Specialist tool growth expected for Bunnings as it tackles the pandemic
Bunnings Group Managing Director, Michael Schneider recently spoke with AHJ not only about the Big Box’s plans to continually evolve into the specialist tool market, but also the key values the business will remain firmly focused on as it works through COVID-19.
AHJ – What are some of the challenges COVID-19 has presented in-store so far and what was your strategy in implementing the changes?
MS – For anyone who is in business, no matter what the industry, there is usually a play book for how you deal with something, including recessions, depressions etc. So, if you cannot work this out yourself, there is always a consultant you can hire to help you through. A pandemic, from a risk management point of view, is seen as a black swan event. You cannot plan for it because you do not know what is going to happen.
We have stayed focussed on four key elements during this time – the first being the safety and well being of our team. The second is making sure we stay in stock. The home improvement, hardware and nursery industry are essential to the community and we have strongly advocated this. We are less interested about which brand is doing what and more about keeping the stock there.
The third piece is if people have projects to do at home, this not only keeps people active but gives them a bit of a feel-good effect. I am personally very passionate about mental health, particularly when the community is facing such a challenge.
The final part is the role we play in the domestic eco-system. This system includes businesses, such as the nurseries growing plants for us, the timber mills milling timber for builder’s yards, and thousands of reps that rely on our business, on Mitre 10 and Home and all the others to be open because it is keeping people in work. We have also implemented a range of measures in-store including the Perspex screens and sanitising stations which has meant other businesses that we would not normally deal with, have engaged with us.
I received a lovely note from a chap who reached out to us to make hand sanitizing stations. Using his business during this time has meant that he has kept 50 of his employees in work. This is a good outcome for the economy and industry. It does not matter if you have a M10 or a Bunnings, or a Home, if we can pull together to keep people working, that is the mind set we need to have.
AHJ – Is Bunnings seeing a higher demand for Australian Made products during COVID-19?
MS – We have not seen a new demand that is material. The challenge we find is that when you ask customers if they prefer to buy Australian Made over an imported product, no matter where it has come from in the world, overwhelmingly the customer says yes. The next question we ask is if the customer would pay more for an Aussie Made product than a product from anywhere else in the world and the answer is no. They shop accordingly. People will buy Australian Made but when unemployment is rising and there is uncertainty in the economy, there is a flight to value. One of the challenges is, product that is made locally is often more expensive than the overseas product.
In saying this the vast majority of our green life is grown here, a big chunk of our timber comes from Australia and obviously we have been jousting a bit with Vic Forests recently on issues of sustainably logged timber. We certainly do not source from just one region in the world as we have been getting product from the Middle East, Europe, the US, Asia and New Zealand. There is certainly no lack of willingness to arrange more Australian Made product when it is available but we are driven by what our customers want to buy, which is often shopping to the value proposition of the product. The ongoing need from Australian manufacturing is to make sure that quality and price are there so the customer can make that choice.
AHJ – What is the update on Vic Forests and will Bunnings re-instate supply?
MS – We have advised Vic Forests, and our suppliers, that due to the court ruling that was handed down, we are unable to purchase timber that is coming from those areas. We are working with those suppliers to work through product that they had already logged, helping them find other customers or other sources of timber. Vic Forests and the mills have indicated that they will appeal but this has not been lodged yet.
If this appeal is upheld and the lower court ruling is overturned, and there is PEFSC status on the timber, then we will re-purchase from there. But because the courts made that decision it means it is in breach of our Global Timber Sourcing Policy. This is very sensitive, which is why we will either help them source new timber feedstock or new customers, or work with anyone that does lose their jobs.
Considering we still bring some product through those mills, some of the impact on the mills will be nothing, or as little as 10 per cent on one of the larger ones. Understandably this is a sensitive issue given there has been bushfires and Gippsland has its own set of challenges through COVID-19. We did not make this decision lightly. We worked with Vic Forests for years to help them work FSC status on their timber but when a court makes its ruling, our hands are tied.
AHJ – Bunnings is currently implementing a strong campaign in its trade space. What are Bunnings’ plans for trade throughout 2020 and beyond?
MS – Our aspiration is to continually invest in growing our trade business over the next decade, with trade now 35 per cent of our revenue.
Inside Bunnings trade – anything that is branded under Bunnings – we have three key customer groups including the general trade, the small to medium builder and the B2B piece for procurement. As a secondary strategy we are looking at categories where we have got very low share in the true trade space. We understand plumbers and electricians shop with us for lots of products but often not the core plumbing and electrical products. Mechanics and trades that use industrial tools are the same.
Last year we made an offer to Adelaide Tools in South Australia, with the acquisition completed this year. We are learning a lot from the family who ran the business for five decades. When the time is right, we will scale this business out of South Australia into other markets in Australia and possibly New Zealand. We think about other categories the same way. Whether it’s plumbing, electrical or hard surfaces, these are areas which are a lot of interest to us because we can help these businesses to grow and bring more competition into those specialist segments. What we do not want to do is fold them in and make them a part of Bunnings, so they will remain stand-alone businesses into the future.
AHJ – How well have tradies received the new Bunnings’ PowerPass App and do you expect it will grow in popularity?
MS – Usage numbers are up to 700,000 on the PowerPass App, with about 150,000 using the app as it allows users to check out on their devices, rather than go through the registers. This has been a great way to reduce contact in-store during COVID-19 and we will announce a few more enhancements for the PowerPass app in early October during our strategy day.
AHJ – Will Bunnings stores or its online space receive automatic access to specialist brands or products that are currently available at Adelaide tools?
MS – Bunnings’ specialist brands strategy is to let those brands play in the specialist space. We understand the decisions that TTI and others have made. We have a fantastic relationship with TTI, AEG and Ryobi, but we see this as a specialist category. There are brands like Makita and DeWalt that do cross over but equally, like Festool, there is a limited range in Bunnings which is really for the serious DIY. However, the offering in Adelaide Tools is quite expansive. STIHL made the decision to withdraw from Adelaide Tools which was their choice, but I feel we have a couple of other industrial power tool brands that will better suit our offer than STIHL. If brands want to engage in the specialist area, they are free to approach us to do that. But we do want to keep them distinctly different.
AHJ – Do the suppliers that offer brand or product exclusivity to Bunnings come to this decision themselves?
MS – Each supplier decides the strategy that they want to go to market with and they make their decision accordingly. For example, you will find Dulux in every hardware store nationally, whether it is Bunnings or the independents.
Milwaukee is another good example of this. Over the years we have been very open with TTI and we would have been happy to have Milwaukee in Bunnings but they made a choice to sell it through the specialist players. I do not think the retailer brand gets anywhere near as much say over these things as the supplier brands. The challenge going forward will be what it is that you are doing with your business to make a supplier want to sell through you, rather than simply go to market. There are a number of global brands like Kärcher and Bosch, that could easily go to market, direct to customers, or they may end up going to customers by selling through formats.
Australia has some of the strictest competition laws in the world. Everyone is very mindful of doing things that are very transparent, which really does put the decision making with the supplier.
AHJ – There is a concern Bunnings Trade Shows can take up a lot of time and resources, not leaving suppliers much time to deal with independents. Is it compulsory for suppliers to attend all shows?
MS – Shows run for 48 hours and often they tie in with our team member Product Expos as well. The trade really likes them because they like to see the new innovations. It is in the supplier’s best interest to be there. Suppliers will get revenue out of those trade shows. If I was running a supplier business, I would increase my resourcing for that period of time with extra teams to help me through an expo so I did not let other customers down. We have had a lot of positive feedback from suppliers and our trade team, as well as our competitors who snuck in and had a look around as well. It is good to see people are interested with what is going on in the industry.
AHJ – With over 70 small format stores throughout the network, will your small store campaign continue?
MS – We try to introduce the right sized stores for the community we go into. If you take metropolitan Melbourne, most of our stores are warehouses with a small store in Brunswick. We went into Brunswick knowing we have got a big warehouse coming, so that store will close when the warehouse opens. We wanted to get in and do some community work in that North Western community so people got used to having Bunnings around and understand how we contribute to the community.
In about 24 to 36 months’ time we will have a new warehouse in Northland in Preston on Bell Street and the Northland Warehouse and the Fairfield small format will close. Quite often we use them tactically to take pressure off bigger stores. In our regional markets, where the town has been too small for a big warehouse, we open a smaller store there. As the populations grow, we review those and expand them or close them and open a bigger store.
AHJ – Bunnings is well known for retaining its staff and an older generation of staff as well. Is this due to culture, excellent working conditions, pay or a combination of all?
MS – This is something we think about a lot and we do our best to create a really good working environment. Some of this comes from culture, benefits, as well as things such as bonus payments for our team while working throughout the pandemic. Our enterprise agreement pays about $150 million a year above the retail award so our team are some of the highest paid retail members in the industry. We also invest heavily in training.
With over 48,000 people working at Bunnings and through things like our internal Facebook, we engage with our team and continually answer enquiries. They are our priority and it pays dividends in the quality of the people that work for Bunnings.
We do not stand a lot on ceremony and we do not see ourselves as a big corporate, but instead as a business focussed on the community and on our team. It is a challenge because it is a very competitive market – it is not just us. There are some out-standing retailers including Mitre 10’s, Home Hardware’s, Reece and Beacon. We understand the competitive landscape and we play a part in improving the industry but we also want to make sure there is strong competition so at the end of the day, it is the customers who are the winners.