are committed to helping tackle climate change by setting targets both in the short and in the long-term. In the short term, we are on track to reduce our carbon emissions in line with global efforts to limit warming to below 1.5°C by 2025. In the long term, we are now committed to reach net zero emissions by the end of 2040.
    Helping our customers to live in more sustainable homes is another of our key priorities. We think everyone deserves a greener, healthier home - that's comfortable to live in but uses fewer resources and costs less to run. With rising energy prices, home energy efficiency has never been more important.

    Its four responsible business priorities are tackling climate change and creating forests, making greener, healthier homes affordable, tackling bad housing and becoming a more inclusive company. Mr Garnier said:

    There is more to do, but we have made good progress since last year, not only with our progress on carbon reduction but also with our work to become a more inclusive company, and our commitment to help people living in unfit housing.

    Related

    Wesfarmers' retail clean energy deal in Queensland.

    Wesfarmers' retail businesses sign onto clean energy - HNN Flash #88, April 2022

    Bunnings pledges to source 100% renewable electricity for its operations by 2025.

    Bunnings aims for 100% renewable electricity by 2025 - HNN Flash #22, November 2020
  • Source: Internet Retailing
  • bigbox

    Big box update

    Bunnings store proposal in Perth arts precinct

    The local arts community believes the unique district is at risk of being destroyed by a large development

    An area of Perth known as the Pickle District has become the latest location for a $25 million development application to build a Bunnings store, with a childcare centre, and retail and hospitality tenancies in a five-storey complex.

    The Pickle District is currently a burgeoning arts precinct, home to art galleries, design and photography studios, a boutique theatre and event spaces, all within a 300-metre radius.

    WAtoday reports the development would take up the block between Cleaver, Newcastle and Old Aberdeen streets to the border of gallery Linton and Kay and demolish the buildings that house existing businesses including Cleaver Street Co, STALA Contemporary, Voxlab, Old Habits, Gourmet Trader and 2 Brothers.

    Pickle District's Town Team spokesman and artist Jon Denaro said the development would be devastating. He told WAtoday:

    We are not opposed to a development in the area, however we want to see a development that honours the existing precinct and is geographically, and culturally valuable.
    The proposed development destroys everything we have been building, the community and the whole potential of the precinct.

    Bunnings property and store development director Andrew Marks said the proposed store would be a small warehouse and form part of a wider development which is being led by a developer.

    We're always very mindful of community feedback and as a potential tenant, we would listen to concerns raised and work closely with the developer through their continued community engagement as they progress their application.

    Developer Saracen Properties said it would bring extensive investment to West Perth and act as a catalyst for the redevelopment of the Pickle District. A report to council said:

    This development will be the first major mixed used multi-storey redevelopment within the locality.
    Taking advantage of these corner locations, the proposed development will comprise recognisable and iconic building features which reflect existing structures and operations within the Pickle District, intended to strengthen its relation with the history of the area.

    Saracen Properties said it had incorporated two spaces - a lower level community space and rooftop event space - to allow the Pickle District's Town Team to continue to operate on the site, and ensure the demolition of warehouses did not take away the area's character.

    Janet Holmes à Court is the owner and director of Holmes à Court Gallery located in the Pickle District. She also told WAtoday:

    Over the past eight years I have seen and have been a part of a growing Pickle District. It has become a totally unique, one-of-a-kind arts precinct.
    The proposed Bunnings development is slap-bang in the middle of [it] and its impact will be insurmountable.
    Not only will it erase small businesses and art galleries, but also shatter the heart of the Pickle District and future opportunities for the ongoing development of this area as a unique multi-arts destination.

    City of Vincent mayor Emma Cole said council was on the cusp of developing a precinct plan for the Pickle District.

    Wesfarmers will not land a business-as-usual Bunnings in this unique area unless they do something extremely innovative.
    Wesfarmers is a big investor in the arts and my suggestion was for them to look at adding a dedicated rooftop level for live music, art galleries and a space for existing tenants to continue their operations. This would make huge difference to how Bunnings lands in the area and adapts.

    The City of Vincent will provide a recommendation to the Joint Development Assessment Panel which will make the final decision.

  • Source: WAtoday
  • bigbox

    USA update

    The Home Depot undertaking a network refresh

    The hardware retailer is also rolling out 125,000 mobile devices to enhance store staff and customer experiences

    The Home Depot is investing in its network infrastructure that will also allow it to streamline its IT management and operations.

    The home improvement retailer is making a large-scale investment in edge technology and network as a service (NaaS) to drive enhanced customer and employee experiences across its North American stores.

    The Home Depot said it has selected Aruba ESP (Edge Services Platform), delivered via HPE (Hewlett Packard Enterprise) GreenLake for Aruba networking, because it provides a solution with agility and flexibility.

    The retailer continues to enhance the interconnected experience that blends the digital and physical worlds; one that allows customers to peruse, research, and purchase with ease, and delivers a familiar experience, regardless of whether they're in-store, online, or using the mobile app.

    Home Depot bricks-and-mortar stores continue to be the centre of the customer experience - in the first quarter of 2022, more than 50% of online orders were fulfilled through a store.

    Delivering a seamless experience to its customers and 500,000 employees is important to The Home Depot. Daniel Grider, vice-president of technology, said:

    Our goal is to enable technology to remove the friction from our customers' and associates' experiences each and every day.
    Our customers trust us to have the right tools and materials to complete their home improvement projects; having an in-store network that further supports interconnected capabilities like in-store navigation or image search allows them to get back to their projects more quickly.

    The Home Depot's technology investments and initiatives are intended to make it easier for customers to design, visualise, and buy materials for their projects. For example, maintaining strong connectivity in stores will help provide Home Depot staff the ability to deliver a great customer experience.

    The Home Depot's refreshed network should streamline IT management and operations. Solutions such as Aruba Central cloud with AIOp capabilities allow the company to proactively monitor network health and address issues before they negatively impact performance.

    The Home Depot's wireless solution includes Aruba location services via WLAN APs, which provide zero-touch determination of AP location, continuously validate and update location, and provide a set of universal coordinates that may be transposed on any building floor map or web mapping platform.

    Related

    Lowe's commitment to edge technologies - HNN Flash #98, June 2022

    Mobile devices

    The Home Depot is also beginning to roll out 125,000 new mobile devices for store staff. The devices, called hdPhones, will be in all US stores by the end of the year, so that every staff member working in-store will have a new device.

    With the latest mobile device technology in collaboration with Zebra Technologies, HPE and Aruba, The Home Depot is making it faster and more convenient for its store associates to serve customers.

    The Home Depot is the first major retailer to combine the new Zebra devices and Aruba Wi-Fi 6 across its more than 2,300 stores, it said. With the combined technologies, the new mobile devices can communicate anywhere across the entire store and into the parking lots.

    The new hdPhones will improve engagement between customers and store staff, while helping customers locate products faster, and quickly connect with experts across the store and beyond. Advanced-range barcode scanning enables staff to locate products, check pricing and inventory availability in hand or from more than 40 feet away, which is particularly helpful when serving customers and locating products in overhead storage.

    Additionally, docking with Zebra's Workstation Connect enables store associates to help customers by viewing and demoing products and specifications on larger screens. Additional capabilities include multi-device integration, more efficient app speeds, in-store texting, direct walkie talkie communication, and more. Executive vice-president and CIO, Fahim Siddiqui, said

    Our customers expect a frictionless experience, in our stores and on their mobile devices. We continue to identify ways to make it more seamless for our customers to shop wherever, whenever and however they want. The enhanced digital in-store environment allows our customers to more quickly get what they need to complete their projects with the help of a more connected associate.

    The home improvement chain first deployed handheld tech for associates in 2010. At the time, the retailer deployed 30,000 transactional/communication devices in 1,970 of its stores, providing store staff with handheld technology that combines inventory management and analytics functions, a phone, a store walkie-talkie, and label printing with POS.

  • Sources: Chain Store Age and RIS News
  • bigbox

    USA update

    Lowe's enters the metaverse

    The home improvement retailer is making more than 500 digital assets available for free to virtual and augmented reality developers

    Lowe's said it will begin helping builders of the metaverse create new possibilities. Rather than entering the metaverse with a storefront to sell virtual goods, Lowe's aims to equip developers free of charge with items from its real-world shelves to make their creations more useful and more inspiring.

    To start, Lowe's will make more than 500 3D product assets available for download for free via Lowe's Open Builder, a new hub designed to be available to all creators. They assets address key challenges of interoperability and accessibility, and are based on real products the company currently sells online and in its stores.

    As the first major home improvement retailer to enter the metaverse, a key goal would be to watch consumer behaviour to eventually capitalise on the opportunity that might exist.

    Lowe's executive vice president and chief brand and marketing officer Marisa Thalberg told CNBC in an exclusive interview the retailer decided not to choose one metaverse platform or game like Fortnite or Roblox but rather "a kind of an agnostic and kind of democratised approach".

    While other brands have found immediate ways to make money in the metaverse, even on an experimental basis, Ms Thalberg said:

    This isn't about immediately jumping in and trying to make an event or immediately commoditising it.

    Rather, she told CNBC:

    Our goal really is to take this new frontier and help people use their imaginations and help them make their virtual spaces as exciting and inspirational and enjoyable as their real world spaces. And that's the only benefit we seek to obtain at this point.

    Lowe's is also releasing a free, limited NFT* collection of boots, hardhats and other related accessories for builders on the Decentraland platform to the first 1,000 participants.

  • An NFT* (Non-Fungible Token) is a financial security consisting of digital data stored in a blockchain, a form of distributed ledger. The ownership of an NFT is recorded in the blockchain, and can be transferred by the owner, allowing NFTs to be sold and traded.
  • Seemantini Godbole, Lowe's executive vice president and chief information officer, also told CNBC exclusively the retailer is applying many of the principles it currently uses for shoppers for this metaverse project.

    What we have noticed in our current mediums like Lowes.com and in our stores ... people like to experiment and while they're shopping and getting inspired they like to put things together in the virtual world before they start their project.
    It's the same idea for the metaverse. That you want them to experiment, feel and understand how it's going to look before they start the project in the real world.

    Ms Godbole said many of these metaverse assets had already been created as 3D digital versions of physical products available for purchase, to help online shoppers visualise the real-life dimensions and features.

    Lowe's is already using virtual and augmented reality technology to allow shoppers to design an entire kitchen online or map their home's floor plan using their smartphone as examples. Ms Godbole said:

    There is just a huge appetite from our customers to use emerging technology [like the VR and AR tools]. We are applying some of those lessons in the metaverse.

    At the moment, Lowe's isn't offering a physical good with the purchase of a virtual one, or any link back to its website from any metaverse platforms, Ms Godbole said. But that could change.

    In the future, we could absolutely think about, how do all these different things link, and make sure that [metaverse users] are able to shop these items on Lowe's dot com or in our stores.

    Through its experimentation and focus on delivering what customers need, Lowe's believes it is uniquely positioned to leverage emerging technology to help people imagine the possibilities. Ms Godbole said:

    Over the past several years, we have infused new technologies into the planning and shopping experience and know our customers have benefitted greatly from being able to explore and test home improvement projects in the virtual world before taking the leap to implementation in their real-world homes or job sites.
    By entering the metaverse now, we can explore new opportunities to serve, enable and inspire our customers in a way no other home improvement retailer today is doing.

    Ms Thalberg acknowledged that the typical metaverse participant "skews really young" likely younger than the typical Lowe's shopper or homeowner today.

    But if you look at kids who've used platforms like Minecraft and Roblox, a lot of what they do there, is fascinatingly enough, build and design. This idea of being able to build and decorate and design and improve is kind of core to how these spaces are emerging.
    And so if we catch them young, that's great, but we see a real utility too, as we look to a huge wave of millennial new homeowners who aren't afraid of technology.

    Analysts see a big breakthrough coming for the metaverse. By 2026, a quarter of consumers will spend at least one hour per day in the metaverse, said consulting and research firm Gartner estimates. Morgan Stanley estimates the total addressable market for advertising and e-commerce opportunities could be worth USD8.3 trillion in the metaverse, with USD697 billion in home and home related spending. The firm lists walking through "home renovation plans" as an example.

    Related

    While this is the company's first step into the metaverse, Lowe's has been using emerging technology to help customers gain inspiration and more easily visualise and plan their home improvement projects for many years. This includes the beta version of an end-to-end room scanning, measurement and estimate tool called "Measure Your Space" in its iOS app.

    Lowe's launches room measurement tool - HNN Flash #71, November 2021
  • Sources: CNBC, Wikipedia, Chain Store Age and Lowe's Home Improvement
  • bigbox

    Big box update: Delivery and store network

    Bunnings Group will use Zoom2u delivery platform

    Bunnings' flood-hit Rocklea store has reopened after major repairs and Bunnings Shepparton turns five

    Zoom2u Technologies (Z2U) recently announced its partnership with Bunnings Group for the use of its delivery platform.

    The Zoom2u platform is an Australian owned delivery platform that connects users with local independent couriers in their area for fast, same-day delivery. It provides customers with a live tracking link showing the real-time location of the delivery as well as an estimated time of arrival.

    The agreement is not exclusive and follows the completion of a trial undertaken with Bunnings across select stores in Australia. Under the agreement, Bunnings is under no obligation to meet a minimum volume of spending or fee commitments.

    The finances are yet to be revealed as it is dependent on delivery volumes. In The Market Herald, Z2U founder and CEO Steve Orenstein, said:

    ...To be chosen as one of Bunnings' last mile delivery providers is a validation of the Zoom2u Platform. It has been a pleasure working closely with Bunnings over the past few months as they trialled the service.

    About Zoom2u Technologies (ASX:Z2U)

    Z2U's core service is the Zoom2u platform, which is a tech-based courier service that allows accredited drivers to make deliveries. It is an algorithm-based platform that can respond with flexibility to demand surges, and provides detailed location data for customers.

    The company does not have warehouses and does not own or lease a fleet of vehicles. Instead it has a team of over 20 tech developers tinkering with software for customers and more than 7000 drivers. Unlike Amazon, which processes deliveries from warehouses and delivery centres, Zoom2U often facilitates deliveries from brick-and-mortar stores to consumers.

    Mr Orenstein said this model gives smaller players an advantage, as businesses can "leverage their retail footprint" instead of working through the Amazon ecosystem. Stores can operate as "micro-warehouses", he said.

    That allows them to be really close to the consumer, and to be able to do an even faster delivery because the delivery system is really short.

    The platform passed 2.7 million completed deliveries in late March, as the market shifts towards customers with larger volume requirements.

    The company also has the Locate2U platform, a SaaS-based tracking delivery service that allows clients to manage their logistics in-house. It is essentially a white label product for businesses to manage their own delivery fleets. Locate2U's customers Amart Furniture, Bing Lee, Super Pharmacy, and waste management firm Cleanaway.

    Z2U has been operating for eight years after it was founded in 2014, with early backing from Perennial Value Management, Gandel's Invest (the investment vehicle for the billionaire Gandel family) and Deals Direct co-founder Mike Rosenbaum.

    Its client base now includes names such as Australia Post, Best & Less, Couriers Please and JayCar.

    By December 2021, Z2U also completed the acquisition of the Local Delivery Shopify App in an $880,000 all-cash deal. Integrating the Local Delivery app gives Zoom2u direct access to another 570 customers across more than 45 countries.

    After its ASX initial public offering (IPO) in September 2021, the business raised $8 million to fund its future growth.

    For more information, visit the Zoom2u home page here:

    Zoom2u delivery platform

    Rocklea store

    Bunnings' Rocklea store has reopened with a revamped cafe and kitchen design centre after being impacted by the floods. It had to seek specialist advice to ensure the warehouse was structurally and hygienically safe to reopen, according to The Courier-Mail.

    However the hardware retailer said it still had not decided what to do with its Oxley store, although redevelopment options in the coming six to 12 months could include a flood-resilient design.

    The revamped Rocklea Bunnings now includes energy efficient LED lighting throughout, a children's playground, new bathroom displays and new format Trade Desk for tradies.

    Bunnings Shepparton

    Bunnings Shepparton celebrated its fifth birthday on the Queen's Birthday long weekend, marking five years of trading. Bunnings Shepparton complex manager Trish Fedley said staff at the store were excited to be celebrating the fifth birthday. She told Shepparton News:

    We love being part of the Shepparton community and it's a great milestone that myself and the team are really proud of.
    Helping customers with their DIY and project needs, and supporting our local community groups through the sausage sizzle and other hands-on activities, has been the highlight for us.
  • Sources: The Market Herald, Stockhead, Inside Retail, Rask Media, The Courier-Mail and Shepparton News
  • bigbox

    Big box update: Privacy concerns and new-gen customers

    Bunnings uses facial recognition technology

    During his keynote speech at the 8th Global DIY-Summit Bunnings Group managing director Michael Schneider spoke about strategies to attract Generation Z

    An investigation by consumer group CHOICE has found that Bunnings, Kmart and The Good Guys are analysing images of people's faces from video camera - CCTV - footage to create profiles based on customers' unique biometric information such as facial features (known as a "faceprint"). Facial recognition technology captures and stores this information.

    CHOICE consumer data advocate, Kate Bower said most customers aren't aware how their face is being captured and used which is raising privacy concerns.

    In CHOICE magazine, Ms Bower said the Privacy Act considers biometric information to be sensitive data, and that a higher standard is applied to it than to other types of personal information.

    It requires that your collection of that information has to be suitable for the business purpose that you're collecting it for, and that it can't be disproportionate to the harms involved.
    We also believe that these retail businesses are disproportionate in their over collection of this information, which means that they may be in breach of the Privacy Act. We intend to refer them to the Information Commissioner on that basis.

    Irrespective of whether the retailers are in breach of the Act or not, Ms Bower believes that clearer and stronger regulations are needed around customer consent and how retailers obtain and use facial recognition data.

    According to CHOICE, Kmart and Bunnings have small signs on the stores where facial recognition technology is used. Both the Bunnings and Kmart privacy policies state the technology is for "loss prevention or store safety purposes". Ms Bower said:

    The use of facial recognition by Bunnings, Kmart and The Good Guys is a completely inappropriate and unnecessary use of the technology.
    Discreet signage and online privacy policies are not nearly enough to adequately inform shoppers that this controversial technology is in use. The technology is capturing highly personal data from customers, including infants and children.

    Simon McDowell, Bunnings' chief operating officer, told CHOICE that facial recognition is one of several measures the retailer has in place to prevent theft and anti-social behaviour. He said:

    At selected stores our CCTV systems utilise facial recognition technology, which is used to help identify persons of interest who have previously been involved in incidents of concern in our stores. This technology is an important measure that helps us to maintain a safe and secure environment for our team and customers.
    We let customers know about our use of CCTV and facial recognition technology through signage at our store entrances and also in our privacy policy, which is available on our website.
    It's really important to us that we do everything we can to discourage poor behaviour in our stores, and we believe this technology is an important measure that helps us to maintain a safe and secure environment for our team and customers.

    Businesses are generally allowed to use CCTV to photograph customers on their premises, but CHOICE points out that privacy law has not kept pace with advances in facial recognition technology. According to Dennis B Desmond, lecturer in Cyberintelligence and Cybercrime Investigations at the University of the Sunshine Coast (QLD) wrote in The Conversation:

    Current Australian privacy laws require retailers to disclose what data are being collected, retained and protected, as well as how it might be used outside of a loss prevention model.

    The investigation

    CHOICE said it asked 25 leading Australian retailers whether they were using facial recognition technology and examined their privacy policies. Based on that investigation, it said Bunnings, Kmart and The Good Guys appeared to be the only retailers among that group who were using the technology.

    Between March and April 2022, CHOICE canvassed more than 1000 Australians in a survey to gauge consumer awareness of facial recognition technology.

    CHOICE staff members also visited some of these stores in person as part of the investigation. Ms Bower says the Kmart and Bunnings stores they visited had physical signs at the store entrances informing customers about the use of the technology, but the signs were small, inconspicuous and would have been missed by most shoppers.

    CHOICE said most customers are not aware some retailers are using facial recognition technology. More than three in four respondents (76%) said they didn't know retailers were using facial recognition.

    This lack of awareness doesn't mean people aren't concerned, according to CHOICE. Most survey respondents (83%) say retail stores should be required to inform customers about the use of facial recognition before they enter the store, and 78% expressed concern about the secure storage of faceprint data. Nearly two thirds of respondents (65%) are concerned about stores using the technology to create profiles of customers that could cause them harm.

    As the statement from Bunnings indicates, most privacy policies can be found online. However Ms Bower said:

    Most of these privacy policies you have to search for online, and they're often not easy to find. But because we're talking about in-person retail shops, it's likely that no one is reading a privacy policy before they go into a store.

    Privacy Act

    CHOICE said it has notified the OAIC (Office of the Australian Information Commissioner) of its findings and asked it to determine whether the use of the technology is consistent with the Privacy Act. Ms Bower said:

    CHOICE is concerned that Australian businesses are using facial recognition technology on consumers before Australians have had their say on its use in our community.

    A five-year review of the Privacy Act is currently being conducted by the Attorney General. Ms Bower said it is an opportunity to strengthen measures around the capture and use of consumer data, including biometric data.

    CHOICE is also calling on the federal government to create a guide to protect consumers who don't want their "faceprint" on file.

    New generation customers

    In The Australian, Bunnings MD Michael Schneider said Bunnings is increasingly reaching out to social media influencers and bloggers, building its YouTube presence and developing apps to help younger people better visualise their living spaces.

    Speaking at the Global DIY Summit in Copenhagen, Denmark, Mr Schneider focused much of his keynote address on the challenges and opportunities of Gen Z and what changes to the business were being made to appeal to this key demographic. He said:

    Just as we got our collective minds around millennials, along came Generation Z. In the Asia-Pacific region, they make up around 20% of the population and are reaching adulthood at a moment of reckoning for the environment, not to mention when home ownership is harder than ever to attain - and having just spent some of their most formative years in many and varied forms of lockdown.
    We believe Gen Z have defined attitudes and preferences that will require a reimagining of the DIY shopping experience. Today, they are infrequent purchasers of DIY products, relative to the average DIYer. And whilst that's probably not too surprising given most still live at home, it means there are fantastic opportunities to connect and engage and inspire them around all things DIY.

    Mr Schneider told the conference that he believed younger Australians were still focused on their future homes despite the declining home ownership rates of young Australians.

    I say this because our research shows they are absolutely thinking about their future homes and, despite affordability challenges, they're optimistic they will own a home one day.
    Their affinity with technology means they are smart home enthusiasts - more than two-thirds are interested in installing smart home tech in the future and similarly Gen Z are really interested in learning more about interior design and home styling.

    Mr Schneider said that unsurprisingly, Gen Z turned to online sources for DIY information and inspiration, and this was a space Bunnings would increasingly play in. He said Bunnings would join with social media influencers, create YouTube videos to help Gen Z discover the Bunnings brand and be inspired about home projects.

    They want to source their DIY inspiration and discover products much in the same way as they curate their social media feeds and use other digital services. For Bunnings. that's meant doing things a bit differently, seeking out social influencers and brands on social media, and thinking about apps to help visualise a space online, blogs and YouTube videos.

    This was shaping how Bunnings communicated with Gen Z on digital platforms, he added. He said Bunnings was working more with social influencers too, recognising the important part these people played in Gen Z making their own retail purchasing decisions.

    We're working extensively with social influencers to bring DIY inspiration to life in a relevant and relatable way. We started working with influencers a few years ago and today we have an extensive program.

    Bunnings has been developing an online community called Bunnings Workshop that provided ideas and inspiration customers need to start a new project. This was being embraced by younger consumers, Mr Schneider said.

    Pleasingly, our membership base has more than doubled in the past two years, and 35 per cent of the Workshop audience are Gen Z or Gen Y, and we have big plans to expand Workshop, including exploring community engagement opportunities such as promoting local community projects and connecting groups with volunteers - to help Gen Z fulfil their desire for purpose.

    Related

    Bunnings' Workshop went live in 2016.

    Bunnings goes social with Workshop website - HI News 2.16 - August 2016

    Bunnings is marketing towards Millennials with its "Make It Yours" video series.

    Bunnings reaches out to Gen M with "Make It Yours" - HNN Flash #11, December 2019

    UK DIY retailer Wickes said it launched the home improvement industry's first campaign on TikTok.

    DIY campaign stars TikTok influencers - HNN Flash #30, January 2021

    About the Global DIY-Summit

    Mr Schneider's keynote speech at the Global DIY-Summit in Copenhagen, Denmark, was centred on the theme: "Always Evolving... Markets, Offers and People". It was held from 8 to 10 June 2022.

    According to the event's in-app voting tool, over 31% of visitors were retailers, approximately 55% were manufacturers while the remaining delegates were consultants, industry associations and education providers.

    Attendees were given the opportunity to attend a Store Tour of Copenhagen, visiting a range of home improvement retailers, including one store pioneering sustainability through re-furbished building materials.

    In addition to presentations, three main workshops focused on driving high productivity in business, remaining relevant in times of disruption, and driving incremental sales on Amazon.

    The next Global DIY-Summit will be held in Berlin, Germany, from 14 to 16 June 2023.

  • Sources: CHOICE, The Guardian Australia, ABC News, The Conversation and DIY Week
  • bigbox

    USA update

    Home Depot and Adobe partner on customer personalisation

    Lowe's Companies is bolstering its omnichannel approach using Dell Technologies

    The Home Depot is deploying the Adobe customer data platform to get a deeper view of customer journeys and to enhance the omnichannel experience. The data platform is part of Adobe's Experience platform.

    The technology will allow the home improvement retailer to deliver personalised campaigns within 24 hours, which previously took seven to 10 days to deliver.

    The effort is an expansion of Adobe's continuing partnership with The Home Depot. According to a company press release:

    With so many touchpoints, the Adobe partnership will provide comprehensive insights into the customer journey. This will enable The Home Depot to optimise experiences across channels while refining marketing investments. This marks the next phase of a partnership that began with digital tools including web analytics and A/B testing, as well as creative cloud applications to design and deliver new online services and experiences.

    Melanie Babcock, vice president of integrated media at The Home Depot, said in the release:

    The Home Depot made early investments in providing omnichannel shopping experiences, and these digital and physical assets continue to guide our strategic priorities.
    Our expanded partnership with Adobe will enable us to enhance the customer experience even further, driving personalisation at scale and further optimising The Home Depot experience across online and in-store.

    Anjul Bhambhri, senior vice president, Adobe Experience Cloud, said in a statement:

    With Adobe Experience Platform, The Home Depot can align teams around a single view of the customer, with strict governance and activation capabilities that will make experiences even more connected and relevant.

    Related

    Home Depot tech focuses on customer experience - HNN Flash #92, April 2022

    Lowe's and Dell

    John Dabek senior director of infrastructure at Lowe's and Alison Biers, director of global marketing for edge solutions at Dell Technologies, recently spoke with industry analysts Dave Vellante and Lisa Martin at the recent Dell Technologies World event. They addressed Lowe's commitment to edge technologies as a key to maintaining its market positioning. Mr Dabek said:

    It's the edge, and the edge has become very, very important for us, because that's where we want to put all of our technologies in the store, closer to the store.

    The extension of compute and storage capabilities to the edge has become imperative for companies to stay competitive, according to Ms Biers. This notion is especially important in a field like retail, where the margins are slim and customers can be fickle.

    Companies like Lowe's have to balance the satiation of perceptive buyers looking for quality and convenience with a complex business model in a changing landscape. Dell's VxRail has been that answer for Lowe's. Mr Dabek explains:

    When you talk about modernising at a fast pace, the first 600 stores that we did with VxRail, we did in three months with the help of Dell. The main goal was zero disruptions in the store. Now we're talking about 100,000+ square-foot stores, so big stores, and we have a very short window.

    In addition, the pandemic exponentially increased the value of Lowe's contractor-facing operations. To maintain pace and create convenience there, the company leaned on edge yet again. Mr Dabek said:

    We have 140,000 mobile devices deployed in our stores for our employees that can do everything from finding merchandise, taking and receiving calls. They can take the device and do a checkout instead of you having to come into the store and then go out again.

    Here's the complete video interview, part of SiliconANGLE's and theCUBE's coverage of the Dell Technologies World event:

    As pandemic fuses digital and in store retail channels Lowe's taps Dell to stay ahead
  • Sources: Retail Customer Experience and SiliconANGLE
  • bigbox

    Bunnings Strategy Day 2022

    Bunnings plans trade revenue growth of $5bn

    The Bunnings part of the Wesfarmers Strategy Day saw the retailer launch a new strategy, which includes growth of its trade business, and evolution of its DIY business from supplier of goods to partner in transformation. Tool Kit Depot is to launch additional 60 stores.

    Wesfarmers held its annual Strategy Day on Thursday, 2 June 2022. HNN will be covering the Bunnings aspects of this in more depth in our upcoming edition of HI News. However, we do want to provide a summary of what seem the most important points delivered by Bunnings managing director Mike Schneider. Some of these may have an immediate impact from a strategic and operational viewpoint for hardware retailers and suppliers.

    Strategy Days tend to vary widely in terms of their importance. The most significant ones were those that occurred from 2010 to 2012, when Bunnings outlined its strategy to overcome the challenge from Woolworths' failed Masters Home Improvement big-box retailer, followed by the 2017 and 2018 Strategy Days which dealt with the decline of Bunnings UK & Ireland (BUKI).

    While the 2022 Strategy Day was not as significant as those, it is the most significant since 2018, as it highlights a shift in strategy for Australia's only big-box hardware retailer. That was outlined - to some extent - by Mr Schneider in his introductory remarks to the Strategy Day presentation:

    We've achieved transformative acceleration of our capabilities, not only in our technology, but across our network design and commercial offer. But a bit like our tagline, this is just the beginning for our next stages of evolution and growth.

    Unfortunately, we have to report that many of these changes will have a direct and significant negative impact on smaller independent hardware retailers over the next year to two years - in other words, it's more immediate than medium-term.

    HNN would highlight the following points as being the most significant.

    Commercial/Trade markets

    It's no secret that Bunnings has been expanding its trade business over the past four years. When the Australian Competition & Consumer Commission (ACCC) gave the go-ahead for Mitre 10 to merge with the Danks-derived Home Timber & Hardware Group (HTH) to form Metcash's Independent Hardware Group (IHG), HNN commented that the end result would be more competition in trade from Bunnings - and that is pretty much what has happened.

    However previously it was not possible to quantify the scale of Bunnings' ambition in that area. Now it is, as Mr Schneider outlined this in response to a question from veteran analyst Shaun Cousins of UBS.

    Yeah, well our aspiration in time, Shaun, is to get the two businesses [DIY and Trade/Commercial] roughly 50/50, which it is in New Zealand, and has been for a long time. But that's not at the expense of consumer growth. So commercial is slowly tracking towards 40% at the moment. But that's because consumer continues to grow well for us. So the commercial [team at Bunnings] have got a big job in front of them.

    Bunnings total revenue for FY2021/22 H1 was $9.2 billion, and revenue for FY2020/21 H2 was $7.8 billion, so the total for the 12 months to December 2021 was $17.0 billion. If we consider Bunnings' trade revenue is around 38% for that period, this means the trade/DIY split is $6.5 billion to $11.5 billion, a difference of $5 billion.

    What Mr Schneider is talking about here is not an even redistribution of that $17 billion so that trade increases by $2 billion to $8.5 billion. Instead, he expects trade to reach $11.5 billion as well - an increase of $5 billion. Added to that, as Mr Schneider points out, overall revenue continues to grow, as that number will be closer to an increase of $5.5 billion.

    Obviously, that is not going to be achievable in the short term, but even if it is a five-year goal, that means extracting over $1.1 billion a year from, essentially, the market currently held by independent hardware retailers. To put that in perspective, that's close to half the annual revenue of Metcash's Independent Hardware Group (IHG) prior to the acquisition of Total Tools Holdings.

    In case there is any doubt that Bunnings intends to compete in the same market as independent retailers, the retailer was very explicit about the profile of its intended market. Mr Schneider remarked:

    But [trade] has got to grow hard in a very profitable way. So we're not taking our eye off the types of customers we're serving and chasing high volume, low margin, that's got risk all over it for everyone. So we're sticking with the sort of small to medium builders and trades and really deepening those relationships, which is setting us up really well.

    This was backed up by Bunnings' chief financial officer, Rachael McVitty (she has been in the role since September 2021, coming over from Blackwoods) in response to an analyst's question.

    We've got a pretty diversified portfolio and mainly focused on the small- to mid-tier residential builders. So credit limits are quite small, and there's no single exposure to any one customer or portfolio of customers. So you know, average size is less than $20,000, to give you an idea, and average credit terms are 30 days. So we have a pretty good read pretty quickly when payment is not made but really strong relationships with our customers. So we've also got really deep understanding of their credit profile as well.

    It's interesting to place this in context with the remarks by the CEO of IHG, Annette Welsh, at the Metcash Strategy Day in 2021, when she said her goal was to have IHG surpass Bunnings in trade revenue.

    One key part of this ambition in trade seems to be Bunnings' truss manufacturing. As Mr Schneider said:

    We're optimising our capabilities, brands and assets to partner across more phases of the build from frame to fix through to finishing. There are significant opportunities for us to participate more strongly in the frame to fix element of the build. We're addressing these through stronger project management capabilities, and an expanded frame and truss network. Our frame and truss sites in Australia supply high quality roof trusses, floor trusses and wall frames.

    This also extends to providing specific builder services:

    We're also introducing new supply and install services including joinery, windows and flooring to save our builders time.

    Tool Kit Depot

    Fairly evidently, the Bunnings expansion into power tool specialist retail with Tool Kit Depot (TKD) will be a part of this planned growth. Mr Schneider provided a thumbnail sketch of projected growth in this area as well. In response to a question by analyst Craig Woolford of MST Marquee he said:

    Tool Kit Depot's aspiration is to get to sort of 70 odd stores over the next few years.

    He provided something of a timeline as well:

    We also plan to expand our Tool Kit Depot store network beyond Western and South Australia in the new financial year, moving into regions where we see strong underserved demand for professional tools.

    Mr Schneider also said:

    Tool Kit Depot is now established in Western Australia with four stores and a refresh of all stores in South Australia is almost complete. And our network planning for national coverage is shaping up really well.

    It seems likely from these statements that there will be an expansion in TKD outlets sometime between July and September in 2022.

    Category growth

    Identifying key areas of category growth from Strategy Day remarks is not always easy. These are narratively scattered, so it is best to start by listing them.

    Mr Schneider on opportunities:

    We've identified a range of opportunities to optimise and expand our existing offer to cater to strong customer interest, including smart security, outdoor furniture and cleaning with a renewed focus on healthy homes.

    Mr Schneider on growth:

    We're focused on growth across all of our product categories, with some specific examples including expanding our room furniture solutions to help our customers organise their homes, strengthening our garden and garden decor offer by extending and localising our plant ranges and improving service in our nurseries.

    Mr Schneider on kitchen and bathroom:

    Further, in kitchen and bathroom, we're increasing our range of customisable and modular products and introducing more complementary accessories.

    Further to that, Mr Schneider on in-home services:

    We're seeing strong interest for in-home services, where Bunnings designs, assembles and installs solutions for our customers. For the first time, we're introducing design consultants to help our customers design their dream bathrooms.

    Mr Schneider on pets:

    We're introducing new pet categories from collars, toys, bowls and beds through to smart pet products.

    Mr Schneider on caravan/RV:

    We're lining up a new range of products to help caravan and RV owners maintain their home on wheels.

    He also mentioned the introduction of appliance sales to some "selected stores". So the list would be, roughly:

  • Garden/plants
  • Room furnishings, including kitchen and bathrooms, but expanding beyond that (home offices, etc.)
  • Indoor and outdoor furniture
  • Expanding existing kitchen design services to include bathroom design
  • Pets
  • Caravans and RVs
  • Smart security (CCTV, Bluetooth door locks)
  • Cleaning/home wellness
  • When we see these categories in a list, it becomes evident that what is really going on here is a shift from selling individual items/products, to selling systems. It's less about "do you want to buy a table?", or "how do I build a bookcase?", and more about "how will I furnish this room?"

    It's a move to an experiential economy, where the "lived in" experience of the house has changed. That fits in with several comments Mr Schneider made about the shift in the way families value their homes.

    The last two years have seen a considerable shift in the way that DIY customers see their homes: as a safe sanctuary, a home office and classroom, as well as an asset that underpins their financial security.

    This translates into the way Bunnings presents its "offer" to customers:

    We're focused on creating more ways to inspire and support our customers to build, improve and maintain whether it's catering to our customers love of DIY, property investors or the growing demand for services and installation.

    That cycle of "build, improve and maintain" is mentioned several times throughout the Strategy Day briefing. It might be that Bunnings is transitioning from being a "supplier" for home projects, to more of a home "partner". The goal is to take that total budget for home development, and work out how to get more of that budget spent at Bunnings. If anything, it seems to be leaning towards the approach taken by Kingfisher's brands B&Q and Castorama.

    As part of this change Bunnings is also stepping up its surveillance of supplier brands as well:

    With customers well and truly back exploring our stores, we've increased the frequency of our range reviews to present the very best of the latest products.

    Own/exclusive brands

    Mr Schneider introduced the issue of own and exclusive brands by saying:

    Our own-brand range continues to grow and has never been stronger, with names such as All Set and Garden Basics giving customers incredible prices and names such as Full Boar, Matador and Mimosa providing outstanding value.

    In response to a question by an analyst regarding how much of revenue was down to own brands, he expanded on this:

    It's a hard number to call, it's sort of around the 30% mark. But there's some swings and roundabouts in that because we've got exclusive brands like Ozito and Trojan that are actually provided to us through our supplier network. But the brand is exclusive to us or it's a brand that we own. So in the case of Trojan it is owned by Bunnings, it's licensed out to a different organisation [which does] an incredible job of innovating and doing all those sorts of things. So it's a little bit blurry at the margins, but no significant expansion, you know, purely based on the fact that we don't think we've got the sourcing sort of capabilities that many of our suppliers do.

    One area where Bunnings is quite different from, for example, US-based home improvement big-box retailers is that it participates less in the development of new products. While the Australian company may have input into product development, both Lowe's and The Home Depot at the very least partner up with some big suppliers to specify what they think the market needs.

    It's an interesting selection of own brands to choose to nominate, as well. Mimosa began as simple outdoor furniture brand, but has morphed into providing outdoor fireplaces and gazebos as well. Matador is the Bunnings outdoor barbecue range. It's rumoured to be a response to US barbecue maker Weber declining to supply Bunnings over a dispute regarding what Weber took to be "grey market" sales.

    Full Boar is the most recent Bunnings own brand, with the trademark registered in June 2020. This is mostly a line of construction/demolition equipment. It's an interesting move, because usually equipment in this range is purchased from established brands, due to the high level of stress it undergoes.

    One possibility is that as it features petrol-powered compactors and spray washers, it's aimed at the market that brands such as Milwaukee are abandoning as they move to cordless battery-powered tools. Additionally, of course, it's also a brand being sold in TKD, providing TKD with another unique point of difference from its competitors.

    Store network changes

    This is one of the more difficult areas to fully interpret. For example, Mr Schneider introduced the topic of store growth by saying:

    We've always had a variety of different but complementary store formats and sites across our network, reflecting a disciplined approach to investment and the evolving needs of the communities we serve... If we consider the next five years, we see lots of runway ahead for network growth and upgrading existing sites. We're forecasting 15 to 20 expansions, upgrades or new Bunnings warehouses and small formats per year.

    An important element of this is that Bunnings is also changing how its stores manage space.

    We're also optimising space in our stores, reviewing how we display our products to maximise ease of shop and inventory productivity. This is showing up in new, easier to shop layout through our power tools, new-look paint shop concepts, and the improvements to in-aisle product information for our barbecues, and co-locating accessories.

    When asked by Mr Woolford of MST if he could provide a percentage estimate of growth in retail floor area, he replied:

    It's about 10 to 11% over the next five years. And the way we sort of think about that is using space more efficiently.

    Mr Schneider went on to explain why space utilisation was so important to Mr Woolford.

    As we make more investments into space management and planning, and as our online offer gets stronger, we can actually scale up and down the sort of assortment that we would have in a store. So, think about a small format store. For a while there, we'd have patted ourselves on the back that we had a full Bunnings range, you know, 95 [to] 96% of the full range crammed in a small store.
    With our online offering, we might scale that back to 70% of the range, but actually a wider availability of that product in store so that the customer experience on the things that really matter are being serviced. And then we've got online and our largest stores to sort of fill out the rest of the range.

    Finally, Mr Schneider was very clear about the number of stores this would involve:

    So that that guidance, I think we've probably given over time of that sort of five to seven net new stores here. That's about that's about right. And obviously there's a couple of other things in there with frame and truss sites and fulfilment centres.

    In fact, though, from 2011 to 2020, the median value for new warehouse stores alone has been nine. So it's possible that Bunnings is slowing its development of new stores. That could be an indication that there is more concern about intra-network store competition (cannibalisation), but it also likely reflects the energy and effort that will be put into building and additional 60 TKD stores over the next three years or so.

    Supply chain changes

    In terms of its foundational strategies, perhaps the most interesting announcement at the Strategy Day was for a shift in its logistics supply chain. Mr Schneider introduced this by stating:

    Some of the current opportunities include: continuing to improve our in-store click and collect capabilities, developing stronger transport management capabilities underpinned by data and technology, introducing fulfilment centres to support our growing range and channels to market across consumer and commercial... Adding additional products to our existing cross-stock programs where it makes sense to optimise store replenishment and stock availability, and implementing technology where it makes sense.

    This was enough to alert veteran analyst David Errington of BankAmerica, who asked exactly what this "evolution" in the supply chain might mean. Mr Schneider clarified that he was talking about the "logical next step", not a "big bang" change to fully automated warehouses, like Amazon. The following three extracts describe this evolving attitude to supply hain.

    Bunnings directly controls its supply chain for globally sourced product via our distribution centre network. But most of our products come direct from local suppliers who source product on our behalf. These suppliers replenish our store network largely through third party logistics providers. The strength of this model was clear during the pandemic, where along with our supplier partners, we were able to handle unprecedented volumes of stock and maintain industry leading in stock availability of around 90% for our customers.
    I think about cross-stock there's opportunities there. And we should be thinking about these as low capital investments, you know, our products set the way stock moves through our supply chain, you know, there's not much we're seeing globally... We've been running cross stocks for a long time, particularly in our GreenLife. area. Some of our suppliers, we'll take Dulux, for example, world class supply chain, very sophisticated manufacturing process. Us doing anything with that supply chain would bring no value to anyone.
    There's lots of little suppliers in Bunnings, who are probably not as efficient with their supply chains as they could [be], could we bring value through some cross docking of those low hanging smaller suppliers, where we could consolidate products in a cross dock facility shipper to store in a more efficient manner. Make it more efficient in store from a backdrop to shelf logistics point of view, take some cost pressure off supply. That's how we're thinking about it.

    What makes this so interesting is that over the past 20 years Bunnings has been very adamant that its low level of involvement in supply chain was a real strength. The logic to that went something along the lines that time, effort and expenditure spent managing supply chain would be better spent on other activities which had a higher potential for growth.

    There have certainly been some environmental changes. With Bunnings stocking 80,000 SKUs, where once it managed 34,000 SKUs, the need for delivery consolidation is very real. Then there are also some Bunnings stores - most noticeably the one under development in the Sydney suburb of Rozelle - where planning agreements limit the number of truck deliveries per day, making cross-stocking a necessity.

    The additional possibility to consider, however, is whether growth opportunities have reduced, and the growth that can be extracted from logistics management is now worth the expenditure of effort.

    Analysis

    No analysis of this situation would be complete without mentioning the external environment. That environment is highly uncertain, and continues to pull in opposite directions.

    Displacement of expenditure

    The chart below shows the recent pickup in international departures from Australia:

    Note that the figures for April 2022 from the Australian Bureau of Statistics (ABS) are estimates. However, they do give a good indication of both how fast they could grow, and also of how they still remain at historically low levels. What would happen to the home improvement market if they not only return to previously high levels, let alone go into overdrive as people rush to take overseas vacations?

    COVID-19 continues

    On the other side of that are the grim statistics that Australia is currently sixth in the world for the rate of COVID-19 infections per 100,000 people during a week, at 94. It is also ranked at tenth for deaths in a week per 100,000 people, with a daily average of 39.5. At this point, only two-thirds of the population has received the third booster vaccine injection.

    While the current COVID-19 variant has a relatively low morbidity rate, the danger is from some new variant developing a morbidity rate closer to that of the Delta variant. The pandemic, in other words, is very far from being over in Australia.

    The economy

    Outside of that, there is, of course, rising inflation in the Australian economy, and the subsequent increase in interest rates. As this was a situation that was evidently going to happen, HNN's conclusion about the housing market during 2022 was that Australian homebuyers knew what would happen, and had decided to purchase houses and go through the down cycle anyway. That said, it is one thing to plan for something, and quite another to actually live through it.

    Other measures aren't looking all that great either. For example (via the Reserve Bank of Australia) consumer sentiment:

    Business investment as share of nominal GDP has done the seemingly impossible, and actually dropped lower over the past year, to a 29-year historical low.

    And, of course, the wage price index growth has managed to make it only back up to where it was in 2018, despite inflation.

    Is Bunnings in the right markets?

    While all that matters, perhaps the most important question is more fundamental. Is the Bunnings basic store format really what the current market needs? Or, to put that in a different way, will the store formats Bunnings uses today be basically unchanged by 2030?

    That seems unlikely, which means that what needs to be considered is mostly a matter of timing, and what the change would be. The Bunnings store format is what might be called a "narrative" style. The bare floors and general low amenity worked 20 years ago, as it was taken as a signal of "inexpensive", "good value", and even "cheap". It backed up the idea that low overheads meant that the goods on sale could have a lower profit margin.

    Today, however, that narrative barely registers with younger customers from Gen Z, and it just seems a bit odd to many from Gen Y. It's clear that Bunnings could, if it wanted to, boost amenity without having to so much raise prices as sacrifice 0.2% of its profit. Yet that would be incredibly risky, as it puts in doubt the big-boxes entire identity.

    Probably that dilemma is best illustrated by the Bunnings website itself. There is something almost institutional in feel about the website, like something built by a keen but not very versatile government department. One big factor that one senses is missing, present on the websites of The Home Depot, Lowe's Companies, Castorama, and even Homebase, is simply people. Not staff members in green aprons, but people who represent the customers. For example:

    What a great idea. But could you see Bunnings doing that? Or is it simply too friendly?

    There is nothing so difficult as taking an established, successful, popular brand, and changing it to better suit both the moment and the emerging markets. Yet if finding new sources of growth is really the problem confronting Bunnings, then it may have no choice other than to contemplate such a transition over the next three years.

    The rise of the independent?

    There is much in this Strategy Day for independent hardware retailers to have some concern about. Bunnings is about to increase its pressure on the trade market, and it is difficult to predict what the outcome of that may be.

    Yet it is difficult, for HNN at least, to shake off the sense that somehow the overall hardware retail market is moving in a direction that does favour independents - if they can rise to some of the new challenges. That's largely because, gradually, the market is seeing its intangibles increase in value.

    Where we've been through a couple of decades where tangible investments, such as stores and stock, have dominated business, now intellectual capital is becoming more important.

    It's still very important to work out how to leverage those intangible values, but it could be that independent retailers discover a path out of what has been a tough two decades.

    bigbox

    UK update

    Kingfisher said demand for DIY remains resilient

    The home improvement retail group also reported that product availability improved following recent supply pressures

    Kingfisher - owner of B&Q and Screwfix in the UK and Castorama and Brico Depot in France and other markets - said it is managing inflationary pressures amid "resilient demand" for DIY despite cost of living pressures.

    Consumer spending is expected to drop as household budgets are squeezed by inflation, particularly in energy prices which have soared in part because of Russia's war on Ukraine

    It said sales had remained at elevated levels seen during the coronavirus pandemic, and that it was confident enough about its outlook to launch a GBP300 million share buyback.

    In a recent trading update, Kingfisher's chief executive Thierry Garnier said the company had retained a "significant proportion of the increased sales during the pandemic".

    Like-for-like sales in the February to April quarter were 16% above the same period in 2019 at GBP3.2 billion, although they dropped back by 5.8% overall compared with the boom in 2021. UK and Ireland sales were down by 14% compared with the year before, but were up nearly 17% on 2019, with kitchen, bathroom and storage products among the bestsellers at B&Q.

    Kingfisher said it was "mindful of the heightened macroeconomic and geopolitical uncertainty that has emerged since the start of the year" but added that it will look to increase its market share. It left profit guidance unchanged at GBP770 million for the full financial year. Mr Garnier said:

    Looking forward, we are reiterating our profit guidance for full year 2022-23. We are focused on delivering on our strategic objectives and growth initiatives, including the growth of our scalable ecommerce marketplace, the expansion of Screwfix in the UK and France, new store openings in Poland, and further increasing our trade customer base.

    One of the big challenges across B&Q and Screwfix since the pandemic has been managing the disruption to supply chains and related increases in costs. The company argues that its scale means it has a strong negotiating position with suppliers, and it also allows it to offer lower prices in its own-brand ranges. Mr Garnier said:

    We continue to effectively manage inflationary and supply chain pressures. As a result, our product availability is now very close to 'normal' levels across all our banners, and we continue to deliver value for our customers through our own exclusive brands and competitive prices.

    Kingfisher also raised the wages of its lowest-paid staff at B&Q and Screwfix by 6.5% and 5.4% respectively.

    In City A.M., AJ Bell Investment director Russ Mould said of the results:

    Sales are proving more resilient than some might have feared. This suggests there is still some pent-up demand for home improvement despite the pressures on household budgets.

    This was echoed by senior investment and markets analyst at Hargreaves Lansdown Susannah Streeter, who said:

    This [sales] shows that a sizeable chunk of customers that picked up a hammer for the first time have kept coming back, thanks to their new skills and a shortage of labour in the building trade.

    Screwfix

    Trade-focused Screwfix announced it will open 80 new shops across the UK and Ireland by January 2023.

    The expansion will create retail vacancies in locations across the UK and Ireland in places such as Swanley and Brackley. Screwfix chief executive John Mewett said its expansion plans are responding to sustained demand from tradespeople who need tools.

    We know how busy tradespeople are and how important it is to be able to find a Screwfix store close to site. In opening more stores across the UK and Ireland, we're making Screwfix even more accessible to tradespeople, ensuring they can get their job done quickly, affordably and right first time.
    We're also delighted to be having a positive impact on local communities, creating more than 800 jobs for local people.

    Screwfix opened 70 new shops in 2021, and the additions this year will take its total stores to 870.

  • Sources: The Guardian Australia, Yahoo Finance (UK), City A.M. and Press Association Limited
  • bigbox

    USA update: Home Depot

    First quarter sales rose 3.8%

    Demand is being driven by rising home values and a market in which many people prefer investing in home improvement to looking for another place to live

    The Home Depot said that the average amount spent per transaction rose 11.4% while the number of transactions declined 8.2% in the first quarter, as inflation continues to lift prices across its stores. Same-store sales rose 2.2% globally, and 1.7% in the US.

    Chief financial officer Richard McPhail said rising home values have helped maintain spending on homes, even as prices and interest rates rise. "The homeowner has never had a balance sheet that looks like this," Mr. McPhail said on the earnings call, adding that home equity values are up 40% the last two years.

    They've seen the price appreciation, and they have the means to spend.

    Home Depot was a major beneficiary during the height of the pandemic. It is now confronting a slowdown from that high and continued supply-chain disruptions. A late start to spring in most parts of the US, as well as the lack of a spending boost from last year's federal government stimulus cheques, contributed to the decline in customer transactions.

    But average spending per transaction is growing faster than Home Depot had expected. That is largely due to inflation across several product categories, including core commodities such as timber and building materials. If inflation persists at its current levels, the company said average spending per transaction would likely rise between 10% and 12% for the year.

    For the three months ended May 1, Home Depot posted earnings of USD4.2 billion, compared with USD4.1 billion, in the first quarter of last year.

    First-quarter sales increased about 4% to $38.9 billion, ahead of Wall Street expectations of USD36.7 billion, according to a survey of analysts by Zacks Investment Research.

    However, the quarterly sales exhibited the slowest pace of growth in two years, noted Neil Saunders, managing director of GlobalData, adding that it was still a pretty good quarter and that the company has managed to keep all the gains it made during the pandemic.

    Mr Saunders cautioned that Home Depot will need to keep an eye on some things, including customer transactions. While customers are pulling back on spending, particularly on big-ticket items, Mr Saunders said that it's not a major concern at the moment.

    We do not see an enormous collapse in demand as many households are still willing to invest in and improve their homes; but there is a definite softening on the cards which we have not seen for quite some time.

    Venture Capital Fund

    The big box retailer has also launched Home Depot Ventures, a venture capital fund to support early-stage companies that enhance customer experience and home improvement. It is way for Home Depot to accelerate emerging technologies.

    The USD150 million fund will consider investment opportunities in businesses at various stages of development, but will focus on early and growth-stage companies that help Home Depot customers and show potential to scale.

    It has invested in Afero, a platform that provides smart capabilities for products; Made Renovation, a digital platform for bathroom renovations; Loadsmart, a freight technology company; and Roadie, a delivery platform that facilitates same-day deliveries in more than 20,000 postcodes around the US.

    With its venture capital fund, Home Depot wants to invest in companies that cater to both professional and homeowner customers, assist its associates and optimise operations in ways ranging from deliveries to the use of data science. Mr McPhail said in a statement:

    With Home Depot Ventures, we're lending our support and expertise to enable rapid scale of innovation. This is an exciting opportunity to find and scale the next big ideas in technology and retail.

    Related

    Home Depot tech focuses on customer experience - HNN Flash #92, April 2022
  • Sources: Wall Street Journal, Transport Topics and Retail Dive
  • bigbox

    USA update: Lowe's

    First quarter sales drop

    The home improvement retailer is also opening its first Pro Fulfillment Centre dedicated to serving professional customers

    Lowe's chief executive Marvin Ellison said that cooler weather impacted spending plans for DIY customers, as they delayed buying items such as outdoor power equipment, BBQs and outdoor furniture. He added that the non-professional customer was the primary reason behind transactions declining at a double-digit rate in the first quarter.

    Lowe's saw the average spending per shopping trip grow 9.1% in the quarter due to product inflation and higher sales to professionals, while total transactions fell 13.1%.

    Mr Ellison acknowledged headwinds such as inflation, but said consumers are still willing to spend on their homes. He told MarketWatch:

    We're aware that we have inflation concerns. We're aware that there are rising interest rates. But as we look at the home improvement sector, we still remain very confident in the outlook and very confident in the sector.
    The home will be forever redefined by the pandemic ...

    Key reasons among the ways in which the home has shifted during COVID-19 is that for many it doubles as a workspace. Mr Ellison does not see American workers heading back to the office in the same way they did before the pandemic. He said:

    This drives a different kind of home spend that did not occur pre-pandemic. That bodes well for home improvement. The more you're home, the more wear and tear there is and the more investment you make...

    There are a number of other factors that Mr Ellison said continue to bolster housing spend, among them high consumer savings, an ageing housing stock, home price appreciation, and continued robust demand in the housing market.

    Consumers feel confident investing in a home.

    Mr Ellison also noted the "ageing in place" trend, wherein baby boomers are hanging on to their homes and investing in modifications. He said:

    They're more active and independent, and want to change their homes for their changing mobility.

    In November 2021, the company launched the Lowe's Livable Home program in partnership with AARP to serve the needs of aging homeowners.

    Lowe's Home Improvement offers ageing-in-place options - HNN Flash #77, January 2022

    Sales are turning around in May, and Mr Ellison is optimistic that the company can make up for the sales that were delayed by weather.

    Still, Neil Saunders, managing director at GlobalData, was cautious, saying fewer households are taking on projects and there was a downward trend in DIY. Mr Saunders wrote in a research note:

    This has come off a very elevated high from the past two years and is now returning to normal.
    As much as it is unhelpful for all home improvement players, it is especially punishing for Lowe's which disproportionally benefitted from newbie improvers and infrequent DIYers visiting its stores. It is these groups where the pullback on spending has been greatest.

    Mr Ellison says that two-thirds of Lowe's sales are for repair and maintenance activity, which is necessary to operate the home, rather than discretionary projects.

    A quarter of Lowe's business is in the professional (tradie) category. Sales in that category grew 20% during the quarter. This compares to Home Depot's greater reliance on professionals which make up around half of its total revenue. (Home Depot reported its first quarter sales rose in the same cooler weather conditions.)

    Lowe's said comparable same store sales fell 4% in the period. For the period ended April 29, Lowe's reported a slight increase in profit to USD2.33 billion. Overall revenue fell 3.1% to USD23.7 billion, just short of Wall Street expectations of USD23.8 billion, according to FactSet.

    Fulfillment centre

    Lowe's is making a big commitment to industry pros with a new fulfillment centre. The 200,000sqft centre is based in Charlotte, North Carolina, and currently serves pro customers in the greater Charlotte area.

    The Pro Fulfillment Centre offers local pros next-day delivery of the products they use most in the quantities they normally purchase. Key features include online tracking of orders, which are available through box or flatbed truck. Assortment consists of more than 1,000 select products, including timber, building materials, roofing, sheetrock, shingles, insulation, windows/doors, and big and bulky items with their key attachments.

    The facility is built to be zero-emission, with battery-powered forklifts. Lowe's will use it to test, learn and evolve its approach to provide an omnichannel experience tailored for pro customers.

    According to Lowe's it considers the Pro Fulfillment Centre as a pilot in the next step of its "Total Home" strategy to serve and attract pro customers, who the retailer says shop at a higher frequency and value speed and convenience.

    Related

    Lowe's launches a dedicated Pro Zone - HNN Flash #41, April 2021
  • Sources: MarketWatch and Wall Street Journal
  • bigbox

    Big box update

    Demo works continue for Bunnings Frenchs Forest

    The future of two flood ravaged Bunnings stores near Brisbane can be revealed with one to remain closed indefinitely and potentially be redeveloped

    An Australia Post distribution centre is being demolished to make way for a five-storey $48 million Bunnings store in the northern beaches suburb of Frenchs Forest.

    The Bunnings development application was approved by the NSW Government's Sydney North Planning Panel in February 2021. It would have been settled in 2020, but for a disagreement between the hardware retailer and Northern Beaches Council about safe vehicle access to the site from Allambie Road. (The store is being constructed at the intersection of Warringah and Allambie Roads.)

    There were concerns that due to the building's proximity to the busy intersection, there were "potential road safety issues with merging vehicles and conflicts with pedestrians". An agreement has been reached to move the main driveway to Rodborough Road, once traffic lights are installed at its intersection with Allambie Roadd.

    The project is still generating some community concerns about traffic in the area, especially with the new The Forest High School set to be built about 400m away on Allambie Road.

    The outlet will be first time Bunnings to offer three levels of retail, according to the Manly Daily News. There will be two levels of parking for close to 400 vehicles.

    Bunnings already has northern beaches outlets at Warringah Mall (Brookvale) as well as Balgowlah, Belrose and Narrabeen.

    Related

    Construction begins on Bunnings Frenchs Forest store - HNN Flash #75, December 2021

    Flood affected stores

    Queensland-based Bunnings stores in Oxley and Rocklea were left devastated from the catastrophic flooding in February this year. The stores sustained significant damage from the floors and had to undergo a full sanitisation clean and major repairs.

    Bunnings regional operations manager Jason Doyle confirmed to The Courier-Mail the Rocklea store was on track to reopen in June. Mr Doyle said specialist teams had been busy making sure this store was hygienically safe and structurally sound. The teams also rectified any store-related damage, rejuvenated floors and rebuilt amenities. He said:

    Our store team is now back on site and we're currently in the re-fit phase, where our teams are re-racking and re-merchandising, getting ready for reopening.

    It is also understood Bunnings is working on redevelopment options on its Oxley store, including floodproof design concepts, over the next six to 12 months. Mr Doyle said the Oxley staff would continue to work at and support nearby stores.

    We are really pleased to confirm that we are on track to reopen our Rocklea store in mid-June. We continue to provide care and support to all our Rocklea and Oxley team, and we thank them for their amazing work helping the community with recovery efforts.
    The safety and wellbeing of our team and customers is our number one priority, and we remain focused on getting Rocklea opened safely as soon as possible to provide the local community access to the products they need.

    Both Rocklea and Oxley stores were victims of the flooding back in 2011 and had to be closed for about two months.

    Mt Isa Bunnings sold

    The Bunnings store in Mt Isa (QLD) which opened in February has been sold for just over $16.2 million on a yield of 4.29%, according to The Australian.

    Set on a 15,430sqm landholding with a net income of $695,000 per annum and brand new 10-year lease, the Bunnings store is five times the size of the previous store that was in Mt Isa.

    Campbell Bowers, Burgess Rawson Queensland partner and joint head of agency, said the Bunnings Mt Isa was another example of the trend of regional Queensland investments performing strongly.

    PropTrack economist Anne Flahertysaid assets like Bunnings had consistently performed extremely well but since the onset of the pandemic there had been growing interest in the assets, which were viewed as a cultural icon. She told The Australian:

    It is seen as a safe, reliable tenant, they are very popular with consumers, and they have a good growth outlook. So from an investor perspective, getting an asset with a Bunnings on it, it's not just appealing from the sense of owning an asset that's housing one of Australia's iconic brands.

    Related

    Bunnings Mount Isa store gets ready for opening - HNN Flash #78, January 2022
  • Sources: Manly Daily News, The Courier-Mail and The Australian
  • bigbox

    Big box update: IKEA

    Planning Studios in Australia

    The first of these smaller format sites will be up to 500sqm and open in north-west Melbourne, followed by Newcastle (NSW) by the end of 2022

    IKEA Australia and New Zealand country chief Mirja Viinanen told The Australian Financial Review it will launch its small-format Planning Studio concept in Australia this year.

    The focus of the Planning Studio is to help customers to create "dream" kitchens and wardrobes, and there will not be any food served on site.

    According to the big box home improvement retailer, the Planning Studios are part of its growth strategy for Australia.

    Each studio will have a collection point nearby where customers can collect their products upon ordering. The goal of the format is to provide customers with more flexibility when accessing the retailer's products. Ms Viinanen said consumers wanted IKEA's products to be more conveniently accessible. She said:

    Convenience is at the heart of our strategy. We will continue to transform and test new formats like the new Planning Studios to be able to meet our customers where it is convenient for them, and we are constantly researching where this need is the greatest to inform our expansion strategy.

    The company expects the Planning Studios will help gather important customer insights and feedback during the first few months of opening. Based on this data, IKEA will consider if and where to open additional Planning Studios in the future.

    Ms Viinanen is also keen to further penetrate online. Pre-pandemic, IKEA generated about 12% of its sales online, but it now accounts for about one-third of group sales. The AFR reports sales reached AUD1.62 billion in the full year to August 31, 2021, based on accounts lodged with the regulator.

    Ingka Group, the largest franchisee of IKEA stores around the world, recently said that it would invest EUR3 billion by the end of 2023, building new outlets and remodelling existing ones to cope with "increasing demand for home deliveries".

    The money will primarily be used to modify its trademark out-of-town (suburban) outlets so they can double up as e-commerce distribution centres. Ingka Group retail manager Tolga Oncu said told Reuters:

    Most of it will be in our existing stores, since we talk about transforming, redesigning the purpose of the square metres.

    In the past few years, Ingka has adapted to the rise in online shopping by developing smaller stores, revamping its website and rolling out a new app as well as digital services such as remote planning tools. Mr Oncu said:

    We feel we have a catch-up to do on the back-end of our operation (and) we have realised that by including stores in our last mile and fulfilment design network we can create a win-win situation.
    Shipping online purchases from the warehouse sections of nearby out-of-town stores will mean faster and cheaper deliveries, with lower emissions, than by shipping from a few logistics centres..
    Instead of building central warehouse capacities for online buys, why don't we send it from our IKEA stores?

    Sustainability

    It is not just all about store expansion for Ms Viinanen who is also the company's chief sustainability officer.

    IKEA has introduced more than 30 big-impact, sustainable-focused initiatives globally, with some in Australia. A clean energy storage initiative was launched to support the South Australian power grid as IKEA aims to achieve 100% renewable energy by 2030.

    The retailer is also using high-end technology to meet some of its sustainability goals, such as robotic automated box cutters and shredders in the distribution centres.

    According to IKEA research, nine out of 10 Australians believe businesses can do more to reduce emissions, and Ms Viinanen is firmly committed to delivering on those expectations. Other initiatives include its circular hubs in stores where shoppers can buy floor stock or get furniture others have returned through the buyback scheme. She told the AFR:

    All of this should be everyday business decisions, as part of business helping to create better everyday life.
    Wesfarmers' retail clean energy deal for retailers in Queensland - HNN Flash #88, April 2022

    Other recent stories about IKEA on HNN

    IKEA is changing up its business model in Australia.

    IKEA small format strategy - HNN Flash #50, June 2021

    IKEA continues to change the way home improvement gets done, reconfiguring what is meant by "DIY".

    IKEA and its place in home improvement - HNN Flash #77, January 2022

    IKEA's mobile checkout technology is being trialled through its Queensland stores.

    IKEA app in QLD stores - HNN Flash #74, December 2021
  • Sources: Australian Financial Review, Reuters and SmartCompany/Inside Retail
  • bigbox

    Big box update

    Bunnings Pymble store opens to the public

    Speculation about a Bunnings Healesville store, bodycams for staff, Bunnings Epsom on the market and Swan Hill outlet sold

    The new $80 million Pymble store - located in Sydney's upper north shore - looks different from the outside compared to more traditional Bunnings stores because of its uniquely shaped roof.

    It has a number of other distinctive architectural features such as coloured exterior glass and extensive landscaping with a boardwalk around part of the site. Brendan O'Hehir, Pymble complex manager told news.com.au:

    With its unique exterior design, it's unlike any other Bunnings in NSW.

    The Pymble store's unique architectural design was developed to suit the local area. It is the first store in NSW to have a newly laid-out paint department. There is also a kitchen design centre, bathroom displays and new look trade service area, a wider range of site safety and workwear products, as well as an aisle for transport and moving needs.

    In addition, it has familiar features including the main retail area, timber and building materials yard, and outdoor nursery. There are sustainability initiatives that will reduce the store's environmental impact, such as LED lighting throughout, energy efficient heating and cooling, on site water reuse and solar panels.

    The multi-level warehouse store spans more than 15,000sqm and has over 300 carparks. It replaces the smaller format store in Gordon, which has been serving the local community for more than 30 years and is the smallest Bunnings store in Australia. Mr O'Hehir said the team has received positive feedback from customers.

    Customers have been telling us they love the design and how nice and bright the store is, and they've really loving that they can get everything they need for their weekend projects so close to home.

    Bunnings Healesville?

    There have been hints on social media that Bunnings may be interested in opening a store in Healesville which is part of Melbourne's scenic Yarra Valley, approximately 52km north-east from the CBD.

    Although there are no current plans yet, it could be a possibility down the track. Bunnings area manager Craig Bleksley told Leader Newspapers (Lilydale and Yarra Valley):

    Healesville is an area of interest for Bunnings but we have no confirmed plans in place. We'll be sure to update the community should this change.

    It would be the first Bunnings to open in the Yarra Valley, with the closest stores in Lilydale and Croydon.

    Bodycam trial

    Three Bunnings stores are trialling body-worn cameras as a way to curb a rise in abuse directed at retail staff, according to The Courier-Mail.

    The move comes after a survey conducted by the retail workers union - Shop, Distributive and Allied Employees Association (SDA) - revealed 76% of participants reported customer behaviour worsened since the pandemic, and more than one in five participants personally experienced violent behaviour from customers including spitting or deliberate coughing.

    Bunnings chief operating officer Simon McDowell said it is crucial to do everything possible to discourage poor customer behaviour, and as a result had rolled out cameras to three stores across Australia.

    SDA Queensland secretary Chris Gazenbeek said he supported the use of the cameras, provided staff were properly trained and comfortable in wearing one. He told The Courier-Mail:

    [The cameras] support the reduction of violence experienced by retail and fast food staff as well as providing safety, reassurance and support during working hours.

    Australian Retailers Association chef executive Paul Zahra said that it was clear protocols surrounding coronavirus had led to a rise in worker abuse.

    We saw elevated levels of customer aggression when the most stringent COVID protocols were in place around check-in requirements, mask-wearing and showing proof of vaccination. Unfortunately, managing customer aggression has become a new skill for frontline workers.

    Bunnings Epsom

    The Bunnings Epsom store located in of Bendigo in central Victoria, has been placed on the market, according to The Bendigo Advertiser. Located on Midland Highway, the site is zoned for Commercial 2 and measures 27,010sqm including a 11,606sqm store.

    The site is expected to attract a high purchase price with other Bunnings sites selling for $65,300,000 (Nowra, NSW), $58,600,000 (Hervey Bay, QLD), $48,800,000 (Para West, SA) and $28,550,000 (Kempsey, NSW).

    The hardware store was built in 2015 and has a 12-year net lease (plus options) as well as fixed 3% annual rental increases and a net income of $1,606,000.

    The property is for sale through Stonebridge Property Group's Justin Dowers and Kevin Tong who are marketing the property in conjunction with Killen Thomas David Marks. Mr Dowers told The Bendigo Advertiser:

    We are continuing to see yields for these types of investments sharpen disproportionately to other asset sectors because of the exclusivity of the tenant and the quality of the lease.
    The market for Bunnings Warehouse investments has further improved over the last 12 months given how well they have performed in and out of lockdown restrictions.

    Adding to the potential for the site is the expected population growth in the Greater Bendigo region. Mr Tong said Greater Bendigo's population is forecast to grow at 1.54% each year from 2021 to 2036 which is more than the state forecast population growth rate of 0.91% each year.

    The growth in Bendigo is as strong, if not stronger than most metropolitan cities. Dwelling approvals, infrastructure investment and tourism help drive the City of Greater Bendigo to being the third largest city in Victoria.

    Mr Tong also said prospective purchasers would also benefit the 50% reduction in stamp duty for commercial properties bought across regional Victoria.

    That is going to be worth quite a significant amount of money especially given the total quantum at Bunnings Epsom.

    Bunnings Swan Hill

    A Bunnings store located in Swan Hill, near the New South Wales border, has sold for just over $18 million reflecting a 3.99% net passing yield.

    The property covers a 1.67 hectare Commercial 1 zoned site at 74 Nyah Road, with a 6666sqm warehouse attached to a nursery and 140 bay car park.

    Bunnings Swan Hill was sold by retired Adelaide doctor Prabhash Goel, who via an entity, Hawkers Property Group, paid $10.95 million at auction for the then new store in August 2015.

    The property is subject to the current lease expiring in seven years, with fixed annual 2.5% rises. With options, Bunnings as the tenant can stay until 2059.

    Rick Silberman, director of retail investments at Savills, negotiated the sale on behalf of Dr Goel. Mr Silberman said the location of the property in a growing regional hub further strengthened the investment case. He told the Australian Financial Review:

    The Swan Hill region has experienced significant growth over the past decade, led by the expansion of agricultural practices and supported by an innovative manufacturing sector.
    Swan Hill is the regional service centre to 38,000 people, supporting 9462 jobs and has an economic output of $2.964 billion.

    The nearest Bunnings is at Echuca, 155 kilometres away.

  • Sources: News.com.au, Leader Newspapers (Lilydale and Yarra Valley), The Courier-Mail, The Bendigo Advertiser, realestatesource.com and Australian Financial Review
  • bigbox

    Big box update

    Bunnings targets market for small to medium builders

    A NSW planning panel defers its decision on the proposed Bunnings store development in Tempe

    Bunnings plans to expand its footprint of frame and truss plants that fabricate and supply timber materials for framing houses. The hardware retailer said it will roll out its new plants over the next 12 to 18 months.

    In an exclusive report in The Australian, Ben McIntosh, Bunnings chief operating officer - commercial, said the additional frame and truss plants would help it service more builders as they planned and executed home building projects.

    We are excited to be expanding our participation in this market, improving our offer and working with even more customers to provide solutions for their projects, end to end.
    The expansion plans form part of our wider commercial strategy as we continue to be a trusted partner to builders, from the moment they are planning a build, right through to the fitout.

    Bunnings may be setting itself up as a major supplier of frames and trusses to home builders, according to The Australian. The thinking is that while builders pick up their home frames and trusses from a Bunnings site, and use their Bunnings trade account, they will be more amenable to buying other building materials that go to constructing their homes, such as fibre cement, doors, plaster, tiles and other building materials.

    Builders and other trades typically have a long shopping list of items they need to buy when constructing a home, and this could help lift sales across the Bunnings group of businesses including Beaumont Tiles. Bunnings' popular "Powerpass" program offers verified trade customers exclusive prices and deals.

    The customer for Bunnings' frames and trusses business will predominantly be a residential builder that has steady volumes of work in the medium-density residential market, typically less than three storeys. It could also be attractive to owner-builders.

    Manufacturing plants

    Bunnings has operated frame and truss plants in Australia for over 20 years. The operations have been a "quiet achiever" for the group, which now views the building materials category as one with growth opportunities.

    The hardware retailer currently operates three frame and truss sites in Australia - at Warnervale and Unanderra in NSW and Hallam in Victoria. This network of frame and truss plants supplies materials in the pre-fabrication of roof trusses, floor trusses and wall frames. The frame and truss team also provide service and advice, including quoting, estimating and detailing for both small and large scale projects.

    It is understood that the hardware retailer is scoping out land and exploring plans to establish as many as three more manufacturing sites. Building industry insiders told The Australian that Bunnings is searching for a site for a new frame and truss facility in Melbourne, another in Brisbane and potentially more in NSW.

    The use of pre-fabricated frames and trusses, to be pumped out by the growing network of Bunnings plants, should dramatically speed up the process on site, as the wall panels and trusses are simply erected as opposed to being constructed cut and nailed on site.

    Frames and trusses can be constructed with timber or steel, with timber the predominant material used across Australia.

    The expansion plans come at a time when many within the building industry are growing increasingly concerned about a new wave of building material shortages, especially timber used for building frames.

    The frame and truss plants give Bunnings a more secure access to core building materials when global supply chains are facing bottlenecks and major delays caused by the COVID-19 pandemic and the war in the Ukraine. The war between Russia and the Ukraine could disrupt supplies and increase prices substantially.

    The Australian construction industry was also left highly exposed to key building material shortages during the COVID-19 pandemic - namely wooden frames and trusses.

    Although supply bottlenecks have improved somewhat in the last few months, many parts of Australia are still in desperate need of timely frames and trusses with some parts of regional Australia waiting as long as four months for frames and nine months for trusses, according to The Australian

    Related

    Building materials cost and supply concerns continue around the country.

    Bunnings tells MBAV supply issues critical - HNN Flash #66, October 2021

    A ban on Russian timber.

    Bunnings bans Russian timber - HNN Flash #88, April 2022

    Tempe store

    Sydney's Inner West councillors have unanimously supported a motion to conduct an independent risk assessment and feasibility review of proposed traffic lights near the site of the proposed Bunnings store in Tempe.

    In passing a motion moved by councillor Mat Howard at a meeting, council resolved to "determine if safety and network impacts previously raised by Transport for NSW could be effectively mitigated", according to the Inner West Independent.

    The Sydney Eastern Planning Panel announced a deferral of their determination on the traffic plan modifications that would give way to construction of the store. In a statement, the panel said:

    The panel considers the matter should be deferred to allow the necessary processes to occur and for a supplementary assessment report to be completed and referred back to the panel for determination in a timely manner.

    It comes after a sustained community campaign by local residents as well as parents and students at the nearby Tempe Public School, who convened the "Safe Traffic Plan for Tempe Bunnings" group.

    The group has previously called for NSW Metropolitan Roads Minister Natalie Ward to visit the proposed site, which residents say is dangerous because of the increased traffic that the new Bunnings store would bring to its narrow streets.

    The group received the support of several councillors, including Cr Howard, Cr Justine Langford and mayor Darcy Byrne. Cr Howard said prior to the panel's decision:

    We're now calling on the Planning Panel to give us the chance to do this important work and then make a decision based on all the facts.

    The background to the motion affirms council's support for the residents' campaign and states that, at the start of March, Transport for NSW acknowledged the pressing safety concerns in a letter to residents.

    Transport for NSW acknowledged significant concerns of residents, Tempe Public School and the community, stating they would support further risk assessment to be undertaken by Bunnings or Council of the Princes Highway access and a feasibility review of traffic lights to determine if the safety and network impacts could be effectively mitigated.
  • Sources: The Australian, 9 News and Inner West Independent
  • bigbox

    USA update

    Home Depot technology renews focus on customers

    The home improvement retailer's chief information officer (CIO) is shifting into a newly created role dedicated to customer experience technology

    The Home Depot is doubling its efforts on online shopping, curbside pickup apps and other digital efforts, and moving its veteran CIO to a new full-time executive role overseeing customer technology.

    The home-improvement retailer was an early winner during the pandemic, when locked-down consumers turned to DIY projects around the home. Amid the lockdowns and social distancing, customers flocked to its physical and online stores, spending savings gleaned from staying at home and government stimulus checks on home-improvement projects.

    The new customer-facing technology leadership role is aimed at helping the company maintain that momentum.

    The company has named CIO Matt Carey as executive vice president of customer experience. Fahim Siddiqui is stepping in as CIO, overseeing technology strategy, infrastructure and software development.

    Mr. Carey joined Home Depot in 2008 as executive vice president and CIO, and Mr. Siddiqui served as the company's senior vice president of information technology since 2018. A company spokesperson told the Wall Street Journal:

    We created a new role that reaffirms our commitment to make shopping at Home Depot a truly interconnected, easy experience for our customers.

    Home Depot said both positions will report to chief executive Ted Decker, who started in his new role in March, after serving as chief operating officer and president.

    Mr. Carey contributed to the retailer's efforts to accommodate COVID-19 lockdowns and other restrictions by deploying digital tools to manage limited-capacity store operations, curbside pickup and online transactions.

    In his new role, Mr. Carey will be responsible for the vision, design and development of customer-experience technologies. Tim Crawford, CIO strategic adviser at Los Angeles-based enterprise IT advisory firm AVOA, told the Wall Street Journal:

    I have seen several CIOs make the move to a more customer-focused role and away from traditional IT.

    He said it makes sense to have a CIO oversee the underlying technology for customer experience tools, "in terms of understanding the tools, capabilities, integrations and requirements."

    Improved search tool

    Home Depot also said it has enhanced it online search tool for customers. According to the retailer, the number of customer searches has grown - now to more than 400,000 unique searches daily - so the technology team is constantly analysing how to improve the experience for everyone. As a result, it has built a search solution from scratch. Home Depot said:

    Not all search engines are created equal, especially when our customers bring various levels of home improvement knowledge to what they type into the search bar.
    That's why our team focuses on the intent of the person searching, rather than the actual words. This also solves any complications that could arise from geographic terminology differences (for example, "weed whacker" vs. "string trimmer"). Plus, our learning algorithm uses ongoing search data to more accurately show customers exactly what they're looking for the first time.
    In addition to building accurate, lightning-fast search results, we're also creating a personalised search experience for customers. Our technology team has built our online channels to consider location, past searches, personalised deal and guide recommendations when populating search results.
    This is especially helpful for customers in specific trade professions, such as an electrician searching for 'pliers' which the app will properly search for as 'electrician's pliers'.
  • Sources: Wall Street Journal and The Home Depot
  • bigbox

    Big box update

    Brunswick locals score a win over a Bunnings development

    A proposed Bunnings development in a residential suburb has officially been rejected

    The Victorian Civil and Administrative Tribunal (VCAT) has blocked Bunnings' proposal to build a $21 million store located in Brunswick East, an inner-city suburb north of Melbourne's CBD.

    The proposed two-storey store was to be 15.4metres in height with a floor space of around 8,600sqm. An underground park was planned with 236 parking spaces. In Daily Mail Australia, VCAT said in its ruling:

    This proposal has failed to achieve this outcome in an acceptable manner when all relevant policies are balanced in favour of sustainable development and net community benefit.

    The development site is surrounded by more than 120 homes, mainly in apartment blocks, and on a congested council road, which includes bike lanes and is a popular pedestrian route.

    Brunswick resident Andrea Bunting, president of the Glenlyon Bunnings Action Group who spearheaded the campaign against the development, said the site - on the corner of Pitt Street and Glenlyon Road - would have made the environment "unsafe" for cyclists and pedestrians.

    With operating hours of 6am to 10pm, Ms Bunting argued that the project would have had an adverse impact on residents because of traffic congestion due to delivery trucks and trade vehicles. She also said the building would be situated on an already busy street.

    The design failed to incorporate a safe way to safely enter and leave the site on a congested road.

    The VCAT panel recognised the local action group's issue with traffic congestion in the area and stated the project did not align with state government and council policies trying to reduce traffic in the inner-city. The panel said that the planned store would also create traffic "saturation" at a nearby intersection.

    However Bunnings has not ruled out submitting new plans in Brunswick East. Bunnings' director of property and store development, Andrew Marks, told Daily Mail Australia:

    Naturally we're disappointed with the Victorian Civil and Administrative Tribunal's decision not to grant a planning permit for a new Bunnings Warehouse in Brunswick, and will now review our options with the developer of the site.
    We're mindful of the positives a new store would bring over and above providing customers an improved offer. In addition to the $46 million investment in the economy, the proposal would create more than 50 new local jobs on top of our existing Bunnings Brunswick team.
    Bunnings has been part of the Brunswick community since 2015 when we opened our Sydney Road smaller format store. We remain committed to providing local customers in Brunswick with a wider range of home and lifestyle products.

    Background

    There was a community outcry at the initial Bunnings proposal, in August 2020, with 538 residents submitting objections to Moreland City Council in the middle of lockdown. According to Green Left, Nic Maclellan of Brunswick Residents Network said:

    For many months in 2020-21, Moreland Council staff had engaged with the Bunnings developer, without addressing the fundamental flaws of their application - especially around impacts on neighbouring apartments and on traffic congestion.
    It was only after a massive community campaign and hundreds of objections that Council fully came on board, with councillors rejecting the permit application and Moreland hiring a barrister to contribute to the case before VCAT.

    More than 200 residents donated $44,000 to the residents' VCAT case, with more than 50 residents becoming parties at VCAT.

    While the developers engaged a QC for the 12-day long case, residents engaged two experts, and a planning advocate to argue on their behalf. It was money well spent, with the residents' advocate winning most of the arguments.

    The case is significant for several reasons, according to Green Left. Many apartment blocks are now being built in commercial zones and, typically, residents have fewer rights than those in residential zones. The Bunnings developer argued that residents in commercially-zoned properties just had to put up with terrible impacts. VCAT disagreed.

    Neil Moreton, who represented many of the residents in an adjoining apartment block noted:

    Bunnings wanted to locate the exit lane for its delivery trucks right next to our balconies. The noise would have been horrendous. VCAT agreed with us that this was completely unacceptable.

    Moreland City Council aims to reduce car use and increase walking, cycling and public transport. The Bunnings Warehouse would be a huge backward step in achieving its aims. Pedestrian and cycling advocates also participated in the VCAT process. Faith Hunter from Moreland Bicycle Users Group said:

    We are very happy to see VCAT's decision affirming that the proposed Bunnings development at Glenlyon Road doesn't strike the right balance with sustainable development and net community benefit.
    In particular VCAT has recognised the substantial negative impacts on the local transport networks, particularly pedestrian and cyclist networks. These impacts directly affect the ways in which families and others will choose to travel on a daily basis.

    Ms Hunter also noted how the Bunnings development undermined residents' desires to become more sustainable:

    Residents in Moreland engaged in lengthy consultation processes over several years to help Moreland Council develop the Moreland Integrated Transport Strategy. This reflects their interest in and aspirations for increasing opportunities for active transport and mode shift.
    The VCAT decision affirms that developers cannot seek to make profits at the expense of local communities and their transport networks, either as they are now or as they plan for them to be in the future.

    Ms Bunting said the decision was a "great relief" for locals:

    Residents generally do want a say in shaping their community, but they get frustrated with the planning process. Too often, they are stacked in the favour of developers, especially those with deep pockets. This victory shows that, with a well-organised campaign, it is possible to win.

    Related: Brunswick residents battling to stop a Bunnings Warehouse being built

    Brunswick store battle is ongoing - HNN Flash #28, January 2021

    Related: Bunnings plans $21 million store in the Melbourne suburb of Brunswick East

    Some locals say "no" to Bunnings in Brunswick - HNN Flash #17, October 2020
  • Sources: Daily Mail Australia, Green Left and Herald Sun
  • bigbox

    Big box update

    Bunnings' bulk trade centre

    The hardware retailer has plans to expand its Noosaville store with a bulk trade centre

    Development applications have been lodged for approval with Noosa Council for Bunnings to build a two-storey trade centre at the Eumundi Noosa Road site where its Noosaville (QLD) store is located.

    The application lodged by town planners RPS Group stated the trade centre would be a stand-alone building at the northern end of its land, according to Noosa News. It said:

    The bulk trade yard will cater to builders and trades customers, rather than being targeted to retail customers.

    The bulk trade yard has a gross floor area of 1087sqm. It would have 57 undercover car spaces and nine proposed on the upper level which the application stated would be 44 more spaces than required under town plan rules. It said:

    The proposed development involves establishing a bulk trade yard for the purposes of providing timber and trade supplies primarily to professional builders and tradesmen.
    Carparking for 'walk in' customers will be in the lower level building undercroft. Customers collecting large quantities or bulky items (such as timber) can drive up the ramp on the building's southern side to circulate and short-term park to load within the upper level of the building.

    It would have carparking on the ground floor and some loading spaces on the upper level for customers buying in bulk. It also said the entry would be via Gateway Drive where it proposed some road upgrades including an extension of the right turn lane and a painted median strip.

    Bunnings subdivided its land in 2014 and the trade centre would be built on the second lot. No changes were proposed to the existing Bunnings Warehouse store. It said:

    It will not be physically connected in any way with the existing Bunnings store. It will not rely on the existing Bunnings store for access.

    The application proposed opening hours of 6am-8pm Monday to Sunday.

  • Source: Noosa News
  • bigbox

    Big box update: Bunnings

    Decision pending on proposed Tempe store

    Bunnings bans Russian timber and a retail premises in New Zealand with a long lease to Bunnings has gone up for sale

    A NSW Planning Panel is expected to make a decision on traffic plans relating to a mega-sized Bunnings in Tempe, a suburb in the inner west of Sydney.

    The store - planned for the corner of Princes Highway and Smith Sreet - will cost almost $50 million to build and will be one of the largest in New South Wales. However, local residents fear the customers of the hardware retailer would see their narrow inner-city streets transformed into rat runs. Jack Breen, Tempe resident and member of the Safe Traffic Plan for Bunnings Tempe group, told Inner West Courier:

    People are fine with the Bunnings, but there's real concern about the effect on traffic and how they're going about it.

    Bunnings has proposed changes to the previously approved plans in a bid for construction to begin without a traffic management plan - made in consultation with Inner West Council and an independent traffic consultant - being endorsed by the same council's traffic committee.

    The approval of council's traffic committee is required before any construction takes place.

    Bunnings director of property and store development Andrew Marks said the retailer simply wished to move forward with the process.

    We are yet to receive approval of the Local Area Traffic Management Plan (LATM) from the council's traffic committee, and we have received no indication as to when a final decision might be forthcoming.
    To move the process forward, Bunnings lodged an application to have the matter decided by the Sydney Eastern City Planning Panel.
    We hope this will allow us to proceed with the approved development with the implementation of all the safety measures proposed in the LATM, to ensure the safe management of local traffic.

    A traffic study by Inner West Council showed negative impacts on 15 local streets and indicated Union Sreet - a thin, pedestrian-heavy street adjacent to the proposed Bunnings - could see over 1500 cars a day, right past Tempe Primary School.

    Residents and councillors have called for the introduction of traffic lights on Princes Highway, in a bid to relieve the anticipated congestion and funnel cars away from Union Street. However, Transport for NSW is not supportive of the idea.

    Inner West Councillors are supporting Tempe residents of Tempe in urging the NSW Government to revisit the traffic management plan for the proposed Bunnings development. Mat Howard, Marrickville ward councillor on the Inner West Council, said:

    Traffic lights would be a win-win for Bunnings and the community, and the truth is the Roads Minister could fix this problem with the stroke of a pen.

    Transport for NSW said it was in dialogue with the other three parties. A Transport for NSW spokesman said:

    Transport for NSW is taking the community concerns seriously and has been working with Council and Bunnings to investigate options to satisfy the concerns raised by the residents, school and community.
    We have put forward a concept proposal to Inner West Council to ban the through movement into Union Street from Smith Street, which would prevent vehicles from leaving the Bunnings site and using the route past the local school.

    Mr Marks said traffic-calming measures would be introduced under the proposed traffic plan to allay concerns, but residents aren't convinced. Inner West mayor, Darcy Byrne said:

    Bunnings are playing hard ball with residents in Tempe and looking for their mega-store to be waived through without proper pedestrian safety measures being implemented. It's crunch time now and we need the NSW Government and Bunnings to act on the very reasonable requests from the local community for a signalised crossing.

    Background

    The community's campaign has been ongoing since 2016, when the plan to build a large Bunnings store in Tempe was approved by the Sydney Eastern City Planning Panel on the condition a traffic management plan was created. In 2021, Bunnings applied for the condition to be removed, with a decision due back by the end of March this year. Mr Breen said:

    We're opposed to that because once you build the store it'll be really difficult to add in traffic lights or other things that would change the layout of the carpark. It really restricts the options.

    Bunnings originally proposed installing traffic lights to allow cars to flow directly onto the highway. However, Transport for NSW opposed the idea saying the lights would be too close to the ones at IKEA. A Transport for NSW spokesperson told Inner West Review:

    It would pose safety issues for road users due to their close proximity to the existing traffic lights in the area and impact the efficiency of the network by increasing travel times.

    But Mr Breen said the lights at the Bunnings location would be within Transport for NSW's guidelines for a safe gap of 130 metres minimum between traffic signals to prevent the "see through" effect. The proposed lights would be 158 metres away from the nearest set. He believes traffic lights would be the "easiest and safest" solution.

    In October 2021, Mr Marks said Bunnings had been working with council on a traffic management plan which incorporates community feedback.

    It includes a number of traffic safety and calming measures to reduce the impact on local roads and slow down traffic, such as the installation of speed humps and signage, traffic direction, and the prohibition of heavy vehicle access to certain streets.

    Related:

    Sydney's Inner West Council will push to improve traffic arrangements at Bunnings' Tempe store - HNN Flash #67, October 2021

    Russian timber ban

    Bunnings has asked its suppliers to stop buying "conflict timber" from Russia following recent declarations by global forestry bodies about timber from that country and ally Belarus, according to the Australian Financial Review (AFR).

    Bunnings said Russia was not a major source of timber for the local home improvement market, but warned of a shortage to supply - on top of existing constraints - of composite laminated veneer lumber, or engineered wood products, in coming months. Bunnings director of merchandise Jen Tucker told the AFR:

    In line with our timber policy which requires us to exclude source material under specific circumstances, we're working with the industry to source suitable alternatives.
    We're mindful that building material constraints are creating real challenges for builders and we're doing everything we can to support the industry to work through this.

    The conflict timber declarations by the Geneva-based Programme for the Endorsement of Forest Certification and Bonn-based Forest Stewardship Council affect buyers with strict procurement policies, whether a retailer such as Bunnings or a government.

    Private buyers of timber do not need to use the same strict risk assessment processes. But sanctions - which Foreign Minster Marise Payne threatened in February - could halt all supplies.

    While Russia only accounts for a small proportion of Australia's timber imports - around $80 million or just under 3% of the total - it accounts for more than one-fifth of the country's imports of LVL, composite material used for structural components such as lintels, I-Joists used in floors and the formply used for the moulds that concrete is poured into for large commercial projects.

    Australia's building industry representatives fear a bigger risk to its timber supply chain if the government imposes sanctions on Russian imports. Housing Industry Association chief executive for policy Kristin Brookfield told the AFR:

    There is a range of materials we do import from the region. If the Australian government was to make any decision around sanctions of products - timber is one of those things - then Australia would have a pain point in terms of supply.

    In February, the Australian Timber Importers Federation (ATIF) industry group wrote to Trade Minister Dan Tehan warning of a 10-20% loss of jobs across the supply chain if Russian timber imports were blocked. ATIF Chairman Nils Koren wrote in the letter:

    If there was a major interruption to Russian supplies of LVL and I-Joists, it is estimated this will disrupt more than 60,000 detached housing starts.

    The conflict timber declaration is also affecting the projects seeking Green Star certification. Green Building Council of Australia chief executive Davina Rooney said:

    As the only recognised timber certification schemes in Green Star, PEFC and FSC have announced that Russian- and Belarus-sourced timbers are now declared conflict timbers and no longer eligible for their standards, this means that Green Star will not be recognising timber from those regions.

    Bunnings in Mangawhai Central, NZ

    A purpose-built retail site that features a Bunnings store is up for sale in New Zealand.

    Mangawhai Central is a large-scale integrated development bringing together retail, hospitality and residential activities, just north of the Auckland regional boundary in Mangawhai. It is set to connect Mangawhai's two existing commercial centres, Mangawhai Heads and Village.

    The property is being marketed for sale through Bayleys in the North Commercial and Industrial and Bayleys Auckland Central. The sale will be by tender closing on 4 May, unless the property is sold earlier.

    The Bunnings location at Lot 9, Service Zone, Mangawhai Central, is currently under construction and due for completion later this year.

    Designed by award-winning Australasian architect Buchan Group, it consists of a large-format retail outlet of around 5418sqm on more than 1.5ha of freehold land with 154 car parks. The building incorporates a retail area, outdoor nursery, canopy goods area, timber trade and building materials yards, plus office and amenities.

    Bunnings New Zealand, a subsidiary of ASX-listed Wesfarmers, will pay semi-gross annual rent of NZD446,900 for its Mangawhai Central outlet, on an eight-year lease running through to 2030 with eight further six-year rights of renewal with a final expiry in 2078.

  • Sources: Inner West Courier, Australian Financial Review and New Zealand Media and Entertainment
  • bigbox

    Kingfisher FY2021/22 results

    Continued growth, new trade strategy

    Kingfisher saw continued growth in most segments during 2021. Surprisingly, it sees strong future growth prospects in do-it-for-me/trade sales, buoyed by its TradePoint service at B&Q stores.

    UK and EU based home improvement retailer Kingfisher has always been an interesting hardware company to study, as it is at the crossing point of so many cultural and economic currents. In its results announcement for its FY2021/22 released in mid-March 2022, the eddies and interplays in those currents are plain to see, and the effects they produce might foreshadow industry developments globally, including in Australia.

    The core element that most home im6provement results will concentrate on during 2022 is what markets and economies emerging from the COVID-19 pandemic will look like, and how those markets will respond to post-COVID concerns such as inflation, supply chain restrictions, and geopolitical instability.

    A major problem retailers struggle with is to work out what changed elements are structural and at least semi-permanent, and which elements are purely transitory. In most cases, of course, changed elements are a combination of both: a transitory trend fades out, but leaves a degree of structural change in its wake.

    One way of conceptualising all of this is to see that the 2020s idea of "home" has changed fundamentally from the 2010s idea of home. There are both practical, concrete changes driving that - such as the increase in work from home (WFH) - as well as more cultural, emotional shifts, such as a greater need for safety and security.

    In that context, home improvement retail is part of the process people use to make these transitions, and the success of retailers will come down to how well they facilitate the transition.

    Financial performance

    In terms of retail sales, Kingfisher overall saw sales for its FY2021/22 (12 months to January 2022) come in at GBP13,183 million, up by 6.8% over the previous corresponding period (pcp), which was FY2020/21. According to Kingfisher, in constant currency terms the increase would have been 9.7%, and in like-for-like (LFL) constant currency it would have been 9.9%.

    As has become common since the pandemic, Kingfisher also supplied the comparison with the pre-pandemic FY2019/20 period. The company stated that the current results represent a 18.1% increase over that period, in constant currency LFL terms.

    Profit for the overall group was GBP1148 million, up by 14.5% on the pcp.

    Breaking that result down by major geographic areas, the UK & Ireland region returned revenue of GBP6505 million, up by 13.3% on the pcp. Profit came in at GBP794 million, up by 16.6% on the pcp.

    France retail sales were GBP4498 million, up by 4.4% on the pcp. Profit was GBP221 million, an increase of 22.5% on the pcp.

    The "other international" category, which includes Poland, Iberia (Spain and Portugal) and Romania, returned revenue of GBP2180 million, which represented a decline of -4.8% on the pcp - though this was still up by 9.2% on the FY2019/20 period in constant currency LFL terms. Profit was GBP133 million, a decline of -5.8% on the pcp.

    Major brands

    Kingfisher's four major brands - B&Q, Screwfix, Brico Depot and Castorama - are responsible for 83.5% of its sales. B&Q had retail sales of GBP4178 million, up by 12.7% on the pcp. Screwfix saw sales increase by 14.3% to GBP2327 million.

    In France, Castorama's sales were GBP2296 million, up 1.4%, but up 5.9% in constant currency terms. Brico Depot had sales of GBP2202 million, up 7.7%, which would have been 12.5% in a constant currency comparison.

    Key issues

    Generally speaking, large home improvement/hardware retailers tend to set strategy according to specific circumstances. There is, first and foremost, the actual market situation, in terms of how much underlying demand is present, and whether this represents an increase or decrease. Secondly, there is the position of the retailer itself, how the retail "surface" it presents to those markets influences its ability to generate revenues.

    Thirdly there are the channels into those markets. Most broadly over recent years that has related to the development of ecommerce, but this also involves the number of stores and the types of stores. Ecommerce itself also breaks down into various path to purchase and path to access patterns, such as in-store purchase on mobile apps and click-and-collect.

    Fourthly, there is what might be called path to product, which is how the retailer goes about meeting established customer demand through sourcing products from external and internal supply chains, including an element of product development.

    The general situation that most home improvement/hardware retailers find themselves facing is that, after coping with high levels of demand during the two pandemic years of 2020 and 2021, markets are not entering a post-pandemic period, where demand remains elevated when contrasted with 2019, but reduced on a prior year comparison.

    A big part of the post-pandemic markets, as 2022 continues, is coping with additional external, geopolitical/economic pressures, which include, for example, Russia's invasion of Ukraine, the continuing fallout from Brexit, and growing economic instability in Turkey.

    For Kingfisher in presenting its FY2021/22 report, these were the key issues that emerged:

  • The ongoing development of ecommerce, beyond simply growing market share, including the ongoing growth in mobile device retail
  • The interrelationship between DIY and do it for me (DIFM)/trade services
  • Increases in the consumer price indices, and how this affects products/brands, especially in regards to what Kingfisher terms "own exclusive brands" (OEBs), which are a combination of home brands and captive brands
  • Store number, size and geographic distribution
  • Ecommerce/digital

    For the overall Kingfisher group, ecommerce sales were 18% of the total, which was the same number as for the pcp, representing a 10% growth over FY2019/20. Click and collect sales were at 73% of all ecommerce sales, down from 78% in the pcp. However, digital is having a stronger overall impact on sales, according to Kingfisher CEO Thierry Garnier, as he stated in his prepared remarks at the results presentation:

    Our e-commerce sales have almost tripled on a 2-year basis, with penetration up 10 percentage points to 18%. And our digitally-enabled sales now represent 26% of sales. Here I mean the sales coming from direct e-commerce channels as well as digital orders in-store for click & collect and home delivery. This new KPI helps us measure how well we are adapting to changing customer behaviours.

    In response to an analyst's question, Kingfisher chief financial officer Bernard Bot broke down the ecommerce numbers further relating to share of sales:

    On online, as we said, excluding Screwfix, we're above 7%. If you look at the difference between the banners B&Q is comfortably above 10%. And then the French banners are comfortably above 5%.

    While other paths to customer such as click and collect are important, Mr Garnier also sees possibilities in home and jobsite delivery services.

    We believe that faster home delivery can be a significant market share driver for us. In August last year, we launched Screwfix 'Sprint', offering one-hour delivery to customers. The services currently covers over one third of UK postcodes, with an average delivery time of around 45 minutes and a fastest delivery time to date of an incredible 8 minutes.
    ...
    Looking ahead, we remain committed to delivering strong growth in e-commerce sales through providing faster speed and convenience. We are moving towards home delivery for full store ranges, and towards faster click & collect and last-mile delivery options.

    One element driving Kingfisher's ecommerce expansion is its use of store-based order fulfilment, which means sourcing orders as close as possible to the delivery location.

    The company is also sensitive to the possibilities in mobile ecommerce. Mr Garnier stated:

    Customers are using mobile more than ever to shop home improvement, and this channel continues to be the fastest growing for us. Mobile sales are up by 300% on a 2-year basis.
    Last year, we launched the new Castorama France and Screwfix apps. The new Screwfix app has been downloaded 2 million times. It has a number of innovative new features, including geolocation, to speed up in-store pick-ups, and we have integrated Screwfix's one-hour delivery service, Sprint.

    In addition to these efforts, Kingfisher also launched an online marketplace in March 2022. According to Mr Garnier:

    Earlier this month, we launched our first e-commerce marketplace, on B&Q's DIY.com, using scalable technology developed with Mirakl. This will dramatically accelerate the product choice that we can provide our customers.
    Our initial offer comes from carefully selected third-party sellers in four home improvement categories - wallpaper, lighting, power tools and lastly, a new category for B&Q, small domestic appliances.

    The intent is essentially to better "monetise" the high amount of traffic that the B&Q diy.com website attracts.

    DIY and DIFM-trade

    Perhaps the biggest surprise, especially for analysts, was Kingfisher announcing expanded measures to secure more market share in the DIFM-trade sector. Kingfisher released more detail regarding its market split between DIY and DIFM/trade. Overall, Kingfisher revenue is 49% DIY and 51% DIFM/trade. That's the exact ratio in the UK, while France is 52% DIY and Poland is 47% DIY.

    Year-on-year revenue growth in DIY has been 15% while in DIFM/trade it has been 7%. However, Kingfisher is outgrowing the overall market in DIFM/trade, with that number at -3% on a compounded annual growth rate (CAGR) over two years, while Kingfisher's CAGR number is 10%.

    According to Mr Garnier in his prepared remarks:

    While Kingfisher has embraced the resurgence in DIY, our outperformance of the market has been driven by our DIFM and trade business. We have seen a strong performance of Screwfix and TradePoint, we have launched new trade-focused own brand ranges, and we have invested in our showroom products and installation services, as well as our broader store and online services portfolio (including our NeedHelp marketplace).
    We are well positioned to capture the growth potential of both DIY and DIFM/trade, and we are executing on plans to further increase trade customer engagement.

    Mr Garnier went on to delineate just how big this opportunity is:

    Trade customers represent a GBP50 billion addressable opportunity for Kingfisher in the UK, France and Poland. Earlier on in the presentation I told you that DIFM and trade represent 50% of our sales, and that we have significantly outperformed the market here over the last two years.

    In particular, Mr Garnier sees TradePoint, the DIFM/trade services offered through the largely DIY-focused B&Q stores, as having strong potential. Its revenues stand at GBP830 million, and it has grown by 20% in the reporting period, and by 33% over the past two years.

    Mr Garnier sees this as a high performance category:

    Our data at TradePoint shows that trade customers shop more frequently than retail B&Q customers, and have a 60% higher basket.

    The move to trade is general across the group:

    Each of our banners is executing on ambitious plans to target trade customers. These include trialling new store layouts and concepts, creating more trade-focused OEB ranges, offering a more user-friendly and integrated digital experience, increasing the speed and convenience of order pick-ups, and further developing our trade loyalty programmes.

    In response to an analyst's question, Mr Garnier further outlined the commitment to trade, noting that this was partially inspired by major US retailers The Home Depot and Lowe's Companies:

    We are convinced that all across the group we have opportunities with the trade. And you see that in the presentation. We have learned from Home Depot from Lowe's. We have spent time on these. We have learned from TradePoint. You see that we did plus 33%, two-year like-for-like for TradePoint. That's very good. Therefore, all across the group, we believe that inside big boxes you have opportunity to do a proper job for the trade.

    Own exclusive brands (OEB)

    One of Kingfisher's real strengths (arguably largely developed by Mr Garnier's predecessor, Veronique Laury, but ably continued by him) has been its development of OEBs. These are now responsible for 45% of Kingfisher sales overall, and have grown in LFL sales by 19% on a comparison with FY2019/20.

    Mr Garnier said in his prepared remarks that he sees this as a strong growth opportunity:

    We are increasingly leveraging the scale of the Group to provide differentiated and specialised products for our trade, discounter and general home improvement banners. During the year we created an additional portfolio of 32 new and redeveloped OEB brands. Some of our OEB ranges, such as Magnusson and Titan, are significantly outperforming sales volumes of major branded competitors.

    Mr Garnier outlined some of the ways in which this has developed under his stewardship in response to an analyst's question.

    OEB, I don't feel there is any execution issue today. We have a good balance between the group and the banners. You see that the penetration of OEB continued to be stable or grows slightly, while at the same time, we have introduced in the past two years a lot of local brands. You'll remember in 2019, we said, well we are missing brands, et cetera so we - even some question with some of you saying, well how come you will increase local brands and still being strong on OEB? How come you - it will impact your margin?
    But today you see that OEB, it's stable or growing. I'm very happy with that and very happy with the new innovation coming in. We mentioned kitchen in the past two years with incredible success. It's very rare to see the same range of products successfully in absolutely every country.

    As items with a built-in higher margin, Kingfisher also sees OEB as a means to keep prices contained in a high-inflation environment.

    Store numbers and size

    One of Mr Garnier's insights has been that the move to constantly increase store sizes in big box retail might not be the best way to go in the future. As he stated in his prepared remarks:

    We continue to increase our store numbers, while aiming to reduce the average size per store. We are doing this by opening more 'compact stores' and 'medium-box' stores, and by 'rightsizing' a relatively small proportion of our larger format 'big-box' stores.
    Compact stores are an important driver for continued market share growth in urban areas. Last year we tested 20 new compact stores across the UK, France and Poland. These tests took place in urban retail parks, high streets and in supermarkets.

    The company has trialled size reductions on larger stores, with what Mr Garnier considers strong results:

    The B&Q results have been very good, with space reductions of 15 to 30% all taken over by discounter retailers. Since reopening, the stores have exceeded our performance expectations, with strong sales retention and improved profitability.
    Following on from these trials, we have now finalised our assessment of our property portfolio and future space requirements across Kingfisher. We are announcing today that up to 40 'big-box' stores across B&Q and Castorama France will be rightsized over the next 10 years. This will include a reallocation of space to e-commerce operations and 'dark stores'. The space reduction equates to circa 3% to 4% of the combined selling space of B&Q and Castorama France.

    Analysis

    One way of looking at what is happening at Kingfisher and other global large home improvement markets is something of a re-segmentation of the markets. Re-segmentation typically occurs when products and practices "jump over" what are really income/wealth levels.

    For example, pre-pandemic DIY was something that households on a budget would be more actively interested in than more established, wealthier households. The pandemic helped to change that as DIFM/trade simply wasn't an option, and with more people isolated at home with few options, DIY seemed an interesting activity.

    Post-pandemic, these segments are now more jumbled, with the main drivers being simply ability, time and inclination. Kingfisher quotes some very encouraging numbers for people in the 18 to 29 year-old age range, with 58% of them reporting increased DIY activity, and 52% intending to do more.

    Yet in some ways this kind of re-segmentation really misses the point. Kingfisher also reports that 40% of its customers are doing WFH, and that most of these predict this will not change for at least the entirely of 2022. That is a really radical shift in how people use and relate to their home space, and it points to a greater revolution that is underway.

    The real face-off that we're seeing at the moment is between people who accept that the pandemic has made strong, permanent changes to cultures and societies, and those who long for a return to how things were in 2019. The key to understanding how this works is that the pandemic has functioned as much as a catalyst as a reagent in encouraging these changes. For example, imposed social isolation revealed just how bizarre, in the age of computers, smartphones and high-speed internet, the idea of a five days a week mass migration to cities by workers had become.

    What is most important about the people committed to changing how their dwelling works as a home is that this type of revolution is not about re-doing a couple of rooms, adding storage or painting walls a new colour. People are really re-thinking how their entire dwelling works for them.

    Download hnn-brief-005

    bigbox

    Big box update

    Bunnings trying out electric trucks with Linfox

    The Victorian state government expands the number of Bunnings stores with pop-up COVID-19 clinics

    Logistics and transport specialist, Linfox, recently confirmed it is trialling new Fuso eCanters as part of its Bunnings contract.

    Bunnings' two all-electric Fuso eCanters are delivering home and lifestyle products to local stores in Melbourne's southwest.

    Powered by 100% renewable electricity, it is a Bunnings first. At least 60 tonnes of carbon dioxide equivalent emissions (CO2-e) can be avoided annually compared to the same size Euro 6 diesel powered truck, based on anticipated usage.

    According to Linfox, the eCanters can be recharged to 80% capacity in an hour using a 40kW DC fast charger, or fully charged in four hours.

    The electric vehicles form part of Bunnings' sustainability strategy with a pledge to reach net zero Scope 1 and 2 emissions by 2030.

    The trial will assist Bunnings to assess methods of transitioning to lower emissions transport in its supply chain in the future. Linfox executive chairman Peter Fox said:

    As leading Australian retailers continue to reduce reliance on traditional energy sources, Linfox is proud to support our customers' ambitious sustainability targets.
    Act Sustainably is a key strategic driver in our Leading the Way 2025 business strategy, and this includes a growing fleet of electric vehicles replacing diesel powered vehicles on suburban transport routes.
    Supply chain partners have an important role to play in the transition to renewable energy and the action we take now will determine our future and the future of generations to come.

    Built by Daimler Truck, the Fuso eCanter will recharge using a rapid charger at Bunnings' Laverton distribution centre.

    Daimler Truck and Bus Australia Pacific president and CEO, Daniel Whitehead, said the electric Fuso eCanter is ideally suited to help Bunnings achieve its sustainability targets. He said:

    We are thrilled Bunnings will use Linfox operated zero emission Fuso eCanters as part of its clear commitment to reduce carbon emissions and address climate change.
    The eCanter is a practical workhorse and its full suite of active safety features, including Advanced Emergency Braking System (AEBS), allows fleets to look after the planet and their workers at the same time.

    More COVID-19 clinics

    The Victorian government announced an additional five Bunnings stores across metropolitan and regional areas to the list of pop-up vaccination sites. Vaccinations have been available at Victoria-based Bunnings' car parks in Craigieburn, Tarneit, Sunshine, Mill Park and Mildura. Health Minister Martin Foley said:

    We're delighted that this fantastic partnership with Bunnings is providing Victorians with yet another way to get their COVID vaccination.
    These pop-ups will focus particularly on areas with fewer points of GP and pharmacy access and provide an easy and convenient way to get a jab while doing some shopping.

    More stores will be added and other pop-ups will target community and cultural groups with lagging rates. Just 42% of Victorians aged 18 to 29 have had their booster and 53.6% of those in their 30s.

    The federal government will also launch a $13 million advertising campaign to increase COVID booster vaccination rates ahead of winter. The campaign across television, print and digital will highlight the importance of a third jab. More than 6.3 million eligible Australians are yet to be boosted.

    Related

    The Victorian state government enlisted Bunnings to host 20 pop-up clinics - HNN Flash #86, March 2022
    bigbox

    Big box update

    Bunnings plans store development in Cowra, NSW

    The Victorian state government is pushing to lift its COVID-19 third dose vaccine rate before winter arrives, enlisting Bunnings to host 20 pop-up clinics

    Cowra Shire Council is expected to approve a $10 million expansion of the Bunnings store in Redfern Street, Cowra (NSW). The council's general committee recently approved a development application (DA) from Bunnings to expand its current store, according to the Cowra Guardian.

    The application seeks consent for the redevelopment of the existing Bunnings warehouse site in the following manner:

    The demolition of existing buildings; construction of a hardware and building supplies centre including a warehouse, covered outdoor nursery, bagged goods store, timber trade sales area, office, amenities and loading areas; seven wall signs and one pylon sign; a main carpark accessed from Redfern Street containing 91 car parking spaces; a secondary carpark accessed from Mulyan Street containing 15 car parking spaces; tree removal and new landscaping works.
    In addition, ancillary civil engineering works including earthworks, stormwater works and road and access works including directional signage and line marking to facilitate vehicular access, as well as consolidation of allotments.
    The new warehouse will be situated on the western part of the site with the main car park on the eastern side of the building.

    Councillors were told by Cowra Shire staff the current Bunnings store would only close for trade for a short time with the work to be carried out in stages. Mayor Bill West said:

    We've been looking for this sort of increased capacity and business and this is what we've got. It's been assessed well and a great benefit to the community...

    Vaccine pop-ups

    Victorians are being encouraged to flock to pop-up COVID-19 vaccination hubs at Bunnings stores across the state to lift third-dose rates ahead of winter.

    The state government announced the hardware chain will host 20 temporary clinics at various Melbourne and regional Victorian sites. The first hubs have opened in Wodonga, Keysborough and Melton East. They will operate between 8am and 1pm, and will remain open for a week.

    Seventeen more Bunnings vaccination pop-ups will follow, with work still being done to determine which shops are chosen.

    The rollout of the pop-ups at Bunnings stores will build on Victoria's success at the former Bunnings in Melton, which delivered more than 150,000 jabs into arms.

    Wesfarmers digital

    Wesfarmers is currently working on its new OnePass online subscription model that has replaced the old Club Catch loyalty program at its online marketplace business Catch Group, reports The Australian.

    It believes the subscription program can be handy for keeping shoppers bonded to Catch but also other parts of the Wesfarmers' retail divisions. It has set up a new corporate entity called Wesfarmers A Plus, with its own board. Its directors include Wesfarmers CEO Rob Scott as well as the CEOs of the conglomerate's key business units including Bunnings managing director Mike Schneider, head of Officeworks, Sarah Hunter and Kmart Group boss Ian Bailey.

    Also on the Wesfarmers A Plus board is Nicole Sheffield, the recently appointed head of digital and data for Wesfarmers who came from Australia Post. Ms Sheffield has also been appointed the first female president for the peak industry body, the Australian Retailers Association.

    Related

    Wesfarmers recently released results for its FY2021/22 first half.

    Wesfarmers-Bunnings results FY2021/22 H1 - HNN Flash #82, February 2022
  • Sources: Cowra Guardian, Australian Associated Press and Herald Sun
  • bigbox

    USA update

    Home improvement livestreams on the rise

    Lowe's and Home Depot see web-based events as a way of keeping customer engagement up

    Lowe's and Home Depot are betting they can keep consumers interested in home improvement projects via online and in-person workshops.

    Both retailers want to hold onto the customers that they gained during the two years of the Covid-19 pandemic, when homebound shoppers invested heavily in improving their living spaces. Now, that spending boom is expected to moderate as the outside world competes for attention - but livestreams may help to keep the retailers' momentum from flagging, and customers are now increasingly comfortable with online workshops. Bill Boltz, Lowe's executive vice president of merchandising, told Bloomberg:

    We did some virtual stuff. We saw success with it, so we wanted to keep that option.

    Early registrations for the streamed workshops, part of an initiative the retailer calls DIY-U by Lowe's, were fully booked, he said, while adding that customers are still looking forward to in-person events as well.

    The online and in-store events are part of efforts to boost spring sales in North America - a crucial season for home-improvement retailers as warmer weather sparks an increase in gardening and building projects.

    Livestreams are one way to keep consumers spending and companies will likely keep investing in them, said Ken Fenyo, president of research and advisory at Coresight Research.

    It's a format that's clearly catching on: Americans spent about USD5.6 billion on livestream shopping in 2020, according to data from Coresight. The firm estimates that the amount doubled to USD11 billion last year and will reach USD26 billion by 2023. As of 2021, about 30% of U.S. consumers had viewed livestreams. Among those, half have made purchases. Mr Fenyo told Bloomberg:

    We're seeing it really emerge in the US. For a lot of companies we're still in that test-and-learn period when a lot of the focus is on engaging customers.

    Livestreams also attract younger customers, he said.

    Many millennials became first-time homeowners over the course of the pandemic. Mr Boltz said he sees them as a key audience for the livestreams and workshops that Lowe's is offering. He said

    There's still a bunch of do-it-yourself business out there.

    Even if livestreams don't generate an immediate purchase, they can still help build customer loyalty down the line. Mr Fenyo said:

    It's a chance for people who are excited about a topic. It's probably less important that it directly leads to sales. It will probably have a longer-term effect, but the livestream in some ways is a great way to build trust and build excitement that should lead to sales down the road.

    Lowe's

    Lowe's announced it will offer livestreams - and in-store experiences - during the spring selling season. Seasonally-themed shoppable livestream and in-store workshops will include "How to Build and Plant a Raised Garden Bed" and "How to Create a Beautiful Lawn," as part of its new DIY-U by Lowe's program hosted by Lowe's expert Red Vest store associates.

    Lowe's campaign for spring will feature the return of SpringFest, which debuted in 2021. This year's month-long SpringFest will have "in-store lawn and garden 'walking tours'". Perhaps in a nod to the fact that spring is the time that many people begin to shake off their seasonal affective disorder (SAD), the company will also reveal 12 "mood-boosting DIY projects," arranged by a number of lifestyle influencers.

    There will also be a promotion for Earth Day, a holiday that is becoming increasingly relevant as the global ecological crisis worsens. In observance of Earth Day (April 22), it said it will "bring up to one million new plants into the world." Or at least, it will be bringing the potential for that many plants to come into the world: for every person who posts a tulip emoji with the hashtag #SeedingSpring on the first day of spring, Lowe's said it will "share a real-life seed" at surprise giveaways hosted at select store locations across the US. The home improvement retailer will also be planting seeds in its hometown of Charlotte, North Carolina.

    The suite of experiences is aimed, in the company's words, at "seeding spring." In other words: providing consumers with the tools, know-how and inspiration that they'll need to make the most of the spring season.

    Home Depot

    At the same time, Home Depot is offering virtual "Homeowner 101" workshops on projects from boosting a home's curb appeal to outdoor living spaces.

    And as a way to further strengthen its position among professional customers, the big box retailer has introduced a virtual workshop series to offer business advice to professional contractors.

    The virtual workshops will cover a wide range of topics: using social media best practices for businesses, managing business expenses and identifying trends within the sector, according to a company announcement. Home Depot kicked off the series with a workshop taught by an associate professor of finance at Georgia Tech's Scheller College of Business. The workshops will run every other month.

    Home Depot's experimentation with livestream programming also includes DIY workshops and seasonal workshops.

  • Sources: Bloomberg, Chain Store Age and The Drum
  • bigbox

    UK update

    B&Q launches home improvement marketplace

    The retailer is enhancing its ecommerce platform to offer a bigger choice, with the ambition of millions of products being available

    B&Q customers will have access to an additional 100,000 products within six months via selected third-party sellers on its new online home improvement marketplace at diy.com. This will triple the existing number of SKUs.

    B&Q's marketplace proposition will both expand existing ranges and add new categories, with products available for home delivery and click + collect options coming in the future.

    Customers will be able to choose from an expanded selection of wallpaper, lighting, and power tools, as well as a new range of small domestic appliances, a new category for B&Q. The home improvement retailer has already signed up 17 third-party sellers, including Black & Decker, Breville and Osram, to sell through the marketplace.

    All third-party sellers at diy.com will be selected by B&Q experts. Sellers undergo a verification process to ensure they complement B&Q's existing offer. Products sold by third-party sellers are easily identified by the description 'sold and shipped by [seller name]' underneath the product title.

    Marketplaces are growing in popularity, with nearly half (48%) of online product searches now starting on marketplace platforms in key markets including the UK and US [survey by Inriver]. B&Q's new marketplace is expected to accelerate its e-commerce growth. It will be hosted online at B&Q's website (diy.com) and the B&Q app.

    B&Q's diy.com is one of the top retail websites in the UK with significant traffic, giving third-party sellers access to a larger sales platform. For B&Q, the launch of a marketplace means diy.com will become even more of a strategic asset to the business, as site traffic grows in line with an increased product offering.

    The multi-channel approach of B&Q's marketplace makes it easier for customers to shop with online and in-store benefits. The integration with B&Q's network of over 300 stores nationwide also means customers can conveniently return many items purchased from the marketplace in-store. B&Q's CEO Graham Bell CEO, said:

    At B&Q, we're focused on improving shopping experiences for our customers to make shopping with us even more convenient. Around 85% of our customers' shopping journeys start online. With the launch of marketplace, customers can now access an even bigger choice of home improvement products online, with the convenient option to return many products at their local store, with click + collect options coming in time.
    Marketplaces are a rapidly growing retail phenomenon around the world and we're excited by the potential this model brings in combination with the convenience of our fulfilment capabilities. The unique multichannel combination of this online marketplace, along with our network of 300 stores, means we can offer customers a level of choice, speed and convenience that pure play retailers cannot match.

    B&Q's marketplace reflects evolving customer demand, with the shift to online and the need for speed, convenience, and choice, and creates a scalable model for Kingfisher, B&Q's parent company, to roll out marketplaces in other markets and banners.

    To support the operation of the marketplace model, Kingfisher has partnered with Mirakl, an enterprise marketplace SaaS platform. Mirakl brings a lot of expertise, shaped by working with over 300 retailers that have adopted the marketplace model including Decathlon and H&M Home.

  • Sources: Kingfisher, Mirakl and Retail Gazette
  • bigbox

    Big box update

    Legal precedent explored by Bunnings court case

    In New Zealand, a building company has succeeded in having a NZD202,000 demand made by Bunnings set aside, based on ruling by a High Court judge

    Bunnings has been accused of unfair dismissal under one of the more obscure provisions of the Fair Work Act, which prevents discrimination against employees for their "social origin", according to a report in the Australian Financial Review (AFR).

    The former employee is suing Bunnings for reinstatement, or $167,000 in damages, in the Federal Circuit Court, over claims his sacking was without merit. Bunnings is seeking to have the case dismissed on the grounds that it has no reasonable prospect of success.

    As background to the case, the AFR states the employee had been employed for six months at Bunnings, and had received a promotion. He was dismissed after details of his earlier conduct at another employer were revealed.

    That conduct, which occurred more than a decade in the past, related to the employee making unwanted sexual advances towards a fellow employee. This was followed by what has been termed "unwelcome sexual intercourse", while the other employee was heavily inebriated, after a drinks function.

    His conduct has led to him being denied certification as a Chartered Accountant.

    According to court documents, the former Bunnings employee claims that there is nothing to indicate he is a serial offender, and that he has suffered from the stigma of the previous incident.

    The "social basis" clause of the Fair Work legislation has been taken to relate mainly to "class-based" discrimination in the past.

    Bunnings' application to throw out the lawsuit is listed for directions on March 29.

    New Zealand court case

    In June 2021, Bunnings in New Zealand served residential builder Sunrise Management with a statutory demand to pay NZD202,312 for building supplies including Gib board, cedar panelling, flashings and other supplies for the construction of houses.

    Sunrise made an application to the High Court in Auckland to set aside Bunnings' demand for payment, according to news website, stuff.co.nz.

    The judgment by associate judge Rachel Sussock said the application relied on Sunrise having a "reasonably arguable" counterclaim against Bunnings which exceeded the amount of the demand.

    The judgment said Sunrise's counterclaim related to the supply of weatherboards by Bunnings.

    Prior to it becoming a commercial customer, Sunrise said Bunnings made clear representations that it did not sell imported weatherboards - specifically, not weatherboards from China.

    Sunrise said that contrary to those representations and to Sunrise's order and Bunnings' invoices for the weatherboards, the weatherboards supplied were manufactured in China.

    Sunrise said that before it became aware of the origin of the weatherboards, they were used in the construction of four houses. The weatherboards on two of the houses had since been replaced and two more were to be reclad, it said.

    As a result of the alleged breach of contract, Sunrise said it had suffered loss exceeding NZD300,000, with a claim filed in the District Court to recover the loss shortly after the application to set aside was filed.

    Bunnings said that Sunrise's weatherboard claim was without merit, the judgment said.

    Bunnings is disputing it in the District Court including on the grounds of limitation and remoteness of damage and had brought a counterclaim for the amounts owing in respect of the weatherboards of NZD37,414.

    Bunnings said a no set-off clause in its terms of trade prevented Sunrise from relying on any counterclaim in seeking to set aside the demand.

    The judge said to succeed in its application to set aside Bunnings' demand on the basis of a counterclaim, Sunrise did not have to prove its counterclaim. Sunrise was only required to establish that its position was reasonably arguable on affidavit evidence, the judge said.

    The judge found it was reasonably arguable that Bunnings made alleged misrepresentations which induced Sunrise to enter into a contract. The judge said it was reasonably arguable that Bunnings' no set-off clause did not apply.

    The judge said it was reasonably arguable that Sunrise had a counterclaim that exceeded the value of Bunnings' statutory demand.

    The statutory demand was set aside, the judge said.

    To read more background details of this case, go to:

    High Court judge in New Zealand rules that Bunnings' NZD202,000 demand to builder be set aside - Stuff NZ
  • Sources: Australian Financial Review and Stuff NZ
  • bigbox

    Big box update

    Decision on Bunnings store in Ulladulla, NSW deferred

    In 2020, a development application was lodged for a new Bunnings Warehouse in Ulladulla

    The matter of traffic conditions surrounding a proposed Bunnings store in the NSW coastal town of Ulladulla was tabled at a Shoalhaven City Council meeting recently, according to the Milton Ulladulla Times. Traffic considerations will determine whether a Bunnings Warehouse in Ulladulla gets approval.

    Elected representatives voted that the item be "deferred to further consider the accumulative traffic impact" on Parson Street, Dowling Street and Princes Highway, and that the network modelling is presented to council for consideration. The initial recommendation put forward at the meeting was to approve the development application, by way of deferred commencement but all councillors were all for the item being deferred for further consideration.

    The proposed development incorporates a subdivision of Lot 23 2A Parson Street, Ulladulla and consolidation of the southern portion with Lots 1-5 189-197 Princes Highway. Construction of associated infrastructure includes roadworks (new roundabout, median and entry/exit driveways) on Princes Highway and a partial extension of St Vincent Street is part of the development application.

    Prior to lodging the current application, Bunnings sought pre-development advice from both council and Transport for NSW (TfNSW) in 2019 regarding potential access opportunities to the Princes Highway and St Vincent Street.

    TfNSW required the provision of a roundabout, a new median on the Highway and the staging of access works to the Highway in two stages.

    Initial access for patrons is to be provided direct entry to the highway with the provision of a roundabout at the junction of Dowling Street and median works north of the roundabout.

    An associated report also noted "public benefits as a result of the provision of additional infrastructure and employment opportunities" from the development.

    Larger Bunnings proposal

    The development application that was lodged on January 30, 2020 for a new Bunnings store, if approved, would be more than double the size of the existing smaller store.

    The proposed Bunnings Warehouse would be located between 189 to 197, Princes Highway in Ulladulla. It represents an investment of more than $16 million by the retailer.

    The development would replace the existing smaller format Bunnings store, with all current team members transferring to the new warehouse once complete.

    Features of the new warehouse will include the main warehouse, outdoor nursery, timber trade sales area, cafe, and a playground, along with click and collect services.

    The store would span more than 11,000sqm and have parking for more than 180 cars.

  • Source: Milton Ulladulla Times
  • bigbox

    USA update: Lowe's

    DIY-U by Lowe's makes its debut

    The retailer is targeting first-time millennial homeowners with an instructional livestream series that includes an e-commerce component

    DIY-U by Lowe's is a home improvement platform that features live and on-demand educational resources for both kids and adults. Livestream sessions are offered twice per month and will include opportunities for viewers to purchase items in real time.

    The company is leveraging high millennial homeownership rates and the affinity for DIY projects by this demographic. Citing a report by the US-based National Association of Realtors (real estate agents) that revealed millennial buyers comprise the largest segment of home buyers - at 37% - Lowe's is tapping into an opportunity to engage with a new generation of DIYers seeking a transformation in how-to learning and experiences.

    During a recent earnings call, Marvin Ellison, chairman and chief executive officer of Lowe's, stated current trends point to increased interest in home improvement.

    We're encouraged by the strengthening millennial household formation trends that will support home buying in the coming years.

    The retailer wants to become the social destination for home improvement DIY enthusiasts.

    The livestreams will be limited to 1,000 participants each in addition to a children's workshop hosted by Lowe's Red Vest store associates as an in-store experience for kids ages 5 to 12.

    The virtual programming hosts will be available to answer project-related questions live during the segment, and participants who attend the virtual workshops will get opportunities to buy supplies.

    Lowe's designed its programming schedule according to season but also incorporated feedback from consumers, which prioritised "flexibility, topic relevance and expert connection" - qualities that resonated most with millennial customers. It will create a natural tie to what customers are tackling around their own home throughout the year.

    The retailer plans to add features that gamify the experience for participants, such as sharing virtual high fives and earning project completion badges. Marisa Thalberg, executive vice president and chief brand and marketing officer at Lowe's in a statement:

    As new generations and new customers embrace DIY, we recognise how valuable our Red Vest store associates can be in providing project 'how-to' help and expertise.
    With the launch of DIY-U by Lowe's, we are making sure that support and a DIY community is available where, when and how people most want it: in-store, live and interactive online, or online on demand.

    Registration for the March schedule has begun and and includes programming that covers "A Bathroom Refresh You Can Do Yourself (How to Install a Vanity)", "Kids Workshop: Shoot the Moon (Build a Game to Compete for the Highest Score)" and "Make Your Home Office Work for You (How to Wallpaper a Room)".

  • Sources: Retail Touch Points, Chain Store Age, PYMNTS, Lowe's Companies, Inc. and RIS News
  • bigbox

    Big box update

    Bunnings South Nowra site sells for $65.3 million

    Two regional Bunnings warehouses are pilot sites for a Victorian state government program in which food supply businesses can click-and-collect rapid antigen tests

    Charter Hall's unlisted Direct Industrial Fund No.4 (DIF4) recently paid $65.3 million for the Bunnings property in South Nowra (NSW) that fronts the Princes Highway. (Charter Hall Direct Industrial Fund No.4 is an unlisted property fund with a major portfolio of Australian industrial properties.)

    With a 240 metre frontage, it is the only Bunnings in the trade area and the largest on the NSW South Coast. The property includes a nearly new, full format warehouse, offering limited capital expenditure over the remaining 11-year lease term. The sale by JLL represents a yield - or return - of four per cent.

    The total site area of 29,350sqm is completely covered by the Bunnings operation and includes an approximate gross leasable area of 17,982sqm and parking for 428 cars.

    This acquisition increases the number of Bunnings properties across Charter Hall's portfolios to 66, representing a gross annual value of almost $3.7 billion.

    Charter Hall Direct CEO Steven Bennett said DIF4's acquisition of Bunnings Nowra adds to the fund's growing portfolio of high quality properties with strong tenant covenants. He told Fairfax Media:

    Bunnings is arguably one of Australia's most trusted businesses and we are proud to add its Nowra store to the fund's long term and resilient tenants.

    The sale of Bunnings Nowra was brokered by Sam Hatcher and Nick Willis from JLL's Retail Investments (Australia), Mr Hatcher said large format Bunnings stores remain very competitively sought after by majority of buyer types.

    They are arguably one of the most secure covenants in Australia. Bunnings Warehouses have been among the most highly sought-after real estate assets since the onset of the pandemic.
    The long leases appeal to investors seeking a defensive and stable income, particularly given the strength of the Bunnings covenant and underlying business performance.

    The acquisition highlights the increasing crossover between retail (now often seen through the lens of last-mile logistics) and industrial property investment mandates, driven by the growth of online shopping and innovations like click-and-collect, according to the Australian Financial Review (AFR).

    Since the onset of the pandemic, there had been over $1.2 billion of Bunnings transactions, Mr Willis said. He told the AFR:

    This level of investment is being driven by increasing weight of capital locally and offshore seeking exposure to both Bunnings and supermarket-based assets. However, supply is becoming increasingly constrained which is driving [yield] compression.

    The Bunnings South Nowra complex opened in January 2021. The former store was demolished in late 2019 to make way for the new $27.8 million building.

    Related

    Nowra store opening - HNN Flash #23, November 2020

    RATs at Bunnings stores

    As part of an Andrews Labor Government pilot, more than 100,000 rapid antigen tests are being made available for Victorian businesses in critical industries such meat and poultry processing, as they grapple with staff shortages due to coronavirus infections.

    Eligible businesses will buy their tests through the Business Victoria website before picking them up at the Bunnings Geelong North and Shepparton stores when their allocation is available.

    Bunnings customer service experience team members will be assisting business customers along the way to help to make the process as simple and convenient as possible and will notify them when their tests are ready for pick-up. The test kits are not part of Bunnings general stock supply and are not available for purchase by store customers.

    Innovation and Digital Economy Minister Jaala Pulford said the unit price - $8.25 including GST per unit - was wholesale, plus a small administration fee and neither the government nor Bunnings was making a profit.

    Ms Pulford also said rapid antigen tests were helping people to live and work safely at this stage of the pandemic and Bunnings had the click and collect capability to keep this simple for businesses.

    Bunnings managing director Mike Schneider said the company was really pleased to be helping the government with the pilot by providing an easy and convenient way for critical workforces in Victoria to access rapid antigen tests. He said:

    As always, we're committed to offering community support where it can have the greatest impact and welcome any initiative that helps business keep their team safe and their operations moving, something that we know is more important now than ever.
  • Sources: Sydney Morning Herald, South Coast Register (Fairfax Media), Australian Financial Review, MENA Report, Herald Sun and Geelong Advertiser
  • bigbox

    USA update: Home Depot

    Home Depot has forecast slower growth as the pandemic-fuelled sales boom begins to level off

    Its chief financial officer said investments in building out the retailer's supply chain would continue to pressure gross margins

    The Home Depot reported that its sales increased 11% in the fiscal fourth quarter compared with the year-earlier period. But the retailer gave a conservative outlook for the next fiscal year, with sales trends "slightly positive" and earnings per share growing at a low single-digit pace.

    Revenues climbed 10.7% in the fourth quarter to USD35.7 billion, above forecasts for USD34.8 billion.

    In the fourth quarter, Home Depot's comparable sales figure, which adjusts for store openings and closings, increased by 8.1%. That trend, though flatter than the company's growth earlier in the pandemic, shows Home Depot is still building on gains stemming from a flood of home improvement activity.

    The number of transactions declined by 3.8% on a comparable basis, but the average transaction value was up 12%. Inflation in several product categories was responsible for much of that gain, Home Depot's chief operating officer and incoming CEO, Ted Decker, told analysts on a conference call.

    Sales to professional customers grew faster than DIY sales in the fourth quarter, but demand in both markets accelerated from the third quarter, the company said. Out-going chief executive and current chair, Craig Menear, said during an earnings call:

    Everything we hear from our pro customers is they've got more work than they can handle. I know for myself, it took a while to get somebody out to just do simple projects around my house. We hear that all over the country.

    Mr Decker said he wants home professionals to think of the company as more than a store of convenient purchases.

    The retailer wants to win contractors' larger, planned orders, like thousands of feet of flooring - not just be their choice for last-minute shopping when they scramble to find a tool or finish a job. That significant shift is part of Home Depot's growth strategy as it tries to sustain momentum beyond the pandemic and reach an ambitious target of USD200 billion in annual sales. He told CNBC:

    We're sort of the 7-Eleven for pros - convenience, value, tremendous product and brands - but what we're building now is something completely different and revolutionary to get the pro planned purchase.

    Home Depot executives did not say when the retailer expects to hit that USD200 billion goal, but it would mark a nearly USD50 billion gain from its annual sales in the year ended Jan. 30.

    About half of total sales come from home professionals, chief financial officer Richard McPhail said. He estimated that the retailer's total addressable market in North American is more than USD900 billion.

    Over the past several years, Home Depot has been investing in supply chain hubs to help it better cater to pros. It's in the middle of a five-year plan to invest USD1.2 billion in its supply chain, including the ongoing construction of flatbed distribution centres that can store and deliver larger orders.

    It built the first one in Dallas and plans to eventually open 40 of them across major US markets. It previously filled such orders out of the stores themselves.

    Mr Decker said the giant hubs have allowed Home Depot to carry a wider merchandise mix and given pros more assurance that they can get quantities they need. For example, he said a conventional store could be expected to stock only about 3,000 square feet of flooring - or enough for three odd jobs.

    With the flatbed distribution centre, he said Home Depot is getting sizable single orders such as 7,000 square feet of flooring and 150 doors.

    Slower growth

    The demand fuelling the company's sales growth has evolved as the pandemic progresses. The first phase of the crisis often brought in customers eager to buy home necessities and to tackle DIY projects around the house. As the pandemic's acute early phases subsided, Home Depot saw sales to professional contractors grow, with homeowners becoming more comfortable bringing workers into their homes again.

    Product categories involving more heavy-duty projects, such as electrical, plumbing and building supplies, saw some of the company's fastest growth rates in the fourth quarter.

    However, sales growth will likely slow this year for the home-improvement retailer said, an indication that the sector's rapid expansion during the COVID-19 pandemic is moderating.

    Also, Home Depot's gross margins, a measure of profitability, have been declining recently, partly because of investments the retailer has made in its supply chain.

    Against rising prices, demand from homeowners remains strong, Mr McPhail said, adding that keeping inventories healthy has been a priority. He told the Wall Street Journal:

    Right now, it's more a situation of staying in stock. We're paying more attention to the impact of staying in stock, compared with how inflation might impact us.
  • Sources: Wall Street Journal, CNBC and Financial Times
  • bigbox

    USA update: Lowe's Home improvement

    Lowe's raises forecast as it takes a larger share of home pro spending

    The retailer has also partnered with online grocery delivery platform Instacart to pilot same-day delivery

    Lowe's Cos Inc. has lifted its full-year sales and profit forecasts and offered an optimistic outlook for home improvement demand in the US in the face of rising mortgage rates.

    Aging houses, rising real estate values and generational trends are fuelling demand for home projects. Americans - including millennials, the country's largest generation - have been buying houses and upgrading to bigger ones during the coronavirus pandemic. That has depleted the supply of available homes and inspired some to hire contractors (tradies) to redo a bathroom, replace a roof or take on other similar projects.

    Executives said the extension of remote work policies would also support a step-up in home upgrade jobs.

    These dynamics have lifted sales for both Lowe's and its main competitor Home Depot. Lowe's CEO Marvin Ellison told CNBC:

    When home prices go up, consumers have confidence to invest in their homes.

    He said repair and maintenance projects will drive spending, even in the face of looming prices rise from inflation and a mortgage rate hike. About half of the country's single-family homes were built before 1980, according to data from the Federal Home Loan Mortgage Corp.

    In the fourth quarter ended January 28, Lowe's net income rose to USD1.21 billion, from USD978 million, a year earlier. Sales climbed to USD21.34 billion from USD20.31 billion last year.

    Lowe's same-store sales in the US increased 5.1% in the fourth quarter, as customers made fewer trips to the company's website and stores but spent more when they did.

    Mr Ellison said in a separate interview that a year ago the mix of purchases looked different as shoppers bought cleaning products and supplies for simple DIY projects. Now, major projects are driving a larger share of purchases.

    Transactions in the US fell 4.4% in the fourth quarter compared with the same period, a year ago. Mr Ellison said sales of big-ticket items that cost at least USD500 grew 15.6% in the quarter. The average ticket at US stores and on Lowe's website rose 9.5% to USD95.66 in the fourth quarter, partially due to inflation.

    Sales from home professionals jumped 23% in the three-month period, too. Professionals tend to be steadier and more lucrative customers.

    Lowe's has been chasing pros with a new loyalty program and perks like reserved parking and free air for tires at its stores.

    Lowe's doubles down on its commitment to pro customers - HNN Flash #80, February 2022

    Pro sales are growing for another reason, too. As the omicron variant recedes and schedules get busier again, some people are hiring contractors rather than taking on DIY projects.

    Like other retailers, Lowe's is seeing costs rise and chasing inventory due to supply chain delays. Inflation drove about half of Lowe's sales increase in the second half of the year, Mr Ellison said.

    In some categories, such as appliances, he said Lowe's has expanded its portfolio of merchandise, so shoppers have a wider variety if an item is out of stock.

    Mr Ellison said the retailer is working closely with suppliers, sourcing more products from the US and importing inventory from other countries. It opened coastal holding distribution centres on the East and West coasts where it can store products from other parts of the globe rather than ordering just in time - an approach that can help retailers' balance sheets, but make them vulnerable if ports are temporarily shuttered or congested.

    He said Lowe's already has its inventory in the US as it gears up for spring, its busiest season. As the weather warms, it will ship merchandise from the coastal holding facilities to regional distribution centres and then stores.

    It's an extra step, but that extra step has given us the ability to have a better in-stock position than most of our competitors.

    Looking ahead, Lowe's expects total sales of USD97 billion to USD99 billion for its fiscal 2022, compared to a previous forecast of USD94 billion to USD97 billion. The company forecast that profit will grow by approximately 8% to 13%.

    One hour delivery

    Lowe's is also partnering with a popular online delivery platform to test same-day delivery in as fast as one hour. It is collaborating with Instacart to make approximately 20,000 products, including small home appliances, building supplies, light fixtures, and garden and outdoor essentials, delivered from the store to their door.

    Lowe's is the first dedicated home improvement partner available on the Instacart marketplace, and should help Lowe's stay competitive with Home Depot in offering on-demand delivery.

    Same-day Lowe's delivery via Instacart is initially available in Boston and Charlotte, North Carolina, with plans for expansion.

    To begin shopping from Lowe's for same-day delivery via Instacart, customers can visit the dedicated Lowe's page on the Instacart site, or select the Lowe's storefront on the Instacart app. For all orders, an Instacart shopper will pick and deliver the order within the customer's chosen delivery timeframe. Customers can follow along and live chat with their shopper in real-time as needed. Mike Shady, Lowe's senior vice-president of online, said:

    Online is a key piece of our omnichannel strategy, and the combination of Lowe's home improvement expertise and Instacart's ability to help deliver right to your door within hours offers a new, convenient way to shop.
    As we explore a suite of solutions to meet our customers' same-day and next-day delivery needs, this partnership is enhancing the customer experience and providing the choices today's customers demand.

    Lowe's rival The Home Depot partnered with Walmart's white-label GoLocal delivery service to offer same-day and next-day delivery in October 2021. The service is limited to items that easily fit in a car such as fasteners, paint and small tools.

    Related

    Home Depot hires Walmart to handle local deliveries - HNN Flash #66, October 2021
  • Sources: CNBC, Reuters, Wall Street Journal, Chain Store Age and PR Newswire
  • bigbox

    Wesfarmers-Bunnings results FY2021/22 H1

    Bunnings maintains revenue, sees earnings decline slightly

    After a bumper first half for FY2020/21, concerns were that Bunnings would see a revenue decline. However, the retailer managed to perform better than expectations.

  • The following is a brief summary of this article. To read the full version, please download the full version by clicking the image/link below.
  • Download hnn-brief-001

    Australian conglomerate Wesfarmers has released results for its FY2021/22 first half, which include results for home improvement big-box retailer Bunnings. Wesfarmers recorded a near flat result in total revenue, at $17.76 billion, down by 0.1% on revenue for the previous corresponding period (pcp), which was the FY2020/21 first half. However, earnings before interest and taxation (EBIT) fell more significantly, to $1.91 billion, down from $2.14 billion in the pcp, a decline of -10.9%.

    Net profit after tax (NPAT) fell even further in percentage terms, coming in at $1.21 billion, down from $1.39 billion in the pcp, a decline of 12.7%.

    Bunnings offered a much better story, with a revenue increase of 1.7% over the pcp to $9029 million. However, earnings before tax (EBT) fell by 1.2% to $1259 million.

    The short-term retreat, however, masks a considerable step-change in revenue and earnings. Compared with the pre-pandemic first half of FY2019/20, Bunnings revenue for the reported half grew by 26.5%, and EBT grew by 34.2%.

    For Wesfarmers, the most significant decline came from the Kmart Group, which includes Kmart, Target Australia and the Catch online business, with EBT at a low of $178 million, down from $487 million in the pcp, a slide of -63.4%. Officeworks also did not do well, with EBT down from $100 million in the pcp to $82 million, a fall of -18%.

    Bunnings in detail

    In terms of the overall hardware and home improvement market, just how well did Bunnings do in revenue terms?

    If we take the raw, overall figures for Australian hardware revenue for the reported period as provided by the Australian Bureau of Statistics (ABS), actual growth in revenue over the pcp was 2.39%. This means that the Bunnings' increase of 1.7% in revenue would seem to be sub-par. In fact, looking at Chart 1, which shows the allocation of revenue across Australia's states and territories as detailed by the ABS, and Chart 2, which shows the distribution of Bunnings' store locations, it's reasonable to assume that Bunnings had more exposure in higher-growth states such as New South Wales (NSW) and Queensland (QLD) than it did to lower growth and negative growth states such as Victoria (VIC).

    If some rough assumptions are made, such as that the revenue generating capability of a smaller format store is 70% that of a warehouse on average, the growth exposure of Bunnings looks closer to a range of 2.7% to 2.9%.

    Yet growth for FY2020/21 H1 over the pre-COVID-19 FY2019/20 H1 at Bunnings did outpace the overall market. Growth in overall hardware revenue for Australia was 20.7%, while in top-line numbers Bunnings grew by 24.3%. If we apply those same calculations to Bunnings in terms of its growth according to store distribution, the growth opportunity was lower than for Australia overall, at around 16.5% to 18.0%.

    So the change that we've seen at Bunnings is sharp over-performance during the first phase of the COVID-19 pandemic, and mild under-performance during the second stage.

    We can only speculate about why that might have happened. Some candidates might be that Bunnings adapted quickly to the difficulties of the pandemic, outpacing other retailers by offering online purchasing, home delivery and click-and-collect services. Also, it could be that specific characteristics of the Omicron variant of COVID-19 might have disadvantaged Bunnings more than it did other retailers in late 2021. (That would include, for example, whether Bunnings enforced retail restrictions - such as denying entry to the unvaccinated - more vigorously than some of its competitors.)

    In his prepared remarks, the MD of Bunnings, Mike Schneider, detailed differences between the first and second quarters that made up the reported half:

    Government imposed lockdowns in Australia and New Zealand impacted quarter one trading and sales. Pleasingly, however, Bunnings was able to recover sales momentum in the second quarter, culminating in a strong Christmas, supported by a good stock position.
    Commercial sales growth remained strong for the half supported by robust housing construction and renovation activity and the execution of our strategy to better serve trades, builders and organisations. Online penetration rose to 4.3% driven by COVID-19 trading restrictions, particularly in Victoria, New South Wales and New Zealand.

    Looking at other performance numbers, these are very much inline with a general slowdown in growth. Store-on-store revenue grew by 1.5% (2021 H1: 27.7%), while total store sales growth was 1.0% (2021 H1: 24.8%). Return on capital (RoC) was, however, higher for the reported period at 79.0% (2021 H1: 76.6%). EBIT margin was slightly lower at 14.3% (2021 H1: 14.7%), but historically high. Chart 3 illustrates these numbers going back to 2013.

    As Mr Schneider commented:

    Overall, we were really pleased with our earnings performance given we were cycling such a strong first half last year, and the cost pressure that's been seen across the industry.

    Mr Schneider also pointed out that Bunnings continued, despite the difficulties of the pandemic, to grow and develop as a retailer:

    During the half the team continue to deliver on our long term strategic agenda. Despite the cost and stock pressures faced by the retail sector, we worked hard to maintain our everyday low prices and strong product availability for customers. We refreshed a number of our product categories with our updated garden care and storage ranges well received, and our new, easier to shop layout for power tools proving popular.
    We boosted in-store service by equipping our team with Push-to-Talk communications. That's allowing us to open additional checkouts quickly when traffic suddenly builds and quickly locate expert team [members] to assist our customers with specialist questions.

    Bunnings has also, according to Mr Schneider, continued to develop its digital capabilities. While the company reached a peak of over 4% of sales coming from online during the lockdowns, this later came down to around 2%.

    As part of our ongoing digital investment, we launched a new e-commerce platform for trade customers. The new mobile friendly website makes it easy for trade customers to shop our full range online, with their PowerPass pricing and arrange delivery to sites or collection at a store. We further improved search performance and personalisation on our new consumer web platform.
    We now have over 110,000 products SKUs available to purchase online. Digital engagement grew with the number of transactions made through Bunnings online store 41% higher than the first half of 2021.

    The three other developments of some note were the launch of FlyBuys, the launch of the first Tool Kit Depot (TKD) stores in Western Australia, and the finalisation of the purchase of Beaumont Tiles.

    In response to a question by analyst Shaun Cousins of UBS, Mr Scott outlined some of the advantages offered by FlyBuys:

    A big part of [launching FlyBuys at Bunnings and Officeworks] is, we have also reset the framework that the shareholder partners are working with Flybuys such that each of our businesses has greater rights around the use of data, which is highly complementary to all of our divisional strategies.
    We also believe - when you think about loyalty programs and data insight programs, from a customer point of view, having the capacity to earn more points and get more value across a broader range of categories really matters. And if you think about consumer-based retail loyalty programs, there is no other program in Australia that provides a broader reach and better value than Flybuys.
    So that's another good reason why our retail brands are keen to be a part of it. And then coming back to what's in it for our retailers, getting the benefit of capturing, you know, cost-effectively capturing customer transaction data in-store is a really key part of each of our divisions growth initiative.

    Mr Schneider followed up Mr Scott's comments by indicating the reception of the program had been positive, and that it fit well with the use of data analytics by Bunnings:

    I've got to say it's, it's something we're really excited about at Bunnings to be a part of, we're seeing really good participation from customers good engagement from our team in obviously reminding customers about scanning their Flybuys cards, but at the end of the day, what this comes down to for us is rapidly accelerating the amount of customer information we have, alongside the fact that the investments we've been making and talking about now for 18 months or so in terms of a data and analytics platform means that we've got the tools to use the information we have.
    I think had we sort of looked at this a couple of years ago, one, the construct probably wouldn't have worked for us, firstly, and then secondly, if we had the data, to be honest, we probably wouldn't have had anything really to, to do with it or meaningful nature.

    In terms of Tool Kit Depot, Bunnings has remained quiet about the development of this trade tool reseller. That partly has to do with the company's desire to develop it slowly through 2022, but also the only current stores are located in Western Australia, which remains somewhat isolated due to pandemic restrictions. The website (toolkitdepot.com.au) indicates the retailer will sell Makita, Milwaukee, Festool and AEG tools, as well a wide range of tool accessories.

    As for Beaumont Tiles, it seems likely that this will be developed slowly through 2022 as well. Mr Schneider had this to say about the acquisition:

    The acquisition of Beaumont Tiles was completed in November [2021], further improving Bunnings' ability to meet the specialist needs of builders and trades. The business remains separate and distinct with the initial focus on making it easy for Bunnings' commercial customers to access Beaumont Tiles' specialist design knowledge and extensive hard services range.

    One aspect of Beaumont's that is not widely understood is that in addition to its consumer tiles business, it has an entire range of tiles for builders, representing value on bulk orders, as well a well-established business in supplying tiles to large commercial installations.

    In response to a question by an analyst, Mr Schneider also described how he sees the market potentially developing through the rest of 2022:

    What we've seen is, look at that sort of 26 or so percent lift in revenue over sort of a two year period, the split of 65/35 [DIY/Trade], broadly remains the same. So what we see is, people being at home or doing more at home, wanting to maintain the projects that they've done, taking on all the new DIY skills that they've got, alongside the fact that access to trade for small jobs is really difficult.
    The pipeline and what we sort of have, you know, and what we can see in terms of pre-orders and things like that, gives us confidence, as I said in my comments before, about what the next period looks like in terms of not only housing starts, but also additions. But that percentage [trade/DIY] hasn't shifted materially at this point in time.

    Analysis

    The first thing that any analysis of these results for Bunnings needs to state is that the retailer really did "nail" the half. It's not perfect - what would be? - but it is very good. To effectively retain most of the market gains from the exceptional FY2020/21 was an unexpectedly good result.

    As HNN has said in the past, the real challenge for Bunnings as part of a listed company is to now convert those gains into further profitable expansions, so that when the market slides again, as it is likely to do in FY2022/23, revenue from expansion business will replace the peak revenue at Bunnings warehouses.

    It's unclear at this moment just how that will work out for TKD and Beaumont Tiles. Certainly the few images HNN has seen of the TKD stores look very good. At a guess, we're not going to see TKD stores launched on the east coast much before September 2022, if then. It's going to be a very competitive marketplace, with both Total Tools and Sydney Tools not only well-established, but simply very good retail operations in their own right.

    As for Beaumont Tiles, while Mr Schneider emphasised the advantages for trade and commercial Bunnings customers, it is evident this remains largely a play for the consumer market. HNN believes there is a strong possibility that a desire to compete with companies such as Reece was one motivator for the acquisition. While Beaumont's will remain an entirely separate and independent business from Bunnings, the case will be that its expertise will be used by Bunnings, which could see an evolution in the way sells, for example, bathroom fittings.

    Related:

    Bunnings links to data through Flybuys – HNN Flash #74, December 2021
    Wesfarmers' move towards data analytics – HI News 4.5, July 2018
    HiLo and everyday low pricing (EDLP) pricing strategies at Bunnings – HI News 2.2, February 2016

    For the full article, please download HNN Briefing using the links below:

    Download hnn-brief-001

    bigbox

    Big box update

    Bunnings Leppington welcomes customers

    A new two-level Bunnings store is being proposed for Tweed Heads (NSW), approximately 600 metres from its current location

    The recently opened Bunnings store in the Sydney suburb of Leppington spans more than 17,000sqm and has more than 350 car parks. It includes a six-lane drive through timber yard, a new format trade desk and an aisle for transport and moving needs to cater for customers moving home or office.

    This store also has new bathroom displays, a kitchen design centre and a wide range of site safety and workwear products. Bunnings Leppington complex manager Kylie Goss said the new warehouse gives customers an alternative to the nearby Hoxton Park and Crossroads stores.

    As part of the store opening, the team provided hands-on support to local community groups in the area. Ms Goss told the Liverpool City Champion:

    Some of our new team members recently headed out to Grow Rehabilitation Residential in West Hoxton, to put in new garden beds and a reflection seating area. We also visited The Animal Rescue Hub in Leppington to put up new gates and fencing and helped to paint some kennels, and we've also reached out to Swag Family in Liverpool to plan upcoming projects and donations.

    Tweed Heads

    The proposed new Bunnings store in Tweed Heads (NSW) would have an expected floor space of 18,200sqm, about double that of the existing store, with an underground parking lot.

    As part of the process, a Voluntary Planning Agreement (VPA) has been sought with Tweed Shire Council. The agreement would result in payments known as "trip ends" credits applied to the current site under the Tweed Road Contribution Plan to be transferred as "credits" from the existing site to the new site. Credits are claimed on the basis that the current store's future use won't generate as much traffic as its likely use is for less intense "Bulky Goods".

    The store's current site on Greenway Drive and the proposed new address which is several hundred metres away at 44 Enterprise Avenue are owned by Harvey Norman. Under the VPA, the existing Bunnings site would be provided for a "lower intensity use", according to a report in Tweed Daily News.

    Bunnings area manager Luke Underwood said the plans for the new store were still tentative, and no development application has been lodged.

    Tweed Shire councillors have discussed a VPA for the proposal. The Echo newspaper reports the VPA was approved by councillors with Mayor Chris Cherry reminding councillors that "it's important that we remember that this is not the development application for the building of Bunnings. This is just with regards to the VPA that allows the traffic trip ends that are currently in the current site to be allocated to, or partially allocated to, the new site". She also said:

    I think it is important that there will be an opportunity when the DA is considered to really address a lot of those traffic issues that were raised in submissions.
    We had 28 submissions, just about all of them raised the issue of traffic and how perhaps a roundabout or a traffic light is needed... some solution is needed because of the location and I think our traffic engineers are going to be looking at that very, very closely.

    Mayor Cherry is in favour of the 100 jobs the larger Bunnings store would create.

  • Sources: Camden Advertiser, Tweed Daily News and The Echo
  • bigbox

    USA update

    Lowe's launches home decor brand, Origin21

    The line offers on-trend pieces reflecting mid-century modern and Scandinavian designs

    Debuting in its 2,000 stores and online, Lowe's Origin21 range represents the home improvement chain's expansion in the home decor category. It has focused on home furnishings as an important growth area as it looks to expand its business and gain market share from its arch-rival Home Depot. Marisa Thalberg, executive vice president and chief branding and marketing officer for Lowe's, told Forbes:

    The Origin21 program fits into our total home strategy. This represents our next great step.

    Origin21 is the retailer's first true exclusive house brand in the home decor sector, and is targeting stylish, trend-seeking millennial consumer looking to modernise their home style.

    Lowe's said Origin21 pairs function and beauty through on-trend items each season. The collection includes everything from throw pillows, rugs, tabletop accents and outdoor furniture to light fixtures, faucets, and faux plants. The pieces can stand alone or flow together in a single space. Pricing is being described as "surprisingly" affordable.

    The brand will be updated seasonally, and Lowe's plans to expand into additional products going forward. Sarah Dodd, Lowe's senior vice president, global merchandising, explains:

    While the line's name pays tribute to 1921, the year of Lowe's founding, Origin21 brings fresh modern style, designed to add the finishing touch to any room across the home. We're excited to bring Origin21 to our customers, which is just part of our larger goal to offer consumers everything they need to finish their home improvement projects, all at an exceptional value.

    The line will be featured prominently in stores with showcase vignettes near entrances, but most individual pieces are shown in their respective departments within the store. Online shoppers can see Origin21 on its own landing page or find items within product-specific searches.

    The new collection joins Lowe's home decor private brand, allen + roth, and both brands are part of the retailer's new House of Style campaign, which aims to deliver on the company's goal to become the only retailer that completes the home style package through total home offerings and extensive selection in one location.

    Related: in late 2020, Lowe's CEO Marvin Ellison said the company will focus on winning more of the US home improvement market with a "Total Home" strategy.

    Lowe's unveils "Total Home" strategy - HNN Flash #27, December 2020
  • Sources: Forbes, PRNewswire and Home Textiles Today
  • bigbox

    Big box update

    Bunnings Garbutt store submits plans for expansion

    Bunnings area manager Merv Stanford said the retailer continues to look for opportunities to improve its existing store network

    A development application (DA) has been lodged with Townsville City Council seeking approval for the expansion of the Bunnings Garbutt store in the suburb of Townsville (QLD). About 2800sqm of store space is to be added, increasing the size of the main showroom and its trade sales, as well as adding about another 50 car parks, reports the Townsville Bulletin.

    According to the DA, lodged on behalf of property owner Dalrymple Townsville Pty Ltd, a road closure has been enacted to permanently close and acquire part of the Dalrymple Roadd reserve, bringing the site about 30m closer to the road frontage. The acquired section of road reserve now forms part of the site.

    An extension to the store is proposed over the western part of the site. The expansion includes reconfiguration of the car park and increase spaces from 668 cars to 718 cars. A number of changes to service vehicle circulation arrangements is also proposed to allow one-way traffic movement, new pedestrian paths and retaining and relocating a World War II hangar memorial.

    The memorial was in the road reserve and is to be relocated within a landscaped area adjoining a Dalrymple Road entrance, which the DA said would ensure an attractive setting.

    A study into the area's World War II heritage was part of the conditions of approval to develop the store in 2002. The memorial commemorates the area's former airfield hangar.

    Townsville market

    A recently released Townsville Regional Scorecard Report shows the city is faring well despite the disruptions being caused by the COVID-19 pandemic.

    The Queensland Country Bank Townsville Region Scorecard Report 2021-22 describes the performance of Townsville region in 2021 and the expectations of performance in 2022. Produced five times in the past 14 years by James Cook University in collaboration with local businesses, the report analysed 28 variables to chart the positive performance of the local property markets in 2021.

    Professor Colin Dwyer said Townsville's residential property market performed the best since 2007 and that commercial market activity was also improving. He said:

    Townsville's home affordability is comparatively better than all capital cities and better than all comparative sized cities.

    Propertyology head of research Simon Pressley said Townsville's 128% increase in annualised house sales to October 2021 was superior to every capital city and more than double the national average. He said:

    This impressive spike in demand is underpinned by arguably the most improved economy in Australia, relative housing affordability and cheap credit.

    Prof Dwyer said Townsville's residential vacancy rate remained tight throughout 2021, sitting at 0.9% for December 2021.

    There are fewer rental properties available in the total pool at the end of 2021, than at the start of 2019. Fewer investment properties, adds pressure and complexity to a tight Townsville residential rental market.

    2021 was a positive year for all commercial property sectors across the Townsville region. Townsville Colliers managing director Peter Wheeler said that Townsville's business confidence was high, with major projects and mining developments starting and flowing through and stimulating the local economy.

    The combined value of the top 10 sales for 2021 in Townsville City was around $200 million, excluding the sale of Kmart Plaza for around $40 million. Residential approvals improved over 50% in 2021 boosting construction activity and influencing inquiry for industrial property.

  • Source: Townsville Bulletin
  • bigbox

    USA update

    Lowe's doubles down on its commitment to pro customers

    The Home Depot and Lowe's are facing competition in home services as Walmart partners with Angi

    Lowe's Home Improvement is expanding perks aimed at attracting and locking in professional customers.

    The new loyalty program for pro (tradie) customers called Lowe's MVPs Pro Rewards, builds on the retailer's credit offering and provides benefits such exclusive offers to business management tools (ie. tips on taxes and warehousing) and select free drinks; chances to win gear and prizes such as a Ford F-Series pickup truck; and the opportunity to earn Lowe's e-gift cards. It is also promising an improved website to help shoppers keep track of their rewards. Shannon Tucker, vice-president of Pro and Tool Rental, said:

    It's a way of us helping the pros be better with their business. We specifically designed the program to help all pros regardless of size.

    Lowe's already offers credit incentives to pro shoppers such as 5% off on some items and no interest for 60 days for business accounts. The new services at Lowe's are aimed at helping contractors' small businesses grow and tackle back-of-house operations. Tony Hurst, senior vice-president of Pro, Services and International said:

    We're deepening our partnership with pro customers because when they succeed, we succeed. Lowe's MVPs Pro Rewards is another big step in Lowe's continued Total Home strategy when it comes to the important pro customer. We are committed to a true business partnership mindset to help pros as they grow their businesses and their futures.

    Pros at Lowe's

    Chief executive officer Marvin Ellison said in an interview with Bloomberg:

    When I arrived three and a half years ago, we didn't have credibility with the pro customers.

    The company had backtracked and stumbled with that key group of shoppers, he said. Now it's aiming to win them back.

    The retailer is trying to win over contractors at a time when their prospects are bright. This year, the majority of US homeowners are planning to use more discretionary income on home improvement projects compared to 2021, according to Lowe's research. Almost half of homeowners say they intend to hire a professional. Contractors are already inundated with jobs, thanks to the nesting trends of the pandemic.

    Lowe's is also targeting the market share held by smaller home-improvement retailers which Mr Ellison estimates is roughly USD600 billion in annual sales in the US, or about double the revenue brought in by Lowe's and Home Depot. Mr Ellison said his company is one of the largest importers of shipping containers in the US on an annual basis - potentially giving it an advantage as supply-chain challenges limit goods at smaller players. The broader selection will appeal to contractors, Mr Ellison said.

    If we're in stock and we are ensuring that we are investing in our business - and trying to limit the amount of costs that we push forward to our pro customers in price - we create a tremendous benefit to them.

    Contractors have been a key part of Lowe's recent growth, which includes eight straight quarters of rising sales and a market value that has risen more than 250% since the start of the pandemic. In December, Lowe's executives said they expect the company's pro sales to grow at double the market rate over the next several years. Mr Ellison said:

    The one thing that the pros said to us loud and clear in our research is that they wanted a business relationship and not a series of transactions.

    Home improvement professionals typically spend more than regular shoppers and visit stores more frequently. Their business is also an area where Home Depot is ahead. Currently, contractors generate about a quarter of Lowe's sales, which totalled USD95.2 billion in the 12 months ended Oct. 29, 2021. They make up about 45% of Home Depot's sales, which were USD147.7 billion over a similar period.

    Walmart home improvement

    Mass market retailer Walmart is expanding its home services offer. It announced a new partnership with Angi (previously Angie's List), which will make service professionals available to Walmart customers in nearly 4,000 stores across all 50 states in the US. When Walmart customers shop in-store or online, they will be able to also book an Angi professional for any of 150 common home improvement projects, including flooring, painting, fence installation as well as smaller jobs like furniture assembly or mounting a big-screen TV.

    Through this alliance, Walmart gets to partner with a known brand that will allow it to compete with the services offered by Lowe's and Home Depot.

    Lowe's Livable Home Services connects customers to "professional independent installers", in select locations, who can install anything from a new door to a smart-home heating device. Home Depot also helps customers find an "authorised service provider", for everything from flooring to landscaping to garage door installation.

    Background

    In 2018, Walmart had taken its initial steps into the home services market when it teamed up with Handy to sell in-home installation and assembly services in over 2,000 stores, and then later online. The idea was that when customers were purchasing items, like furniture, they could also immediately purchase an installation appointment to help them get the new item set up in their home. The move had followed rival Amazon's own entry into home services, which had included the launch of a dedicated Home Services hub on its retail website in 2015.

    Shortly after Walmart announced its partnership with Handy, the company was acquired by Angi Homeservices. And last year, Handy co-founder Oisin Hanrahan became the CEO of the combined organisation. It was expected that Walmart could also capitalise on this arrangement by later expanding its own deal to include Handy's full range of home services at some point, given the potential market.

    Today, Angi, not Handy, will become Walmart's home services partner. This will allow the retailer to link its customers to Angi's network of more than 250,000 professionals.

    Angi's branding - which was relaunched in 2021 - will be found both in-store and online. Last year, the company decided that "Angie's List" no longer accurately described its offerings as it was no longer just "a list" but rather a site where customers could research, book, schedule and pay service pros and other home contractors.

    Customers will be able to book Angi's services both online and in-store alongside any eligible item or from Angi's dedicated landing page at Walmart.com, which is expected to go live in mid-February, according to the TechCrunch website. After purchase, Angi will reach out to coordinate the booking. For larger services, a dedicated project advisor provides the customer with a custom quote, finds a pro and handles the work to make sure the project is successful.

    Once a service is purchased, Angi will reach out to coordinate the booking, and all projects are backed by the Angi Happiness Guarantee, which covers projects up to their full purchase price.

    Walmart will be Angi's first, limited-time exclusive retailer to offer its services. Mr Hanrahan said in a statement:

    We are pleased to launch Angi with Walmart, a leading global retailer, as our first retail integration. Since the start of the pandemic, the home is in focus and people across the US are doing more home improvement, maintenance, and repair work and they are often turning to Walmart to find the tools and materials needed to start those projects. Things like sprucing up an entertaining space by installing a new smart TV, painting a nursery for a family addition, and transforming an outdoor space and adding a patio are now projects that Walmart customers can get done seamlessly with the help of an Angi pro as part of the Walmart shopping experience.

    Angi is the result of a 2017 merger between two separate companies. Angie's List started in 1995 and was one of the first comprehensive online guides to local home-improvement contractors. It originally existed as a subscription service, before it was purchased by IAC and combined with HomeAdvisor, a similar service.

  • Sources: Retail Info Systems, Bloomberg, Techcrunch and TheStreet
  • bigbox

    Big box update

    Bunnings is Australia's strongest brand, according to Brand Finance

    The Bunnings Trade Centre in Naenae, New Zealand has been sold to a Wellington-based private investor

    Brand valuation consultancy Brand Finance has released its 2022 rankings that shows Bunnings jumping eight spots to become Australia's strongest brand, with a Brand Strength Index (BSI) score of 88.5 out of 100 (up seven points) and a corresponding AAA brand strength rating.

    According to Brand Finance, in the last 12 months Bunnings has remained top-of-mind for Australian consumers by continuing to provide essential household and trade goods as well as contributing to the country's vaccination rollout programme by setting up pop-up vaccination clinics in remote areas. Mark Crowe, managing director of Brand Finance Australia, said in a statement:

    Bunnings' efforts in responding to residential and trade demand along with aiding the vaccination rollout has not gone unnoticed by consumers, who ranked the retailer particularly highly in terms of quality, innovation, value for money, loyalty and customer service.

    Bunnings Group managing director Mike Schneider exclusively told the Australian Financial Review the acknowledgement in the Brand Finance rankings was a credit to the entire team "who provide friendly and helpful service every day and often go above and beyond to make sure customers have the best experience - whether that's in store, online or out in their local community.

    Even during a really challenging period for all Australians, the resilience, care and support our team have demonstrated is testament to the importance of creating a people-first culture, and why our team remains the heart of the Bunnings brand.

    Apart from calculating brand value, Brand Finance also determines the relative strength of brands through a balanced scorecard of metrics evaluating marketing investment, stakeholder equity including familiarity, loyalty, staff satisfaction, corporate reputation, and business performance. Certified by ISO 20671, Brand Finance's assessment of stakeholder equity uses original market research data from around 100,000 respondents in over 35 countries and across nearly 30 sectors.

    Bunnings' brand value was estimated to be AUD4.005 billion, up from last year's valuation of AUD2.732 billion, placing the hardware retail chain 12th on the Brand Finance Australia's brand value rankings.

    Retail

    The retail sector remains the most valuable in the Australia outperforming other sectors including banking, mining and telecom for the second year in a row. It has a cumulative brand value of AUD40.4 billion, and accounts for 25% of the country's total brand value.

    The growth in brand value (15%) over the last year was largely spurred by the COVID-19 pandemic as consumers spent more time at home seeking not just entertainment, but also online shopping and home improvement projects. Mr Crowe said:

    The Australian retail sector has moved from strength to strength during the pandemic, overtaking the once dominating banking industry to become the nation's most valuable.
    While leading Australian brands such as Woolworths, Coles, Bunnings, and Officeworks have thrived, the sector will need to continue to innovate and keep up with new trends to continue on this positive trajectory in a post-pandemic society.

    Brands able to embrace e-commerce and those offering essential goods and services have forged ahead, with 16 of the 17 retailers in the Brand Finance Australia Top 100 2022 ranking recording brand value growth.

    Every year, Brand Finance every year puts 5,000 of the biggest brands to the test, and publishes nearly 100 reports, ranking brands across all sectors and countries.

    Bunnings NZ trade centre

    The Bunnings Trade Centre in the Hutt Valley suburb of Naenae in New Zealand has been sold at a yield of 4.51% in a transaction brokered by exclusive agents, CBRE New Zealand.

    The Bunnings Trade Centre site occupies an entire block bounded by Hollands Crescent, Cambridge Terrace, Vogel Street and a service lane just south of the Naenae shopping precinct, according to the Waikato Times. The property has approximately 9385sqm of gross leasable area and more than 80 car parks, with a brand new seven-year net lease to Bunnings.

    Matthew St Amand, managing director of CBRE Wellington said that the profile of the location was enviable; situated on an island site of 1.3 hectares of land. The building's convenient trade focused layout has undergone significant refurbishment works to improve the offer for local trade customers.

    Bunnings Trade Centre Naenae offered investors a chance to enter the investment market with a leading market retailer that allows for annual rental growth. This is a cornerstone investment to any portfolio.
  • Sources: Australian Financial Review, SmartCompany, Ad News and Waikato Times (Stuff Limited)
  • bigbox

    USA update

    Lowe's will open a number of in-store pet shops

    The Home Depot has named company veteran Ted Decker as its new CEO while outgoing CEO Craig Menear will continue to serve as chair of the board

    Lowe's Home Improvement is teaming up with Petco to open pet shops inside a selected number of stores as a way to spur sales and expand the customer base of both retail brands. The first one will open near San Antonio, Texas in early February, with 14 other locations planned in Texas, North Carolina and South Carolina by the end of March.

    The addition of pet merchandise is part of Lowe's strategy to become a one-stop shop for everything homeowners may need. Customers can buy dog food and cat litter, and visit with a vet, while shopping for paint and other supplies for home projects.

    Lowe's and Petco see the in-store shops as a way to draw in new customers, deepen loyalty and drive more frequent store and website visits.

    Both retailers have been pandemic beneficiaries, as Americans took on DIY projects and adopted pets while spending more time at home. In the coming months, however, they could face a more challenging backdrop if consumers feel squeezed by rising inflation or decide to spend a larger chunk of the budget on vacations and nights out instead of pet accessories and home projects.

    Lowe's has looked to new merchandise categories to keep sales growing, along with capitalising on the strong real estate market. It added more home decor to its website and stores. It launched an initiative to sell and install items that allow seniors to age in their own homes. And it began piloting fitness equipment, such as treadmills, rowers and dumbbells, at about 20 of its stores. It already carries some pet goods, such as dog beds and pet-proof carpeting.

    For Petco, the curated version of its stores is a way to get in front of more shoppers and potentially encourage them to visit its larger stores and website as it competes with online players such as Chewy.

    Petco chief merchandising officer Nick Konat said he expects the shops will especially resonate with DIY-inclined millennials. During the pandemic, many of those 20- and 30-somethings led the way with "nesting" trends, as they bought homes or moved into bigger places, adopted cats or dogs - and in some cases, saw pets as a "trial run" before having children, he said.

    They're a high-spend customer and they really take care of their pet like their family. And they've also been doing the same with their homes, with a lot of them being new homeowners or new renters.

    Each shop will feature Petco's logo and merchandise for cats and dogs, including some of its exclusive labels, such as its food brand, WholeHearted, and fashion brand, Youly. It will carry more than 700 items that customers can buy online and pick up in store, if they live near a Lowe's store that's part of the pilot. Some stores will also offer services from veterinarians and pet professionals who visit the sites, including for vaccination, microchipping, prescription pest prevention and mobile grooming.

    The store-in-store will vary in size, but the first location will be about 1,100 square feet and will be placed at the front of the store, said Bill Boltz, Lowe's executive vice president of merchandising.

    The shops will be staffed by a Petco employee, in addition to ones from Lowe's, Mr Konat said.

    Marisa Thalberg, executive vice president and chief brand and marketing officer at Lowe's, said the chain had been selling more and more pet accessories in recent years, including items like a PetProtect Carpet from Stainmaster. She told Ad Age:

    You take these two trends - the boom in the pet lifestyle market and the boom in housing and DIY market, and they do have this incredible intersection.

    Like many consumers, Ms Thalberg added a dog to her family during COVID-19. She said:

    When a store within a store concept works well is when you take two meaningful resonating brands that aren't overlapping, but have this incredible ability to complement each other.

    Through a survey, Lowe's found that nearly 70% of consumers say pets played a role in the decision-making process when they searched for their current home. Nearly 60% said they would be more likely to shop at a home improvement retailer if they could also purchase pet products in the same location.

    Along with pet products and services, Lowe's will have a photo station for pet pics. Even before the formal photo option, Lowe's customers have long been posting pictures on social media of their pets, Ms Thalberg said. The #DogsofLowes Instagram hashtag, an organic trend that Lowe's was not involved with creating, has more than 4,000 posts currently.

    Some of those dogs might even appear in the marketing for the collaboration. Lowe's and Petco are tapping four pet influencers, including a rescue dog named Waffles, to promote the effort. Lowe's is also running geotargeted social media marketing and a special landing page for Lowes.com/Petco for customers in the area of the Petco stores that will provide an option for buy online, pick up in store.

    Shop-in-shops have long been a trend for two like-minded retailers looking to maximise their sales potential and attract new customers. However, in recent months, the trend has grown in popularity. Experts credit the rise to marketers' willingness to try new things and add innovative, destination-type experiences to their brick-and-mortar outposts at a time when ecommerce continues to dominate. The Lowe's/Petco deal is no exception. Ms Thalberg said:

    This is how we create a 'destinational' retail experience.

    New Home Depot CEO

    The Home Depot announced that chief operating officer Ted Decker will step into the role of CEO, effective March 1. He has also been elected to the company's board of directors.

    Craig Menear, currently chairman and CEO, will continue to serve as chair of the board. He has been at the retailer for more than 20 years and began as CEO in November 2014. Mr Menear said in a statement:

    As a 22-year associate of The Home Depot, Ted has nurtured our culture by living our values and demonstrating servant leadership throughout his career.
    Ted has grown with the company by taking on expanded roles of leadership from his time in strategic business development, finance and merchandising to leading our day-to-day interconnected operations in his role as president and COO. His ability to blend the art and science of retail is exactly what is needed in the next phase of growth for The Home Depot. I have tremendous confidence that he will guide our company to new heights.

    Mr Decker joined The Home Depot in 2000 and was named president and chief operating officer (COO) in October 2020, where he was responsible for global store operations, global supply chain, outside sales and service, real estate, as well as merchandising, marketing and online strategy, serving pro and DIY customers in stores and online.

    Previously, Mr Decker served as chief merchant and executive vice president of merchandising, where he was responsible for all store and online merchandising departments, merchandising strategy, vendor management and services, and in-store environment.

    The retailer has seen tremendous growth during the pandemic, as nesting trends and a strong housing market inspired Americans to invest in their homes or move to bigger places. That growth has continued, including in the most recent fiscal quarter, even as some consumers hired home professionals in lieu of DIY projects. The company is in a similar position to Lowe's in that it will have to prove it can keep those sales going as Americans face rising prices due to inflation and potentially shift their spending toward services such as dining out and traveling.

  • Sources: CNBC and Ad Age and The Home Depot/PR Newswire
  • bigbox

    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 Lowes.com/LivableHome 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."

    Commentary

    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 Lowes.com 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 news.com.au (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: News.com.au, 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.

    bigbox

    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.

    Questions

    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.

    Analysis

    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.

    bigbox

    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.

    Campbelltown

    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.

    Analysis

    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.

    bigbox

    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 7NEWS.com.au.

    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 7NEWS.com.au 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 7NEWS.com.au
  • 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.

    Tempe

    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.

    Kyneton

    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

    Queensland

    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 news.com.au 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, news.com.au, 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

    Supercars

    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.

    Background

    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

    Jimboomba

    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

    Kempsey

    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.

    E-commerce

    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.

    OEB

    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

    Kitchens

    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.

    Analysis

    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.

    bigbox

    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.

    Caboolture

    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

    Jolimont

    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.

    Related:

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

    Trademarks

    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

    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.

    Forecasting

    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.

    Digital

    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.

    Analysis

    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.

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    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.

    Questions

    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.

    Analysis

    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.

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