Retail update

Pontings Mitre 10 awarded national prize

A garden supplies retailer is seeking a strategic investor and Beacon Lighting impresses with bumper profit

A Mitre 10 store in Warrnambool (VIC) wins top award; NSW-based Flower Power is reportedly looking for a partner to grow the business; and Beacon Lighting delivered a 133% profit rise in the half year to December 31.

Mitre 10

Pontings Mitre 10 recently won the prize as Independent Hardware Group's number one medium sized store in Australia. Director John Ponting said staff received the "totally unexpected" award during a live-streamed ceremony. He told The Warrnambool Standard;

It was a great honour to get the state award and then to go to the next level and get the national award, it says a lot for the staff behind us and the support we have from the community.
It would be one of the standout achievements that we have accomplished as a family.

Director Pam Madner (nee Ponting) said the prize was the first national award the family had won in its 98-year ownership of the store.

We grew up as kids and this was always part of who we were. Probably a lot of it is the climate at the moment, lots of people are doing building, [and] interest rates are low.
But it's also the relationship we have with our customers. That is what differentiates ourselves from non-family businesses.

The hardware retail business, started by Walter Ponting and brother Len, is now owned and operated by the third generation.

"I think they would be proud", Ms Madner said of her parents and grandparents. "One that it still exists, and two that we're recognised Australia-wide."

Related: Pontings Mitre 10 won IHG's 2020 award for the best medium-format store in Victoria and Tasmania.

Warrnambool store wins Mitre 10 award - HNN Flash #29, January 2021

Flower Power

Flower Power chief financial officer Michael Spiteri confirmed to the Street Talk column in The Australian Financial Review (AFR) that the company is searching for a new investor. He told the AFR:

We're looking for a partner as long as it's the right business partner that can help us to grow.

It is understood the family-owned Flower Power would like to sell a stake in the business, rather than sell out entirely.

Sources said Flower Power was generating $15 million to $20 million earnings before interest, tax, depreciation and amortisation before the pandemic struck. However, it is understood the business had performed well through COVID-19 because of the home improvement/DIY boom that resulted from people staying home during lockdowns.

Flower Power has 10 stores across NSW mainly around Sydney's outskirts, with a presence in western Sydney suburbs such as Penrith and Prospect, as well as north of the city in Warriewood, Terrey Hills and Glenhaven. Its stores include cafes and playgrounds for kids.

Mr Spiteri is Flower Power's only shareholder not related to company founder Nick Sammut, according to documents lodged with the corporate regulator.

Mr Sammut founded the business in 1968 and it is now run by his son, chief executive John Sammut with support from his brothers Mark and Collin. The brothers are all shareholders in the business, as well as two other Sammut family members.

Beacon Lighting

Bumper sales from the lighting retailer's bricks-and-mortar stores along with building and renovation activity throughout the pandemic lockdowns contributed to its 132.8% rise in first-half net profit of $22.2 million.

Sales across the business increased 23.5% to $151.3 million. Its online sales grew 111.1% to $14.4 million.

Profit margins climbed to 14.6%, from 7.8% a year earlier. A large part of that stemmed from the retail group not needing to have promotional sales and specials because the demand was so heavy from customers.

The retailer also shifted to early opening hours - 7.30am - in an attempt to gain a bigger slice of the tradie market, and this helped trade club customer sales jump 50% in the first half. Beacon's trade club now has at least 39,800 customers, up almost 7000 from December 2019.

The retailer never took JobKeeper payments. "Sales never reduced to a point where JobKeeper was necessary", said chief executive Glen Robinson in the AFR.

The cooling and lighting retailer admitted that many customers' unfamiliarity with pricing on lights would continue to improve its gross margins, according to CFO David Spiers in The Australian. He said:

Most people don't know the price of lighting products because they shop infrequently.

Beacon Lighting opened new stores at Virginia in Queensland, Camperdown in Sydney, Tweed Heads in NSW, and at Belmont in Perth.

The lighting company still sees its future in bricks and mortar despite the major boost to its online sales. It has acquired sites in Molendinar, on the Gold Coast in Queensland, and Traralgon, in regional Victoria. It is looking at 69 new store opportunities over the coming years.

Beacon remains 55% owned by the Robinson family after going public in 2014.

  • Sources: The Warrnambool Standard, The Australian Financial Review and The Australian
  • retailers

    Big box update

    Frenchs Forest store gets the greenlight

    Over 200 people have signed a petition calling for the proposed Bunnings Warehouse at the former RAAF base in Dubbo to be stopped

    A five-storey Bunnings Warehouse is planned for Sydney's northern beach suburbs and a petition has called for a stop to the Bunnings development in Dubbo (NSW).

    Frenchs Forest

    Bunnings has gained approval from NSW planning authorities for a store to be built at the corner of Warringah Road and Allambie Road in Frenchs Forest.

    The $48million store will offer customers three levels of shopping and include a large outdoor garden centre, kid's playground and hardware and building supplies. The 20,000sqm development will also have two levels of parking to accommodate 400 vehicles.

    An Australia Post distribution centre and a two-storey office block will be knocked down to build the store.

    Bunnings regional operations manager, Alan Harvey told The Daily Telegraph the company was pleased to receive approval for the new multi-level Bunnings Warehouse.

    While it is too early to confirm an opening date, we look forward to providing a wide range of home and lifestyle products to the Frenchs Forest community.

    Northern Beaches Council was initially worried about safe vehicle access to the store because of its close proximity to the busy Warringah and Allabie Road intersection. Its concerns related to "potential road safety issues with merging vehicles and conflicts with pedestrians". The main driveway will be moved to Rodborough Road once traffic lights are installed at the Allambie Road intersection to combat safety concerns.

    The exterior of the warehouse will also change as a result of council complaints regarding the size of the Bunning's logo and colour scheme. Bunnings will limit the amount of green paint used on facades, have fewer hammer logos visible and reduce the size of the logo by 33% on Rodborough Road.


    A petition to stop the construction of the proposed Bunnings store in Dubbo has been launched by locals. According to the Daily Liberal and Macquarie Advocate, it cited an increase in cars to the area, as well as trucks, and states:

    ...[T]he proposed development will create safety issues for residents, businesses (including child care) and schools in the immediate vicinity.
    This huge increase in traffic threatens the safety of pedestrians, including children, and other local road users. The associated noise will destroy the amenity of the area for local residents.

    However, Bunnings regional operations manager Robyn Hudson said access to and from the site has been designed by the developer's expert consultants and was "carefully considered to ensure a safe and accessible store".

    Concerns have also been raised about the Bunnings Warehouse building being "totally out of character" for the area because it will be "on the front doorstep of many residents". The petition states:

    The project delivers no benefit to the community as Bunnings is currently appropriately located on Sheraton Road in an industrial/commercial area, with room to expand if they need to.

    Ms Hudson said:

    Bunnings has been part of the local Dubbo community since 2008 and we're looking to move to a larger location that's expected to create over 40 new jobs for locals, in addition to our existing Dubbo team.
    If approved, the new store would represent a significant direct investment in the local community and would provide residents with an even wider range of home and lifestyle products...
    We value to views of the local community and we'll work with the developer and council to listen to and address community feedback as the application progresses.

    The development application for the $30 million store is currently before Dubbo Regional Council.

    Related: Building plans lodged for a larger Bunnings store in Dubbo (NSW).

    A bigger Bunnings Dubbo store is being proposed - HNN Flash #30, January 2021
  • Sources: The Daily Telegraph, Daily Mail Australia and Daily Liberal and Macquarie Advocate
  • retailers

    Indie store update

    Bellingen General Hardware closure

    The building housing Mitre 10 Pittsworth has hit the real estate market and a hardware store has leased space in inner-Melbourne

    A hardware store located in Bellingen (NSW) is set to close; a Toowoomba (QLD) based Mitre 10 building is for sale; and a Mitre 10 store is expected to open in a shopping strip in inner-city Melbourne.


    Shaun Green, owner of Bellingen General Hardware has decided to shut the doors of his store for the final time. The closure will leave the small town with no hardware outlet.

    For the last couple of years, Mr Green had been running the store on his own with some unpaid help from family under increasingly difficult conditions. He told The Bellingen Shire Courier-Sun:

    I can't afford to pay wages. The last 12 to 18 months I haven't even paid myself very much.

    He believes Bunnings is only part of the number of challenges that led to closure of his hardware retail business. He said:

    It's a combination of things. There's the Bunnings advertising power. They've been doing it for 20 years and they've indoctrinated a generation. It's not just Bunnings, it's Big W, it's Kmart, it's the Reject Shop. All the big players.

    On a local level, he believes the main street beautification process as the first of a series of disruptions that have caused permanent changes to shopping behaviours in the town. He said:

    It wasn't just the loss of the parking, when they were doing the pavers you couldn't even walk down the footpath.
    That's when it started going bad. Because people get into habits, they started going into Toormina and Coffs Harbour. And since then, you've had the drought. Bush fires. Before COVID started we had the water restrictions, which meant people weren't doing gardening.
    Then COVID, which made a lot of things difficult to get. There was a limited supply of stock coming into the country. Things were harder to get, [and] more expensive. A lot of people started shopping online. Habits are formed, and they just keep doing it.

    Mr Green bought the store from Jim and Kathryn Hunt at the end of 2015, after working with them for six months. Prior to this, he worked at Norco Rural in Bellingen for seven years. But he does not regret the purchase at all. He said:

    I've learned heaps. I've made a lot of good friends and industry contacts. This has been part of my journey, everything happens for a reason.

    He expects the final day for the shop will be February 23, and he will take a well-earned break following its closure.


    The Pittsworth Mitre 10 freehold property on Yandilla Street has been listed for sale through an expressions of interest campaign by real estate group Ray White.

    In the online listing, lead agent Kathy Hohms said the hardware store held the lease on the property until the end of the year, with options until 2026. The listing said:

    The property has free street parking available at the front entrance and also off street parking bays at the nursery entrance off Short Street.
    The building, built circa-1950, comprises a large showroom and retail area with frontage display windows on both sides of the central entrance. The nursery [is] accessible from the showroom and it also has customer rear access.

    The expressions of interest period will end on March 31.

    South Yarra

    The Chapel Street shopping strip precinct in Melbourne's inner suburb of South Yarra may soon have a Mitre 10 store after real estate agency Gray Johnson negotiated a lease with the new tenant.

    According to a report in The Age, the retail space measures 201sqm and the retail business scored a five-year lease paying $60,000 (+GST) a year.

    The hardware shop is leasing No. 356, close to the corner of Chapel Street and Malvern Road.

  • Sources: The Bellingen Shire Courier-Sun, Toowoomba Chronicle (Online) and The Age
  • retailers

    USA update

    Lowe's trials giving customers stock for purchases

    Ace Hardware Corp. completed a strong fiscal 2020 when its stores in the US stayed open during the pandemic as essential retail operations

    In a pilot project for home improvement retailer Lowe's, fintech company Bumped found that customers who were rewarded for their purchases with shares of the retailer's stock increased monthly spending by USD47.82 and visited the store on average 0.84 times more per month.

    The data also showed that customers who were rewarded in fractional shares of Lowe's stock became more loyal and shopped less at Lowe's competitors, according to the press release. David Nelsen, founder and CEO of Bumped, said:

    In industries dominated by duopolies, like the home improvement category is, it's critical that brands look to build long-term, lasting relationships.

    Bumped gives customers fractional shares of stock when they spend with their favourite brands, and has been piloting its software app over the past two years.

    Ace Hardware

    For the fiscal year, Ace Hardware posted net income of USD317.6 million versus USD140.4 million in the year before.

    A 14.7% increase in average ticket and a 9.8% increase in comparable transactions versus the prior year drove Ace's 25.9% gain in comparable sales for the full year from the approximately 3,300 Ace retailers that share daily retail sales data with the parent company.

    Full-year revenues were USD7.76 billion with retail revenues of USD751.5 million and wholesale revenues of USD7.01 billion compared to total revenues of USD6.07 billion with retail revenues of USD506.7 million and wholesale revenues of USD5.56 billion in the fiscal year previous. Operating income was USD333.1 million versus USD133.8 million in the year earlier.

    Ace Hardware added 167 new US-based stores in fiscal 2020 and cancelled 76 stores. This brought the retailer's total US store count to 4,647 at the end of fiscal 2020, an increase of 91 stores from the end of fiscal 2019. On a worldwide basis, Ace added 201 stores in fiscal 2020 and cancelled 104, bringing the worldwide store count to 5,463 at the end of fiscal 2020.

  • Sources: Yahoo Finance and Homeworld Business
  • retailers

    SOLD: Seymour Timber and Hardware

    Retirement plans

    Owner Alan Bower is also looking to sell his other store, Broadford Timber and Hardware

    As the proprietor of Seymour Timber and Hardware, Alan Bower had mixed feelings when he sold the store. Although he's looking forward to retirement, Mr Bower is sad to see the end of the business he has owned for the past 15 years. He told the Seymour Telegraph:

    On one hand I'm really looking forward to retirement, but on the other I really enjoyed my time with the staff and customers.

    Mr Bower moved to Mitchell Shire 30 years ago to raise a family and was keen to work for himself after a career in the public service. He wanted to do something local in an industry he enjoyed and took the opportunity to purchase Broadford Timber and Hardware in 1996. Ten years later he purchased two hardware stores in Seymour and combined them into the current store on Anzac Avenue.

    Mr Bower is also looking to part with the Broadford store and hopes to sell it as a going concern. He said:

    It will be up for sale if a good price is offered. The stores are my superannuation, so I'm looking for the right offer.
    I want to thank the community for their loyal support through the years. We haven't got a closing date yet, but the Seymour store will likely be trading until May or June. I also want to thank the staff I've had through the years. They have supported me and always looked after our customers...I will miss the two stores, but I've been thinking about retirement for a while and I think now is the right time.

    A clearing sale will be held at Seymour Timber and Hardware before the store closes.

  • Source: Seymour Telegraph
  • retailers

    Europe update

    B&Q expands its tools hire trial with Speedy

    Screwfix sales reach GBP2 billion and ManoMano records a 240% sales hike in the UK during 2020

    Speedy brings tool hire into more B&Q stores; omni-channel trade-focused retailer Screwfix said it continues to focus on its team and customers; and web-based DIY marketplace ManoMano said it has 50 million unique visitors per month, an increase of 70%.


    UK home improvement retailer B&Q and tool hire chain Speedy have extended their trial of Speedy hire outlets in B&Q stores. The trial began in July 2020 with Speedy concessions now at nine B&Q stores throughout Britain. A further five outlets opened in January.

    The concessions, typically about 90sqm in size, give B&Q retail and trade customers the option to hire equipment from Speedy as part of their B&Q shopping trip. The offer includes Speedy's four-hour national delivery promise on certain products.

    Customers can order and collect Speedy products from the select B&Q stores, complementing Speedy's own network of 200 depots. They can hire a range of mobile access platforms, tower scaffolds, mini diggers and dumpers, plate compactors, floor sanders, mixers and heaters. Speedy chief executive Russell Down said:

    We are delighted to be trialling Speedy concessions in B&Q stores. These will make the option of hiring tools and equipment much more accessible to DIY customers and enable trade customers to hire equipment seven days a week...

    B&Q business development director Chris Bargate said:

    We're committed to testing new initiatives and are delighted to be trialling this tool and equipment hire service in our stores with Speedy. Our customers are continuing to adapt and change to new ways of living and shopping, and these new concessions with Speedy are just one way in which we're making it easier for people to improve their homes.
    We're excited by the potential re-use of our space to offer new services in store and are keen to understand how customers respond.


    Screwfix recently confirmed that it had passed GBP2 billion in sales in its latest financial year. During the year it opened 30 shops, created more than 500 new jobs and benefited from high levels of demand both online and in-store during COVID-19 lockdowns. It now has 725 outlets across the UK and Ireland.

    In the past five years, Screwfix has created 4,000 new jobs in total, opened a new store once a week - on average - and doubled sales from GBP1 billion to GBP2 billion. The retailer said that many new recruits include the under-24 age group.

    The growth came as people now working from home or furloughed during lockdowns held over the last year looked to improve their surroundings, buying from retailers such as Screwfix and sister company B&Q either directly or through the tradespeople who are Screwfix's core customer base. During the first lockdown, Screwfix's branches operated as click and collect fulfilment points and saw sales grow across all in-store and digital channels.


    ManoMano is an online marketplace for DIY, home improvement and gardening products, headquartered in France.

    After achieving EUR1.2 billion in sales turnover in 2020, the company said it is building its presence in Northern Europe, and increasing support for its merchant partners.

    By doubling its sales volume in 2020, ManoMano said it has demonstrated the scalability of its model. Philippe de Chanville and Christian Raisson, co-founders and co-CEOs of ManoMano, said in a statement:

    The year 2020 has been marked by a considerable increase in European consumers' digital expectations for DIY, garden and home products.

    ManoMano said it has 50 million unique visitors per month and 7 million active users. With 10 million products, ManoMano offers a significant online catalogue.

    The UK is most important market for ManoMano's growth. The company saw a major boost in demand during 2020, with sales turnover in the UK increasing by 240% to EUR105 million.

    ManoMano said it carefully selects its partners to ensure a qualitative offer for customers. On its UK platform, 75% of sellers are based in the UK. To support its growth plans ManoMano will make further investments in its UK-based marketing including TV advertising.

    In mid-2020, ManoMano partnered with order management specialist OneStock to optimise fulfilment logistics in the UK and across Europe. It appointed OneStock to manage all UK warehouse and merchant stock, enabling guaranteed delivery dates for shoppers and freeing merchants from logistical constraints.

    ManoMano has already rolled out its fulfilment service in France and Spain which promises delivery in either 24 or 48 hours. It is working with OneStock to extend this feature to customers in the UK, Italy and Germany.

  • Sources: Construction Index, Internet Retailing and Retail Times
  • retailers

    Indie store update

    Sunshine Mitre 10 building flagship store

    Brisbane's C&L Tool Centre was acquired by industrial distribution company Stealth Global in late 2020

    A new flagship store for Sunshine Mitre 10 in Nambour (QLD) and C&L Tool Centre is operating under different ownership.


    Queensland-based Sunshine Mitre 10's plans to build its optimal store in Nambour is in the same town where the business began 110 years ago.

    Sunshine Mitre 10 general manager Neil Hutchins recently announced the new site at 980 Nambour Connection Road (formerly occupied by Allclass Kubota Tractors), and said it already has council approval and will open later this year. He said:

    The transformation of the 13,000sqm site is well underway, and the local community has already shown excitement and support for this endeavour.
    The new location in Nambour is important because it not only meets the increasing demand from our retail and trade customer base, but it also supports the town of Nambour and pays respect to the heritage where the company was started by Walter Lanham in 1910.
    We have been steadily expanding the Sunshine Mitre 10 group across Queensland with more recent store openings in Bundaberg, St George, and Brisbane, and we have a focus on supporting the communities of the towns in which we operate.
    Nambour is at the top of that list in terms of regions we want to support. This new store is the next step in our expansion, and this flagship location will be the best possible representation of our brand and heritage. We're excited to see it unfold and transition into another 110 years of locals supporting locals.
    Sunshine Mitre 10 already employs more than 400 staff across our network of stores in Queensland, including the seven sites we operate throughout the Sunshine Coast. We are pleased to have committed to this multimillion-dollar investment on the back of a 25-year lease at this location.

    The site has 4,000sqm under roof and will be one of the largest in the Sunshine Mitre 10 network. It is expected that dozens of jobs to be created, in addition to the development and construction of the site being managed and built by local builders and tradies. Mr Hutchins said:

    This new flagship store will include all the latest brands and products and showcase the best hardware product available. The site will have everything you need to get in, get out, and get on with it. The entire project has been meticulously designed to provide the customer with the ultimate hardware shopping experience.

    The new store will feature dedicated departments around building and hardware, along with homewares, electrical, hand and power tools, kitchens, painting and decorating, gardening and outdoor, appliances and plumbing as well as the dedicated trade products and services Sunshine Mitre 10 is known for.

    Mr Hutchins said when the store opens, Sunshine Mitre 10 would continue to operate the existing Court Road store for the convenience of the local community and work to transition its loyal customers of 75 years to the new location.

    We look forward to inviting everyone to the grand opening mid-2021.

    Related: Sunshine Mitre 10 has 18 locations throughout Queensland. HNN took a tour of its operations in 2019.

    Sunshine Mitre 10: The Innovators - HI News, page 68


    Distribution group Stealth Global Holdings, headquartered in Perth, has purchased construction trade-focused retailer C&L Tool Centre.

    Established in 1969, C&L is a reseller of industrial and tooling supplies, safety and personal protective equipment, and hardware, building, construction and workplace consumables primarily to professional (80%) and retail (20%) customers. They include multinational corporations, small-to-medium enterprises, schools and universities, and government agencies.

    C&L operates three divisions and offers well-known brands within a "mega-store" setup comprising a showroom and distribution centre across 2700sqm.

    Almost 25% of the company's sales orders are received and processed online through various digital channels.

    For the 2020 financial year, C&L delivered revenue of $14.3 million and earnings before interest taxation depreciation and amortisation of $1.26 million. Sales for the first four months of the 2021 year are believed to be tracking 25% higher than the previous corresponding period.

    The directors and management of C&L continue to work with the business under the change of ownership.

    The C&L acquisition is believed to be complementary to Stealth's existing business, with the companies sharing a similar customer and supplier base and offering similar services. Stealth said it would spend $3.83 million acquiring C&L.

    Stealth managing director Mike Arnold said the synergies would deliver on the company's aim of providing long-term value to shareholders and customers.

    [We believe] the depth of C&L's products and tailored services will give [our] merged businesses greater scale as we continue to build a national distribution network to deliver more value, better experiences, more stores in our network, a deeper assortment of merchandise and brand range, and a more complementary team of experienced [personnel]...

    Stealth is a supplier and distributor of safety, industrial, healthcare and workplace consumable products. Its services include distribution and logistics services, contract supply and on-site inventory management solutions. It operates through four segments: industrial, safety, healthcare and workplace supplies.

    The company's industrial segment provides maintenance, repair and operations (MRO) supplies, hoses and fittings, adhesives, sealants and fillers, tools and equipment and electrical products. The safety division provides clothing, footwear, hand protection and lifting and handling, height safety, and safety glasses products. Healthcare has first aid products including medical supplies, consumables, disinfectant and wipes and disposable towels products. Workplace supplies provides packaging and tapes, cleaning and janitorial, crib and kitchen, storage and hardware products. Its portfolio of brands includes BSA Brands (a joint venture between Stealth and Bisley Workwear) and Heatleys Safety & Industrial.

    Related: US big box retailer Home Depot acquired HD Supply, one of the largest distributors of maintenance, repair and operations (MRO) products in the multifamily and hospitality markets throughout the US and Canada.

    Home Depot buys HD Supply Holdings (again) - HNN Flash #25
  • Sources: Reflected Image Productions amd Small Caps
  • retailers

    DIY campaign stars TikTok influencers

    #MyWickesMyWay is a series of videos

    UK-based retailer Wickes said it is the home improvement industry's first campaign on the social media platform

    The #MyWickesMyWay TikTok campaign launched by UK DIY retailer Wickes in late 2020 involved seven content creators each producing a video on the social media platform.

    Working with influencer marketing agency Takumi, the TikTok creators were tasked with adapting existing trends, including DIY tips and transformation hacks, to drive awareness of Wickes' product range and reach new audiences. The sponsored posts encourage viewers to engage with the brand and its campaign hashtag, #MyWickesMyWay driving user-generated content by participating in hands-on home improvement challenges.

    Wickes' first influencer campaign on TikTok aims to engage younger consumers who use the app to follow their favourite DIY creators and share videos. By running its #MyWickesMyWay campaign with branded hashtag challenges, Wickes could demonstrate how to use its products for home improvement projects and urge people to visit its stores. As an essential business, its locations have remained open during recent lockdowns and offers delivery and "click and collect" service.

    Following its launch, the campaign delivered over 612,600 views and 120,000 likes as well as a reach of 442,000 and engagement rate of 17.9%, according to Takumi. Wickes head of marketing Shelley Allison said in statement:

    TikTok is the ideal space for creating fun home improvement content at a time when consumers of all backgrounds are either discovering or re-engaging with this area.
    We want to help the nation feel houseproud, and as we're all spending more time inside our four walls, we want to encourage new audiences to engage with our brand and home trends. The #MyWickesMyWay campaign helps to deliver important awareness for Wickes as the go-to destination for all things DIY, inspiring consumers to go out and get creative with new tips and tricks.

    Recent research from Wickes also revealed that over half (53%) of those working from home throughout the pandemic admit to deliberately sprucing up areas of their homes so they look better on a video call.

    About TikTok

    On average, TikTok users spent 52 minutes per day on the app in 2019. This is just shy of the 53 minutes per day Instagram users spent on the platform despite having been around almost a decade longer. And 90% of TikTok users return to the app multiple times a day, according to Marketing Dive.

    These high levels of engagement are driven by the entertaining short-form video content that populates users' feeds and makes it difficult to put down. It also offers marketers the chance to encourage user-generated content, spark trends and create viral content quickly.

    Although TikTok is a particularly effective way for brands to reach younger audiences, it's misguided to think there aren't opportunities beyond this core user base. In the US alone, TikTok's adult audience is growing by 357% annually.

    You can view some of the videos on Wickes' TikTok page at this link:

    Wickes'#MyWickesMyWay campaign on TikTok
  • Sources: Marketing Dive, Influencer Online, Decision Marketing (UK) and TikTok
  • retailers

    Indie store update

    Warrnambool store wins Mitre 10 award

    Sydney Tools opened an outlet located close to Domain Central in Garbutt, one of Queensland's largest homemaker centres

    Pontings Mitre 10, located in Warrnambool (VIC), has won Independent Hardware Group's 2020 award for the top medium-format store in Victoria and Tasmania. It recognises the store's retail excellence, engagement with community and innovation.

    The store opened in 1923 and traded under Home Timber and Hardware from 1993 before taking on the Mitre 10 banner in 2019.

    Co-owner John Ponting said he was "surprised" and "humbled" and could not recall winning another award in 15 years. He told The Warrnambool Standard:

    I think we have raised the standard of the business. It is all about customer service and building the customer's trust, and we have a good diversity of staff, young to old and male to female and customers really have some sort of connection with the store.

    Operations manager Kat Ross said the award was a "fantastic achievement" for the 55 staff.

    We would also like to thank our loyal customers for their continued support, especially throughout such unprecedented times of 2020.

    Sydney Tools

    In late 2020, Sydney Tools opened a showroom and warehouse on Bayswater Road, Garbutt, which is expected to be a retail hub for North Queensland.

    At the time, Sydney Tools manager Ryan Luke said like many retailers, there had been delays getting stock into the country because of COVID-19 but the store was fully stocked within a couple of weeks.

    Prior to launching its Garbutt location, Sydney Tools said it has executed on its expansion plan that involved opening 10 stores during 2020 including five in Queensland and one each in NSW and Victoria. It has also opened stores for the first time in the Northern Territory, South Australia and Western Australia.

    Ten more stores are expected to open in 2021 and in four years the company said it expects to have a network of 70 stores across the country.

  • Sources The Warrnambool Standard and Townsville Bulletin
  • retailers

    Mega warehouse for home and garden e-tailer

    VidaXL is a Dutch e-commerce giant

    The Netherlands-based online retailer is set to expand its local presence by building a mega warehouse in outer Melbourne

    Online retailer VidaXL has committed to a land and build package of 113,620sqm in Tarneit (VIC), after signing a deal with Frasers Property Industrial through its Australian subsidiary HB Commerce, according to a report in the Australian Financial Review.

    The e-tailer which sells home, outdoor furniture and garden products will occupy the space which includes a warehouse and two offices. Frasers Property Industrial general manager - southern region Anthony Maugeri said that the site will help VidaXL accelerate its e-commerce operations in Australia.

    The new national distribution centre is designed to help VidaXL accommodate its rapid online business growth and customer demand which is in-line with the rise of e-commerce and a structural shift towards online retailing.

    Completion of VidaXL's facility is anticipated in April 2022.

    The move by the Dutch home and garden products online retailer comes as a growing number of e-commerce businesses acquire new warehouse facilities amid the online shopping boom generated by COVID-19. Amazon will build an even bigger 200,000sqm warehouse in Sydney. CBRE director of advisory and transaction services industrial and logistics, Todd Grima, said:

    CBRE forecasts an additional 350,000sqm of additional new space will be required each year to accommodate growth in e-commerce. The VidaXL transaction reflects the growing e-commerce trend in Victoria and its new facility will be fully racked and hold over 100,000 pallets.

    VidaXL launched in Australia in 2014 and is currently growing at over 100% per annum.

    Founded in 2006, VidaXL has grown from selling products via other e-commerce platforms such as Amazon, Ebay and Kogan, to also sell from its own web-based store. Within 14 years, the Dutch company has grown its market reach across Europe and is active in 29 countries.

    But the continuing increase in online shopping and large pure-play online businesses such as VidaXL is unlikely to dominate retail spending. Retail expert at Queensland University of Technology's Business School, Gary Mortimer, told SmartCompany:

    There are still consumers that want to go out into a nursery centre, touch and feel and engage with products and also get face-to-face advice on technical products and electronics.

    According to Mr Mortimer, while Australians spent an estimated $45 billion online in 2020 - a 40% increase from the previous year - only 12.5% of retail sales are made online. He said:

    It still suggests that about 88 cents in every dollar is still being spent inside a physical store.
  • Sources: SmartCompany and Toy Hobby Retailer
  • retailers

    Indie store update

    Margaret River store wins Mitre 10 state award

    A Tasmanian based store described as a "well-established family business with a strong brand and customer base" has been listed for sale

    Margaret River Mitre 10 has won the retail group's state award for excellence in Western Australia. The store won the annual award on a criterion based on sales, customer service, store standards, stock availability and community involvement.

    The store changed to the Mitre 10 banner in October 2019, from the Home Timber and Hardware brand.

    A new layout helped staff and customers deal with the restrictions brought on by the COVID-19 pandemic. Store manager Paul Brown told the Margaret River Mail they could practice social distancing with a lot more ease than with the old layout.

    Mr Brown said it was extra special to receive the award after only being part of the Mitre 10 group for 12 months. He said:

    We're all thrilled to have taken out this prestigious award. It's a real feather in the cap for us. Since transitioning, the store has become the flagship Mitre 10 outlet in the South West [of WA] and continues to offer the best possible service and range to their loyal trade and retail customers.
    Our fantastic team provide our customers with professional and dedicated customer service, always striving towards 100% satisfaction.
    This award was only possible due to the fantastic support we have received from the local community, in what has been very trying times.

    The state awards were announced in late November 2020.

    Brighton Hardware

    The owners of a hardware store located in Brighton (TAS), around 29kms from Hobart, have decided to retire and placed the store for sale.

    For the past 15 years, Paul Diaz and Leanne Taylor-Diaz have focused on providing quality products and exceptional service.

    The store is a previous Tasmanian Telstra Micro Business Awards winner after turning the business around from a reputation of being poorly stocked and over-priced to successful regional store.

    At the time, Paul and Leanne told Brighton Community News that when they took over the store the stock was depleted, there were few customers, and they had only about $20,000 to stock the shop. Leanne admitted she hardly knew the difference between a nail and a bolt.

    While Paul said he had a strong background knowledge of what was required in terms of making sure the shop flourished, both of them also relied on finding out what customers wanted and then let their friendly personalities deliver it. Their loyal customers did the rest.

    In three years, Brighton Hardware became a $450,000-a-year business. Paul said:

    It's a local shop and once they saw that they could come in here and get what they wanted, they came and bought more and more.

    The store is currently operating six days a week and is set just off the main road with customer parking available.

  • Sources: Margaret River Mail, The Mercury and Commercial Real Estate
  • To read the latest edition, please download HI News:

    Download hinews-6-04


    Europe update

    Wickes launches work-from-home kitchen range

    Homebase is selling premium Miele appliances and Grafton Group announces its latest acquisitions

    UK DIY retailer Wickes is selling a range of fitted kitchens with built in desks and bookcases to help its customers to work from home more efficiently. This collection of multifunctional kitchens is a clever response to a demand for more home office space.

    The new Fitted Kitchen Home Office range aims to provide a more professional set-up so that everyone can repurpose their space to better suit their needs.

    Available in Wickes stores around the UK, homeowners can mix and match a selection of 33 modern colours, cupboards, shelves, drawers and practical workstations to suit different design preferences. It gives those without a study the chance to easily create a dedicated space for the working week, while still keeping the kitchen functional for other family members.

    There are six styles to choose from including the shaker-style Chester range, Milton, Tiverton, minimalist Sofia, Melrose, and modern Camden.

    The idea rides on the back of recent consumer research that found only 49% of Britons have a proper desk or workstation, with 39% using the dining table, 28% working on a kitchen table, and 20% sitting on the sofa with a laptop tray. Whilst these are manageable for short periods of time, they aren't the best long-term solution. Paul Bangs, category director of Kitchens and Bathrooms at Wickes, said:

    We understand there can be challenges associated with working from home which is why we've introduced a new working solution that fits seamlessly into everyday life.
    We are always working to deliver innovative and helpful products and services that fit into our customers ever changing needs and believe the new option of a kitchen home office will provide them with more choice when considering at-home workspaces as we all continue to adapt to new ways of working.

    Kitchens at Homebase

    Home improvement and garden retailer Homebase has a partnership with Miele that allows it to sell the appliance maker's ovens, hobs, extraction, refrigeration, dishwashers and laundry products online and in showrooms. The Miele range of appliances have been on display in 15 stores including in the new "Kitchens by Homebase" showroom in Guildford, Surrey. Michael Hardwick, key account manager for Miele GB, said:

    Homebase is a new partner for Miele, enabling us to create greater brand awareness and communicate with a much broader audience.

    In August 2020, Homebase announced the launch of Bosch and NEFF appliances as part of its kitchen offering. At the time, Ian Penney, business director for Homebase Room Solutions, said:

    The kitchen is the hub of the home and we know our customers are looking for inspiration for how they can make their busy lives easier.
    Embarking on a kitchen renovation can be daunting, but we're here to take the pain out of the journey ... A kitchen isn't just units and worktops, the appliances, paint, flooring and tiling, accessories are just as important - and we have something for every taste. We're really pleased to be partnering with Bosch and NEFF, to help bring our customers even more innovative and quality products.

    In similar move, selected Bunnings stores began selling Samsung home appliances in late 2020. This rollout is expected to expand this year, according to Appliance Retailer.

    Bunnings director of merchandising and marketing, Phil Bishop said the partnership supports its focus on extending its product range in the kitchen category.

    We are thrilled to be working with Samsung to expand their home appliance range in the Australian market and to provide our customers with even more choice at the best price. Samsung is world renowned for their cutting-edge technology and we look forward to continuing to grow our partnership to offer our customers the latest innovations in home appliances.

    The partnership is a first for Samsung and aims to meet growing demand for smart products.

    Grafton Group

    Building materials distributor Grafton Group and owner of the Woodies DIY chain has agreed to acquire Dublin-based Proline Architectural Hardware.

    Proline specialises in the supply of traditional and contemporary architectural ironmongery products including door locks, hinges and handles. It works closely with architects on the specification and scheduling of ironmongery products for commercial, public sector and residential projects. The company reported revenue of EUR10.8 million in 2019.

    Grafton said Proline's product range and expertise allowed joinery manufacturers, contractors and trade customers to source ironmongery products from a single source. Grafton chief executive Gavin Slark said:

    Proline will bring specialist expertise to Grafton in the architectural ironmongery distribution segment in Ireland. It will also enable us to offer a broader range of products and services and to extend our customer base in this segment of the market. The acquisition of Proline is in line with our strategy of acquiring specialist, high-quality businesses that trade in complementary markets.

    Grafton said the deal is still subject to approval by the Competition and Consumer Protection Commission.

    Prior to its Proline acquisition, Grafton announced its purchase of AVC Ltd, a UK-based manufacturer and distributor of bespoke wooden staircases that trades as StairBox.

    Founded in 1994, StairBox has focuses on "the use of technology, operational expertise and a culture dedicated to cost effectively manufacture an extensive range of high-quality customised staircases".

    It has developed a software application that enables customers to accurately design, visualise and price staircases on the StairBox website. The resulting products are manufactured at what it said was a state-of-the-art production facility in Stoke-on-Trent.

    The company primarily serves trade customers operating in the repair, maintenance and improvement market.

  • Sources: House Beautiful (UK), Retail Times, Appliance Retailer, RTE, Irish Times, DIY Week, Proactive Investors and Irish independent
  • To read the latest edition, please download HI News:

    Download hinews-6-04


    Metcash/IHG results for FY2020-21 H1

    Acquisitions help to drive growth

    While IHG continued to trail the market in terms of sales revenue growth, growth in EBIT was very strong, boosted by increased DIY sales and cost containment

    Metcash, the owner of the Independent Hardware Group (IHG), has reported its results for the first half of its FY2020/21, covering the period between 1 May 2020 to 31 October 2020. Results for the overall company showed sales of $7.06 billion, up from $6.29 billion in the previous corresponding period (pcp), which was the first half of FY2019/20. This represents an increase of 12.24%.

    Earnings before interest and taxation (EBIT) came in at $203.0 million, up from $155.7 million in the pcp, an increase of 30.38%. Net profit after tax is stated as $125.1 million for the half. As Metcash wrote down $249.3 million during the pcp, leaving a loss of $151.6 million, percentage comparisons are not meaningful.

    Hardware division

    The Hardware division, which includes IHG and the newly acquired Total Tools, earned $759.3 million for the half, up from $599.9 million in the pcp, an increase of 26.57%. Division EBIT came in at $64.5 million as compared to $38.9 million in the pcp, an increase of 65.80%.

    That's the simple version.

    First of all, these are the results that are derived from applying the Australian Accounting Standards Board (AASB) 15 standards, which exclude "charge-through" earnings. We can include those, in which case the Hardware division earned a total of $1259 million in the reported half, and $1044 million in the pcp, an increase of 20.6%.

    While that is useful in terms of comparing past first half-years, AASB 15 is here to stay, so it is best to get used to the new numbers, excluding charge-through sales.


    In a note on its presentation slides for the Hardware division (#14), Metcash states that:

    Excluding acquisitions, total sales increased 16.2%

    This is footnoted, and the footnote reads:

    Acquisitions include Total Tools Holdings and in FY20 G. Gay & Co, Keith Timber and Wormersley's.

    We would have to assume that "total sales" refers to sales under AASB 15, which means that acquisitions were responsible for $62.3 million in sales. Of that, Total Tool Holdings (TTH) is responsible for $18.6 million, which means the other acquisitions brought in $43.7 million.

    One additional part to this, however, is that, as Metcash's chief financial officer Brad Soller informed the analysts during the earnings presentation, while Metcash owns only 70% of TTH, it is required to report 100% of that company's revenues. The other 30% is then taken out in liabilities.

    So, effectively, $5.6 million should be deducted from the overall sales, bringing them down to $753.7 million. TTH is responsible for $13 million of that, the other acquisitions for $43.7 million, and IHG (for comparison purposes to the pcp) $697.0 million. (That's a derived estimate, so we cannot vouch for its complete accuracy.)

    In terms of EBIT, the Metcash presentation notes that acquisitions contributed $8.5 million to earnings, and lists TTH's contribution as $4.8 million. (In this case, as we're dealing with EBIT, we would assume the 30% liability has been already applied to TTH's EBIT numbers.)

    So that would mean that EBIT can be broken down into $56 million largely from IHG, $4.8 million from TTH, and $3.7 million from the other acquisitions. Which means that a rough estimate of EBIT growth directly attributable to IHG would be around 44.0%.

    The media release which accompanied the results indicated the growth in EBIT was the result of higher sales volumes, an increase in sales of DIY/consumer products which carry a higher margin, a shift to more direct revenues from joint venture and fully owned company stores. Hardware also delivered a great deal of cost containment, especially as regards necessary expenditure on COVID-19 containment measures.

    In response to an analyst question about the source of growth, IHG CEO Annette Welsh responded:

    Customers were unable to go further than five kilometres. And to that extent, it would have driven some of those customers to their closest hardware store, and we benefited from that.

    Other performance metrics

    According to the media release accompanying the results, like-for-like (comp) sales increased by 13.2%, with DIY/consumer up 35% and trade sales up by 4%. This helped to shift the balance for IHG between DIY and trade from its previous 36/64 to 40/60, in percentage terms.

    While IHG had good performance, the store network also saw a net loss of six stores during the reported half. The Metcash presentation reports a loss of 10 stores from the banner group, and a gain of 90 stores - though 86 of those are from TTH, so in terms of IHG, it was a gain of just four stores.

    The number of Mitre 10 stores increased by nine to a total of 330, while the number of Home Timber and Hardware stores declined from 168 to 153. True Value Hardware and Thrifty-Link store numbers remained constant on 161.

    Total Tools Holdings

    A number of interesting issues were raised by the analysts at the results presentation as regards TTH. However, this turns out to be a complex topic, and HNN will be covering it in more depth in our next edition of HI News.


    Metcash is very optimistic - with a few caveats - about the future of its Hardware division. According to the company's media release:

    In Hardware, sales in the first five weeks of 2H21 are up 25.3% (+19.3% ex-Total Tools) with sustained strong demand in DIY and Trade sales continuing to track positively. The business will continue to focus on its MFuture growth initiatives across Trade, DIY and digital, and retaining customers gained through the COVID-19 period. The second half will include a full six months of trading by Total Tools, including the four stores acquired and anticipated acquisition of a majority interest in a further eight independent stores.

    The caveat, however, is this:

    There continues to be a high level of uncertainty as to the potential impact on all our Pillars of any changes to COVID-19 related restrictions and resulting changes in consumer behaviour.

    The optimism the company has around TTH, and what that indicates both about Metcash and the market, is something that Andrew McLennan, an analyst with Goldman Sachs, picked up on as well in his questions:

    With respect to tools, with the successful Total Tools acquisition on your belt, you've got a very strong position now in trade. I'm just wondering how we should think about this business going forward from a consolidation perspective? Could you say that the growth - you are a mile ahead of anyone else in the trade part of the market. I'm just wondering how we should think about MFuture consolidation opportunities.
    Just given the scale and the positioning in the trade part of the market, just how much more consolidation could be?

    Metcash CEO Jeff Adams responded encouragingly, but with a degree of wariness as well:

    Look, I think it's still very fragmented. There's still lots of opportunities out there for us to, similar to Total Tools, really step change and if we're able to find the right strategic fit and the value work for that, then certainly, we'd be interested. But there's still lots of opportunity because it's still a very fragmented market in Hardware.

    IHG CEO Annette Welsh also responded to these suggestions:

    Yes. I think the one thing to say is that there's real confidence in the model that we have and in the heritage in trade in that format... So we'll look to continue to drive that.


    It is a somewhat well-worn saying, but a rising tide does lift all boats. Looked at strictly comparatively, the 16.2% increase in IHG revenue does not actually track the market. Overall hardware retail sales for Australia for the pcp were $9769.7 million. For the reporting half, sales were $12,214.6 million. That's an increase of 25.03%, leaving IHG a full 9% off the pace. And more likely, given that IHG has a larger presence in Victoria, New South Wales and Queensland, which gained the most sales during the recent half, closer to 10%.

    Of course that is offset by the large gain in EBIT that the Hardware division did manage to accrue, which is in part a tribute to extensive cost-cutting measures, as well as the surge of DIY spending.

    The real question that continues to linger over IHG is whether it is continuing to pursue an early 2000s strategy as we enter into the third decade of the 21st Century. Take for example, this statement by Mr Adams:

    Our retail banner groups are ideally positioned to continue benefiting from the change in consumer behaviour to more 'local' shopping, and their improved competitiveness supported by our MFuture initiatives is assisting them to retain new and returning customers to their stores.

    HNN would dispute that there can be any real evidence of that pattern change in consumer behaviour at this time. It is simply a myth to believe - in our opinion - that in the long term consumers will "wake up" to the benefits of shopping locally.

    There are some consumers that certainly like to shop locally, and there are consumers who find it easier - and more enjoyable - to shop at "big box" retailers. Rather than hoping that consumers have somehow been "retrained" to prefer local shopping, it might be better to research ways to better appeal to a broader market.

    This is actually a very deep subject - and one we will explore in more depth in the next issue of HI News. Perhaps as a pointer towards that, it is best to close with this: all the acquisitions that Metcash - and therefore the Hardware division - have pursued have been about acquiring businesses with established path-to-market which could be enhanced through a centralised, moderately scaled approach to business processes.

    Contrast that with, for example, Wesfarmers' acquisition of Catch - which was all about technology, innovation and personnel. The COVID-19 pandemic should have been a "wake-up call" (in the American parlance) to these possibilities not a further temptation to continue with what are really the market daydreams of the 1990s.


    Indie store update

    Dahlsens Mitre 10 Myrtleford property sold

    Achesons changes to the blue banner and threw a party for the local community in Forbes (NSW)

    The 4560sqm building that houses the Dahlsens Mitre 10 store in Myrtleford (VIC) has sold for $3.35 million and Acheson's Mitre 10 recently held an event to celebrate its new look grand opening.


    The freestanding Dahlsens Mitre 10 property located at 39-49 Myrtle Street attracted 63 inquiries and sold on a yield of 8.5%, according to a report in The Age.

    The property, which was listed for sale for the first time in 30 years, hit the market early in the COVID-19 shutdowns.

    Just prior to the building's auction, Dahlsens reassured locals that while the landlords may change, there will be no change to the hardware store's services.

    At the time, Wangaratta-based director Mike Noble from Garry Nash & Co said the property and its location were very appealing for prospective buyers. He told The Myrtleford Times:

    When we have a really good regional asset come on the market we often get regional people enquiring because, without generalising, regional people understand regional assets.
    Generally you get a much better return on a regional asset than a city investment so we also tend to get the city people looking at regional investments based on the return. It has been quite competitive - this is not a cheap asset.
    With interest rates being the lowest they've ever been, it is a very good condition for people to be looking at commercial investments...

    The hardware store employs around 30 people and pays just over $284,000 a year in rent and is 10 years through a 15-year lease.


    The Acheson family owned hardware store has served the local community for several decades and first opened in 1970.

    Jacinda Acheson said the grand opening was a great day out for everyone and was a success. She told the Forbes Advocate:

    It was fantastic to see people bring their family out and support their local business.

    Ms Acheson said Acheson's Mitre 10 would like to thank the Forbes Magpies Junior Rugby League Club for running the BBQ, as well as Lars Coffee for providing hot drinks, Brianna Bell from Showbiz Foods, Dippin Dots, and 2PK/ROK FM.

    Along with thanking the everyone who attended the launch of the store's new look, Ms Acheson said they would like to thank and acknowledge the team at Acheson's Mitre 10 for all their effort and support.

    Related: Acheson's Mitre 10 was formerly a Home Timber and Hardware store.

    Acheson's HTH makes the switch to Mitre 10 - HI News, page 27
  • Sources: The Age, Myrtleford Times and Forbes Advocate
  • retailers

    Elders expects more retail members

    Australian Independent Rural Retailers

    Earlier this year, a Roy Morgan consumer survey of about 1000 respondents found the Elders brand the most trusted name in Australian agribusiness

    Listed agribusiness Elders has grown its branch and wholesale rural supplies member network as the sector continues to undergo a shakeup following the amalgamation of Landmark and Ruralco by major rival Nutrien Ag Solutions last year.

    The Australian Independent Rural Retailers (AIRR) network, which includes eight warehouses, supplies wholesale products to about 370 AIRR member stores. It has grown from about 340 back when the rural merchandising group agreed to the $187 million Elders takeover in mid-2019.

    Among recent additions to AIRR has been South Australia-based YP Ag - a former CRT (Combined Rural Traders) member. Elders chief executive officer and managing director, Mark Allison describes it as the sort of "blue chip" rural merchandising business that is likely to trigger another wave of recruits moving away from Nutrien. He told Stock Journal:

    We've had about 12 new members coming across from CRT to sign up to the wholesale group this year and we can see good growth potential in VIC, NSW and QLD.
    We haven't lost any AIRR members since the business became part of Elders. AIRR has already exceeded our performance expectations with earnings before interest and tax of $21.9 million and is highly likely to exceed year earnings we originally planned over a full year.

    Former rival operators are now trading as part of the Elders network after it spent a further $18 million on business acquisitions in the financial year. The NSW North Coast was proving fertile ground for new Elders/AIRR members who were previously aligned with Landmark and Ruralco.

    AIRR also has plans for a warehouse in Tasmania, which could see more retailers joining Elders.

    Mr Allison said other potential AIRR members may actually find a better fit as part of the Elders' agency and store network, or within its horticulture business, Ace Ohlsson.

    According to Mr Allison, part of the company's latest eight-point plant is to continue pursuing some "massive opportunities" to win more market share in new geographies and across all product and services areas.

    Although he said the company is taking a methodical and "low pulse rate" approach to growth, it is understood there are about six potential acquisitions under consideration. Mr Allison said:

    We have a pipeline of acquisition opportunities, but it comes down to talking about the right numbers, locations and being sure they are the right cultural fit for us.

    The company also launched a branch incentive program enabling store managers to share bonus reward payments with staff as specific sales benchmarks are achieved. Mr Allison said:

    We looked at our competition in the market, which is invariably private operators and we thought this platform would drive the right private reward mentality in our teams.

    Profit performance

    Elders has posted an 80% profit increase to almost $123 million in the year ended September 30. It has been bolstered by a rain-revived turnaround in cropping activity and restocking demand, and strong flow-on benefits from its 2019 takeover of AIRR. Mr Allison said:

    Coronavirus has had no material impact on us so far.

    Although some specific business categories experienced market price shocks, notably the wool market, Elders had not needed to tap any government JobKeeper funding, or cut staff or working hours across its 220 branches, or draw on a $50 million working capital facility it established to provide emergency trading headroom when the pandemic hit.

    Mr Allison said rural property vendors were experiencing high demand for their farmland, which was expected to continue well into 2021.

    Revenue rose 29% to $2.09 billion and underlying earnings before interest and tax jumped 60% to $119.4 million. Gross margin growth was recorded across all state geographies and products. Mr Allison said:

    Our solid business foundations and strict financial discipline, and a commitment to ensuring the safety and prosperity of clients, communities and staff, allowed us to succeed despite challenging operating conditions in FY20.
    We now have a business that can make good money in a bad year and great money in a good year.

    Mr Allison said the results included 10 months of contribution from the AIRR business. AIRR added $44 million in wholesale gross margin - well in excess of projections. Its portfolio of house brand crop protection and veterinary products, combined with growth in Elders' Titan chemical product sales, were expected to make even more impact as the farm supplies division attracted more retailer members.

    Elders has about 18% of the total farm services market across Australia, behind Nutrien with more than 40%.

  • Sources: Stock Journal and The Australian Financial Review
  • retailers

    UK's Homebase up for sale again

    Pandemic drives sales at DIY stores

    Hilco, the turnround specialist company that bought the home improvement retail group in 2018, looks to benefit from the boost in DIY sales

    UK-based Homebase could have a new owner - its fourth in five years - as its current owner, Hilco looks to capitalise on the pandemic boost for home improvement retailers by putting the DIY chain up for sale. It is seeking to secure a deal from potential buyers after just over two years of getting the company back on track.

    Damian McGloughlin, Homebase chief executive, told the Financial Times that a transfer of ownership within two to three years had "always been part of the plan" and that with Homebase's profitability restored "now was the right time".

    A stock market listing is also an option, added Homebase chief financial officer Andrew Coleman. He told the Financial Times:

    It is something we have looked at. We'll have to see how things play out but all options are on the table.

    The group is thought to be hoping to secure new ownership by next Easter.

    Hilco acquired Homebase for GBP1 (and its substantial lease liabilities) in 2018 from Wesfarmers which had paid GBP340 million for the group just 18 months earlier. Wesfarmers had wanted to convert Homebase stores to its Bunnings format, but customers proved unreceptive to the focus on building and DIY in warehouse-style stores at a retailer traditionally known for home decor and gardening.

    Under the deal in which it sold Homebase, it should be noted that Wesfarmers is entitled to 20% of the sale proceeds if the Hilco sale happens.

    Under Mr McGloughlin, Homebase has moved back towards its homewares areas and introduced partners such as Tapi for carpets and Bathstore, which it acquired out of administration, for bathrooms. He said:

    We operate across a broader range of categories than B&Q or Wickes. People come to us to finish a room, not to build one.

    Mr McGloughlin also helped to steer Homebase to a return to profit in 2019 with underlying profits of GBP3.2 million against losses of GBP114 million in 2018.

    Hardware and home improvement stores have been among the relative winners from the COVID-19 pandemic as consumers adapted their properties to incorporate home offices and diverted spending from holidays and leisure to DIY projects.

    Mr McGloughlin said that spending more time away from the office had "helped people fall back in love with their homes" during the pandemic and that the warm summer weather in the UK had helped its garden centres.

    However, he added that sales of big-ticket items such as kitchens had suffered, and the company's ecommerce operation had at times struggled to cope with the increased demand. He said:

    We did more orders in three weeks than we would ordinarily do in 52 weeks.

    Homebase has since signed a 10-year partnership with Hut Group to overhaul its ecommerce offering, and said it would be opening more stores and experimenting with new formats as it emerged from its rehabilitation.

    Hilco ownership

    In just over two years of ownership, Hilco has carried out a widespread overhaul, closing underperforming stores, securing rent-reductions and cutting jobs to shore up the firm's finances. It has also shut two of Homebase's six distribution centres and secured a GBP95 million lending facility from Wells Fargo, a major American multinational financial services company. In a statement, Homebase said:

    Having built an excellent foundation, Homebase is moving out of its turnaround phase and entering into an exciting new chapter of growth. Now is the right time for us to be starting conversations with potential new owners to accelerate our plan.

    Homebase said it hopes to build on the more than 10,000 product lines added in the last two years, introducing new and expanded ranges by working with brand partners.

    It also has plans to open around 15 new stores over the next two years in cities and regions where it does not already have a Homebase store.

    The DIY chain now has 155 shops and 15 Bathstore outlets with more than 6,600 employees. At its peak it had 250 stores and 12,000 staff.

    Related: HNN covered the Wesfarmers sale of Homebase extensively.

    Wesfarmers takes a new path to growth - HI News, page 34
  • Sources: Financial Times, Yahoo Finance UK, Irish Examiner, and The Australian
  • retailers

    In praise of families: Mitre 10

    Grass roots marketing campaign

    The "Built by Families" series uses documentary-style videos to bring to life the legacy of family-run businesses in the Mitre 10 store network, and their connection to their local communities

    The latest campaign from Mitre 10 seeks to celebrate the "real stories and people behind its stores".

    Independent Hardware Group general manager of marketing Karen Fahey said the video series aims to invite consumers to understand what the Mitre 10 brand stands for. In a statement, she said:

    We are so proud to tell the stories of the local and incredibly generous families in our network. The people within our stores are the real brand champions and this is one way we can give them a voice.
    Built by Families aims to demonstrate how family-owned businesses engage and support their communities. It invites Australian consumers into the lives of these families, stirring emotions and building relatability. There's nothing superficial or contrived about the stories. Just genuine tales told by authentic people in communities across Australia.

    The videos begin with three businesses, the Hitchins family based in Moe (VIC), the Hastings and Benton family in Diamond Creek (VIC) and coming soon, the Johnson family in Mona Vale (NSW). Brand ambassador, Scott Cam, provides an introduction for the series. Ms Fahey said:

    Consumer trust and belief in our brand stems from generations of families delivering on a service and work ethic and fostering strong relationships with their customers - the very trademark of locally-owned, family-run business.
    The generational knowledge and expertise contained within these families is priceless and cannot be replicated. These three stories are saying it's not just product on the shelf in our's the people who work there, their values and the small things they do that make their communities better.
    The spirit of Mitre 10 lingers on in towns long after the lights go out and the store is shut. We encourage consumers to think differently about the people behind their local hardware store and listen to their stories. When you shop with locals you'll not only have a more enriching experience, you'll invest in the health of that community.

    The campaign will be implemented through multiple channels including a dedicated "Built by Families" website, TV advertising spots during The Block and social media.

  • Source: AdNews
  • Related: HNN featured the Mitre 10 Diamond Valley store extensively in a previous edition:

    HI News: Diamond Valley Mitre 10: The corporate/indie balance

    Pandemic delivers gardening boom in SA

    Newman's Nursery in Tea Tree Gully

    Industry association president expects the increase in sales, up 25% on average, to last for at least the next 18 months to two years

    In South Australia, demand for plants has increased so much since the pandemic that many nurseries and garden centres are struggling to find workers, according to a report in The Adelaide Advertiser. Nursery & Garden Industry of SA president David Eaton said members are looking for more staff in most areas, from production through to retail.

    Initially when COVID-19 hit, there was huge demand for vegetables then anything edible, then fruit trees that would take three years to bear fruit, then indoor plants.
    With more people spending time at home, perennial outdoor colour is showing strong growth and we think high demand will continue. This has sparked something that will be a trend for many years to come."

    Communications consultant Neville Sloss said surveys of garden centres revealed much of the rise in demand has come from new customers and many of them keep coming back. He told The Advertiser:

    Our garden centres reported that apart from extra business from existing customers, many more people new to gardening were shopping with them.
    What they are now reporting is that these people have kept coming back, and we estimate that there are now up to 30% new gardeners in our SA community - and that is the feeling nationally as well.

    At Newman's Nursery in Tea Tree Gully (SA), co-director Dianne Hall is experiencing a "major skills shortage" and has been unable to fill two full-time positions for trained staff. She said:

    People need expert guidance and so they ask lots of questions like 'Does that fruit tree need a pollinator?', 'How big will it grow?', 'What's the root system like?', 'Will it affect the footings of my house?' or 'Does it like sun or shade?'
    You need to be a trained horticulturalist. In the past, you'd advertise and there'd be 200 or 300 apply and half of those people would have horticultural qualifications. Now they haven't got any qualifications. They might be a keen gardener and mow someone's lawn but haven't got the knowledge to answer customers' questions.

    Members of the Horticultural Media Association Australia have been lobbying the South Australian state government to address the issue by creating more pathways for training the skilled workers that the industry needs.

  • Source: The Adelaide Advertiser
  • retailers

    Indie store update

    Marulan Rural Supplies

    Nagambie hardware store, F.W. Parris and Sons is closing its doors and the premises has been sold

    In Nagambie (VIC) Bruce and Gladys Parris have decided to slow down and make the most of their golden years after working in the family hardware store since 1968. Their store, F.W. Parris and Sons is shutting down.

    According to the Southern Riverina News, John Sanderson Machinery will take on part of the building where the store is located, and Rebecca Baker Pharmacy has purchased the showroom.

    Mr Parris said his dad and uncle borrowed a stationary hay bailer from their father to start the business. He told the Southern Riverina News:

    They worked with the old-school hay bailers where you brought the hay to the machine and it took a team of men to make it all happen. My dad was quite inventive and he and my uncle slowly improved their process until they were working with more modern, automatic hay bailers.
    They purchased the showroom in Nagambie in the '50s and began selling and servicing hay bailers, tractors and other machinery.
    I'm not entirely sure how they made the switch from hay bailers to hardware but over several years they decided it was more viable than trying to keep with the advancing hay bailing technology.

    Mr and Mrs Parris joined the business in 1968 after Mr Parris completed an apprenticeship in Melbourne. The couple was looking for an escape from the city and had always wanted to return to Nagambie. Mr Parris said:

    When my uncle died unexpectedly and my dad had semi-retired, I took over and have been doing it ever since...
    I was joking with Damian Sanderson (from John Sanderson Machinery) for a number of years about him buying the business and me retiring and one day it actually happened.
    Selling the business is not an option because small hardware stores aren't viable due to big businesses coming to town. Having the building in the hands of another local business is the next best thing.

    Mr Parris also told the Shepparton News in a separate interview:

    It's a bit sad the shop is closing, but on the other side it's a little bit of a relief, too. All this is going to continue on - it's not as if developers are going to come in and build on the land.

    He thanked his loyal customers who have kept his family in business for so long.

    Without them, there would be nothing here.

    The couple wants to stay busy in retirement and remain connected with the community. Mr Parris said:

    I'm going to continue carting wool and machinery. That will keep me going but will allow me to back the pace off. We will always remain in the Nagambie community. A big part of what we loved about the business was seeing local faces and finding out what they're up to.

    Serving farming customers

    It's a different story for Daniel Muller who purchased Marulan Rural Supplies (NSW) in November 2015. He recently told the Goulburn Post.

    Being part of a small community has been the most amazing experience. We came from Sydney, where we did not have the same sense of belonging. We have our kids' school teachers, netball coaches, soccer coaches, local shopkeepers, grandparents, aunties, cousins and siblings, employees from the mines, the police, they all come into the store.
    They all come in for a bag of scratch mix, and leave after a yarn and a laugh. Some bump into a neighbour here, others meet new friends. Our humble shop is the most social place.

    Being an active member of the community also means the store sponsors its local soccer and cricket teams and provides its schools with raffle prizes and donations. Mr Muller said:

    We engage with our community by being members of our Chamber of Commerce ... We always strive to support local business, groups and the community in everything we do.

    He described what Marulan Rural Supplies offers its farming customers.

    Our customer service, pricing and reliability is something we pride ourselves on. We carry all stock out to our customers' cars, engage with customers and find out their stories, research and source items that we do not currently stock and help our customers with all their needs.
    Our deliveries are always reliable. From our fencing contractors who come in at the crack of dawn to our 'I'm running late, can you just drop a bale of hay off on your way home' customers.

    The store is an authorised Supagas dealer and recently became a registered firearms dealer selling guns, ammunition and accessories. After responding to customers' requests, Mr Muller employed a resident gun expert and underwent a rigorous eight-month process before being granted a firearms dealer's licence. Mr Muller said:

    This side of the business has gone from strength to strength. Our customers are amazed at our low prices and range.
    We stock a large range of brands including Gamo, Howa, Savage, Lithgow, Adler, Ruger, Miroku, Akkar and many others in all different calibres from air rifles up to 6.5 Creedmoor.

    In addition to an extensive range of rural supplies, it also stocks treated pine from Penrose Pine and are able to cater for customer special orders. The store also sells a high-quality fencing range including treated pine or galvanised strainers and stays, hinge joint, netting and barb. Its stock feed covers animals from alpacas to peacocks, from cattle to bison - the store has a customer with bison - and from racing greyhounds to pedigree cats.

    Marulan Rural Supplies has a small and hardworking team with five full time staff and five casual weekend staff. Mr Muller said:

    Everyone brings their own strengths to the business which is such an asset in helping our customers with their needs.
  • Sources: Southern Riverina News and Goulburn Post
  • retailers

    Blackwoods industrials retail expands in NZ

    Store rollout and refurbishment

    The Wesfarmers-owned retailer said it is responding to changes in the market as it updates its Workhorse range

    Industrials retailer, NZ Safety Blackwoods - part of Wesfarmers - is embarking on an expansion plan for the New Zealand market over the coming year.

    National manager of trade centres, Chris Mason, said it is already two-thirds of its way through its nationwide store refresh program to upgrade stores and relocate a number of them to bigger sites. He told The New Zealand Herald:

    There will be more stores [opening], particularly in the Auckland market. What we'll be looking to do around the rest of the country is to either expand existing locations or refurbish and transform the retail experience.
    [Store growth] will be single-digits over the next year, but we've certainly got larger plans.

    NZ Safety Blackwoods currently has six stores in Auckland and 24 spread throughout the country, selling safety equipment, engineering supplies, uniforms and packaging.

    It has been operating in New Zealand in various forms for over 30 years. NZ Safety and Blackwoods were trading separately until about four years ago when Wesfarmers merged both brands.

    In Australia, Blackwoods is the largest provider of industrial and safety supplies with 60 branches and distribution centres.

    Growth factors

    The trend towards fashionable workwear among tradies along with a boom in infrastructure projects and advances in technology are helping to fuel its expansion, said Mr Mason.

    The drive for growth comes down to a changing trend from our customer base. A younger more image-conscious tradie who cares about brand and their image when on site. We're being driven by a desire for fashionable workwear - not just in clothing, even with tools.
    The industrial sector is also being disrupted by technology and things are changing at a rapid pace in terms of safety and innovation. You see it in tools, for example, with wireless connections to control speed and who can use them now, earmuffs with Bluetooth and different types of connectivity to allow people to communicate easily on site. We're not immune to that disruption from technology that you are seeing in other industries.

    Durable workwear labels designed for the "fashion conscious" tradie are now sold alongside tools, engineering supplies, safety and personal protective equipment (PPE) in a retail environment which for the first time has mirrors and changing rooms - features that would have been unheard of in this industry even just a few years ago.

    Mr Mason said the trade industries are shedding their traditional persona as a new generation of more image-conscious tradies emerge along with increasing numbers of women entering trade industries. Its stores are evolving to meet this changing demand.

    The old school self-image of the typical New Zealand tradie has changed over recent years and this has manifested in a growing design trend for more stylish workwear which was traditionally seen as purely functional.
    More commonly now, they are looking for workwear that they can come off the site, take off their work boots and head down to the pub.
    The designer label on their work clothing is just as important to them as their casual clothes are and a range of recognisable fashion brands like King Gee, Levis and FXD have developed an offering to meet this need...
    As a retailer, our offering has evolved to provide the service levels to match the positioning of this style of attire which now includes a more customised fitting service.

    Tools, clothing and apparel have been the fast-growing products for NZ Safety Blackwoods. Its plans were to increase the size of existing stores to accommodate larger ranges in these categories. Mr Mason said:

    The line between workwear and casual wear is certainly being blurred, and that's right across the industry ... With the infrastructure projects going on there is a need for a larger workforce and so younger tradies are entering that workforce. There's been a drive on recruitment into the trades and apprenticeships, and we're certainly seeing that drive some of the growth.
    In the short to medium-term there's still a large opportunity for expansion. The government through Covid has committed to big spending in infrastructure and construction to keep the economy moving forward so we see there is a big market.

    Mr Mason said Wesfarmers recognised "there was a opportunity here" and "would continue to invest where it makes sense to do so". NZ Safety Blackwoods turns over about NZD240 million each year.

    Flagship store

    It recently opened a new 1000sqm flagship store in Penrose, an industrial suburb in Auckland. The Penrose store footprint is twice as large as the group's next largest store and is its 30th store in New Zealand.

    Mr Mason said its investment in a local omnichannel expansion program will cover bricks and mortar stores as well as its e-commerce platforms.

    We are seeing more tradespeople working in smaller teams now and there is a move towards a centralised purchasing model where being able to get everything they need to get the job done in one place means greater efficiency and less time away from the site.
    Offering an integrated retail solution provides access to a wider range of products with the minimum time needed to make the purchase," he says.

    Mr Mason also said the number of customers using click and collect has doubled in recent months and the new store will include a touch screen terminal that allows customers to order from more than 100,000 products - with the option of delivery to their worksite or collection from one of its 30 trade centres across New Zealand.

    Workhorse range

    Blackwoods recently revamped its own brand of workwear called Workhorse, according to Manufacturers' Monthly. Originally launched in 2014, Workhorse now has clothing or both night and day wear.

    Apparel program manager at Blackwoods, Cahal Callanan, said the company wanted to provide a "real value proposition" to large industrial businesses who needed workwear to protect employees. She told Manufacturers' Monthly:

    One of the main factors in the new range was to add in more stretch fabric, so it fits to workers bodies and allows more movement for people on site doing these active jobs. They are working eight to ten hours each day of really solid work, so if their uniform can fit and move with them it makes them more comfortable and efficient.

    Workhorse launched a range with high visibility as a focus. Instead of using day-time high-visibility colours, such as yellow or orange, the range is made from white fabrics. The Blackwoods team believe white is the most naturally luminescent colour and contrasts well in dark environments.

    National category and sourcing manager of apparel and footwear, Leigh Eam, said the safety aspects of the designs across the Workhorse range is what makes it unique. She told Manufacturers' Monthly:

    White really does stand out in a dark environment and in addition with our biometric tape applied to the garments a person is really visible.

    Biomotion retro-reflective tape is another element of design for the nightwear range that is crucial to improving safety. She said:

    Usually you may only get one band of tape around the leg and arm for visibility. But to increase this, with our new range we added two bands on either side of the joint on the leg and arm and this makes it easier to identify which direction the person is moving in.

    She said there is also an "X" configuration across the back of the uniform so machine operators can easily identify which way a person is facing.

    With two bands featured on the arms and legs of the clothing, each band moves when a person is walking and people can clearly see the motion of that person. I think this range that Cahal has created really focuses on the fit-for-purpose needs for night works.

    Blackwoods developed the Workhorse range by listening to its customer support staff to identify the unique needs of Australian industries. One important aspect that came out of this direct feedback is the use of 100% cotton fabric. Mr Eam said:

    Australians love wearing 100% cotton and we know that the Australian high-visibility standard has been modified to allow workwear ranges to use the natural cotton that Australians want.
    There are also a range of other factors like clothing vents to combat heat and collars that can be pulled up around the neck to protect from the sun. We created clothing with these elements, and they are intrinsic to our workwear range.
  • Sources: New Zealand Herald, NZ Safety Blackwoods, The Press and Manufacturers' Monthly
  • retailers

    Indie store update

    Budget gets positive response

    Total Tools is set to open an outlet in regional Victoria and Narromine Hardware keeps it local

    General manager, Andrew Pitman from Geelong based Belmont Timber and Fagg's Mitre 10 said the business believes the federal budget will help revitalise the wider economy and provide a confidence boost for the local community. He said he is pleased the government will borrow to fund personal tax relief and new incentive programs for business, infrastructure and job creation. He told The Geelong Advertiser:

    A trillion-dollar national debt is breathtaking in scale but it's what the country, and regional Australia, needs to support future investment and growth.

    In particular, Mr Pitman welcomed the extension of the first home loan deposit scheme, the ability to write off new assets, job creation incentives and the tax cuts. He said:

    The payment of up to $200 per week to hire young Australians is very appealing and will help reverse some of the high youth unemployment we have in Geelong. This aligns with our participation in the GROW G21 program that helps disadvantaged youth secure new work opportunities.

    Mr Pitman said the hardware retailer would also take advantage of the ability to write off assets through the purchase of vehicles and equipment with that investment to be shared among Geelong suppliers.

    He believes personal income tax cuts will also ultimately see more money flow back into the economy and build consumer confidence. He said:

    In the lead-up to Christmas, the additional money will be spent in the retail space and help resuscitate retailers that have suffocated under the weight of COVID-19...
    Small business, tourism and the hospitality industry have been haemorrhaging under lockdown and the additional federal government stimulus will help bring back the customers as Australians seek to holiday domestically.
    We also believe that 2021 will see a strengthening trend of Melburnians migrating to regional Victoria and in particular Geelong.
    COVID-19 has been an enabler for the development of the home office workplace. The new work from home ethos will see Geelong's population continue to grow as Melburnians seek the appeal of an affordable regional lifestyle.

    Total Tools in Warrnambool

    Total Tools Warrnambool franchise director Kyall Wragge has been placing the final touches on a 1534sqm store in East Warrnambool's Harvey Norman Complex. It is expected to open in mid-November.

    The business owner went ahead with plans to open despite this year's disruptions, using a vacant shopfront and a site occupied previously by floorcare and cleaning retailer Goodfreys. Mr Wragge told The Warrnambool Standard:

    We weren't going to let the challenge of COVID hold us back.

    A former Melbourne resident, Mr Wragge moved to Warrnambool to start the store because of the city's growing trade-based industries. He explains:

    Data shows there's a lot of qualified tradies around the area. It's a growing area, you can see it through the roads and the housing ... It was voted the most liveable city in Australia; it's a beautiful place and it's growing.

    Mr Wragge said he is gearing the new store at both DIY and trades markets to "complement" existing hardware stores in the region.

    Narromine Hardware

    Narromine Hardware located about 40 kilometres west of Dubbo (NSW) is benefitting from an air of optimism with local shopkeepers enjoying increased foot traffic and farmers excited by the prospect of a long-awaited, decent harvest.

    After experiencing the devastating impacts of a prolonged, unprecedented dry spell, closely followed by the global pandemic blow, the general vibe among locals is finally looking up, according to Dubbo Photo News.

    The hardware store will soon celebrate its second year under new ownership in November. In its first year, the team made much-needed changes to the space which was home to previous hardware shop fronts for over 65 years. In an earlier interview, manager Tracy Brennan said:

    We've remodelled the layout to serve our customers better, expanded the range of stock and refurbished both the interior and exterior of the shop and trade desk. We also cemented our back shed and turned it into a trade centre.

    It also modified the range in store to better suit the current water restrictions, and ordered grey water hoses and a range of gardening products so residents can reuse their water elsewhere.

    More recently, it brought the newsagency into the hardware store, making it a one-stop-shop for locals.

    Capitalising on the buoyant atmosphere, retailers have teamed up with the Narromine Shire Council for a major Shop Local campaign which will run from November 1 to December 18.

    The marketing strategy aims to promote the Narromine region as a leading shopping destination in the lead up to Christmas and continue to encourage people to shop locally. Narromine Shire Council communications manager, Kelly McCutcheon, told Dubbo Photo News:

    Come December, our shops will turn into overall weekend trading so they will be open on Saturday and Sunday. A lot of our cafes are going to complement that and open for that time as well.

    A late-night shopping event in Narromine is also planned for December 10, where most retailers will keep their doors open for a few extra hours.

  • Sources: Geelong Advertiser, The Warrnambool Standard and Dubbo Photo News
  • retailers

    Pandemic drives sales at Beacon Lighting

    Effective online channel

    The company said first-quarter underlying net profit after tax (excluding Beacon Energy Solutions) had increased to $8.4 million from $2.2 million

    A trading update for the first quarter of 2021 showed Beacon Lighting's like-for-like store sales was up by 26.6% driven by an increase in home renovations and home offices during COVID-19 lockdowns. Consumers have been sprucing up their homes with new lighting products, as well as desk lamps or ceiling fans for home offices.

    The online channel proved successful for Beacon Lighting, as it has for many retailers during home isolation. Its online sales rose by 156% in the period.

    Retail trading conditions have been supportive of the lighting and fan product categories, with strong growth being exhibited across all Australian markets except for the Melbourne region.

    Due to lockdowns, the company's Melbourne stores have been closed to retail customers since 6 August 2020. However, it has made use of these stores to process online orders, click & collect contact-free pickups, and service trade customers.

    Beacon Lighting chief executive Glen Robinson said during the difficult times around the coronavirus pandemic the retailer had been able to provide its customers with a safe and rewarding shopping experience in stores and online.

    We are seeing many customers investing in their home as they spend more time at home working and studying. Thanks to the support of our customers and the commitment of our team members, the group has been able to achieve these strong results.

    FY results

    Beacon Lighting has been benefitting from the trend to work from home driven by the COVID-19 restrictions, as stuck-at-home Aussies spruce up their fixtures and fittings with the spare cash they have that would have otherwise been spent on a holiday, travel or hospitality. In August, it unveiled a bumper full-year profit, up 38.5% to $22.2 million after sales grew to $252.2 million for the 12 months through June.

    On an underlying basis, which strips out the impact of Beacon's exit from its solar business as well as the sale of a distribution centre, net profit after tax lifted 16.8% to $19.1 million.

    Beacon Lighting's online sales surged 78% in the June half, lifting online sales for the year by 50.6%.

    In an earlier trading update back in June, Mr Robinson told The Australian:

    Much of it (rising sales) is coming from the fact people are not spending in cafes and restaurants, they are not going on overseas holidays, so they are investing in their house.
    Some of it might be coming out of superannuation money, and they see it as a good opportunity to improve the value of their home and change their spending habits from where they would usually go...
    [Sales increase] is across the board so there has been an uplift. Probably the strongest growth categories were light globes, desk lamps that sort of stuff ... even things like ceiling fans, garden lighting was very popular.

    More recently, the lighting retailer took out a seven-year lease on prominent retail space located on 1860 Sandgate Road, Virginia (QLD). A Bunnings store is being built next door. CBRE's Adam Brimson told The Courier Mail that an estimated 63,000 vehicles passed the location each day.

    In Melbourne, Beacon Lighting's purpose-built distribution facility at the Gilbertson Industrial Estate in Derrimut (VIC), encompasses a 11,469sqm warehouse and office on a two-hectare site.

  • Sources: Weekend Australian, Motley Fool Australia, The Australian, The Australian Financial Review, The Courier Mail, and Sydney Morning Herald
  • retailers

    Sydney Tools setting up shop in Orange

    Tools for tradies

    Earlier this year, it opened a megastore in Darwin as part of its ongoing national expansion

    A fit-out for a new Sydney Tools store in Orange (NSW) has been underway and director Jason Bey told the Central Western Daily that the industrial power tool and accessory retailer is looking to hire upwards of 15 staff.

    As a significant regional centre, Orange has the industries where its customers rely on hand and power tools for their job. Mr Bey said this will be the 44th store for the business but the first in the Central West.

    Orange has been an area of interest for a very long time. Since the inception of Sydney Tools in 2001 we would always have people who would travel to our Sydney store.

    Northern Territory

    The Winnellie (NT) store is the first one outside Sydney Tools' eastern seaboard locations. Mr Bey said the 2500sqm store located on the Stuart Highway was recognition of its belief in Darwin as a growth market. He told The Northern Territory News:

    We see Darwin as offering enormous growth potential for the specialist tools market. Around 11,158 people were employed in the construction industry in the Northern Territory in 2018-19, making it the fourth-largest employing industry in the region.
    While this represented a decline in employment of 23.1% in year-on-year terms, in line with a decrease in building and engineering activity, we believe a number of significant upcoming infrastructure projects are set to underpin the sector.
    The upshot will be the provision of much-needed employment for specialists in a range of key trades, and a fuelling of demand for capital equipment, accessories and hand tools.

    Projects include the Federal Government's $1.6 billion works program at Darwin's RAAF Base Tindal that is expected to create 300 jobs during the construction phase and the $260 million Ship Lift and Marine Industries Project. The marine industries project is designed to expand shipbuilding and repairs capability and expected to create 100 jobs during construction and 400 positions permanently. Mr Bey said:

    Our move into the Northern Territory is a no-brainer. It's a market with enormous potential and growth over future years.
  • Sources: Central Western Daily and The Northern Territory News
  • retailers

    Lowe's lockers for contactless deliveries

    Growing popularity of BOPIS services

    The lockers will be installed at more than 1,700 stores by the end of March 2021

    US home improvement retailer Lowe's recently announced plans to install Buy Online Pickup in Store (BOPIS) self-service lockers across all its US stores, aiming to improve contactless delivery for online shoppers amid a worsening COVID-19 spread.

    Lowe's frictionless shopping experience through its pickup lockers is ideal for time-pressed customers especially during the upcoming Christmas holiday period. It provides consumers with a fast fulfillment solution, while also potentially serving as a more cost-efficient option for Lowe's over delivery.

    The addition of lockers leverages innovative technology to provide a safe and easier way for customers to collect same-day online orders at their convenience.

    Electronic technology embedded in the lockers generates a scannable barcode as soon as an order is ready for pickup. Once store staff stages an online order, the customer receives an automated email notification that contains a one-time user barcode.

    The customer then completes the pickup by scanning the barcode at the locker using their smartphone without having to wait in line, receive assistance from a store associate or contact a touchscreen or keypad. It eliminates checkout time and allows fast movement in and out of the store.

    Executives at Lowe's say more than 60% of orders customers place online are being retrieved at its big-box stores. Joe McFarland, Lowe's executive vice president of stores, said in a statement:

    With more than 60% of online orders picked up in our stores, this gives our customers one more option and the added flexibility to control how and when they get that order.

    According to a study conducted by McKinsey & Company, as many as 60% of US consumers stated that they are currently using BOPIS services and will continue using it when the pandemic subsides. So the popularity and widespread usage of contactless retail services are likely to continue in the future.

    Lowe's expects to install the lockers in most metropolitan cities by Thanksgiving in late November. For providing the retail locker solution, it is working with Parcel Pending by Quadient, a major package solutions provider in the US.

    Lowe's investment in pickup lockers builds on improvements the company has made to its website, in-store technology and its delivery network over the past 18 months.

    As the coronavirus took hold, many consumers began turning to e-commerce more than ever before. And though Lowe's was deemed an essential business during mass lockdowns, the retailer still saw online sales skyrocket in recent months.

    As shopping preferences shifted during the pandemic, Lowe's moved up the migration of to the cloud and rolled out curbside pickup to support sustained online growth.

    Moreover, the company is focusing on accelerating front-end work and drive customer-facing capabilities. These capabilities include online-delivery scheduling and order tracking, a customised homepage, simplified search and navigation as well as enhanced online product offering to boost customer experience.

    Related: Competitor, Home Depot already offers such lockers at a number of its stores.

    Home Depot results FY2018/19 H1 - page 43
  • Sources: Zacks Investment Research, RTT News, Retail Dive and PR Newswire
  • retailers

    Indie store update

    New Home Hardware store in Berry Springs, NT

    Terang and District Co-operative ended its 2019-20 financial year with an increased surplus after a solid year of trading

    A Home Hardware store has opened in Berry Springs, a mostly rural locality in the Northern Territory and Terang Co-op in regional Victoria delivers strong financial year results.

    Berry Springs

    The newly opened Home Hardware store is part of the Berry Springs shopping precinct, replacing Berry Springs Hardware.

    Owners Russell and Lindy Willing plan to have the business's drive-through ready by November so customers can stock up on bulky items such as feed and cement. Mr Willing said the store would also offer services including pool testing and key cutting, as well as barbecues, paint and power tools. He told the Northern Territory News:

    We've invested in a good range of garden and power tools we believe will be appreciated by locals. We are really confident the store's range will meet the needs of our rural folk. And if we don't have exactly what they need, we encourage feedback so we can genuinely meet people's needs wherever possible.

    The store is located on 10 Doris Road, Berry Springs (NT).


    In his annual report presentation, Brendan Kenna, chairman of Terang and District Co-operative, said trading had been steady and the co-op had achieved a before-tax profit of $76,255. The net operating profit after tax was $44,709, up from $17,079 the previous year, which was also an improvement on 2018.

    The $24.4 million turnover was the second highest on record. The co-op's financial year finished on 29 February, but the AGM was pushed back due to the coronavirus pandemic.

    Over the past 12 months, the co-op has continued its positive progression, introducing significant improvements such as a $900,000 redevelopment of the

    Supa-IGA supermarket, becoming part of Mitre 10, joining the National Rural Independent (NRI) group and introducing clothing lines for the first time in the 25-year history of the rural store.

    Mr Kenna told The Standard that changes implemented over previous years were starting to take effect, describing the past year as one of consolidation and implementation of the co-op's strategic plan.

    He said the financial year had been impacted by the St Patrick's Day fires as people and businesses dealt with the aftermath of that disaster. But he said there was a more promising outlook with better profits in the latter half of the financial year bolstered by improved confidence and prices in the dairy industry.

    During the 2019-20 financial year 129 new members were welcomed, bringing the total to 2844 and the figure has since grown to 2954.

  • Sources: The Northern Territory News and The Warrnambool Standard
  • retailers

    Green shopping aisle at UK's Homebase

    The shelves promote environmentally friendly products

    It showcases energy efficient and eco-friendly home improvement products and offers information on how to get a smart meter installed, all in one place

    UK-based home improvement retailer, Homebase has just launched a "green shopping aisle" in five stores located in London, Edinburgh, Bridgend, Birmingham and Leeds with more stores to follow.

    Designed for the environmentally conscious, the store aisle is a picturesque grass walkway and canopy infused with foliage and butterflies. It is also decorated with evergreen climbers and vegetation, to help customers find the section of the hardware store that will make their home more sustainable. Chris O'Boyle, trading director at Homebase, told the Daily Star:

    We know that more and more of our customers are looking to make environmentally friendly decisions as they embark on home and garden improvement projects.
    'The Green Aisle' not only puts some of our most sustainable and eco-friendly products all in one place for those who know what they're looking for, but will also provide advice and inspiration, supported by our expert teams, for people who need a hand turning their green ambitions into reality.
    Whether it's something as simple as a draught excluder to sit at the bottom of a door, getting a smart meter installed or a bigger project such as installing new insulation, there are hundreds of ways - both big and small - that can help people make a positive difference to their home.

    Homebase's Green Aisle has launched at the same time as the British government's "Green Homes Grant" scheme, with a number of items selected based on their energy efficiency credentials. Items range from white goods and electricals through to insulation and smart appliances.

    The Green Aisle is also available online at the following link:

    The Green Aisle at Homebase

    The concept was developed in partnership with Smart Energy GB, an organisation that is tasked to help people in Great Britain to understand smart meters during the national rollout and how to use their new meters to be cleaner and greener with their energy use.

    It was also created after research found 74% of Britons want to make their homes greener, but half have no idea where to start. The poll of 4,000 Brits, commissioned by Smart Energy GB, also found 71% hope going green will save them money.

    Meanwhile, seven in 10 said they want to help the environment. Four in 10 of those polled via OnePoll are keen to use environmentally friendly paint when redecorating. Others are looking to install energy efficient home appliances 38%, smart home tech 34%, a water-saving showerhead 31% or a smart meter 29%.

  • Sources: Daily Star (online) and Birmingham Mail
  • retailers

    Bondi Junction Timber & Hardware

    Small store, great strategies

    Smaller hardware stores all too often become jumbles of different products that require a map and a compass to find just what you want. Bondi Junction is instead a thoroughly modern, neat, organised and clean store, that features great merchandising.

    The Bondi Junction Timber & Hardware Store (Bondi Junction Hardware) has been operating in one form or another at its Oxford Street location for well over 60 years. Its modern, most recent incarnation really dates back to 2009, when one of its employees, Neil Houlton, decided he would take over the store, as something he could do through his "retirement" years. As part of that deal, he took on his daughter, Kerry Renshaw, as a silent partner.

    Most unfortunately, Mr Houlton passed away in April 2015. That left Kerry as the sole director of the business - which was a little difficult, as she was living in the US at that time with her young family. For the next two years, the business continued with some of the established managers, such as Ken Dunlop, at the store helping to make it work. Kerry eventually found her way back to Sydney, and started being more hands-on in managing the store as well.

    In mid-2017, with the current managers looking to move on, Bondi Hardware found itself looking for a new manager. And that is where Adrian Blythe entered the picture. As Adrian tells it:

    I knew one of the guys that was retiring. I knew both [managers] from my wholesaling days as well, so I've had a relationship with both of them for a while. And it just came up in a general conversation. Because when I left the last retail store, I went back into wholesaling for a while.
    So I was coming into the store to sell product and that. And then I got talking and Ken was saying, "Oh I'm retiring." And then the next time I came in he said, "I know now I'm going to retire soon." So I'm saying, "What are they doing, who are they going to replace you with?" He says, "I don't know." And then the last time I came in he says, "I'm now retiring in a month."
    I said, "Well, I might be interested, maybe." I was like, you know what? It's a nice small shop, I've got a bit of an intimate knowledge, after being a wholesaler for six years servicing this store. Dealing with them for six years as another of my retailers, so always kept in touch.
    And it just sort of went from there.

    While Adrian is responsible for much of what goes on inside the hardware store side of the business, Alan Grinham handles the very active timber yard. He's been in hardware since the late 1990s, and has worked at Mitre 10 and what he terms "the other one" (Bunnings). Alan claims that working at "the other one" was just an accident, during a transition.

    As Adrian describes their comfortable working arrangement:

    Alan focuses on the outside, the lengths of timber, the sheet material, the cement that I'm cutting, that sort of stuff. And then we help each other out when it comes to special orders, customer orders, various things like that.

    One change for both of them was working at a store that was part of the Hardware & Building Traders (HBT) buying group. Bondi Junction Hardware has been a member for well over 10 years. For a small, very active store, what HBT has to offer has proved ideal. As Adrian explains it:

    This is the first HBT store that I've worked for, but I have noticed that they do put a big emphasis on not trying to tell you how to run your store. With HBT they mainly help you out with rebates. So you get to a certain spend you get rebates, or just whether there's certain deals going and stuff like that.
    But they will let you run your business how you want to run your business. As opposed to [Independent Hardware Group (IHG)], who want more of a say. You have to have the products, you have to be in catalogues, and so forth.
    We use predominately HBT suppliers. Because they look after us, so we tend to help out by sticking to those ones.

    Store strategy

    What's really interesting about Bondi Junction Hardware is that Adrian has built the small store to work as a well-stocked, orderly and effective retail experience.

    Since I've come on board, I've re-laid the whole shop. And not just in terms of moving stuff around. Before the idea was that "our tradies don't care, they just want stock".

    In some ways, that's part of a generational shift. But it's a particular generational shift, and Adrian outlines the root causes.

    You need to have a layout. You need to have a proper format. Maybe once upon a time, let's say pre-Bunnings, they were probably like that, it didn't really matter to tradies much. But Bunnings has forced a lot of the smaller shops like this I suppose, to run a proper, actual format. If you can make it easier for the guys to find what they want, that increases overall sales.

    That statement is important because it remains difficult for many hardware retailers to admit just how much influence Bunnings has had on the market. That influence really grew during the time the big-box retailer was competing with Woolworths' failed Masters Home Improvement. And there is also the background influence of IHG's Sapphire store program.

    While it is possible to go to extremes that are really not all that useful to the tradie market, expectations have shifted. In particular tradies are very time-conscious. As Adrian says, it is simply vital to have a store that presents as clean, well-organised and consistent.

    A good example of the kinds of changes that Adrian made were with drill bits, which saw him move to stock more from Sutton Tools.

    One of the first areas was all our drill bits. We had all these really old, beaten up racks that were all different sizes, and they were all bent, and stock was just anywhere. It cost us nothing, it cost nothing from the suppliers, they'll supply the racks. So I got the company to come in, put some new racks in. We looked at the range, they were able to expand on the range of what we sold.
    A lot of the times you've just got to use your suppliers. So people like Sutton, they came out and brought out the new racks. And the rep spent a day here pulling all the stock down, re-laying it.


    Adrian also benefitted from some suppliers finding alternative ways to handle packaging changes, especially when it comes to changing packaging over.

    One particular paintbrush we had never sold. There was almost no sales history on it whatsoever. Then the company rep came in one day and said, "Oh look, we're actually rebranding, doing new labels." So he offered to send out all the new labelling. So we had to pull off all the old cards and repackage. And the new packaging was much better, a nice green. Just like that, all of a sudden, those brushes started selling. Purely due to the packaging change.

    There is a lot to that brief story. First of all the recognition that the problem wasn't the product, but the packaging. Secondly, getting a really good package redesign. Then, in a way that preserved costs for the supplier, was very environmentally friendly, and resulted in rapid change, simply shipping out the new display cards for the retailer. The retailer, of course, is highly motivated to sell the stock, and this process is actually easier than, say, destocking then restocking the product.

    Expansion points

    Adrian is also alert to some of the high-margin incidentals that can help make a store both more amenable to customers, and polish up its numbers a bit. One change Bondi Junction Hardware made was to go from a vending machine selling soft drinks, to an in-store fridge.

    We bought a fridge, and you get those really hot days, a couple days we've been cleaned out of Gatorades or Powerades. Because they've got all the guys onsite and it's a 40-plus degree day.
    That replaced a drinks machine, but no one really thought it was ours. It was costing lots in terms of electricity. When we moved to having the in-store fridge, we started selling lots more.


    While Adrian has been hard at work making the store itself into a well-functioning retail system, Alan has also been working hard on the timber yard of the store - which is a big driver of revenue and profit. Of course, many of the problems that Adrian faces inside the store, Alan faces outside the store, only magnified a couple of times across a more narrow range. The store's space, given its location, has to be compact, and timber, of course, is anything but compact.

    There is a really defined market for timber from Bondi Junction Hardware. First of all, given the high level of traffic congestion in Sydney from 7am to 7pm, being able to get timber without leaving the city is a big advantage. As Alan describes the situation:

    So I suppose you could say in the heart of eastern suburbs where we are, we're the only timber supplier. The nearest one to here, you'd have to go over the East Gardens [a 20 to 40 minute drive]. So if someone asks for something we haven't got, and we say "Look, I haven't got any, but they'll probably have it over there near East Gardens, "they'll almost always say "I'm not going that far."


    One very good metric to judge the success of a smaller store in an active environment is ticket size. With limited, niche trade traffic, how much is spent on each transaction is a vital measure of success.

    According to Adrian, the average transaction size is a healthy $100-plus. That compares favourably to the smaller average transaction size of $30 to $40 many stores have. Of course, equally, given its position and the predominance of trade customers, there are fewer transaction. Around 500 a day may be a comparable average for stores elsewhere, while Bondi Junction Hardware typically does fewer than 200. That said, for a smaller store, the combination of high ticket sales and fewer transactions is much better than mid-range tickets and mid-range transactions numbers.

    That is in a store where the total area is 750 square metres, and of that only 105 square metres are for the store area itself (the rest is the timber yard).

    Working for an owner who is an accountant, it is also important to make sure that the gross profit numbers are heading in the right direction. As Adrian tells us, he and Alan have managed to make that happen. Like most good retailers, this has not been as simple as just bumping up the prices.

    The owner keeps a close eye on the figures. Since I've come on board I've been able to reduce the spending, I've been able to increase the sales. Which has meant we're making about 10 points more, on the gross profit.
    It's not through raising prices. A lot of it was through decreasing some of the prices. But when you decrease, you start to sell more, unit price drops. So you might directly seem to lose a bit of gross profit, but then with the volume you sell, it tends to make up for it. It was a matter of looking at stuff like that.

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    Retail as audience

    How the pandemic will accelerate change in retail

    While the pandemic has created problems of its own, it has also more clearly outlined tensions between past and possible future ways of doing retail

    Sars-CoV-2 and the disease it causes, COVID-19, has had a very direct and immediate effect on retail, causing stores to close and customers to stay away. But could it also have a longer-lasting and more fundamental effect, as science and new technical capabilities assume a prominent place in social and economic life?

    The whole catastrophe

    It's worth considering, for a moment, exactly what a catastrophe, such as the pandemic, really is. "Catastrophe" has two main meanings: the result of a disaster, and - curiously - the denouement, the final, climatic development of a classical tragedy (such as Macduff killing Macbeth in Shakespeare's play). The latter was its original meaning, and it began to be used for the former in the mid-18th Century.

    So there is a commingled sense that catastrophes are at once surprising and yet often seem to have been predictable after the event: the volcano that erupts, the earthquake along a known faultline - or, indeed, a pandemic taking a shape foreshadowed by both scientists and science fiction writers for decades.

    Given those warnings, it's not really possible to put these events down to "bad luck". What they really are, typically, is what Americans would term "a wake-up call". What catastrophes really do is to point out the significant gap that has developed between the accepted and expected view of things, and the actual, underlying reality.

    The problem, of course, arises in determining where that gap really exists. After the sinking of the Titanic, for example, it might have been tempting to undertake an extensive study of icebergs. The reality, though, was that the shipwreck revealed Edwardian England did not know as much as it thought it did about both metallurgy and ship design.

    It is just so with the pandemic, as well. For example, there has been a persistent desire to see its lesson as being, in one way or another, that "China is bad" (because it was the origin point of the Sars-CoV-2 virus). China, in this case, is just the iceberg. Of course it has all the attractions of the "blame the iceberg" approach: no one is really to blame (except China), and the world can be said to have been behaving perfectly (except China).

    But blaming China is not, self-evidently, going to stop the next pandemic - nor will it help nations of the world recover from this one. Which raises the question: what will help stop another pandemic, and possibly hasten recovery from this one?

    One clue might be to look at the practices of those nations that have been successful in stemming the effects of the pandemic, often securing better economic outcomes as well. The approach to the pandemic in nations such as Australia, the US, and the UK, as well as much of the EU (except Germany) has been to see it as a matter of people interacting with a virus. This has resulted in an emphasis on moving people with some probability of having contracted the virus into some form of medical detention. (HNN notes that the word"quarantine" is frequently used incorrectly. You cannot, technically, quarantine someone who is known to have a target disease. It's purely a preventative measure - and originally lasted 40 days, which is the origin of the word.)

    Other countries such as South Korea, Taiwan and Germany, have taken an information approach instead. Their emphasis has been on contact tracing combined with extensive, early testing. One reason why all three have adopted that approach is due to the legacy of their prior experience with other diseases in recent times. Mistakes they made then taught them the benefits of contact tracing. South Korea fought off Middle Eastern respiratory syndrome (MERS) in 2015, and Taiwan was hard-hit by severe acute respiratory syndrome (SARS) in 2003. Germany suffered a major outbreak of e. coli in 2011 - 3,950 people were affected, 53 died, and 800 suffered hemolytic uremic syndrome, which can lead to kidney failure.

    It is also the case that many of these early, successful approaches have run into trouble at a later stage. The record for countries being able to control the pandemic when restrictions are lifted, no matter how good their contact tracing may be, is poor. Most have attempted to balance economic activity against pandemic spread, and most have, unfortunately, not found that balance.


    Restated, the problem of Sars-CoV-2 virus and the pandemic it has caused really has to do with the way in which linked global societies have managed only a partial transition to an information-driven environment. Manufacturing, finance and product development have been globalised, but not disease detection, prevention, and treatment.

    It's helpful to look at this situation in terms of a historical change that is underway. The best label we can come up with for this change is "post-manufacturing".

    Post-manufacturing does not, of course, refer to an an economy which has stopped making objects, such as cars. What it does refer to is an economy where the growth in value has shifted from the manufacturing processes themselves, to the ability of the products produced to successfully interact with software.

    Of course, this is not the first time that the economy has taken this kind of turn. From around 1890 to 1930, the same thing could have been said about electricity, where engagement with this technology became central to economic growth. Electricity was joined by the internal combustion engine from 1910 to 1940, plastics from 1920 to 1970, and, post-war, from the mid-1950s to the early 1980s, transistors.

    That said, software is emphatically different from all these other economy-boosters. It is not produced by industrial means, but rather results from the practical application and distillation of knowledge itself. It responds to issues of scale, economically, but does not require scale to be produced, opening up the potential for different methods of development, production and distribution, such as open source.

    Those characteristics means its capacity to add value is both astonishing, and yet uncertain. A prime example is provided by Tesla, the most successful global maker of electric cars. Founded in 2003, the company completed its initial funding round in 2006, and launched its first vehicle in 2008. The Roadster was a Lotus sportscar powered by electric batteries. When Tesla launched its Model S four years later, the automobile as software was finally achieved.

    The Model S isn't just about electric motors, it's also about near-autonomous driving, which has the capacity, when developed into fully-autonomous driving, to help change national economies. What we're talking about, basically, is a single-purpose robot as car.

    Despite the evident success of early post-manufacturing businesses, it's easy to understand why making the necessary shift is so hard. Manufacturing, in its more modern sense, has been with us now for over 200 years, dating back to the late 18th Century. Mass production took off, firstly in the US, in the 1850s, and was, indirectly, a contributing cause to the American Civil War. In the early 20th Century, it came to reshape the US and other economies, helped by electrification of factories and better techniques in steel production.

    During World War II manufacturing developed further techniques of scale, and this helped to fuel the post-war boom of the 1950s and 1960s. It hit historic highs as the chemical industry developed new materials, in particular polymer-based plastics.

    Beside boosting economies, manufacturing also influenced the way things were done everywhere in society, along with a responsiveness to the organisational principles of the military, to which most working people had been exposed during the war years. Schools, hospitals, restaurants, police and even governments all shaped themselves around manufacturing principles. It has become, especially for the past 75 years, simply the way things get done.

    Yet while many decry the shift of manufacturing to China and other low labour cost countries as an economic problem, a more accurate view is that what has been transferred are those activities that have the lowest future growth potential. The problem comes down to localities which have lived through three successive generations where most families were supported by a vibrant manufacturing base, and who now find themselves struggling to adapt to change.

    So it is not an economic problem. It's a social problem. One indicator of this is that, while countries such as the US, the UK and Australia worry about the shift of manufacturing jobs to China, countries in Latin America are also confronting what they overtly refer to as post-manufacturing. Their problem isn't China, however, it's the increasing automation in developed countries, which means those countries are now shifting less manufacturing to places such as Mexico and Brazil.

    Post-manufacturing retail

    What does this mean for retail, and specifically home improvement retail?

    Most of the debate about how retail might change concentrates on how much revenue comes in through online sources, and how much originates from physical stores. That narrative cites some changing numbers for online purchases during the pandemic which could prove "sticky" into the future.

    It is no surprise, of course, for retailers to discover that online retail has jumped significantly. In the UK, this has seen online sales climb from a 20% share to a 30% share, while in the USA online has lifted from 17% of overall retail sales to 22%. (These figures are net of car and car part sales, as well as restaurant and bar/pub sales.) In Australia, the growth in online sales has surged by 49%, to reach close to 12% of overall retail.

    Some individual stores did well out of online. The department store Myer, for example, sold $422.5 million online for its FY2019/20. This amounted to 17% of overall sales, and represented a 61.1% increase on the previous financial year.

    But if we are thinking in terms of post-manufacturing, it is debatable whether the split between physical and online sales/distribution matters as much as the industry currently believes. If the metric of post-manufacturing is all about how much engagement with software it enables, online offers itself as a ready place for that. Yet most customers today, and for some substantial time, are unlikely to shift from physical stores. Evidently, then, the real move for retail over the next five years is to increase software engagement in physical stores, while boosting engagement online as well.

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    TradeTools positioned for current growth

    Hiring spree during COVID-19 restrictions

    Owner Greg Ford is all about sharing wealth with employees and not interested in selling out

    Founder of Queensland-based retailer TradeTools, Greg Ford is not afraid to share the wealth. He has over 50 shareholders and most of them are his employees.

    Mr Ford started TradeTools in 1987 to create jobs for himself and his father. In 2020, there is a workforce of 240 people across 18 stores located across the state from Tweed Heads to Cairns. There is also an outlet in Vanuatu and another Queensland store in Browns Plains due to open later this year.

    The global pandemic has accelerated growth for the retailer and has employed almost 30 new staff to cater for the unprecedented increase. About 10-12% of sales came from online. Mr Ford told the The Courier Mail:

    We're a little bit reluctant to admit it but we have had a massive increase in turnover ... We had one quiet week when COVID hit and then it went whoosh and it has never stopped. It's nuts.
    Every store has gone up and our figures are currently 60% above what they were this time last year ... I think we just drained all the money out of tourism ... because no one is going anywhere.
    If we manage to average our current turnover through the rest of the year, we are going to be looking at $160 million, $170 million turnover.

    Mr Ford said sales could have been even higher if there was more stock to sell. The company was expecting 76 containers to be delivered at its head office in Stapylton on the Gold Coast in July.

    Profit sharing

    Having enough trained workers and keeping stock on the shelves have been the two biggest challenges the company has faced in recent months.

    It will take a couple of years to fully train new workers but Mr Ford does not anticipate any problem retaining them. TradeTools paid a weekly commission based on turnover and provides the opportunity for staff to become shareholders after 10 years of service.

    Mr Ford credits this profit-sharing initiative with helping the business to thrive before and during the coronavirus crisis. With an average staff retention rate of eight years, TradeTools staff are experts in their craft - a point of difference that he believes any competitor would be hard-pressed to replicate.

    While the remuneration of workers across the country has come under pressure amid the COVID-19 pandemic, many of Mr Ford's staff are benefitting from the surge in demand. He told SmartCompany in a separate interview:

    I don't pay myself a multimillion-dollar salary, I don't need it. The big corporates have never been able to get into the specialised end of the tool industry [due to a] lack of expertise.

    (HNN readers are already aware that Bunnings and Metcash have acquired once-independent brands Adelaide Tools and Total Tools.)

    The business owner said anyone asking to buy his company gets the same answer: "Not on your life."

    Mr Ford is British born, grew up in Europe and has lived in the United States. He has seen what happens when independent companies fold in the face of large businesses en masse and believes it's not pretty. He said:

    I've seen what happens when you basically let corporations run the country. That's what we see in the States and Europe.
    Companies like TradeTools can be privately owned and have a strong, engaged workforce. I want to see that philosophy continue to expand.
    I don't want Bunnings to be the only hardware company in Australia ... it's the whole point of TradeTools.

    But beyond this, Mr Ford wants more independent business owners to adopt profit-sharing initiatives with their workers, saying there is a range of benefits to sharing, whether that's aligning incentives to promote success or just being able to sleep soundly at night. He said:

    We spread the wealth around and everyone benefits. I cannot understand why others, especially in the higher echelons of business in Australia, just can't see that.
    It allows you to sleep at night knowing your employees aren't continually looking for a new job, and it allows you to be more trusting of the people who work for you because they're taking part in the profitability of the business.

    Mr Ford also sees a need to expand local manufacturing. TradeTools stocks its own range of locally made private-label tools called Renegade Industrial. He said:

    I've always thought we should produce more of our own products here. When I came to Australia 47 years ago many things were made in Australia, I've been sorry to see that so many things are now made overseas.
  • Sourced from SmartCompany and The Courier Mail
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    Reece signs up with LatitudePay

    Access to more home improvement customers

    It has recently taken out warehouse space at an industrial park that is part of Melbourne Airport

    Latitude Financial has confirmed it has added ASX-listed plumbing and bathroom supplier Reece to its interest-free "buy now, pay later" (BNPL) platform, LatitudePay, for people who are completing home renovations in a COVID-19 economy.

    Reece has benefited from the increased spending in the home, which is set to be bolstered further as the federal government starts paying its $25,000 homebuilder grants.

    LatitidePay is also used by retailers such as Harvey Norman and Forty Winks as well as tech giants Apple and Samsung. The company said LatitudePay was close to signing up 350,000 customers across Australia and New Zealand since its launch in September 2019.

    Latitude CEO Ahmed Fahour said the company was focusing on the home improvement space to capitalise on people spending more money on their homes during lockdowns as a result of the coronavirus. He told The Australian:

    Reece is an example of a business doing incredibly well with the growth of the home economy. Everything is geared towards the home economy for our business.

    The plumbing and bathroom group recently announced that its net profit increased 13.3% to $229 million The result was driven by a 10% increase in sales to $6 billion during in its 100th year of operations. In Australia and New Zealand, sales revenue grew by 0.8% to $2.88 billion.

    Reece managing director, Peter Wilson said the company's ventures arm, Superseed, has also launched an online job management platform for its customers in Australia and America. He said there were other innovations to come in new fields. He told The Australian:

    Our vision is to be a digital leader for the trades. We know we are a really important part of the way the trades operate. Increasingly as we pivot to a much more digital world, we want to be connected into their digital ecosystems.

    Reece followed its $1.9 billion acquisition of US-based MORSCO in 2018 with a $221 million purchase for Californian plumbing wholesaler Todd Pipe in 2019.

    More recently, the company has taken out a 10-year lease on a new warehouse it will move into next year, located at Melbourne Airport. Reece will consolidate a number of brands in the one site and service suppliers and customers from the purpose-built 11,670sqm facility in August next year. This follows Amazon's commitment to take space in the same industrial business park for its gig-economy Amazon Flex drivers to service its the city's northern and western suburbs. (See "Amazon's first robotic warehouse in Australia" story in this issue.)

    Capital raising

    In April, Reece raised $647 million to boost its balance sheet so it could capitalise on greater investment on plumbing and sanitation by customers arising from the pandemic.

    The company also said the funds would be used to support the business during the period of global economic uncertainty, increase liquidity, reduce net debt and potentially position it for acquisitions.


    Reece sees future beyond ANZ market - HI News, page 31

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    Mitre 10 store planned for Hobart CBD

    Clennett's Mitre 10 has signed a lease agreement

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

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

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

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

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

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

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

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

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

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

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

    Sourced from The Mercury


    Brennan's rebadged as Petries Mitre 10 Dubbo

    Changing of the guard

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    Michael Brennan looks back

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

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

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

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

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

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

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

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

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

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

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

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


    Gunna-Do Hardware on the market

    Business is for sale after 37 years

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

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

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

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

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

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

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

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

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

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

    Sourced from The Morning Bulletin


    IHG sales decline as new CEO takes over

    In midst of decline, Total Tools acquisition bid confirmed

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    Store network

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

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

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

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

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


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

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

    Total Tools acquisition

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

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

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

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

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

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

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

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

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

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


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

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

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

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

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

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

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

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


    Paint store proposal to expand

    Inspirations Paint North Rockhampton

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

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

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

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

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

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

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

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

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

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

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

    Sourced from The Morning Bulletin


    Terang Co-op stores move to Mitre 10

    Signage is being changed

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

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

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

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

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

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

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

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

    Sourced from The Standard


    Local hardware bucks the trend

    Eastern Suburbs Hardware

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

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

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

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

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

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

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

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

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

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

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

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

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

    Sourced from The Queensland Times

    Related: Eastern Suburbs Hardware featured in a previous story.

    Big boxes no problem for HBT store - HNN

    Rural store investment

    Tom Grady Rural Merchandise

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

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

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

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

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

    He said the business had also prioritised safety for customers.

    Sourced from The Gympie Times


    Regional revival

    Mount Alexander H Hardware

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

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

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

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

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

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

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

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

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

    As Lachlan explains the situation:

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

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

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

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

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

    To read the entire story, please download HI News:

    Download hinews-6-02


    COVID-19 retail economy

    What shape will hardware retail assume?

    A V-shaped recovery is unlikely

    How will the novel cornonavirus SARS-CoV2 (which gives rise to the COVID-19 disease) affect hardware retail during 2020/21?

    Underlying every question about Australia's economic future under the pandemic are two related queries: how bad will the initial hit be to the economy, brought about by the urgent need to self-isolate and shut down most business activity? And, secondly, how fast can the economy come back from this self-imposed slowdown?

    In terms of hardware retail, it is important to look across a wide range of areas in order to effectively answer that first question. Those areas would include:

  • the overall economy
  • the housing market
  • the employment market
  • how retail overall is being affected
  • changes to markets
  • In effect, though, at the moment most of what we can say about all of these areas amounts to speculation.

    Most forecasters see Australia's gross domestic product falling by 4% to 6% for 2019/20, with a further, perhaps deeper fall for 2020/21. While there have been some "scare" figures suggesting urban house prices may fall by as much as 30% by 2024, a more reasonable view from the Commonwealth Bank of Australia is that there may be 11% property price falls from March 2020 to March 2023, followed by flat to mild price increases - providing the overall economy returns to growth.

    In the period from mid-April to early May, according to Australia Bureau of Statistics (ABS) figures there has been a massive job loss in areas such as hospitality, with over 240,000 jobs, or 25%, gone, while retail has seen a decline of 2.5%, or 34,000 jobs. Construction saw 63,000 jobs go, a loss of 5.3%. Other hard hit areas include real estate and the professional/scientific/tech sector.

    It is still too soon to really gauge the overall effect on the retail sector. Obviously, a number of categories have been hard hit, such as restaurants, fashion and personal services. At the same time, however, others have seen a considerable boost, including supermarkets, pharmacies, and - for the most part - hardware retail.

    The IHG position

    The Metcash-owned Independent Hardware Group (IHG) did release some information about its prospects in the immediate future, in a presentation it prepared for a round of equity raising, and released on 20 April 2020.

    HNN collated the points it provided about hardware throughout the document:

    Trading update - five months ended March 2020

  • Hardware sales declined 1.3% in the five months ended March 2020, which is an improvement on the decline in 1H20 of 4.2%
  • In March there was an increase in demand across both the Trade and DIY segments. The increase in Trade can be attributed to pre-purchasing based on concerns about COVID-19 restrictions being introduced for Hardware retailers
  • Ongoing

  • Full IHG store network continuing to trade (some restrictions in Tasmania)
  • Growth in DIY categories (paint, accessories and garden)
  • Demand continues to exceed supply in certain categories (personal protection equipment, cleaning products, seeds & seedlings)
  • Significant online sales growth, launched 'Click & Deliver' to DIY customers
  • Outlook

  • The stronger DIY sales in March have continued into early April, particularly in the paint and garden categories
  • There is uncertainty as to how long COVID-19 related buying behaviours will continue to impact demand
  • COVID-19 trading restrictions have, to date, not materially impacted the ability of Hardware stores to trade
  • Trade sales in FY21 are expected to continue to be impacted by a slowdown in construction activity. There is the risk of a further decline in construction activity related to COVID-19, however this is not expected until 2H21
  • The business continues to have a strong focus on costs to help offset the impact of any reduction in sales volumes
  • There seems to be a sharp contrast in these comments to what HNN is hearing from other independent retailers. Certainly, there is not a similar level of pessimism about trading conditions prior to February 2020, and many hardware retailers saw sales in March increase substantially over prior years.

    It is also just a little bit difficult to parse exactly what is meant by the notion that construction activity is set to slow down in 2020, but not due to COVID-19, while a slowdown in construction activity in 2021 will be due to COVID-19. The second point is valid, but it seems likely there will be a slowdown in 2020 that will be directly attributable to COVID-19.


    Most hardware retailers are aware that, while things have so far been OK, and many have enjoyed a boost in sales during a season that is usually a bit quiet, this is unlikely to continue. While much attention is spent on how businesses will open, the larger question that looms in the immediate future is not whether there will be an overall downturn in the economy, but just how deep that downturn is going to be.

    HNN has deliberately not added much comment about the future of the building and construction industry, because we are not convinced that anyone has a clear idea about how that will travel through the rest of 2020. Perhaps the best such analysis available at the moment comes from the RBA minutes from its May meeting. In terms of the housing and construction industries, those minutes note:

    Social distancing restrictions on home inspections and in-person auctions, as well as heightened uncertainty about the future, had significantly reduced turnover in the established housing market. Members noted that some of the concerns that construction activity could be severely affected in the near term by supply chain disruptions and health-related site closures had not been realised. However, contacts in the liaison program had reported that demand for both new and established housing had fallen.
    Lower incomes and confidence, as well as lower expected population growth, were expected to affect demand for new housing for an extended period. Members also discussed the effect of a possible increase in the number of people moving back home or living in larger households for financial reasons. At the same time, the supply of rental housing had been boosted as properties that had previously been offered as short-term accommodation were shifted to the long-term rental market.

    House prices are likely to continue to fall. Accommodation rental prices will also fall, as the Airbnb and other short-term rental markets collapse, along with tourism as an export market. On the other hand, it seems likely there will be substantial state government expenditure in infrastructure.

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    Hardware store sales in self-isolation

    Covid-19 sparks a sales surge for many retailers

    Painting and outdoor landscaping top the list of current home improvements as homeowners use their time in isolation to give their living spaces a makeover

    Across Australia, demand for small jobs and DIY maintenance - such as repairing dodgy door hinges - from homeowners in isolation has gone through the roof. As a result, hardware and home improvement stores have benefited from a boost in sales.


    Clennett's Mitre 10 managing director William Clennett told the Sunday Tasmanian that this past Easter had been busier than usual, during what is traditionally one of the busiest times for hardware stores.

    Following an initial few weeks when the store experienced an intense period for people buying products like seedlings and methylated spirits and greenhouses, the store remains busy and more orderly with people buying more traditional DIY products.

    Mr Clennett said painting appeared to be the number one job on people's lists, with interior paint being snapped up in huge quantities.

    Bathroom products - including tiles, toilets and vanities - were also among the top sellers across his four stores in Kingston, Huonville, Glenorchy and Mornington in Tasmania. And outdoor makeovers are also in high demand, with paving, fencing, cubby houses and gardening projects all popular.

    Power tools, chicken wire, pots, seedlings and timber for building backyard vegie gardens have all been strong sellers, as people look for easy and relatively cheap projects that kids can help with.

    Clennett's Mitre 10 also launched a free "dial and deliver" service, to ensure Tasmanians who don't feel comfortable going to a hardware store can still access supplies, with 20-30 deliveries made each day.

    Like many other retailers, Mr Clennett's stores have implemented social distancing strategies and are encouraging cashless payment.


    In regional Victoria, WB Hunter Home Timber & Hardware general manager Paul Serra said a range of measures had been introduced, including home delivery options, cancelling outside visitations, social distancing and staff disinfecting surfaces. Prior to the Easter break, he told Shepparton News:

    We also have good drive-through facilities.

    Mr Serra said the company's sole focus was to ensure the local rural industry and food producers had access to their products. He said:

    Our stores are very safe, they're very big, and if people aren't sure we can do deliveries.

    Mooroopna Hardware store manager Joey Campanelli said in a bid to encourage people to use their home delivery services, delivery fees had been reduced. He said:

    We're applying the 1.5-metre rule as much as possible, we have hand sanitiser and wipes at each counter, and encourage people to use them after each transaction.
    We're still open for trade and, in the event of a shutdown, we're still happy to do home delivery service.

    Seymour Timber and Hardware store manager Richard Morris said there was huge demand for garden equipment, plants and paint as people made the most of isolation. He told the Seymour Telegraph:

    We will keep operating as long as the government let us ... The team are still offering deliveries, but we are taking all the necessary social distancing precautions.


    Taylor's Hardware has been operating in Bundaberg for the past six decades and with two generations working within the business. It offered free timber offcuts for kids to keep their minds occupied during isolation and school holidays. Store manager Adam Taylor explained to NewsMail:

    We started giving timber offcuts to customers with young kids when they came in to the store to pick up some hardware supplies. Eventually it turned into a really fun activity for the school holidays, where the kids can get creative and they send photos into us of what they've made.

    Store managers at Home Timber and Hardware Biloela and Mitre 10 Biloela said staff had been "flat out" and were struggling to stock some products. HTH store manager Tim Kessler told the Central Telegraph that his store had had 33% customers in the month of April.

    People aren't allowed to travel so they are being forced to shop in town which has been a benefit for us and other businesses. People are taking the chance to do home renovations. Painting and gardening seem to be the two biggest ones as well as other little home renovations.
    Some customers have already said that the money they put aside to go on holidays they can't use, so they are using the money for renovations.

    Mr Kessler said paint supply companies had been working around the clock and his supply warehouse in Brisbane was up 40% in output. He said:

    If we'd known six weeks ago we'd be this busy we'd have put on extra casuals. When our stock comes in, getting it on the shelves has been hard because we're constantly serving customers.

    Mitre 10 Biloela store manager Warren Cullen said the industry as a whole were seeing a busy period nationally as residents stuck at home were spending money on their homes to stay productive. He told the Central Telegraph:

    We get one main delivery a week from our biggest supplier (and) we have had to increase volume on that. We have also had to do more orders with individual companies, the frequency of ordering has been higher than normal.

    Mr Cullen said that with Chinese exports closed from January to March, there had been a shortage of stock Australia wide and in his store on some products. He said:

    One of the areas that's been heavily affected is gardening, it has been heavily affected by the shortage of seeds nationally ... There's a number of products that are out of stock until June and July.

    Dalby's Sunshine Mitre 10 retail manager Lena Taylor said despite initially fearing the coronavirus restrictions would cause a downturn, the shop had been extremely busy (from early April to mid-May). She told the Dalby Herald:

    It's like everyone thinks doomsday is coming. People are buying gardening products, timber, paint. Paint is the big one...We have been having trouble keeping up stock because everybody has been hit and we're just starting to get more supplies in.

    Roma Home Improvement Centre owner Tony Lambert said it was an unusually busy time which had taken him by surprise. He also told the Dalby Herald:

    Store traffic is certainly up and sales are up because people can't go anywhere on holidays, there's no junior sport and people can't do the stuff they normally do. So they are just doing stuff around the house. Gardening is an area that has had a vast increase.

    Mr Lambert said he was fortunate to be maintaining his business at a time when many retailers were hurting. But he said it was inevitable that the demand for DIY materials would drop back to normal when restrictions are lifted.

    When we go back to normal life people will get back to their usual activities in due course.

    New South Wales

    Sydney residents have also been using the extra time spent at home to spruce up the garden, fix a crooked door or paint the walls. Sammy Sciglitano from Booth and Taylor Hardware in Annandale (NSW) told the Sydney Morning Herald:

    We've never seen business like this in our lives.

    Mr Sciglitano, who has worked at the store for 13 years, said customers first started stocking up on potting mix, fertiliser and fruit or vegetable seeds before turning to paints and outdoor decks. Sales were surging "at least 50%" on weekends as homeowners turned into DIY tradespeople, he said.

    Deniliquin Mitre 10 has seen an influx of customers since restrictions came into effect. Business co-owner Katrina Knuckey told the Deniliquin Pastoral Times that plants and paint have been the most popular items purchased since lockdown.

    People have been coming into the store all the time getting what they need to start or finish their renovations and DIY projects. A lot of people are painting indoors and outdoors, as well as perfecting their gardens and building new things with the kids which is great to see.

    But the pandemic has also brought on supply issues. Ms Knuckey explains:

    Supply is now returning to normal with most of the items in demand back on our shelves.

    While the lockdown has placed significant pressure on the economy, Mrs Knuckey said she has been pleasantly surprised that the store could continue operating through such a difficult time for all business.

    We thought we would need to close our doors and do what we could to keep our employees in a job. However we have been lucky in that coronavirus has had a positive impact, not just a negative one...

    Mawhood's Mitre 10 has been busy delivering gas bottles, gardening products and timber products, and has seen a "huge increase" in home deliveries, according to the Oberon Review.

    Ynez Campos, a staff member at Inspirations Paint, said interior and exterior paint had been flying off the shelves at the Haberfield-based store. She said:

    A lot of people are redoing their [house] exteriors and there's a lot of DIY. And people have kids at home so they're getting the kids to help.

    She said fewer time pressures meant customers had "a bit more time to fuss over the different tonnes of white".

    Western Australia

    Peel Paint Place owner Allan Elliott has had more people through the doors since social distancing restrictions began. He told the Mandurah Mail:

    [In April] our Mandurah and Rockingham stores both had a 30 per cent increase in foot traffic ... Covid-19 has definitely impacted our business positively...
    We offered deliveries or drive-thru services as we have an eftpos machine we can just take out to their cars.
    People appreciated the extra service in the first two weeks of social distancing but now more customers are coming into the store as the fear factor surrounding Covid-19 has dissipated.

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    Ikea Australia to sell solar panels

    The range was initially introduced to international markets seven years ago

    The payback time in Australia when investing in a full solar system is the fastest payback time of any other Ikea country, according to Ikea Australia chief executive Jan Gardberg

    Home improvement and furniture retailer, Ikea has begun a trial to sell solar panels. The idea is for Ikea staff to test out the offering, provide feedback, and ensure any bugs are ironed out by the time the product is launched to consumers.

    Ikea's business leader for Home Solar, Petra Toth said Australia is the first country outside Europe to be offered panels. She said:

    Our strategy globally is to make solar more accessible for people to live a sustainable life every day. It has been going really well in Europe.

    Ikea has partnered with local solar panel supplier, Solargain, that has more than 20 years' experience in the market. The solar panels will not be offered as a DIY product but are designed to take the complexity out of installing home solar systems by establishing a one-stop shop model. They are expected to be available in all states by June or July. Ms Toth said:

    This product is not about picking up flatpacks. We will be focusing on quality and we have a range of warranties to back that up.

    Ikea will be the first point of contact, with trained staff collecting data such as the number of people in the household and booking quotes, while Solargain installs the solar panels, inverters and mounting systems backed by Ikea warranties.

    The Solstrale package includes a custom rooftop solar design, full installation (by Ikea's partners, not the homeowner), PV panels, inverters and mounting systems - with an option to add battery storage if so desired.

    Ikea said pricing in Australia would vary from region to region - depending on any local and state government incentives and rebates - and depend on the size of system purchased. Ultimately, the company hopes to expand Solstrale sales to all of its markets by 2025.

    According to Ikea Australia retail manager and chief sustainability officer, Jan Gardberg, the move to solar is ideally timed for the current conditions in Australia. He said:

    We know the unlocked potential that awaits with democratising sustainable solutions through renewable energy. Our climate is perfectly suited for Australia to be a leading market for the Ikea home solar offering.

    Ikea has already spent more than $4 billion on making its stores focused on cleaner energy, powering its buildings across the globe. In Australia alone, 20,000 solar panels have been installed across its sites, contributing to a total of 900,000 worldwide.

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    For Ace Hardware, mobile means loyalty

    Engaging customers in the channels they prefer

    The hardware retailer has discovered that customers want in-store, mobile and online shopping experiences to be individualised

    Data from B2B platform, Payments News & Mobile Payments Trends ( suggests retailers that focus on innovating only one sales channel will likely squander opportunities and have difficulties generating consumer loyalty.

    Retailers should instead take hybrid approaches to customer relationships, maintaining both the speed expected from online and mobile platforms as well as in-store shopping's convenience and tactile advantages, according to Deanna Moreno Hernandez, mobile marketing senior manager at hardware retailer Ace Hardware. She said:

    We are in the process of enhancing our data capabilities to see a more holistic view of our consumers and their shopping journeys to better serve their needs [on] whichever channels they prefer to [use].
    We lean on our IT team to help develop in-house technologies to serve our retailers so they can provide memorable experiences in-store.

    Ace Hardware is revamping its rewards system and mobile channel but the company is also making sure its new experiences work with its existing physical locations and consumer shopping patterns. It believes consistently seamless experiences are key to retaining customers regardless of where they shop.

    Omnichannel ease of use

    Retailers that want smooth omnichannel experiences must harmoniously maintain three distinct shopping channels that serve shifting payment and customer needs, all without distracting consumers. Shoppers are expecting increased personalisation as well, so retailers must carefully consider how to foster customer trust and satisfaction.

    Mobile is thus emerging as a top channel for today's retailers - and not just because of its ease of use and popularity among younger consumers. This channel can also bridge in-store and online experiences, improving personalisation at brick-and-mortar stores and allowing shoppers to track purchases and loyalty points on the go. Ms Hernandez said:

    The [new Ace] mobile app is enabling this [convenience] by offering personalised experiences. The questions that a store owner would ask to get to know customers better are replicated in the mobile app.

    Ace has also grafted this mobile experience into its delivery options, allowing customers to mix and match where they make purchases, she added. App users can shop products and schedule pickups at particular locations or search for the nearest stores, and all can offer promotions directly within the app. Ms Hernandez said:

    Your purchases, whether in-store or online, are reflected on and in the app and can easily be repurchased.
    The fulfillment options of buying online and picking up in-store, assembly and delivery from your local store leverages our retail footprint of more than 4,500 stores to ensure the customer has a positive experience shopping in-store or digitally, in our new app or [on]

    Using mobile to connect online and brick-and-mortar sales can also help retailers maintain consumers' trust. All purchases are categorised and maintained on devices that typically never leave shoppers' hands, encouraging them to head back to familiar brands.

    Loyalty in new retail age

    Ace Hardware is relying more on mobile as an integral part of its loyalty strategy. Ms Hernandez added that the retailer is implementing app features to simplify the purchasing process. She said:

    The integration of our loyalty program, Ace Rewards, will allow members to easily access their membership cards, coupons, rewards and birthday offers all in one place.
    Long gone are the days where customers will need to carry the coupon around to ensure they use it.

    Developing this mobile loyalty has its own obstacles, though. Smartphone real estate is finite, and brands stake their claim by creating easily navigable and convenient mobile apps. Ace Hardware is hoping its offerings will entice consumers and boost customer conversion, as such offerings - especially those tailored to mobile - may enable retailers to build trust with brand-agnostic consumers.

    Merchants will have to continually update their strategies, however, if they want to maintain customer relationships and satisfy new generations. Brick-and-mortar, mobile and online channels will likely experience major shifts in consumer behaviours over the next few years, and successful retailers will be the ones that engage consumers and anticipate what they want.

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    Kingfisher negotiates rent as B&Q stores reopen

    The home improvement group drops out of FTSE 100

    It has also donated personal protective equipment (PPE) critical for frontline healthcare workers fighting Covid-19

    B&Q's network of 288 stores in the UK are now open to the public, albeit with strict new safety measures in place. The DIY chain is classed as an essential retailer under the British government's lockdown rules, but it shut up shop in March before making a staged return with an initial 155 stores opening first.

    It has limited the number of customers in stores, switching to card-only payments and installing perspex screens at checkouts. Owing to the bulky nature of some DIY materials, the retailer is allowing two people to shop together so that they can "self-serve" larger items.

    Parent company, Kingfisher has been negotiating its rent payment terms as it tries to save cash amid the coronavirus crisis. It has asked to pay rents across its 950 UK stores on a monthly basis, rather than each quarter, according to Sky News.

    If the home improvement retailer is given the go-ahead to pay monthly - rather than three months upfront each quarter - it will be able to keep the extra cash on its balance sheet during the coronavirus epidemic.

    Kingfisher is not seeking rent cuts and has no plans to suspend payments. A spokesman told CityAM:

    We are looking to work constructively with our landlords to successfully navigate our way through these extraordinary times.

    In early March, the company said supply chains in China and the Far East, which make up 25% of total goods sold, had started to reopen. Products from Italy were also still flowing, with factories remaining open.

    Prior to negotiating its retail rents, the home improvement retail group was relegated from the FTSE 100 following a quarterly reshuffle of the sought-after stock market ranking.

    The Financial Times Stock Exchange 100 Index, informally called the "Footsie", is a share index of the 100 companies listed on the London Stock Exchange with the highest market capitalisation.

    The news comes after a tough trading period for the group, which has so far seen new chief executive Thierry Garnier attempting to revitalise the company. However, it saw demand for DIY and garden equipment surge – up 38% in March – in the weeks before the coronavirus lockdown.

    Over the group's fiscal first quarter to April 30 total sales fell 24% to GBP2.16 billion pounds, with like-for-like sales down 24.8%, reflecting COVID-19 related disruption. It did not issue profit guidance for the 2020-21 year.

    Kingfisher also announced a donation of protective medical equipment to health services across Europe worth GBP1 million when demand for the items soared in the wake of the coronavirus pandemic.

    Since the COVID-19 crisis hit Europe, Kingfisher and its businesses have ringfenced all their remaining stock of personal protective equipment (PPE) so it can be donated to frontline healthcare workers.

    Kingfisher confirmed it ordered a further three million face masks from suppliers in China and Israel. These will be for donation to the health authorities in the UK, France, Poland and Romania, or to equip staff who are facilitating its online and click & collect orders in stores.

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    Mining boosts Thrifty-Link store

    Kapunda mine site depends on local businesses

    Store manager Peter Duregon has been instrumental in acquiring materials for the Kapunda Mine project

    The ongoing copper recovery project at Kapunda Mine in South Australia has delivered economic benefits valued at around $25,000 to regional businesses including the Kapunda Hardware & Garden Centre, a Thrifty-Link store.

    Works at the historic mine site, headed by Environmental Copper Recovery (ECR) Pty Ltd, were done to validate research performed by CSIRO and Adelaide University.

    Kapunda Thrifty-Link Hardware was able to order in materials crucial to the work carried out by ECR. Store manager Peter Duregon said there was "no doubt" money was spent in the region. He told The Barossa Herald:

    They've (ECR) certainly been supportive as just one transaction alone for a bore casing was about $1000. Mining is not a cheap game, so it was nice to know they called on us when they could have gone elsewhere.

    Peter's knowledge and resourcefulness to quickly access the necessary hardware was referred to ECR by Drillsmith which is also involved in the project. DrillSmith is another Kapunda-based company that specialises in geotechnical investigation, drilling of earth stakes, environmental drilling and project management.

    ECR managing director Leon Faulkner said it was always the company's intention to rely on regional businesses. The financial benefits were further spread to Kapunda's hotels, accommodation and food outlets.

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    Nowra loses local hardware store

    Taffa's Hardware site being sold

    James Stewart is moving on after the closure of his store and Taffa's Hardware is expected to sell for about $4.5 million, according to its real estate agent

    Stewart's Hardware in Nowra (NSW) will close at the end of February 2020. Owner James Stewart has spent 25 years in the local hardware industry, starting with North Nowra Hardware as a teenager. He worked for Walsh's Mitre 10 prior to taking over the business and re-launching it as Stewart's Hardware in March 2016.

    Mr Stewart cited online spending and high rental rates in Nowra's CBD as the main reasons for the store's closure, as well as the South Nowra Bunnings store doubling its size. He told the South Coast Register:

    Many of these factors are forcing a variety of different types of stores to close, or many are moving out of the area, largely to South Nowra.
    I felt obligated to take on and take over this business to continue the Walsh's family hardware business with good old-fashioned hardware knowledge and service that has been provided to this area since 1877. I couldn't just let it close. I wanted to take it on to continue to provide service to the community, conveniently located in town as an alternative to Bunnings.
    A lot of our customers are elderly and rely on public transport. I feel for them. We survived as long as we did, due to their support.

    After a short break following the store's closure, Mr Stewat plans to start Stewart's Handyman Business.

    West Ryde store for sale

    Taffa's Hardware, considered an iconic store after 64 years in the Sydney suburb of West Ryde, closed at the end of last year. Its 403sqm site, located in the heart of the suburb's CBD, is set to be auctioned in March 2020 through Ray White Commercial.

    Anthony Taffa worked alongside his dad and founder of the store, Ron, and has been managing the store that became Taffa's Mitre 10 with his sister Julianne. He told the District Northern Times:

    It was very difficult for us and took us a long time to come to that decision - it is in the long term the right one.

    Taffa's Hardware first opened its doors back in 1955. In the mid-1970s the store's floorspace was expanded and a second level was added.

    The business, which had operated independently, became part of Hardex Hardware, a co-operative of similar businesses created by Ron Taffa. In 1980, he left the group and joined the Mitre 10 group and remained part of it for the next 40 years. Anthony Taffa said:

    It was important to keep evolving and refreshing the business - we have four different logo sets for Mitre 10.

    Changes within the local area, increasing costs and decreasing margins led to the decision to stop trading. Ron Taffa passed away aged 90 in December 2018. In Commercial Real Estate, Anthony said:

    It was amazing when we closed down. We had so many people come through and say their grandparents used to do their shopping there, and then their parents after them, and now they did. It was incredible. They were thanking us for being such a great community service, and for everything we had done, and a couple of customers were in tears.

    The Taffa family have always been community-minded, and sponsored local football and cricket teams, and donated merchandise to local schools and groups to help them raise money for various charities and organisations. Anthony said:

    It's been a wonderful 64 years, but times have now changed and local community desires have changed too.
    It's very much part of our family history so closing the business and selling it are difficult things, but we have to move with the times. It's amazing how many people built their homes with what my father sold them, and their response when they heard we were going was very touching.

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    Bunnings gets go-ahead for Rozelle store

    Heavy concessions

    While Bunnings has won its application, will the store actually work?

    The long-running saga of efforts by Bunnings to open a kind of mini-warehouse store in the inner-Sydney suburb of Rozelle has finally concluded its first phase. After several years, a refusal to grant a building application, and a successful appeal to the New South Wales Land Court, Bunnings now has a go-ahead to build the store.

    The judgement in the case Artazan Property Group Pty Ltd v Inner West Council [2019] NSWLEC 1555 is available online at: . Artazan pushed forward the case for the Wesfarmers-owned Bunnings. The development company has honed its skills at helping some less popular projects past council objections, most notably with the expansion of the Stiletto brothel in Camperdown, which one Sydney councillor dubbed "the Westfield of brothels".

    There are a number of features that make this case compelling. On the town planning, and local independent store versus corporate giant angle, the town council has had its hand forced to permit the construction of a large retail premise is an area that is basically industrial in nature. One question that gets raised by this is exactly how fair other planning decisions will now look in retrospect. Will the council need to slacken some restrictions, so that smaller retailers can compete at the same level as Bunnings?

    From the perspective of Bunnings, this kind of development has the potential to serve as a model store for a new strand of development, as it seeks to reach deeper into highly active areas of inner-cities with smaller format stores that are almost tailor-made of click-and-collect/home delivery operations.


    In the end, the objections came down mainly to issues related to traffic and congestion. Additional matters considered included trading hours, secondary effects of traffic congestion, issues related to flooding and to pollution.

    The traffic issue was examined from a number of perspectives. According to Section 20 of the ruling:

    Council's traffic-related concerns can be summarised as follows: (1) negative impacts on local traffic system (here I also consider traffic-related amenity concerns), (2) inadequate parking and (3) inadequate loading and unloading arrangements.

    The first point came down to these three concerns:

    (1) expected traffic generation of the development, (2) capacities of existing network to accommodate expected new traffic; with the ultimate point of attention the capacity of the Parsons/Mullins Street intersection to accommodate the additional traffic, and (3) residential amenity implications of additional traffic.

    Expected traffic generation

    This portion of the discussion was further divided into three parts:

    (1) supply side predictors of traffic (in particular considering gross floor area (GFA) of the outlet, and product/service offerings (in particular the attraction to professional tradespersons), (2) demand side predictors (eg considering geographic sales catchments and relevant competition), and (3) proposed or induced constraints (eg specific conditions imposed by regulators or adopted by proponents).

    In terms of supply side, this largely came down to trying to find comparable Bunnings stores which could be used to infer the traffic load the store would attract, which was expressed as the "peak traffic generation rate", given in vehicle trips per hour, per 100 square metres of floor space. Four locations were used: Fairfield, Victoria; Lilydale, Victoria; Artarmon, New South Wales; and Kent Town, South Australia.

    Artarmon had a higher level of traffic generation than the other sites, but the Bunnings side countered this by suggesting this was because it had a larger catchment area.

    The point was also made by the Bunnings side that the store did not feature a tradie loading area for utes, which would reduce vehicular traffic.

    In terms of the demand side, Bunnings represented that the measure it used to determine catchment was the number of households within a 10 minute drive from the store, and suggested that stores such as Kent Town actually had a higher number of households than the store at Rozelle would have.

    In terms of constraints, the Bunnings side agreed to a number of constraints in terms of its delivery vehicles. These would be limited to 15 vehicles per weekday, except in the month of December, when this would be increased to 20 per day.

    The size of these vehicles was also restricted. There would be limited to medium rigid vehicles, up to 8.8 metres in length, excluding the 12.5 metre trucks previously proposed.

    The representatives for the Inner West Council did suggest that, while there were restrictions on the use of the loading dock for tradies, continued market demand might see this change. However, this concern was not agreed to.

    Capacities of existing network to accommodate expected new traffic

    This discussion largely devolved to the matter of whether the Mullins/Parsons Street intersection immediately in front of the proposed store location would be adversely affected to a critical extent. Expert opinion, modelling and video-based evidence was submitted by both sides.

    The critical factor considered was whether traffic at the intersection would back up so far as to block the actual exit and entrance to the proposed store. That entrance is set back just 30 metres from the intersection.

    It was found that in the end, the added traffic level would be acceptable.

    Local traffic impacts

    Here the Court chose to rely heavily on evidence tendered by the Bunnings side using traffic modelling through SIDRA (Signalized Intersection Design and Research Aid). This is a software package developed by the Australian Road Research Board as an aid for capacity planning.

    Modelling through SIDRA showed that the effect on local traffic of building the Bunnings store would be minimal. As a secondary point, the Court also noted that as the area was zoned light industrial, it did not have the same expectations and restrictions as a pure residential area might have had.


    As regards parking, the decision followed the same pattern as that for traffic generation. The Council suggested a higher rate of parking per 100 square metres, the Bunnings side suggested a lower one, and the Court agreed more with the Bunnings modelling than the Council's. This was largely because the Council modelling was derived from parking at larger Bunnings warehouse store, and the Court accepted Bunnings' argument that customers parked for shorter periods at smaller stores.


    One way of looking at the case for the Bunnings store in Rozelle is that it is a unique store being built in a somewhat unique location. While many locals do not think that the modelling presented by the Bunnings side will reflect the real traffic situations in the long term, the Court really had no choice but to accept the data tendered and regard it as reasonable.

    This does mean, however, that this development will be closely monitored into the future. If the Bunnings modelling proves correct, then the Rozelle Bunnings could serve as the basis for the construction of similar projects in other inner-urban areas. If it instead turns out that the modelling is quite wrong, Rozelle will form a strong basis for Councils elsewhere in Australia to reject similar planning permissions.

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    Metcash no longer into Total Tools: report

    A deal could be confirmed soon

    Its focus on tradies - rather than mum-and-dad shoppers - was pitched as a selling point to prospective buyers

    The Street Talk column in the Australian Financial Review (AFR) has reported that Metcash, owner of the Independent Hardware Group (IHG), is no longer in the running to acquire the Total Tools business.

    Sources told the AFR that Metcash had decided the tool retail group was not for them - or perhaps did not meet the price expectations of the group's owner.

    According to the AFR, Total Tools is said to be more focused on holding discussions with private equity companies in the hope of having a deal confirmed by February 2020. Sources speculate it could be Quadrant Private Equity which was involved in the sale of Burson Auto Parts (now Bapcor) and taps and water systems company Zip Industries.

    The tradie-focused tools retailer said its stores have 7,000 products on hand with access to over 60,000 SKUs on its online store.


    With IHG recording negative sales growth for its most recent half, and Annette Welsh set to take over from Mark Laidlaw in May 2020, it's likely the Total Tools acquisition proved to be too uncertain a risk. Ms Welsh will be only the third CEO for Metcash's hardware business, and she will inherit a retailer highly attuned to Mr Laidlaw's aggressive style of doing business in what is largely a cooperative enterprise.

    Mr Laidlaw had personal ties with the leadership team at Total Tools, but Ms Welsh likely would prefer not to add a tricky acquisition to the set of tasks she faces moving into 2021.


    Metcash 2019-20 H1 results: Hardware sales (including charge-throughs) fell by 4.2% over the pcp to $1040 million - HNN

    Sourced from Australian Financial Review

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    Amazon Australia lockers through Stockland

    Located at malls across NSW and Victoria

    It has also partnered with Commonwealth Bank and the Victorian Association of Newsagents to host locker banks

    Stockland has brought the world of online shopping into the heart of its bricks-and-mortar retail centres by installing Amazon delivery lockers at malls in NSW and Victoria.

    The self-service kiosks for parcel pick-ups are located at Stockland's Piccadilly Centre in Sydney's CBD, Green Hills in the Hunter Valley's Maitland and The Pines in Melbourne's Doncaster East. Stockland chief executive of commercial property Louise Mason said:

    Offering Amazon Locker in Stockland retail town centres provides greater convenience for our customers who are not home for the delivery of their purchase and ensures they can pick up.

    It provides another option for those living in high-rise apartment blocks where packages can't be easily left at the door, or for those who don't want expensive items left on their doorstep during the day, tempting so-called parcel pirates. It's all about providing consumers with "more flexibility and control over their deliveries," Patrick Supanc, director of delivery technology at Amazon told Yahoo News Australia.

    When choosing a locker at the Amazon checkout, users will get a code used to open the locker. When it arrives, they will be notified in an e-mail and will have three days to collect their item.

    If shoppers decide to pick up from a staffed storefront which has partnered with Amazon, they will have 14 days to collect it. These stores will have signage denoting them as part of Amazon Hub.

    As well as providing another option for customers, it should help boost overall delivery times. Mr Supanc said:

    We also think about how can we make the experience easy for drivers who are delivering items.

    There are two options, a locker system as well as storefronts such as newsagents where customers can choose to pick up their items. Amazon has also partnered with Commonwealth Bank and Victorian Authorised Newsagents Associations for its automated locker rollout.

    Sourced from Urban Developer and Yahoo News Australia.

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    Screwfix store rollout in Ireland

    The Irish network could grow to 40 stores

    With over 40 years of experience, Screwfix expanded its portfolio with bricks and mortar stores to complement its online business

    After launching three new stores in Ireland, trade specialist Screwfix wants to maximise the opportunities in the building and renovation boom with a plan to expand to 40 branches.

    The brand is already familiar to tradespeople and home renovators through its online operation,

    Each of the new stores will stock about 10,000 products including power tools, workwear and heating and electrical parts. Customers can also place orders online or through phone for items from a catalogue of 24,000 products. Screwfix CEO John Mewett said in a statement:

    We're extremely excited to be launching Screwfix stores in Ireland to help tradespeople get their jobs done quickly, affordably and on time.
    The creation of bricks and mortar stores in Ireland is a major milestone for us and a direct result of the increasing demand from Irish tradespeople ... Our Irish customers are already committed to our website, but we know the convenience a Screwfix store provides their local town.

    The three new stores are located in Sandyford and Swords in Dublin and Waterford. Another store will open in Ennis, Co Clare.

    Screwfix is part of home improvement group Kingfisher which also owns B&Q and Castorama and Brico Depot.

    Sourced from Irish Times and Retail Insight Network.

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    Store openings with stars of The Block

    Maclean Mitre 10 in New South Wales

    A Home Timber and Hardware store, part of Hastings Co-op, celebrated the first day of trade at Sovereign Place Town Centre in Port Macquarie (NSW)

    The Block contestants Andy and Deb Saunders were special guests at the Maclean Mitre 10 store opening recently. The Daily Examiner reports that families lined up to meet the TV celebrities. A stand-up comedian, Andy easily broke the ice with the store's customers. He told the newspaper:

    We just love things like this because we love to connect to people. Their barriers come down when you're relaxed and having fun with them. The alternative is not having fun with people...
    I love watching smiles on people's faces. Some people don't have as many teeth as others, but it's still a smile nonetheless.

    The couple share a lot in common with many people in the region. Their home at Wallabi Point on the Mid-North Coast was recently saved by the NSW Rural Fire Service.

    Maclean Mitre 10 co-owner Shaun Johnson said Andy and Deb were the latest in a string of The Block contestants to visit the store. He told the Daily Examiner:

    The Block is just such a fantastic show and Andy and Deb would probably be the

    fourth or fifth couple of contestants we've hosted over the years.

    It's great for the local community to come out and engage with celebrities and appreciate how down to earth and normal they are.

    The opening also acknowledged the hardware store's branding switch from Home Timber and Hardware. Mr Johnson and Jason Southwell have co-owned the store since September 2018 and have been in the process of transitioning the business to Mitre 10 since July 1. Mr Johnson said:

    In a town like Maclean, we understand the community needs to have responsive, knowledgeable staff in the hardware store so we can give them the right product for their jobs, at the right price.

    Sovereign Place Town Centre

    As one of the contestants of the latest series of The Block, Deb was also special guest at the opening of the Home Timber and Hardware (HTH) store in Thrumster (NSW).

    The store is just one of the Hasting Co-op's rural and hardware offerings that also includes a Mitre 10 and CRT, and is located in the newly opened Sovereign Place Town Centre in Port Macquarie. Hastings Co-operative CEO Allan Gordon said the opening was the beginning of a different era for retail in the Hastings.

    The IGA supermarket is a concept store which has been designed as a one-stop destination for shoppers with an in-house butcher, bakery, a significant range of locally-made products and produce as well as partnership hubs with HTH and Harvey Norman.

    Mr Gordon said the new IGA outlet, which has a creche, has set a new benchmark. He told Port Macquarie News:

    This project is at another level and captures the latest trends. Having a creche in a supermarket is a real winner for us too. We have set the new benchmark for future development in this area.

    The centre is home to Port Macquarie's first NRMA electric vehicle charging station. NRMA executive general manager motoring Neil Payne said this charger would help drive the next generation of motoring tourists to the region, improving mobility and contributing to the local tourism economy.

    Sourced from The Daily Examiner, Wauchope Gazette and Port Macquarie News


    Sunshine Mitre 10

    The innovators

    Sunshine Mitre 10 has developed a network of stores in Queensland, which has provided a testbed for new innovations

    How will Australia's home improvement industry develop into the future? After spending several days with the managers of Sunshine Mitre 10, Travis Cunnane (general manager), Darren Fanshaw (group retail manager), Deen Saint (group trade manager) and Jason Monahan (trade operations manager), HNN thinks we might have had a glimpse of one possible future.

    It's a future that could enable more independent retailers to take a greater share of the ongoing growth in the home improvement category. It also might help some hardware retail entrepreneurs to escape the defensive, low-capital rut in which they have been trapped since the early 2000s.

    Sunshine Mitre 10 has 20 business units at 18 different locations, based in Queensland's Sunshine Coast, about 100km north of Brisbane. While the Sunshine Coast is central to Sunshine Mitre 10, its locations range from Ipswich, to the immediate west and south of Brisbane, up into northern Queensland, at Weipa. That is a span of some 2500km - roughly the same distance you would have to travel to reach Moscow from Zurich.

    It's a thriving, well-run business, with turnover of around $100 million a year. But what makes it really interesting is that Sunshine represents one of the best examples of a new kind of retail structure in the independent hardware and home improvement retail sector (iHHIR). It's a pointer towards the real potential that exists in this sector of the market, even as competitive pressures continue to grow.

    The Sunshine solution

    The big question is: what does that response need to be? Looking at the example of Bunnings itself, it's not difficult to give an answer. What is clearly needed is more market innovation, particularly when it comes to developing better path-to-customer offerings. However, innovation was a major problem for the iHHIR sector even before the global financial crisis (GFC) and reduction in mining activity that followed. With the Australian economy in a period of sustained slow growth, an increasing number of retailers now find innovation too risky a strategy to chance.

    These survival factors are compounded by structural difficulties in the small to medium business (SMB) sector. A major difficulty is that the sector does not have readily available sources of capital (as we'll discuss in more detail later), especially for innovation investments. Much of retail, and especially iHHIR, is dominated by small retailers, which struggle with innovation, because any change will affect their entire revenue stream, which means the risks are consistently high.

    What this points to is that if the iHHIR sector is to survive and thrive in the future, it needs to change more than just its processes. It needs to shift structure, to develop an overall business model which makes innovation more possible and less risky.

    It's important to note that this doesn't mean every retailer has to engage in risky innovation. It does mean, however, that the industry needs to develop significant centres of innovation, which can help to generate needed change for the overall industry.

    After spending several days on Queensland's Sunshine Coast being given a tour of, and insight into, IHG's Sunshine Mitre 10, it is fairly clear to HNN where the industry can find at least one starting point for building this kind of innovation engine.

    What Sunshine has done, over the past decade, is to mould its business into a kind of regional hub, a store network that not only can act as a growing profit centre, but which also - almost paradoxically - strengthens rather than diminishes the independent stores adjacent to - but outside of - its own network.

    It's not the case that most retailers in the iHHIR should consider becoming part of such a network - a type of network HNN is calling a "hub network". But most retailers would benefit from there being more regional hub networks in the Australian market.

    Sunshine history

    Sunshine Mitre 10 today is a network of stores, along with a small warehouse facility in Brisbane, and a truss plant. The company also participates directly in the business areas of locks, appliance sales, and steel products.

    Its formation dates back to 2008, before Metcash acquired the Mitre 10 group. It was built on the merger of two established Queensland retailers, Lanham's and the Melville family business, Melco.

    Lanham's began as W. Lanham & Sons Timber Mill in 1910, based in Nambour. The steam-powered sawmill provided timber for construction as the town prospered in the shadow of its sugar mill. By the 1970s, Lanham's had moved beyond timber to hardware supplies, and opened an additional store in Cooroy.

    John and Mark Melville opened their Noosaville Melco store in 1988, selling timber and building supplies. Subsequent stores were opened in Gympie, Maroochydore and Caloundra.

    When the two companies got together in 2008, the combined business was initially known as MelcoLanhams Mitre 10. The business also held the registered name of Sunshine Hardware Pty Ltd, and some years after the merger changed its operating name to Sunshine Mitre 10.

    Such amalgamations are not uncommon in hardware retail, but what followed was uncommon, as the Mitre 10 organisation (prior to its acquisition by Metcash) entered into a 49% ownership joint venture (JV) with Sunshine. According to Travis:

    John Melville wanted to get out, the Lanhams wanted to stay in. There were a few brothers on the Lanhams side, and two of them stayed. Dave Lanham is the chairman of Sunshine, and Tim is a shareholder who also works in the business. He's part of the management team.
    They own the freeholding in Nambour and Kingaroy. So that's how the joint venture came about, and they renamed it "Sunshine". And from there, opportunities [for expansion] came about, like [the stores at] Roma and Kingaroy.

    This investment ended up as a significant feature of Metcash's eventual acquisition of Mitre 10. The proffer documents from Metcash indicate that Sunshine produced earnings before interest, taxation, depreciation and amortisation (EBITDA) of $4.9 million in the 12 months to 30 June 2009. Mitre 10 gained $2.4 million for its 49% share. That equates to over 13% of Mitre 10's $18 million overall EBITDA at the time - a considerable contribution.

    The next change was that at some time during FY2013/14, Mitre 10 acquired a further 35.7% of Sunshine, moving its ownership up to 84.7%. The company also aquisitioned Northern Hardware Group in April 2016, which included the Weipa Mitre 10 and the Mareeba Mitre 10.

    Sunshine helped to create a key strategy that Mark Laidlaw adopted after he took over as CEO of Mitre 10, following Mark Burrowes, who was the first CEO after the Metcash acquisition. While Mr Laidlaw made it clear that Mitre 10 would not pursue a strategy of corporate ownership of stores - one of the wrong steps Mitre 10 had taken, with the development of a subsidiary to develop and own "Mega" stores, in a countermove to Bunnings - JVs offered an opportunity to extend Metcash's reach, while retaining the advantages of the knowledge and skill of independent hardware retailers. Similar JVs followed with companies such as Fagg's Mitre 10 stores in Geelong. (Metcash now controls 90% of Fagg's.)

    While the strategy has been copied and repeated, Sunshine has itself become something unique and original for Metcash's IHG. It could be said that Sunshine has become less of a JV arrangement, and more of a "hybrid" enterprise.

    In a standard JV, there tends to be a strong separation of concerns. The capital partner provides finance, and sets a series of guidelines and goals. The operational partner follows those guidelines and goals, but also pursues its own goals, and provides certain guidelines for the capital partner as well.

    The difficulty with this is that capital and non-capital partners can have very different objectives. In general, capital partners want to see growth, and non-capital partners concentrate on return on investment (RoI). The end arrangement is typically a balance between these two - but, in many cases, it is the RoI approach that wins out. JVs frequently provide above-average returns, but are a poor vehicle for growth.

    What has happened at Sunshine is that both the capital partner, IHG, and the independent principals are obviously committed to achieving high levels of growth, through innovation tied to appropriate - but far-ranging - expansion.

    The need to push beyond some of the unwarranted assumptions people have about JVs is something Travis is passionate about. As he told HNN:

    One of the things that frustrates me is because we're a JV corporate - whatever - people say a lot of nonsense about how the business works. Listen, we treat this as if it's our business. For the management team, this is our baby.
    Apart from the board meetings that we have, to be fair to Mark [Laidlaw] and to the directors, IHG gives us a fair bit of autonomy to deliver the outcomes, and they support us when we need it, pull us into the line on the odd occasion when we need that.
    It's really like every other single retailer in hardware, in that if you're passionate and you treat it like it's your own business, you generally get good results. If the people who work here are turning up just because they're getting a pay cheque, I think we're in trouble.

    Travis is also adamant that JVs do not get special privileges when it comes to treatment by IHG. They do get exposed to new ideas first, but that can be both good and bad, he says.

    We trial things before we roll them out to independent members and all that. It's true. We do. We often have this stuff, two years, 12 to 18 months before it gets rolled out to independents.
    We give a lot of feedback. We've told them some stuff is just crap and you need to start again, and they do it. It would be very difficult for an independent to put in, say, the core range for the first time, because what if it turns out to be a disaster?
    Whereas for us, we can just roll with the punches, and modify it, and give them the feedback. So it is really important from that regard.

    Travis also sees the expansion through the acquisition of HTH as offering considerable advantages:

    If you don't have a network, it's easier for the builder to go to Bunnings, because they have a network. Since Metcash have come onboard, and particularly with the Danks acquisition, we're starting to act like a network now. We have given jobs to Hudsons in New South Wales, through Murphy Builders, actually.
    We've started to act like a group, now. We've actually got a larger network than Bunnings. But yeah, historically we've never really taken advantage of that. I think now we're starting to do that.

    Travis and the rest of the Sunshine team also see JVs as providing a very good exit strategy for many independent hardware retailers, especially those that are "ageing out" of the business, without a clear path of succession.

    Having joint ventures is good for members that do want to get out. Because there aren't people queuing up to buy an independent hardware store, and if there's no succession planning, it's just becoming more common now. [JVs] are a good way for owners to extract some value out of the business. And they're entitled to that.

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    Hume & Iser, Bendigo

    Stephen Iser takes the store to the next level

    After nearly 140 years, Hume & Iser knows a thing or two about hardware retail. As does Stephen Iser, its managing director.

    Since the 1990s, Hume & Iser has been a watchword in the industry for how a regional retailer should operate, first under Home Timber & Hardware livery, and more recently as it has transformed into the virtual epitome of what a modern Mitre 10 Sapphire store should be.

    Stephen Iser, the company's managing director, is one of the stalwarts of his generation of retail managers, the people who have really defined what the modern hardware retail industry is all about. It is a generation that has been slowly but steadily retiring out of the industry. The reasons are usually, like Stephen's, family related.

    Hume & Iser modernises

    While Stephen modestly says he got the top job because he was "the last man standing" after many management changes, that was far from the case. By the time he was appointed, he had spent 22 years working at Hume & Iser, the last 10 of those as sales manager.

    In fact, as it turned out, this was almost perfect timing at Hume & Iser. Someone with a heavy sales background was exactly what was needed to take advantage of what was going to be the a strong, sustained surge in spending on home improvement by Australian households, and a rapid expansion in Bendigo.

    According to the website Australian Property Investor:

    Ranked 209th out of a total of 550, Greater-Bendigo was among Australia's top 20% when compared to the rest of Australia.
    The median price for a house in Bendigo has increased at an average of 8.3 per cent average annually, from $98,500 at the start of 2000 to $320,000 at the end of 2014. Average rental yields of 4.7 per cent resulted in a total return of 13 per cent.

    Bendigo's population has grown by an average of 1.5 per cent over the last decade, lower than the national average of 1.6 per cent.

    Currently, Bendigo also has home ownership of over 70%, and a steadily increasing overall population, with new suburbs growing at the fastest rate.

    The challenge facing Stephen, after he was appointed general manager, and the company had time to readjust to its changed circumstances, was how best to take advantage of the available growth. The solution he came up with for Hume & Iser was to make sure that it could grow its DIY/consumer business - something that he was very successful at doing. Even today, the balance between trade and DIY stands at around 50/50 - a considerable achievement, considering that it is now close to 70/30 across IHG.

    One of the main reasons for this is Stephen understood early on that to take advantage of the growth potential of the area, it was necessary to appeal to a broader market, especially women. A key part of that strategy was Hume & Iser's ongoing membership in HTH. After joining its early incarnation, Pro International, the company did leave for a while in the late 1980s, but rejoined HTH in the 1990s.

    The move to Sapphire

    Stephen admits that when Metcash initially took over HTH he was somewhat sceptical about how that arrangement was going to work.

    I just didn't think, you know - how could it work? How could one company own Mitre 10, Home Hardware, Thrifty-Link, and True Value?

    I!t just didn't gel with me. So in the interim, we joined Natbuild [National Building Suppliers Group] because I thought, we're going to end up a creek without a paddle. So we joined Natbuild in the interim.

    I sat on the national council of HTH, and we merged the HTH and Mitre 10 councils together. They started talking how they're going to manage it, in discussions with Mark Laidlaw and Annette Welsh. Anyway, a path became reasonably clear of how it could be done, even though it was very complicated.
    Then IHG said they would prefer us to go along with the IHG. They said, "And here's what we can do". So, cutting a long story short, we got out of our relationship with Natbuild.

    At that stage, Hume & Iser were still an HTH store, but clearly part of IHG. The Sapphire process started later in 2017,

    Then the process started about the Sapphire program, and they introduced the Sapphire program. And the Sapphire program was for them to build 200 Sapphire stores of this size throughout Australia by 2021 or 2022. And they came to us and said, "We want you to build" what they call "the best store in town: the Sapphire store".

    What is interesting about this is that, where for most retailers Sapphire has meant boosting their DIY/consumer business, in the case of Hume & Iser, it meant improving the store's trade business.

    When this Sapphire program came up, while we had a good business, I could see that there was better layouts and that it was a fresher store. In particular, we hadn't done anything out in this area, in the timberyard, for over 25 years. That was old hat [the way it was], so I said to the board, "We could've done that out there".

    Stephen realised that, given the current market, the under-investment in the trade area had meant some lost opportunities.

    Yeah, all the racking and that hadn't been updated. Inside, it wasn't too bad. It was quite reasonable in the main store, but I said to the board, "If we do [the store], we have to do [the outside trade area].. We just have to do this". So they agreed. They could see the merit.
    Builders are changing all the time, as you can imagine, the younger ones coming through now. Most stuff gets delivered, but they also pick up a lot of stuff from the first thing in the morning to the last thing at night.
    So we had massive congestion out there [in the yard] when we had a lot of staff in there, and a lot of utes and trailers. So [IHG] came up with this plan. The group's got a lot of experience in the people that are doing this. We could've fiddled around with it [ourselves], but would've got it as nowhere near as good as what they've done.
    [IHG] gave us a whole new concept, a whole new plan for the whole place. And then we put it on a big piece of paper, and we said week one, week two, week three, and off we went.

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    Bunnings plan places other stores on alert

    It will join Bridgestone Select Tyre and Auto in the precinct

    Proposed store is consistent with the approvals in place at Plainland (QLD), according to the developer

    The Lockyer Valley in Queensland will be home to a new Bunnings Warehouse, with a location now confirmed. (See "Stores in development around Australia" story in Big Box Update.) Commercial construction website EstimateOne had a listing for a Bunnings store in Plainland, with a budget of between $15 million to $20 million.

    Prior to a location being confirmed, the news that Bunnings was planning a store in the region sparked major concerns amongst local hardware store owners.

    Goodwin and Storr Mitre 10 owner John Storr said it was worrying, as Bunnings was already affecting his business. He told the Gatton Star:

    Even at the moment when there's no Bunnings in the area they're still having a detrimental affect on my business. There's such a big floating population of workers that work outside the area - they're going to Bunnings all the time.

    He believes the arrival of the hardware retail chain would be catastrophic. Mr Storr said:

    We've been in business for over 100 years and I don't know how well I'll do against Bunnings, to be honest. It's not just prices, it's just the volume of product they have that I can't compete with.
    If they do open up, I'll give it two years to see how it is and if I can't make a living out of it I'm just going to close up the shop.

    He claimed the big box store "decimated" small businesses and questioned how it was allowed to expand.

    Plainland's Hardware and Rural owner Stephen Rule also told the Gatton Star:

    I hope our customers would be loyal, we're a family business - all the hardware stores in the area are family businesses.

    Mr Rule claimed customers wouldn't benefit, saying prices at Bunnings were no cheaper.

    I's perception - they try to give the perception they're cheaper but they're actually not.

    He believes any job creation from the development would be offset by losses in other businesses.

    Bunnings acting general manager for property Garry James said in response to the concerns there was room for everyone in the market. He said:

    We compete with a huge range of retailers and believe that there is ample room for a wide variety of operators, speciality providers and online retailers. Bunnings is a strong employer of local residents in the Lockyer Valley, with over 700 team members employed in surrounding stores.

    Sourced from the Gatton, Lockyer and Brisbane Valley Star

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    Ace Hardware bets on e-commerce and delivery

    Investment in technology

    The company has more stores than its rivals, and believes this will provide it with a competitive advantage

    According to a special report in the Wall Street Journal (WSJ), Ace Hardware plans to spend billions to expand its e-commerce capabilities, including a recently launched buy-online-deliver-from-store service.

    A number of financial analysts question the viability and cost of such an effort. Each local Ace store owner has autonomy from the retail cooperative's corporate head office, and over half of them - at the time the report was published in August 2019 - have yet to embrace the company's online-delivery vision.

    However chief executive John Venhuizen believes the local focus of his company gives it an edge over bigger competitors such as Home Depot which is also spending billions to shorten the time it takes to reach any home with a delivery, no matter the size.

    Mr Venhuizen spoke to the WSJ about his strategy. In response to a question about how Ace Hardware plans to maintain its market share in a changing industry against larger competitors such Home Depot and Lowe's, as well as Amazon, he said:

    In order for us to win, we've got to wage a battle on three fronts. The first is service. Having local stores with local ownerships who live in, work in, and know that community better than anyone at corporate ever will is a huge strategic advantage to us.
    The second is convenience, and what we're trying to do is exploit the geographic proximity advantage we have. Versus everyone you just mentioned - Home Depot, Lowe's, Amazon - we have a lot more stores. We have 5,200 stores around the world in more than 67 countries, and more than 75% of US households are within 15 minutes of an Ace store. We've got about USD2 billion of inventory sitting right in the neighbourhoods.
    The third is quality. We have a fanatical devotion to locally relevant, high-quality products that are different than what you can get at some of the competitors you just mentioned.

    The WSJ also asked about the bricks-and-mortar focus of Ace said it had in the past. Mr Venhuizen said:

    We're betting the farm on what we know is a timeless principle - that serving hearts and human connection will always have the potential to stir a soul.
    So how do we apply that principle? We recently launched nationally BODFS, which is a goofy industry term that stands for Buy Online, Deliver From Store. We are actually leveraging our local stores, their inventory, their vehicles and - here's the key point - their people to do the delivery to their neighbours.
    There isn't some random who-knows-who delivering the product to whip onto your porch. The person delivering the product knows what the product does, how to use it, how to start it, how to season it in. That matters. Now, sometimes it may be far less relevant, but the greater the degree of complexity, the more important the degree of knowledge.

    Mr Venhuizen also explained how Ace's delivery offerings are different from Lowe's and Home Depot that offer their own delivery, installation and haul-away services.

    We have more stores than the two of them combined. So the proximity to the homes and businesses is a significant advantage.
    Then ... the delivery is actually done by the employees who work in those stores. So it isn't outsourced to a cobbled-together, third-party strategy. It's actually done by the employees who work in the store.

    As a retailer-owned cooperative, Ace store owners have to opt into doing this delivery service, and many aren't participating yet. Mr Venhuizen said:

    It's operationally really difficult to execute, and you see retailers all over the world struggling with that last mile.
    I think we have about 2,100 or 2,200 stores now that are fully executing [the buy-online-deliver-from-store service] from Almost every Ace-branded store is doing some form of delivery on their own, and as they operationalise that, they're waiting until it's excellent before they integrate with online because the volume is starting to surge.
    We're helping them with that as best we can, but some of them still feel like they have a way to go.

    Sourced from The Wall Street Journal

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    Homebase technology is part of turnaround

    It is working with Neptune's DX Platform

    The IT solutions should help simplify customer ordering, product inventory and supplier management

    UK DIY chain, Homebase has adopted "low-code and agile development methodologies" to build new applications as part of its digital transformation.

    The first application is a "product look-up" mobile app for employees that will enable them to quickly look-up product details and specifications. This app will eventually have features allowing staff to reserve and order items in real-time. It will also have the capability to help customers and staff specify and order complex products, such as bathrooms and kitchens, both instore and online.

    Key to the initiative is joining up information from supply-chain and supplier systems to make it simple for the customer to know if the product is available, how quickly it can be delivered and precisely when their purchase is due to arrive.

    In addition to product selection and availability, the app will include delivery scheduling, warehousing and stock integration, requiring a high level of integration with disparate legacy systems.

    The home improvement retailer is working with Neptune Software's DX Platform that provides a rapid-application development "front end" that connects with Homebase's legacy systems. IT teams can then design, develop, integrate and manage applications demanded by the business with little or no code required.

    Natalie Kouzeleas, managing director of Neptune Software UK, suggested that low-code development approaches can cut development time by 60%.

    Paul Cannon, director of IT at Homebase, talked up the importance of moving quickly with new technology deployments. He said:

    We want to empower our teams with the right, cutting edge technology which allows them to deliver the best possible customer service.
    Gone are the days of complex integration projects that take years to complete. Now we build a new experience, roll it out to a single store, and if it works it can be live across the business in weeks.

    Homebase said the new agile development approach is a key aspect of the company's turnaround strategy, and it indicated this route will give the business a better chance to compete digitally in an increasingly competitive market.

    Small format stores

    Homebase could also be testing small-format outlets and opening new stores in cities where existing branches have closed. CEO Damian McGloughlin spoke exclusively to DIY Week recently about the future of Homebase, as the retailer works to integrate its latest acquisition, Bathstore.

    Homebase has already introduced a number of concessions into its stores to help enhance its offer, including Tapi, Ponden Furniture, Silentnight and, most recently, AHF Furniture and Carpets, Denby, and Bedeck.

    The acquisition of bathroom specialist Bathstore looks set to further expand the collection of what Mr McGloughlin describes as "complementary concessions".

    Plans are afoot to introduce Bathstore into Homebase stores in a number of different forms, from a branded presence in the home improvement retailer's bathroom offer in smaller stores, to a shop-within-a-shop concept in larger Homebase outlets.

    Homebase took control of Bathstore's website, as well as 44 stores, when the bathroom retailer entered administration in June. Mr McGloughlin said it is working closely with landlords to secure the right deals for stores, as they look into the potential for some of these sites to house a small-format Homebase.

    With 70 loss-making Homebase stores set to close by the end of the year as part of an ongoing review of the portfolio, Mr McGloughlin said:

    I think we've got the right-sized stores now, 40,000-45,000sqft is the right size for me. But we could also test smaller stores in smaller locations like high streets.
    If we are very clear about what we are and our proposition, it might be that the smaller format is a decorating shop or even a small kitchen shop. I don't know at this stage ... It's my vision and I'm still shaping it.

    Looking at ways to grow the business further, Mr McGloughlin sees potential for new Homebase stores in a number of geographical locations that don't currently host a branch. Equally, he believes there is scope to return to some regions where Homebase has closed an unprofitable store. He said:

    We would look at putting a Homebase into one of the Bathstore sites ... But, if not, there's lots of retail space out there. There are big cities with opportunities for us to go back but in a better location.

    Sourced from Computing UK, Essential Retail and DIY Week

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    Mitre 10 returns to Warrnambool

    Petrie's completes its renos

    The Bell family of Kangaroo Island sold its Linden Lea Mitre 10 store in Kingscote to new owners

    The exterior of the Ponting Bros Home Timber and Hardware store in the regional Victorian town of Warrnambool has recently undergone the process of being painted in Mitre 10's signature blue colour. It marks more than a decade since the hardware retailer last traded in the town.

    Independent Hardware Group now owns both brand names. Ponting Bros operations manager Brendan Raven believes the change will entice more shoppers into the store, which has also increased its stock range. He told The Standard:

    I think Mitre 10 is the stronger brand out of two with the public perception. Customers are pleased to see the Mitre 10 brand back in town.

    Warrnambool's former Calco Mitre 10 closed in the early 2000s. The Ponting Bros hardware store, which is now owned by third generation family members, has traded at its current site for nearly a century.

    Mr Raven explains that while the approximately 4000sqm store would remain the same, the layout would change to allow it to hold more stock. He said:

    It had been many years since Pontings had made changes to their retail part of the business and it was time for an upgrade. The paint department has grown three times the size in the new layout.

    Mr Raven said despite reports of a building downturn across the state, the Warrnambool business had seen "year-on-year growth" and expected to grow its 47 staff. He added:

    We are defying a lot of the averages you hear in the city.

    Petrie's upgrade

    Renovations have been under way at the Petrie's Mitre 10 store in Orange (NSW) for the last six months. The investment has seen the addition of a 2000sqm covered drive-through trade yard, reports the Central Western Daily.

    It recently officially opened the centre with a trade breakfast and a range of activities. Customers bought in their Paslode nail guns to be cleaned and serviced and their tools to be tested and tagged.

    Several suppliers offered specials to mark the official opening of the drive-through.

    Ownership change

    A new owner is also taking over the Linden Lea Mitre 10 in Kingscote on Kangaroo Island (SA). Proprietors, the Bell family were a looking to transition and sold the store.

    Philip Bell told The Islander the family had spent more than 40 years building the business up but was now ready to move on. The new owner would keep running the retail outlet under the Mitre 10 banner and there were no major staff changes expected, he said.


    Ace Hardware expands with DIFM market

    It buys a home repair services franchise

    The hardware retail co-operative now boasts more locations than the combined store count of its main competitors Home Depot and Lowe's

    US retailer, Ace Hardware is getting straight into the "do it for me" (DIFM) market with its acquisition of home improvement service franchise Handyman Matters. CEO and president, John Venhuizen told Business Insider the timing seemed right for the move, given the group's growth trajectory.

    Its total store network is currently 5,300 globally. Most of those locations - 4,600 - are in the United States. He said:

    We feel like we have an incredible amount of momentum. There are not many retailers in the United States that are opening stores. Many are shutting them. We opened more than 900 in the last five years and we'll open more than 800 in the next five. We feel like we're aligned with what the consumer wants.

    Handyman Matters will be rebranded as Ace Handyman Services and operate as a standalone subsidiary. The Colorado-based company has 57 franchisees across 23 states in the US, employing a workforce of 250 people who help customers with carpentry, flooring, painting, and other home improvement services. On-site services for consumers and small businesses also include plumbing, electrical and flooring.

    Ace expects to complete the integration and re-branding initiatives by the first quarter of 2020. Andy Bell, founder and CEO, will continue to lead the day-to-day business operations for Ace Handyman Services.

    At its recent buying show in Atlanta, Ace Hardware said retailers will not be expected to be franchisees, but they will benefit from the acquisition because local franchisees will be required to purchase their materials at Ace stores.

    According to Mr Venhuizen, customers have been "basically begging" Ace Hardware to launch in-house home improvement services offerings, and Handyman Matters aligned with its goal of being "the helpful place". He explains:

    It's this natural fit of bringing 'helpful' to the home, so that we have a service provider that can actually do it for the consumer. It fits naturally with what we're known for and the trust that our brand has engendered in these communities.

    It also ties in with the rise of the DIFM market where home improvement customers hire professionals to do the heavy lifting on projects through trusted retailers.

    Mr Venhuizen said there's not much of a difference between the DIFM customers and the DIY shopper. Ultimately, it comes down to the customer's appetite for a home improvement project or maintenance task, level of expertise, and the nature of the project.

    DIFM offerings

    The Ace Hardware deal appears similar to Ikea's 2017 acquisition of TaskRabbit, the on-demand platform, which links freelance workers with jobs, from handymen to movers to assistants. TaskRabbit was expected to boost Ikea's delivery and assembly capabilities.

    Home Depot and Lowe's both offer installation services through independent contractors. In 2015, Amazon launched Amazon Home Services, which also works with external service providers.

    In its 2018 annual report, Home Depot wrote that demand for installation services is expanding "particularly for our 'baby boomer' customers who may have historically been DIY customers but who are now looking for someone to complete a project for them."

    The retailer has said it is focusing more on its professional service providers because they perform services for its DIFM customers that will help the it drive higher product sales.


    Amazon Australia launches online garden store

    A challenge to Bunnings?

    The online retail giant wants to capture a share of the gardening and outdoor market

    The gardening and outdoor retail category has a new entrant with Amazon Australia now selling pool supplies, outdoor furniture, barbecues and gardening tools.

    Since its arrival in late 2017, the online retailer has rolled out a number of different categories into the Australian market including baby goods, pets, and pantry food and drinks. Rocco Braeuniger, the out-going country manager of Amazon Australia said:

    Our garden store adds to the over 125 million products already available on Amazon Australia, underscored by great value and fast delivery.

    Amazon will inevitably compete with Bunnings and other hardware and garden retailers in the outdoor and garden market. According to a report in the Sydney Morning Herald (SMH), Bunnings claims it has over 20% of this category. The gardening segment has been valued at about $2.7 billion.

    Bunnings is using click-and-collect as its primary logistics method, while Amazon will deliver products directly to its customers. Amazon Prime members will receive free shipping and a guaranteed two-business day delivery on eligible garden items. Customers who do not have Prime can access free delivery on orders above $39 when shipped by Amazon Australia. A one-day delivery service is available in select areas across the country.

    Amazon also said it has new drones that will deliver packages to customers in 30 minutes or less in the coming months. However, items not fulfilled by Amazon and sold through third-party sellers will not be able to get free shipping and likely incur additional delivery charges and longer transport times.

    In a statement to the SMH, Bunnings managing director Mike Schneider said he welcomed Amazon's competition but believed Bunnings in-store experience and expertise would win out.

    Having our team of experts in-store means we are also able to offer great service to run alongside our online transaction capability. We typically find that many of our online customers like to head into store to pick their items up.

    Trent Rigby, senior strategist at Retail Oasis, believes Amazon's garden store launch is well-timed and could potentially pose a challenge for Bunnings and other garden and outdoor retailers. He told the SMH:

    With the scale and speed that Amazon operates at, they're a big threat in whatever category they choose to go into. Not only will they compete on price, but the direct delivery option is more appealing and convenient than click and collect.

    To prepare for the launch, Amazon commissioned research to study the outdoors habits of Australians. It found younger people are the most enthusiastic gardeners, with 75% of millennials indicating they grow their own organic fruit, vegetables or herbs.

    Veggie gardens (22%) are the number one most wanted item, followed by the outdoor barbie (21%), and various outdoor furniture (18%). Somewhat surprisingly, 15% of respondents said they would be keen to give beekeeping a try.

    As part of the launch, Amazon Australia is attempting to bring back the garden gnome and giving the chance for five people to win a personalised, handmade gnome. Landscape designer and Selling Houses Australia co-host Charlie Albone is one of the judges. He said:

    Working in the landscaping industry, I've seen many outdoor trends come and go over the years, but one thing is a certainty and that is that Australians love the great outdoors. The humble garden gnome is a classic feature of the Australian garden, and I'm thrilled that Amazon Australia is giving it a 21st century makeover.

    New country manager

    Amazon Australia will also have a new country manager when Matt Furlong replaces Mr Braeuniger who is leaving after two years in the job. Mr Furlong will officially take over the reigns on October 1.

    A former Procter & Gamble executive, Mr Furlong has been at Amazon for seven years in a variety of roles including US category leader for home improvement, tools, major appliances and smart home. For the past 18 months, he has been technical advisor to Doug Herrington, who leads the North America consumer business.

    Mr Braeuniger was appointed country manager for Australia in August 2017, four months before Amazon launched its new e-commerce business. He is moving on to take a senior international role in Europe.

    The Financial Review reports that Amazon Australia's online retail sales reached $106 million in calendar 2018 and sales from related parties (including sales from the US website) rose to $158 million, taking total revenues to $292 million, based on accounts lodged with the corporate regulator.

    Retail experts say Amazon's Australian launch has been underwhelming and sales and the number of sellers have fallen short of expectations. However, Mr Braeuniger dismissed suggestions the world's largest online retailer was struggling to gain traction in Australia, pointing to the rapid growth in its product range and services, including delivery service Prime, Fulfilment By Amazon, Global Store and, most recently, Launchpad, an incubator program for start-ups and entrepreneurs. He told The Financial Review:

    The Prime launch has been successful, we are outperforming all the other countries on a relative scale ... and Prime Day was the most successful shopping event we have ever had in Australia.

    Sources: Amazon Australia, Sydney Morning Herald and Australian Financial Review

    Related: HNN covered Amazon's entry into the Australian market extensively.

    Amazon is coming to town - HI News, page 50

    Sources: Amazon Australia, Sydney Morning Herald and Australian Financial Review


    Did independents outperform the big guys?

    Results from IHG and Bunnings subdued

    While both Bunnings and IHG claimed that the hardware retail market declined in the FY2019 H2, the stats show the decline was not dramatic

    Looking back over the Australian Bureau of Statistics (ABS) report for retail sales in the hardware sector for FY2018/19, the slightly surprising conclusion is that non-corporate independents - those outside of Metcash's Independent Hardware Group (IHG) - have won back some marketshare.

    Before we get to that, though, let's look at how the hardware retail market performed for FY2018/19. As shown in Chart 1, for Australia overall, hardware retail sales were $19480.8 million, an increase of 2.28% over the previous corresponding period (pcp), which was FY2017/18. This was also an improvement over the growth number for FY2017/18, which was just 1.11%.

    By far the best performing state was Victoria (VIC), with revenues of $5564.3 million, an increase of 8.90% on the pcp. The Australian Capital Territory increased revenues by 5.36% on the pcp, to record revenues of $367.8 million. The worst result for the financial year was Western Australia (WA), which dropped by 8.25% on the pcp, with sales of $1958 million - its first drop below $2 billion in sales since FY2013/14. The rest of the states and territories recorded mildly positive results of around 1% growth over the pcp.

    We've heard a number of companies in the industry claim that the last quarter of FY2018/19 saw some decline in their markets. Looking at Chart 3, which contrasts revenues in the Q4 of financial years, it would seem this is not entirely statistically supported. What is perhaps disheartening to corporate executives is that so many of the states and territories are contracting, but that contraction is, overall, around the 2% range, while VIC has growth figures of over 8%.

    Charts 4,5 and 6 look contrast FY2017/18 with FY2018/19 for New South Wales (NSW), VIC and Queensland (QLD), which together make up over 76% of hardware retail revenues. The biggest surprise is probably how optimistic these sales numbers are, with big increases for VIC, and both NSW and QLD closely shadowing sales for the previous year.

    Chart 7 shows the overall numbers for Australia over FY2016/17, FY2017/18 and FY2018/19. Growth from FY2016/17 to FY2017/18 is negative during the first half, becoming positive in the second half. Growth from FY2017/18 to FY2018/19 is positive throughout the year, though only mildly so.

    What we would really have to conclude, looking at the results for both IHG and Bunnings is that they have not done a good job of capturing the potential of this market. (The Metcash/IHG financial year does close out in April, but the company remarked that trading through May and June had been in decline.)

    It's likely, given this, that the real winner for FY2018/19 has been the non-corporate independents, many of whom are in buying groups such as National Builders (Natbuild) and Hardware & Building Traders (HBT). Partly that may be because Bunnings and IHG are overweight in NSW and underweight in VIC (in terms of growth prospects).


    Metcash's Hardware segment, which consists primarily of the Independent Hardware Group (IHG), recorded equally lacklustre results. Excluding charge-through sales, overall revenue for the reporting period was $1165.1, up 1.9% on the pcp. Including charge-through sales, sales were $2.10 billion, down by 0.9% on the pcp.

    Hardware did show a steep rise in EBIT, reporting $81.2 million, up by $11.9 million on the pcp, a gain of 17.2%. However, the company states that around $10 million of that is the result of one-off "synergies" from the acquisition of the Home Timber & Hardware Group (HTH).

    It appears much of those synergies originate from the closure of non-performing HTH stores, and subsequent asset sales. As a result estimated EBIT from continuing operations would be $71.2 million, a gain of 2.7% on the pcp (presuming that the pcp EBIT number relates to continuing operations as well).

    Other EBIT gains resulted from efforts by the company to improve the efficiency of its operations.


    Bunnings reported topline revenue of $13,166 million, up by 5.0% on the pcp. EBIT rose by 8.1% on the pcp, to hit $1626 million. In terms of total stores growth, this was 5.2%, down from 8.0% in the pcp. For store-on-store (comp) sales growth, this was 3.9%, down from 7.8% in the pcp. Return on capital improved slightly, coming in at 50.5%, up from 49.4% in the pcp.

    In his prepared remarks, Bunnings managing director Michael Schneider reaffirmed the retailer's commitment to the DIY market, while also highlighting its growth in retail to trade customers.

    While making DIY even stronger remains core. We continue to build solutions that connect our customers with local experts, making it easier and more affordable for them to have products in-store, particularly when it comes to a licensed tradesperson.
    We have expanded our assembly and installation offer to help our customers who don't always have the time or skills to undertake some jobs and projects. 18 new services were introduced throughout the year with a total of 30 services now available. Uptake from customers continues to grow, with Dux hot water installation, toilet installation and barbecue assemblies being some of the most popular services we offer.

    Mr Schneider also pointed to the retailer's growing focus on lifestyle based retailing.

    We have also expanded our in-store events and activities, making it even easier for our customers to learn new skills and bring their home and lifestyle aspirations to life. Every store now has a mobile DIY unit, which is used to engage our customers in aisle with product demonstrations, displays and craft.

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    Bretts moves to Natbuild

    Yenckens also leaves Mitre 10

    Old alliances and wholesale relationships continue to change in the trade end of hardware retail

    Queensland-based Bretts has switched its wholesale business from Independent Hardware Group (IHG) to Natbuild.

    In Victoria, Yenckens has also decided to move on from its Mitre 10 banner. The retailer has moved most of its business to Hardware & Building Traders (HBT), and the rest over to Natbuild.

    Both businesses will continue to do some purchases from IHG, however they will now conduct their buying of large bulky hardware goods, such as timber, from Natbuild,

    Natbuild chief executive Peter Way told The Australian he was receiving a pick-up in interest and inquiries from independent hardware chains wishing to sign up to the buying group. He said:

    There has been strong inquiries and interest, and I think our service or our value proposition is appealing because we are transparent. There's no 'you get this if you jump through this hoop'. It's probably the varying difference between us and other groups like Metcash.

    The trade category is increasingly becoming a heated area of competition for both corporate retailers and buying groups as they attempt to outbid each other in appealing to the needs of tradesmen.

    Source: The Australian


    Bretts Timber sees steel in its future - HI News, page 22

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    Homewares, the next retail battleground?

    Bunnings, Kmart, Coles and Aldi compete in the category

    Ecommerce homewares retailer, Temple & Webster said it generated a record $1 million in checkout revenue in one day in June

    In a relentlessly competitive retail environment, the homewares category is increasingly popular among shoppers. Bunnings, Kmart, Coles and Aldi have all launched their latest homewares ranges. So has online retailer, Temple & Webster, a specialist in this sector. It recently posted its first profit result.

    Bunnings' Smart Homes Products line features throws, rugs, cushions and chairs. There are also children's homewares as well as storage items.

    Recent research from Roy Morgan showed Kmart is considered a major a homewares shopping location, with one in five Australians shopping there for home products. Its collection continues to take inspiration from Scandi minimalism and boho luxury. Young children and toddlers have also been included in the new range that features a night light.

    Coles released a limited edition homewares range over a four-week period. Its Your Home Collection had 101 items including cushions, throw rugs, lamps, shelves and storage boxes.

    Aldi has had significant success selling homewares as part of its popular weekly special buys range. Its homewares collections have included Scandinavian-style floor lamps and furniture, knit throws and French linen sheet sets.

    Temple & Webster results

    Online homewares retailer, Temple & Webster said the number of active customers on its site increased by 37% to 271,000 in 2018-19.

    CEO Mark Coulter said much of the group's initiatives are about gaining marketshare of the number of millenials wanting to buy furniture and homewares online. He told the Sydney Morning Herald:

    Our core demographic is 35 plus, and as more millennials become 35 to 38-year-olds they begin to enter our market.
    They've grown up buying everything online, and furniture is something you start to spend more money on when you're in your late 30s and 40s. That trend is happening irrespective of what's happening with house prices and broader retail.

    Customers are buying furniture and homewares online, but online sales in Australia was still low at around four per cent, according to Euromonitor, compared with 13.7% in the United States and 14.2% in Britain. The Australian furniture and homewares market is worth about $13.6 billion.

    He said Temple & Webster's growth in July showed its customers hadn't been restrained by the broader softness in retail, and he intended to bolster spending on technology including a new mobile app and expanding the range of products available beyond the current 150,000 including its own private label range.

    Mr Coulter said Temple & Webster's ''drop-shipping'' delivery model, where products purchased online are then sent to customers directly from suppliers, was enabling quicker delivery times.

    Mr Coulter also said the group's major focus was on accelerating its Australian operations and capturing as much of the rebound in the housing market as possible, rather than any offshore expansion. He believes that ''now was the time to invest''.

    Temple & Webster produced earnings before interest, tax, depreciation and amortisation of $1.1 million for 2018-19 to be in the black for a full year for the first time. It made a loss of $700,000 a year ago.

    Sources: Australian Financial Review, Sydney Morning Herald and Daily Mail Australia


    Big business in pet care - HNN

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    Bathstore bought out by Homebase

    The privately owned chain had 135 stores in the UK

    Chief executive Damian McGloughlin said the group is delighted to welcome Bathstore into the Homebase family

    UK home improvement retailer, Homebase has secured a deal to acquire the UK's largest specialist bathroom retailer, Bathstore. This will rescue the brand from administration.

    The company will take over 44 branches and the Bathstore website, and plans to open a "significant" number of concessions within its own stores over the next 18 months. The DIY chain hopes to boost its own bathroom operations with the purchase.

    The remaining 90 stores not being transferred to Homebase will continue to trade until remaining display stock is sold off.

    Bathstore launched a fully adapted bathing suite in 2017, revealing plans to dominate the specialist space. Its Easy Bathing collection was part of a plan to claim a large stake of the specialist bathing market after deciding that it was an under-served sector.

    Founded in 1990 by Patrick Riley and Nico de Beer, Bathstore has been hit by worsening trading conditions in recent times with a slowdown in housing transactions and ongoing consumer uncertainty in the UK.

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    Ace earns top marks for customer satisfaction

    Online engagement

    It tied with True Value for highest customer satisfaction in the J.D. Power 2019 US Home Improvement Retailer Satisfaction Study

    Ace Hardware and True Value managed to excel against their big box competitors - Lowe's, Menards, The Home Depot - as ranked by the 2,400 customers surveyed in the latest J.D. Power Home Improvement Retailer Satisfaction Study.

    The survey rated the retailers across five key attributes. But in analysing the overall survey results, J.D. Power analyst Christina Cooley identified online engagement as critical to success in serving home improvement customers. In this area, Ace Hardware puts distance ahead of the competition. She said:

    The better a retailer site performs online in meeting the customers' needs, the greater their overall experience. So the two go hand-in-hand.

    Ms Cooley noted that 41% of the customers surveyed either researched or shopped online prior to visiting the store. Consumers who check out potential purchases online also spend more on home improvement products than those who do not conduct web-based research.

    Yet, J.D. Power added, many home improvement retailer websites don't measure up to customer expectations. Overall satisfaction for home improvement retailer websites is 821 on a 1,000-point scale, a bit lower than the rating for manufacturer websites (832), image and video sharing websites (843) or social networking sites (869).

    The Ace Hardware corporate website is filled with how-to information in its tips and advice section. The site also directs visitors to the local store's site which is personalised to the community and the needs that it serves. Ms Cooley said:

    Over the last several years, Ace clearly has put a lot of resources, attention and investment into their website to be engaging for customers, whether they're looking to just purchase online or to find information at the local level.

    A positive online experience researching local destinations where the right products and help can be found is directly correlated to a more positive shopping experience and more money spent. Ms Cooley adds:

    Those that did research online prior to purchasing spent about USD600 more per year on home improvement products, than those who did not shop or research online.

    In her consulting work with independent retailers, Ms Cooley emphasises that the website's primary role is to draw customers into the store where the real retail magic happens. Ace Hardware's corporate structure, as a co-operative of 5,200 locally-owned and operated hardware stores supported by a high performing head office operation, gives it the edge. Andy Enright, vice president retail development at Ace Hardware, told Ms Cooley:

    While we do have significant national scale, our independent owners live in the communities they serve. This local mindset and entrepreneurial spirit, along with a nonstop focus on fulfilling our 'Helpful Place' promise is why Ace continues to be recognised for high customer satisfaction and has seen nine years in a row of same-store sales growth.

    Besides Ace Hardware's support of local member companies' digital presence, the retailer gets the five key attributes in J.D. Power's home improvement index right as well.

    Store facility

    In addition to ranking home improvement retailers by cleanliness, convenient location, store layout and design, the survey found shoppers want to get in fast, find what they need fast and get out fast. Ms Cooley said:

    Local hardware stores like Ace do that much better than the big boxes.

    Ace's smaller size and scale, as well as its community-centric approach to merchandise selection, gives it the edge. Mr Enright said:

    We are a high-touch, convenience hardware store that makes it easy to get in, find the product you are looking for, get help if needed and get out quickly so you can complete your project faster.

    Product selection

    Lowe's and Home Depot may have a lot more product selection, but they also present shoppers with a "paradox of choice" problem where too many choices make for confused and often dissatisfied shoppers. Rather than stocking everything, Ace Hardware aims to stock only the right things that its local customers want.

    Merchandise is customised to each local market with the aim to present the best quality brands. Ace ranked highest in the "Quality of merchandise is above expected" question, and in "Staff thoroughly explained products and features".

    Priced for value

    In retail, price still matters and many consumers will drive a few extra miles to save a few cents. So while Ace Hardware may not be able to match the often lower prices that a big box retailer can offer, it also understands that the real value of choosing Ace hinges on many other factors besides who's got it cheapest. Mr Enright said:

    We pay close attention to our CPI (competitive price index), and recently deployed CPI data down to the store and item level to better ensure we stay competitive in each local market.

    Regarding customers' overall satisfaction, J.D. Power said the retailers that provide assistance to customers within two minutes of arriving in the store get a 67 point boost in overall customer satisfaction. Having the cheapest prices in no way matches the impact of superior service.

    Promotions attract shoppers

    In addition to supporting regular sales promotions, Ace Hardware provides extra incentives and exclusive discounts to its 48 million Ace Rewards members. The data collected about customers' preferences at both the national and local level helps the retailer further personalise product selections and services in the stores.

    In addition, Ace Hardware members are increasing the number of special in-store events.

    Staff and service

    Ace Hardware doubles down on customer service as the key to being its tagline, "Helpful Place." To do that it also doubles down on training. Mr Enright said:

    We put a lot of focus on employee training, development and engagement. Last year we launched a new training program combining both e-learning tools and hands-on training. The curriculum is based on an associate's role and experience level in the store in order to improve their knowledge and confidence. That way they are better prepared to provide exceptional service to our customers.
    To have highly-engaged customers, you need highly-engaged employees.

    Sources: Forbes and Homeworld Business

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    Elders moves into wholesale

    It is offering a deal to acquire AIRR

    Taking on Australian Independent Rural Retailers allows Elders to have a presence in the wholesale market

    The $187 million takeover bid by agribusiness Elders for Australian Independent Rural Retailers (AIRR) will give it an entry into the wholesale supply of farm products for the first time.

    Elders managing director Mark Allison said wholesaling to independent retailers provided an attractive growth opportunity for the company. He told The Adelaide Advertiser:

    We don't have any wholesale channel and AIRR is very strong in that area. About 100 of their members are in produce and hobby farming areas, so it's quite complementary to our business.
    AIRR is also very strong in the pet supplies area. All the AIRR stores will continue to run independently, as they already are."

    Lachlan Cox, owner of Cox Rural, said the acquisition would enhance his company's purchasing power when negotiating terms with key suppliers. He operates six AIRR member stores in South Australia, and told The Advertiser:

    There's a great opportunity to leverage off both businesses, while still remaining independent.

    Cox Rural has been running since 2002 and is a founding member of AIRR.

    Mr Allison said the acquisition provided the opportunity for Elders to leverage AIRR's distribution and logistics coverage with benefits in improving the Elders supply chain. He told The Australian:

    Helping us backward integrate through our supply chain can deliver a 10-15% margin gain.

    The deal includes a purchase price of $157 million for the group and Elders will also pay out AIRR's existing $30 million in debt. While the Elders deal does not include ownership of the AIRR network of 340 independent rural supplies and pet produce outlets, it does provide a combined network of more than 550 stores.

    Mr Allison said he hoped the deal would be completed by November. It is subject to approval by AIRR shareholders, the Australian Competition and Consumer Commission (ACCC) and the court.

    Access to more independents

    The acquisition should help position Elders to compete more strongly with Canadian fertiliser giant Nutrien as it moves to complete a $469 million takeover of Ruralco.

    Mr Allison believes there is a significant opportunity to add independent retailers in the fallout from Nutrien acquiring Ruralco, which is a leading wholesaler to independents through its CRT (Combined Rural Traders) retail operations. He said:

    Our view is there are another 300 independents out there who may decide to move across to an alternative wholesale network.

    The Nutrien takeover of Ruralco, if it secures regulatory and shareholder approvals, could see a network of 654 Landmark and Ruralco stores across Australia. There would remain about 360 rural stores outside either network.

    Elders, which turns 180 this year, already has more than 17% rural retail market share behind Landmark and Ruralco. Mr Allison said if both deals were approved, "it would make us clear one and two".

    About AIRR

    Established in 2006, AIRR was founded by long-time rural retailer Peter Law to support independent rural stores and pet and produce storeowners through group buying power but without franchise costs or obligations. The business supplies 240 independent stores and 100 Tuckers Pet & Produce stores with more than 6000 animal health, feed and general merchandise products. It is supported by a network of eight warehouses around Australia servicing over 1500 customers.

    The group also owns and operates five retail locations in Victoria and is listed on the Primary Markets Exchange.

    AIRR comes with some major intellectual property assets. It has 190 product registrations with the Australian Pesticides and Veterinary Medicines Authority under its own brands: a number of crop protection chemicals under the Apparent brand, along with other animal health and general merchandise products under the Independents Own label.

    Elders' acquisition would give it much greater exposure to the higher margin pet and animal health market.

    AIRR has annual revenue of about $500 million and forecast earnings of $22 million for the 12 months to September 30, according to a report in The Australian Financial Review.

    As AIRR managing director, Mr Law will remain in his role and replace Mr Allison as Elders' biggest individual shareholder with about 1.8% of the company. Mr Allison will become AIRR chairman.

    ACCC inquiries

    The Elders takeover of rural wholesaler AIRR has attracted the attention of the competition watchdog as it holds a public inquiry into the consolidation of the rural services industry.

    Nutrien's earlier bid for Ruralco in a $470m deal is also being investigated by the ACCC and due to be decided on August 15. Ruralco has about 73 wholly owned stores as well as a host of independents, who are the focus of both ACCC inquiries into the sector.

    The Elders-AIRR deal is expected to be decided on September 12. But Mr Allison said it had been talking to the competition regulator about the AIRR deal and was confident it would have no objections.

    More acquisitions?

    Sources have told the DataRoom column in The Australian that Elders may still be looking at the PGG Wrightson farm supplies business in New Zealand as an acquisition target.

    PGG Wrightson offers Elders another entry into the wholesale rural services market. However the company falls outside the tax umbrella for Elders, resulting in higher payments of tax for the company. This could be seen as an argument against the acquisition.

    PGG Wrightson, which is listed in New Zealand, sold its seeds operations to Danish company DLF Seeds for NZD421 million (AUD401 million) and has a market value of about NZD415 million. Analysts say PGG Wrightson is a good business and would be the right fit for Elders.

    However Mr Allison has publicly rejected suggestions Elders might be looking at another acquisition.

    Sources: The Australian, The Australian Financial Review, Tasmanian Country, and The Adelaide Advertiser.


    TradeTools opens Cairns outlet

    Rival tool firms embark on expansion

    The Cairns store is the Gold Coast company's 19th retail location and the first in Far North Queensland

    Tradies and weekend warriors have a new destination for their tools in Cairns now that TradeTools has opened a retail outlet on Mulgrave Road.

    Managing director Jeremy Stewart said the business had been looking for a suitable site in Cairns since 2017 before settling on the old Cheeky Monkeys Play House site. He told The Cairns Post:

    The showroom alone in our new store is over 1100sqm, so it's big enough to showcase our massive range of the best tools from the best brands. And we have about another 1000sqm of warehouse on top of that.
    We've shipped tools to customers in Cairns for a long time and Cairns tradies, businesses and the public have been asking us for a TradeTools store.

    The new store has opened with six staff including a qualified repair technician.

    Retail competition

    TradeTools has plans to expand its offering to other parts of Queensland and is facing fresh competition from New South Wales-based Sydney Tools which opened its first Queensland store in Archerfield last month. Sydney Tools wants to roll out 15 more stores across the state over the next three years. Director Jason Bey told The Courier Mail:

    Sydney Tools has seen record breaking sales this year which is the rationale for our national expansion strategy.

    While seeing the NSW company as a "direct competitor", TradeTools chairman Greg Ford is sceptical about his rival's plan for expansion in an already saturated market. He also told The Courier Mail:

    I'll believe it when I see it. I don't think the market is big enough to warrant another 15 industrial tool stores. If I thought there was room for another 15 stores I would have opened another 15 stores.

    Mr Ford has been working in the industrial tool trade sector since 1980 and said the new entrant has not "disrupted" sales and believes Sydney Tools is taking away customers from Bunnings. Founded in 1987, TradeTools has remained privately owned and Mr Ford said the business has "expanded when Queensland has expanded".

    A sluggish retail environment and a cooling of the construction market has not caused TradeTools to put the brakes on its expansion plans. After Cairns, it will open stores in Rockhampton and Mackay. The industrial tool company will only acquire new locations when cash flows allow for the company to buy a site in full. Mr Ford said:

    We only expand when we can afford the premise outright. Our aim in the next 10 years is to double our turnover.

    After the company expands north, Mr Ford is looking to open his first NSW store in Lismore.

    Sources: The Cairns Post and The Courier Mail


    Sunshine Mitre 10 Gympie wins QLD Store of Year

    Award for independent stores over 2500sqm

    The Sunshine Mitre 10 group in Queensland has picked up yet another award, this time from Hardware Australia

    Hardware Australia has awarded the Sunshine Mitre 10 store located in Gympie, QLD, the prize for Queensland's Store of the Year, in the category for independent stores over 2500sqm.

    The prize was handed out at the 2019 Hardware Australia awards in Brisbane recently. According to a company spokesperson:

    Sunshine Mitre 10 Gympie Superstore is the largest supplier of timber in the Sunshine & Cooloola Coasts, Darling Downs, South Burnett and Wide Bay regions. We take pride in the fact that we can provide all the building supplies our customers need, under the one roof, whether they are a builder, renovator or dedicated DIYer.

    The Gympie store is no stranger to prizes - in 2016 it also was voted as having the best cafe in town via a Facebook survey of locals.

    HNN is traveling to Queensland to visit a number of Sunshine Mitre 10 stores in July, and we'll be providing a full report in the near future.

    Other awards

    Aside from the top retailer awards, Hardware Australia also offered the following at its 2019 prize giving ceremony:

  • Store of the Year under 2500sqm - CNW Electrical Gladstone
  • Trade Store of the Year - BMS Mitre 10
  • Garden Department of the Year - Porters Mitre 10 Mackay
  • Employee of the Year - Katy Draper from Sunshine Mitre 10 Roma
  • Sales Representative of the Year - Nick Sommerfelt from Makita
  • Industry Rising Star - Katy Nicholls-Hurley from Jeays Hardware Mitre 10
  • Brian Lee Hardware Industry Legend - Clint Spence from Beaudesert Mitre 10
  • Overall Supplier of the Year - Makita
  • Queensland Building Products Supplier of the Year - Cement Australia
  • Queensland Hardware Supplier of the Year - Bremick
  • Queensland Timber Supplier of the Year - ITI
  • Queensland Paint & Paint Products Supplier of the Year - Dulux
  • Queensland Tool Supplier of the Year - Makita
  • Queensland Electrical & Lighting Supplier of the Year - HPM Legrand
  • Queensland Bathroom & Bathroom Products Supplier of the Year - FIX-A-TAP Australia
  • Queensland Garden & Outdoor Products Supplier of the Year - Searles
  • retailers

    A career looking after locals

    Co-owner Tim Kessler has competed a 30-year apprenticeship

    After three decades at the store, he believes there are not too many other things he would rather be doing

    As part owner of the Home Timber and Hardware in Biloela (QLD), Tim Kessler recently told the Central Telegraph newspaper that he understands the importance of looking after your customers, supporting the economy of his rural town, and gradually building a trusted rapport with his community.

    Mr Kessler said he began working at the store in 1987, but left quite soon after in 1988. He started at the store as a glazier while the store was being constructed. Mr Kessler explains:

    ...After about 12 months I moved on but things didn't work out where I was, so I came back. The bloke that owned the business happened to be in here at the time and said, 'Do you want your job back?' So I started back and I have been here ever since. I guess I am lucky the owner at the time must have seen some potential in me.

    He was soon offered the trade manager's position, and in 1996 became the general manager, before becoming a business partner in 1998. In 2016 he became part owner with a new business partner. He said:

    So, now I've been here officially since February 1989. I've done my 30-year apprenticeship so I should be right!

    During that time, Mr Kessler has witnessed the store undergo many major milestones. In a previous interview, he said:

    Probably one of the biggest things that has changed was the expansion of the business in 2008. But even getting the electronic cash registers and the progression to completely computerised email invoices and statements has been a big change.

    Getting to know customers is a major reason why he enjoys his job so much. He said:

    ...You get to know your customers because it's a small town. We get to see them down the street and people know my name. There's the regulars and then there's new people who come to town and you get to know them too.
    We have fun with our trade customers and there's just that good rapport going. We have good staff here, and a regular comment we get is that the staff seem to be having fun.

    He understands that a younger generation want to move away from small country towns but he believes it is a matter of "making your own fun". He has also said:

    I think it is a really good career for those that want a challenge in this industry. As long as they are willing to have a go, they will go a long way in this business.

    Mr Kessler, who has 15 staff at the store, said business was currently "a struggle" for many.

    But I think that's a lot to do with the current dry weather conditions. We seem to be doing okay.

    He said it was important for locals to support local, and newcomers were often surprised by the extent of his stock range.

    A customer said recently, 'It's amazing how much stuff you keep here'.

    Mr Kessler said it was easy to underestimate what was on offer in a rural town, and many new customers worried that if a town didn't have more than one option they might be getting "ripped off". With a second hardware shop in Biloela, he believes it is important to work together sometimes.

    When we run short of something, we can easily ring up the other hardware shop and we help each other out. Or we can point the customer in that direction or to other businesses in town that we think could help. It's all about getting people to spend money in the town and helping people out.

    Metcash-IHG results flat for FY2019

    Sales declined by 0.9%

    Metcash has succeeded in merging HTH with Mitre 10 - now it has to make the merged company profitable

    Australian retail conglomerate Metcash has released its results for its FY2018/19, ending 30 April 2019.

    Results overall were positive, but mildly disappointing. The company recorded revenue of $12,669.3 million, which represented an increase of 1.8% over the previous corresponding period (pcp), which was FY2017/18.

    Earnings before interest and taxation (EBIT) fell by 1.4% on the pcp, reaching $330.0 million. Excluding corporate EBIT, Metcash's food, liquor and hardware segments lifted EBIT by 2.2%.

    Metcash's hardware division, which includes the Independent Hardware Group (IHG), recorded the only decline across the business's three segments. Revenues for IHG were $2102.0 million, falling by 0.9% on the pcp. EBIT was more robust, with the company reporting the number of $81.2 million, up by 17.1% on the pcp. However, that number does include around $10 million of merger synergies; absent that boost, EBIT rose by around 2.9%.

    In notes to the release of the results, the company stated that:

    Sales were negatively impacted by the slowdown in construction activity, the closure of unprofitable company-owned stores, and the loss of a large HTH wholesale customer in Queensland in 1H19. Excluding the loss of this customer, sales increased 0.3%.

    The company stated that like-for-like (comp) sale across its wholesale business rose by 2.3% over the pcp. It also claimed that the retail comp number showed an increase of 3.0% over the pcp in its bannered stores.

    The results announcement also included this statement as one source of the mildly disappointing numbers:

    An increase in the proportion of Trade sales in the sales mix to ~65% (FY18: ~63%) had an adverse impact on wholesale margins.

    In comments made the Metcash CEO Jeff Adams during the presentation, he stated:

    We've accelerated our Sapphire upgrade program this year. This has led to a further 30 stores being upgraded, increasing the total stores through the program by the end of the year to 60. We continued to see strong sales growth from our Sapphire stores, and these stores have delivered an average sales improvement of over 15%. We've targeted a further 140 stores to go through the Sapphire program by 2022.
    In trade focus we have added a further 7 stores; and now have 11 low-cost trade-only stores; and continue to target 40 stores by 2022. And we've also made good progress on our digital initiatives supporting our strong trade business such as truck tracker and Trade Plus.
    On our Hardings' plumbing business, we are excited about the growth opportunities with the Hardings business and are making good progress with the rollout of Hardings in New South Wales and Tasmania. The new store-in-store Hardings at our Tooronga Mitre 10 store in Victoria is almost complete. And customer awareness and sales through the balance of the IHG network of the Hardings range are growing and in line with our expectations.
    And then finally, we've again made good - we've had good success in rolling out our core ranging programs across all key categories.


    The results for IHG are somewhat mixed. In a historical sense, we could say that the company has come to the end of what has been a very positive and successful chapter, with the acquisition of the Home Timber & Hardware Group (HTH) completed.

    Many companies have stumbled over such acquisitions, but IHG CEO Mark Laidlaw and his team have handled the transition well. Far fewer members of HTH have left the group than were initially expected, and IHG has managed to continue to drive forward its Sapphire program of store enhancement - which underpins its efforts to move more stores to stocking its "core range" of warehouse-stocked goods.

    That said, IHG has also shown how vulnerable it can be to store losses, with the departure of Bretts Timber in Queensland. According to the financial results:

    Excluding the loss of this customer, sales increased 0.3%.

    Which means, effectively, that Bretts accounted for 1.2% of sales for IHG.

    The next stage

    IHG is now entering into the next stage of its development. The transition is over, and it is now facing questions as to how the company that has resulted will fare into the future.

    The results from FY2018/19 are not encouraging. If we take ABS retail sales numbers, and weight sales growth for hardware retail according to IHG store locations, we get a baseline growth figure for the company's FY2018/19 compared to FY2017/18 of 3.3%.

    Yet IHG is claiming only a 3.0% comp number at the retail level - and those numbers are taken, according to the results from "sales growth based on a sample of 171 network stores that provide scan data", which are likely to be the better stores in the network, including all the Sapphire stores.

    In simple terms, IHG has not kept up with the market. As HNN has suggested elsewhere, we suspect that IHG had counted on gaining more sales not so much from competition with Bunnings - which was the substance of its "headline" statements at the time of the HTH acquisition. Rather, it expected to gain market share from the rest of the independent market.

    As we've also suggested, that perhaps did not happen because far from establishing a clear price advantage with suppliers, IHG's market activities actually led to other buying groups also achieving advantageous deals with suppliers.


    At this stage it seems likely that IHG really needs to reconsider some of the strategies it initially formulated in late 2016, during the acquisition of HTH. While it will obtain some advantage from its main strategy - low prices through volume supplier deals driven by warehouse capabilities - it is looking as though that will not prove quite the growth strategy it had hoped.

    That and other issues will be taken up by HNN in the next edition of HI News, 5-03.


    Big boxes no problem for HBT store

    Slower growth for big box retailers?

    Most big box retailers are seeing sales growth on a per-square-metre basis lag increases in operating costs. Smaller retailers emphasising service are performing better than larger players while online sales are leading to many big box retailers to cannibalise their sales, according to research from investment bank Morgan Stanley.

    HBT member, Eastern Suburbs Hardware located in the suburb of Raceview (QLD) was featured recently in the Queensland Times. Owner Gerry Galligam said he has been in the industry since he was 16 years old, and has owned the business for the past 12 years. He told the newspaper:

    I worked in sales. I managed Benchmark which later became BBC Hardware. I ended up working for myself as a concreter. I could see that many of the local businesses were losing out to the big-box stores.

    Independent stores like Eastern Suburbs Hardware have found niches where consumers seek local products, services, advice and experience.

    According to Mr Galligam, his store focuses on industry knowledge, customer service and quality products.

    Eastern Suburbs Hardware was founded by Henry and Adele Christie in 1965. Mr Christie introduced the first hire service in the area for building and associated products. He sold almost anything from cement mixers to lawn mowers and tools.

    Mr Christie sold the store when he became an SES co-ordinator and Arthur Kathage bought it and operated it from 1978 to 2007, before Mr Galligam took it over. He said:

    We work hard at offering personalised and prompt service. We have a delivery truck so we can meet demands.
    The concrete services are our growth area. We are doing a lot of steel reinforcement ...and have gone from two to three tonnes a month to now 90 tonnes a month.
    Most people think we are not competitive on price. The reality is we don't have the overheads. We have lower overheads and belong to a buying group of independent hardware stores that is 700-strong.

    As a result of his membership to HBT, Eastern Suburbs Hardware gains competitive prices for many of its products.

    Mr Galligam said the store bases it success around service in addition to reasonable pricing, and being able to give customers what they need. He believes supermarket hardware stores can still be beaten on price and Eastern Suburbs Hardware holds its own in a tough retail environment.

    Big box performance

    Other independent stores can find themselves competing more effectively as sales growth at big box retailers are lagging behind rent and wage increases, according to analysis by Morgan Stanley.

    In a research note to clients earlier this year, Morgan Stanley's retail analyst Thomas Kierath wrote that Australian big box retailers, in their current form, could be slowly becoming extinct, based on trends from the financial reporting season in February 2019. (This Morgan Stanley data is based on retail across all categories, not just hardware or home improvement.) He wrote:

    We think that consumers are shifting away from big box retail formats as they increasingly prefer convenience and experiences that are better cultivated in a small box environment.

    Based on Morgan Stanley's figures, only three of 22 big box retailers reported sales-per-square-metre growing faster than operational costs.

    The Morgan Stanley analysis used sales-per-square-metre for benchmarking growth. Sales growth per square metre (sqm) was then lined up against retail's two biggest operating costs - rent and wages over the same six-month period.

    Rental growth was calculated at 2.5% - a value derived from one of Australia's biggest retail landlords, the Scentre Group, owner of 43 shopping centres formerly housed in the Westfield empire.

    Morgan Stanley chose wages growth of 3.5%, as per the Fair Work Commission's minimum wage determination for retail workers. Mr Kierath wrote:

    Soft sales-per-sqm growth for large box retailers will likely bite soon given 70-90% of operating costs inflate at between 2.5% [rent] and 3.5% [labour]. We think very few retailers are delivering sales-per-sqm growth ahead of in-built cost growth at the moment.

    The following graph shows big box retailers' sales-per-square-metre growth.

    That operational inflation is in many ways unavoidable as there are inherent costs in cost-cutting. Mr Kierath wrote:

    Should retailers cut back on staffing, opening hours or marketing we think that this likely accelerates the slowdown in sales-per-sqm growth.

    Size does appear to matter in the big box world, with "small" outperforming "large", in the previous six months, prior to the February 2019 reporting season. Morgan Stanley puts the divergence in performance down to three key factors that continue to evolve.

    The convenience shift: There is a structural trend of consumers becoming even more short on time, so they prefer to shop at stores that are convenient to them, rather than at retailers that operate stand-alone destination-type stores.

    Online sales: It appears as consumers shift to online they are purchasing less from big box format retailers, perhaps because click-and-collect is so popular and consumers are preferring do to this at locations that are convenient to them.

    Experience matters: Smaller retailers tend to pay higher rents compared with big box retailers, so are inherently more invested in providing an enriching experience. This means stores are presented in a more customer-friendly way.

    That's a worry for the big box owners if their strategy continues to involve building ever-expanding boxes.

    Digital dilemma

    Online selling - with its vast range and wafer-thin margins - is already casting a large shadow over big box retailing. Morgan Stanley believes that "online is taking a disproportionate bite out of the big box retailers".

    For the likes of Coles and Woolworths, investing in online sales is a form of corporate cannibalism.

    The Morgan Stanley report found Coles and Woolworths generated 26% of sales growth from online. It noted:

    Sales growth from existing stores ex-online is just 1.3% for the majors.
    Interestingly, [the] Nielsen [retail survey] indicates that [greater than] 50% of online sales growth is cannibalised from stores and a further [greater than] 40% from competitor stores, which points to low sales incrementality.

    The Morgan Stanley report on big box retailers first appeared on the ABC news site:

    Big box retail struggling as shoppers shift to online sales - ABC News

    HBT: Market leading strategy

    HBT CEO Greg Benstead helps HBT go pro

    The competitive edge that HBT seeks to give its members combines low prices and high rebates from suppliers, combined with "just enough" services at a low administration fee

    In early May 2019 the Australian hardware retail buying group, Hardware & Building Traders (HBT), hosted what turned out to be a complex (even ground-breaking) National Conference, echoing the complex situation not just in hardware retail, but in the Australian economy as well.

    Melbourne contributed its usual decently-grey weather, and the Melbourne Convention and Exhibition Centre (MCEC) contributed its somewhat challenged aesthetics, and equally challenging logistical systems.

    In the absence of HBT's much-beloved doyen of its administrative team, Ashlin Fisher (happily on maternity leave after giving birth to a gorgeous baby girl, Finn), the conference had to rely on the ministrations of a third-party organiser for its day-to-day functioning. The result was an efficient conference, but one which lacked a little when it came to conviviality - even if the HBT members and staff worked hard to overcome that.

    Though, on reflection, the mood of the conference likely had less to do with its administration, and more to do with its own nature. This was by far the most serious conference HBT has hosted for the past five or six years. In fact, in HNN's opinion, this conference will come to be seen as marking the second major inflection in the group's history since its founding in 1997, with the first marked by Tim Starkey taking over as group manager back in the late 1990s.

    If anything really proves that HBT's current CEO, Greg Benstead, has throughly and swiftly absorbed the group's culture since joining it in early 2018, it was the way in which he oversaw the release of what is effectively a new strategy for the group. While other large buying groups tend to release new strategies with a degree of flashiness, the HBT way is to more or less back your way into anything new.

    That introductory dialogue goes something like:

    We're going to do this new thing - except, of course, it's not really new, as it's a lot like this thing we used to do, some time ago, only, well, yes, I suppose it is also new, a bit. OK more than a bit. But it's a good idea.

    In other circumstances, that might seem wishy-washy, or just indefinite, but in the context of HBT, it's a form of courtesy. It clearly acknowledges that the members of HBT really are independent, that change can be hard, and brings a mixture of gains and losses - though hopefully more gains. It is also represents a deserved trust in the HBT members, that they will consider such changes, and, once they have understood what is happening, often wholeheartedly embrace that change.

    The change

    So, what is the nature of the change in HBT? To begin with, it's a change that is responding to a range of forces. These are forces within HBT itself, as well as forces within the hardware supplier market created by all its participants: HBT, the Metcash-owned Independent Hardware Group (IHG), the National Building Suppliers Group (Natbuild), and a half-dozen smaller - but significant - niche hardware buying groups.

    On top of that are significant changes underway at the overall "market maker", the Wesfarmers-owned Bunnings. And beyond all of this are strong macro-economic forces in the Australian - and even global - economy coming into play.

    What is most extraordinary - and, indeed difficult to grasp - is how fortuitous the combination of these various forces will likely turn out to be for HBT as a buying group.

    Partly by chance, partly by a form of determined, long-term evolution over the years, as well as some interesting choices made by its current management, HBT has placed itself in a very healthy position. It is not a position from which it will dominate the industry, but it is strong enough to resist efforts by other groups to have influence beyond their membership.

    Most importantly, it's a position from which it will be able to deliver to its own membership its promised benefits: a chance to be competitive, to retain flexibility, and to deliver a measure of real security in one of Australia's toughest forms of retail.

    But what really marks this change, more than anything else, is its simple maturity. In his opening remarks to the conference, and at other moments, Mr Benstead was at pains to declare that HBT is not becoming "corporate", nor does it have any intention to go down that path. HNN is sure this is quite sincere. However, what Mr Benstead and others have delivered is something that is actually close to the corporate (though different): sheer professionalism.

    The mark of this professionalism is that HBT has singled out the activity it needs to pursue to deliver maximum value to its members for the next 10 years. This puts it in a place where it can maximise value creation, for all participants in the independent hardware market.

    That specific activity is unlikely to be at the centre of the sustained future development in retail at large, and specifically hardware retail. What HBT has done, very wisely, is to chose a prime secondary function, one which it is uniquely suited to deliver.

    To put that in terms of a musical analogy, HBT has realised that in the marketplace set to develop in the near future, its role is not to play the saxophone and trumpet solos, but rather to establish a core rhythm through the bass and drums.

    Origins of the change

    The first clue that HBT was about to go down a different path came when the buying group began to evolve its operations out of its long-time office in the outer Melbourne suburb of Rowville. That started with the hiring of ex-Coles, Foodworks and Philips Lighting buyer/sales executive Jody Vella as leader of the buying group in August 2018. That was followed a couple months later by Mr Vella's hiring of three additional members of the buying team, Mark Sampson, Kevin Marshall, and Pete Hurley. Their numbers were rounded out by Val Skyba in a support role. And, of course, there is the ever-reliable Gavin Keane, who has brought his experience and deep knowledge of both suppliers and members to this new team. Fundamental change, without the support of "the Gav" (as many of us call him), would probably not be possible.

    What this buying group set out to do, led by Mr Vella, under the guidance of Mr Benstead, was to refine, redefine, and re-envision how HBT handles its relationships with suppliers. That has meant delving into the essentials of how a hardware buying group should go about creating value for its members, while also looking after suppliers that agree to closely align with it.

    This means taking into account the competitive situation of members' stores, the competitive situation of the suppliers in their marketplace, and also HBT's position in relation to other buying groups. Once these factors are determined and understood, the various parties can work out how to maximise value under current market conditions and, finally, how to divide that value up, in a sustainable manner, between these participants.

    In business strategy terms, what HBT is doing is taking the buying group function, its relationship to its customers (the members) and to its suppliers towards a position that is beyond what we sometimes refer to as "game theory".

    Game theory is based on situations where there is incomplete information available, with each participant in a market manipulating what is known and what is concealed to develop some kind of advantage for their own side. The insight that Mr Benstead and others in HBT have had is that, due to size and scale constraints, if they follow the game theory path, HBT will nearly always lose.

    To use an analogy, it's a bit like HBT is playing poker with IHG and Bunnings. HBT gets dealt five cards, but IHG is always dealt six, and Bunnings probably about nine. The others start out with better odds, and will win most hands.

    The alternative is for HBT to go beyond the game by releasing more information, and forming bonds of trust with suppliers and others in the market. Stretching the above analogy, HBT and the suppliers can show each other their cards, and agree to split their winnings (at least to some extent).

    This strategy will, from time to time, not succeed. However, HNN believes that what Mr Benstead and others on the HBT executive team have worked out is that the hardware market is, at the moment in a very unique situation, one where this strategy has a good chance of delivering strong benefits to HBT members most of the time.

    In HNN's opinion, this is a very strong strategy, and unique not only to hardware retail, but to retail in general in Australia. It's not just professional: it's truly market-leading.

    Click to download

    To read the full article, please download the latest issue: HI News 5.2: HBT: Market leading strategy


    Retailers shift investment to SG&A

    With costs unlikely to decrease, more productivity is key to growth

    Over the past three years, independent hardware retailers have price matched against Bunnings with increasing success. Now they need to invest in productivity -- as Bunnings is doing

    Independent hardware retailers, aided by buying groups, have done a great job over the past three years in closing the price/margin gap with the market's major competitor, the Wesfarmers-owned Bunnings. They have managed to narrow the gap to the extent that price has become less relevant to customer choice. At the same time they have highlighted the advantages they offer, introducing a new competitiveness into the market.

    However, in the wake of these developments, and just as most hardware retailers are feeling somewhat confident about price/margin, a new competitive challenge is developing. It's one that, while its effects may be delayed by a couple of years, will prove to be just as significant as the price/margin struggle that began 15 years ago.

    Resetting strategy

    It's understandable - given the drive and effort involved in answering the price/margin challenge - that much of independent hardware retail strategy has focused on what, in managerial accounting terms, we refer to as gross profit and gross profit margin (GPM).

    Gross profit is gross revenue minus the cost of goods sold (COGS). GPM is that gross profit divided by gross revenue, usually shown as a percentage. For most hardware retailers, COGS is simply the cost of buying stock, plus in-shipping costs (delivery to the store) and, in a few cases, out-shipping costs (delivery to the customer) as well.

    GPM for retailers is thus really about the effectiveness of the wholesale supply chain, and how that measures up to current market conditions. Most retailers have a good sense of what the minimum GPM they need is, and it's a convenient "score card" for tracking overall progress.

    Given the current market situation, GPM has also been used as a measure of competitiveness. It helps retailers to determine what their baseline profitability is, given the current wholesale cost of goods, in the context of market price constraints. For most hardware retailers, "market price constraints" comes down to "what does Bunnings charge?".

    Retailers will often determine their prices by thinking about the customer value chain (CVC) for a product in the context of the Bunnings price. That goes something like: "Bunnings is charging $X, but my store is less of a drive for them, we have better store amenity, plus knowledgeable, personalised service, are community involved, and offer payment terms on accounts, so I can charge $X plus Y%". Keeping an eye on GPM makes sure that $X plus Y% remains clearly profitable.

    There are good reasons why this has become a dominant approach, but it does lead to strategies that are purely cost-focused. The difficulty with cost-focused strategies is that they typically do not promote much in the way of either growth or productivity improvements.

    Bunnings and other large retailers are very aware of this limitation. They are also aware that, when it comes to squeezing more value out of the supplychain, future gains are likely to be small and incremental. That's especially the case as, with analysts expecting the RBA to cut Australia's baseline interest rates eventually down to 1.0%, we could be looking at an AUD that is worth around USD0.61 to USD0.64. That makes imports from China more expensive than they have been in the past. This is a condition likely to continue for the next two years, at least. Such currency depreciation will wipe out most supplychain efficiency and competitive gains.

    This is of acute importance to Bunnings, because the company's pricing focus remains on consumers, not competition. That means that relative pricing advantage, while welcome, is not the endgame. As former Bunnings managing director John Gillam famously told analysts at one Strategy Day briefing, "the margin is the outcome". In cases where that margin begins to become thin, Bunnings usually responds by influencing the outcome, rather than simply raising prices.

    The realisation that the supplychain will yield low levels of growth is what has led many major retailers to adopt the next wave of competitive strategies. These were initiated over two years ago, but reached peak development during the past year.

    It's easy to get a little distracted by the specific technologies and techniques that are being used to implement these strategies (such as data analytics), but it's the core strategic intent that needs to be acknowledged. That strategic intent can be represented by saying Bunnings (and other retailers) are taking a closer look at performance measures outside of GPM.

    In particular, they are placing more strategic focus in the area of operating profit, which is derived by subtracting operating expenses (OPEX) and COGS from the company's net sales. OPEX is made up mostly of sales, general and administrative (SG&A) costs, along with costs such as those for research and development (R&D). The performance number that gets derived from this is operating profit margin (OPM), which is the operating profit divided by the net sales, usually represented as a percentage.

    Where does CAPEX get spent?

    If we look a little deeper, however, the situation is just a bit more complex than this. Some analysts see most company strategies as coming down in the end to the interactions between three, fundamental core components of large businesses: COGS, OPEX and capital expenditure (CAPEX). In retail you can pretty much split companies up into those that use CAPEX to boost COGS and those that use CAPEX to boost OPEX. US big-box retailer Wal-Mart is a classic example of the first category, and The Home Depot exemplifies the second.

    Wesfarmers as a whole - and Bunnings in particular - is a company that is switching from the first category to the second. This explains - at least in part - why the company de-merged Coles into a separate entity. The supermarket business, as it exists today, will remain all about COGS, which means, given the supplychain constraints, it will continue to be low-growth.

    While this may be a large change for Wesfarmers and Bunnings, many independent hardware retailers may wonder why it should be of concern to them - how much worse, after all, could competition from Bunnings get? But in reality, whether it is intentional, or a matter of "collateral damage", this shift in strategy by Wesfarmers is likely going to have a great effect directly on independent hardware retailers.

    That effect is going to be sharp because, at least as things currently stand, the independents don't have a mechanism which will help them to catch up with Bunnings, as they did during its COGS-oriented strategy, where they were ably assisted by buying groups.

    One major reason why the OPEX strategy is harder to counter than the COGS strategy, is that every COGS strategy is, at heart, based on the utilisation of scale. Bunnings' pricing helped it establish and retain scale, and that scale further enabled pricing. Independent hardware retailers fought back through increased discipline in their buying groups, a narrowed focus onto a limited range of suppliers, which resulted in increased volumes in strategic products from those preferred suppliers. They created scale, in other words.

    OPEX strategy is, by contrast, not based on scale in a business, but on its size instead. Though they seem to be almost the same thing, they really aren't. There are businesses with large scale, but small size, and large businesses with small scale. Wesfarmers, of course, has both.

    One question that independent retailers often have is, what are the practical uses of something like data analytics? One answer that surfaced during The Home Depot's May 2019 investor presentation came from the company's head of merchandising, Ted Decker, when he described new processes for changing up product ranges as they aged.

    Previously, we would wait for a category to degrade, then we would launch a comprehensive line review, which takes months to implement changes. We're now establishing the process and tools to continuously review our assortments, line structure and space requirements so our merchants can better sustain category performance.
    Our aim is to ride the crest of the wave rather than degrade and have to reset. To accomplish this at scale, we're building out the technology to support an automated end-to-end process that incorporates our assortment, planogram, fulfilment, project planning and execution applications. Going forward, we'll be even more agile and will update our assortments or change space assignments more frequently and with better accuracy.

    Instead of tracking falling results for a product over two or three months, then taking another two to three months to bring in a solution, The Home Depot will be able to compress all that into less than two months. The company can do that because it's relying on a wide dataset drawn from a number of stores in a specific region. The impact on customer relevancy and satisfaction, as well as profits, will be considerable.

    The size of Wesfarmers - at this point fully cashed-up from the Coles de-merger - enables it to invest considerable sums (likely over $800 million for data analytics) in developing new technologies, new connectivities, and integrating these into its businesses. On the cost side, that expenditure is amortised over its market reach. On the gains side, given this market reach, even a fractional gain will enhance its position across those markets, and bring significant returns.

    Size has always been an advantage, but there are strong indications that it has become more advantageous since the global financial crisis (GFC). There have been increasing concerns expressed by global economists over the past five years, as they have noticed a growing disparity between the ability of two types of firms to grow in terms of productivity at a much higher rate than the overall slow productivity growth at the majority of firms. Those two types of firms are large firms that have a dominant market position, and those that are on the "cutting edge" of technological development in a market - frequently new entrants.

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    Indie store update

    Warehouse for tradies

    Coventry Group has finalised its $36 million acquisition of hardware and industrial supplier Nubco

    Mitre 10 in Kilmore (VIC) has trade hub ambitions; and Nubco will continue to be operated as a stand-alone business with no store closures and a focus on procurement synergies, following its acquisition by Coventry.

    Kilmore gets Mitre 10 trade warehouse

    Kilmore Mitre 10 has opened a trade-focused warehouse that offers quick pickups or deliveries for tradies. Director Simon Meyer said he had gradually been building the business into a more trade-focused business over the past four years. He told The North Central Review:

    We've really focused on having the materials that builders need to have in stock and undercover so they're protected and ready to go.

    The warehouse runs as a pick and pack or dispatch-only site, which means customers can't shop there but can collect goods. Orders are placed in-store and stock can either be picked up or delivered. It measures 2500sqm, and is one and a half times the size of the store site nearby, and currently holds enough timber to build 100 houses. Mr Meyer said:

    We're really just reacting to what our customers demanded. We needed to have more available and to be able to react faster so that we're not constantly trying to get things in for people, we've got the majority of it available at all times.

    Planning for the warehouse began two years ago, but the site only became available in October 2018. After stock, racking and equipment was put in place, it became operational in April this year. Mr Meyer explains:

    The few builders who have been lucky enough to go down there to pick up stock, that we're been able to supply directly onto their vehicles, have been very impressed with what they've seen and the volume and stock quality we have on hand.
    We're expanding on what we have had but making sure we have the fast-moving lines in volume so we're never caught short. We really want to be able to give the public here in Kilmore more than what they think we can give them.
    We try to pack a lot in and try to make sure that our value is as close as we can get it to the biggest competitors in hardware...

    Coventry Group buys Nubco

    Coventry Group has completed its $36 million, 100% acquisition of Nubco, a hardware and industrial supplier with seven locations across Tasmania.

    Coventry delivers industrial solutions to the mining, construction and manufacturing sectors, supplying a range of fastening systems, cabinet hardware systems and hydraulics, lubrication, fire suppression, refuelling systems and related products. The company, led by executives Robert James Bulluss, Rod Jackson and Ken Lam, in recorded $168 million revenues in 2018.

    The Nubco acquisition offers synergies that will benefit Coventry's Australia-based business by delivering procurement cost savings and knowledge transfer. It is expected to also provide earnings and cash generation to Coventry.

    Law firm HWL Ebsworth advised Coventry Group on the deal.

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    Europe update

    Turnaround progress at Homebase

    Kingfisher-owned B&Q is testing a smaller-store format before committing to a wider roll out

    Homebase has revealed the extent of its restructure to date in its first earnings release since Wesfarmers sold it; and Kingfisher opens its GoodHome by B&Q store that it believes offers a simpler way of shopping for home improvement projects.

    Homebase returns to design roots

    DIY and garden centre retailer, Homebase said it has limited its losses in the second half of 2018 as a turnaround plan under new owners begins to show signs of progress.

    During the half-year, the retailer reintroduced popular ranges such as furniture, brought back in-store concessions and laid the foundations to rebuild its digital offer. It also plans to reintroduce kitchen showrooms to its portfolio, Chief executive, Damian McGloughlin, said:

    The benefits of the changes we have made are starting to come through ... Clearly, we are only 10 months into a three-year turnaround plan.
    Homebase remains one of the most recognisable retailers in the UK and Ireland, and the progress we have made in reinvigorating our customer experience means we are very optimistic about the future.

    Reporting financial results for the six months to end of December last year, with exceptional items, including the profit from the sale of a freehold store and other property-related provisions, losses narrowed by almost 96% to GBP8.2 million, while improved margins helped gross profit jump by a fifth during the period. However, sales slipped 3.5% to GBP497.8 million, from GBP515.6 million in the same period last year.

    The company also cut costs by GBP100 million. Homebase said closing 47 loss-making stores and two of its six distribution centres, reducing headcount from head office by almost 40%, and removing complexity from processes, has helped it to achieve strong financial and operational performance.

    A Company Voluntary Arrangement (CVA) allowed Homebase to close its loss-making stores and secure rent-reductions for another 70 sites. The firm credited the GBP95 million asset-based lending facility from Wells Fargo Capital Finance for supporting it with working capital.

    Hilco purchased the company in June 2018 for GBP1 from Australia's Wesfarmers that had bought the chain for GBP340 million in 2016. Prior to its Hilco takeover, Homebase had 250 stores at its peak and 12,000 staff.

    Home improvement made convenient

    At its recent Innovation Day, home improvement retail group Kingfisher revealed its GoodHome concept that will provide a simpler way of helping renovators and professionals with their projects.

    GoodHome is a way that Kingfisher's innovation becomes visible to customers for the first time, with a pilot store opening in the town of Wallington (UK). This store is an express format focusing on convenience and focusing on the most common DIY projects such as painting walls, fixing taps or installing new sockets.

    The company describes the store as modern and a local outlet that offers more than just home improvement products. It has a team of skilled staff offering expert help in-store; an effortless digital shopping experience designed to make improving homes easier; and inspiration and information to help plan projects. It will also have a dedicated counter for professional tradespeople. There are plans to have more express store trials in the UK and France later this year.

    GoodHome is part of the B&Q network and marks a departure from the DIY chain's larger sheds and its only other smaller shop, on London's Holloway Road. The 5,400sqft site has a sales area of just 1,615sqft and offers around 6,000 products. A typical B&Q store is around 100,000sqft and stocks 40,000 SKUs.

    This core range will be available for same day delivery, with an extended range of over 20,000 products for bigger projects, available for next day Click and Collect in-store or home delivery.

    Products in GoodHome are not stocked on the shop floor in the traditional way. Instead, customers either purchase items by using in-store digital screens, or by clicking and collecting through the B&Q app. Kingfisher chief trading officer, John Colley said:

    We know that customers are shopping differently. They want convenience and access to products and services, however and whenever they want. This trial store is about offering them just that - a new kind of home improvement store that is simple, modern and convenient. It's just one of the ways in which we are making home improvement accessible for everyone.

    As an international brand, Kingfisher said GoodHome aims to shake up the home improvement market by offering products and solutions that are design-led, high quality and affordably priced. Speaking at the Innovation Day launch, outgoing CEO Veronique Laury, said of GoodHome:

    We started three years ago, and we have undertaken in-depth research to get knowledge on home improvement and customer needs. By doing this, we found that people are improving their homes with the same purpose - they want a home that is good to live in. However, this study also revealed that most improvement projects are abandoned either before they begin or before they are finished. It may be lack of inspiration, too much complexity, not enough skill, time or money. Whatever the problem is, there are often too many barriers to create a good home.
    Our customers tell us 'home improvement can be a nightmare' and the heart of our purpose, everything that we have been doing for the last few years, and we continue to do, is about fixing the nightmare. The biggest change [in the home improvement market] has been the arrival of new players like Amazon and ManoMano. But so far, no market player is offering an end-to-end seamless home improvement experience. No one has solved the nightmare. And this is our potential.
    GoodHome is our new international home improvement customer proposition, based on deep customer understanding. It stands for simple, sustainable, unique and innovative solutions that last and which are affordable. GoodHome is the name we put on everything we are doing to make home improvement accessible to the many, not the few: our new product offer, new services, new store concepts, our training centre and our new charitable foundation.

    GoodHome products and services will be available online and in B&Q, Castorama and Brico Depot stores throughout the UK, France, Poland and Romania.

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    HI News 5.2: Europe Update

    USA update

    Retail analytics platform at Lowe's

    True Value said it is "putting the power back into members' hands" in terms of being able to market locally

    Lowe's is strengthening its technology focus by taking on a retail analytics business; and True Value Company is moving into the next phase of hyper-local advertising.

    Lowe's gets into retail analytics

    Home improvement retailer Lowe's has acquired the retail analytics platform of e-commerce software company Boomerang Commerce.

    Lowe's will integrate the platform's technology into its retail business as it looks to bolster strategic and data-driven pricing and merchandise assortment decisions across the business. The platform processes product and pricing datasets and converts them to insights and actions.

    In addition to the technology and tools for the platform, some staff from Boomerang's retail analytics teams in Bangalore and the US will join Lowe's.

    The acquisition includes tools and technology for the retail analytics platform, which is proprietary, but doesn't include customer contracts or related confidential information.

    Following the transaction, Boomerang's Commerce IQ service will operate as an independent business under the name. In a statement, Lowe's chief information officer Seemantini Godbole said:

    ...Pricing and assortment planning have been identified as strategic areas in need of modernisation [at Lowe's]...Adding this team and technology to our existing capabilities helps us leverage the right data quickly, effectively and successfully.

    Profits in Q1

    Soon after it announced this acquisition, Lowe's reported a first quarter 2019 sales increase of 2.2% to USD17.7 billion from first quarter 2018 sales of USD17.4 billion.

    Comparable store sales for the company's US business rose 4.2% while overall comps rose 3.2%. Profits rose 13.6% to USD1 billion in the quarter.

    The company currently operates 2,002 home improvement and hardware stores in the US and Canada representing 208.8 million square feet of retail selling space.

    Hyper-local True Value campaigns

    To increase relevancy and reduce wastage hardware retailer True Value is working to redefine the concept of "location" in location-based advertising.

    After the retailer made the decision to shift ownership from its shareholders and sell a majority stake to a private equity firm, it paved the way for the new True Value to embrace a "marketing-as-a-service" model, offering hyper-local and highly targeted marketing to stores. Company president and CEO, John Hartmann, told Forbes magazine:

    Our goal is to drive profitable retail sales by offering these independent retailers the programs and campaigns that enable their stores to compete in an omnichannel world.

    To this end, True Value has invested in the capabilities to offer retailers á la carte marketing and advertising programs that help promote their business locally. Mr Hartmann explains:

    We stopped charging a national advertising fee so that our local store owners could optimize their approach to traditional and digital advertising. It all boils down into one word: customisable.

    For consumers, highly customised marketing that is geo-targeted and supported by opt-in relevant messaging on their mobile devices delivers a better advertising experience-on their terms. For store owners, access to a digital marketing program tailored to their needs ensures shoppers come in the door-and keep coming back.

    Dave Elliott, senior vice president Marketing, said in an interview with Hardware Retailing magazine:

    In 2019, each store will have its own individual marketing program, and they will be able to adjust it as the dollars go up and down, right on the screen. We're putting that power in their hands because True Value marketing is about customisation, so we are relevant locally.

    Rather than investing in advertising to reach consumers in the vicinity of a particular store, True Value is working with agencies and marketing tech partners to better understand and address audiences in the trade areas around physical shops. Sue Smolenski, divisional vice president, marketing strategy, told Forbes that it is part of a company-wide strategy to help retailers optimise their ad budgets, not waste them.

    Marketing programs are a big part of the package that has allowed True Value to welcome more than 400 new retailers in the last year, according to Mr Hartmann. Since the restructuring, he said, True Value has also made a USD150 million investment to "modernize supply chain capacity and ensure True Value continues to offer the most competitive product fill rates for our customers in the industry".

    At one level, Mr Hartmann said it's about serving and supporting independent retail. Store owners, equipped with marketing packages and services customised to their needs, are locally relevant and ultimately successful in driving in-store traffic and increasing sales.

    True Value data suggests digital marketing drives sales "34% higher for advertised items in stores that participate in the True Value Rewards loyalty program". It follows that successful retailers have to restock their shelves more often-and they rely on one of the 13 True Value distributions centres to replenish the supply.

    Boosting sales serves everyone in the ecosystem. But Mr Hartmann said the prize is understanding new and better ways to capitalise on the differentiating strengths of local retail.

    Physical stores are in business today because there's something unique about being independent and local. Our own observations indicate that millennial consumers, particularly first-time homeowners, prefer local to the web-based trader.

    It's a huge customer segment - 84 million millennials in the US alone - that will be the highest spending consumer segment in the home improvement market by 2020.

    Fortunately for True Value's independent retailers, it's also a segment new to DIY jobs and eager to go to local stores for advice and supplies. Mr Harmann said:

    Our retail stores provide a high level of expertise and highly personalised service that young consumers crave. That's something you can't get from a drone.

    To read more in USA Update, download the latest issue:

    HI News 5.2: USA Update

    Getting together: consolidating indie retailers

    Start with strategy

    If Australia's indie hardware retailers are to consolidate, they need to start by forming workable strategies

    Australia's independent hardware retail sector continues to contract, even as overall hardware retail revenue numbers grow.

    The graph above illustrates the decline in the numbers of hardware retail businesses in Australia, categorised by revenue tranche.

    The second datapoint is just this: overall retail revenue for hardware, according to the ABS, increased from $12.3 billion in FY2007/08 to $19.1 billion in FY2017/18, growth of 55.6%. Allowing for inflation, the increase would be from $15.2 billion in today's dollars, to $19.1 billion, a market size increase of 26.0%.

    To summarise, despite strong growth in overall revenues, the number of stores is declining, except for those with revenues of over $2 million a year.

    For most independents, the reason why this has happened is easy to determine: Bunnings. While the independents have found themselves increasingly hemmed in by declining gross profit margins, Bunnings has continued to grow, expanding in terms of both revenue and earnings before interest and taxation (EBIT).

    The independent sector has had over 15 years now to develop a significant response to Bunnings. What it has developed, so far, is largely a series of survival strategies. Some of these have worked, but, as the stats show, they've worked better for larger stores.

    What we've seen recently is a growing trend for independents to consider viewing their entire sector as more of a unified group. There is certainly a lot of healthy competition between independents, and between competing buying groups, but there is a growing sense that there may be areas where increased cooperation could produce benefits for all participants.

    The only way for this kind of strategy to work at all is if it is strongly focused on growth. This could mean an increase in topline revenues, an increase in profit margin, or both.

    If the strategy is not about the overall growth of the independent sector, then all it would do is redistribute existing marketshare differently between participants.

    That growth could come from any of three areas: reclaiming marketshare in some areas; taking a larger share of new and emerging markets; and by increasing the role of service provision in areas currently dominated by products.

    Another important value is that any strategy of cooperation has to mean that all participants have at least a chance to benefit, and those benefits should be, as much as possible, distributed evenly between stores of all sizes, in all regions of Australia.

    A strategy

    It's not enough to say "let's all get together", and hope that some kind of coherent strategy will emerge from that. If leaders at the various buying groups, and key, influential retailers in the industry want to see broader cooperation, then these strategies need to be developed first.

    We can think about this as being achieved through something like a two-step process. The first step would be to find some common, agreed purpose that everyone in the independent sector would benefit from. Once that coherency is established, it can form a platform on which future, more developmental strategies are built.

    First stage

    In particular, HNN would caution against what might seem the "easiest" strategy to begin with, which is to use such consolidation to concentrate market power on fewer brands and suppliers, thus driving down wholesale supply prices to lower levels. While pursuing that strategy to some extent is necessary and good for the market, taking it beyond a certain point results in diminishing returns.

    From HNN's perspective, the best clue as to how consolidation could be started is something that was suggested to us by Andrew Graham when we were profiling the Traralgon H Hardware store. In discussing the difficulties of the power tool market, Mr Graham said that, beyond pricing problems, one of the major obstacles was that most purchasers began their research on the internet, which meant that their initial searches brought back results from retailers such as Bunnings and Sydney Tools. Smaller hardware retailers simply can't achieve a high ranking in Google searches.

    What is really needed by the independent sector is a well-designed, highly informative web presence that is all about hardware, home improvement and building. It needs to be a website that can become the foremost hub for all this type of information. Its purpose would be to draw in people starting down their path to purchase, and make it clear the independents represent a great alternative to the large and online-based retailers.

    One of the best things about this concept is that, if it received broad industry support from the main buying groups, it could be mostly self-funded, primarily through the sponsorship of selected brands which would receive support.

    In effect, such a project, while being very useful and making a real difference to all independent retailers, would also serve as both a "test" of industry resolve, and an opportunity to consider and further develop exactly how such a consolidation might work.

    Second stage

    Below we've listed three such possible second stage developments, which range from borrowing some techniques from Bunnings and others, through to radical new service offerings. These are really just examples, as HNN is certain retailers themselves would have very good ideas for future developments.

    Captive brands

    One of the big advantages that Bunnings has developed is its "captive brands", which are brands where it has exclusive rights of sale for Australia, including some in which it exerts a degree of input.

    Ryobi, for example, provides Bunnings with a big share of the intermediate to high end of the DIY market, as well as some of the light trade market. Ozito is a more complex brand, as Bunnings seems to have a degree of input into the products produced, with many of these custom-tailored to the needs of the Australian market.

    Even massed together, it's unlikely the independent sector could easily make these kinds of commercial arrangements. What it could do, however, is to find some brands that have become established overseas, particularly those for market sectors which need more of a boost, and bring them to Australia.

    A good case in point would be the 24-volt cordless power tools made for the US-based big box retailer Lowe's under the Kobalt brand. These have been out for around four years now, in a line of tools that includes a drill, impact driver, grinder, reciprocating saw, circular saw, and even a jigsaw.

    The general reviews of these tools are quite positive, reflecting high-quality. They are heavier than most 18-volt tools, but they do pack a punch when it comes to power. Most importantly, they sit at a very good price/performance point in the market.

    In particular, they are ideal for the builder market, which often needs that extra grunt, and whose trades are used to dealing with heavier machinery. As a cordless tool, much of the local certification process is relatively easy, with the exception, of course, of the battery charger, which would have to be re-engineered for Australian current (converting it from 110-120 volt US current).

    There would be many hurdles to overcome, of course, but such a tool would really hit the market in a place where Bunnings and online tool retailers are not well-protected.

    Weekend rentals

    Retailers such as Bunnings do make money through their volume of sales of DIY consumer power tools. So it makes sense that Bunnings might not want to consider expanding the rentals the company does offer, in everything from utes and trailers to floor sanding equipment, to more everyday tools such as drills and impact drivers.

    In general, though, most hardware retailers in the independent sector don't make very much from power tools sales to DIY consumers. So why would they not consider some form of "weekend rental"? According to statistics Roy Morgan developed in 2015, only something like 54% of household actually own power tools, so it is certainly a viable market.

    What has held retailers back is that developing this kind of rental business is far more complex than it might seem at first glance. You need some kind of software that tracks inventory, reserves tools, rents tools, and accounts for returns. You need a transactional website to arrange the rental itself. You probably need retrieval and return lockers, where renters can pickup and return rented goods. You'll have to track tool condition, ensure tools are safe for rental after return, and possibly provide some kind of basic safety information for tool operation.

    That's too much, and too expensive for a single retailer to put in action — but it is something the entire independent sector could get behind and make possible. Of course, the main goal behind this isn't just to earn extra revenue from rentals, it's also to enable many more people to do DIY work, and thus increase sales of goods and materials they need.

    3D printing of construction components

    While this might seem like something that won't mature for anther 10 years or so, it's a field that continues to advance, and will probably enter the mainstream in two to three years. When we think about house construction, we know that one of the limiting factors is often that there is a defined set of (for example) joist hangers, with set angles and configurations. Architects and often builders on the ground "making it work" can find themselves having to make expensive alterations to plans when an unusual situation is encountered, and they need to stay within the constraints of these components.

    The alternative, which many of us have seen on too many construction sites, is "altering" the joist hanger with a couple of whacks from a hammer. This creates a weaker joist hanger, and a potential hot spot for future failure.

    It's possible to 3D print in metal, and there is also a developing practice using ABS plastic combined with carbon fibre, which creates very strong elements. The metal used in many of these printers is maraging steel, which is a special, low-carbon steel with around four times the strength of standard construction steel. It is supplied to the printer in the form of a powder, then fused in 40-micron thick layers to form the desired shape.

    As with most of these developments in construction, there is an ongoing problem of adoption, as it requires acceptance by architects, builders, tradespeople, and regulators. That said, this kind of technology can solve so many problems for the actual builder, that we would expect it to get a substantial boost in acceptance once it clears the basic hurdles.

    This would be well-suited to a sector-wide introduction because it requires not only an expensive (leased) infrastructure, but also training of store staff and education of the intended market. As a service-heavy element of the business, it would be insulated as regards competition from retailers such as Bunnings.


    It's important to acknowledge that the current dispersed nature of the independent hardware retail sector is not an "accident" of any sort. There are powerful reasons why creating any kind of consolidation is going to be difficult.

    HNN also does not think, as some have suggested, that such a change is a direct response from anything like a "growing threat" from Bunnings. We do expect Bunnings to continue to grow over the next five years, but we also think much of that growth is going to come in areas that are outside of "traditional" hardware retail.

    A good example of that would be a move into the area adjacent to its current flat-pack kitchen range, and into semi-custom kitchens. This is — in a phrase popular at the moment — a "highly-fragmented" market, where consolidation could see major benefits emerge. Given the minor role that kitchens play for most independents, the impact would be limited, with the main effect on suppliers such as IKEA, Freedom and The Good Guys.

    We think, rather, that the change is in direct relation to the way the market itself is changing, driven in part by the wider acceptance of digital-based enterprise. We expect to see these kinds of affiliations growing in several retail sectors.


    IHG FY2018/19 first half results

    EBIT surges, but revenue cools off

    IHG presented mixed results, with EBIT continuing to benefit from the HTH acquisition and revenue growth slowed

    Metcash released its results for the first half of its FY2018/19 in December 2018. The company reported group revenue of $6.2 billion, an increase of 2.2% on the previous corresponding period (pcp), which was the first half of FY2017/18. Group earnings before interest and taxation (EBIT), also increased, up by 1.2% to reach $158.1 million.

    For the company's hardware division, the Independent Hardware Group (IHG), EBIT and revenues also increased. EBIT grew by a reported 34.0% on the pcp to reach $37.8 million. This included organic growth, as well as an accounting for continued cost synergies from Metcash's acquisition of the Home Timber & Hardware Group (HTH). Revenue increased by 1.25% on the pcp, to reach $1.09 billion. Overall like-for-like (comp) sales increased by 3.3%, while comp sales for bannered stores went up by 4.2% on the pcp.

    The CEO of Metcash, Jeff Adams, put the small increase in revenues down to outperformance during the pcp. In his prepared remarks, he stated:

    Our IHG hardware business led by Mark [Laidlaw] and his team has performed well, but was comping against some very strong construction activity in the corresponding half.

    Mr Adams detailed the makeup of the EBIT earnings as well:

    Looking now at hardware's EBIT performance. Hardware has again delivered a very good earnings result. EBIT increased $9.6 million. And pre-AASB, the improvement was $10.2 million or 37.6%. The stronger result was due to additional synergies from the HTH acquisition of about $7.5 million and further cost efficiencies and earnings growth from the increased sales. This was partly offset by an increase in the weighting of trade sales in our mix. We expect total synergies for the year to be approximately $10 million, bringing the cumulative synergies from the HTH acquisition to be approximately $34 million.


    Mr Adams also mentioned IHG's venture into trade-only stores, some of which are being brought to market under the IHG's higher-amenity Sapphire program.

    Our pilot trade store-focused stores are continuing to perform well. And we expect to have 12 low-cost, trade-only stores operating by the end of financial year 2019, growing to 40 by 2022.

    At a Strategy Update for investment analysts held in early March 2019, Mr Laidlaw went into further detail about this venture:

    We are also setting up a trade only concept. We've done 11 of them. They're in the cheaper rental areas, low rents. They're certainly to be set up for the tradies to get in get out. And you'll notice the branding has changed. So Mitre 10, it is there but it's not prominent ... Our aim is to roll out 40 of these stores and overlay a digital program across these stores. No one's done this properly yet. Screwfix have. We can't see anyone else that's actually done this properly and we see a great opportunity for us to deliver that.

    Hardware performance

    Perhaps the most unexpected part of the announcement was that IHG stated that its revenue split between trade and DIY/consumer had changed from the 40/60 split forecast at the time of its acquisition of HTH, to a higher trade weighting of 35/65.

    In response to an analyst's question regarding the negative impacts of a declining construction market, the CEO of IHG, Mark Laidlaw, played down the longer term effects:

    What does it all mean going forward? I don't know. I'm going for the correction rather than the crash theory. I talk to our big stores very often and they're saying, there's going to be a tightening in the next two years, but it's not panic for us. And we believe there's enough opportunities and initiatives to cover that.

    Mr Laidlaw expanded further on this outlook in response to another analyst's question.

    We now have company stores, so we can see the pipeline. So of our big company stores, strong pipelines for about middle of next year. And then it's going to get tougher. So what do we have to do? We have to start to get a bigger share of the wallet. We have to get the whole of the house. At the moment, we are big on timber and not a lot more. So there's great opportunities for us to extend the Hardings part of our business which is plumbing. There's other areas which we're looking to move into frame and truss. So I'd agree with you, it is coming off. I can't tell you what percentage is coming off, but it is coming off. But we believe there are great opportunities to offset that with other initiatives that we've got in place.

    In his prepared remarks, Mr Adams had also touched on the potential for growth through the company's Hardings plumbing business:

    Our Hardings business has very strong market position in Victoria. In addition to opening a new store there at Tauranga, we have started the rollout of Hardings in New South Wales and Tasmania as well as starting to sell the Hardings products through the balance of the IHG network. The Hardings business is a very successful one, and we are quite excited about leveraging its growth opportunities across the whole IHG network of stores.

    Mr Laidlaw also answered an analyst's question regarding the overall margins for the business, admitting that margins had not increased.

    So the margin is flat. And I think it's fair to say because our trade mix has moved up to that from, say, 60% to 65%, we're seeing some margins come off, which are flat because there's been other synergies that have offset it, but the mix has changed.

    Mitre 10/HTH mix

    While Metcash did not go into further details about the tension in IHG between long-term Mitre 10 stores and the more recently acquired HTH stores, Mr Laidlaw did speak to this matter at the Strategy Update. He said in part:

    The other big challenge through the integration has been the branding strategy that we talked about. So that has been a very emotional argument and we thought we would lose more stores than we actually have because they would think it's a takeover of Mitre 10 over the Home brand ... The two brands will stay. I mean it would have been very unwise even though we might have wanted to do it to move everything to Mitre 10, we would have lost stores.
    I think that's really settled down. We had a conference last week, week before, and it's coming together. The members are far more united. There's a few non-believers there still that's true, but we're getting a sense that the Home stores are really feeling part of the family and now focusing the effort on the true enemy for us which is the big box.

    Mr Laidlaw took up this theme later in the analyst briefing:

    Something you'll notice on this chart: Mitre 10 now has 22 stores in Tasmania. It used to be about 11 on both brands. We have made that a blue and white state. The four Home Timber & Hardware stores there are predominantly little Thrifty-Links.
    We have used this as an absolute test bed where we've made it a blue and white state. And think of the synergies we're going to get there because instead of running two catalogue programs, you now run one catalogue program, instead of running two television commercials, we'll be running one television commercial radio etc. So we really believe that's the test bed to see what other synergies we can drive out of the business.


    Metcash is a company that has become very adept at spin (some will recall its peculiar treatment of underlying profit after tax as an example), and one example of that skill has been its handling of the increased threat to its trade business from Bunnings.

    According to most of what IHG has to say about this, Bunnings is failing at expansion into trade, while IHG continues to expand. One reason, it seems likely, that IHG is expanding into trade, is that it has lost considerable marketshare in DIY/consumer to Bunnings. As is well known, DIY/consumer carries far higher margins, which means IHG's EBIT numbers will be negatively affected in the long term.

    There is a poor tendency in many commentators to dismiss the efforts of large businesses in new or expanding fields when these do not yield immediate results. A good case in point, and what HNN believes will eventually become an object lesson, is commentary on Amazon in Australia.

    Some of that is happening in regards to Bunnings and trade. As HNN has pointed out since the amalgamation of HTH with Mitre 10 into IHG, that move has removed some of the unstated restrictions placed on Bunnings in terms of expansion versus market control. We do believe that Bunnings will continue to develop its trade business, and this is likely to heavily impact on future earnings by IHG.

    Further, while IHG has done a good job of retaining HTH stores in its network, that has largely been due to a wise decision to hold back on pressuring more of these to switch to Mitre 10 branding. As cost pressures exert more pressure due to falling sales, we could see IHG effectively transplant its Tasmanian strategy to areas such as South Australia. The results in terms of store retention should be interesting.

    An additional pressure on group cohesion could be its continued rollout of its Trade centres, with, as Mr Laidlaw intimated, an "internet overlay". It's difficult to see how such an overlay would be anything other than corporate, which could see a scenario develop where a Screwfix-like digital offer begins to erode sales by independent store owners.

    Of course, IHG may escape many of the consequences of these actions as well – it's certainly proven itself adept at survival in its recent history. But these are very real risks, and they should not be underestimated. The IHG we see over the next two years in the down market could prove not to be a cyclical aberration, but instead the shape of the company's future.

    To read these and other articles in our HI News PDF magazine, please download here:


    Bretts Timber sees steel in its future

    Bretts' slogan is "Let's Talk Timber and Hardware"

    Bretts opened a steel fabrication facility at its Geebung (QLD) manufacturing plant in 2018

    Brisbane-based hardware and building products company, Bretts opened a steel frame and truss fabrication facility at its Geebung (QLD) manufacturing plant in 2018. It is looking beyond its long-standing timber reputation as rising timber costs and shortages mean builders are increasingly incorporating steel into new homes.

    Bretts manufacturing business development manager Darren Harris conceded the decision by a company that started operations in 1912 from a sawmill, raised a few eyebrows. Its slogan is "Let's Talk Timber and Hardware".

    However Mr Harris said the move was already paying dividends with 15% of the company's housing frames and trusses now made of steel.

    Each year, the company produces enough frames and trusses, both wood and steel, to make more than 1500 homes. While steel frame houses have been in Australia for half a century, a shortage of timber and price increases following a wave of mill closures has meant more builders are shifting into steel.

    Mr Harris said Bretts' largest customer for timber frames informed the company last year that it would be using steel in 50% of its projects in the future. Within three months, Bretts had started its steel fabrication business at its Geebung site, where it also manufactures aluminium windows and doors. He told the Courier Mail:

    We could have worn a $500,000 plus loss [by not switching to steel] but we simply focused on providing them with what they needed.
    Traditionalists in the industry might see us as traitors but to survive in a business you need to be aware of market shifts.

    Steel frames and trusses were easier to assemble in the factory and builders could generally put them up quicker. Mr Harris said:

    Steel maybe saves half a day on a job.

    The steel arrives at Bretts in large coils from supplier BlueScope where it is fed into machines that cut the flat sheets into the required lengths using a digital blueprint of the house. It is then assembled into wall frames and roof trusses before being shipped to the building site.

    Mr Harris now expects steel frames to make up more than a quarter of Bretts' business by 2024. He said:

    Commercial builders are leading the way in use of steel and we expect this to equate for 25-30% of our overall business within five years.

    The company has put on 10 extra staff to make the steel frames, with plans to expand production this year. Mr Harris said that despite the move into steel, timber will always be an important product for Bretts, which remains a family-owned business.

    Houses still look the same in that they have windows and doors but the technology and materials have changed. The old asbestos has gone and there are new types of cladding. But timber is still going to be around for flooring and timber posts.

    From The Brisbane Courier Mail

    To read these and other articles in our HI News PDF magazine, please download here:


    IHG Expo 2019

    IHG held its annual Expo in mid-March at the Adelaide Convention Centre

    This year's IHG Expo included a review of the past year's performance, and a guide to its growth plans

    The Metcash-owned Independent Hardware Group (IHG) held its 2019 Expo in Adelaide on 19-20 March. HNN attended the plenery session at the start of the Expo. According to IHG, there were 852 delegates/staff attending, as well as 893 supplier personnel, for a total of 1745 in all.

    Perhaps the best way to begin our coverage is through the lens provided by two endings. The first marked the end of a heartfelt, warm and at times very funny presentation by one of Mitre 10’s founding members, John Clennett. In part this was in recognition of the group’s 60th anniversary.

    But, just before we get to that, let’s hear about Mitre 10’s founding moment, as Mr Clennett related the history, which took place in 1959 in the grand tradition of the founding of hardware groups (Hardware & Building Traders followed a similar path):

    The four of them got together in a small weatherboard home in Union Road which still stands in Surrey Hills in Victoria. It was the home of a chap called Reg Buchanan who ... was the main driver and there were the four players Reg, Tom Danaher, Jack Womersley and Ian Davey together with Ian Nisbet. They had quite a number of meetings and then ... they said look we’ve been buggering around with trying to do something together, let’s have a big luncheon, let’s get legless, and finalise some decisions.
    Reg was very keen to sell paint, so he said, “Bugger it!”, threw $5000 on the table, and said to the others, “Well, are you going to join me or not?”
    So, before you could say “Jack Robinson”, they had $20,000 and then went off to a paint company and they were able to buy the paint at really less than half the price that they ever one of them [had paid before].

    At the close of this interesting review of the earliest history of Mitre 10 (which began as “Mitre 8”), Mr Clennett offered these remarks, reflecting on Mitre 10’s history, and IHG’s present:

    A lot of us remember when we as members ran the business. That was a time when co-operatives were reasonably successful. Those times are gone, and you’ve heard ... how important it is for all of us as small retailers to be supported by, in our case, Metcash is a publicly listed company with a real commitment to people ... and your individual businesses. So whatever you do, understand that Metcash actually care for us all and you need to support them, and you need to demand from them what you want from them. Thank you very much.

    We can match that up with the closing remarks of IHG CEO Mark Laidlaw, at the very end of the Expo’s plenary session:

    So, guys, it is time to unite. We’ve been spending too much time fighting each other amongst the brands. It doesn’t matter whether you are Home, Mitre 10, Thrifty or True Value. The thing that unites us is that we’re all independents. And Metcash for its part and IHG can add enormous value, as you’ve heard today in those areas that it’s hard for independents to do. We will invest in the brand. We will invest in store development. We’ll invest in the digital. We’ll invest in the warehouses, and we’ll invest in people — probably the most important.
    We will also — now that we have started to get our model together — reach out to those other independent groups such as HBT and Natbuild. It is time that we all unite. They don’t have to come under our brands but we do need to get together.
    We have great respect for Bunnings. But in this time, when the consumer is changing so rapidly, will they be flexible and adaptable enough to change with that? Time will tell. For our part there is a great opportunity to unite and become a genuine opportunity for Australian shoppers. Thank you very much.

    These closing summaries suggest a similar basic rationale: the market has changed in such a way that independent retailers will likely be able to better survive and prosper when they are in some form of partnership with a corporate entity, such as Metcash.

    Mr Clennett based his statement on what is likely a very genuine “gut feeling”, and many years of experience. Mr Laidlaw’s closing statement was more definite. It listed a series of activities that IHG would undertake:

    • Brand investment, including advertising, etc
    • Store development, which is likely a reference to the Sapphire program, and IHG’s “paintbrush” store ratings system
    • Investment in the digital aspects of retail business
    • Investment in warehouses, for the distribution of goods
    • Investment in people, such as training and/or hiring IHG staff

    This has become a familiar argument over the past five years or so. Mitre 10 and then IHG has presented itself as a “safe haven” from the market dominance of Bunnings. Much of that “safety” has come from its belief that its warehouse-based consolidation of demand across limited brands, which provides better bargaining power and therefore lower prices from suppliers, was one way of diminishing Bunnings’ dominance in low pricing.

    The counter-argument from buying groups such as HBT and Natbuild has been that the costs associated with IHG’s model are high, while they have very low costs, a difference which diminishes the pricing efficiencies of IHG’s model. The buying groups also provide a less-hierarchical, flatter model, where individual members really can see suppliers they discover become part of the group.

    It is the need to make these points and demonstrate them that drove most of the plenary presentations that Mr Laidlaw and IHG’s general manager - merchandise and operations, Annette Welsh, delivered. Mr Laidlaw concentrated on achievements to date, and the development of the organisation, while Ms Welsh provided an insight into innovations, and the direction IHG is taking towards markets and customer engagement — what Mr Laidlaw labelled “the sexy future stuff”.

    Ms Welsh also outlined some possibilities that, if developed further, could really help change the independent hardware retail sector, across all buying groups.

    Past and present

    Mr Laidlaw’s delivery of the latest news to members is quite distinctive. It’s very far from, for example, an officer reporting HQ’s view of the battle to the troops. It’s more like a battle-hardened sergeant in a behind-the-lines bunker letting his comrades know what the last battle was like, and what he expects from the next one. He projects a sense of physicality, that at times leads you to expect he would, given half the chance, be willing to wrestle some of the more recalcitrant graphs and numbers to the ground.

    There is certainly no doubt about his passion, and, as with all the top staff at IHG, there’s a clear sense that he is preoccupied not with his own success, but rather with that of the enterprise. It’s a passion that, while very welcome, can also lead to some over-statements. Perhaps that’s because Mr Laidlaw is seeking a balance, somewhere, between the strategic value of a percentage point, and the awareness that these numbers mean something also to the welfare of a family, to the value of a life spent in hardware retail, out there in the crowd of members gathered in the half-dark of the amphitheatre of the Adelaide Convention Centre.

    So, what is it that Mr Laidlaw is so passionate about? In terms of IHG itself, two main, linked concerns he has are the cohesion of the group, and its potential for growth. A good place to start to pick this apart is with what is commonly accepted as the bellwether for the group’s health, the store numbers.

    Store numbers

    Not that Mr Laidlaw is terrifically keen on these numbers himself. As he commented:

    We’re a public company. Couple times a year we front the analysts, we front our shareholders, and the first question that the analysts always tend to ask as they roll it into their modelling is, oh your store numbers, you’re closing stores, store numbers are going down. And that is true. So what we’ve done here, we’ve measured store numbers since we took over the business in 2010 and in the independent sector they actually have declined 28 percent. It’s worth having a look at that change.

    At the actual results announcement in December 2018, Mr Laidlaw made this response to the query about store numbers:

    The other thing that’s important to note that there were a 170 stores called Thrifty-Link that we took out from Woolworths that are about 20% of the stores that represent 2% of the [wholesale sales] volume. Those stores will continue to close and [this] will have minimal impact on our EBIT and indeed on our sales. So I’m not hung up on those. The other ones are with the company stores. We had 41 company stores that we acquired from Woolworths. Today, we have 37. We have got out of four poor leases, which has actually added to our EBIT. We did lose one large customer. We lost a large customer in Queensland.

    Looking at these numbers for the past couple of years, in Metcash’s proposal for the acquisition of HTH, the number of bannered stores was set at circa 740. A slide to 690 indicates a decline of 6.8% (over two years). That’s inline with the background rate of the 28% over eight years provided by Mr Laidlaw.

    The other element to note (as mentioned elsewhere in this issue) is that figures from Australian Bureau of Statistics (ABS) show there was a net loss of over 1000 hardware retail businesses with annual revenues under $2 million during the same period. It’s also worth noting that the ABS figures show there were 6127 hardware retail businesses at the end of FY2007/08, and 5325 left at the end of FY2017/18. That’s a decline of 13%, though allowing for mergers and consolidations, the real decline is likely around 11%.

    This has taken place against a background of an increase in overall retail revenue for hardware, according to the ABS, from $12.3 billion in FY2007/08 to $19.1 billion in FY2017/18, growth of 55.6%. Allowing for inflation, the increase would be from $15.2 billion in today’s dollars, to $19.1 billion, a market size increase of 26.0%

    For Mr Laidlaw and IHG, the reason for that discrepancy, the increase in overall revenue and the decrease in the number of viable stores, can be explained by a single word of two syllables: Bunnings.

    Equally, other buying groups have seen membership numbers increase. In terms of general comments in the industry, however, several seasoned veterans have told HNN that they have been surprised at IHG’s retention number, and had privately predicted the group losing around 10 or more further stores. Mr Laidlaw’s very hard work has produced results.

    Yet those same observers see 2019 as being quite a testing year in this regard for IHG. These observers see IHG moving to increase pressure on HTH members to cross-brand to Mitre 10. There is some support for this notion in remarks made by Mr Laidlaw when addressing financial analysts at a Metcash Strategy Update in early March 2019:

    Mitre 10 now has 22 stores in Tasmania. It used to be about 11 on both brands. We have made that a blue and white state.... We have used this as an absolute test bed where we’ve made it a blue and white state. And think of the synergies we’re going to get there because instead of running two catalogue programs you now run one catalogue program, instead of running two television commercials, we’ll be running one television commercial radio etc. So we really believe that’s the test bed to see what other synergies we can drive out of the business.

    As HNN has stated in the past, and as Mr Laidlaw’s remarks make clear, this is a great move from a corporate perspective, as it will decrease costs and increase earnings. However, many observers are not confident that all HTH members will see these moves as an entirely positive development.

    Revenue performance

    Quite rightly, Mr Laidlaw mentioned he was proud of the financial performance of IHG (formerly Mitre 10):

    But our revenues — proud of this chart — only eight, nine years of being here we have grown our sales back... For full year 2011 financial year we were about a $750 million business. Very few of our stores were buying through us, our suppliers were going direct to the stores.
    We developed a strategy. We stuck to it and through those next five or six years we continued to grow at about 5 percent a year and then fantastically and amazingly we took the opportunity to acquire the HTH business, and we doubled our revenues to $2.1 billion on a wholesale basis. We would expect of course the next couple of years that will flatten but then we’re confident that we’ll get a second kick after that.

    The recovery of Mitre 10, and its transformation into IHG is indeed praiseworthy. The business of completing a merger between two separate organisations of near-equal size is complex, and many organisations fail.

    The reason why IHG has not really received the recognition it deserves for this feat, however, is because — from the perspective of financial analysts — it has so far been more of a sidestep than a step forward. While revenues have grown, so has capital investment. Return, and in particular growth on return, is how corporations are judged.

    Since the acquisition, IHG has returned considerable earnings before interest and taxation (EBIT) through additional efficiencies it has developed, but the company also announced that this kind of gain is almost over.

    It’s very understandable, given the venue and the message that IHG had to deliver, that Mr Laidlaw not mention a recent, salient datapoint. The results from the first half of Metcash’s 2018/19 financial year were released in December 2018, and they are not encouraging. EBIT return was good, but overall revenue grew by only 1.25% — though like-for-like sales in bannered stores rose by 4.2%.

    While performance in terms of savings are material and ongoing, the core question now is how the company can use its additional scale to create growth.


    One of the slight surprises announced at the half year results in December was that IHG sees itself as having moved from around a 60/40 split between trade/DIY to a 65/35 split. In his session at the Expo, Mr Laidlaw did go some way to explaining that evolution, seeing it as an indirect consequence of the Woolworths/Masters business plan:

    So Woolworths bought Danks first, and then they certainly acquired some of those other businesses. Hudson’s, Belmont, Tait’s, and they bought them 100%. And then, as we know, that madness stopped in 2016, and it was sold — [all] the businesses — and we took the opportunity to bring them together. And that’s why you then see today that we’ve moved to about 65 percent split between trade, 65% trade, 35% DIY.

    Going back to the presentation for the acquisition from 2016, this shows that Mitre 10 had a 55/45 split trade/DIY, while HTH had a 62/38 split, and the projected outcome of the merger was 59/41. This new shift further towards trade indicates that, while the history is accurate, there is more than that going on.

    To speculate, what is happening is that IHG has recognised two things: the first is that, for the moment, Bunnings has an almost unassailable position in DIY, and wresting marketshare away would be very tough — especially in the reduced demand situation of falling house prices and subdued activity in real estate markets. The second element is that Bunnings really is going into a situation of change, and it is possible that two years from now, a part of that market will be easier to take on.

    Meanwhile, of course, IHG is working hard to experiment at expanding into new areas of the trade market. In introducing Metcash’s half-year results, the company’s CEO, Jeff Adams, said this in his prepared comments:

    Our pilot trade store-focused stores are continuing to perform well. And we expect to have 12 low-cost, trade-only stores operating by the end of financial year 2019, growing to 40 by 2022.

    That document also describes the “trade-only” store objectives:

    The new Trade Only store was designed as a low-cost model to meet the Trade customer’s needs and attract new customers to the Mitre 10 brand.

    Some more insight into the thinking behind trade-only was also provided by Mr Laidlaw in response to an analyst’s question at the half-year results presentation.

    The traditional Mitre 10 business is a segment in the renovations. They didn’t deal with the big tier one builders, Mitre 10. It was good. It was a nice, safe place, and you make better margins in that area. So we have a large share of that 65% trade in the renovations. And then we also do have new dwellings, which is what we picked up with the big company stores. But we’re not in the multi-dwelling market.

    Bunnings has recently commented that its trade market is confined to the trades renovator, and builders who do one to ten houses a year. The strategy with the Mitre 10 trade-only stores could be to capture more of the five to 15 houses a year builder market.

    Sapphire/Mitre 10 crossbrand

    At first glance, some of what we’ve said above about IHG “cooling” it on DIY for the next two to three years, while getting set for a later push, might seem to contradict the ongoing expansion of the Sapphire program. In Metcash’s annual report for 2018, it described the targets for Sapphire:

    The success of the program to date has led to it being accelerated to target the completion of approximately 200 stores by 2022.

    Mr Laidlaw commented on the program:

    We’ve now completed 56 Sapphire stores. They are in three formats. We are at 27 stores at the time when we presented last year, so nearly 30 stores have been added. Some 37 are in that mixed-type business, they have a perfect mix ... maybe 55 trade 45 DIY now it’s the perfect mix of business. We also completed eight that are smaller convenience DIY stores.

    This indicates that the company will pick up the pace of Sapphire conversions to around 42 a year, to meet its goal. This large investment in DIY (though trade also benefits from the program) might seem to not fit with the DIY strategy described above, but actually it complements it nicely. In terms of the strategy of a delayed push into DIY, IHG could be planning to make that push once it has a fleet of stores fitted to a higher standard.

    HNN would predict that around 2021 Sapphire could further develop in two ways. There could be a new, higher standard introduced, which would relate more to the “connected store”, and internal infrastructure, as well as a “Sapphire Lite” program, which will help to improve the standard of amenity of more stores, without all the current requirements.

    Mr Laidlaw also commented on the requirements for HTH stores which planned to switch over to the Mitre 10 brand.

    So we may have confused a lot of people here last year when we talked about the opportunity to move to Mitre 10. And I think we left you thinking that to become a Mitre 10 you had to do Sapphire, you had to invest and you had to put in the core range that’s required under Sapphire. We had a lot of good discussion and debate with our National Advisory Council. We were very good and we developed a road map for the brand and it’s recognised that you do not have to make Sapphire standards to be painted up to Mitre 10.

    He commented further that four stores had already been cross-branded, and that a further 30 would make the transition during 2019.


    At the end of his presentation, Mr Laidlaw provided a quick overview of the market as IHG sees it developing over the next two years. Along with most in the hardware and construction industry, he sees the current “crash” as being somewhat oversold, and suggests that housing levels will likely come back to 2015 levels, but not below that. He pointed out that the market structure of IHG, as it stands currently, should adapt well to the shift in the market.

    The other thing ... to talk about is that we believe our business is quite well balanced in the sectors of the segments that we operate in. So in other words, if we’re 35% DIY and we’re 30% in the renovations and alterations and we’re 30% in the detached housing [then] we are only 5% in the multi-dwelling, which is the area that will get smashed the most.

    While that identifies how IHG has moved to protect its marketshare, and limit the effects of the downturn, what this doesn’t account for is the big question: where will growth come from?

    That’s really the question that Ms Welsh set out to answer after Mr Laidlaw’s presentation, by outlining some of the ambitious plans that she, Mr Laidlaw and the management team at IHG have developed.

    Future and growth

    After a field report on IHG stores that were doing well against the competition, Ms Welsh began a discussion of the market as IHG sees it:

    We know how hard it is for marketshare movement in the DIY side of the market. But where there is opportunity is in the trade side of the business. This is a $17.6 billion market in Australia and we compete evenly for share at this moment in time with Bunnings, and there’s a big piece of the market under the expertise of plumbing. But the remaining 62 percent still sits in a very fragmented way, and that’s where the opportunity is.

    She emphasised the importance of this market, not only for stores that are already trade-focused, but also for those with an established DIY business:

    Even if you are purely, at this moment in time, DIY, I’m going to ask you to keep your thoughts open over the course of the next couple of minutes as I talk you through the trade part of our business. And, potentially, encourage you to think about the opportunities you may have within this market.

    In what followed, she emphasised a series of market insights and directions. These included: exploring market adjacencies in house construction (whole of house); prefabrication; alignment between suppliers through a hardware retailer to deliver a complete solution to a builder; expanding markets through digital techniques; and making use of what IHG considers to be data analytics.

    Though that list really does not do Ms Welsh’s message justice. It wasn’t a message about expanding current practices to new areas, but rather developing new practices that encompass additional market opportunities. To go back to the statement by Mr Laidlaw with which we began, he said IHG “have started to get our model together”. What Ms Welsh outlined was what that model could do, and the direction in which it is headed.

    Whole of house: five stages

    One of the major areas of expansion Ms Welsh highlighted was a move to supply builders with products for all five stages of construction, which she called the “whole of house” strategy. Those stages would be:

    • foundations
    • frame and truss
    • lock-up
    • fix
    • fitout

    She introduced this strategy like this:

    There are five stages to the build of a house. Most of you and everyone of you I’m sure in this room knows this better than I do. So, five stages to build a house. And historically, traditionally, as an independent group, what we’ve done is really focus our attention on the frame and lockup stages, with a particular focus on selling quality stick timber.

    As Ms Welsh pointed out, this is also a vulnerable market segment at the moment:

    It’s given us a fantastic business but as the building cycle comes off that’s going to come under pressure in terms of our ability to maintain sales.

    To explore further opportunities, Ms Welsh’s team took a look at the current business both company and joint-venture stores were doing:

    We segmented our company owned stores and joint venture builders over 9000 account customers, and what we discovered was what, as much [about] what they are buying from us, as what they’re not buying from us.

    What they discovered was that they did well in the frame, lock-up and stick timber business, but this consisted of only 34% of the total opportunity. Looking beyond that, there was a further 62% of construction materials that IHG was not servicing, and that existed in what Ms Welsh describes as “a highly fragmented market”.

    Where we think the biggest opportunity is, is in the fix and fit-out stages. The good news that comes with that is that fix and fit-out comes absolutely with a better margin, higher profit return than perhaps the earlier stages of the build.

    To enable this approach, Ms Welsh and her team set about enhancing supplier relationships.

    To ensure we can complete a whole of house we were clear as a merchandise team that we were probably missing a few key relationships [needed] to make sure that we can offer product across all five stages of the build. So we went about making sure that we were able to fill every gap in the need of your builder.

    One step was to build a better relationship with truss makers.

    We created through Brett Martin a wonderful alliance with Melbourne Truss that is enabling our Victorian teams to start our relationship with the builder at the frame and truss level.

    With timber supplies tight, the team extended this to steel frames as well.

    We didn’t have a relationship with any supplier to enable you to support a builder on steel. We now do, through Steel Frame Solutions.

    The end result of this is a comprehensive set of suppliers.

    We have this, right suppliers with the right products and the right relationships, to ensure we can fill every single gap — or at least 90 percent of them. I’m sure there’s a few that we need to work on.

    Sales alignment

    With this background, Ms Welsh sees an opportunity for the trade sales reps in IHG hardware retailers to better align with their reps in supplier firms.

    Within those stores what you all have is sales reps, sales managers that are the key to the relationship with the trade. It’s what makes us different to any corporate. Within our own companies we know we have 73, and if I was to add up all of the others around the country, there would be more than 200. What we’d like to do is really see how we can leverage that army alongside the similar army that exists within our supplier base and help build the value that we add to the trade every day.

    Later in her talk she was more specific about what would happen in these relationships:

    I’m creating and starting trials to ensure that the sales managers that are aligned to every member in the room can connect with an equivalent expert in the supplier base. [This is] to ensure that together we can go to a builder and align the best quality of information that the supplier has on the best product for the builder, with the best relationship and service proposition that comes from our sales managers and our teams, and put the two together. [Then you can] have a conversation with the builder, and get them to understand and recognise the increased value that bringing that business through the right group with the right source product from the right supply can [deliver].

    One of the trials that Ms Welsh delivered was through Richmond Mitre 10.

    We’re confident in that model ... because of the great work that’s been done by Ben Shaw and his team at Richmond Mitre 10 in Victoria. About six months ago ... we had segmented the builders of Richmond’s Mitre 10. We understood what they weren’t buying from us. There were a couple of key areas that Ben was clear that there was opportunity.
    One of them was frame through Melbourne Truss, the other one was cladding, they were buying it through James Hardie, plaster through Boral, etc. [Ben] brought in the local state-based sales representatives from those three suppliers, and said, “I think we have an opportunity. Here are my top 17 builders that represent 40% of my trade business and I think together if we do this right, we can actually convert them to bring their business across to Mitre 10 Richmond.
    Across those five suppliers that they engaged with, the sales growth for 17 builders in six months was 24 percent. That’s a whole of house strategy.


    Ms Welsh also provided a quick update on how online sales are doing, and what IHG’s plans for its future are. Much of IHG’s online development has been about establishing click-and-collect ordering.

    A year ago we sold through the membership $1.5 million dollars on click and collect. This year that number will exceed $6 million. It’s a huge amount of work and a massive amount of growth but over 500 stores every month receive an order from click-and-collect, and that provides that opportunity to drive a consumer to store and the connection that we’ve got with the consumers. Our expectation is next year that will be $11 million and the year after $30 million.

    Digital enables collecting more data about customers, and Ms Welsh sees the profile of these customers as being very positive.

    The average basket size on click-and-collect is now $220 and through the work that the digital teams have done it is attracting a brand new customer to us. A customer that wants to pay in a different way than a normal credit card or cash, [using] Afterpay or Zip-pay. A female customer, and a younger customer. All of this is really clear and key to the strategy I’ve talked about right at the front: can we grow the basket size of the customers we have, or can we attract brand new ones? And digital is doing actually both of those.

    Data analytics

    Ms Welsh also provided some details about the use of what IHG considers to be data analytics.

    The key to getting digital right, the key to consumer driven is about making sure that we have data... It adds huge value in relation to ensuring shopper-led [and] that we have the planograms right. But what it also does is enable us to engage with each one of the consumers in a manner that means something to them.
    And the way in which this is only going to succeed is if you and your teams continue to ask that awkward question, the one that the teams must become more used to is, “can I have your e-mail address or your mobile phone number?” The reason for that is we can personalise the product offer to the customer. What we want to do is ensure that we don’t bombard any customer with information that’s not relevant, that we give them information that’s going to add value to them.


    The developments put forward by Ms Welsh certainly would seem to offer some opportunities for growth. However, it’s equally evident that this is going to be difficult, long-term work to bring off successfully.

    Importantly, most of these suggested developments rely on a more centralised, corporate approach to managing the business of IHG. The commercial deals with suppliers, for example, will rely on IHG/Metcash building a relationship with a fellow supplier corporation, which will enable individual members to benefit, through IHG. Along with the transition to more Mitre 10 branded stores mooted by IHG, this kind of deal will be able to unlock more value for all participants.

    There is absolutely nothing wrong with this, of course. What is good about it, is that it more clearly defines the buying groups in the independent sector. IHG can represent the consolidated, corporate approach. Groups such as Natbuild and HBT can represent an approach where the “capital” consists of the people and the businesses that make up the group. For them, the “return” is not an EBIT number or a share price, but simply the success of those members and their businesses, on their own terms.

    It’s a genuine choice.

    At the same time of course, there is also some drive behind the idea of a more united independent sector, which Mr Laidlaw went some way to suggesting as an agenda item for the future. For that to happen, though, the sector would have reach beyond the corporate/non-corporate divide, and find common ground.

    What would that common ground look like? HNN believes that there is a strong clue in the work presented by Ms Welsh at the IHG Expo. In very broad form, many of the plans she presented contain the possibility of a new, different model that the independent hardware sector could adopt. That model is based on changing from commerce that is based on selling products supported by services, to primarily selling services that are supported by products.

    It would be a sharp change to the industry. What would drive it forward, however, is that this is the one model which would help independent hardware retailers get out from under the constant erosion of profit margin through competition with Bunnings, and other price-driven hardware retailers.

    In what follows we lay out some broad outlines of what this might look like.

    The Bunnings model

    If we are talking about business models in the modern Australian hardware retail market, we really do need to begin with Bunnings. We can start by repeating Mr Laidlaw’s astute and accurate assessment of the state of Bunnings — and of the industry:

    We have great respect for Bunnings. But in this time, when the consumer is changing so rapidly, will they be flexible and adaptable enough to change with that?

    While Mr Laidlaw is applying this need for change to Bunnings, it is, of course, applicable everywhere in the hardware industry, and especially to IHG — as well as groups such as HBT and Natbuild.

    The Bunnings model really begins with a specific relationship between profit margin and risk. This was developed during the time John Gillam was managing director. His realisation was that any increase in profit margin also increases business risk in retail, as, in an informed market, higher margins decrease the propensity of consumers to buy a product.

    That risk is, of course, balanced by the countervailing risk that if profit margins are too low, the retail business will not generate sufficient returns to cover operating costs and return on capex.

    Most retailers balance these two risks through externalities. The risk of the higher profit margin is reduced through high levels of marketing, high store amenity and, where possible, some control over the supply of a product.

    The entire Bunnings business model is based on reducing any risk arising from profit margin to the lowest possible level. Once a business has that kind of low-risk ballast providing stability, it can then radically increase risk in other areas. That means it needs only minimal marketing, low store amenity, very lean logistics, and customer service that is adequate, but far from outstanding.

    Of course, the only way for such a business to increase profits (which it must, in a corporate environment) is for it to continuously expand. But, as it turns out, increasing risk in all those areas — low store amenity, minimally trained staff — reduces the cost of expansion. As it expands, associated operating costs decrease, so that profit margin can go lower — and a competitive cycle is formed.

    This model has proved to be a very difficult for other retailers to compete against. Lacking the scale and supply chain access of Bunnings, retailers find limited profit margins render some business lines unviable and also, at the very least, inhibit their ability to recapitalise and further develop their businesses.

    The independent business model

    The model for most independents is to charge slightly higher prices than the lowest in the market, but to compensate for this by value-adds such as advice, better store amenity, and being “local” businesses.

    Looking at the raw numbers, as pointed out above in the business failure statistics, that isn’t working as well as retailers would like. They face what is really almost the equivalent of a “profit drought”, with retailers making do with less and less in order to survive.

    But what if there were a different business model, which provided for higher profit margins, did not require a high level of scale, would appear first in trade/commercial, and then move to DIY/consumer, and would also fit with the existing infrastructure of today’s independent hardware retailers?

    Such a model is in many ways implicit in the market approaches that Ms Welsh outlined during her talk. It has the potential to take hold over the next two to three years, and bring with it substantial changes to independent hardware retail in Australia.

    The basics of this model are simple. Rather than, as they do at present, selling products, with those sales enabled by the provision of services, such as delivery and finance, instead retailers will sell the equivalent of services, and those sales will be enabled by products.

    This solves the profit margin difficulty, because profit in service delivery is based not on costs, but quality, and quality of services is the result of skill and training. It is also a model that relies heavily on the digital, both in its marketing and delivery.

    While this might seem far from today’s model and market, in fact the work of Ms Welsh comes surprisingly close to directly touching the new model. It’s a definite step in that direction.

    If we look at what’s involved in IHG’s whole of house strategy, it is evident that this is a move from seeing a house build as a succession of product orders to be fulfilled, to regarding it instead as a continuum of build activities. When Ms Welsh speaks of what facilitates this market opportunity, it’s not about finding the lowest priced products and throwing them on the back of a truck for delivery. It’s about establishing an interlocking connection between suppliers, sales reps at IHG, a store owner (who may have relevant local knowledge as well) and the needs of the builders themselves.

    This is based on knowledge sharing between participants, and it is the sharing of that knowledge that builds value. In fact, the single most brilliant thing that Ms Welsh had to say in her presentation was this:

    Already, today, you are seeing 49,000 of those house plans. And when you get a house plan in hand, it offers up and opens up the opportunity for the world around all five stages [of the house build].

    The architectural plan is the central document of a build, and lays out what products are needed, but also, suggests the order and cadence of the build. Retailers could provide a comprehensive quote or bid based on this information. This could be developed in association with the groups involved. It’s likely that in such a case, builders will not regard the quote in terms of the prices of individual components, but rather as an overall price for a sequence of service deliveries to the build site.

    We could say that the move from products to services could change the main business model from the retailer-centric notion of using low profit margin to reduce retailer risk, to the consumer-centric notion of using knowledge sharing (driven by digital capabilities) to reduce consumer risk. In the latter case, value is not a matter of reduction to the basics, but instead something created from skill, trust, and better relationships.

    Data analytics

    While data analytics are useful in selling products, they are vital through the entire marketing process for services. However, the data analytics that are needed are what we might term “tertiary stage” analytics, which are quite different from both primary and secondary stage analytics.

    Most of what IHG presented at the Expo as data analytics was very much secondary stage. That stage is dominated by processes of segmentation. At first glance, segmentation does look like it is consumer focused — because, after all, you are “looking” at consumers. Closer examination, however, shows that it is surprisingly retailer focused.

    For example, on one slide Ms Welsh showed the need to segment builders by size. What is that really about? Size is usually used by retailers as a means to prioritise potentially more profitable customers over less profitable customers — and the less profitable ones, through this process, will likely lose out a bit. Yes, small and large builders do have different needs, but from a service rather than product perspective, it’s actually not all that different.

    What’s the alternative? In tertiary data analytics there is a concept known as “behavioural identity” or BI. Rather that assuming identity based on characteristics such as size, BI tracks what the customer does, and determines from this what their current BI is.

    BI seeks to understand what stage of the project development process customers are currently occupying. To take a consumer example, think of someone considering buying a kitchen. Segmentation divides these customers up into kitchen size, planned expenditure, materials, and so forth. The customer is then exposed to suitable products, based on this.

    The advantage of BI is that it permits complex interactions from the retailer, that can help the consumer move through the different BIs necessary to complete the purchase. In a kitchen project, customers might have a diagram sketch of what they want, or just be trying to choose a style. If there is a diagram, perhaps the consumer can take a picture of it with a mobile phone, and the retailer can provide an interactive version. If it’s all about style, the retailer can help build mood boards. Over time, the data on mood boards could accumulate, and the BI system might be able to determine, just from a mood board selection, the type of kitchen the consumer might prefer.

    To take a commercial example, an important characteristic to determine about builders is what their current attitude towards risk is. Some builders have a generally high acceptance of risk, others seek to reduce risk at all costs, but most vary the risk they are willing to assume depending on the project.

    How do you work out a builder’s risk status? One way is to analyse building permits and plans to determine whether a build is in keeping with past builds in an area, whether it is like other builds the builder has done, and how successful the immediate past builds of the builder have been.

    That’s not easy, and you really need a highly qualified data scientist to work out how to quantify those elements, and how to derive a risk profile from them. But the processing power to do this, which 20 years ago would have required access to a supercomputer, and today be purchased from Amazon, Google or Microsoft for a reasonable hourly rate.


    All the buying groups have strong, unique identities. At the Expo you could experience a strong sense of fealty and fun in a robust, vigorous package. HBT, of course, is unmatched in the pure larrikin, creative cleverness of its members. Natbuild excels at a kind of store-by-store strategic approach, one which has made it surprisingly influential in the market. All of these have a place, now and in the future.

    The IHG Expo 2019 indicated the possibility of a move towards a more mature independent hardware sector, across all the buying groups. While the competition for buying group membership is set to continue, there are other processes at work, which will most likely benefit everyone in the sector.

    But what remains to do, if this potential is to be realised, is further hard work for all buying groups over the next three or four years. All the groups have a crucial contribution to make, and all the groups, should this model be developed, stand to benefit, and regain overall marketshare.

    To read these and other articles in our HI News PDF magazine, please download here:


    Traralgon H Hardware

    Andrew Graham takes his Dad's 30+ year-old store into the future

    Located in Victoria's Latrobe Valley, this H Hardware store has worked hard to expand its market through innovative products, great staff, plus new marketing initiatives online and to women

    When we imagine where –regionally – future developments will come from, most of us think of urban environments, or at the very least the suburbs and associated regions of major cities. Yet, in Australia at least, that's far from being the case. Rural and ex-urban areas have contributed more than their fair share of novel developments and inventions throughout the nation's history.

    Given that, it's probably not so much of a surprise to find that many of the innovations in hardware retailing originate in regional areas. In the case of Taralgon H Hardware and Andrew Graham, these innovations are about finding ways to expand market reach into new areas. In particular, and what first caught our attention about Andrew, is his work on reaching out to female customers and tradespeople.

    Traralgon is located 144km (or 160km by road) east and a little south of Melbourne, Victoria. It's in the Latrobe Valley, which is situated in the broader region of Gippsland. With a population of 25,500, Traralgon is Victoria's 11th largest town, just behind Mildura and Warrnambool, and ahead of Wangaratta at 18,600. The nearby towns of Moe and Morwell combine to add a further 28,000 to Latrobe's population, which recorded a total number of 75,000 in 2017. The entire Gippsland area has a population of 272,000.

    The Latrobe Valley is well-known for its production of electricity for the Melbourne market through the use of its brown coal reserves. Traralgon also has a papermill, first established in 1936, and then expanded post-World War II. It shares an active dairy industry with much of the surrounding district of Gippsland, the verdant green paddocks supporting a Lions dairy plant, among other commercial enterprises.

    Historically, Traralgon was sufficiently prominent in Victoria that 65 years ago it was one of the towns where Her Majesty, Queen Elizabeth II, stopped to greet the Australian people, on 3 March 1954.

    All that sounds good, but what is really unusual and interesting are some of the less likely activities the area has nurtured. It is also home to Australia's only aircraft manufacturer, and is currently set to provide strawberries to Melbourne, via Australia's largest hydroponic strawberry glasshouse, covering 12 hectares. The Latrobe Valley has been selected as the trial site for an electricity-generation "microgrid", which will enable farmers and others to directly share excess electricity generation, without going through a central provider –a bartering arrangement that will be managed through blockchain accounting.

    The store

    Given all that, it's perhaps not such a surprise that you would find someone who is building a real presence in the Australian independent hardware retail industry working in Traralgon.

    The Traralgon H Hardware is situated on Church Street, right near the town's centre, where it has been operating for several decades. It doesn't take long in a conversation with Andrew to realise you are talking to someone who takes hardware retailing very seriously. He has taken a new approach in areas such as marketing, product selection and staffing, but it's the fact that these ideas are built on an in-depth knowledge of hardware that really impresses. He's that rare combination of a second-generation hardware retailer who is able to retain the essence of long-term practice, while also integrating new business opportunities, and updating old practices.

    The store in Traralgon was originally opened by his father, Rob Graham, in 1988, and his mother, Charmaine Graham (a nurse by training), worked alongside him. This followed on from a previous hardware store the couple had opened in suburban Mordialloc, in 1983, meaning the family has been in the business for 36 years now. (Andrew's parents are originally from Moe.)

    Hardware retailing came after Rob's career in the Australian Navy, which he joined as a teenager. As Andrew tells the story:

    Dad left the navy because he was stationed in Sydney. So, he came back to to Frankston and then did the store in Mordialloc, sold that, came to Traralgon, and a year later, bought this store. Which from memory was a tiling and hardware store.
    We were a Homestead store for that period. Then I think it was 1996 or 1997 they had the merger and became Home Hardware. I think the population has grown like four times from what it was.

    It wasn't just the store and the business sense that Andrew gets from his father. It's evident in what Andrew says that Rob also had a strong passion for the business.

    Anyone who knew Dad, knew how passionate and vocal he was. I used that to go to the Home Hardware regional meetings, and pretty much pull him out of them!
    He was passionate about the businesses. He was on the selection committees for the catalogues, when they used to have those. It would have been in the late 1990s to the early 2000s. Dad was on the board, which was something like the members executive, like I am on the members' exec for HBT.
    He was very well-known and he would be very vocal about that because when they started setting catalogues nationally, he fought back against that. When something that works here, won't work in Queensland, for example. You are going to have that going either way, but it was really about having input and finding where it sort of does work nationally. That's what he was really asking for.

    With a history like that, it's no wonder that when Woolworths bought out Danks, and Home Timber & Hardware Group (HTH) along with it, after decades with HTH, Rob decided to leave that group and join HBT instead.

    When all that stuff happened with Woolworths – it was all too corporate for us. If I told the old man we were going to go to [Mitre 10] Sapphire today he would probably burn the shop down! And that's been the beauty of HBT. It's like every input you have is at least listened to and you get an answer back to it. Meanwhile, the corporate [stores] have got the blinkers on. They only feed the stores what they need to know.

    While Andrew has been happy with the transition to the HBT brand, it's the shift up in HBT to H Hardware branding that he sees as giving his store a real spark. He sees the brand as having a very bright future, combining the best of what the corporate independent groups receive with the responsiveness of non-corporate, cooperative groups.

    If I had of known about H Hardware when we left Home Hardware, I would have gone into it at 100% straight away. Trying to do your branding on your own is just hard. It costs a lot of money.
    The exclusive products with H have also been good. We had a family come from the Mooroopna H Hardware store when I was working on a Saturday, and the kid saw my [branded] car at the front and wanted to come into the store.
    His name is Mitch, from memory, and he does a lot of their Facebook posts. He's like a six or seven years old and he's like the mascot of the store and he wanted to stop in.
    It's cool that we are getting recognition, there's more popping up everywhere. And that's all it takes, once you get a bit more traction in the industry, we'll start to get more known. Once there's more of us in a similar area, we can start doing some sort of marketing together today. That's what we used to do when we were a Home store, we'd all put money together, do some TV, and then you can spread your costs a lot more.

    Today's hardware

    While issues about buying groups and the role of branding in helping hardware retailers grow are important, in today's environment there are a couple of things you have to do right out of a dozen that are equally important.

    To name some of those issues: there is hiring staff, firing staff, wage calculations, product selection that provides just the right price/quality/availability balance so that narrow margins can produce decent profits, store design, intrusive council regulations (notably about footpath displays and signage), planning regulations, technology –both for driving sales, as well as understanding new product technologies –sales reps that are overstretched by margin pressure on supplier companies, the exchange rate of the Australian dollar, as well as whole new ways of marketing.

    We haven't even mentioned Bunnings yet. And not just Mum and Dad's Bunnings, but the Bunnings Masters built, which seems to be almost everywhere, and "coming soon" to any likely market that crops up.

    For the next generation that will shape what hardware retail will be in the future, it must feel at times like reaching one of those unexpectedly hard levels in a video game (such as the tubular level of Nintendo's Super Mario World) where even though you've demonstrated good skills to come that far, you now have to develop a whole new set of skills if you want to continue.

    The answer seems to be to not only absorb the lessons of the previous leaders of independent hardware retail –the importance of personal relationships, personal service, closeness to the community, forging good commercial relationships, and extending a helping hand to tradespeople when possible –but to equip themselves also for a dynamic approach to the retail environment.

    The first step we see these leaders taking is to make an effort to step outside the hardware retail "bubble". For Andrew that meant working elsewhere in the hardware industry, and even stepping entirely outside of it for a time.

    When Bunnings opened [in Traralgon, in June 2012], I went to work for some other businesses. So I had the opportunity to do something different.
    I ran the Plumbtec in Frankston for about five years. I also worked for Beaconsfield Home Hardware for a couple of months, then sold cars for a couple of years. I really learnt heaps there, surprisingly, especially sales techniques.<
    Then I ran the Plumbtec in Warragul, which is part of Burdens Bathrooms, and I also learnt a lot there. I had 250 staff, it's an old business so it had a boys club and I don't believe in that stuff. I'm not a politics person and I actually came in and about three guys in the business had applied for the job and didn't get it. I got the job so I was already on the back foot with those people –and I didn't care!
    A big thing that businesses don't work on these days is culture. It's something I've been really pushing in the shop here for the last three years. That's what I learnt when I left Plumbtec, it had a poor culture, in my opinion.

    While that kind of informal education is key, Andrew also knows that formal education plays a part as well. That's why he's currently in a program to obtain his Masters in Business Administration. It's a program that not only provides a structure to business thinking and strategy, but also the tools to understand and express what is happening in a business. Culture, understanding what it really is and how it works, is one of those tools.

    Not that Andrew thinks that having a great business culture is an easy thing to pull off. As he points out, that is especially the case in hardware retail, where there are long work hours, and a range of stresses, from being polite, courteous and engaging with customers, dealing with the "big personalities" of some tradespeople, and, of course, more direct physical stress that comes from shifting heavy things, as well as dealing with hazardous substances daily.

    So culture is a big thing. The boys are working 7:00am until 5:30pm sometimes. And it's physical and draining, so if you don't have a [good] culture in the business they're just gonna burn out. Be spiteful, talk behind the boss's back, and it festers into your customers. Because they're on site, they are the face of the store, they're talking to customers. They are supposed to be salespeople –not just your delivery drivers.

    Andrew has some very clear ideas about what it takes to build a better culture in hardware retail:

    It's things like chatting to staff more than anything. I don't like saying that you want to be their friend. Because if you want to admonish them, or even possibly dismiss them, then you don't want to be their friend. But you have to make that relationship with them. So you've got to get to know about their home life and hobbies, and be aware of of their actual personalities, how that affects them, because everyone is different.

    But it's more than that, too, for Andrew. He's taken an active role in his community to employ people who have disabilities.

    I've been hiring a few staff from one of the local disability agencies lately. The lady who I work with from Wise Employment is just awesome. She's come from corporate human resources and recruitment.
    Most people think disability services is about hiring someone with autism or Down's [syndrome], or something like that –which is cool as well. My brother-in-law has Down's and he's completely hilarious. He works at Woolworths, so it's not like he can't work in this industry.
    That's what everyone thinks of. They don't think that people with depression and anxiety also have disabilities.
    So I'm a big advocate. My wife has been a respite carer for 12 years. Because her brother has Down's, she's always been involved with it.

    It's not, Andrew is quick to point out, just some entirely charitable thing to do –there are other advantages as well.

    Obviously it helps to get subsidies from the government, but also I'm finding the people I hire from Wise work harder. And not just work harder, but they really want the job so they are a lot more motivated.

    Accepting people as they are, and helping them to fit into an enabling store culture, while at the same time keeping the productivity up, is something Andrew also extends to younger hires.

    My Dad, for example, he really can't handle managing some of the younger staff. Attracting younger people to the industry and then managing them properly, that's a big thing when I talk to everyone at HBT.
    One of my [MBA] subjects was about managing the millennials and how it is 100% different. It's not that they don't work hard, they just work differently. Different work ethics, different lifestyle etc. So we work long hours, and you have to embrace it.
    We've got a guy who plays cricket, and we let him go home early on a Thursday so he can go to cricket training. That's worth more to him than any pay rise. Just so he can have a lifestyle.
    That's a hard thing with a lot of these older guys in the industry. They don't understand, they just think this younger generation is outstandingly lazy. It might look like that, but, really, it's not.

    One of the keys to getting HR matters sorted out, Andrew believes, is to make use of outside consultants for some of the important parts.

    I make use of the local Victorian Chamber of Commerce, and I've got a woman named Crystal who really helps me out. It cost about $1200 a year, and you can call her and she'll just get the right person to call you. On their website, you can download every template you can ever think of.

    Sometimes, however, Andrew has called in even more specialist help.

    I employed a woman last year, who was an HR specialist. She wrote all my workplace contracts. Once, I also got her to help dismiss a staff member whom I knew had sort of a jagged history with employment. He had already taken someone [through the complaints process] for unfair dismissal. He came into work one day and was moving one of his elbows like he's hurt it.
    And then I found out he had started recording conversations with my Dad, and with my sister who works here as well. So I thought, this is just going to become bad.
    I got her in and she was like this silent assassin. She is such a nice, quiet young lady. She just let him know he was going to be dismissed with the most monotone, polite voice.
    I learnt a lot on the spot watching her do it. One thing she did was to offer to provide him with support afterwards, like "if you want to sit down with me, I'm happy to go through everything with you". If I said, "do you want to sit down have a chat afterwards for some support?", it wouldn't work! But she was an independent person doing it. And that's something like $60 to take care of what could have been a big problem.

    While that is something of the less pleasant side of managing staff, Andrew is more drawn to the side where a business can directly improve the worklife of people, enhancing both their productivity and earning potential. What dominates that area is supplying good quality training, for the right staff.

    Something I went into the last couple of years is to find the best way to educate my staff. A lot of people in this business try to do everything themselves. Every self-help book you read tells you not to do this! Easy to say but hard to do!
    One of our new guys has been with me for about four months now. I hired him from the local race club, he used to manage the restaurant. I hired him because he had management experience, and he used to manage the pub in Warragul so he can talk to everyone, which includes those tradespeople who have "big personalities".
    But he turned out to be really good with our systems. I just unloaded everything on him. Like, information on every supplier I know, how to do everything on the computer. The growth in him was the quickest I'd ever seen in a staff member. He's just very good at absorbing stuff, which really helps.
    Doing that, I could instantly see why it was such a good idea. It's made my life much easier. So I've been trying to do that a lot more. But you can see with the older store owners, like Dad –he can't do that. And he doesn't even really want to unload most jobs. Because the way he had to run the business, you had to do everything yourself. And at that time, 20 years ago, you actually could.


    Many retailers struggle a little with marketing, while for others it's a natural part of the business –and Andrew is very much in the latter category. As with most "switched-on" marketers in hardware retail, Andrew's first point of reference is the rise of Facebook as a marketing platform.

    It's all marketing, and you want to gauge your return. That's why Facebook marketing is good, because you can see the actual return.
    I tested the local paper. We paid for a Christmas ad in it. The ad said that if you bring it in with you, you would get 20% off as well as going into the draw to win a $500 gift voucher.
    Only one response. It went out to 60,000 people in the area and only one came in.
    You've still got to wade through the crap on Facebook but at least you can see people talk about it, you can see there is interaction. It's time-consuming, but you've got to do it.
    I've been trying to work out how to get more people more interactive with the business this year like YouTube videos, so that's my next job to do.

    One problem Andrew and others have encountered, and a reason why this kind of marketing can be so time-consuming, is that most suppliers have not really geared up to help independent retailers with marketing their products.

    The problem is suppliers don't give us enough marketing material. The thing that really annoys me is a lot of suppliers do quite a bit of marketing for Bunnings, but don't contribute much to our marketing. Companies like Holman –they've got a great range and give a great deal to HBT members –but when it is advertised on TV, it's constantly Bunnings ads for Holman. I know Bunnings helps to fund that, but it's just frustrating that they don't give us videos or anything like that, that we would happily use. You go on to their YouTube page and there's Bunnings logos on some of the videos so you can't even use them. When they don't give you enough marketing you have to do your own which is very time consuming. For such good products, it's really frustrating.


    One of the areas where Andrew is far ahead of most hardware retailers is in understanding and getting better results from the women's market. We've seen a lot of efforts to engage better with this market which have come off as at best a little condescending. However, Andrew's approach has been very different, and very effective. It all starts with special events, a "Ladies' Night", but one with a very different focus.

    I'd been talking to the ladies on staff about doing a Ladies' Night, and so we had one –and it went crazy! It went really well.
    A lot of what my thoughts were that in the Latrobe Valley we have this situation. We have a lot of guys –because of what happened with the Hazelwood power plant shutting down in 2017 –who have gone into fly-in, fly-out [FIFO] work, so they're not home. Also, family separations are bigger these days, so a lot of ladies are trying to learn home maintenance on the fly.
    So, they really needed to know how to do the work. I did things like getting a local tradesman to come in and show them how to fit a door handle. We had Sheffield here, Bremick, Amgrow, PPG. Ladies were buying hand tools, drill bit sets and more. It was a really good vibe. They were asking the tradesmen questions and pulling things off the shelf.<
    The only criticism we had was that they wanted more crafty stuff. I didn't want to do that because one of our competitors do a lot of them and they do all the crafty stuff. I actually want to make this practical.

    What's evident in speaking with Andrew is that what makes his approach to the women's market so different from other hardware retailers is that it is holistic. Rather than just trying to "bolt on" sales to women, he's integrated women into his sales staff, and into the tradespeople he markets to as well.

    There are a lot more apprentices coming through who are women which is awesome. In the Valley, we've always had some of the best tradesmen in the area because of the power stations up here, and all that's being privatised now. It's all been changing, and it's good to see a lot more women coming through.
    We get a lot of ladies coming in here, because I've got a lot of women staff in the store –it's a 50/50 split. And sometimes you see people gravitate to the women more.
    I just hired the first lady to work in the timber yard. She's been here two months now, and she's picking it up pretty well. Her Dad was a plasterer and she also knows some of the builders. When I was at Plumbtec, I used to have a lady who worked with me on the trade desk. I find them more level headed, they don't get angry easily. However, you need to watch out, because they can hold grudges a lot longer than guys usually do!

    It's not only on the supply-side of tradespeople that there is a better gender split, there's also a specific demand for female trades as well.

    I am getting asked a lot more for lady tradespeople. I was speaking to a guy who does work for the Office Choice store, and he had to do a job for a law firm that specialises in domestic abuse and domestic violence. They asked specifically for lady trades, because they want to support that area, but it's also about being more comfortable.
    There still are not enough lady tradies down here at all. I'm trying to build up a network of lady tradies. In fact for the next ladies' night, I've got a lady plumber, a lady builder, and a woman landscaper. That will be great for the training on the ladies night.

    One reason why Andrew was keen to adopt the ladies' night approach is that he hasn't found "trade nights" to be very effective.

    Builders just don't appreciate them anymore because there are so many. Also there weren't many coming in because they were knackered at the end of the day. So I started doing breakfasts, and still only a few turn up.
    But what set me over the edge was we had a Christmas party for the builders not last Christmas but in 2017, and I bought a thousand dollars worth of grog and food. We had three people turn up. Then they complain that they don't get anything for free!

    To read these and other articles in our HI News PDF magazine, please download here:


    Indie store update

    State awards for HTH stores

    A hardware and trade supplies store slated for an inner-city suburb of Toowoomba (QLD) has been approved

    The Independent Hardware Group 2018 Awards of Excellence were awarded to two Home Timber and Hardware (HTH) stores recently.

    The team at Peterborough Home Hardware in South Australia have taken out a win for the state's best store, two years in a row.

    The store were awarded for its cleanliness, outstanding customer service and large stock range. Store owners and managers, Nick and Konny Srour have been serving Peterborough and the surrounding towns of Terowie, Yongala and Orroroo for nearly 14 years. Nick Srour told The Flinders News:

    For a regional country town, many people comment about the amount of stock that we have in the shop and ... we have travelled around a fair bit to a lot of country towns and it is hard work stocking a store in a country town but we realised early on that if you don't have the stock people go elsewhere.

    Winning the award for the second time helped them realise that what they provide is award worthy. They strive for exceptional customer service and they believe this is what will keep their customers coming from far and wide, time and time again. Nick said:

    I came in here when I was a builder many years ago and you used to have to badger the staff to find out when your order was coming in and we didn't want that to happen. We have a process in place and we try to get the products that the customers want as soon as we can.

    There is also an added element to the store's customer service and that is their four legged friend Sandy, who wanders the store and greets the customers. Konny said:

    Everybody loves Sandy, you can't not love her she is so cute. She came to us when she was five weeks old and everyone loved her. One of our customers brought her into the store and we couldn't resist. From then on, she gets upset if we don't bring her, and the customers are upset if she is not here.

    The team want to thank Peterborough and surrounding towns for keeping them in business and supporting them as a local business choice. Both Nick and Konny pride themselves on being described as the "mini Bunnings of the Mid North" and "best store ever".

    Dipper's store

    In Moree (NSW), Dipper's Home Timber and Hardware won the Northern Region Store of the Year Over 1,000m2 and the Northern Region Garden Centre of the Year. The victory took owner, Rebecca Diprose, by surprise, according to the Moree Champion. She said:

    I think these awards are reflective of our great staff and the hard work everyone has put in over the past 12 months. We've embarked on substantial physical changes that customers will notice - visual merchandising that is clean and fresh, de-cluttering so visitors can see through the store, and really efficient labelling - the right product and the right price.

    Rebecca's vision for Dipper's is to encourage a retail outlet that "people can take their coffee and go for a wander in a genuine customer friendly shopping environment".

    Our interior decorating, shelving, merchandising is all about increasing our store standards, and we believe there's still room for improvement, which we'll be focusing on over the next 12 months.

    South Toowoomba

    Toowoomba Regional Council officers have approved a proposal to create a nearly 500sqm hardware store tenancy at 19 Pechey Street in South Toowoomba (QLD).

    The new development would be built in two stages, with the main store, 15 car parks, loading bar and landscaping down first before a warehouse tenancy and another loading bay were added later. Planning officer Peter Swan said in his report he was satisfied that the code-assessable application had met the planning scheme requirements. He told The Chronicle:

    The proposed development generally complies with the assessment benchmarks or it can be conditioned to comply. Where the applicant has not provided sufficient information, conditions have been imposed to ensure compliance.

    Those 81 conditions covered landscaping, waste management, fencing, stormwater and visual amenities.

    South Toowoomba doesn't currently have a hardware store, with the nearest one being a Mitre 10 in Darling Heights.


    To read more in Indie Store Update, download the latest issue by clicking on the following link:

    Indie Store Update - HI News Vol. 4 No.8

    Diamond Valley Mitre 10

    Sapphire program

    Long-time Mitre 10 store carefully balancing an independent approach with corporate marketing advantages

    Diamond Valley Mitre 10 began in 1979 as a store name "Timber King". It was little more than a tin shed in a leased paddock outside the town of Diamond Creek, about 25km north of Melbourne. Flash forward 39, almost 40 years later, and the business Norm Hastings started in a tin shed while living in a small caravan has moved closer to the centre of Diamond Creek, and now occupies a block that is 1.4ha., with a main store of 2000sqm and an extension of 1380sqm of floor space, plus an additional 1300sqm under cover in the outside yard. The renamed Diamond Valley Mitre 10 (DVM10) also has a turnover of well over $20 million a year.

    Though none of those numbers completely tell the story. The real value of the company is in its human capital, which extends through its 85 total employees (many of whom are, of course part-time). It's a crew that includes Norm's children, as well as an outstanding team of veteran retail staff, many of whom have been with the store for over 15 and even 20 years.

    It's the kind of human capital that is valuable to everyone involved: the store management, because it gives the business excellent capabilities in the field, the staff itself as it means experienced, high performance people get to work with colleagues of equal standing, and can learn from experienced people at first hand - and, of course, it really benefits the customers, who get such great service many of them may not even realise just how lucky they are.


    Obviously, all that didn't "just happen". The progress from the tin shed to the 2000sqm, high ceiling, high-finish store required lots of effort and even more risk-taking.

    The development of the first store, the tin shed, started only a year after it first opened. As Norm tells it:

    The tin shed that we had, we decided to put some hardware into that. We put some hardware into the shop but we ran out of space. So we were going to rebuild a double storey building onto the front of the tin shed, and we made that the hardware store. And we joined Mitre 10 at the same time.

    The next really major change took place in 2007, when Timber King moved from its original location to the new store in the centre of Diamond Creek, and changed its name to Diamond Valley Mitre 10 (DVM10). Timber King had bought up a local company, Valley Outdoor Supply, and the new enterprise was partly a result of merging those two businesses.

    That wasn't the only change. Timber King's long-time manager of hardware operations, Frank Benton, also bought a part of the business, becoming a partner. As operations manager, Paige Hastings explains:

    Frank is the one who developed the whole retail side of things in terms of the hardware store. Before that, it was mainly timber, and Frank gave some pizzazz to it and developed that side (DIY and retail) of things.
    Frank is a merchandiser. That's what he's done throughout his career. He's built that from scratch. He used to work for McEwans. He brought that to the store and he took my brother and various other people under his wing, and he's been very stringent in terms of the merchandising. Now he's starting to bring some of that theory out into the trade area, and it does help. It's your silent salesperson. It really attracts people to the area.

    Frank's influence is really felt everywhere throughout the store. When you point out some very good feature of how products are presented and sold, the floor staff will just about always say something like "Yeah, that was Frank's idea".

    Even with a great team, the store expansion, move and name change carried a high degree of risk. But it started to pay off almost instantly. The new store fully opened to the public on a Saturday, and by the end of Sunday demand had been so high that the store completely ran out of paint.

    What makes this a really notable achievement is that at the time, in Mitre 10's pre-Metcash days, the buying group had opened a large number of "Mega" stores, almost all of which had started to fail by 2008. Sources have told HNN this was in large part due to difficulties in keeping them stocked - they had the stores, but they didn't have the supplychain. The one exception was an independently owned Mega store in Packenham, which, some of the floor sales staff told HNN, had been a source of inspiration for the original merchandising at DVM10's second location.


    Ten years after the move to the new premises, in 2017, the DVM10 team decided it would be a good idea to make moves to keep the store fresh and at the forefront of good design and presentation. So the management decided to sign up for IHG's Sapphire store program.

    As Paige describes the decision:

    So we were 10 years old. Sales are still kicking along and about where we wanted them to be. However, we wanted to keep up with the industry. We knew that Bunnings were building new stores out in the northern suburbs. And we just wanted to stay fresh. We wanted to keep up with the market and to evolve with the community. So we needed to give them a reason to shop here instead of anywhere else, to keep shopping local and keep supporting the local community.
    That's the main reason why we did it. Through the merchandising and the way that the store looks, people can actually see that you are investing in what you've got.

    DVM10 store management is very pleased with the result of the Sapphire transformation. Talking to the people on the floor who manage departments, it's also evident that there was a great deal of give-and-take when it came to implementing "standard" Sapphire design policies. When HNN asked Paige about this, she explained:

    We had to [make changes to Sapphire] because one of our biggest growth areas is garden and outdoor - which is quite unique for a Mitre 10 store. And the profits are quite healthy in that area as well.
    We wanted to invest money in that department, and we changed some of the elements that Sapphire had. For example, they wanted us to have the paint counter right at the front. But we saw the need to push for placing faster-moving kinds of items up front for impulse buys. That is mainly because our store is so narrow and slim. It's not really wide like a lot of Mitre 10 stores are, so we pushed to have paint remain at the back, which is where it was before.
    You can still see the paint desk from the front, and that was our compromise with them. However, we weren't missing impulse sales. Paint is ... you're only going to buy it if you really need it. It's not like you're going to just walk past one day say, "Oh, I really want that".
    So we were very strict on the fact that we wanted to still have the "prettiness" at the front. A lot of our customers are female, so that's also very different to many other Mitre 10s. In fact, in the retail area, 80% of our clientele is female, and that's what we needed to keep pushing.

    Part of the compromise on the paint desk was that, while the Sapphire team wanted the paint card display shelves at right angles to the desk (which is parallel to the front entrance wall), DVM10 pointed out it would be better if they were angled so that they, too, were visible from the front. The end effect is a "V" of display cards in back of the paint desk, all presenting to the entrance of the store. It's highly effective.

    There was a similar development of the above-shelf signage. While this was originally a two-dimensional, flat display, DVM10 pointed out that it could be used instead to front additional shelving, making a handy storage place for additional stock. (That's important to DVM10 as they operate with minimal warehouse storage for stock.) The result works so well, that it's likely you will see a similar system appearing in more recent Sapphire conversions.


    To read the full version of this article, please download the magazine, HI News, Vol.4, No.8, by using the link below:

    HI News, Vol.4, No.8: Diamond Valley Mitre 10

    Lowe's store closures and exits

    "Non-core" activities

    Managing inventory, building efficiency in-store and driving increased sales per square foot

    US home improvement chain, Lowe's announced that it is closing 20 of its most underperforming stores around the United States and an additional 31 stores in Canada.

    The stores set to close may have been hurt by their proximity to Home Depot stores and other Lowe's stores, according to Credit Suisse analyst Seth Sigman. He noted that of the US stores being closed, 75% have another Lowe's within 10 miles, and 90% have a Home Depot store within 10 miles.

    The majority of the Canadian stores that are being shut down are under the Rona banner, a chain that Lowe's bought in 2016 for USD2.3 billion.

    Lowe's currently operates 2,390 home improvement and hardware stores, including 1,740 in the US. The shuttering of the stores is expected to take place by February, the end of its 2018 fiscal year.

    Mexico, "non-core" exits

    Lowe's said it is exiting its retail business in Mexico, where it operates 13 stores, and exploring alternatives for the business, including a sale.

    The company also said it has identified "certain non-core activities" to exit including its contracting service, Alacrity Renovation Services and Iris Smart Home businesses.

    Lowe's CEO Marvin Ellison, in pursuing a buyer for the Iris home automation business, said the company will no longer pursue ventures that dilute its return on capital.

    Lowe's decision to sell its smart home Iris platform is a major shift for the company. It was the first major home improvement retailer to target the mass consumer market with a broad home automation solution using the open platform by Iris for devices from different brands to connect with each other. Back in 2015, Lowe's Innovation Lab launched leading edge technology including robots at CES (Consumer Electronics Show).

    While Lowe's plans to sell its Iris business, it will continue to sell smart home products. A Lowe's spokesperson said:

    We will continue to carry Iris and other smart products on our shelves. However, we will focus on the retail side of the Iris business, not on supporting our own smart home platform. The smart home category continues to be an important part of our customers' home improvement journey, and Lowe's remains committed to carrying the breadth and depth of smart home products and brands to meet our consumers' needs now and in the future.

    The moves to exit Mexico and divest its contracting and smart home businesses came as it reported a sluggish third quarter. Same-store sales rose 1.5%, trailing analysts' estimates of 2.9%.

    However the home improvement retailer posted revenue of USD17.42 billion in the period, up 3.8% from the same period year ago, and beat analysts' forecasts who expected USD17.33 billion.

    Lowe's said earnings for the quarter were USD629 million, down from USD872 million during the same quarter of 2017, mostly because of costs related to store closures recently announced.

    CEO priorities

    This was the first full quarter under Mr Ellison since becoming CEO in July. He has told investors that he needs time to focus the company on improving core operations, and he's removing distractions and underperforming assets to do that. The review of the business has been "substantially" completed, Lowe's said.

    In an interview with the Charlotte Business Journal, Mr Ellison said making changes quickly was part of the plan.

    It's best to do a detailed assessment of the business as quick as you can to limit the disruption over the long-time horizon.

    After thinning executive positions at the company, Mr Ellison began paring away what he sees as non-essential in the aisles of Lowe's. That means rethinking some of the goods it sells, getting rid of lower-selling items, and focusing on the top 2,000 products it carries. Lowe's also wants to bolster its business with professionals, something that has been Home Depot's forte. He said:

    The pro customers are looking for a great price, service that saves them time and brands they want.

    Lowe's is working to regain those customers by expanding its offering of brand-named tools and through other methods.

    In another interview with The Observer, Mr Ellison said he considers Lowe's a "transformation" and not a "turnaround" like J.C. Penney, where he spent the last three years as CEO. The priority for Lowe's right now, he said, is improving basic "retail fundamentals".

    Retooling inventory is one of the "retail fundamentals" Mr Ellison said has to be addressed first. Another "fundamental" to be addressed is a need for basic engineering standards for unloading large trucks so as to make the best use of workers' time.

    Home Depot, where Mr Ellison spent 12 years, including six as executive vice president of stores, has launched same-day and next-day delivery in a handful of markets. He said Lowe's is testing that service in select places, but that the company's supply chain isn't "mature enough" to roll it out chain-wide. He said:

    I call it 'second mover advantage'. Sometimes it's not terrible that you're behind if you have the capital to catch up quickly. So we're going to learn a lot from our competition. And we'll be right there with them, if not right in front of them, in a few years.

    However Mr Ellison believes that when its recently opened USD150 million direct fulfillment centre in Tennessee is in full operation, two-day deliveries will be possible to 75% of the continental US.

    Down the line, Lowe's also will be looking at how to better position itself with social media, Ellison says, especially to appeal to young customers and first-time homeowners undertaking do-it-yourself projects. YouTube, for instance, is a huge opportunity for Lowe's to grow in, Mr Ellison said, as it helps to de-mystify DIY projects.

    We're going to do a much better job of leveraging social media ... so that we can be more active and make sure customers know that we are relevant and we want to help them to make choices.


    To read more in USA Update, download the latest issue by clicking on the following link:

    USA Update - HI News Vol. 4 No.8

    Retail update

    Smart home zones in Beacon Lighting stores

    Temple & Webster is looking to expand its products in the home improvement market

    Beacon Lighting believes consumer demand for "smart" lighting can lift sales; and Temple & Webster looks to capture a greater portion of the dollars that consumers spend on their homes.

    Meeting the demand for smart products

    Wi-fi has been deployed across all of Beacon Lighting's 109 stores, which the retailer will use to set up smart home demonstration zones in each location. Chief information officer Mick Tan told IoT Hub the wi-fi network would be used to help the retailer educate consumers on the benefits and requirements of smart home automation setups. He said:

    What we're doing at Beacon is creating an area where we put smart lights by Phillips and LIFX in two different areas [of each store]. We attach them to a Google Home and Amazon Echo and we talk to them. We're actually demonstrating to customers how it works and what you need device-wise to have it in your house.

    Mr Tan said that Beacon Lighting will also be launching its own brand of lights that would be more cost effective than the big brand systems already in the market. He said that he has been testing Beacon's own smart lighting technology in his own home. He said:

    I'm experimenting with the products from our manufacturer and have become the test case for them. I like that when I'm watching TV I can lower the lights, or that if I'm not home in winter by 6pm the light is on [automatically] so my dogs are happy [and] can see where they're going.

    Mr Tan revealed that Beacon Lighting may also use the wi-fi network to trial some beacon technology in stores for location-based marketing and footfall traffic measurement purposes. The retailer may be looking at smart price tags on products on the showroom floor.

    Sales expectations

    In a trading update at its annual meeting recently, Beacon said same-store sales were flat in the September quarter after growing 1.6% in 2018.

    However, chief executive Glen Robinson expects consumer demand for "smart" or internet-connected lighting and strong growth in Beacon's international, street lighting, solar and architectural lighting businesses - to lift top-line sales. He told Fairfax Media:

    There's been a lot of coverage of [smart lighting] on home renovation shows like The Block and [replacing standard lighting with internet-connected lighting] potentially has just as much upside as the LED transition has had.
    That's been a real benefit to Beacon in the last decade and I see smart lighting in a similar transition.

    Beacon also expects an uptick in renovation activity to counter the impact of weaker house prices, housing starts and churn. Mr Robinson said:

    People aren't selling houses as much as they were, and that's had a bit of an impact on sales. However, we expect renovation activity will start to pick up and that should be positive ... at the moment we're in a lull between those two points.

    New stores are also cannibalising sales at existing stores, but Mr Robinson said about 20 stores opened in the past two-and-a-half years were starting to mature and earn their keep.

    Beacon Lighting's gross margins rose 230 points to a record 65.7% in 2018, helping to deliver a record net profit of $19.6 million. Mr Robinson said further gross margin growth was unlikely this year because of the weaker Australian dollar, which will push up the price of lights imported from Asia in US dollars.

    Temple & Webster moves into home improvement

    Online homewares and furniture retailer, Temple & Webster is targeting the home improvement market to expand its business.

    The web-based retailer plans to add products such as flooring, window coverings, sinks, taps and baths to its existing range. Chief executive Mark Coulter told Fairfax Media:

    Home improvement is a big category - a bigger category than furniture and homewares.
    We won't go into selling timber and building materials - that's not our game - but what we will be looking at is categories that make sense and are a natural extension to our range...[For example, curtains and potentially larger appliances]
    You may go to Bunnings for your building materials, but if you're looking for inspiration you come to us - we think there is an opportunity there.

    The retailer has taken initial steps towards offering more home improvement and DIY products when it introduced a paint range in May 2017, but Mr Coulter said the company will begin going after the market more aggressively this year.

    The home improvement category has even lower online penetration in Australia than furniture, with Bunnings only recently launching a limited e-commerce site and Mitre 10 offering buy online, pick-up in-store. Mr Coulter told Inside Retail:

    I think Bunnings not being online is an opportunity for us, but I think we'll play in a different space. Like Amazon, Bunnings is definitely about convenience and price, whereas we're about inspiration and making a home beautiful.


    The company sees the next phase of its journey as one all about growth. With only 4% of furniture and homewares being currently purchased online, it believes it is well placed for strong growth for years to come.

    It predicts sales will shift online at a faster rate as Millennials aged 22 to 35 start spending money in the homewares and furniture category.

    The web-based retailer recently reported a solid first quarter in what it expects to be its first profitable year of trading since launching in 2011. Gross revenue was up a record 39% year-on-year in the first quarter of FY19 and earnings before interest, tax, depreciation and amortisation (EBITDA) were in excess of $200,000.

    The group finished the quarter ended September 30, 2018, with a cash balance of $10.5 million and net cash flows of $600,000.

    The number of active customers grew by 30% year-on-year, reaching 214,000, and a record number of first-time customers were added during the quarter at a cost of $55 per customer. Forty-five per cent of orders were made by repeat customers.

    First-time customers are profitable during their first year with the group, said Mr Coulter. He added:

    This means that we can now begin to accelerate marketing spend beyond digital channels to ensure more of Australia is aware of Temple & Webster.


    The online retailer is planning for an app due to launch before Christmas. Mr Coulter explains:

    Interestingly, we are thinking about it slightly differently. We want to make sure our mobile site is a fast, transactional site, and our mobile app is the place where you go to experience the world of Temple & Webster.

    It also plans to open a small-format design store to provide in-person styling services and advice to customers out of its head office in St Peters, Sydney. Mr Coulter said:

    It's a place to come and experience Temple & Webster in the real world, see samples of products, meet a consultant and have a more human experience. The whole point is to make [the customer's] shopping journey easier.

    At the same time, it is an opportunity for the retailer to test a new bricks-and-mortar format, having already trialled a clearance outlet and a showroom in its Richmond (NSW) store. Mr Coulter said the company will continue to experiment with different physical formats, though its "main game" is online retail.

    The company is also testing the market in New Zealand, setting up shop on TradeMe before possibly establishing a dedicated website and app. If the expansion is successful, Mr Coulter said the team will look to launch in other markets, with South East Asia a probable area of focus.


    Europe update

    Staffing restructure at B&Q

    Trade retailer uses artificial intelligence to deliver a seamless, personalised customer experience

    Plans are underway at B&Q to no longer have overnight stock taking roles leading to the loss of 200 supervisory roles; parent company Kingfisher replaces the head of its struggling French division; and artificial Intelligence (AI) will unify Toolstation's online and offline customer databases onto one platform.

    B&Q cuts store roles, leadership changes

    Home and DIY retailer B&Q announced it will move an additional 1750 staff to "customer-facing colleagues on shop floors", a move which will mean overnight operations will be scrapped.

    Stock replenishment will now be carried out during the day by the extra staff on the shop floor, so that overnight shift management and supervisor roles will be cut, along with the higher hourly rate.

    The retailer stated that it would offer "colleagues in overnight replenishment roles the opportunity to take a new daytime replenishment role instead, though we recognise that not all of them may want to take up these new positions". B&Q retail and property director Paul Crisp added:

    The overall impact of the proposals will be to improve our customers' shopping experience in our stores...The changes in replenishment would mean...improving stock availability and customer service throughout the day.
    In addition, we are creating greater consistency in the way we operate our stores, removing duplication of tasks and improving efficiency...

    Senior management reshuffle

    Parent company, Kingfisher also made a number of senior appointments across the business, with former Screwfix CEO, Graham Bell taking up the helm of B&Q UK & Ireland.

    The home improvement group also revealed that current B&Q boss Christian Mazauric has been appointed CEO of Kingfisher in France to replace Marc Tenart who has decided to step down from his role.

    The move, which became effective on October 1, has set in motion a number of other changes across senior management.

    Mr Mazauric has worked at Kingfisher for 17 years, holding a number of positions across Castorama France, including operational roles and then four years as finance director. Other roles have included finance director of B&Q UK & Ireland and CEO of Brico Depot Romania. He took over the CEO role at B&Q UK & Ireland in 2017 and, since then, has successfully led the business through a significant number of changes.

    Mr Bell will be replaced by Kingfisher group digital director John Mewett. Mr Bell has spent 20 years at Kingfisher, during which time he has been B&Q operations director and HR director. He made the move to Screwfix in 2006, where he led operations and property before his appointment to CEO last year. At Screwfix, he has overseen the rapid roll-out of the store network, opening 60 stores a year, on average, for the past five years.

    John Mewett is the new boss at Screwfix, and has spent 10 years with Kingfisher, starting his career at Screwfix in 2008 as marketing and IT director. During this time he played a significant role in its growth and, most recently, has been leveraging the group's digital capability across the other business units.

    Toolstation integrates AI into its marketing

    Tools and building supplies retailer to the trade, Toolstation has expanded its partnership with marketing platform company Emarsys to include "personalised direct mail and link a physical channel to its digital marketing strategy". The deal will see Toolstation use the Emarsys Artificial Intelligence (AI) to support its direct mail, email, and SMS marketing strategy.

    The news comes just weeks after it was reported that over 52% of UK shoppers believe that retailers need to offer a more seamless experience between online and offline commerce to retain their custom. This was one of the key findings from a survey of 1,000 shoppers, conducted by e-commerce agency, PushON, which stated that retailers should invest in technology that enables a better omnichannel experience, according to

    Toolstation customers can buy online, through a dedicated UK call centre, via a mobile website or at over 300 branches. Customer information is captured both in-store and online so the company can consolidate this data to get a clear view of its target audience.

    Data consolidation is critical to enable a more coordinated marketing strategy across different channels. Using the Emarsys Offline Mail, Toolstation can also pre-set and optimise its direct mail marketing as part of wider multi-channel campaigns. Greg Richardson, head of marketing at Toolstation, said:

    With all our customer data now in one place, we have a deeper understanding of the level of engagement we're achieving across various channels, and the different types of campaigns our customers like to see. Consolidating our data into one platform was always going to be a huge priority for us in a post-GDPR (General Data Protection Regulation) world, and Emarsys will enable us to be responsible custodians of all the information we hold.

    Emarsys manages over 350 million daily interactions while analysing 3.9 billion consumer records and 2.5 million purchase events. It integrates customer intelligence, personalisation, predictive recommendations and omnichannel marketing at scale, across all devices and social channels into a single cloud-based marketing platform. Grant Coleman, vice-president and market director - UK at Emarsys, said:

    Direct mail is one of the most powerful tools in a multichannel marketing strategy, due to its unique ability to drive and strengthen relationships with customers.
    We're delighted to expand our partnership to help Toolstation get a 360-degree view of their customers and run more efficient and tailored marketing campaigns across email, SMS and direct mail.

    HBT Business Workshop

    HBT's special event for members

    Held at the RACV Royal Pines resort in Queensland, the Workshop event showcased the best of HBT values: strong leadership ideas, member engagement - and lots of good conversations

    If you wanted to find a subtitle for the strategic content that HBT's CEO, Greg Benstead delivered at the conference, it might well be "How to avoid becoming collateral damage". What he has clearly understood - and this knowledge is surprising rare in the leadership of independent hardware retail groups - is that Bunnings (and other companies) are not, in any sense, out to "get" independents.

    All that Bunnings cares about, in a strategic sense, is continuing and increasing growth, by finding new markets, and improving prices and efficiencies in existing markets. In the process of doing that, it can certainly harm independent retailers - but they are, to use a modern term, "collateral damage", not targeted victims.

    As a consequence, what Mr Benstead understands and conveyed to HBT members in his opening address, was that what you need to do to survive one of Bunnings' periodic growth surges, is to make sure that you are, strategically and in your market orientation, not in "the wrong place at the wrong time".

    Once you are clear that this is a good strategic goal, it's not really all that hard to do, as Mr Benstead showed by many of his comments about the market. You just have to get one of those conditions right - where you are at strategically, or the timing - to stay on the safe side of the market.

    Probably the most laudatory part of what Mr Benstead and HBT's general manager, member services Mike LoRicco had to present is that they deftly avoided the trap that many small business groups fall into: they didn't press the "greed" button. It's always tempting to promise growth, to talk about profits, highlight canny deals and so on. The reality, though, for the solid, professional small retailers that make up most of HBT's membership, is that "security" will win out over "greed" anytime.

    While that might seem like a cautious approach, the truth is that behind the scenes the new leadership at HBT has been anything but cautious. As Mr Benstead no doubt knows from his years of working for a large corporation, if you want to change things as a new CEO, the time to do that is right away, after you assume the position. While the temptation is just to stick with the expected practice of the past, and make changes in the second and third years, that just about never works.

    As a result we've seen Mr Benstead moving to shake things up right from the beginning. One reason he's been able to move so fast is because Mr LoRicco has been his co-manager on many projects, acting like a personal database of the history of the past 25 years of the home improvement industry, and HBT in particular.

    Recently those changes have meant shaking up the way HBT handles its buying, with three new buyers joining the group. But perhaps the most exciting news is that HBT is looking into launching its own tools brand. While HBT is not sharing many details on this, we can say that there was one session for ITT members that went on for a suspiciously very long time.

    All we really know is what Mr Benstead had to say in his opening remarks:

    Just as we launched H brands many years ago, it has been very successful rolling out, we also see an opportunity for the ITT Group to develop a tools brand as well, so we are going to show the look of that as well to the relevant members. We will be doing that a little later on today.

    If they can bring this off, it will be not only significant for HBT, but also for hardware industry buying groups in Australia. Own-brand tools are one of the advantages that IHG enjoys, and is also a technique that Bunnings uses very effectively. This kind of partnership and sourcing for HBT could have very wide significance to the overall industry.


    To read more, please download the current issue on the following link:

    HBT 2018 Business Workshop - HI News Vol. 4 No.7

    Indie store update

    Store returns to its independent roots

    Mitre 10 goes back in time and Mackay-based Porters celebrates a milestone anniversary

    Heatherbrae store, H&D Timber and Hardware regains its independent status; Toowoomba suburb poised to get a hardware and trade supplies store; Mitre 10 revisits its history in its latest campaign; Dahlsens' Warrnambool store shuts down; WA co-op that includes a Makit Hardware closes permanently; Porters Hardware in Mackay has been in operation for 135 years.

    Timber & hardware store turns independent

    H&D Timber and Hardware, located in Heatherbrae (NSW), has been part of the local business community for decades, in different configurations.

    Darrell and Diana Haynes opened the original H&D Timber store in Raymond Terrace in the Hunter region of NSW, back in 1978. In 2009, Darrell and Diana's son James and wife Renee relocated H&D to 1 Archibald Place, Heatherbrae.

    In that time the business has seen a few changes in name, but the family connection has remained strong. General manager, Renee Haynes told the Port Stephens Examiner:

    James and I both run the day-to-day operation, with Darrell in the timber mill...and Diana taking care of the admin side of the business. On top of supplying timber and hardware, we always donate money, gifts or time to the community and sponsor the local soccer and football junior teams.

    For many years, H&D Timber and Hardware were part of a group - Home Hardware and then Mitre 10 - but recently went it alone as a fully fledged independent operation. Renee explains:

    It was time for us to take control back of our business and focus on what our customer base needed, but we remain a member of the Paint Place group and stock Wattyl and Norglass paints.

    The decision to go independent has coincided with a new chapter in the family business, the opening of "Select Fasteners". Select Fasteners offers stainless steel and high tensile bolts, along with a range of construction glues, screws and tools. Renee said:

    James has known for a little while that we were not able to serve our trade customer to the full 100% capacity due to lack of space for more construction and industrial he created Select Fasteners.

    Store proposal in South Toowoomba

    The Chronicle reports a new trade and hardware supplies store is being proposed for Toowoomba (QLD), as part of a new development. The council will look over an application from Coonan Industries to build a "hardware and trade supplies" store on Pechey Street in South Toowoomba, nearby the public hospital.

    According to plans put forward by Precinct Urban Planning's Paul Kelly, the development will be split into two tenancies, including a warehouse as a second shop. He wrote in his submission:

    The final development will be built to boundary on the northern and southern side boundaries and rear western boundary with carparking, access and landscaped areas within the front setback which comprises 19.3m.
    The building will be slab on ground construction with tilt-up panel concrete walls that will include a textured finish to the front eastern elevation visible from the street.

    The site currently features a warehouse, which is home to a MotoGear supply shop. But the applicant wants to demolish the current building and replace it with a new structure.

    South Toowoomba doesn't currently have a hardware store, with the nearest one being a Mitre 10 outlet in Darling Heights.

    The council will look at the proposal as code-assessable which means public consultation is not directly sought. Its decision on the proposal is expected later this year.

    Mitre 10 plays on its history

    The latest campaign from Mitre 10 promotes the brand's heritage and its support for tradies building houses in Australia.

    It was created by Edge and features brand ambassador and host of Channel 9's The Block, Scott Cam. He is driving through time in a series of classic utes past period homes of the 1950s, 60s and 80s. Edge Group managing director, David Stretch, told Mumbrella:

    While Mitre 10 was established in 1959, some of its member stores had been family-run businesses for over a hundred years, building relationships with their local builders, generation after generation. And this provides the perfect platform for the campaign.

    Mitre 10's general manager - marketing, Karen Fahey said the campaign is a celebration of the brand's heritage but also showcases the group's state-of-the-art "Sapphire-standard stores" that are set up to service the trade.

    From years of experience, Mitre 10 knows what tradies want and this has informed our store development program: drive-thru trade areas, dedicated trade desks, timber under cover, state-of the art colour centres. And of course, what works for the trade also works for the weekend warrior DIYers. Service, expertise and a trade quality range are all elements of shopping with Mitre 10, and they are all celebrated in this campaign.

    The campaign includes a 45-second and 30-second brand TV commercials, supported by 15-second retail ads, airing throughout the 2018 season of The Block. Edge executive creative director, Matt Batten, said:

    While last year's TVC celebrated DIY renovators...this year's commercial champions the unsung heroes who really do all the hard graft on The Block, and thousands of renos and new builds around the country - the tradies. It's a fun little drive through time with Scotty in some classic Aussie cars passing some classic Aussie homes.

    Warrnambool loses Dahlsens store

    Dahlsens Building Centre in Warrnambool (VIC) has closed its doors. According to a report in The Standard newspaper, management issued a statement that said:

    Changing market conditions mean that businesses need to make some hard decisions to ensure they remain sustainable in the long run. Over the last few years we have witnessed flat market conditions and also a change in the demographics of our customer base in Warrnambool and the surrounding region.
    With little indication that these trends will change, it is unfortunately no longer viable for Dahlsens to sustain the operating costs of the Warrnambool store. After careful consideration we have made the decision to close the site, with trading ceasing on September 27.
    This announcement marks a big turning point for Dahlsens in the western region of Victoria and it will be sad to no longer have a presence in Warrnambool as part of our store network.

    Management said staff would be informed about other vacant positions within the company and would "receive assistance during this difficult time". The statement also said:

    For those affected, the company would like to publicly thank them all for their dedication and effort over the years.

    The Warrnambool store supplied pre-fabricated truss and wall frames, posi-struts, timber, bricks, mesh, plaster, claddings, doors and door handles, fix out, front of wall plumbing, kitchen and bathroom joinery and power tools.

    It was part of a chain of 20 stores, eight truss and frame manufacturing sites and one metal roofing centre across Victoria and southern New South Wales. Dahlsens has subsidiaries in Sydney, far north Queensland, Western Australia and the Northern Territory.

    It is the largest independent hardware retailer in Australia. The fifth-generation family owned and operated group opened its first store in 1877.

    WA-based co-op has closed after 98 years

    The Broomehill, Katanning & Woodanilling (BKW) Co-operative in Katanning (WA) which traded as IGA, Cellarbrations, Makit Hardware, Bi-Rite Electrical and Telstra has shut its doors for the last time after liquidators rejected an offer from a local buyer to keep the business operating.

    The BKW Co-op went into administration in August 2018 after $800,000 of losses over the last two years.

    The Albany Advertiser revealed the co--op board was calling for expressions of interest in the business, which has operated for 98 years.

    Co-op administrator Neil Cribb sent a letter to all co-op members to inform them he had selected a preferred buyer for the business. However, their offer has since been rejected.

    The co-op was formed in 1921 by a small group of farmers and residents across the region. The shop has since become an iconic business in the Great Southern Region.

    Co-op chairman Norm Flugge said multiple factors had led to the decision to enter into administration.

    What really conspired against us was the perfect storm, it was a combination of the online competition, seven-day trading as well as the general decline of the retail industry throughout Australia.

    Mr Flugge said the co-op's recent efforts to revitalise the shop's look and brand had proven to be a little too late to save it.

    I believe we made some good changes in management late last year and the new manager brought a great deal of experience in retail. Unfortunately before those initiatives could really deliver values and turn some of those trading figures around, we ran out of time.

    Porters enters 135th year of operation

    Timber and hardware retailer Porters Mitre 10 celebrated its 135th anniversary this year, and remains a significant hardware and timber business in Mackay (QLD). Established way back in 1883 as Charles Porter & Son, it is a highly regarded family business brand.

    Descendants of Charles Porter continue to run the business. Paul Porter is a director, Gavan Snr is managing director and Barry Porter is chairman of the board. The brothers told their often-told story to The Daily Mercury recently.

    Porters has 11 branches operating under the Mitre 10, Inspirations Paint and Plumbing Plus banners. Stores are located in Mackay city, Cannonvale, Glenella, Marian, Proserpine and Sarina.

    It won Hardware Store of the Year (over 2500sqm) and Garden Centre of the Year at the Hardware Australia Queensland Awards earlier this year.


    Indie store update

    Mitre 10 closure after more than two decades

    End of an era for Port Fairy hardware store and Mitre 10 in Kingaroy responds to new Bunninngs

    A South Australian Mitre 10 store is shutting down in anticipation of a nearby Bunnings being built; a hardware store in Port Fairy (VIC) is on the market; Mitre 10 gets ready to compete with Bunnings in Kingaroy (QLD); Mount Isa store gets an ATOM industrial hardware store; hardware is part of new-look Hastings Co-op; and Terang Co-op records small profit in annual results.

    Domain Mitre 10 closes before Bunnings opens

    After 26 years, Domain Mitre 10 in Westbourne Park (SA) is closing down before a new Bunnings store being built just 3km away opens for business. Owner Chris Wauchope told the Adelaide Advertiser that his store could not compete with a $45 million Bunnings store being built in nearby South Road, Edwardstown.

    Mr Wauchope said he chose not to renew his lease after predictive figures showed his business had little chance of surviving a loss of trade once the Edwardstown Bunnings opened. He said it was a "very tough decision" that had "far-reaching implications".

    Port Fairy hardware business for sale

    Ken and June Brookes are selling their Port Fairy (VIC) hardware business and property after 42 years in the industry. The couple has decided to retire and the sale of Brookes Home Timber and Hardware is expected to fetch in excess of $2.5 million.

    While the couple is keen to sell the business and property as one, there has been interest from those who want to just purchase the property for redevelopment.

    Mr and Mrs Brookes opened the store not long after they cut short a round-the-world trip and returned to Koroit (VIC) to help his ill father. The couple had left Australia in 1973, spent a year living in New Zealand before heading around the world via South America and Europe when word came that Mr Brookes' father needed help running his plumbing business. He told The Standard:

    This is why we are here. We were going to head over to Canada so we'll take that up later, we'll resume our trip so to speak.

    The couple's first store, called Port Fairy Hardware, opened in March 1976. In 1983 they purchased the Sackville Street shop and moved the business there, expanding the site over the years when they purchased about five neighbouring blocks.

    Mr Brookes said he had built up the business to include electrical goods, tools, hardware, timber, paint and giftware.

    We've grown it from nothing to what it is. Our aim was to keep business in Port Fairy for Port Fairy and district people. I just hope that whoever takes it on has a good feeling for Port Fairy.

    Mitre 10 responds to Bunnings Kingaroy

    Sunshine Mitre 10 Kingaroy in South Burnett (QLD) believes it already offers everything people need despite a new Bunnings Warehouse opening in 2019. Retail store manager Steve Miatt said he was extremely proud of his team and the hard work they did for the community. He told the South Burnett Times:

    We employ more than 40 people and have many staff with 10 years or more service and some with more than 15.

    Julie Hanson and Barry Collins are two such team members with 27 years of service to Mitre 10's Kingaroy store between them.

    Sunshine Mitre 10 has been focused on supporting the local community since it opened in 1985 in its 4000sqm purpose built premises. Mr Miatt said:

    We employ locals who have been a part of the Kingaroy community for many years and are proud of their long term connections.

    The store has heavily supported many community and sporting groups for nearly over three decades, Mr Miatt said. And it would continue to look after their customers as well as they always have, no matter what new business came into town.

    We pride ourselves on our exceptional service to retail and trade customers, providing a large range from our store as well as expert advice for everyone.

    ATOM opens in Mount Isa

    Industrial hardware supplier ATOM has opened shop in Mount Isa (QLD) thanks to resident, Mark Campbell.

    Born and bred in Mount Isa, Mr Campbell has spent the past 20 years working in the mining sector. He saw an opportunity to develop the local supply market, so he approached the company.

    ATOM chairman Jason Johnson flew up to Mount Isa to meet with Mr Campbell and was so impressed he spent the plane ride home putting together a business plan on the back of an envelope. He told the North West Star:

    Mark approached us and told us there was a gap in the market, and we really backed him. We checked out his credentials and thought this is someone we can build a business around.
    We could see that our business model would work here, provided we had the right local person. The original plan was to open a small to medium size business, but we were lucky enough to land two major Glencore tenders at about the same time we were opening.

    ATOM's Mount Isa store is referred to as the "Bunnings for industry", selling giant spanners, gumboots, angle grinders and safety goggles.

    Hastings Co-op re-development includes hardware

    Construction work is progressing behind the scenes on Hastings Co-op's IGA supermarket, hardware and liquor store which will open in October 2019, as part of the Sovereign Hills town centre in regional New South Wales.

    Chief executive officer Allan Gordon said the new store would be an integral part of Hastings Co-op's family of 15 businesses. He told Port Macquarie News:

    Uniquely, our IGA store will incorporate a full-service hardware store where customers will be able to buy everything from a hammer to landscaping supplies. Covering more than 600sqm, the hardware component will add a great dimension to our offering.

    The development will eventually provide 25,000sqm of amenity to the growing Sovereign Hills community and beyond. The open-air design will feature roof-mounted solar panels, with rainwater harvesting to be utilised for all landscaping irrigation, while recycled bricks and natural timbers will form the key architectural features of the building.

    When it's completed, the Sovereign Hills master-planned community will be home to 2,000-plus new homes, onsite schools, childcare, recreation facilities and the area's new town centre.

    Terang Co-op believes in its business model

    Rural co-operative, Terang Co-op posted a modest profit for the 2017-18 financial year in what has been a tough economic period for south-west Victoria.

    The supermarket, hardware and rural supplies business made a small net profit of $9900 from a turnover of more than $23 million. (The Co-op posted a profit of $150,000 for the 2016-17 financial year.)

    Co-op chief executive officer Kevin Ford said although the Co-op's bottom line hadn't provided the result they'd wanted, the positive was that $270,000 of debt had been paid. He told the Standard:

    We're in a financially stronger position than we were 12 months ago.

    Terang Co-op chairman Brendan Kenna said the Co-op had grown sales against the previous year but costs had continued to climb. He also said the Co-op's rural services were still suffering from the severe downturn that hit the dairy industry. He told the Weekly Times:

    Our business is reflecting their reduced circumstances.

    Mr Kenna believes the co-operative model remained viable and important to rural communities. He said:

    We were all shocked to watch the rapid demise of one of Australia's largest co-operatives, Murray-Goulburn. [We] felt the pain and disappointment of its members as they saw their business fail.
    But as big business and the large banks increasingly turn their back on rural Australia, in the pursuit of higher profits at the expense of services, it makes the co-operative model more important than ever and we think it has an exciting future.

    Membership continued to grow with 110 new members bringing the total to 2610. Highlights of the year also included the purchase of the DTS West business and the branding of dairy services as 360 Dairy Solutions.


    Europe update

    Homebase stores closing as Bunnings UK brand disappears

    B&Q moves away from promotional pricing and Metabo Germany joins Cordless Alliance System

    Homebase's turnaround plans involves closing 42 of its 241 stores; B&Q will reduce the use of short-term pricing deals and discounts; Metabo Germany partners with power tool manufactures to form Cordless Alliance System (CAS); HOUSE opens fifth UK store; and Travis Perkins said a "challenging UK DIY market" has negatively impacted its consumer-facing brands.

    Homebase confirms 42 closures, for now

    DIY retailer Homebase said at least 42 outlets will be shutting down by early next year. The company is looking to close stores in order to cut costs after being acquired by Hilco for GBP1 earlier this year, with up to 70 more stores potentially at risk.

    Homebase wants to cut rents - or close - on nearly a fifth of its 241-store chain, via a company voluntary agreement (CVA), a controversial insolvency procedure used by struggling firms to shut underperforming shops.

    Under the process, Homebase will also promise to continue paying market rents on about half its stores but will ask for smaller rent reductions on another 60 and business rate reductions on all the stores where it wants rent cuts. Chief executive Damian McGloughlin said:

    Launching a CVA has been a difficult decision and one that we have not taken lightly. Homebase has been one of the most recognisable retail brands for almost 40 years, but the reality is we need to continue to take decisive action to address the underperformance of the business and deal with the burden of our cost base, as well as to protect thousands of jobs.
    The CVA is therefore an essential measure for the business to take and will enable us to refocus our operations and rebuild our offer for the years ahead.

    The company added that the trading environment had been "extremely challenging", with weak consumer confidence. Homebase said:

    Under the terms of the CVA proposal, all creditors receive a better outcome than any other likely alternative.

    Restructuring experts at Alvarez & Marsal will carry out the CVA, which will require the support of landlords via a vote on 31 August. The process is designed to stave off administration and save the business, but landlords say it is being misused as a quick way to downsize during tough times.

    A group of landlords settled out of court after challenging a CVA process at department store House of Fraser before it was bought by Sports Direct via a pre-pack administration.

    However, Stephanie Pollitt, the assistant director of real estate policy at the landlords' trade body, the British Property Federation (BPF), said:

    Homebase and Alvarez & Marsal have demonstrated best practice, engaging with the BPF in the process and therefore ensuring property owners' interests have been properly taken into account.

    Under Hilco's ownership, the 24 stores that were trading as Bunnings will convert back to the Homebase fascia.

    Amazon to buy sites?

    According to the Sunday Telegraph, Amazon is looking to acquire Homebase stores around the UK as it looks to extend its network of warehouses. If completed, the Homebase sites, many of which are situated in urban locations in major towns and cities, could become "last mile" warehouses, allowing for quicker delivery times for items ordered from the site.

    B&Q drops prices, adopts EDLP strategy

    UK-based DIY and garden chain, B&Q plans to lower prices on 2,000 products by around 15%, as part of its "Do It For Less" strategy, in the hope that lower prices all year round will appeal to shoppers. As a result, the retailer will be reducing its short-term pricing deals, including multi-buys, and reviewing some of its loyalty scheme benefits.

    It has already invested GBP100 million in dropping prices on both branded and own-branded products, with further discounts planned on additional lines later on this year.

    Like EDLP (Every Day Low Prices), B&Q's pricing strategy is aimed at encouraging shoppers to take on home improvement projects straight away, rather than waiting weeks or months for the next promotion or sales event.

    B&Q said its new policy means that customers can enjoy competitively-priced products any day of the week throughout the year, rather than having to wait for sales to roll around.

    The company also said its "Do It For Less" plan will make DIY more affordable, and therefore accessible to homeowners and renters of all ages and incomes. Paul White, B&Q's commercial director, said:

    People may enjoy hunting for the best deal, but at the end of the day there is much more comfort knowing that there's one place where you can always get a low price.
    All customers want to have prices they can trust and, as industry leaders, it's our responsibility to look after their best interests by ensuring our customers get our most competitive price.

    B&Q first introduced a "simplified pricing strategy" across its kitchens offer in September 2014. Describing it as a successful move, B&Q said the use of promotional pricing in the category makes it difficult for customers to know if they are getting the best possible price.

    The retailer said the economies of scale afforded by being part of the Kingfisher group and the joint buying functions under the One Kingfisher transformation enable it to price products competitively, as well as building a "unique and unified offer".

    B&Q started to promote its Do It For Less price drops in mid-July, in the mainstream press, and via digital and social media, as well as in-store marketing.

    When Bunnings acquired the Homebase stores in 2016, it rolled out EDLP across the Homebase business with an "Always low prices" tagline. The converted Bunnings stores came with "Lowest prices are just the beginning" tagline that was later changed to help UK customers understand what the stores actually sold. It meant that Bunnings generally concentrated on beating the opposition with low prices but analysts believe B&Q was often able to match these savings, which often resulted in a race to the lowest price.

    Q2 improves

    A run of hot weather also boosted sales at B&Q parent company, Kingfisher in the second quarter as more customers stocked up on barbecues and other outdoor items.

    However, shares fell 2.2% as analysts pointed out that Kingfisher's recent performance has relied too much on good weather conditions.

    The retail group, which also owns Screwfix, reported a 3.4% increase in sales to GBP3.25 billion for the quarter ended July 31. On a like-for-like basis, sales grew 1.6%, rebounding from a 4.0% decline in the first quarter when snowfall and icy temperatures in February and March kept customers away.

    In the UK and Ireland division, like-for-like sales increased 4.2%, including 3.6% growth at B&Q and a 5.5% gain at Screwfix. Kingfisher said sales at B&Q were buoyed by demand for weather-related categories while Screwfix sales were lifted by the opening of 12 new outlets during the quarter. George Salmon, equity analyst at Hargreaves Lansdown, said:

    At first glance, UK results represent a marked improvement. However, the strong sales figures are more a function of a scorching summer than any underlying progress. Strip out the impact of summer items like barbeques and garden furniture, and sales, which headed south over the winter, have continued to fall. That's quashed any hopes that B&Q would benefit from the recent problems at Homebase.

    Like-for-sales in France dipped 1% as its DIY retail store Castorama continued to struggle in part due to weaker footfall and the impact of restructuring efforts. In the other international unit, like-for-like sales edged up 1.4%, driven by growth in Poland.

    Metabo Germany joins Cordless Alliance System

    Metabo in Germany announced its partnership with other tool manufacturers to create the Cordless Alliance System (CAS).

    Under the CAS partnership, nine manufacturers of similar company size and with a focus on power tools for professional applications, will be sharing the same battery platform and chargers produced by Metabo. This allows CAS manufactures the use of the same battery pack systems, providing compatible batteries to be interchanged with other CAS tools manufacturers.

    It provides end-users more freedom, flexibility with a broader range of tools, costs savings and solves problems by sharing the same battery platform across multiple tool manufacturers. Currently, there are over 110 power tools that are part of the CAS manufacturers.

    The partnership is the latest step towards expanding Metabo's vision of a cordless construction site and metalworking shop, entirely run with 18V Lithium-ion High-Density Battery operated tools.

    Metabo Germany president, Horst Garbrecht, expects the CAS to continue to grow, with a variety of manufacturers joining in the name of advanced battery technology. He said:

    With Lithium-ion High-Density Battery we have enough power for the most energy-intensive applications, allowing us to build any hand-held power tool in a cordless version in such a way it meets the professional user's requirements of power and endurance.

    When choosing a technology partner, CAS manufacturer Rothenberger chose to go with Metabo for several reasons, according to managing director Dr Christian Heine:

    Due to the developments in [previous] years, Metabo has conquered the technological leadership and currently offers the most powerful system in the industry.

    Aussie HOUSE opens in Norwich

    Homewares and kitchen specialist, HOUSE, has opened its fifth UK store in Norwich's intu Chapelfield centre.

    The Australian-based retailer has already opened stores in Oxford, Bracknell, Sheffield and online at Executive chairman and CEO, Steven Lew, said:

    Our UK rollout has focused on opening the best stores in the right locations. Norwich is a natural fit for HOUSE...

    The Norwich HOUSE store offers more than 4,000 products including cookware, bakeware, glassware, kitchen gadgets, small electrical appliances, knives, table linens and accessories. With online ordering available in-store, Norwich residents will have access to a large range of brands including Cuisinepro, Alex Liddy, LSA and Joseph Joseph, to name a few.

    Established in Australia in 1978, HOUSE is a member of the Global Retail Brands (GRB) family. GRB is the largest private specialty kitchen & homewares chain in the southern hemisphere, with more than 170 stand alone stores. The UK is the first foray into the northern hemisphere with more planned.

    Travis Perkins' DIY business faces market challenges

    The challenging state of the home improvement market in the UK are reflected in the latest results from Travis Perkins' consumer-facing division that includes DIY chain Wickes and trade supplier Toolstation.

    Sales fell 1.8% to GBP807 million in the six months to the end of June, though on a like-for-like basis the drop was 4.2%.

    Travis Perkins previously warned householders was reining in spending and unwilling to splash out on major DIY projects such as kitchens and bathrooms. Uncertainty in the property market and poor weather in March and April compounded this, as building projects were put off.

    However, the situation has become so serious chief executive John Carter has launched a comprehensive review of the business, with current market conditions expected to continue for the "foreseeable future". He said:

    Wickes has had a far more challenging period as weaker consumer spending trends, combined with a difficult competitive environment, have held back profitability.
    Consequently, the Wickes team is executing a significant cost-reduction program. Whilst these savings will help drive improved profitability through the second half of the year, Wickes' profits will be lower than previously expected.

    While attention was focused on the consumer business, Travis Perkins reported a rise in group revenues of 4.4% at GBP3.4 billion, though it fell to a GBP123.4 million pre-tax loss from a GBP167.4 million profit for the same period last year. This was largely the result of a GBP246 million goodwill impairment against Wickes, with restructuring costs also having an impact.

    Sales growth was driven by the continued growth of the store network in the UK, with 22 new stores opened in the half taking the total network to 317. The expansion of the Toolstation Europe network continued with further stores in the Netherlands and an extension of the trial in France, with encouraging sales results.

    The other parts of the business performed better. General merchanting, the company's largest division which supplies builders, reported sales up 0.9% at GBP1.1 billion, plumbing and heating - which was restructured last year - was 15.5% better at GBP774 million, and the contracts business, which supplies larger builders, saw sales rise 6.4% to GBP718 million.

    Mr Carter tried to put a positive spin on the business, saying "long-term drivers of market growth remain strong, centred on the UK's requirement for more homes and under-investment in the repair, maintenance and improvement of existing dwellings".


    USA update

    In-store lockers at Home Depot

    Newly installed Lowe's CEO "cleaning" house and MORSCO buys Nevada plumbing business

    Home Depot is installing lockers in its stores for customers to pick up items they have ordered online; Lowe's CEO is working quickly to streamline the business; MORSCO enters Nevada plumbing market; Lowe's is using virtual reality technology to get people into stores; cloud-based platform makes managing hourly staff more efficient at Ace Hardware; and home improvement companies phasing out paint strippers with toxic chemicals.

    Home Depot adds convenience to online sales

    Big box retailer, Home Depot is installing lockers in many of its locations to support its in-store pick-up service. The move enables the home improvement retailer to get items to online customers right away instead of waiting for their purchases to be delivered to their home.

    Those who order merchandise online are directed to the rows of orange boxes, where they unlock the designated one and then leave without having to seek assistance from an employee. Spokeswoman Lana Johnston has said:

    ...customers' expectations with shopping are changing, and they want as many options as you can possibly give them.

    As a result, Home Depot hopes to have lockers in all its brick-and-mortar stores within three years. With 46% of its online orders picked up at stores, "the lockers allow us to simplify that process by providing customers with the convenience of self-service and time savings," Ms Johnston said.

    Lockers at Home Depot were first tested in early 2016 and were rolled out more widely late last year. They offer three compartment sizes that can hold more than 60% of items available through the retailer's "Buy Online, Pickup In Store" program. Items that don't fit can be picked up at the customer service desk.

    Lockers are a way that chains such as Home Depot are trying to leverage their network of stores - one is situated within 10 miles (16kms) of 90% of the US population - to provide customers with their merchandise soon after it is ordered.

    Given the massive size of its stores and myriad items that it makes available online but are not sold in stores, the lockers seem to make sense. Rob Haslehurst, managing director and partner of L.E.K. Consulting, believes the lockers help reduce lines at the stores' customer service desks, which had become a "pinch point." And "many consumers don't like interacting with people, and the locker gives that segment a way to get their product in an all-digital experience."

    The pick up locker option also meets the consumer desire to avoid shipping charges on their online orders, according to research from Astound Commerce, which found that 57% of shoppers (in the US) hunt for free shipping offers, making "low shipping rates" too expensive for most.

    Q2 performance

    The big box retailer also beat expectations during the second quarter as it boosted its full-year profit and revenue forecasts. Its second-quarter profit reached USD3.51 billion, or USD3.05 per share. That a much bigger per-share profit than the USD2.84 that Wall Street was looking for, according to analysts surveyed by Zacks Investment Research.

    Revenue rose to USD30.46 billion, from USD28.11 billion, also topping projections of USD29.98 billion on Wall Street.

    Sales at stores open at least a year, or same-store sales, increased 8%, and 8.1% in the US.

    Home Depot said that big ticket sales - now being defined as transactions over USD1,000 - represent about 20% of the chain's US sales. It had previously defined big ticket sales as transactions over USD900.

    In the second quarter, transactions over USD1,000 were up 10.6% compared to the second quarter of fiscal 2017. Big ticket purchases that contributed to growth during the period included vinyl plank flooring appliances. Its Pro customers also helped drive growth.

    New Lowe's CEO hits the ground running

    In less than two months, Lowe's chief executive officer Marvin Ellison has decided to shut down a division of smaller stores and eliminate USD500 million in capital projects that will be returned to shareholders.

    Lowe's said it would close 99 stores of its hardware and garden chain Orchard Supply by the end of the fiscal year. It also said it would seek to cut back on inventory of slow-selling product lines and reinvest in faster-moving goods.

    The acquisition of Orchard Supply, with stores based mainly on the west coast of America, accelerated the company's expansion into key markets like California. But it came at a price as the chain, which Lowe's purchased out of bankruptcy for about USD205 million, was often a drag on results.

    For the shutdown of the unit, Lowe's took a USD230 million charge last quarter, and it expects additional costs of as much as USD475 million in the second half of the year.

    Mr Ellison said the exiting of Orchard Supply was part of a larger strategic review of the company that will including looking at its real estate holdings and assets that don't involve its retail business. Cost cutting will also be a major focus. He said:

    The company has unfortunately become distracted over the past few years. We must create a true expense reduction culture here.

    Lowe's same-store sales growth has usually lagged Home Depot's because it focuses more on DIY customers compared to its rival's focus on professional contractors (tradies) with their larger purchases.

    The home improvement retailer's same-store sales increased 5.2% during the period that ended August 3, capitalising on the delayed demand for spring season goods but missed expectation of a 5.34% increase.

    However net sales rose 7% to USD20.89 billion, beating expectations. Excluding one-time items, the company earned USD2.07 per share, topping estimates of USD2.02.


    Under Mr Ellison, who took charge in July, the company has also eliminated four senior positions including chief operating officer, chief customer officer, corporate administration executive, and chief development officer, while creating two new senior roles for stores and supply chain.

    To keep Lowe's from slipping further behind Home Depot, Mr Ellison said a shake-up was necessary. In a statement, he said:

    We have taken a fresh look at our organisational structure and are realigning our leadership team to improve our focus, better leverage Lowe's omni-channel capabilities and deliver increased value for our customers, associates and shareholders.

    The overall purpose of the changes is to "drive operational excellence," according to the company.

    Reece-owned MORSCO enters new market

    US-based distributor of plumbing, waterworks and HVAC products, MORSCO announced it has entered into an agreement to purchase the assets of Desert Pipe & Supply's Las Vegas location.

    Desert Pipe & Supply is a plumbing wholesaler located in Palm Desert, California and Las Vegas. The company has serviced residential and commercial plumbing and mechanical contractors for more than 30 years.

    As a part of the agreement, five associates and one Desert Pipe & Supply location in Las Vegas will become a part of MORSCO, operating under the Farnsworth Wholesale brand, following a transition period. Desert Pipe & Supply's Palm Desert outpost will continue to be owned and operated by the existing Desert Pipe & Supply ownership. MORSCO CEO, Chip Hornsby, said:

    MORSCO is very enthusiastic to be a part of the booming Las Vegas market. This is certainly an area of the country we've had on our radar for some time and this opportunity with Desert Pipe & Supply fits well into our overall strategic growth initiatives for 2018. As the Las Vegas economy continues to recover from the financial crisis in the late 2000s, MORSCO sees plenty of opportunity here...

    Australian plumbing group, Reece recently completed its acquisition of MORSCO. First announced in May 2018, this acquisition marks Reece Group's entry into the US plumbing market through MORSCO's 170+ branches within 16 states throughout the Sun Belt region of the US.


    Supplier update: Reece expands into US, after 10 year study

    Lowe's attracting DIYers with reality tech

    Augmented reality and virtual reality tools are being used by Lowe's to help customers visualise and "feel" a large home improvement product in the context of the customer's living space.

    Josh Shabtai, director of lab productions at Lowe's Innovation Labs, said:

    We look at age-old customer problems. These are problems that keep resurfacing that folks haven't solved yet. Our hypothesis is that as we move people closer to realising their visions, they'll feel more confident.

    Lowe's Innovation Labs were established four years ago to delve deeper into these questions, said Mr Shabtai. Often working with startups, the company has since rolled out several pilot projects to test customers' comfort with virtual and augmented reality, including Holoroom How-To, which immerses a customer in a DIY project - such as tiling a shower - and gives them step-by-step instruction to complete the task; employee training programs that involve virtual reality; Holoroom Test Drive, a feature that uses VR to offer customers a chance to sense the feeling they are actually holding and using a power tool; and View in Your Space, a mobile app feature which lets customers visualise how a piece of furniture may fit within the physical dimensions of their own living spaces.

    Of these pilots, two currently are still in market: Holoroom Test and the AR feature which went live for Android users in March.

    While quick turnaround trials may suggest there are challenges getting customers to comfortably use the technology on a regular basis, Mr Shabtai said the timing is part of Lowe's approach to test new use cases, study the outcomes, and apply the lessons to future releases. He said:

    We're trying to refine the experience and move on to an application that will be better and ready to scale.

    Mr Shabtai said early results are showing that VR-and AR-enabled tools offer two key use cases: helping customers better navigate how they'll use tools or whether products are physically compatible with their homes; and helping employees learn more quickly to offer more personalised expertise. This will add more value to the in-store experience.

    When [customers] come into a Lowe's store, they want to talk to an employee who is a real expert in the space.

    According to company proprietary data, employees who are trained on machinery using VR are 76% more likely to try out a piece of machinery compared to those who were trained using conventional methods; and customers have 42% greater recall with VR tools compared to YouTube how-to videos.

    He conceded that the biggest challenge standing in the way of more mainstream adoption is cost, while AR can be more quickly deployed given the ubiquity of smartphones.

    Lowe's advantage is to tie the customer closer to the brand through these types of immersive efforts. Tactile experiences through virtual and augmented reality are ways legacy retailers can keep customers loyal, especially with competition from Amazon. Jim Cusson, president of retail marketing agency Theory House, said:

    Amazon wins on convenience and selection, so how can retailers combat that? A lot of this has to do with the experience and brand engagement [derived from immersive tools like VR and AR].

    Morningstar analyst Jaime Katz also wrote in a recent report that Lowes' business model is built off of customer service, knowledge, and innovation. Using VR and AR could help augment its reach.

    Ace Hardware manages hourly staff with software

    Several Ace Hardware locations have turned to workforce management software company Deputy to help manage an hourly workforce across a number of stores.

    The software supports mobile clocking in and out capabilities, scheduling, meal and break compliance, task-tracking and performance management. This should free up managers and floor staff to spend time serving customers. Darrell Moseley, owner of a Washington-based Ace Hardware store, said:

    I used to spend up to eight hours a week creating my staff's schedules, With Deputy's integrated timesheet and scheduling feature, this previously laborious task only takes a couple hours, leaving my time open to pay attention to other critical matters - bettering our store's performance.

    Deputy is an Australian-based company that aims is to make managing employees easier. Ashik Ahmed, Deputy's CEO and founder, tells UK-based that Deputy is designed to reduce the stress of mundane tasks and automate team schedule management. He said:

    Deputy as a product, what we do is scheduling, time and attendance, communication and tasking. These problems are universal for any hourly paid worker and Deputy solves them in a mobile-first, user-intuitive way that allows the product to get easily adopted.
    The key part of what we offer is mobility. Everyone has a smartphone these days and 60% of our user base is actually on mobile.

    Deputy's platform is a smartphone-based app, which is accessible by every employee to clock in and out and swaps shifts. Auto-scheduling is a new feature that is powered by artificial intelligence for workers to build their own schedules. Mr Ahmed said:

    Quite a lot of businesses will be using an iPad app that we have for clock in and out, and of course we made sure it is all GDPR (General Data Protection Regulation) complaint. Because it is smartphone accessible, people can have their schedules and do everything they need to change their work lives.
    For Deputy...what we want to do is get the best employees back on the floor working with the team. Everything that they have to do from an administrative perspective, they can do straight from their phone.

    Home improvement firms ban toxic chemicals

    Home Depot announced it will stop selling paint stripping products containing purportedly toxic substances responsible for consumer deaths. The big box retailer will phase out the use of the chemicals - methylene chloride and N-methylpyrrolidone - in paint removal products by the end of this year.

    Banning the two chemicals is a way "to build upon our strategy to maintain continual improvement in health and environmental safety for products," it said in a statement.

    The announcement came after aggressive lobbying by a group known as Safer Chemicals, Healthy Families, which includes more than 450 US-based organisations and businesses. At least 60 deaths are blamed on the chemicals commercial use, the group said.

    Rival home improvement retailer, Lowe's was the first US retailer to agree to ban those chemicals, according to Mike Schade, a representative of Safer Chemicals.

    Paint and coating giant, Sherwin-Williams also recently said it would stop using the chemicals.

    The chemicals have been found to pose unacceptable health risks to the public, including cancer, harm to the nervous system and to childhood development, and death. In 2017, the US Environmental Protection Agency proposed a ban on the paint removers that contain the chemicals.

    However, the agency has taken no action since Scott Pruitt became EPA administrator.