What we can learn from the Australian hardware market

  • Opinion
  • January 26, 2016
  • Paul Keane
What we can learn from the Australian hardware market

At this time of the year, there is always more focus on the DIY business. Most of us who have spare holiday time do a few household chores and head off to the local hardware store for supplies. These days, the stores are much larger and sell a wider range of merchandise. The product offer appeals to both male and female shoppers. In fact most operators would tell you that DIY stores now have more female shoppers than male. This is sensible reasoning and the merchandise reflects that demographic model.

The lure of the Australian DIY market 

Given the competitive nature of the DIY business, it came as a surprise to us back in 2011 to learn that Woolworths Australia was entering the DIY business through their new Masters brand of stores. Woolworths of course were noted for their expertise and success in the supermarket business, but they felt they had to take on their competitors Wesfarmers who own Coles and Bunnings in an attempt to secure a market share of what was perceived as a lucrative DIY market.

They “sunk” considerable energy into the new chain launch, and in fact there are 10 Masters Stores in Sydney as an example of the growth. The outcome has been a “lemon”, in that the Woolworths board has decided to stop any more growth and put the chain up for sale. One suspects that the likely buyer will be Bunnings who will only take stores that they feel are likely to grow into profit and in the right locations. Those that are left left will probably see out their time and eventually close.

How the NZ DIY market compares

So are there lessons to be learnt for the New Zealand market from the Australian experience? The DIY industry here is very interesting in that the three players, being Bunnings, Mitre 10 and PlaceMakers, are all competing for the same business in what is a relatively small market. Bunnings is part of the Wesfarmers group out of Australia, Mitre 10 is effectively a cooperative, and PlaceMakers is part of Fletcher Building.

So how they all are perceived and what are their opportunities?

Bunnings is a very experienced retailer, certainly over the past year they have dominated the local market through expansion and merchandise range. The Australian expertise has proven to be a good model and has stood the test of time – indeed, Wesfarmers are now expanding into the UK by purchasing the Homebase chain there. Attracting female shoppers to what used to be staid, blokey hardware stores has added markedly to the opportunity for sales growth for all companies, by making the stores interesting and friendly with “advice” available from experienced on-the-floor staff.

Mitre 10 has also been driven from a similar model, but maybe still lacks a little in customer assistance and product knowledge. Also some store locations may not be as well considered as those of Bunnings.

PlaceMakers, has drifted significantly from a “trade/ retail” store to a trade only store. Whilst still “hanging in there” it seems that the stores are a true reflection of the customer base, with an attraction to “robust male customers”. Certainly, the appearance of the stores would not attract a wider customer base. Although they have seen sales growth as the construction sector has picked up, PlaceMakers will need to revisit its retail offerings if they want to compete for the consumer dollar.

Is DIY store expansion at a turning point?

Growth in the NZ market for DIY operators must surely be at the cusp. It was interesting to note over the weekend that Walmart are closing a number of small outlets in favour of strengthening the larger format stores which have the capability of offering a full range of merchandise. Some years ago The Warehouse ventured into a small store “test case” or two but we have noted that this trend has not continued. They have settled, it seems, for large format stores as the basic store size for The Warehouse brand. As a result, we would doubt that any of the NZ DIY operators would consider smaller stores than what they currently have on offer.

This means new store growth will be limited, which suggests a takeover or merging could well be the answer for growth and sales/profit improvement. 

Woolworths Australia also owns the Countdown brand in New Zealand. Some years ago the supermarket chain started to sell a range of general merchandise goods, suggesting that the launch of “Masters” in Australia was going to feed into the supermarket chain. Gradually that level of merchandise has reduced, and the test may well have been abandoned. Dick Smith Electronics also fell into the Woolworths ownership camp before it was sold on, and the result is of course the receivership of that chain of a couple of weeks ago.

Diversify only if you have the know how

It is apparent that the need for expertise in range is essential to the success of any business. The “Masters” example is a lesson for all retailers who want to diversify. Infrastructure and basic “know how” are the key ingredients for success.  In recent years we have seen diversification come to haunt certain retailers, leaving the holding company licking its wounds. The expansion by The Warehouse into food and groceries was one such example.

DIY and any retail offering is all about knowledge that can be passed onto customers in a simple transparent form. Tinkering with food and DIY as a joint opportunity has proven once again that you need different skill sets for each, and mixing them up is not such a good recipe for success.

Sharewatch | Wesfarmers

Wesfarmers was in the news this month for its $700 million acquisition of UK hardware chain Homebase. The company is already one of the world’s largest retailers, with chains including Coles, Bunnings, Officeworks, Target and Kmart.

Wesfarmers is such a large company that it doesn’t report any useful information on its NZ retail operations, but across Australia and New Zealand combined, Bunnings’ revenue grew 11.6% year-on-year, to AUD $9.5 billion. Trading EBIT was $1.0 billion, 11% of sales – pretty good for any retailer.

Coles is also performing strongly in Australia these days – for 2015, its revenue rose 2.2% to $38.2 billion. Coles has grown EBIT in each year since Wesfarmers bought it in 2008.

In New Zealand, Wesfarmers has boosted Kmart’s performance hugely over the last few years. They haven’t been afraid to invest in the chain, opening up several new stores and getting the existing stores back on a better footing. Bunnings, of course, has been a great success as well. It has achieved profitable, steady growth to the point where it has sales of $900 million and is almost as large as Mitre 10.

 Paul Keane is a registered property professional and has vast experience in New Zealand’s commercial property industries. He provides retail and property consultancy including development management to many New Zealand property owners, developers and city councils. 

This post originally appeared on RCG's blog.

​ ​

This is a community discussion forum. Comment is free but please respect our rules:

  1. Don’t be abusive or use sweary type words
  2. Don’t break the law: libel, slander and defamatory comments are forbidden
  3. Don’t resort to name-calling, mean-spiritedness, or slagging off
  4. Don’t pretend to be someone else.

If we find you doing these things, your comments will be edited without recourse and you may be asked to go away and reconsider your actions.
We respect the right to free speech and anonymous comments. Don’t abuse the privilege.


Eat my Lunch opens its first physical store

  • News
  • July 23, 2019
  • Courtney Devereux
Eat my Lunch opens its first physical store

The popular buy one give one model of Eat My Lunch has officially opened its first retail store in Auckland’s downtown Britomart. The store maintains its charity initiative, supplying a Kiwi kid lunch with every $14 spent.

Read more

InStyle names All Is For All’s Grace Stratton a ‘Badass Woman’

  • News
  • July 18, 2019
  • The Register team
InStyle names All Is For All’s Grace Stratton a ‘Badass Woman’

Grace Stratton, the 20-year-old founder of specialty ecommerce site All Is For All, has been named one of 50 global Badass Women by US glossy magazine InStyle. The list includes international celebrities like Mindy Kaling and businesspeople like Stitch Fix chief executive Katrina Lake.

Read more

Wellbeing in the workplace: Here's how its affecting your staff, and your bottom line

  • Opinion
  • July 18, 2019
  • Elly Strang
Wellbeing in the workplace: Here's how its affecting your staff, and your bottom line

Idealog editor Elly Strang recently spoke at the Magazine Publishers Association conference about the importance of wellbeing in the workplace, and the key takeaways from Wellness Month. She shares why it shouldn't be thought of as a luxury nice-to-have, like yoga classes, as research is showing it impacts on your bottom line, as well as some tips on how to create change in the workplace.

Read more

Social scoreboard

Zavy and The Register have worked together to create a scoreboard that compares how the top 25 traditional media advertising spenders in New Zealand have performed on social media over the past 30 days, updated in real time.

Regional rollercoaster
What does retail look like in 2019 for ...
Concept to closet
Business coverage of New Zealand Fashion Week.
Town centres
A positive retail environment over the past 12 ...
Amazon Arrival
Keeping up with all things Amazon as it ...
The Retail Yearbook 2017
As we battle our way through the busiest ...
Hospitality enhancing retail
Some think food and integrated hospitality offerings will ...
The future is bright
We spoke with four retailers in their twenties ...
Spotlight on signage
At first glance, the humble in-store sign might ...
Red Awards 2016
The Red Awards for retail interior design celebrate ...
Auckland Unitary Plan
Auckland is changing. The Unitary Plan will decide ...
How to open a store
Sarah Dunn considers what it would take to ...
All things to all people
Kiwi retailers share their omnichannel strategies.
Rising stars
Retail's top young achievers.
Delivering on your promises
The sale isn't over until your item is ...
Retail in heartland New Zealand
Retailers keep the regions pumping, but how strong ...
Women in retail help one another. We spoke ...
The changing face of retail
Shifting demographics are creating big changes in New ...
The retail yearbook
With the help of experts in the retail ...
Retail rogues
We put the spotlight on staff training. Jai ...
Here come the giants
Topshop has arrived in Auckland’s CBD, David Jones ...
From retail to e-tail
Ecommerce has become part of the way mainstream ...
Window shopping: A spotlight on social media
Sarah Dunn and Elly Strang look at how ...
Loyalty in the digital age
How are retailers maintaining loyalty? Sarah Dunn, Elly ...
The Innovators | In partnership with Spark Business
Technology is rapidly changing the retail industry as ...

How HomeAR is incorporating AR into architecture design

  • technology
  • July 18, 2019
  • Courtney Devereux
How HomeAR is incorporating AR into architecture design

Many people struggle to envision plans from simple 2D renders and floor plans, as without a designer's eye, filling in blanks from imagination isn’t the most reliable method when it comes to something as important as building a brand-new home or store. Reactar has launched an augmented reality-based platform, HomeAR, to counteract this, which allows users to see and engage with homes in a virtual way, making the very personal process more reliable.

Read more

Simon West is the new chief executive of Torpedo7

  • Who's Where
  • July 18, 2019
Simon West is the new chief executive of Torpedo7

Simon West, who has 20 years' experience leading companies like Ezibuy, has been appointed the chief executive of The Warehouse Group's outdoor retailer Torpedo7.

Read more

Bay of Plenty D2C Saltysea opens its first store

  • Design
  • July 17, 2019
  • Sarah Dunn
Bay of Plenty D2C Saltysea opens its first store

Stephanie Saxton has been selling cheeky swimsuits and ethical activewear online out of Bay of Plenty's Athenree since 2018. She's now opened Saltysea's first bricks and mortar store, the Salty Collective.

Read more
Next page
Results for
About us.

The Register provides essential industry news and intelligence, updated daily. And the digital newsletter delivers the latest news to your inbox twice a week — for free!

©2009–2015 Tangible Media. All rights reserved.
Use of this site constitutes acceptance of our Privacy policy.

The Register

Content marketing/advertising? Email or call 022 639 3004

View Media Kit